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

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

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

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

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Mark One)</b></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&#160;12(b)&#160;OR (g)&#160;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"><b>&#160;</b></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"><b>&#160;</b></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"><b>&#9746;</b></span></ix:nonNumeric><b>&#160;ANNUAL
REPORT PURSUANT TO SECTION&#160;13 OR 15(d)&#160;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"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the fiscal&#160;year ended&#160;<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>,&#160;<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"><b>&#160;</b></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"><b>&#160;</b></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"><b>&#9744;</b></span></ix:nonNumeric><b>&#160;TRANSITION
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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>OR</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:DocumentShellCompanyReport"><span style="font-family: Times New Roman, Times, Serif"><b>&#9744;</b></span></ix:nonNumeric><b>&#160;SHELL
COMPANY REPORT PURSUANT TO SECTION&#160;13 OR 15(d)&#160;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</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>For the transition period from &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;to
&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Commission file number: <ix:nonNumeric contextRef="c0" name="dei:EntityFileNumber">001-40150</ix:nonNumeric></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: 18pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b><ix:nonNumeric contextRef="c0" name="dei:EntityRegistrantName">First High-School Education Group Co., Ltd.</ix:nonNumeric>
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</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>

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

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</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">No. 1-1, Tiyuan Road, Xishan District</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:EntityAddressCityOrTown">Kunming</ix:nonNumeric>, Yunnan Province <ix:nonNumeric contextRef="c0" name="dei:EntityAddressPostalZipCode">650228</ix:nonNumeric>, </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>People&#8217;s Republic of <ix:nonNumeric contextRef="c0" format="ixt-sec:countrynameen" name="dei:EntityAddressCountry">China</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"><b><ix:nonNumeric contextRef="c1" name="dei:ContactPersonnelName"><ix:nonNumeric contextRef="c0" name="dei:ContactPersonnelName">Tommy Zhou, Chief Financial Officer</ix:nonNumeric></ix:nonNumeric> </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Telephone: <ix:nonNumeric contextRef="c1" name="dei:CityAreaCode">+86</ix:nonNumeric>-<ix:nonNumeric contextRef="c1" name="dei:LocalPhoneNumber">10-62555966</ix:nonNumeric></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>E-mail: <ix:nonNumeric contextRef="c1" name="dei:ContactPersonnelEmailAddress">tommyzhou@dygz.com</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:EntityAddressAddressLine1">No. 1-1, Tiyuan Road, Xishan District</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:EntityAddressCityOrTown">Kunming</ix:nonNumeric>, Yunnan Province <ix:nonNumeric contextRef="c1" name="dei:EntityAddressPostalZipCode">650228</ix:nonNumeric>, </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>People&#8217;s Republic of <ix:nonNumeric contextRef="c1" format="ixt-sec:countrynameen" name="dei:EntityAddressCountry">China</ix:nonNumeric> </b></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">Securities registered or to be registered pursuant to Section&#160;12(b)&#160;of
the Act.</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">
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  <tr style="vertical-align: top">
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    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(Title of Class)</span></td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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><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: 51%; text-align: center"><span style="font-size: 10pt">Title&#160;of&#160;each&#160;class</span></td> <td style="width: 2%; text-align: center">&#160;</td> <td style="border-bottom: black 1.5pt solid; width: 47%; text-align: center"><span style="font-size: 10pt">Trading&#160;Symbol</span></td> </tr> <tr style="vertical-align: top; background-color: #CCEEFF"> <td style="text-align: center"><span style="font-size: 10pt">American depositary shares, each representing three Class&#160;A ordinary shares, par value US$0.00001 per share</span></td> <td>&#160;</td> <td style="text-align: center"><ix:nonNumeric contextRef="c0" name="dei:TradingSymbol"><span style="font-size: 10pt">FHSEY</span></ix:nonNumeric></td> </tr> <tr style="vertical-align: top; "> <td style="text-align: center"><span style="font-size: 10pt"><ix:nonNumeric contextRef="c0" name="dei:Security12bTitle">Class&#160;A ordinary shares, par value US$0.00001 per share</ix:nonNumeric><sup>*</sup></span></td> <td>&#160;</td> <td style="text-align: center">N/A</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; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left">*</td><td style="text-align: justify">Not for trading, but only in connection with the quoting
of the American depositary shares on the <span style="-sec-ix-hidden: hidden-fact-0">OTC market</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: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="margin: 0pt">&#160;</p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"></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">Securities for which there is a reporting obligation pursuant to Section&#160;15(d)&#160;of
the Act.</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: 40%; padding-bottom: 1.5pt">&#160;</td>
    <td style="width: 20%; border-bottom: black 1.5pt solid; text-align: center"><span style="font-size: 10pt"><b>None</b></span></td>
    <td style="width: 40%; padding-bottom: 1.5pt">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">(Title of Class)</span></td>
    <td>&#160;</td></tr>
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</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">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:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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"> <td style="width: 49%; padding-left: 40pt; text-align: justify; text-indent: -31pt"><span style="font-size: 10pt">Class&#160;A ordinary shares, par value US$0.00001 each</span></td> <td style="width: 2%; text-align: justify">&#160;</td> <td style="width: 49%; text-align: justify"><span style="font-size: 10pt"><ix:nonFraction contextRef="c2" decimals="INF" format="ixt:num-dot-decimal" name="dei:EntityCommonStockSharesOutstanding" scale="0" unitRef="shares">54,577,170</ix:nonFraction> were outstanding as of March 31, 2023</span></td></tr> <tr style="vertical-align: top"> <td style="padding-left: 40pt; text-align: justify; text-indent: -31pt"><span style="font-size: 10pt">Class&#160;B ordinary shares, par value US$0.00001 each</span></td> <td style="text-align: justify">&#160;</td> <td style="text-align: justify"><span style="font-size: 10pt"><ix:nonFraction contextRef="c3" decimals="INF" format="ixt:num-dot-decimal" name="dei:EntityCommonStockSharesOutstanding" scale="0" unitRef="shares">32,261,530</ix:nonFraction> were outstanding as of March 31, 2023</span></td></tr> </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Indicate by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule&#160;405 of the Securities Act. Yes <span style="font-family: Times New Roman, Times, Serif">&#9744;</span> <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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">If this report is an annual or transition report, indicate by check
mark if the registrant is not required to file reports pursuant to Section&#160;13 or 15(d)&#160;of the Securities Exchange Act of 1934.&#160;&#160;
Yes <span style="font-family: Times New Roman, Times, Serif">&#9744;</span> <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">&#160;</p><div>

</div><p style="text-indent: 0.5in; font: 10pt Times New Roman, Times, Serif; margin: 0pt">Indicate by check mark whether the registrant (1)&#160;has filed all
reports required to be filed by Section&#160;13 or 15(d)&#160;of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. <ix:nonNumeric contextRef="c0" name="dei:EntityCurrentReportingStatus">Yes</ix:nonNumeric> <span style="font-family: Times New Roman, Times, Serif">&#9746;</span> 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; text-indent: 0.5in">&#160;</p><div>

</div><p style="text-indent: 0.5in; font: 10pt Times New Roman, Times, Serif; margin: 0pt">Indicate by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to Rule&#160;405 of Regulation S-T (&#167;232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was required to submit such files). <ix:nonNumeric contextRef="c0" name="dei:EntityInteractiveDataCurrent">Yes</ix:nonNumeric> <span style="font-family: Times New Roman, Times, Serif">&#9746;</span>
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; text-indent: 0.5in">&#160;</p><div>

</div><p style="text-indent: 0.5in; font: 10pt Times New Roman, Times, Serif; margin: 0pt">Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of &#8220;large accelerated filer,&#8221;
&#8220;accelerated filer&#8221; and &#8220;emerging growth company&#8221; in Rule&#160;12b-2 of the Exchange Act.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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: bottom"> <td style="width: 35%; text-align: justify"><span style="font-size: 10pt">Large accelerated filer <span style="font-family: Times New Roman, Times, Serif">&#9744;</span></span></td> <td style="width: 30%; text-align: justify"><span style="font-size: 10pt">Accelerated filer <span style="font-family: Times New Roman, Times, Serif">&#9744;</span></span></td> <td style="width: 35%; text-align: justify"><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></tr> <tr style="vertical-align: bottom"> <td>&#160;</td> <td>&#160;</td> <td style="text-align: justify"><span style="font-size: 10pt">Emerging growth company <ix:nonNumeric contextRef="c0" format="ixt:fixed-true" name="dei:EntityEmergingGrowthCompany"><span style="font-family: Times New Roman, Times, Serif">&#9746;</span></ix:nonNumeric></span></td></tr> </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">If an emerging growth company that prepares its financial statements
in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards&#8224; provided pursuant to Section&#160;13(a)&#160;of the Exchange Act.&#160;&#160;<ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:EntityExTransitionPeriod"><span style="font-family: Times New Roman, Times, Serif">&#9744;</span></ix:nonNumeric></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 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&#160;5, 2012.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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;
<ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:IcfrAuditorAttestationFlag"><span style="font-family: Times New Roman, Times, Serif">&#9744;</span></ix:nonNumeric></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">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. <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">&#160;</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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 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> <td style="vertical-align: top; width: 32%"><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="vertical-align: bottom; width: 2%; text-align: justify">&#160;</td> <td style="vertical-align: top; width: 32%; text-align: center"><span style="font-size: 10pt">International Financial Reporting Standards as issued by the International Accounting Standards Board <span style="font-family: Times New Roman, Times, Serif">&#9744;</span></span></td> <td style="vertical-align: bottom; width: 2%; text-align: justify">&#160;</td> <td style="vertical-align: top; width: 32%; text-align: center"><span style="font-size: 10pt">Other <span style="font-family: Times New Roman, Times, Serif">&#9744;</span></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">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.&#160;&#160; 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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">If this is an annual report, indicate by check mark whether the
registrant is a shell company (as defined in Rule&#160;12b-2 of the Exchange Act). Yes <span style="font-family: Times New Roman, Times, Serif">&#9744;</span>
No&#160;<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">(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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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&#160;<span style="font-family: Times New Roman, Times, Serif">&#9744;</span> No&#160;<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: 0.25in">&#160;</p><div>

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</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="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

</div><div><a id="toc_001"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>TABLE OF CONTENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; 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; background-color: rgb(204,238,255)">
    <td style="width: 90%"><a href="#a_001"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">INTRODUCTION</span></a></td>
    <td style="text-align: center; width: 10%">ii</td></tr>
  <tr style="vertical-align: top; ">
    <td><a href="#a_002"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">FORWARD-LOOKING STATEMENTS</span></a></td>
    <td style="text-align: center">v</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><a href="#a_003"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">PART I</span></a></td>
    <td style="text-align: center">1</td></tr>
  <tr style="vertical-align: top; ">
    <td style="padding-left: 0.5in"><a href="#a_004"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS</span></a></td>
    <td style="text-align: center">1</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.5in"><a href="#a_005"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE</span></a></td>
    <td style="text-align: center">1</td></tr>
  <tr style="vertical-align: top; ">
    <td style="padding-left: 0.5in"><a href="#a_006"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 3. KEY INFORMATION</span></a></td>
    <td style="text-align: center">1</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.5in"><a href="#a_007"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 4. INFORMATION ON THE COMPANY</span></a></td>
    <td style="text-align: center">47</td></tr>
  <tr style="vertical-align: top; ">
    <td style="padding-left: 0.5in"><a href="#a_009"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 4A. UNRESOLVED STAFF COMMENTS</span></a></td>
    <td style="text-align: center">72</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.5in"><a href="#a_010"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS</span></a></td>
    <td style="text-align: center">73</td></tr>
  <tr style="vertical-align: top; ">
    <td style="padding-left: 0.5in"><a href="#a_011"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES</span></a></td>
    <td style="text-align: center">94</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.5in"><a href="#a_012"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS</span></a></td>
    <td style="text-align: center">101</td></tr>
  <tr style="vertical-align: top; ">
    <td style="padding-left: 0.5in"><a href="#a_013"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 8. FINANCIAL INFORMATION</span></a></td>
    <td style="text-align: center">104</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.5in"><a href="#a_014"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 9. THE OFFER AND LISTING</span></a></td>
    <td style="text-align: center">106</td></tr>
  <tr style="vertical-align: top; ">
    <td style="padding-left: 0.5in"><a href="#a_015"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 10. ADDITIONAL INFORMATION</span></a></td>
    <td style="text-align: center">106</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.5in"><a href="#a_016"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</span></a></td>
    <td style="text-align: center">113</td></tr>
  <tr style="vertical-align: top; ">
    <td style="padding-left: 0.5in"><a href="#a_017"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES</span></a></td>
    <td style="text-align: center">115</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: left"><a href="#part2">PART II</a></td>
    <td style="text-align: center">116</td></tr>
  <tr style="vertical-align: top; ">
    <td style="padding-left: 0.5in"><a href="#a_018"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES</span></a></td>
    <td style="text-align: center">116</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.5in"><a href="#a_019"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS</span></a></td>
    <td style="text-align: center">116</td></tr>
  <tr style="vertical-align: top; ">
    <td style="padding-left: 0.5in"><a href="#a_020"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 15. CONTROLS AND PROCEDURES</span></a></td>
    <td style="text-align: center">116</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.5in"><a href="#a_021"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT</span></a></td>
    <td style="text-align: center">118</td></tr>
  <tr style="vertical-align: top; ">
    <td style="padding-left: 0.5in"><a href="#a_022"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 16B. CODE OF ETHICS</span></a></td>
    <td style="text-align: center">118</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.5in"><a href="#a_023"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES</span></a></td>
    <td style="text-align: center">118</td></tr>
  <tr style="vertical-align: top; ">
    <td style="padding-left: 0.5in"><a href="#a_024"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES</span></a></td>
    <td style="text-align: center">118</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.5in"><a href="#a_025"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS</span></a></td>
    <td style="text-align: center">118</td></tr>
  <tr style="vertical-align: top; ">
    <td style="padding-left: 0.5in"><a href="#a_026"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 16F. CHANGE IN REGISTRANT&#8217;S CERTIFYING ACCOUNTANT</span></a></td>
    <td style="text-align: center">119</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.5in"><a href="#a_027"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 16G. CORPORATE GOVERNANCE</span></a></td>
    <td style="text-align: center">119</td></tr>
  <tr style="vertical-align: top; ">
    <td style="padding-left: 0.5in"><a href="#a_028"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 16H. MINE SAFETY DISCLOSURE</span></a></td>
    <td style="text-align: center">119</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.5in"><a href="#a_029"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS</span></a></td>
    <td style="text-align: center">119</td></tr>
  <tr style="vertical-align: top; ">
    <td style="padding-left: 0.5in"><a href="#item16j">ITEM 16J INSIDER TRADING POLICIES</a></td>
    <td style="text-align: center">119</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><a href="#part3">PART III</a></td>
    <td style="text-align: center">120</td></tr>
  <tr style="vertical-align: top; ">
    <td style="padding-left: 0.5in"><a href="#a_030"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 17. FINANCIAL STATEMENTS</span></a></td>
    <td style="text-align: center">120</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.5in"><a href="#a_031"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 18. FINANCIAL STATEMENTS</span></a></td>
    <td style="text-align: center">120</td></tr>
  <tr style="vertical-align: top; ">
    <td style="padding-left: 0.5in"><a href="#a_032"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 19.EXHIBITS</span></a></td>
    <td style="text-align: center">120</td></tr>
  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</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>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

</div><div><a id="a_001"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>INTRODUCTION</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Unless we indicate otherwise and for the purpose
of this annual report only:</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">&#8220;ADRs&#8221; refers to
the American depositary receipts which, if issued, evidence the ADSs;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">&#8220;ADSs&#8221; refers to
American depositary shares, each of which represents three Class A ordinary shares;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">&#8220;Affected Entities&#8221;
refers to the middle schools that are affected by the Implementation Rules, and entities holding such middle school institutions or middle
school programs, which are listed in &#8220;Item 4. Information on the Company&#8212;C. Organizational Structure&#8221;;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">&#8220;affiliated entities&#8221;
refers to the entities that First High-School Education Group Co., Ltd. controls and consolidates through contractual arrangements, as
the context requires, including, collectively, Long-Spring Education Holding Group Limited, or Long-Spring Education, its subsidiaries
and our schools;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">&#8220;CAGR&#8221; refers to
compound annual growth rate;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">&#8220;China&#8221; or &#8220;PRC&#8221;
refers to the People&#8217;s Republic of China, excluding, for the purpose of this annual report only, Taiwan and the special administrative
regions of Hong Kong and Macau;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">&#8220;Class A ordinary shares&#8221;
refers to our Class A ordinary shares, par value US$0.00001 per share;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">&#8220;Class B ordinary shares&#8221;
refers to our Class B ordinary shares, par value US$0.00001 per share;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">&#8220;Double First Class University
Plan&#8221; refers to a tertiary education development initiative designed by the PRC government in 2015, which aims to comprehensively
develop elite Chinese universities into world-class institutions by the end of 2050 through developing and strengthening their individual
faculty departments;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">&#8220;first-tier universities&#8221;
refers to the first batch of universities that enroll students after Gaokao. First-tier universities generally have stronger comprehensive
strengths, such as school facilities, academic resources and research capabilities, among other things, and frequently gain special support
from the PRC central and local governments. To be admitted into a first-tier university, interested high school graduates must achieve
certain high scores set by the relevant PRC provincial education authorities and select such university in their general university applications;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">&#8220;Gaokao&#8221; refers
to the university entrance examinations administered in China;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">&#8220;Gaokao repeaters&#8221;
refers to the high school graduates who fail to achieve satisfying results in Gaokao or be admitted to the universities of their choosing,
and elect to repeat the last year of high school and retake Gaokao in the following year;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">&#8220;high school(s)&#8221;
refers to, for the purpose of this annual report, high school institutions or high school programs provided in our schools;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">&#8220;Implementation Rules&#8221;
refers to the Implementation Rules for Private Education Laws, which was issued by the PRC State Council on May 14, 2021 and became effective
on September 1, 2021;</span></td>
</tr></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="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">&#8220;middle school(s)&#8221;
refer to, for the purpose of this annual report, middle school institutions or middle school programs provided in our schools that also
provide high school programs;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">&#8220;ordinary shares&#8221;
refers to our ordinary shares, par value US$0.00001 per share and our Class A ordinary shares and Class B ordinary shares, par value
US$0.00001 per share;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">&#8220;our schools&#8221; refers
to Kunming Xishan Long-Spring Experimental Secondary School (<span>formerly known as</span> Resort District
Hengshui Experimental Secondary School), Kunming Chenggong Long-Spring Experimental Secondary School (formerly known as Yunnan Hengshui
Chenggong Experimental Secondary School), Yiliang Long-Spring Experimental Secondary School (formerly known as Yunnan Hengshui Yiliang
Experimental Secondary School), Yunnan Hengshui Experimental Secondary School&#8212;Xishan School, Qujing Hengshui Experimental Secondary
School, Yunnan Yuxi Hengshui Experimental High School, Yunnan Long-Spring Foreign Language Secondary School, Xinping Long-Spring Advanced
Secondary School (formerly known as Xinping Hengshui Experimental High School), Xishuangbanna Long-Spring Experimental Secondary School
(formerly known as Xishuangbanna Hengshui Experimental High School), Qiubei Long-Spring Experimental Secondary School (formerly known
as Yunnan Hengshui Qiubei Experimental High School), Wenshan Long-Spring Experimental Secondary School (formerly known as Yunnan Hengshui
Wenshan Experimental High School), Zhenxiong Long-Spring Advanced Secondary School (formerly known as Yunnan Hengshui Zhenxiong High
School), Mengla Long-Spring Experimental Secondary School (formerly known as Mengla Hengshui Experimental High School), Hengshizhong
Education Tutorial School, Guizhou Zunyi Tutorial School, Shaanxi Hengshi Tutorial School, Xinping Hengshui Experimental Middle School,
and Shaanxi Hengshui Experimental Middle School, unless otherwise specified, before the deconsolidation of the Affected Entities, and
Kunming Xishan Long-Spring Experimental Secondary School, Kunming Chenggong Long-Spring Experimental Secondary School, Yiliang Long-Spring
Experimental Secondary School, Yunnan Hengshui Experimental Secondary School&#8212;Xishan School, Qujing Hengshui Experimental Secondary
School, Yunnan Yuxi Hengshui Experimental High School, Yunnan Long-Spring Foreign Language Secondary School, Xinping Long-Spring Advanced
Secondary School, Xishuangbanna Long-Spring Experimental Secondary School, Qiubei Long-Spring Experimental Secondary School, Wenshan
Long-Spring Experimental Secondary School, Zhenxiong Long-Spring Advanced Secondary School, Mengla Long-Spring Experimental Secondary
School, Hengshizhong Education Tutorial School, Guizhou Zunyi Tutorial School, and Shaanxi Hengshi Tutorial School, unless otherwise
specified, after the deconsolidation of the Affected Entities, as the context requires;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">&#8220;RMB&#8221; or &#8220;Renminbi&#8221;
refers to the legal currency of China;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">&#8220;tutorial school(s)&#8221;
refers to, for the purpose of this annual report, tutorial school programs for Gaokao repeaters, unless otherwise specified;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">&#8220;US$,&#8221; &#8220;U.S.
dollars,&#8221; &#8220;$&#8221; or &#8220;dollars&#8221; refers to the legal currency of the United States of America;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">&#8220;VIE&#8221; refers to
Long-Spring Education Holding Group Limited;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">&#8220;Western China&#8221;
refers to Sichuan, Guizhou, Yunnan, Shaanxi, Gansu and Qinghai provinces, Inner Mongolia Autonomous Region, Tibet Autonomous Region,
Xinjiang Autonomous Region and Ningxia Autonomous Region and Chongqing municipality;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">&#8220;we,&#8221; &#8220;us,&#8221;
&#8220;our&#8221; or &#8220;our company&#8221; refers to First High-School Education Group Co., Ltd., its subsidiaries and its affiliated
entities; and</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">&#8220;Zhongkao&#8221; refers
to the high school entrance examinations administered in China.</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: 0.25in">We have made rounding adjustments to reach some
of the figures included in this annual report. Consequently, numerical figures shown as totals in some tables may not be arithmetic aggregations
of the figures that precede them.</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="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">First High-School Education Group Co., Ltd., our
ultimate Cayman Islands holding company, does not have any substantive operations other than indirectly controlling Long-Spring Education,
the VIE which controls and holds our schools, collectively as the affiliated entities, through certain contractual arrangements. Investors
in the ADSs are purchasing equity securities of our ultimate Cayman Islands holding company rather than purchasing equity securities of
the affiliated entities. We conduct our business operations through both our subsidiaries and the affiliated entities, which we effectively
control through certain contractual arrangements. We, together with the affiliated entities, are subject to PRC laws relating to, among
others, restrictions over foreign investments in education services set out in the Negative List (2021 Version) promulgated by the Ministry
of Commerce (&#8220;MOFCOM&#8221;), and the National Development and Reform Commission (&#8220;NDRC&#8221;). As a result, we have to control
over the affiliated entities through contractual arrangements. The VIE structure is used to replicate foreign investment in China-based
companies where the PRC law prohibits direct foreign investment in the operating companies. Neither we nor our subsidiaries own any share
in the affiliated entities. Instead, we control and receive the economic benefits of the affiliated entities&#8217; business operation
through a series of contractual agreements with the affiliated entities. The contractual agreements with the affiliated entities are designed
to provide Yunnan Century Long-Spring Technology Co., Ltd. (&#8220;Yunnan WFOE&#8221;) with the power, rights, and obligations equivalent
in all material respects to those it would possess as the principal equity holder of the affiliated entities, including absolute control
rights and the rights to the assets, property, and revenue of the affiliated entities. As a result of our direct ownership in Yunnan WFOE
and the contractual agreements with the affiliated entities, we are regarded as the primary beneficiary of the affiliated entities. Because
of our corporate structure, we are subject to risks due to uncertainty of the interpretation and the application of the PRC laws and regulations,
including but not limited to limitation on foreign ownership of private education entities, and regulatory review of oversea listing and
offering of securities of PRC companies through a special purpose vehicle, and the validity and enforcement of the contractual agreements.
We are also subject to the risks of uncertainty about any future actions of the PRC government in this regard. Our contractual agreements
may not be effective in providing control over the affiliated entities. We may also subject to sanctions imposed by PRC regulatory agencies
including Chinese Securities Regulatory Commission if we fail to comply with their rules and regulations.</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: 0.25in">We and the affiliated entities face various legal
and operational risks and uncertainties related to being based in and having significant operations in China. The PRC government has significant
authority to exert influence on the ability of a China-based company, such as us and the affiliated entities, to conduct its business,
accept foreign investments. For example, we and the affiliated entities face risks associated with regulatory approvals of offshore offerings,
oversight on cybersecurity and data privacy. Such risks could result in a material change in our operations and/or the value of the ADSs
or could significantly limit or completely hinder our ability to offer ADSs and/or other securities to investors and cause the value of
such securities to significantly decline or be worthless. The PRC government also has significant discretion over the conduct of the business
of us and the affiliated entities and may intervene with or influence our operations or the development of the private education industry
as it deems appropriate to further regulatory, political and societal goals. Furthermore, the PRC government has recently indicated an
intent to exert more oversight and control over overseas securities offerings and foreign investment in China-based companies like us.
Any such action, once taken by the PRC government, could significantly limit or completely hinder our ability to offer securities to investors
and cause the value of such securities to significantly decline or in extreme cases, become worthless. For relevant risks, see &#8220;Item
3. Key Information&#8212;D. Risk Factors&#8212;Risks Related to Doing Business in China.&#8221;</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: 0.25in">Our financial statements contained in the annual
report on Form 20-F for the years ended December 31, 2020, 2021 and 2022 have been audited by an independent registered public accounting
firm that is headquartered in Singapore and has been inspected by the Public Company Accounting Oversight Board (United States) (&#8220;PCAOB&#8221;)
on a regular basis, which was not included in the list of PCAOB Identified Firms of having been unable to be inspected or investigated
completely by the PCAOB in the PCAOB Determination Report issued in December 2021. We have not been identified by the U.S. Securities
and Exchange Commission (the &#8220;SEC&#8221;) as a non-inspection registrant under the Holding Foreign Company Accountable Act (the
&#8220;HFCAA&#8221;), as of the date of this annual report. <span>Additionally, in August 2022, the China
Securities Regulatory Commission (the &#8220;CSRC&#8221;), the Ministry of Finance of the PRC </span>(the &#8220;MOF&#8221;) <span>and
the PCAOB signed a Statement of Protocol (the &#8220;Statement of Protocol&#8221;), which establishes a specific and accountable framework
for the PCAOB to conduct inspections and investigations of PCAOB-governed accounting firms in mainland China and Hong Kong. On December
15, 2022, the PCAOB announced that it was able to secure complete access to inspect and investigate PCAOB-registered public accounting
firms headquartered in mainland China and Hong Kong completely in 2022. The PCAOB Board vacated its previous 2021 determinations that
the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong
Kong. </span>However, should PRC authorities obstruct or otherwise fail to facilitate the PCAOB&#8217;s access in the future, the PCAOB
Board will consider the need to issue a new determination. In the event that future regulators in China take steps to restrict the audit
firm&#8217;s access to working papers in mainland China or Hong Kong, or if the PCAOB is unable to fully inspect our audit working papers,
or if the PCAOB expands the scope of its determination so that we are subject to the HFCAA, it could restrict or limit our access to the
U.S. capital markets or in the over-the-counter trading market in the United States may be prohibited under the HFCAA. If, in the future,
we have been identified by the SEC for two consecutive years as a non-inspection registrant whose registered public accounting firm is
determined by the PCAOB that it is unable to inspect or investigate completely because of a position taken by one or more authorities
in China, the SEC may prohibit our shares or ADSs from being traded on a national securities exchange or in the over the counter trading
market in the United States. For more details about the risk on the HFCAA and its impact on us, see &#8220;Item 3. Key Information&#8212;D.
Risk Factors&#8212;Risks Related to Doing Business in China&#8212;Our shares and ADSs will be prohibited from trading in the OTC market
under the Holding Foreign Companies Accountable Act, if the PCAOB is unable to inspect or investigate completely our auditors for two
consecutive years. The cessation of trading of our ordinary shares, or the threat of their being prohibited from being traded, may materially
and adversely affect the value of your investment.&#8221;</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: 0.25in">Our reporting currency is Renminbi. This annual
report contains translations of certain foreign currency amounts into U.S. dollars for the convenience of the reader. Unless otherwise
stated, all translations of Renminbi into U.S. dollars were made at RMB6.8972 to US$1.00, the noon buying rate on December 30, 2022 as
set forth in the H.10 statistical release of the U.S. Federal Reserve Board. We make no representation that the Renminbi or U.S. dollar
amounts referred to in this annual report could have been or could be converted into U.S. dollars or Renminbi at any particular rate or
at all.</p><div>

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


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

</div><div><a id="a_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; text-indent: 0.25in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">This annual report contains forward-looking statements
about our current expectations and views of future events. These forward looking statements are made under the &#8220;safe-harbor&#8221;
provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements relate to events that involve known and unknown
risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from
those expressed or implied by these statements.</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: 0.25in">You can identify some of these forward-looking
statements by words or phrases such as &#8220;may,&#8221; &#8220;will,&#8221; &#8220;could,&#8221; &#8220;expect,&#8221; &#8220;anticipate,&#8221;
&#8220;aim,&#8221; &#8220;estimate,&#8221; &#8220;intend,&#8221; &#8220;plan,&#8221; &#8220;believe,&#8221; &#8220;is/are likely to,&#8221;
&#8220;propose,&#8221; &#8220;potential,&#8221; &#8220;should,&#8221; &#8220;continue&#8221; or other similar expressions. We have based
these forward-looking statements largely on our current expectations and projections about future events and financial trends that we
believe may affect our financial condition, results of operations, business strategy and financial needs. The forward-looking statements
included in this annual report relate to, among other things:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">our mission, goals and strategies;</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; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">our ability to retain and grow
customer base;</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; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">our future business development,
financial condition and results of operations;</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; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">expected changes in our revenue,
costs or expenditures;</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; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">our ability to manage and expand
the sales network and other aspects of our operations;</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; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">our projected markets and growth
in markets;</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; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">our potential need for additional
capital and the availability of such capital;</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; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">competition in our industry;</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; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">relevant government policies
and regulations relating to our industry;</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; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">general economic and business
conditions globally and in China; 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; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">assumptions underlying or related
to any of the foregoing.</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: 0.25in">You should read this annual report and the documents
that we refer to in this annual report completely and with the understanding that our actual future results may be materially different
from and worse than what we expect. Moreover, new risk factors and uncertainties emerge from time to time and it is not possible for our
management to predict all risk factors and uncertainties, 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 qualify all of our forward-looking statements by these cautionary statements.</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: 0.25in">This annual report also contains certain data
and information that we obtained from various government and private publications. Statistical data in these publications include projections
based on a number of assumptions. Failure of the market to grow at the projected rate may have a material adverse effect on our business
and the market price of the ADSs. In addition, projections or estimates about our business and financial prospects involve significant
risks and uncertainties. Furthermore, if any one or more of the assumptions underlying the market data are later found to be incorrect,
actual results may differ from the projections based on these assumptions. You should not place undue reliance on these forward-looking
statements.</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: 0.25in">The forward-looking statements made in this annual
report relate only to events or information as of the date on which the statements are made in this annual report. Except as required
by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information,
future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. Comparisons
of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless
specifically expressed as such, and should only be viewed as historical data.</p><div>

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


</div><!-- Field: Page; Sequence: 7 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: LowerRoman; Name: PageNo -->v<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

</div><div><a id="a_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; text-indent: 0.25in"><b>&#160;</b></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"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Not applicable.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Not applicable.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><span style="text-decoration:underline">A. <i>[Reserved]</i></span></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><span style="text-decoration:underline">B. Capitalization and Indebtedness</span></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Not applicable.</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"><b><span style="text-decoration:underline">C. Reasons for the Offer and Use of Proceeds</span></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Not applicable.</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"><b><span style="text-decoration:underline">D. Risk Factors </span></b></p><div>

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

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><i>Our business is subject to a number of risks,
including risks that may prevent us from achieving our business objectives or may adversely affect our business, financial condition,
results of operations, cash flows, and prospects. These risks are discussed more fully below and include, but are not limited to, risks
related to:</i></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"><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">&#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"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">our efforts to be in compliance
with the Implementation Rules materially and adversely affecting our business, financial condition, results of operations and prospect
in the future;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">our limited operating history,
which makes it difficult to predict our prospects and our business and financial performance;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">potential contractual disputes
in relation to the sponsorship in the schools that local governments may claim to have sponsor interests, which could cause us to lose
control of the affected schools if any such contractual dispute were to judicially determined against us;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">new legislation or proposed
changes in the PRC regulatory requirements regarding private education, which may cast doubt on the legality of our contractual arrangements
and our revenue derived from the running of schools pursuant to our contractual arrangements;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">our ability to execute our
growth strategies, continue to grow rapidly or manage our growth effectively, which may negatively affect our prospects and our business
and financial performance;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">our ability to charge tuition
and boarding fees at sufficient levels to be profitable or increase our fee level, which may negatively affect our profitability;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">our ability to enroll and retain
a sufficient number of students, which may negatively affect our profitability;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">potential unfavorable changes
in our cooperative relationships with local governments or favorable government policy treatment, which could negatively affect our current
business model and/or result in disputes with the relevant local governments;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">our ability to obtain all required
approvals, licenses and make all required registrations for our education services and business operations, which could subject us to
fines and penalties and order to cease operation in the case of non-compliance;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">our ability to integrate businesses
we acquired or plan to acquire in the future, which may negatively affect our expansion;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">our ability to attract and
retain a sufficient number of qualified teachers and principals, which could negatively affect our business if we experience a shortage
of high-quality teachers and principals;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>


</div><!-- Field: Page; Sequence: 8; Options: NewSection; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->1<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">our ability to maintain the
market recognition of our brand and our reputation; and</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">accidents, injuries or other
harm at our school premises or otherwise arising from or in connection with our education services, which could subject us to tort liabilities.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0"><b><i>Risks related to our corporate structure </i></b></p><div>

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

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">compliance of the contractual
arrangements that establish our corporate structure for operating our business, which could subject us to penalties if the PRC government
finds that our corporate structure and contractual arrangements does not comply with applicable PRC laws and regulations;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">uncertainties in the interpretation
of newly issued rules, regulatory actions and statements related to VIE and private schools, under which we may be unable to assert our
contractual rights over the assets of the affiliated entities;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">failure by the VIE or its shareholders
to perform their obligations under our contractual arrangements with them, which could force us to rely on legal remedies under PRC laws
to enforce the contractual arrangements, which may not be effective;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">uncertainties with respect
to the interpretation and implementation of the newly enacted Foreign Investment Law and its impact on the viability of our current corporate
structure, which could require us to take additional actions with respect to, or modify or unwind, our current contractual arrangements
to the extent required by any unfavorable interpretation or implementation; and</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">actual or potential conflicts
of interest of shareholders of the VIE with us, which could cause such shareholders not to act in the best interests of our company.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0"><b><i>Risks related to doing business in China </i></b></p><div>

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

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">changes in China&#8217;s economic,
political or social conditions or government policies, laws and regulations, which could adversely affect the education services market
and harm our business;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">uncertainties with respect
to the PRC legal system, which may affect our decisions on the policies and actions to be taken to comply with PRC laws and regulations;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">any actions by the Chinese
government may cause us to make material changes to the operation of our PRC subsidiaries or the affiliated entities;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">significant uncertainties in
the application and interpretation of the Law on Promoting Private Education, the Implementation Rules and their detailed implementation
rules and regulations;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">increased regulatory scrutiny
focus on U.S.-listed companies with operations in China, which could add uncertainties to our business operations, share price and reputation;
and</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">difficulty for overseas regulators
to conduct investigations or collect evidence within China, which could increase difficulties you face in protecting your interests.</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Risks related to the ADS</i></b></p><div>

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

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">delisting of our ADSs from
NYSE, which may continue to have a material adverse effect on the trading and price of our ADSs;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">volatility of the trading price
of the ADSs;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">the sale or availability for
sale of substantial amounts of the ADSs; and</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">impact of our dual-class share
structure on the ability of holders of our Class A ordinary shares and ADSs to influence corporate matters, which, among other things,
will limit your ability to influence corporate matters and could discourage others from pursuing any favorable change of control transactions.</span></td>
</tr></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="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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"><b>Risks Related to Our Business and Industry</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Our efforts to be in compliance with the Implementation Rules
has materially and adversely affected and may continue to materially and adversely affect our business, financial condition, results of
operations and prospect in the future. </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: 0.25in">On May 14, 2021, the PRC State Council promulgated
the amended Implementation Rules for Private Education Laws (the &#8220;Implementation Rules&#8221;), which became effective on September
1, 2021. Pursuant to the Implementation Rules, (1) foreign-invested enterprises established in China and social organizations whose actual
controllers are foreign parties shall not sponsor, participate in or actually control private schools that provide compulsory education,
(2) social organizations or individuals shall not control any private school that provides compulsory education or any non-profit private
school that provides pre-school education by means of, among others, merger, acquisition and contractual arrangements, and (3) private
schools providing compulsory education shall not conduct any transaction with any related party, and any other private school conducting
any transaction with any related party shall follow the principles of openness, fairness and impartiality, fix the price reasonably and
regulate the decision-making, and shall not damage the interests of the state and the school or the rights and interests of the teachers
and students, which may impose restrictions on the above-mentioned related party transactions. Such prohibition has significantly affected
the enforceability of the exclusive management services and business cooperation agreements with affiliated entities providing compulsory
education.</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: 0.25in">The Implementation Rules have had significant
impacts on our business operations and our results of operations. As a result of the effectiveness of the Implementation Rules, we have
lost control over the Affected Entities as from September 1, 2021, which primarily include the middle schools providing compulsory education
and the sponsor entities within China that are affected by the Implementation Rules. Consequently, we classified the operation for the
Affected Entities as discontinued operations. We have determined that, in substance, we had ceased to recognize revenues for all activities
related to the Affected Entities and had discontinued all business activities with such entities by September 1, 2021 except for the continued
provision of essential services to keep these schools in normal operations. Such discontinuation has had a material and adverse impact
on our business, financial condition and results of operations. Our ability to engage in the compulsory education in China has been materially
and adversely affected, and we cannot assure you that we will be able to restore such ability, which could materially and adversely affect
our business, prospects, results of operations and financial condition.</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"><b><i>We have limited operating history, which makes it difficult to
predict our prospects and our business and financial performance. </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: 0.25in">We have a limited operating history of 10 years.
Although our first school established in 2012, the majority of our schools were established in or after 2017. Our limited operating history
may not serve as an adequate basis for evaluating our prospect and results of operations, including revenues, cash flows and operating
margins. We have encountered, and may continue to encounter in the future, risks, challenges and uncertainties associated with operating
a private education business, such as addressing regulatory compliance and uncertainty, engaging, training and retaining high-quality
teachers, and expanding our school network. If we do not manage these risks successfully, our operating and financial results may differ
materially from our expectations and our business and financial performance may suffer.</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: 0.25in">In addition, as some of our schools commenced
operations recently, they have not yet reached their full capacity. For newly established schools, we only admit students for the entry
classes, such as the tenth grade for high schools, but not higher grades, upon the establishment of a new school, which leads to a relatively
lower utilization rate for such schools. With our existing students progressing into the next grades in school and as we fill up new entry
classes, the utilization rates of our newly established schools will increase accordingly. We cannot assure you that we will be able to
successfully increase the utilization rate for the schools that are in the ramp-up stage, which may materially and adversely affect our
business growth and profitability.</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"><b><i>If local governments claim to have sponsor interests in certain
of our schools, we could be subject to contractual disputes in relation to the sponsorship in those schools or the entry into contractual
arrangements over those schools. </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: 0.25in">We primarily collaborate with local governments
to establish and operate our schools. The cooperative arrangements for a total of 15 schools provide that the local governments retain
ownership in the affected schools&#8217; &#8220;ownership assets&#8221; without defining what constitutes such assets. It is possible
that &#8220;ownership assets&#8221; could be interpreted in a way to include sponsor interest, in which case, the local governments may
have a claim over the sponsor interest in the affected schools. We have obtained written statements from local governments for all of
the seven schools confirming our understanding that &#8220;ownership assets&#8221; refer to real estate and tangible assets that local
governments provided.</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: 0.25in">In addition, the school operation permits for
Yunnan Hengshui Experimental Secondary School&#8212;Xishan School and Yunnan Yuxi Hengshui Experimental High School provide that the local
governments and Long-Spring Education are co-sponsors of such schools. We have obtained written statements for Yunnan Hengshui Experimental
Secondary School&#8212;Xishan School and Yunnan Yuxi Hengshui Experimental High School from the local governments confirming our understanding
that the sponsor interests of such schools belong to Long-Spring Education. As of the date of this annual report, we are in the process
of amending these permits to designate Long-Spring Education as the sole sponsor.</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: 0.25in">Furthermore, according to the list released by
People&#8217;s Government of Xishan District on March 30, 2022 and our recent communication with such government authority, Yunnan Hengshui
Experimental Secondary School&#8212;Xishan School may be turned into a public school upon further determination. As of the date of this
annual report, we are in the process of communicating with the competent authorities on such matter.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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-indent: 0.25in">To the extent that any local government has a
claim over the sponsor interest in or control over any of our schools, we could be subject to contractual disputes. For example, the government
claimants could argue that they have de facto sponsor interest in the affected schools per our cooperative arrangements and that the entry
into the contractual arrangements in relation to the affected schools have infringed their interests. If the government claimants successfully
persuaded the court to rule in their favor, we could lose control over the affected schools and may be unable to receive the full rights
and economic benefits of any or all of those schools, in which case we would no longer be able to include the operating results of those
schools in our consolidated financial statements, which in turn would materially and adversely affect business, results of operation and
financial condition.</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">

</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Uncertainties exist in relation to new legislation or proposed
changes in the PRC regulatory requirements regarding private education, which may materially and adversely affect our group structure,
our business, financial condition and results of operation.</i></b><i> </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-indent: 0.25in">Pursuant to the Law on Promoting Private Education of the PRC (the
&#8220;Private Education Law&#8221;), last amended and becoming effective on December&#160;29, 2018, sponsors of private schools may choose
to establish schools in China as either non-profit or for-profit schools. Sponsors are not permitted to establish for-profit schools that
provide compulsory education services, which cover grades one to nine. Sponsors of for-profit private schools are entitled to retain the
profits from their schools and the operating surplus may be allocated to the sponsors pursuant to the PRC Company Law and other relevant
laws and regulations. Sponsors of non-profit private schools are not entitled to any distribution of profits from their schools and all
revenues must be used for the operation of the schools. For further details, see &#8220;Item 4. Information on the Company&#8212;B. Business
Overview&#8212;Regulations&#8212;Regulations on Private Education in the PRC&#8212;The Law on Promoting Private Education.&#8221; Our
school sponsors have registered Xinping Long-Spring Advanced Secondary School, and Xishuangbanna Long-Spring Experimental Secondary School
as for-profit private schools and have registered Kunming Chenggong Long-Spring Experimental Secondary School, Yiliang Long-Spring Experimental
Secondary School, Qujing Hengshui Experimental Secondary School, Xinping Hengshui Experimental Middle School, Qiubei Long-Spring Experimental
Secondary School, and Wenshan Long-Spring Experimental Secondary School as non-profit private schools, while have not submitted classified
registration materials for the rest of our schools as for-profit or non-profit educational institutions. We cannot assure you that our
current intention to register some of our schools as non-profit educational institutions will not materially and adversely affect our
business, financial condition and results of operations. As a holding company, our ability to generate profits, pay dividends and other
cash distributions to our shareholders under the Private Education Law is affected by many factors, including but not limited to the characterizations
of our schools as for-profit or non-profit schools, the profitability of our schools and other affiliated entities, and our ability to
receive dividends and other distributions from our wholly-owned PRC subsidiary, Yunnan WFOE, which in turn depends on the service fees
paid to Yunnan WFOE from our schools and other affiliated entities. If our schools are unable to be registered as for-profit private education
entities, the approval of which is subject to the discretion of government authorities, our contractual arrangements with such schools
may be subject to more stringent scrutiny. Furthermore, pursuant to the Private Education Law, sponsors are not permitted to establish
for-profit schools if such schools provide compulsory education services, which cover grades one to nine. Nevertheless, during the reporting
period, compulsory education services accounted for a significant portion of our student base as well as revenue.</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: 0.25in">In addition, the Opinions on Further Strengthening
and Regulating the Administration of Education Fees (the &#8220;Opinions&#8221;), which were issued on August 17, 2020 by the MOE, the
National Development and Reform Commission, the Ministry of Finance, the State Administration of Market Regulation and the National Press
and Publication Administration, reiterate the provision from the decision that the sponsors of non-profit privately-run schools may not
obtain proceeds from the running of schools. The Opinions further provide that the sponsors of non-profit privately-run schools and non-profit
Sino-foreign cooperative educators may not obtain proceeds from the running of schools such as tuition income, distributing school balances
(residual assets) or transferring proceeds from the running of schools through related-party transactions or affiliated parties or other
means. The Opinions have not specified (1) whether the contractual arrangements fall within the activities of transferring the proceeds
from the running of schools through profit privately-run schools and non-profit Sino-foreign cooperative educators may not obtain proceeds
from the running of schools such as tuition income, distributing school balances (residual assets) or transferring proceeds from the running
of schools through related-party transactions or affiliated parties or other means, (2) the relevant legal consequences of engaging in
activities through contractual arrangements, or (3) the scope of proceeds from the running of schools by listing other possible income
sources such as meal and accommodation services.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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-indent: 0.25in">We are entitled to the tuition and boarding fees
to be paid by our schools that are largely derived from the proceeds from the running of schools pursuant to our contractual arrangements.
See &#8220;Item 4. Information on the Company&#8212;C. Organizational Structure&#8212;Our Contractual Arrangements.&#8221; If any law
and regulation that may be promulgated in the future further defines the contractual arrangements, including ours, as related-party transactions
transferring proceeds from the running of schools, we may not obtain the part of the tuition and boarding fees under our contractual arrangements
that is funded by proceeds from the running of schools. As advised by our PRC legal counsel, Beijing Zhongwen Law Firm, the Opinions do
not affect the legality of our contractual arrangements in accordance with applicable PRC laws and regulations, as the provisions under
the Opinions did not render the contractual arrangements invalid under the Civil Code of the PRC. As of the date of this annual report,
however, we have not sought declaration from the relevant government authorities as to the legality of our contractual agreements under
the Opinions, and we are not aware of any official administrative or judicial declaration on, or interpretation of, the Opinions, especially
as applied to contractual or other similar arrangements under which we operate. We are also not aware of when official administrative
or judicial declaration or interpretation on that matter will be released, if at all, and we cannot assure you that the Opinions will
not be interpreted, or further laws and regulations will not be promulgated, in a way that would affect or impair our ability to retain
the tuition and boarding fees under the contractual arrangements in the future. Our business, financial condition and results of operations
would be materially and adversely affected if we are unable to obtain any or all of the tuition and boarding fees to be paid by our schools
under the contractual arrangements.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>We may not be able to execute our growth strategies, continue
to grow rapidly or manage our growth effectively. </i></b></p><div>

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

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">We have experienced steady growth and expansion
since the establishment of our first secondary school in 2014. We plan to continue to expand our operations in different geographic locations
in China primarily by (1) entering into partnerships with local governments and independent third parties; (2) establishing new self-owned
schools; and (3) acquiring additional schools if there are suitable targets.</p><div>

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

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">However, we may not be able to continue to grow
as we did in the past due to uncertainties involved in the process as follows:</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">we may not be able to attract
and retain a sufficient number of students for our existing and new schools;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">we may not be able to hire,
retain and train qualified teachers, and attract and retain management, administrative and marketing personnel for our existing and new
schools;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">we may be unable to optimize
our student&#8217;s academic performance as expected;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">we may be unable to adequately
update our operational, administrative and technological systems and strengthen our financial and management controls to support our
future expansion;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">we may be unable to keep strengthening
our operational, administrative and technological systems, our financial and management controls;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">the development and acquisitions
of new schools may be delayed or affected as a result of many factors, such as delays in obtaining government approvals or licenses,
and changes in applicable laws and regulations, some of which are beyond our control;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">we may not be able to maintain
and enhance our brand name and reputation;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">we may be unable to successfully
execute new growth strategies; and</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">we may be unable to successfully
integrate entities we have established or acquired into our operations.</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">These risks may increase significantly as we expand
into new geographical areas. We may find it difficult to manage our financial resources, implement uniform education standard and operational
policies and maintain consistency across our network. There are no guarantees that we will be able to effectively manage any future growth
in an efficient, cost-effective and timely manner, or at all. Our growth in a relatively short period of time is not necessarily indicative
of results that we may achieve in the future.&#160;In addition, local governments and cooperative partners may have interests which are
not entirely in line with ours and may consider their own interests or the interests of other stakeholders of schools in making cooperation
decisions, and as a result, we may be unable to execute our expansion plan and growth strategies in a cost-effective or timely manner,
or at all. Any failure in our management and execution of our expansion plan may materially and adversely affect our ability to capitalize
on new business opportunities, which in turn may 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-indent: 0.25in">&#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 -->5<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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-indent: 0.25in">These risks may increase significantly as we expand
into new geographical areas. We may find it difficult to manage our financial resources, implement uniform education standard and operational
policies and maintain consistency across our network. There are no guarantees that we will be able to effectively manage any future growth
in an efficient, cost-effective and timely manner, or at all. Our growth in a relatively short period of time is not necessarily indicative
of results that we may achieve in the future. In addition, local governments and cooperative partners may have interests which are not
entirely in line with ours and may consider their own interests or the interests of other stakeholders of schools in making cooperation
decisions, and as a result, we may be unable to execute our expansion plan and growth strategies in a cost-effective or timely manner,
or at all. Any failure in our management and execution of our expansion plan may materially and adversely affect our ability to capitalize
on new business opportunities, which in turn may 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-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>We may be unable to charge tuition and boarding fees at sufficient
levels to be profitable or increase our fee level. </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: 0.25in">Our revenues are primarily driven by our tuition and boarding fees.
For 2020, 2021 and 2022, tuition income accounted for 80.2%, 77.4% and 82.3% of our total revenues, respectively, and our boarding fees
accounted for 5.1%, 5.7% and 2.2% of our total revenues, respectively, for the same periods. Subject to applicable regulatory requirements,
we determine our tuition and boarding fee rates based on many factors, including market supply and demands for our education, our cost
of operations, the quality of education services we provide, the geographic area we operate in, and general economic conditions of the
PRC. Although we have been able to increase the tuition and boarding fees we charge our students at certain schools in the past, we cannot
guarantee that we will be able to maintain or increase our tuition in the future without adversely affecting the demand for our education
services. Our competitive advantage might be adversely affected if we fail to implement the optimal pricing strategy to maintain our profitability,
which could adversely affect our student enrollments and consequently our revenues and cash flow.</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: 0.25in">As part of our cooperation with local governments,
we admit a certain number of local students on behalf of the government as publicly-sponsored students. These students pay us tuition
typically at the level of public schools, which are usually lower than the normal tuition we charge, and under our cooperative arrangements
with local governments for certain of our schools, we may receive government subsidies to make up for the tuition difference. As of December
31, 2020, 2021 and 2022, the number of publicly-sponsored students in our schools was 6,755, 7,993 and 8,293, respectively, accounting
for 43.2%, 47.1% and 47.8% of our total students for our continuing operations as of the same dates. We have limited discretion in increasing
the tuition for publicly-sponsored students, and the government subsidies have an upper limit which we may gradually use up over a number
of years. We intend to re-negotiate with the local governments to obtain additional government subsidies to cover the tuition difference
for the publicly-sponsored students after we use up the upper limit or our cooperative arrangements with local governments expire. If
our re-negotiation efforts fail, or if we cannot collect the outstanding amount of government subsidies on time, we would be unable to
make up for the price difference for publicly-sponsored students, which would materially and adversely affect our profitability.</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: 0.25in">The tuition and boarding fees we charge are subject
to regulatory restrictions. While we are not required to obtain pre-approval from relevant authorities before raising our tuition and
boarding fees in Yunnan province, China where most of our schools are located, we are generally required to file and record our price
increase with local governments, who in turn still maintain certain level of control and oversight of our operation. We might also be
inspected by relevant pricing authorities in the future, which could result in negative adjustments in our tuition and boarding fees and
material disruption of our operations.</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: 0.25in">Furthermore, the tuition we may charge is subject
to a number of other factors, such as the perception of our brand, the academic results achieved by our students, our ability to hire
qualified teachers, and local economic conditions. Any significant deterioration in these factors could have a material adverse effect
on our ability to charge tuition at levels for us to remain profitable.</p><div>

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


</div><!-- Field: Page; Sequence: 13 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->6<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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"><b><i>If we fail to enroll and retain a sufficient number of students,
our business could be materially and adversely affected. </i></b></p><div>

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

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Our ability to continue to enroll and retain students
for our schools is critical to the continued success and growth of our business. The success of our efforts to enroll and retain students
will depend on several factors, including our ability to:</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">enhance existing education
programs and services to respond to market changes and student demands;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">develop new programs and services
that appeal to our students and their parents;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">maintain and enhance our reputation
and brand recognition as a leading school operator;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">expand our school network and
geographic reach;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">effectively market our schools
and programs to a broader base of prospective students;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">manage our growth while maintaining
consistency of our teaching quality;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">maintain cooperative relationships
with local governments; and</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">respond to increasing competition
in the market.</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">In addition, local and provincial government authorities
may impose restrictions on the number of students we can enroll. Our business, financial condition and results of operations could be
materially and adversely affected if we cannot maintain or increase our student base as we expand our school network.</p><div>

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

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Our ability to maintain sufficient cash to fund our operations
depends on our financing activities. </i></b></p><div>

</div><p style="text-align: left; font: 10pt 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: 0.25in">Our ability to maintain sufficient cash to fund
our operations depends on our financing activities. In August 2020 and November 2021, we entered into sale and leaseback arrangements
with certain financing leasing companies for net financing proceeds of RMB93.5 million and RMB50.0 million (US$7.8 million), respectively.
Under the sale and leaseback arrangements, Yunnan WFOE, Long-Spring Education, Yunnan Long-Spring Logistics Service Co., Ltd. and ten
of our schools, or collectively the lessees, sold certain equipment, including computers, projectors and printers, to the lessors. Concurrent
with the sale of the leased equipment, the lessees lease back all of the leased equipment sold to the lessor for a lease term of two or
three years. We consider the substance of the transaction to be debt financing in nature and no gain or loss is recognized upon the sale
of these assets. If the lessees fail to make lease payments in full and timely or there be any material adverse change in our business,
the lessor has the right to immediately collect the total lease payments, request for penalty on late payment, and/or retrieve the leased
equipment. As a result, our ability to maintain sufficient cash to fund our operations could be diminished, which may materially and adversely
affect our business, financial condition and results of operations.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Any unfavorable changes in our cooperative relationships with
third parties or favorable government policy treatment may adversely affect our business. </i></b></p><div>

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

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Our asset-light business model, under which we
form mutually beneficial cooperative arrangements with third parties, including local governments and real estate developers, has allowed
us to grow rapidly and expand with light capital commitments and have more flexibility in our allocation of financial resources. Under
such arrangements, our partners contributed or leased to us land and/or school facilities, and our government partners also granted to
us favorable tax treatments or other forms of favorable government policies or support, while we contributed our expertise in operating
private schools, teachers, as well as operating expenses of the schools and capital expenditures to construct and renovate school facilities.</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: 0.25in">If our relationship with our partners deteriorates
or favorable government policies and support cease to be available, we may incur substantial amount of expenses in connection with our
infrastructure, promotion, and other matters relating to school establishment and operations, which may materially and adversely affect
our business, financial condition and results of operations. We may also be unable to form cooperative relationship with third parties
in the geographic areas we plan to enter and expand into, which would materially and adversely affect our ability to grow as quickly as
planned or maintain historical growth rates.</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: 0.25in">The cooperative arrangements for five schools
within our network have provided that the local government has the right to appoint a majority of a school&#8217;s board of supervisors,
which shall be the supreme decision-making body in school management. As of the date of this annual report, we obtained written statements
from local governments for four of such schools confirming that the school council or board of director should be the decision-making
body for such schools. To the extent any of these local governments changes their view toward our collaborative relationships and claims
to have control in these schools, we could be subject to contractual disputes with the local governments in relation to the management
of such schools.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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 -->7<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;We are also required to meet certain academic
performance targets pursuant to the cooperative agreements. If we fail to meet such performance targets, we may be found in breach of
the agreements and be unable to continue our cooperation with the relevant governments, which may materially and adversely affect our
relationship with the relevant governments, as well as our business, financial condition and results of operations. We may also be unable
to enter into similar cooperation agreements with third parties in the future, which may materially and adversely affect our business,
financial condition and results of operations.</p><div>

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

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>We may be unable to obtain all required approvals, licenses and
make all required registrations for our education services and business operations, and may be subject to fines and penalties if the operations
of our business do not comply with applicable PRC laws and regulation. </i></b></p><div>

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

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">In order to conduct our business and operate our
schools in China, we are required to obtain and maintain various approvals, licenses and permits and fulfill registration and filing requirements.
For example, to establish and operate a school in the PRC, we are required to obtain a private school operation permit from the local
education bureau and register with the local civil affairs bureau to obtain a certificate of registration for a privately-run non-enterprise
unit for a non-profit school, or register with the local market supervision and administration department to obtain a business license
for a for-profit school. Such local regulatory authorities may also conduct annual inspection of our schools. We currently hold valid
private school operation permits for all of our operating schools except for Shaanxi Hengshi Tutorial School and Shaanxi Hengshui Experimental
Middle School, which are still in the process of obtaining a private school operation permit and registering with the local market supervision
and administration department or the local civil affairs bureau, and Hengshizhong Education Tutorial School for which the private school
operation permit has been cancelled. For such schools which conduct business before we can obtain a private school operation permit, we
may be subject to order to cease our operation, refund the income we collected and a fine ranging from one to five times of the income
the sponsor collected. We cannot guarantee that all of our existing schools will be able to renew their permits, or that all of our newly
opened schools will be able to receive operation permits in a timely manner or at all, which may materially and adversely affect our business
and results of operations.</p><div>

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

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">A total of 14 of our schools have not set up their
own on-site medical clinics, all of such schools are in the process of engaging third-party hospitals and/or medical clinics with valid
practice license to provide healthcare services on campus, and recruiting a sufficient number of medical care personnel. However, we cannot
assure you that we may be able to obtain all relevant practice licenses, retain third-party licensed medical care providers or otherwise
fully comply with the relevant laws and regulations relating to on-site medical clinics at all of our current locations in a timely manner
or at all, and we may be subject to orders to rectify within a specified period of time.</p><div>

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

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">While we intend to obtain all requisite permits,
approvals and complete the necessary filings, renewals and registrations on a timely basis for our schools, there is no assurance that
we will be able to obtain all required permits given the significant amount of discretion the local PRC authorities may have in interpreting,
implementing and enforcing relevant rules and regulations, as well as other factors that are beyond our control and anticipation. If we
fail to receive required permits in a timely manner or obtain or renew any permits and certificates, we may be subject to fines, confiscation
of the gains derived from our non-compliant operations, the suspension of our non-compliant operations or disgorgement of our profits
to compensate for any economic loss suffered by our students or other relevant parties, which may materially 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-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>We may not be able to successfully integrate businesses we acquired
or plan to acquire in the future, which may adversely affect our business growth. </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: 0.25in">We have expanded rapidly primarily through organic
growth. We have, in the past, acquired an underperforming high school and successfully turned it into a high-quality high school with
solid academic results. We may attempt to make similar acquisitions in the future. The integration of acquired schools is complicated
and time-consuming and requires significant resource commitment, standardized integration process, and adequate planning and implementation.
We may not successfully integrate the schools we acquire in a timely manner and may not effectively and efficiently manage our expansion,
which would have a material adverse effect on our financial condition and results of operations. In addition, as advised by our PRC legal
counsel, our plan to pursue further expansion through acquisitions could be affected by regulatory uncertainty in connection with the
Private Education Law and related implementation rules.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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"><b><i>We may be unable to engage with the Affected Entities to provide
education services as we expected.</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: 0.25in">Following the effectiveness of the Implementation
Rules, we have been engaging with the relevant government authorities and external advisors to seek full compliance with the Implementation
Rules and other applicable PRC laws and regulations. However, we are exploring the possibility of continuing to engage with the Affected
Entities in future cooperation on mutually acceptable terms and in full compliance with the Implementation Rules and other applicable
PRC laws and regulations. The future cooperation may involve our provision of management services to the Affected Entities, such as consultation
for school operation, catering and accommodation, property management and maintenance, administrative management, student admission and
school branding. However, the future cooperation with the Affected Entities, if any, will be arm&#8217;s length transactions on mutually
acceptable terms, and we cannot assure you that the cooperation under contemplation will be specifically permitted by competent government
authorities or that we will be able to agree on commercial terms satisfactory to us, and as such, we may be unable to effectuate the cooperation
with the Affected Entities as we expect.</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"><b><i>We may not be able to attract and retain a sufficient number
of qualified teachers and principals. </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: 0.25in">As an education service provider, our ability
to recruit and retain qualified teachers and principals is crucial to the quality of our education and services and our brand and reputation.
To ensure our successful operation and growth, we need to retain and continue to hire high-quality teachers specialized in specific subjects
that are able to teach the courses we offer or plan to offer to our students, as well as high-quality principals who are able to effectively
manage the operation of our schools. We must provide competitive compensation and benefits packages to attract and retain qualified candidates.
However, there is no guarantee that we would be able to keep recruiting teachers and principals meeting the high standards in the future,
or retain our current, high-quality teachers and principals, especially when we seek a more rapid expansion plan to meet the growing demands
for our services. Furthermore, under our business model, we may not be able to provide extensive training to our newly hired teachers
for them to familiarize with our teaching methods and to retain existing teachers who can provide such trainings. A shortage of high-quality
teachers and principals, a decrease in the quality of our teachers&#8217; and principals&#8217; performance, whether actual or perceived,
or a significant increase in the cost to engage or retain high-quality teachers and principals would 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-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>We may not be able to maintain the market recognition of our
brand and our reputation. </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: 0.25in">Our success depends heavily on our reputation.
We might face potential difficulties in maintaining our reputation and brand recognition, which could adversely affect our student enrollments
and results of operations. Our ability to maintain our brand and reputation could be affected by many factors, some of which are beyond
our control, including: our ability to deliver satisfactory academic results, the teaching quality of our teachers, the academic quality
and achievements of our students, news report about our company, our schools or our partners, results of government inspections or compliance
with relevant regulations, unauthorized use or other infringement of our copyright and brand by third party, campus incidents, especially
safety incidents, and any kind of disruption of our education services.</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: 0.25in">We have developed our student base mainly through
word-of-mouth referrals. Our other promotion efforts include participating in education fairs organized by local governments and distributing
relevant promotional materials in connection with such fairs. However, we cannot guarantee that our promotional efforts will be enough
to maintain or enhance our reputation in the marketplace to remain competitive. Our promotional efforts may be insufficient to enhance
our brand recognition and reputation and we may incur excessive expenses for our promotions, which may adversely affect our business.</p><div>

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


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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><i>Accidents, injuries or other harm at our school premises or otherwise
arising from or in connection with our education services may adversely affect our reputation and subject us to liabilities. </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: 0.25in">We may be subject to liabilities arising from
accidents or injuries or other harm to students or other people on our school premises, including those caused by or otherwise arising
in connection with our school facilities, employees or education services. We could also face claims alleging that we were negligent,
provided inadequate maintenance to our school facilities or supervision of our employees and therefore may be held liable for accidents
or injuries suffered by our students or other people at our schools. In addition, if any of our students or our employees or contractors
commits unlawful acts or displays seriously inappropriate behavior, we could face allegations that we failed to provide adequate security,
supervision or were otherwise responsible for his or her actions, even if such acts or behavior may occur off our school premises. As
an education services provider, we may be held liable for other accidents, injuries or other harm in relation to our education services
and students, such as commuting to our schools and extracurricular activities. We may also be subject to liabilities arising from out-of-school
activities or events which we organize or involve in. As a result, our schools may be perceived to be unsafe, which may discourage prospective
students from applying to or attending our schools.</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: 0.25in">Our schools have also outsourced the operation
of all of our meal catering services to third parties since September 2017. We cannot assure you that we will be able to maintain the
quality of food or monitor the meal preparation process to ensure its quality, that service providers adhere to food quality standards,
or that no incidents resulted from food quality will occur in the future. In the event of incidents arising from poor quality food that
result in any serious health violations or medical emergencies, such as mass food poisonings, our business and reputation could be materially
and adversely affected.</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: 0.25in">Furthermore, although we maintain certain liability
insurance, the insurance coverage may not be adequate to fully protect us from these kinds of claims and liabilities. In addition, we
may not be able to obtain liability insurance in the future at reasonable prices or at all. A liability claim against us or any of our
employees could adversely affect our reputation, student enrollment and retention, and teacher recruitment and retention. Such a claim,
even if unsuccessful, could create unfavorable publicity, incur substantial expenses for us and divert the time and resources of our management,
all of which may have a material and adverse effect on our business, prospects, financial condition and results of operations.</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"><b><i>Failure to adequately and promptly respond to changes in examination
systems, admission standards, test materials, teaching methods and regulation changes in the PRC could render our education services less
attractive to students. </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: 0.25in">Our reputation, student enrollment, and results
of operations depend in part on our ability to prepare our students for various tests and examinations, such as Gaokao. Admission and
assessment processes undergo continuous changes, in terms of subject and skill focus, question type, examination format and the manner
in which the processes are administered. We are therefore required to continually update and enhance our curricula, course materials and
teaching methods. Any failure to respond to the changes in a timely and cost-effective manner will adversely impact our students&#8217;
academic performance and the marketability of our education services, which would 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-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Regulations and policies that decrease the weight
of scholastic competition achievements in the admissions process mandated by government authorities or adopted by schools or affect the
number of students participating in Gaokao or Zhongkao may have an impact on our student enrollments and teaching methods. For example,
the Ministry of Education of the PRC (the &#8220;MOE&#8221;), issued certain implementing opinions in January 2014 to clarify that local
educational administrative departments at all levels, public schools and private schools are not allowed to use examinations to select
their students for admission to middle schools from primary schools. As a result, we may need to adjust our teaching methods to accommodate
a student body of a potentially wide competency range. Failure to track and respond to these changes in a timely and cost-effective manner
would render our courses, services and products less attractive to students, which may materially and adversely affect our reputation
and ability to continue to attract students.</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"><b><i>If we fail to help our students achieve their academic goals,
student and parent satisfaction with our education services may decline. </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: 0.25in">The success of our business depends on our ability
to deliver quality school experiences and help our students achieve their academic goals. Our schools may not be able to meet the expectations
of our students and their parents in terms of students&#8217; academic performance. A student may not be able to attain the level of academic
improvement that he or she seeks and his or her performance may otherwise not progress or decline due to reasons beyond our control. We
may not be able to provide education that is satisfactory to all of our students and their parents, and student and parent satisfaction
with our services may decline. In addition, we cannot guarantee that our students will be admitted to higher levels of education institutions
of their choice. Any of the foregoing could result in a student&#8217;s withdrawal from our schools, and dissatisfied students or their
parents may attempt to persuade other students or prospective students not to attend our schools. If our ability to retain students decreases
significantly or if we otherwise fail to continue to enroll and retain new students, our business, financial condition and results of
operations may be materially and adversely affected.</p><div>

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


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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><i>We face intense competition in the PRC education industry and
we may fail to compete effectively. </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: 0.25in">The private education sector in China is rapidly
evolving, highly fragmented and competitive, and we expect competition in this sector to persist and intensify. We compete with public
schools and other private schools that offer similar programs in each geographic market where we operate our schools. In particular, we
face significant competition from public schools and other private schools in Yunnan province, China. Although our business model and
cooperative relationship with local governments helped us receive favorable regulatory treatments, we may fail to compete effectively
with public schools that may enjoy more substantial financial and policy support from the local governments. Additionally, our competitors
may adopt similar curriculums, school management approaches and marketing strategies, with different pricing and service packages that
may be more appealing than ours to students and parents in the relevant regions. Some of our competitors might be able to dedicate more
resources than we can to the development and improvement of their schools and respond more quickly than we can to the changes in student
demands, testing materials, admission standards, market needs and new technologies. As such, we may be required to lower our tuition and
boarding fees or increase our spending in order to maintain our competitiveness and retain or attract students and qualified teachers
or pursue new market opportunities. If we are unable to successfully compete for new students, attract and retain competent teachers or
other key personnel, maintain or increase our tuition level, enhance the quality of our education services or maintain our operations
in a cost-effective manner, our business and/or results of operations may be materially and adversely affected.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Our business may be disrupted if we lose the services of our
senior management and other key personnel. </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: 0.25in">Our continued success depends in part on the expertise
and dedication of our senior management team and other key personnel. We rely on our senior management and school administrators for the
efficient and effective operation of our schools and the execution of our business plans, which is vital for us to compete in the education
industry. We may experience changes in our senior management in the future for reasons beyond our control. We may not be able to retain
our directors, senior management, or other key management personnel, who might either join our competitors or start their own businesses
that directly compete with us. If we lose one or more of our directors, senior management, or other key management personnel, we might
not be able to hire qualified candidates to fill the gap in a timely manner and our business could be materially disrupted or otherwise
adversely affected.</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"><b><i>Our school premises and facilities are subject to extensive governmental
approvals and compliance requirements. </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: 0.25in">The construction and usage of our school premises
requires various permits, certificates and approvals, including, for example, land use rights certificates, construction permits, public
health permits and certificates for passing fire control assessments. As of the date of this annual report, we leased three business premises
for our schools and were provided with 12 business premises by governments pursuant to our cooperative arrangements with them. For premises
we leased from or were provided for use by local governments or entities associated with local governments, the lessors or premise providers
failed to obtain the relevant land use rights certificates, construction planning approvals or construction permits, or failed to pass
the relevant environmental protection verification, fire control assessment or inspection for completion of construction, or failed to
provide us with the authorization to lease the premises. If the government authorities suspend the use of such premises or require measures
to be taken to rectify the defects or any of our lease agreements is invalidated due to the defects of such premises, or if any third
party successfully challenges our use of the affected premises, the operation of the affected schools could be interrupted and we may
need to relocate those schools, which would incur additional expenses and our business and results of operations may be materially and
adversely affected.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">We have also encountered, and may in the future
encounter, problems in fulfilling the conditions precedent to the receipt of the permits, certificates and approvals for our self-built
premises. As of the date of this annual report, we built four business properties for our schools on the leased or provided premises.
For our self-built school premises which we have already put in use, the lessors or premise providers have not obtained the relevant land
use rights certificates, construction planning approval or construction permits, or passed environmental protection verification, fire
control assessment and inspection for completion of construction primarily because the lessors or premise providers failed to fulfill
the conditions precedent to completing such procedures, and we may be subject to fines and/or temporary suspension of the usage of the
affected school premises before the defects are rectified. If the lessors, premise providers or we ourselves are not able to rectify the
defects in a timely manner, or fail to obtain requisite permits, certificates or approvals for campuses and school premises we plan to
develop in the future, we may become subject to administrative fines and other penalties, which could disrupt our business and cause us
to incur additional expenses.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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"><b><i>A significant portion of our schools are not in compliance with
fire safety regulations. </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: 0.25in">According to the PRC fire safety laws and regulations,
construction projects and decoration projects are generally required to obtain fire safety permits or complete fire safety filings except
for certain statutory exemptions. As of the date of this annual report, we leased three business premises for our schools, were provided
with 12 business premises by governments pursuant to our cooperative arrangements with them, and built four business properties for our
schools on the leased or provided premises. As the four business properties were built on the leased or provided premises, we do not control
the ownership licenses of the business properties. As of the date of this annual report, we have obtained fire safety permits or written
evidence for passing the fire safety inspection for five of our schools. For the schools that we have not obtained the fire safety permits
or written evidence for passing the fire safety inspection nor made the requisite fire safety filings, it is primarily because the lessors
or premise providers failed to fulfill the condition precedent to completing such procedures. We have, however, arranged periodic inspections
for all of the premises by third-party fire control assessment institutions and obtained verification reports that our school premises
have met the technical requirements for the fire safety inspections. We cannot assure you that the lessors, the premise providers or we
ourselves would be able to obtain the fire safety permits, rectify the defects or otherwise fully comply with the relevant fire safety
laws and regulations at all of our current locations in a timely manner or at all. Given the relevant lessors or premise providers have
the legal obligation to obtain fire safety permits or complete fire safety filings, we cannot assure you that such lessor or premise provider
can meet the conditions precedents to obtaining such permits or completing such filings, over which we have little control. We may be
subject to orders to rectify within a specified period of time or to suspend operations for such non-compliance. As a result, we may not
be able to occupy certain of our current locations and may be ordered to relocate our operations to other locations that comply with the
relevant fire safety laws and regulations, and we cannot assure you that such alternative locations will be available on commercially
reasonable terms or at all, which could materially and adversely affect our business, results of operations and financial conditions.</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"><b><i>Failure to control rental costs, control the quality, maintenance
and management of the leased school premises, obtain leases at desired locations at reasonable prices or failure to comply with the applicable
PRC property laws and regulations regarding certain of our leased and owned premises could materially and adversely affect our business.
</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: 0.25in">As of the date of this annual report, we leased
three premises and have been provided with 12 premises by governments pursuant to our cooperative arrangements with a total gross floor
area of approximately 718,297 square meters for our school operations. These school premises, including the associated school buildings
and facilities, were developed and/or maintained by our landlords or the providers. Accordingly, we are not in a position to effectively
control the quality, maintenance and management of such premises, buildings and facilities. In the event that the quality of the school
premises, buildings and facilities deteriorates, or if any or all of our landlords or providers fail to properly maintain and renovate
such premises, buildings or facilities in a timely manner, or at all, the operation of our schools could be materially and adversely affected.
In addition, if any of our landlords terminates the existing lease agreements, refuses to continue to lease the premises to our schools
when such lease agreements expire, or increase rent to the level not acceptable to us, or the providers refuse to continue to provide
the premises for our use, we will be forced to relocate our schools to other locations, we may not be able to find suitable premises for
such relocation without incurring significant time and costs, or at all. If this occurs, our business, results of operations and financial
condition could be materially and adversely affected, and our students, teachers and staff may also be negatively affected by such relocation.</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: 0.25in">We did not receive from the lessors of some of
our leased premises copies of the title certificates or obtain proof of authorization to lease or provide the premises for our use from
land providers for certain of our school premises. As of the date of this annual report, we are not aware of any actions, claims or investigations
threatened against us or our lessors or premise providers with respect to the defects in our land use interests. However, if any of our
leases or cooperative arrangements is terminated as a result of challenges by third parties or government authorities for lack of title
certificates or proof of authorization to lease, while we do not expect to be subject to any fines or penalties, we may be forced to relocate
the affected schools and incur additional expenses relating to such relocation, or we may not be able to find suitable premises for relocation
at all.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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-indent: 0.25in">Under the applicable PRC laws and regulations,
the parties to a lease agreement are required to register and file the executed lease agreement with the relevant government authorities.
As of the date of this annual report, all the lease agreements for the leased properties that we occupy are not registered or filed. As
advised by our PRC counsel, while the failure to complete the lease registration will not affect the legal effectiveness of the lease
agreements according to PRC law, the relevant real estate administrative authorities may require the parties to the lease agreements to
complete lease registration within a prescribed period of time and the failure to do so may subject the parties to fines ranging from
RMB1,000 to RMB10,000 for each non-registered lease. While we have not been subject to any penalties or disciplinary action related to
the failure to register our lease agreements, we cannot assure you that we will not be subject to penalties or other disciplinary actions
for our past and future non-compliance. The failure to comply with the applicable PRC property laws and regulations regarding certain
of our leased premises may cause us to make relocations and be subject to fines and suspension of business, which may 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-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>We face uncertainties with respect to the development of regulatory
requirements on operating licenses and permits for our online education services in China. </i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">As a supplement to conventional school programs,
we provide online education services on third-party platforms to our students on a complimentary basis. See &#8220;Item 4. Information
on the Company&#8212;B. Business Overview&#8212;Our Online Education Services.&#8221; As advised by our PRC legal counsel, the launch
of the courses developed by us on third-party online platforms and the use of the education resources available thereon by our students
and teachers do not involve any activities in relation to the provision of basic or value-added telecommunication services, and therefore
we are not required to obtain additional approvals, licenses or permits for the online education services we currently provide, except
for those we already obtained.</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: 0.25in">However, we may be required to apply for and obtain
additional licenses or permits, or make additional registration and filings for our online education services, as the interpretation and
implementation of current PRC laws and regulations are still evolving, and new laws and regulations may also be promulgated. There can
be no assurance that once required, we will be able to obtain all the required approvals, licenses, permits and complete all necessary
filings and registrations on a timely basis for our online education services, given the significant amount of discretion the PRC authorities
may have in interpreting, implementing and enforcing relevant rules and regulations, as well as other factors beyond our control and anticipation.
If we fail to obtain required approvals, licenses and permits or complete necessary registrations and filings in a timely manner, we may
be subject to fines or suspension of our non-compliant operations, and we may be forced to cease the provision of online education services
in whole or in part, which could adversely affect our overall teaching results and appeal to students.</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"><b><i>Our business is subject to seasonal fluctuations, which may cause
our operating results to fluctuate from quarter to quarter. This may result in volatility and adversely affect the price of the ADSs.
</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: 0.25in">We have experienced, and expect to continue to
experience, seasonal fluctuations in our results of operations, primarily due to seasonal changes in service days, student enrollments
and influence of the summer and winter breaks. We generally require students to pay tuition and boarding fees for each semester upfront
prior to the commencement of such semester, and recognize revenues for the tuition fees and boarding fees received proportionately over
relevant period of the applicable program. However, the timing of our recording of our costs and expenses do not necessarily correspond
with the timing of our recognition of revenues. Our interim results, growth rates and profitability may not be indicative of our annual
results or our future results, and our historical interim and annual results, growth rates and profitability may not be indicative of
our future performance for the corresponding periods. These fluctuations could result in volatility and adversely affect the price of
the ADSs.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Termination of our cooperative relationship with Hebei Hengshui
High School may adversely affect our business. </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: 0.25in">We have partnered with Hebei Hengshui High School,
a well-regarded benchmark of secondary schools in China, in developing a series of standardized measures and protocols for each stage
in a school&#8217;s development and for a wide variety of scenarios in school management and operation, which we require all of our schools
to consistently adhere to. We also have teachers with work experience at Hebei Hengshui High School to coach our teachers to ensure the
consistent implementation of effective teaching methods within our school network. If the cooperation is terminated by Hebei Hengshui
High School, or if any unforeseeable events cause us to terminate our cooperation with Hebei Hengshui High School, we may be required
to change the names of our schools and may be unable to recruit additional high-quality teachers laterally from Hebei Hengshui High School
and ensure our overall teaching quality and the operation of our education system could be materially and adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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"><b><i>Failure to adequately protect our intellectual property could
materially and adversely affect our business. </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: 0.25in">Unauthorized use of any of our intellectual property
may adversely affect our business and reputation. We rely on a combination of copyright, trademark and trade secrets laws to protect our
intellectual property rights. Nevertheless, third parties may obtain and use our intellectual property without due authorization. The
practice of intellectual property rights enforcement action by the PRC regulatory authorities is in its early stage of development and
is subject to significant uncertainty. We may also need to resort to litigation and other legal proceedings to enforce our intellectual
property rights. Any such action, litigation or other legal proceedings could result in substantial costs and diversion of our management&#8217;s
attention and resources and could disrupt our business. In addition, there is no assurance that we will be able to enforce our intellectual
property rights effectively or otherwise prevent others from the unauthorized use of our intellectual property. Failure to adequately
protect our intellectual property could materially and adversely affect our brand name and reputation, our business, financial condition
and results of operations.</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"><b><i>We may be subject to intellectual property infringement claims,
which may be expensive to defend and may disrupt our business and operations. </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: 0.25in">We cannot assure you that our operations or any
aspects of our business do not or will not infringe upon or otherwise violate trademarks, patents, copyrights, know-how or other intellectual
property rights held by third parties. From time to time, we may be subject to legal proceedings and claims relating to the intellectual
property rights of others. In addition, there may be third-party trademarks, patents, copyrights, know-how or other intellectual property
rights that are infringed by our products, services or other aspects of our business without our awareness. Holders of such intellectual
property rights may seek to enforce such intellectual property rights against us in China, the United States or other jurisdictions. If
any third-party infringement claims are brought against us, we may be forced to divert management&#8217;s time and other resources from
our business and operations to defend against these claims, regardless of their merits.</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: 0.25in">Additionally, the application and interpretation
of China&#8217;s intellectual property right laws and the procedures and standards for granting trademarks, patents, copyrights, know-how
or other intellectual property rights in China are still evolving and are uncertain, and we cannot assure you that PRC courts or regulatory
authorities would agree with our analysis. If we were found to have violated the intellectual property rights of others, we may be subject
to liability for our infringement activities or may be prohibited from using such intellectual property, and we may incur licensing fees
or be forced to develop alternatives of our own. As a result, our business, financial condition, results of operations and prospects may
be materially and adversely affected.</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"><b><i>We may be involved in labor and employment related disputes and
legal claims from time to time arising out of our operations. </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: 0.25in">We may, from time to time, be involved in labor
and employment related disputes with and subject to such claims by school personnel and other employees. We cannot assure you that any
of the labor and employment related legal actions will be resolved in our favor. We may be subject to uncertainties as to the outcome
of such legal proceedings and our business operations may be disrupted. Such legal or other proceedings involving us may, among other
impacts, incur significant costs for us, divert our management and other resources, disrupt our business operations, draw negative publicity
against us or damage our reputation. As a result, our business, financial condition and results of operations may be materially and adversely
affected.</p><div>

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

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>We and certain of our directors and officers have been named
as defendants in a putative shareholder&#160;class&#160;action&#160;lawsuit, which could have a material adverse impact on our business,
financial condition, results of operation, cash flows and reputation.</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: 0.25in">We will have to defend against the putative shareholder class action
lawsuit described in &#8220;Item&#160;4. Information on the Company&#8212;B. Business Overview&#8212;Legal Proceedings,&#8221; including
any appeals of such lawsuit should our initial defense be unsuccessful. We are currently unable to estimate the timing, possible outcome
or loss or possible range of loss, if any, associated with the resolution of the lawsuit. There can be no assurance that we will be able
to prevail in our defense or reverse any unfavorable judgment on appeal, and we may decide to settle such lawsuit on unfavorable terms.
Any adverse outcome of the case, including any plaintiff&#8217;s appeal of a judgment in the lawsuit, could have a material adverse effect
on our business, financial condition, results of operation, cash flows and reputation. The litigation process may utilize a significant
portion of our resources and divert management&#8217;s attention from the day-to-day operations of our company, which could harm our results
of operations and require us to incur significant expenses to defend the suit. In addition, there can be no assurance that our insurance
carriers will cover all or part of the defense costs, or any liabilities that may arise from these matters. We also may be subject to
claims for indemnification related to these matters, and we cannot predict the impact that indemnification claims may have on our business
or financial results<i>.</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"><b><i>Our brand image, business and results of operations may be adversely
impacted by students and employees&#8217; misconduct and improper activities, many of which are beyond our control. </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: 0.25in">We have limited control over the behavior of our
students, our teachers and other employees. To the extent any improper behavior is associated with our schools and education services,
our ability to protect our brand image and reputation may be limited. In addition, if any of our students or employees suffer or allege
to have suffered physical, financial or emotional harm following contact initiated in connection with our education services, we may face
civil lawsuits or other liabilities initiated by the affected student and employees, or governmental or regulatory actions against us.
In response to allegations of illegal or inappropriate activities in connection with our education services or any negative media coverage
about us, PRC governmental authorities may intervene and hold us liable for non-compliance with PRC laws and regulations concerning the
dissemination of information on the internet and subject us to administrative penalties or other sanctions, such as requiring us to restrict
or discontinue some of the education services provided by us. As a result, our business may suffer and our brand image, student base,
results of operations and financial condition may be materially and adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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-indent: 0.25in">We are exposed to the risk of other types of employee
fraud or other misconduct. Other types of employee misconduct include intentionally failing to comply with government regulations, engaging
in unauthorized activities and misrepresentation to our students, which could harm our reputation. It is not always possible to deter
employee misconduct, and the precautions we take to prevent and detect this activity may not be effective in controlling unknown or unmanaged
risks or losses, which could harm our business, financial condition and results of operations.</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"><b><i>We recorded share-based compensation, and we may grant share-based
awards in the future, which may result in increased share-based compensation expense. </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: 0.25in">We recorded share-based compensation of RMB177.8
million in 2018 for our directors, officers and employees and certain external consultants for their services performed. We may grant
share-based awards pursuant to our 2021 Share Incentive Plan and other share incentive plans to be adopted in the future, which we believe
will help us attract and retain key personnel and employees. As a result, our expenses associated with share-based compensation may increase,
which may 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: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Unauthorized disclosure of personal data that we collect and
retain due to a system failure or otherwise could expose us to liabilities and adversely affect our reputation and business. </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: 0.25in">We maintain records that include personal data,
such as academic and medical records, address and family information. If the security measures we use to protect personal data are ineffective
due to a system failure or other reasons, we could be liable for claims of invasion of privacy, impersonation, unauthorized purchases
or other claims. In addition, we could be held liable for the misuse of personal data, fraudulent or otherwise, by our employees, independent
consultants or third-party contractors.</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: 0.25in">We could incur significant expenses in connection
with rectifying any security breaches, settling any resulting claims and providing additional protection to prevent additional breaches.
In addition, any failure to protect personal information may adversely impact our ability to attract and retain students, harm our reputation
and materially adversely affect our business, prospects and results of operations.</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"><b><i>Any health pandemics, including the recent outbreak of COVID-19,
and other natural disasters and calamities, could have a material adverse effect on our business operations. </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: 0.25in">We are vulnerable to health pandemics, including
COVID-19, Ebola virus diseases, H1N1 flu, H7N9 flu, avian flu, Severe Acute Respiratory Syndrome (SARS) and other epidemics. For example,
COVID-19 has <span>significantly affected China and many other countries</span>. On March 11, 2020, the
World Health Organization declared COVID-19 a global pandemic. Many businesses and social activities in China and other countries and
regions were severely disrupted, including school operations. Such disruption and the potential slowdown of China&#8217;s economy could
have a material adverse effect on our business, results of operations and financial condition.</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: 0.25in">As a result of the government-mandated quarantine
measures following the COVID-19 outbreak, the spring semester of 2020 at all the secondary schools in China, including ours, was postponed,
and we have resorted to various alternative teaching methods, including live streaming, to resume basic teaching activities. See &#8220;Item
4. Information on the Company&#8212;B. Business Overview&#8212;Our Online Education Services.&#8221; On March 31, 2020, the MOE also announced
that Gaokao would be postponed by one month until July 2020 due to the COVID-19 outbreak. We have re-opened our high schools for graduating
classes and our tutorial school programs since late March 2020 and re-opened our other classes in late April 2020. To reduce the risk
of infection and contain the virus spread, we have implemented a series of control measures, including body temperature monitoring of
our students and staff and periodical sanitization of school facilities. We have also expanded our school schedule with longer school
hours and extended the spring semester to catch up with our teaching plans. The delayed school openings and the alternative teaching activities
could adversely affect our student enrollment, our teaching results and our students&#8217; academic performance.</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: 18pt">In 2022, we experienced higher operating costs due
to increased spending in COVID-19 related prevention and testing equipment. We paid additional subsidies for our staff working during
irregular shifts to accommodate local preventive and partial lock-down measures. In addition, compared with 2020, we were required to
pay higher corporate social insurance premiums. In February 2020, Ministry of Human Resources and Social Security, Ministry of Finance,
and State Administration of Taxation jointly announced Notice on the Exemption of the Payment of Social Insurance Premiums for Companies
in China, a notice aiming to reduce corporate social insurance burden during COVID-19 outbreak. The exemption period ended in December
2020, and therefore our cost of revenues in 2021 slightly increased compared to 2020. In 2022, our schools experienced temporary closures
due to the COVID-19 outbreak. Furthermore, the COVID-19 outbreak related traveling and gathering restrictions in China in had an adverse
impact on our student admission campaigns in 2021 and 2022. Our student admission officers had to rely on higher portion of video calls
and online marketing measures, whereas the quality of student admission might be negatively affected. All of the foregoing impacts of
COVID-19 outbreak could materially and adversely affect our business, results of operations and financial condition. See &#8220;Item 5.
Operating and Financial Review and Prospects&#8212;A. Operating Results&#8212; Major Factors Affecting Our Results of Operations&#8212;COVID-19
outbreak.&#8221;</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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-indent: 18pt"><span>Many of the
restrictive measures previously adopted by the PRC governments at various levels to control the spread of the COVID-19 virus have been
revoked or replaced with more flexible measures since December 2022.&#160;Moreover, there has been and may continue to be an increase
in COVID-19 cases in China, and as a result, we experienced temporary disruption to our operations where many of our students, teachers
and other staff were infected with COVID-19 in December 2022. To the extent that future waves of&#160;COVID-19&#160;disrupt normal business
operations in China, we may face operational challenges with our services. The extent to which the&#160;COVID-19&#160;pandemic impacts
our results of operations will depend on future developments, which are highly uncertain, including the availability and effectiveness
of any new vaccines and the emergence of any new&#160;COVID-19&#160;variants, among others.</span> We will pay close attention to the
development of the outbreak of COVID-19 and continuously evaluate its impact on our business, results of operations and financial condition,
which we believe will depend on the duration of the pandemic and the government&#8217;s responsive measures.</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: 0.25in">In addition, other natural disasters and calamities,
such as fire, floods, typhoons, earthquakes, power loss, telecommunications failures, wars, riots, terrorist attacks or similar events,
could cause severe disruption of our operations or those of our industry customers, which could materially and 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-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>We have limited insurance coverage with respect to our business
and operations. </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: 0.25in">We are exposed to various risks associated with
our business and operations, and we have limited insurance coverage. We are exposed to risks including, among other things, accidents
or injuries in our schools, loss of key management and personnel, business interruption, natural disasters, terrorist attacks and social
instability or any other events beyond our control. The insurance industry in China is still at an early stage of development, and as
a result insurance companies in China offer limited business-related insurance products. We do not have any business interruption insurance,
or key-man life insurance. Any business interruption, legal proceeding or natural disaster or other events beyond our control could result
in substantial costs and diversion of our resources, which may 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-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>If we fail to maintain an effective system of internal control
over financial reporting, we may be unable to accurately report our financial results or prevent fraud. </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: 18pt">As a public company, we are subject to the reporting
requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002 (the &#8220;Sarbanes-Oxley Act&#8221;), and the rules and regulations
of the applicable listing and corporate governance standards of the <span>over-the-counter market (the
&#8220;OTC&#8221; market)</span>. We expect that the requirements of these rules and regulations will continue to increase our legal,
accounting, and financial compliance costs, make some activities more difficult, time-consuming and costly and place significant strain
on our personnel, systems and resources.</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: 0.25in">The Sarbanes-Oxley Act requires, among other things,
that we maintain effective disclosure controls and procedures and internal control over financial reporting. Commencing with our fiscal
year ended December 31, 2021, we must perform system and process evaluation and testing of our internal control over financial reporting
to allow management to report on the effectiveness of our internal control over financial reporting in our Form 20-F filing for that year,
as required by Section 404 of the Sarbanes-Oxley Act. In addition, once we cease to be an &#8220;emerging growth company&#8221; as the
term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness of our
internal control over financial reporting.</p><div>

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


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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-indent: 0.25in">In the course of auditing our consolidated financial
statements that are included elsewhere in this annual report, we and our independent registered public accounting firm identified one
material weakness in our internal control over financial reporting, in accordance with the standards established by the PCAOB.</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: 0.25in">The material weakness that has been identified
relates to our lack of sufficient number of financial reporting personnel with appropriate knowledge, experience and training of U.S.
GAAP and SEC financial reporting requirements to properly address complex U.S. GAAP accounting issues and prepare and review financial
statements and related disclosures in accordance with U.S. GAAP and reporting requirements set forth by the SEC. To remedy our identified
material weakness, we have adopted and plan to continue to adopt certain measures to improve our internal control over financial reporting,
including (1) hiring more qualified accounting personnel with extensive experience and knowledge in handling U.S. GAAP and SEC financial
reporting requirements; (2) providing regular and appropriate trainings for our accounting staff, especially trainings related to U.S.
GAAP and SEC reporting requirements; and (3) setting up performance measurement and reward plan for our accounting staff aligning with
our objective of internal control over financial reporting and our ethical value. However, the implementation of these measures may not
fully address these weakness and deficiencies in our internal control over financial reporting, and we cannot conclude that they have
been fully remedied. Our failure to correct these weakness and deficiencies or our failure to discover and address any other weakness
and deficiencies could result in inaccuracies in our financial statements and 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 could significantly
hinder our ability to prevent fraud.</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: 18pt">We cannot assure you that there will not be additional
material weaknesses or any significant deficiencies in our internal control over financial reporting in the future. Any failure to maintain
internal control over financial reporting could severely inhibit our ability to accurately report our financial condition, results of
operations or cash flows. If we are unable to conclude that our internal control over financial reporting is effective, or if our independent
registered public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial
reporting once that firm begins its Section 404 reviews, investors may lose confidence in the accuracy and completeness of our financial
reports, the market price of the ADSs could decline, and we could be subject to sanctions or investigations by the SEC or other regulatory
authorities. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other
effective control systems required of public companies, could also restrict our future access to the capital markets. See &#8220;Item
15. Controls and Procedures&#8212;Management&#8217;s Annual Report on Internal Control over Financial Reporting&#8221; and &#8220;Item
15. Controls and Procedures&#8212;Internal Control Over Financial Reporting.&#8221;</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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"><b>Risks Related to Our Corporate Structure</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>If the PRC government finds that our corporate structure and
contractual arrangements does not comply with applicable PRC laws and regulations, we could be subject to severe penalties and our business
may be materially and adversely affected. </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: 18pt">We are a Cayman Islands company and thus, we are
classified as a foreign enterprise under the PRC laws. Foreign investment in the education industry in the PRC is extensively regulated
and subject to numerous restrictions. Under the Special Administrative Measures for Foreign Investment Access (Negative List) (2021)(the
&#8220;2021 Special Administrative Measures&#8221;), foreign investors are prohibited from investing in primary and middle schools in
the PRC for students in grades one through nine. High school is also restricted industries for foreign investors, and foreign investors
are only allowed to invest in such industries in cooperative ways with domestic investors, provided that domestic investors play a dominant
role in such cooperation. Furthermore, under the Implementation Opinions of the MOE on Encouraging and Guiding the Entry of Private Capital
in the Field of Education and Promoting the Healthy Development of Private Education, which was issued by the MOE on June 18, 2012, the
foreign portion of the total investment in a Sino-foreign joint venture high school should be below 50%. According to relevant regulations,
the foreign investors invested in high schools must be foreign education institutions, with relevant educational qualification and high
quality of education. See &#8220;Item 4. Information on the Company&#8212;B. Business Overview&#8212;Regulations&#8212;Regulations on
Foreign Investment in Education in the PRC&#8221; for details. Accordingly, our wholly-owned subsidiary, Yunnan WFOE, in China is currently
ineligible to apply for the required education licenses and permits in China for the operation of primary and middle schools. In order
to establish the structure for operating our business in China, we entered into a series of arrangements in which our wholly-owned subsidiary,
Yunnan WFOE, receives full economic benefits from our schools. For a description of these contractual arrangements, see &#8220;Item 4.
Information on the Company&#8212;C. Organizational Structure&#8212;Our Contractual Arrangements.&#8221; We expect to continue to rely
on our contractual arrangements to operate our education business.</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="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">On July 24, 2021, the General Office of State
Council and the General Office of Central Committee of the Communist Party of China jointly promulgated the Opinions on Further Alleviating
the Burden of Homework and After-School Tutoring for Students in Compulsory Education (the &#8220;Alleviating Burden Opinion&#8221;),
which provides, among others, that (1) Academic AST Institutions are prohibited from raising funds by listing on stock markets or conducting
any capitalization activities&#894; and (2) foreign capital is prohibited from controlling or participating in any Academic AST Institutions
through mergers and acquisitions, entrusted operation, joining franchise or variable interest entities. The Alleviating Burden Opinion
provides that any violation of the foregoing shall be rectified. The Alleviating Burden Opinion further states that the administration
and supervision over academic subjects tutoring institutions for students on grade ten to twelve shall be implemented by reference to
the relevant provisions of the Alleviating Burden Opinion. It remains uncertain as to how and to what extent the administration over academic
subjects tutoring institutions for students on grade ten to twelve will be implemented by reference of the Alleviating Burden Opinion.</p><div>

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

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">If our corporate structure and contractual arrangements
are found to be in violation of any PRC laws or regulations, or if we are found to be required but failed to obtain any of the permits
or approvals for our private education business, the relevant PRC regulatory authorities, including the MOE, which regulates the education
industry in China, the MOFCOM, which regulates the foreign investment in China, and the Ministry of Civil Affairs, which regulates the
registration of schools in China, would have broad discretion in imposing fines or punishments upon us for such violations, including:</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">revoking the business and operating
licenses of us and/or our affiliated entities;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">discontinuing or restricting
any related-party transactions between us and/or our affiliated entities;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">imposing fines and penalties,
or imposing additional requirements for our operations which we or our affiliated entities may not be able to comply with;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">revoking the preferential tax
treatment available to us;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">requiring us to restructure
the ownership and control structure or our current schools;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">requiring us to restructure
our operations in such a way as to compel us to establish new entities, re-apply for the necessary licenses or relocate our businesses,
staff and assets; or</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">restricting or prohibiting
our use of the proceeds from overseas offerings to finance our business and operations in China, particularly the expansion of our business
through strategic acquisitions.</span></td>
</tr></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="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">As of the date of this annual report, similar
ownership structure and contractual arrangements were used by many China-based companies listed overseas, including a number of education
companies listed in the United States. To our knowledge, none of the fines or punishments listed above has been imposed on any of these
public companies, including companies in the education industry. However, we cannot assure you that such fines or punishments will not
be imposed on us or any other companies in the future. If any of the above fines or punishments is imposed on us, our business, financial
condition and results of operations could be materially and adversely affected. If any of these penalties results in our inability to
direct the activities of Long-Spring Education and its schools and subsidiaries that most significantly impact their economic performance,
and/or failure to receive the economic benefits from Long-Spring Education and its schools and subsidiaries, we may not be able to consolidate
Long-Spring Education and its schools and subsidiaries in our financial statements in accordance with U.S. GAAP. However, we do not believe
that such actions would result in the liquidation or dissolution of our company, our wholly-owned subsidiaries in China or Long-Spring
Education or its schools or subsidiaries.</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: 0.25in">In addition, pursuant to the Implementation Rules,
(1) foreign-invested enterprises established in China and social organizations whose actual controllers are foreign parties shall not
sponsor, participate in or actually control private schools that provide compulsory education, (2) social organizations or individuals
shall not control any private school that provides compulsory education or any non-profit private school that provides pre-school education
by means of, among others, merger, acquisition and contractual arrangements, and (3) private schools providing compulsory education shall
not conduct any transaction with any related party. Where any other private school conducts any transaction with any related party, it
shall follow the principles of openness, fairness and impartiality, fix the reasonable tuition and fees and regulate the decision-making,
and shall not damage the state interests, the interests of the school or the rights and interests of the teachers and students, otherwise,
there is a risk of being ordered to make corrections within a time limit, and the illegal gains, if any, shall be confiscated after the
fees collected are returned; if the circumstances are serious, the sponsor, actual controller and member of the decision-making body or
supervisory body shall not become the sponsor, actual controller or member of the decision-making body or supervisory body of other private
school within one to five years; if the circumstances are especially serious with adverse social impact, the sponsor, actual controller
and member of the decision-making body or supervisory body shall not become the sponsor, actual controller and members of the decision-making
body or supervisory body of other private school permanently; if a violation of public security administration is constituted, the public
security organ shall impose a public security administration punishment according to law; if a crime is constituted, criminal responsibility
shall be investigated in accordance with the law.</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: 0.25in">These regulations may challenge the enforcement
of our contractual arrangements that establish our corporate structure for operating our business, for example, the clause or provision
of the exclusive management services and business cooperation agreement in relation to related party transactions between Yunnan WFOE
and the affiliated entities to the extent concerning private schools offering compulsory education have been rendered not legally enforceable
since September 1, 2021. Furthermore, our contractual arrangements may not be enforceable in the PRC if the PRC government authorities
take a view that such contracts contravene any mandatory provision of PRC laws and administrative regulations or are otherwise not enforceable
due to offending public order or good morals. In the event we are unable to enforce these contractual arrangements, for our continuing
operations, we may not be able to exert effective control over the affiliated entities and its shareholders, and our ability to conduct
our business may be materially and adversely affected. We are continuously assessing the impact of relevant regulations on our business
and making necessary measures and efforts to comply with the requirements under these regulations and implementations, including restructuring
corporate structure or unwinding contractual arrangements. However, the relevant authorities have yet to promulgate any detailed implementation
rules and regulations under the Implementation Rules, it is still unclear whether the above provisions have any retrospective effect for
contractual arrangements over private compulsory education schools existing before September 1, 2021, therefore, there remains uncertainty
as to when and how the Implementation Rules will become specifically applied to our business.</p><div>

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


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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"><b><i>Uncertainties exist with respect to the interpretation and implementation
of the newly enacted Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance,
business, financial condition, results of operations and prospects. </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: 0.25in">On March 15, 2019, the National People&#8217;s
Congress of the PRC (the &#8220;NPC&#8221;) promulgated the Foreign Investment Law, which came into effect on January 1, 2020 and replaced
the trio of existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign
Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law. 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 investments. However, since it is relatively new, uncertainties
still exist in relation to its interpretation and implementation, and failure to take timely and appropriate measures to cope with the
regulatory-compliance challenges could result in material and adverse effect on us. For instance, though the Foreign Investment Law does
not explicitly classify contractual arrangements as a form of foreign investment, it contains a catch-all provision under the definition
of &#8220;foreign investment&#8221;, which includes investments made by foreign investors in China through means stipulated in laws or
administrative regulations or other methods prescribed by the State Council of the PRC (the &#8220;State Council&#8221;). Therefore, it
still leaves leeway for future laws, administrative regulations or provisions promulgated by the Stale Council to provide for contractual
arrangements as a form of foreign investment, at which time it will be uncertain whether our contractual arrangements will be deemed to
be in violation of the market access requirements for foreign investment in the PRC and if yes, how our contractual arrangements should
be dealt with. In addition, if future laws, administrative regulations or provisions prescribed by the State Council mandate further actions
to be taken by companies with respect to existing contractual arrangements, we may face substantial uncertainties as to whether we can
complete such actions in a timely manner, or at all. In the worst-case scenario, we may be required to unwind our existing contractual
arrangements and/or dispose of the relevant business operations, which could have a material and adverse effect on our current corporate
structure, corporate governance, business, financial condition and results of operations.</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"><b><i>We rely on contractual arrangements with Long-Spring Education
and its shareholders for our business operations in China, which may not be as effective as direct ownership in providing control. </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: 18pt">We have relied and expect to continue to rely on
contractual arrangements with Long-Spring Education and its shareholders to operate our business in China. For a description of these
contractual arrangements, see &#8220;Item 4. Information on the Company&#8212;C. Organizational Structure&#8212;Our Contractual Arrangements.&#8221;
These contractual arrangements may not be as effective as direct equity ownership in providing us with control over our affiliate entities.
Any failure by our affiliated entities, to perform their obligations under the contractual arrangements would have a material adverse
effect on the financial position and performance of our company.</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: 0.25in">If we had direct ownership of Long-Spring Education,
we would be able to exercise our rights as a shareholder to effect changes in the board of directors of Long-Spring Education, which in
turn could implement changes, subject to any applicable fiduciary obligations, at the management and operational level. However, under
the current contractual arrangements, we rely on the performance by our affiliated entities and their shareholders or sponsors of their
obligations under the contracts to exercise control over our affiliated entities. The shareholders or sponsors of our affiliated entities
may not act in the best interests of our company or may not perform their obligations under these contracts. Such risks exist throughout
the period in which we intend to operate certain portion of our business through the contractual arrangements with Long-Spring Education.
If any dispute relating to these contracts remains unresolved, we will have to enforce our rights under these contracts through the operations
of PRC law and arbitration, litigation and other legal proceedings and therefore will be subject to uncertainties in the PRC legal system.
See &#8220;&#8212;Any failure by our affiliated entities and their shareholders or sponsors to perform their obligations under our contractual
arrangements with them would have a material and adverse effect on our business.&#8221; As a result, uncertainties in the commercial arbitration
system or legal system in China could limit our ability to enforce these contractual arrangements. In addition, if the legal structure
and the contractual arrangements were found to violate any existing or future PRC laws and regulations, we may be subject to fines or
other legal or administrative sanctions. Therefore, our contractual arrangements with Long-Spring Education and its shareholders may not
be as effective in ensuring our control over the relevant portion of our business operations as direct ownership would be.</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: 0.25in">If the imposition of government actions causes
us to lose our right to direct the activities of our affiliated entities or our right to receive substantially all the economic benefits
and residual returns from our affiliated entities and we are not able to restructure our ownership structure and operations in a satisfactory
manner, we would no longer be able to consolidate the financial results of our affiliated entities.</p><div>

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


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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-indent: 0.25in">Furthermore, we are a holding company incorporated
in the Cayman Islands. As a holding company with no material operations of our own, we conduct a substantial majority of our operations
through our subsidiaries established in China, the VIE, and its subsidiaries in China. We control and receive the economic benefits of
the VIE and its subsidiaries&#8217; business operations through certain contractual arrangements. Our ADSs on the OTC market represents
shares of our offshore holding company instead of shares of the VIE or its subsidiaries in China. We may not be able to continue to satisfy
the applicable requirements and rules with respect to such structure.</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"><b><i>If the PRC government determines that the contractual arrangements
constituting part of the VIE structure do not comply with PRC regulations, or if these regulations change or are interpreted differently
in the future, we may be unable to assert our contractual rights over the assets of the VIE, and our ADSs or ordinary shares may decline
in value or become worthless. </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: 0.25in">Investors in the ADSs are not purchasing equity
securities of our subsidiaries that have substantive business operations in China but instead are purchasing equity securities of a Cayman
Islands holding company. We are a Cayman Islands holding company that conducts all of its operations and operates its business in China
through its PRC subsidiaries and the affiliated entities through contractual agreements. Such structure involves unique risks to investors
in the ADSs.</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: 0.25in">Recently, the PRC government adopted a series
of regulatory actions and issued statements to regulate business operations in China, including those related to VIE and private schools,
which may challenge the validity of our contractual arrangements. In the event that the PRC government determines that the contractual
arrangements constituting part of the VIE structure do not comply with PRC regulations, or if these regulations change or are interpreted
differently in the future, we may be unable to assert our contractual rights over the assets of the VIE, and our ADSs or ordinary shares
may decline in value or become worthless.</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: 0.25in">On May 14, 2021, the PRC State Council promulgated
the amended Implementation Rules, which became effective on September 1, 2021. Under the Implementation Rules, social organizations and
individuals are prohibited from controlling a private school that provides compulsory education by means of, among others, merger, acquisition,
and contractual arrangements, and a private school providing compulsory education is prohibited from conducting transactions with its
related parties. In particular, the prohibition over related party transactions has significantly affected the enforceability of the exclusive
management services and business cooperation agreements with affiliated entities providing compulsory education. Therefore, we re-assessed
our control over the Affected Entities. Based on the relevant accounting standard in accordance with U.S. GAAP, we have concluded that
we have lost control of the Affected Entities since September 1, 2021, in view of the significant uncertainties and restrictions the Implementation
Rules impose on our ability to direct the range of ongoing activities that would most significantly impact the returns of those entities
and to be exposed to returns that are commensurate with a controlling interest, and that such uncertainties and restrictions already had
a significant impact on our ability to direct and its economic exposure from involvement with such entities.</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: 0.25in">Except for the Affected Entities, the contractual
arrangements enable us to: (1) exercise effective control over the affiliated entities; (2) receive substantially all of the economic
benefits of the affiliated entities in consideration for the services provided by us; and (3) have an exclusive option to purchase all
of the equity interests in the affiliated entities when and to the extent permitted under PRC law. Therefore, we are able to consolidate
the financial results of the affiliated entities in our consolidated financial statements. However, our PRC legal counsel has advised
us that as there are substantial uncertainties regarding the interpretation and application of PRC laws and regulations, and we cannot
assure you that the PRC government would agree that our corporate structure or any of the above contractual arrangements comply with current
or future PRC laws or regulations. PRC laws and regulations governing the enforcement of these contractual arrangements are uncertain
and the relevant government authorities may have broad discretion in interpreting these laws and regulations.</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"><b><i>Any failure by our affiliated entities and their shareholders
or sponsors to perform their obligations under our contractual arrangements with them would have a material and adverse effect on our
business. </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: 0.25in">Our affiliated entities and their shareholders
or sponsors may fail to take certain actions required for our business or to follow our instructions despite their contractual obligations
to do so. In addition, there might be a risk that the shareholders of the performing parties to the contractual arrangements may raise
objections to the arrangements. If they fail to perform their obligations under their respective agreements with us, we may have to rely
on legal remedies under PRC law, including seeking specific performance or injunctive relief, which may not be effective. For example,
if the shareholders of Long-Spring Education were to refuse to transfer their equity interests in Long-Spring Education to us or our designee
if we exercise the purchase option pursuant to these contractual arrangements, or if they were otherwise to act in bad faith toward us,
then we may have to take legal actions to compel them to perform their contractual obligations.</p><div>

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


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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-indent: 18pt">All the agreements under our contractual arrangements
are governed by PRC law and provide for the resolution of disputes through arbitration in China. Accordingly, these contracts would be
interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. The legal system in
the PRC is not as developed as in some other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system
could limit our ability to enforce these contractual arrangements. Meanwhile, there are very few precedents and little formal guidance
as to how contractual arrangements in the context of a consolidated variable interest entity should be interpreted or enforced under PRC
law. There remain significant uncertainties regarding the ultimate outcome of such arbitration should legal action become necessary. In
addition, under PRC law, rulings by arbitrators are final, parties cannot appeal the arbitration results in courts, and if the losing
parties fail to carry out the arbitration awards within a prescribed time limit, the prevailing parties may only enforce the arbitration
awards in PRC courts through arbitration award recognition proceedings, which would require additional expenses and delay. Moreover, our
contractual arrangements provided that arbitrators may award remedies over the shares and/or assets of our affiliated entities in China,
injunctive relief and/or winding up of our affiliated entities, and that courts of competent jurisdictions are empowered to grant interim
remedies in support of the arbitration pending the formation of an arbitral tribunal. However, under PRC law, arbitrators have no power
to grant injunctive relief and may not directly issue a provisional or final liquidation order to protect assets or equity interest involved
in case of disputes. In addition, interim remedies or enforcement orders granted by foreign courts in the United States and the Cayman
Islands may not be recognized or enforceable in China. In the event we are unable to enforce our contractual arrangements, or if we suffer
significant delay or other obstacles in the process of enforcing these contractual arrangements, we may not be able to exert effective
control over our affiliate entities, and our ability to conduct our business may be negatively affected. See &#8220;&#8212;Risks Related
to Doing Business in China&#8212;Uncertainties with respect to the PRC legal system could have a material adverse effect on us.&#8221;</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"><b><i>The shareholders of Long-Spring Education may have actual or
potential conflicts of interest with us and not act in the best interests of our company. </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: 0.25in">The shareholders of Long-Spring Education may
have actual or potential conflicts of interest with us. These shareholders may breach, or cause Long-Spring Education to breach, or refuse
to renew, the existing contractual arrangements we have with them and Long-Spring Education, which would have a material and adverse effect
on our ability to effectively control Long-Spring Education and receive economic benefits from it. For example, the shareholders may be
able to cause our agreements with Long-Spring Education to be performed in a manner adverse to us by, among other things, failing to remit
payments due under the contractual arrangements to us on a timely basis. We cannot assure you that when conflicts of interest arise any
or all of these shareholders will act in the best interests of our company or such conflicts will be resolved in our favor. Currently,
we do not have any arrangements to address potential conflicts of interest between these shareholders and our company. If we cannot resolve
any conflict of interest or dispute between us and these shareholders, we would have to rely on legal proceedings, which could result
in disruption of our business and subject us to substantial uncertainty as to the outcome of any such legal proceedings.</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"><b><i>Contractual arrangements between our affiliated entities and
us may be subject to scrutiny by the PRC tax authorities and a finding that we or our affiliated entities owe additional taxes could materially
reduce our net income and the value of your investment. </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: 0.25in">Under PRC laws and regulations, transactions between
related parties should be conducted on an arm&#8217;s-length basis and may be subject to audit or challenge by the PRC tax authorities.
We could face material adverse tax consequences if the PRC tax authorities determine that the contractual arrangements between us and
our affiliated entities are not conducted on an arm&#8217;s-length basis and adjust the income of our affiliated entities through the
transfer pricing adjustment. A transfer pricing adjustment could, among other things, result in, for PRC tax purposes, increased tax liabilities
of our affiliated entities. In addition, the PRC tax authorities may require us to disgorge our prior tax benefits, and require us to
pay additional taxes for prior tax years and impose late payment fees and other penalties on our affiliated entities for underpayment
of prior taxes. To date, similar contractual arrangements have been used by many public companies, including companies listed in the United
States, and, to our knowledge, the PRC tax authorities have not imposed any material penalties on those companies. However, we cannot
assure you that such penalties will not be imposed on any other companies or us in the future. Our net income may be reduced if the tax
liabilities of our affiliated entities materially increase or if they are found to be subject to additional tax obligations, late payment
fees or other penalties.</p><div>

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


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>If any of our affiliated entities becomes the subject of a bankruptcy
or liquidation proceeding, we may lose the ability to use and enjoy assets held by such entity, which could materially and adversely affect
our business, financial condition and results of operations. </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: 0.25in">We currently conduct our operations in China through
contractual arrangements with our affiliated entities and the shareholders of Long-Spring Education. As part of these arrangements, substantially
all of our education-related assets that are important to the operation of our business are held by our affiliated entities. If any of
these entities goes bankrupt and all or part of their assets become subject to liens or rights of third-party creditors, we may be unable
to continue some or all of our business activities, which could materially and adversely affect our business, financial condition and
results of operations. If any of our affiliated entities undergoes a voluntary or involuntary liquidation proceeding, its equity owner
or third-party creditors may claim rights relating to some or all of these assets, which would hinder our ability to operate our business
and could materially and adversely affect our business, our ability to generate revenues and the market price of the ADSs.</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"><b><i>We may rely on dividends paid by our PRC subsidiaries to fund
cash and financing requirements. Any limitation on the ability of our PRC subsidiaries to pay dividends to us could have a material adverse
effect on our ability to conduct our business and to pay dividends to holders of the ADSs and our ordinary shares. </i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">We are a holding company, and we may rely on dividends
to be paid by our PRC subsidiaries for our cash and financing requirements, including the funds necessary to pay dividends and other cash
distributions to the holders of the ADSs and our ordinary shares and service any debt we may incur. If our PRC subsidiaries incur debt
on their own behalf in the future, the instruments governing the debt may restrict its 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-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Pursuant to the Law on Promoting Private Education,
sponsors of for-profit private schools are entitled to retain the profits from their schools and the operating surplus may be allocated
to the sponsors pursuant to the PRC company law and other relevant laws and regulations. Sponsors of non-profit private schools are not
entitled to any distribution of profits from their schools and all revenue must be used for the operation of the schools. According to
Implementation Rules, a non-profit private school should allocate no less than 10% of its audited annual non-restricted net asset increase,
or a for-profit private school should allocate no less than 10% of its audited annual net income, to its development, respectively. Under
PRC laws and regulations, wholly foreign-owned enterprises in the PRC, such as Yunnan WFOE, may pay dividends only out of their accumulated
profits as determined in accordance with PRC accounting standards and regulations. In addition, a wholly foreign-owned enterprise is required
to set aside at least 10% of its after-tax profits each year, after making up previous years&#8217; accumulated losses, if any, to fund
certain statutory reserve funds, until the aggregate amount of such a fund reaches 50% of its registered capital. At the discretion of
the wholly foreign-owned enterprise, it may allocate a portion of its after-tax profits based on PRC accounting standards to staff welfare
and bonus funds. These reserve funds and staff welfare and bonus funds are not distributable as cash dividends. However, the relevant
authorities have yet to promulgate any detailed implementation rules and regulations under the Implementation Rules. We remain uncertain
as to the timing and substance of the rules under the Law on Promoting Private Education and Implementation Rules to be promulgated, and
how such rules will impact our operation. Furthermore, if our subsidiaries or the affiliated entities in China incur debt on their own
behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments to us. Any
limitation on the ability of our wholly-owned PRC subsidiaries to pay dividends or make other distributions to us could materially and
adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise
fund and conduct our business.</p><div>

</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"><b><i>PRC regulation of loans and direct investment by offshore holding
companies to PRC entities may delay or prevent us from making loans or additional capital contributions to our PRC subsidiaries and affiliated
entities, which could harm 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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">As an offshore holding company of our PRC subsidiaries
and affiliated entities, we may (1)&#160;make loans to our PRC subsidiaries and affiliated entities, (2)&#160;make additional capital
contributions to our PRC subsidiaries, (3)&#160;establish new PRC subsidiaries and make capital contributions to these new PRC subsidiaries,
and (4)&#160;acquire offshore entities with business operations in China in an offshore transaction. However, most of these uses are subject
to PRC regulations and approvals. For example:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">loans by us to our wholly-owned
subsidiaries in China, which are foreign-invested enterprises, cannot exceed statutory limits, which is the difference between the total
investment amount and the registered capital of our wholly-owned subsidiaries, and must be registered with the State Administration of
Foreign Exchange of the PRC, or SAFE, or its local counterparts;</span></td>
</tr></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="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">loans by us to our affiliated
entities, which are domestic PRC entities, over a certain threshold must be approved by the relevant government authorities and must
also be registered with SAFE or its local counterparts; 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; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">capital contributions to our
wholly-owned subsidiaries in China must be filed with MOFCOM or its local counterparts and must also be registered with the local bank
authorized by SAFE.</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: 0.25in">As a result of the requirements and limitations
outlined above, the amount of funds that we can directly contribute to our operations in China through Yunnan WFOE, is limited. In addition,
on March 30, 2015, SAFE promulgated the Circular of the SAFE on Reforming the Administrative Measures of Settlement of Foreign Exchange
Capital of Foreign-invested Enterprises (the &#8220;SAFE Circular 19&#8221;), a notice regulating the conversion by a foreign-invested
company of its capital contribution in foreign currency into Renminbi. The notice requires that the capital of a foreign-invested company
settled in Renminbi converted from foreign currencies shall be used only for purposes within the business scope as approved by the applicable
government authorities and may not be used for equity investments in China unless such activity is set forth in the business scope or
is otherwise permissible under PRC laws or regulations. In addition, SAFE strengthened its oversight of the flow and use of such capital
of a foreign-invested company settled in Renminbi converted from foreign currencies. The use of such Renminbi capital may not be changed
without SAFE&#8217;s approval, and may not in any case be used to repay Renminbi loans if the proceeds of such loans have not otherwise
been used. Violations of the SAFE Circular 19 will result in severe penalties including hefty fines. As a result, the SAFE Circular 19
may significantly limit our ability to transfer the net proceeds from our initial public offering and future overseas offering to our
operations in China through our PRC subsidiaries, which may adversely affect our ability to expand our business. On February 13, 2015,
the SAFE promulgated the Circular on Further Simplifying and Improving the Direct Investment-related Foreign Exchange Administration Policies
(the &#8220;SAFE Circular 13&#8221;), which was effective on June 1, 2015. Pursuant to the SAFE Circular 13, the registration of existing
equity is required in lieu of annual foreign exchange inspection of direct investment. The SAFE Circular 13 also grants the authority
to banks to examine and process foreign exchange registration with respect to both domestic and overseas direct investments.</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: 0.25in">We expect that PRC laws and regulations may continue
to limit our use of proceeds from our overseas offering or from other financing sources. We cannot assure you that we will be able to
obtain these government registrations or approvals on a timely basis, if at all, with respect to future loans or capital contributions
by us to our entities in China. If we fail to receive such registrations or approvals, our ability to use the proceeds from our initial
public offering and future overseas offerings and foreign currency to capitalize our PRC operations may be hindered, which could 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-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Risks Related to Doing Business in China </b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>PRC economic, political and social conditions, as well as changes
in any government policies, laws and regulations, could adversely affect the overall economy in China or the education services market,
which could harm our business. </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: 0.25in">Our revenues are all sourced from China. Accordingly,
our business, prospects, financial condition and results of operations are subject, to a significant extent, to economic, political and
legal developments in China.</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: 0.25in">The PRC economy differs from the economies of
most developed countries in many respects. Although the PRC economy has been transitioning from a planned economy to a more market-oriented
economy since the late 1970s, the PRC government continues to play a significant role in regulating the industry. The PRC government continues
to exercise significant control over China&#8217;s economic growth through allocating resources, controlling the incurrence and oversight
and discretion over the conduct of our business and may intervene with or influence our operations as the government deems appropriate
to further regulatory, political and societal goals. The PRC government has recently published new policies that significantly affected
certain industries such as the education and internet industries, and we cannot rule out the possibility that it will in the future release
regulations or policies regarding our industry that could adversely affect our business, financial condition and results of operations.
Changes in any of these policies, laws and regulations could adversely affect the economy in China or the market for education services,
especially for Gaokao and Zhongkao, which could harm our business. Furthermore, the PRC government has recently indicated an intent to
exert more oversight and control over overseas securities offerings and other capital markets activities and foreign investment in China-based
companies like us. Any such action, once taken by the PRC government, could significantly limit or completely hinder our ability to offer
or continue to offer securities to investors and cause the value of such securities to significantly decline or in extreme cases, become
worthless.</p><div>

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


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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">While the PRC economy has experienced significant
growth over the past decades, growth has been uneven, both geographically and among various sectors of the economy. In addition, the rate
of growth has been slowing since 2012, and the impact of COVID-19 on the Chinese and global economies in 2020 is likely to be severe.
In particular, the National Bureau of Statistics of China reported a 6.8% drop and a 3.2% growth in GDP for the first and second quarters
of 2020, respectively, compared with the respective periods of 2019. Any adverse changes in economic conditions in China, in the policies
of the PRC government or in the laws and regulations in China could have a material adverse effect on the overall economic growth of China.
Any significant slowdown in China&#8217;s economic growth may cause our potential students to delay or cancel their plans to enroll in
our schools, which in turn could reduce our revenues. The PRC government has implemented various measures to stimulate economic growth
and guide the allocation of resources. Some of these measures may benefit the overall PRC economy, but may have a negative effect on us.
For example, our financial condition and results of operations may be adversely affected by government control over capital investments
or changes in tax regulations. In addition, in the past, the PRC government has implemented certain measures, including interest rate
adjustment, to control the pace of economic growth. These measures may cause decreased economic activity in China, which may adversely
affect our business and results of operations. In addition, the increased global focus on social, ethical and environmental issues may
lead to China&#8217;s adoption of more stringent standards in these areas, which may adversely impact the operations of China-based companies
including us.</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: 0.25in">Furthermore, our company, the VIE and its subsidiaries,
and our investors may face uncertainty about future actions by the government of China that could significantly affect the affiliated
entities and its subsidiaries&#8217; financial performance and operations, including the enforceability of the contractual arrangements.
As of the date of this report, neither our company nor the VIE has received or has been denied permission from Chinese authorities to
list on U.S. exchanges. However, there is no guarantee that our company or VIE will receive or not be denied permission from Chinese authorities
to list on U.S. exchanges in the future.</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"><b><i>Uncertainties with respect to the PRC legal system could have
a material adverse effect on us. </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: 0.25in">The PRC legal system is a civil law system based
on written statutes. Unlike the common law system, prior court decisions in a civil law system may be cited as reference but have limited
precedential value. Since 1979, newly introduced PRC laws and regulations have significantly enhanced the protections of interest relating
to foreign investments in China. However, since these laws and regulations are relatively new and the PRC legal system continues to evolve
rapidly, the interpretations of such laws and regulations may not always be consistent, and enforcement of these laws and regulations
involves significant uncertainties, any of which could limit the available legal protections.</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: 0.25in">In addition, the PRC administrative and judicial
authorities have significant discretion in interpreting, implementing or enforcing statutory rules and contractual terms, and it may be
more difficult to predict the outcome of administrative and judicial proceedings and the level of legal protection we may enjoy in the
PRC than under some more developed legal systems. These uncertainties may affect our decisions on the policies and actions to be taken
to comply with PRC laws and regulations, and may affect our ability to enforce our contractual rights, property (including intellectual
property) or tort rights. In addition, the regulatory uncertainties may be exploited through unmerited legal actions or threats in an
attempt to extract payments or benefits from us. Such uncertainties may therefore increase our operating expenses and costs, and materially
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-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Any actions by the Chinese government, including any decision
to intervene or influence the operations of our PRC subsidiaries or the affiliated entities or to exert control over any offering of securities
conducted overseas and/or foreign investment in China-based issuers, may cause us to make material changes to the operations of our PRC
subsidiaries or the VIE, may limit or completely hinder our ability to offer or continue to offer securities to investors, and may cause
the value of such securities to significantly decline or be worthless.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">The Chinese government has exercised and continues
to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. The ability
of our subsidiaries and affiliated entities to operate in China may be impaired by changes in its laws and regulations, including those
relating to education, taxation, land use rights, foreign investment limitations, and other matters.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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-indent: 0.25in">The central or local governments of China may
impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts on
our part to ensure our PRC subsidiaries and the affiliated entities&#8217; compliance with such regulations or interpretations. As such,
our PRC subsidiaries and the affiliated entities may be subject to various government actions and regulatory interference in the provinces
in which they operate. They could be subject to regulation by various political and regulatory entities, including various local and municipal
agencies and government sub-divisions. They may incur increased costs necessary to comply with existing and newly adopted laws and regulations
or penalties for any failure to comply.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Furthermore, it is uncertain when and whether
we will be required to obtain permission from the PRC government to list on U.S. exchanges in the future, and even when such permission
is obtained, whether it will be later denied or rescinded. Although we believe that our company, our PRC subsidiaries, and the VIE, are
currently not required to obtain permission from any Chinese authorities, and none of them has received any notice of denial of permission
to list on the U.S. exchange, our operations could be adversely affected, directly or indirectly, by existing or future laws and regulations
relating to our business or industry, particularly in the event permission to list on U.S. exchanges may be later required, or withheld
or rescinded once given.</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: 0.25in">Accordingly, government actions in the future,
including any decision to intervene or influence the operations of our PRC subsidiaries or the affiliated entities at any time, or to
exert control over an offering of securities conducted overseas and/or foreign investment in China-based issuers, may cause us to make
material changes to the operations of our PRC subsidiaries or the VIE, may limit or completely hinder our ability to offer or continue
to offer securities to investors, and/or may cause the value of such securities to significantly decline or be worthless.</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"><b><i>Based on the recent development of PRC law, there is significant
uncertainty about the application and interpretation of the Law on Promoting Private Education, the Implementation Rules and their detailed
implementation rules and regulations. We may be subject to significant limitations on our ability to engage in the private education business,
acquire private schools, or receive payments from the VIE and may otherwise be materially and adversely affected by changes in PRC laws
and regulations.</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: 0.25in">Pursuant to the Law on Promoting Private Education,
sponsors of private schools may choose to establish schools as either non-profit or for-profit schools. Sponsors are not permitted to
establish for-profit schools that provide compulsory education services, which covers grades one to nine and which accounts for a significant
portion of our students as well as revenue during the reporting period. Sponsors of for-profit private schools are entitled to retain
the profits from their schools and any operating surplus may be allocated to the sponsors pursuant to the PRC company law and other relevant
laws and regulations. Sponsors of non-profit private schools are not entitled to any distribution of profits from their schools and all
revenue must be used for the operation of the schools.</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: 0.25in">As a holding company, our ability to generate
profits, pay dividends and other cash distributions to our shareholders under the Law on Promoting Private Education, the Implementation
Rules and other relevant laws and regulations are affected by many factors, including whether our schools are characterized as for-profit
or non-profit schools, the profitability of our schools, and our ability to receive dividends and other distributions from our PRC subsidiary,
Yunnan WFOE, which in turn depends on the service fees paid to Yunnan WFOE from the affiliated entities. Yunnan WFOE has respectively
entered into exclusive management services and business cooperation agreements with the affiliated entities and each of the shareholders
of Long-Spring Education, pursuant to which Yunnan WFOE has the exclusive right to provide comprehensive technical and business support
services to the affiliated entities. As advised by our PRC counsel, as of the date of this annual report, except for the Affected Entities,
our right to receive the service fees from our schools and other affiliated entities did not, to our knowledge, contravene any PRC laws
and regulations then in force. Likewise, the payment of service fees under our contractual arrangements should not be regarded as the
distribution of returns, dividends or profits to the sponsors of our schools under the PRC laws and regulations then in force.</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: 0.25in"></p><div>

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</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: 0.25in">However, according to the Implementation Rules,
which came into force and effect beginning September 1, 2021, (1) foreign-invested enterprises established in China and social organizations
whose actual controllers are foreign parties shall not sponsor, participate in, or actually control private schools that provide compulsory
education; (2) social organizations or individuals shall not control any private school that provides compulsory education or any non-profit
private school that provides pre-school education by means of, among others, merger, acquisition and contractual arrangements; and (3)
private schools providing compulsory education shall not conduct any transaction with any related party. Where any other private school
conducts any transaction with any related party, it shall follow the principles of openness, fairness and impartiality, fix reasonable
tuition and fees and regulate the decision-making, and shall not damage the state and the school or the rights and interests of the teachers
and students, otherwise, there is a risk of being ordered to make corrections within a time limit, and the illegal gains, if any, shall
be confiscated after the fees collected are returned; if the circumstances are serious, the sponsor, actual controller and member of
the decision-making body or supervisory body shall not become the sponsor, actual controller or member of the decision-making body or
supervisory body of other private school within one to five years; if the circumstances are especially serious with adverse social impact,
the sponsor, actual controller and member of the decision-making body or supervisory body shall not become the sponsor, actual controller
and members of the decision-making body or supervisory body of other private school permanently; if a violation of public security administration
is constituted, the public security organ shall impose a public security administration punishment according to law; if a crime is constituted,
criminal responsibility shall be investigated in accordance with the law.</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: 0.25in">Therefore, a private school providing compulsory
education is prohibited from conducting transactions with its related parties. As a result, the clause or provision of the exclusive
management services and business cooperation agreements, in relation to related party transactions between a private school providing
compulsory education and Yunnan WFOE, have been rendered not legally enforceable since September 1, 2021. Since September 1, 2021, we
have ceased our transactions with the Affected Entities, to the extent practicable. However, to keep these private schools providing
compulsory education open, we continued to provide essential services without recognizing any revenues relating to such activities to
schools providing compulsory education in our discontinued operation, which are key to the normal daily operation of these schools. As
date of this annual report, schools providing compulsory education that we continue to provide services to have not received any further
rectification requirements or penalty notices from the relevant competent authority, and we are currently unable to assess, with any
certainty, the risks of penalty associated with our continued provision of such essential services. We are continuously assessing the
impact of relevant regulations on our business and making necessary measures and efforts to comply with the requirements under these
regulations and implementations, including restructuring corporate structure or unwinding contractual arrangements.</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: 18pt">In particular, the enforcement of our contractual
arrangements may be challenged, and our corporate structure may need to be restructured to comply with the new regulations, which may
be time-consuming and expensive and impose additional restrictions on our business expansion and may further adversely affect our business
operations and results of operations. See &#8220;&#8212;Risks Related to Our Corporate Structure&#8212;If the PRC government finds that
our corporate structure and contractual arrangements does not comply with applicable PRC laws and regulations, we could be subject to
severe penalties and our business may be materially and adversely affected.&#8221;</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"><b><i>Our shares and ADSs will be prohibited from trading in the OTC
market under the Holding Foreign Companies Accountable Act, if the PCAOB is unable to inspect or investigate completely our auditors
for two consecutive years. The cessation of trading of our ordinary shares, or the threat of their being prohibited from being traded,
may materially and adversely affect the value of your investment. </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: 0.25in">Pursuant to the HFCAA, if the SEC determines that we have filed audit
reports issued by a registered public accounting firm that has not been subject to inspections by the PCAOB for two consecutive years,
the SEC will prohibit our shares and ADSs from being traded in the OTC market in the United States.&#160;On December&#160;2, 2021, the
SEC adopted final amendments to its rules implementing the HFCAA, which include requirements to disclose information, including the auditor
name and location, the percentage of shares of the issuer owned by governmental entities, whether governmental entities in the applicable
foreign jurisdiction with respect to the auditor has a controlling financial interest with respect to the issuer, the name of each official
of the Chinese Communist Party who is a member of the board of the issuer, and whether the articles of incorporation of the issuer contains
any charter of the Chinese Communist Party. These amendments also establish procedures the SEC will follow in identifying issuers and
prohibiting trading by certain issuers under the HFCAA. In March 2022, the SEC issued its first &#8220;Conclusive list of issuers identified
under the HFCAA,&#8221; which indicates that those companies are now formally subject to the delisting provisions if they remain on the
list for two consecutive years. We have not been identified by the SEC as a commission-identified issuer under the HFCAA 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: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Our current auditor, Audit Alliance LLP, the independent registered
public accounting firm that issues the audit report included elsewhere in this annual report and is headquartered in Singapore, is a firm
registered with the PCAOB, and, as of the date of this annual report, was not included in the list of PCAOB Identified Firms in the PCAOB
Determination Report issued in December 2021. The PCAOB currently has access to inspect the working papers of our auditor. However, the
recent developments would add uncertainties to our trading or future offering of our securities in the United States, and we cannot assure
you whether 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 they relate to the audit of our financial statements. To the extent this status changes in the future and our auditor&#8217;s
audit documentation related to their audit reports for our Company is inaccessible for inspection by the PCAOB or if the PCAOB is unable
to inspect or investigate our auditor completely because of a position taken by an authority in a foreign jurisdiction, trading in our
shares could be prohibited under the HFCAA, and, as a result, our shares could be suspended or prohibited from trading in the OTC market.</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: 0.25in"></p><div>

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</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: 0.25in">Our ability to retain an auditor subject to PCAOB inspection and investigation,
including but not limited to inspection of the audit working papers related to us, may depend on the relevant positions of U.S. and Chinese
regulators. With respect to audits of companies with operations in China, such as our company, there are uncertainties about the ability
of auditors of such companies to fully cooperate with a request by the PCAOB for audit working papers in China without the approval of
Chinese authorities. In August 2022, the CSRC, the MOF, and the PCAOB signed a Statement of Protocol (the &#8220;Statement of Protocol&#8221;),
which establishes a specific and accountable framework for the PCAOB to conduct inspections and investigations of PCAOB-governed accounting
firms in mainland China and Hong Kong. On December 15, 2022, the PCAOB announced that it was able to secure complete access to inspect
and investigate PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong completely in 2022. The PCAOB Board
vacated its previous 2021 determinations that the PCAOB was unable to inspect or investigate completely registered public accounting firms
headquartered in mainland China and Hong Kong. However, should PRC authorities obstruct or otherwise fail to facilitate the PCAOB&#8217;s
access in the future, the PCAOB Board will consider the need to issue a new determination. In the event that future regulators in China
take steps to restrict the audit firm&#8217;s access to working papers in mainland China or Hong Kong, or if the PCAOB is unable to fully
inspect our audit working papers, or if the PCAOB expands the scope of its determination so that we are subject to the HFCAA, it could
restrict or limit our access to the U.S. capital markets or in the OTC market in the United States may be prohibited under the HFCAA.
If our ADSs are prohibited from trading in the OTC market in the United States, there is no certainty that we will be able to list our
Ordinary Shares on a securities exchange outside the United States or that a market for our Ordinary Shares will develop outside the U.S.
Such a prohibition would significantly affect our ability to raise capital on terms acceptable to us, or at all, which would have a material
adverse impact on our business, financial condition and prospects.</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"><b><i>If the settlement reached between the SEC and the &#8220;big
four&#8221; PRC-based accounting firms concerning the manner in which the SEC may seek access to audit working papers from audits in
China of US-listed companies is not or cannot be performed in a manner acceptable to authorities in China and the United States, we may
be unable to timely file future financial statements in compliance with the requirements of the Exchange Act in the future.</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: 18pt">In December&#160;2012, the SEC brought administrative
proceedings against the &#8220;big four&#8221;&#160;PRC-based&#160;accounting firms, alleging that they had violated U.S. securities laws
and the SEC&#8217;s rules and regulations thereunder by failing to provide to the SEC the firms&#8217; audit work papers and other documents
related to certain other&#160;PRC-based&#160;companies that are publicly traded in the United States.</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: 0.25in">On January&#160;22, 2014, the administrative
law judge presiding over the matter rendered an initial decision that each of the firms had violated the SEC&#8217;s rules of practice
by failing to produce audit papers and other documents to the SEC. The initial decision censured each of the firms and barred them from
practicing before the SEC for a period of six months. The decision was neither final nor legally effective until reviewed and approved
by the SEC, and on February&#160;12, 2014, the&#160;PRC-based&#160;accounting firms appealed to the SEC against this decision.</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: 0.25in">On February&#160;6, 2015, the four&#160;PRC-based&#160;accounting
firms each agreed to a censure and to pay a fine to the SEC to settle the dispute and avoid suspension of their ability to practice before
the SEC and audit U.S.-listed companies. The settlement required the firms to follow detailed procedures and to seek to provide the SEC
with access to PRC-based firms&#8217; audit documents via the CSRC. Under the terms of the settlement, the underlying proceeding against
the four&#160;PRC-based&#160;accounting firms was deemed dismissed with prejudice four years after entry of the settlement. The four-year
mark occurred on February&#160;6, 2019. Despite the Statement of Protocol, it remains uncertain whether the SEC will further challenge
the four&#160;PRC-based&#160;accounting firms&#8217; compliance with U.S. laws in connection with U.S. regulatory requests for audit
work papers or if the results of such a challenge would result in the SEC imposing penalties such as suspensions.</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: 0.25in">In the past we had engaged certain Chinese affiliates
of the &#8220;big four&#8221; accounting firms as our independent registered public accounting firm. While we did not do so for the fiscal
year ended December 31, 2022, we cannot assure you that we will not engage or otherwise rely on their audits in the future. If the accounting
firm we engage were denied, even temporarily, the ability to practice before the SEC, and we were unable to timely find another registered
public accounting firm to audit and issue an opinion on our financial statements, our financial statements could be determined not to
be in compliance with the requirements of the Exchange Act. Such a determination could ultimately lead to the quoting of our ordinary
shares on the OTC market or deregistration from the SEC, or both, which would substantially reduce or effectively terminate the trading
of our ADSs in the United States. Moreover, any negative news about any such future proceedings against these accounting firms may cause
investor uncertainty regarding China-based, United States-listed companies and the market price of our ADSs may be adversely affected.</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: 0.25in"></p><div>

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</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"><b><i>Failure to comply with governmental regulations and other legal
obligations concerning data protection and cybersecurity may materially and adversely affect our business, as we routinely collect and
store data during the conduct of our business.</i></b></p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">We routinely collect and store data during our
operations. We store basic personal information such as students' name, age, birthday and other personal information, and use such data
for the purposes of facilitating students in the examination application and national census and statistics related reporting process
only. We are subject to PRC laws and regulations governing the collecting, storing, sharing, using, processing, disclosure and protection
of data on the Internet and mobile platforms as well as cybersecurity. On August 17, 2021, the state council promulgated the Regulations
on Protection of Critical Information Infrastructure, which became effective on September 1, 2021. Pursuant to the Regulations on Protection
of Critical Information Infrastructure, critical information infrastructure shall mean any important network facilities or information
systems of an important industry or field, such as public communication and information service, energy, communications, water conservation,
finance, public services, e-government affairs and national defense science, which may endanger national security, peoples&#8217; livelihoods
and public interest in the event of damage, function loss or data leakage. In addition, relevant administration departments of each critical
industry and sector, or Protection Departments, shall be responsible to formulate eligibility criteria and determine the critical information
infrastructure operator in the respective industry or sector. The operators shall be informed about the final determination as to whether
they are categorized as critical information infrastructure operators. On December 28, 2021, the Cyberspace Administration of China jointly
with other 12 government authorities, issued the Measures for Cybersecurity Review (2021), which became effective on February 15, 2022,
and repealed the Cybersecurity Review Measures (2020) simultaneously. The Measures for Cybersecurity Review (2021) provide that critical
information infrastructure operators purchasing network products and services and data processors carrying out data processing activities,
which affect or may affect national security, shall apply for cybersecurity review to the cyberspace administrations in accordance with
the provisions thereunder. As of the date of this annual report, no detailed rules or implementation have been issued by any Protection
Departments and we have not been informed that we are identified as a critical information infrastructure operator by any governmental
authorities. We will closely monitor the rule-making process and will assess and determine whether we are required to apply for the cybersecurity
review.</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: 0.25in">On August 20, 2021, the Standing Committee of
the National People&#8217;s Congress (the &#8220;SCNPC&#8221;) promulgated the Personal Information Protection Law, which became effective
on November 1, 2021. The Personal Information Protection Law aims at protecting the personal information rights and interests, regulating
the processing of personal information, ensuring the orderly and free flow of personal information in accordance with the law, and promoting
the reasonable use of personal information. According to the Personal Information Protection Law, personal information includes all kinds
of identified or identifiable information related to natural persons recorded by electronic or other means, but excludes de-identified
information. The Personal Information Protection Law also specified the rules for handling sensitive personal information, which includes
biometrics, religious beliefs, specific identities, medical health, financial accounts, trails and locations, and personal information
of teenagers under fourteen years old and other personal information, which, upon leakage or illegal usage, may easily infringe the personal
dignity or harm safety of livelihood and property. Personal information handlers shall bear responsibility for their personal information
handling activities, and must adopt necessary measures to safeguard the security of the personal information they handle. Otherwise, the
personal information handlers will be ordered for rectification or suspension or termination of provision of services, confiscation of
illegal income, subject to fines or other penalties.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><span style="font-size: 7pt">&#160;</span></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">We cannot predict the impact of these new laws
and regulations, if any, at this stage, and we will closely monitor and assess any development in the rule-making process. Therefore,
it remains uncertain whether the proposed measures will be applicable to our business, or whether the future regulatory changes would
impose additional restrictions on companies like us. Failure to comply with the cybersecurity and data privacy requirements in a timely
manner, or at all, may subject us to government enforcement actions and investigations, fines, penalties, suspension of our non-compliant
operations, among other sanctions. As a result, we may be required to upgrade or change our service offerings and other aspects of our
business to comply with such laws and regulations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 18pt"><span style="font-size: 7pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">We have adopted various measures to ensure compliance
with privacy and data protection regulations. However, our security control may not prevent the improper leakage of personal data and
confidential information. Additionally, we cannot assure you that we will be able to address any vulnerabilities in our systems that we
may become aware of in the future. In particular, we could be subject to attacks on our systems by external parties or fraudulent or inappropriate
behaviors by our employees, third-party providers or other business partners. Third parties may also gain access to our data using computer
malware, viruses, spamming, phishing attacks or other means. A security breach that leads to leakage of data and information of our users,
even though anonymized, could still subject us to legal liabilities, regulatory sanctions, reputational damage and loss of user confidence.
In addition, data breaches or any misconduct during the process of collection, analysis, and storage of data, could result in a violation
of applicable data privacy and protection laws and regulations in China, and subject us to regulatory actions, investigations or litigations.
Even if these actions, investigations or litigations do not result in any liability to us, we could incur significant costs in investigating
and defending against them, and could be subject to negative publicity about our privacy and data protection practices, which may affect
our reputation in the marketplace. Potential risks related to our collection and use of data could require us to implement measures to
reduce our exposure to liability, which may require us to expend substantial resources. As a result, our business, results of operations
and financial condition could be materially and adversely affected.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 18pt"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 18pt"><span style="font-size: 7pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>The filing procedure with the CSRC shall be fulfilled and the
approval of other PRC government authorities may be required in connection with our future offshore offering under PRC law, and, we cannot
predict whether or for how long we will be able to complete the filing procedure with the CSRC and obtain such approval or complete such
filing, if required. </i></b></p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 18pt">The Regulations on Mergers and Acquisitions of Domestic
Companies by Foreign Investors (the &#8220;M&amp;A Rules&#8221;), adopted by six PRC regulatory agencies in 2006 and amended in 2009,
include, among other things, provisions that purport to require that an offshore special purpose vehicle, formed for the purpose of an
overseas listing of securities through acquisitions of domestic enterprises in China or assets and controlled by enterprises or individuals
in China, to obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle&#8217;s securities on an
overseas stock exchange. On September&#160;21, 2006, pursuant to the M&amp;A Rules&#160;and other PRC laws, the CSRC published on its
official website relevant guidance regarding its approval of the listing and trading of special purpose vehicles&#8217; securities on
overseas stock exchanges, including a list of application materials. However, substantial uncertainty remains regarding the scope and
applicability of the M&amp;A Rules&#160;to offshore special purpose vehicles. We completed our initial public offering on March 11, 2021.</p><div>

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

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 18pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">On July&#160;6, 2021, the relevant PRC government
authorities issued the Opinions on Severely Cracking Down on Illegal Securities Activities According to Law, which were made available
to the public on July 6, 2021. These opinions emphasized the need to strengthen the administration over illegal securities activities
and the supervision on overseas listings by China-based companies. These opinions proposed to take effective measures, such as promoting
the construction of relevant regulatory systems, to deal with the risks and incidents facing China-based overseas-listed companies and
the demand for cybersecurity and data privacy protection. The aforementioned policies and any related implementation rules to be enacted
may subject us to additional compliance requirement in the future. As these opinions were recently issued, official guidance to act upon,
and interpretation thereof remain unclear in several respects at this time. Therefore, we cannot assure you that we will remain fully
compliant with all new regulatory requirements of these opinions or any future implementation rules on a timely basis, or at all.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 18pt"><span style="font-size: 7pt">&#160;</span></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">On February 17, 2023, the CSRC promulgated the
Trial Measures of the Overseas Securities Offering and Listing by Domestic Companies (the &#8220;Overseas Listing Trial Measures&#8221;)
and the related guidelines, which became effective on March 31, 2023. According to the Overseas Listing Trial Measures, PRC domestic companies
that seek to offer and list securities in overseas markets, either in direct or indirect means, are required to fulfill the filing procedure
with the CSRC and report relevant information. The Overseas Listing Trial Measures provides that an overseas listing or offering is explicitly
prohibited, if any of the following: (1)&#160;such securities offering and listing is explicitly prohibited by provisions in laws, administrative
regulations and relevant state rules; (2)&#160;the intended securities offering and listing may endanger national security as reviewed
and determined by competent authorities under the State Council in accordance with law; (3)&#160;the domestic company intending to make
the securities offering and listing, or its controlling shareholder(s)&#160;and the actual controller, have committed relevant crimes
such as corruption, bribery, embezzlement, misappropriation of property or undermining the order of the socialist market economy during
the latest three&#160;years; (4)&#160;the domestic company intending to make the securities offering and listing is currently under investigations
for suspicion of criminal offenses or major violations of laws and regulations, and no conclusion has yet been made thereof; or (5)&#160;there
are material ownership disputes over equity held by the domestic company&#8217;s controlling shareholder(s)&#160;or by other shareholder(s)&#160;that
are controlled by the controlling shareholder(s)&#160;and/or actual controller.</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: 0.25in">The Overseas Listing Trial Measures also provides
that if the issuer meets both the following criteria, the overseas securities offering and listing conducted by such issuer will be deemed
as indirect overseas offering by PRC domestic companies: (1)&#160;50% or more of any of the issuer&#8217;s operating revenue, total profit,
total assets or net assets as documented in its audited consolidated financial statements for the most recent fiscal&#160;year is accounted
for by domestic companies; and (2)&#160;the main parts of the issuer&#8217;s business activities are conducted in mainland China, or its
main place(s)&#160;of business are located in mainland China, or the majority of senior management staff in charge of its business operations
and management are PRC citizens or have their usual material events in mainland China.</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: 0.25in">The Overseas Listing Trial Measures further provides that, initial
public offerings or listings in overseas markets by domestic companies, either in direct or indirect form shall be filed with the CSRC
pursuant to the requirements of the Overseas Listing Trial Measures within three business days after the relevant application is submitted
overseas. The companies that had already been listed on overseas stock exchanges prior to March 31, 2023 or the companies that had obtained
the approval from overseas supervision administrations or stock exchanges for its offering and listing prior to March 31, 2023 and will
complete their overseas offering and listing prior to September 30, 2023 are not required to make immediate filings for its listing, but
are required make filings for subsequent offerings in accordance with the Overseas Listing Trial Measures. Companies that had already
submitted an application for an initial public offering to overseas supervision administrations but had not yet obtained the approval
from overseas supervision administrations or stock exchanges for the offering and listing prior to March 31, 2023 may arrange for the
filing within a reasonable time period and should complete the filing procedure before such companies&#8217; overseas issuance and listing.
Companies, like us, that had already been listed overseas as of March 31, 2023 are not required to make immediate filing with the CSRC
but are required to file with the CSRC within three business days after the completion of subsequent securities offerings in the same
overseas market where its securities were previously offered and listed, or file the required filing materials with the CSRC within three
working days after the submission of relevant application for subsequent securities offerings and listings in other overseas markets.
In addition, an overseas listed company is required to report to the CSRC within three business days after the occurrence and announcement
of any of the following material events: (1) a change of control of the listed company; (2) the investigation, sanction or other measures
undertaken by any foreign securities regulatory agencies or authorities in respect of the listed company; (3) a change of listing status
or transfer of listing segment; and (4) the voluntary or mandatory delisting of the listed company. If there is any material change of
the principal business of the listed company after the overseas offering and listing so that the listed company is no longer required
to file with the CSRC, it shall file a specific report and a legal opinion issued by a domestic law firm to the CSRC within three business
days after the occurrence thereof.</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: 0.25in">If we do not receive prior approval or complete the filing, to the
extent it is required, for any of our future offerings of securities overseas or up-listing to the New York Stock Exchange (the &#8220;NYSE&#8221;)
or the NASDAQ Stock Market, or to maintain the trading status of our ADSs, or if we inadvertently conclude that such prior approval or
any filing is not required, the CSRC or other PRC regulatory agencies may take actions requiring us, or making it advisable for us, not
to proceed with such offering or maintain the trading status of our ADSs. Any failure to obtain or delay in obtaining approvals and completing
filing procedures from the CSRC or other regulatory authorities or other procedures, including the cybersecurity review, for our offshore
offerings, or a rescission of any such approval or filing if obtained by us, or if we are unable to comply with any new approval requirements
or regulatory requirements which might be adopted for offerings that we have completed prior to the publication of the above-referenced
opinions, would subject us to sanctions by the CSRC or other PRC regulatory authorities. These regulatory authorities may impose fines
and penalties on our operations in China, limit our ability to pay dividends outside of China, limit our operating privileges in China,
delay or restrict the repatriation of the proceeds from our offshore offerings into China or take other actions that could materially
and adversely affect our business, financial condition, results of operations, and prospects, as well as the trading price of our securities.
The CSRC or other PRC regulatory authorities also may take actions requiring us, or making it advisable for us, to halt our offshore offerings
before settlement and delivery of the shares offered. Consequently, if investors engage in market trading or other activities in anticipation
of and prior to settlement and delivery, they do so at the risk that settlement and delivery may not occur. In addition, if the CSRC or
other regulatory authorities later promulgate new rules or explanations requiring that we obtain their approvals or accomplish the required
filing or other regulatory procedures for our prior offshore offerings, we may be unable to obtain a waiver of such approval requirements,
if and when procedures are established to obtain such a waiver. Any uncertainties or negative publicity regarding such approval requirement
could materially and adversely affect our business, prospects, financial condition, reputation, and the trading price of our securities.</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: 18pt"></p><div>

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>It may be difficult for overseas regulators to conduct investigations
or collect evidence within China. </i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 18pt">Shareholder claims or regulatory investigations
that are common in jurisdictions outside China are difficult to pursue as a matter of law or practicality in China. For example, in China,
there are significant legal and other obstacles to providing information needed for regulatory investigations or litigation initiated
outside China. Although the authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities
of another country or region to implement cross-border supervision and administration, such cooperation with the securities regulatory
authorities in the United States or other jurisdictions may not be efficient in the absence of a mutual and practical cooperation mechanism.
Furthermore, according to Article 177 of the PRC Securities Law, or Article 177, which became effective in March 2020, no overseas securities
regulator is allowed to directly conduct investigation or evidence collection activities within the territory of the PRC, and without
the consent by the Chinese securities regulatory authorities and the other competent governmental agencies, no entity or individual may
provide documents or materials related to securities business to any foreign party. While detailed interpretation of or implementation
rules under Article 177 has yet to be promulgated, the inability of an overseas securities regulator to directly conduct investigation
or evidence collection activities within China and the potential obstacles for information provision may further increase difficulties
you face in protecting your interests. See &#8220;&#8212;Risks Related to our ADSs&#8212;You may face difficulties in protecting your
interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands
law and conduct our operations in China&#8221; for risks associated with investing in us as a Cayman Islands company.</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>The discontinuation of any preferential tax treatment currently
available to us, in particular the tax exempt status of our schools, could materially and adversely affect our results of operations.
</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: 0.25in">Prior to the Private Education Law taking effect
on December 29, 2018, private schools for which the school sponsors do not require returns are eligible to enjoy the same preferential
tax treatment as public schools according to the Implementation Rules of the Law on Promoting Private Education. Pursuant to the Private
Education Law, a non-profit private school may enjoy the same preferential tax treatments as public schools in accordance with the relevant
PRC laws and regulations. Our school sponsors have registered Xinping Long-Spring Advanced Secondary School and Xishuangbanna Long-Spring
Experimental Secondary School as for-profit private education institutions and have registered Kunming Chenggong Long-Spring Experimental
Secondary School, Yiliang Long-Spring Experimental Secondary School, Qujing Hengshui Experimental Secondary School, Xinping Hengshui Experimental
Middle School, Qiubei Long-Spring Experimental Secondary School, and Wenshan Long-Spring Experimental Secondary School as non-profit private
schools. We have not made decisions to register some of our schools as for-profit or non-profit schools as we are currently in the transition
period during which no registration election is required. There is a possibility that the PRC government may promulgate relevant tax regulations
that will eliminate such preferential tax treatment, or the local tax bureaus may change their policy, in each such case, we will be subject
to PRC enterprise income tax going forward. The discontinuation of any preferential tax treatment currently available to us or the determination
of any of the relevant tax authorities that any of the preferential tax treatment we have enjoyed or currently enjoy is not in compliance
with the PRC laws would cause our effective tax rate to increase, which would increase our tax expenses and reduce our net profit.</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"><b><i>We may be subject to potential tax penalty and surcharge for
the enterprise income tax payable in PRC. </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: 0.25in">As of the date of this annual report, our nine
schools have not paid enterprise income tax for revenues generated from formal education services and three of these nine schools and
another one school have not paid enterprise income tax for revenues generated from informal education services, among which we have obtained
confirmation letters from or conducted interview with the PRC tax authorities for six of these schools to confirm that such schools are
not required to pay enterprise income tax. As of the date of this annual report, we have not obtained confirmation letters from the PRC
tax authorities for the remaining four schools, and we may be subject to additional tax liabilities if deemed payable by the relevant
PRC tax authorities. If any of our schools is deemed to have failed to pay enterprise income tax within the prescribed time limit, we
may be subject to tax penalty and related surcharges and our business, financial condition and results of operations could be materially
and adversely affected.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>If we are classified as a PRC resident enterprise for PRC income
tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders or the ADS holders.
</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: 0.25in">Under the PRC Enterprise Income Tax Law and its
implementation rules, an enterprise established under the laws of jurisdictions outside of the PRC with its &#8220;de facto management
body&#8221; within the PRC is considered a &#8220;resident enterprise&#8221; and will be subject to PRC enterprise income tax on its
global income at the rate of 25%. The implementation rules define the term &#8220;de facto management body&#8221; as the body that exercises
full and substantial control and overall management over the business, productions, personnel, accounts and properties of an enterprise.
In 2009, the State Administration of Taxation (the &#8220;SAT&#8221;) issued a circular, known as SAT Circular 82, which provides certain
specific criteria for determining whether the &#8220;de facto management body&#8221; of a PRC-controlled enterprise that is incorporated
offshore is located in China. Although this circular only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise
groups, not those controlled by PRC individuals or foreigners, the criteria set forth in the circular may reflect the SAT&#8217;s general
position on how the &#8220;de facto management body&#8221; text should be applied in determining the tax resident status of all offshore
enterprises. According to SAT Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group
will be regarded as a PRC tax resident by virtue of having its &#8220;de facto management body&#8221; in China and will be subject to
PRC enterprise income tax on its global income only if all of the following conditions are met: (1) the senior management and core management
departments in charge of daily operations are located mainly within the PRC; (2) decisions relating to the enterprise&#8217;s financial
and human resource matters are made or are subject to approval by organizations or personnel in the PRC; (3) the enterprise&#8217;s primary
assets, accounting books, company seals, and board and shareholder resolutions, are located or maintained in the PRC; and (4) at least
50% of voting board members or senior executives habitually reside in the PRC.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">We believe none of our entities outside of China
is a PRC resident enterprise for PRC tax purposes. However, the tax resident status of an enterprise is subject to determination by the
PRC tax authorities and uncertainties remain with respect to the interpretation of the term &#8220;de facto management body.&#8221; If
the PRC tax authorities determine that First High-School Education Group Co., Ltd. is a PRC resident enterprise for enterprise income
tax purposes, we may be required to withhold a 10% withholding tax from dividends we pay to our shareholders that are non-resident enterprises,
including the holders of the ADSs. In addition, non-resident enterprise shareholders (including the ADS holders) may be subject to PRC
tax at a rate of 10% on gains realized on the sale or other disposition of ADSs or ordinary shares at a rate of 10%, if such income is
treated as sourced from within the PRC. Furthermore, if PRC tax authorities determine that we are a PRC resident enterprise for enterprise
income tax purposes, dividends paid to our non-PRC individual shareholders (including the ADS holders) and any gain realized on the transfer
of ADSs or ordinary shares by such shareholders may be subject to PRC tax at a rate of 20% (which, in the case of dividends, may be withheld
at source by us), if such gains are deemed to be from PRC sources. These rates may be reduced by an applicable tax treaty, but it is
unclear whether non-PRC shareholders of First High-School Education Group Co., Ltd. would be able to claim the benefits of any tax treaties
between their country of tax residence and the PRC in the event that First High-School Education Group Co., Ltd. is treated as a PRC
resident enterprise. Any such tax may reduce the returns on your investment in the ADSs.</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"><b><i>We face uncertainties with respect to indirect transfer of equity
interests in PRC resident enterprises by their non-PRC holding companies. </i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">In February 2015, the SAT issued the Bulletin
on Issues of Enterprise Income Tax on Indirect Transfers of Assets by Non-PRC Resident Enterprises or Bulletin 7. Pursuant to Bulletin
7, an &#8220;indirect transfer&#8221; of PRC assets, including a transfer of equity interests in an unlisted non-PRC holding company
of a PRC resident enterprise, by non-PRC resident enterprises may be re-characterized and treated as a direct transfer of the underlying
PRC assets, if such arrangement does not have a reasonable commercial purpose and was established for the purpose of avoiding payment
of PRC enterprise income tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax, and
the transferee or other person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a
rate of 10% for the transfer of equity interests in a PRC resident enterprise.</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: 0.25in">On October 17, 2017, the SAT issued the Announcement
of the SAT on Issues Concerning the Withholding of Non-resident Enterprise Income Tax at Source, or Bulletin 37, which came into effect
on December 1, 2017 and further amended on June 15, 2018. The Bulletin 37 further clarifies the practice and procedure of the withholding
of nonresident enterprise income tax.</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: 0.25in">There is uncertainty as to the application of
Bulletin 37 or previous rules under Bulletin 7. We face uncertainties on our offshore restructuring transactions or sale of the shares
of our offshore subsidiaries, where non-resident enterprises, as the transferors, were involved. Under Bulletin 37 and Bulletin 7, our
company may be subject to filing obligations or taxes if our company is the transferor in such transactions, and may be subject to withholding
obligations if our company is the transferee in such transactions. As a result, we and our non-PRC shareholders may have the risk of
being taxed for the disposition of our ordinary shares or ADS and may be required to spend valuable resources to comply with Bulletin
7 and Bulletin 37 or to establish that we or our non-PRC shareholders should not be taxed as an indirect transfer, which may have a material
adverse effect on our financial condition and results of operations or the investment by non-PRC investors in us.</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"><b><i>The custodians or authorized users of our controlling non-tangible
assets, including chops and seals, may fail to fulfill their responsibilities, or misappropriate or misuse these assets. </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: 0.25in">Under the PRC law, legal documents for corporate
transactions, including agreements and contracts are executed using the chop or seal of the signing entity or with the signature of a
legal representative whose designation is registered and filed with relevant PRC market regulation administrative authorities.</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: 0.25in">In order to secure the use of our chops and seals,
we have established internal control procedures and rules for using these chops and seals. In any event that the chops and seals are
intended to be used, the responsible personnel will submit the application through our office automation system and the application will
be verified and approved by authorized employees in accordance with our internal control procedures and rules. In addition, in order
to maintain the physical security of our chops, we generally have them stored in secured locations accessible only to authorized employees.
Although we monitor such authorized employees, the procedures may not be sufficient to prevent all instances of abuse or negligence.
There is a risk that our employees could abuse their authority, for example, by entering into a contract not approved by us or seeking
to gain control of one of our subsidiaries or our affiliated entities or their subsidiaries. If any employee obtains, misuses or misappropriates
our chops and seals or other controlling non-tangible assets for whatever reason, we could experience disruption to our normal business
operations. We may have to take corporate or legal action, which could involve significant time and resources to resolve and divert management
from our operations.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Restrictions on currency exchange may limit our ability to receive
and use our revenues effectively. </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: 0.25in">The PRC government imposes controls on the convertibility
of the Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. We receive substantially all
of our revenues in Renminbi. Under our current corporate structure, our Cayman Islands holding company may rely on dividend payments
from our PRC subsidiaries to fund any cash and financing requirements we may have. Under existing PRC foreign exchange regulations, payments
of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions,
can be made in foreign currencies without prior approval of the SAFE, by complying with certain procedural requirements. Specifically,
under the existing exchange restrictions, without prior approval of SAFE, cash generated from the operations of our PRC subsidiaries
in China may be used to pay dividends to our company. However, approval from or registration with appropriate government authorities
is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment
of loans denominated in foreign currencies. As a result, we need to obtain SAFE approval to use cash generated from the operations of
our PRC subsidiaries and affiliated entities to pay off their respective debt in a currency other than Renminbi owed to entities outside
China, or to make other capital expenditure payments outside China in a currency other than Renminbi.</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: 0.25in">In light of the flood of capital outflows of
China in 2016 due to the weakening Renminbi, the PRC government has imposed more restrictive foreign exchange policies and stepped up
scrutiny of major outbound capital movement including overseas direct investment. More restrictions and substantial vetting process are
put in place by SAFE to regulate cross-border transactions falling under the capital account. If any of our shareholders regulated by
such policies fails to satisfy the applicable overseas direct investment filing or approval requirement timely or at all, it may be subject
to penalties from the relevant PRC authorities. The PRC government may at its discretion further restrict access in the future to foreign
currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies
to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders, including holders
of the ADSs.</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"><b><i>Our subsidiaries and affiliated entities in China are subject
to restrictions on making dividends and other payments to us.</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: 0.25in">We are a holding company and rely principally
on dividends paid by our subsidiaries in China for our cash needs, including paying dividends and other cash distributions to our shareholders
to the extent we choose to do so, servicing any debt we may incur and paying our operating expenses. The income for our PRC subsidiaries,
especially Long-Spring Education, in turn depends on the service fees paid by the affiliated entities. Current PRC regulations permit
our subsidiaries in China to pay dividends to us only out of their accumulated profits, if any, determined in accordance with Chinese
accounting standards and regulations. Under the applicable requirements of PRC law, our PRC subsidiaries may only distribute dividends
after they have made allowances to fund certain statutory reserves. These reserves are not distributable as cash dividends. Pursuant
to the Law on Promoting Private Education, sponsors of for-profit private schools are entitled to retain the profits from their schools
and the operating surplus may be allocated to the sponsors pursuant to the PRC company law and other relevant laws and regulations. Sponsors
of non-profit private schools are not entitled to any distribution of profits from their schools and all revenue must be used for the
operation of the schools. According to Implementation Rules, a non-profit private school should allocate no less than 10% of its audited
annual non-restricted net asset increase, or a for-profit private school should allocate no less than 10% of its audited annual net income,
to its development, respectively. In addition, prior to the specific Implementation Rules being promulgated by the State Council and
other relevant regulations promulgated by other local and regional governments, at the end of each fiscal&#160;year, each of our schools
that are private schools in China is required to allocate a certain amount to its development fund for the construction or maintenance
of the school properties or purchase or upgrade of school facilities. In particular, our schools that require reasonable returns must
allocate no less than 25.0% of their annual net income, and our schools that do not require reasonable returns must allocate no less
than 25.0% of their annual increase in the net assets of the school for such purposes. However, the relevant authorities have yet to
promulgate any detailed implementation rules and regulations under the Implementation Rules. We remain uncertain as to the timing and
substance of the rules under the Law on Promoting Private Education and Implementation Rules to be promulgated, and how such rules will
impact our operation. Furthermore, if our subsidiaries or the affiliated entities in China incur debt on their own behalf in the future,
the instruments governing the debt may restrict their ability to pay dividends or make other payments to us. Any such restrictions may
materially affect such entities&#8217; ability to make dividends or make payments, in service fees or otherwise, to us, which may materially
and adversely affect 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"><b><i>Fluctuations in exchange rates could have a material adverse
effect on our results of operations and the value of your investment.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">The value of the Renminbi against the U.S. dollar
and other currencies is affected by changes in China&#8217;s political and economic conditions and China&#8217;s foreign exchange policies,
among other things. In 2005, the PRC government changed its decades-old policy of pegging the value of the Renminbi to the U.S. dollar,
and the Renminbi appreciated more than 20% against the U.S. dollar over the following three years. Between July 2008 and June 2010, this
appreciation halted and the exchange rate between Renminbi and the U.S. dollar remained within a narrow band. Since June 2010, Renminbi
has fluctuated against the U.S. dollar, at times significantly and unpredictably. On November 30, 2015, the Executive Board of IMF completed
the regular five-year review of the basket of currencies that make up the Special Drawing Right (the &#8220;SDR&#8221;), and decided
that with effect from October 1, 2016, Renminbi is determined to be a freely usable currency and will be included in the SDR basket as
a fifth currency, along with the U.S. dollar, the Euro, the Japanese yen and the British pound. In the fourth quarter of 2016, the Renminbi
has depreciated significantly against the backdrop of a surging U.S. dollar and persistent capital outflows from China. This depreciation
halted in 2017, and the RMB appreciated approximately 7% against the U.S. dollar during this one-year period. In 2018, a new round of
RMB depreciation emerged under the influence of a strong U.S. dollar and the trade friction between China and the United States. With
the development of the foreign exchange market and progress towards interest rate liberalization and Renminbi internationalization, the
PRC government may in the future announce further changes to the exchange rate system and we cannot assure you that Renminbi will not
appreciate or depreciate significantly in value against the U.S. dollar in the future. It is difficult to predict how market forces or
PRC or U.S. government policy may impact the exchange rate between Renminbi and the U.S. dollar in the future.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Significant revaluation of the Renminbi may have
a material adverse effect on your investment. For example, to the extent that we need to convert U.S. dollars we receive from our overseas
offering into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi
amount we would receive from the conversion. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of making
payments for dividends on our ordinary shares or the ADSs or for other business purposes, appreciation of the U.S. dollar against the
Renminbi would have a negative effect on the U.S. dollar amount available to us.</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: 0.25in">Very limited hedging options are available in
China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any material hedging transactions in an
effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future,
the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure or at all.
In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert Renminbi
into foreign currency.</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"><b><i>The M&amp;A Rules and certain other PRC regulations establish
complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue
growth through acquisitions in China.</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: 0.25in">The Provisions on the Merger and Acquisition
of Domestic Enterprises by Foreign Investors (the &#8220;M&amp;A Rules&#8221;) adopted by six PRC regulatory agencies in 2006 and amended
in 2009, and some other regulations and rules concerning mergers and acquisitions established additional procedures and requirements
that could make merger and acquisition activities by foreign investors more time-consuming and complex, including requirements in some
instances that the MOFCOM, be notified in advance of any change-of-control transaction in which a foreign investor takes control of a
PRC domestic enterprise. Moreover, the Anti-Monopoly Law requires that the MOFCOM shall be notified in advance of any concentration of
undertaking if certain thresholds are triggered. In addition, the security review rules issued by the MOFCOM that became effective in
September 2011 specify that mergers and acquisitions by foreign investors that raise &#8220;national defense and security&#8221; concerns
and mergers and acquisitions through which foreign investors may acquire de facto control over domestic enterprises that raise &#8220;national
security&#8221; concerns are subject to strict review by the MOFCOM, and the rules prohibit any activities attempting to bypass a security
review, including by structuring the transaction through a proxy or contractual control arrangement. In the future, we may grow our business
by acquiring complementary businesses. Complying with the requirements of the above-mentioned regulations and other relevant rules to
complete such transactions could be time-consuming, and any required approval processes, including obtaining approval from the MOFCOM
or its local counterparts may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our
business or maintain our market share.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>PRC regulations relating to the establishment of offshore special
purpose 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, limit our PRC subsidiaries&#8217; ability to increase its registered capital
or distribute profits to us, or may otherwise adversely affect us.</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: 0.25in">The SAFE promulgated the Circular on Relevant
Issues Relating to Foreign Exchange Administration of Overseas Investment and Financing and Return Investments Conducted by Domestic
Residents through Overseas Special Purpose Vehicles (the &#8220;SAFE Circular 37&#8221;), in July 2014 that requires PRC residents or
entities to register with SAFE or its local branch in connection with their establishment or control of an offshore entity established
for the purpose of overseas investment or financing with such PRC residents or entities&#8217; legally owned assets or equity interests
in domestic enterprises or offshore assets or interests. On February 13, 2015, SAFE issued SAFE Circular 13, which took effect on June
1, 2015, pursuant to which, the power to accept SAFE registration was delegated from local SAFE to local qualified banks where the assets
or interest in the domestic entity was located. In addition, such PRC residents or entities must update their SAFE registrations when
the offshore special purpose vehicle undergoes material events relating to any change of basic information (including change of such
PRC citizens or residents, name and operation term), increases or decreases in investment amount, transfers or exchanges of shares, or
mergers or divisions.</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: 0.25in">SAFE Circular 37 is issued to replace the Circular
on Relevant Issues Relating to Foreign Exchange Administration of Financing and Roundtrip Investments by Domestic Residents via Overseas
Special Purpose Vehicles, or SAFE Circular 75.</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: 0.25in">If our shareholders who are PRC residents or
entities do not complete their registration with the local SAFE branches, our PRC subsidiaries may be prohibited from distributing their
profits and proceeds from any reduction in capital, share transfer or liquidation to us, and we may be restricted in our ability to contribute
additional capital to our PRC subsidiaries. Moreover, failure to comply with the SAFE registration described above could result in liability
under PRC laws for evasion of applicable foreign exchange restrictions.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">We have used our best efforts to notify PRC residents
or entities who directly or indirectly hold shares in our Cayman Islands holding company and who are known to us as being PRC residents
to complete the foreign exchange registrations. However, we may not be informed of the identities of all the PRC residents or entities
holding direct or indirect interest in our company, nor can we compel our beneficial owners to comply with SAFE registration requirements.
As of the date of this annual report, all PRC residents known to us that currently hold direct or indirect ownership interests in our
company completed the registration with SAFE as required by the SAFE Circular 37, except for Mr. Shaowei Zhang, who is in the process
of updating his SAFE registration for his equity position in the offshore special purpose vehicles, including Long-Spring Education Management
Limited, Long-Spring Education Technology Limited, and Long-Spring Education Consulting Limited. However, we may not at all times be
fully aware or informed of the identities of all our shareholders or beneficial owners that are required to make or update such registration,
and we cannot compel our beneficial owners to comply with SAFE registration requirements. As a result, we cannot assure you that all
other shareholders or beneficial owners of ours who are PRC residents or entities have complied with, and will in the future make, obtain
or update any applicable registrations or approvals required by SAFE regulations. Failure by such shareholders or beneficial owners to
comply with SAFE regulations, or failure by us to amend the foreign exchange registrations of our PRC subsidiaries, could subject us
to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit our PRC subsidiaries&#8217; ability to
make distributions or pay dividends to us or affect our ownership structure, which could adversely affect our business and prospects.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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"><b><i>Failure to comply with PRC regulations regarding the registration
requirements for employee stock ownership plans or share option plans may subject the PRC plan participants or us to fines and other
legal or administrative sanctions.</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: 0.25in">Pursuant to SAFE Circular 37, PRC residents who
participate in share incentive plans in overseas non-publicly-listed companies due to their position as director, senior management or
employees of the PRC subsidiaries of the overseas companies may submit applications to SAFE or its local branches for the foreign exchange
registration with respect to offshore special purpose companies. Our directors, executive officers and other employees who are PRC residents
and who have been granted share-based awards may have to follow SAFE Circular 37 to apply for the foreign exchange registration before
our company becomes an overseas listed company. In February 2012, SAFE promulgated the Notices on Issues Concerning the Foreign Exchange
Administration for Domestic Individuals Participating in Stock Incentive Plans of Overseas Publicly-Listed Companies, or SAFE Circular
7. Under SAFE Circular 7 and other relevant rules and regulations, PRC residents who participate in stock incentive plan in an overseas
publicly-listed company are required to register with SAFE or its local branches and complete certain other procedures. Participants
of a stock incentive plan who are PRC residents must retain a qualified PRC agent, which could be a PRC subsidiary of such overseas publicly
listed company or another qualified institution selected by such PRC subsidiary, to conduct the SAFE registration and other procedures
with respect to the stock incentive plan on behalf of its participants. Such participants must also retain an overseas entrusted institution
to handle matters in connection with their exercise of share-based awards, the purchase and sale of corresponding shares or interests
and fund transfers. In addition, the PRC agent is required to amend the SAFE registration with respect to the stock incentive plan if
there is any material change to the stock incentive plan, the PRC agent or the overseas entrusted institution, or any other material
changes.</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: 0.25in">We did not grant any share options to our employees
or consultants under our 2021 Share Incentive Plan as of the date of this annual report but may do so in the future. When we do, from
time to time, we need to apply for or update our registration with SAFE or its local branches on behalf of our employees or consultants
who receive options or other equity-based incentive grants under our share incentive plan or material changes in our share incentive
plan. However, we may not always be able to make applications or update our registration on behalf of our employees or consultants who
hold any type of share incentive awards in compliance with SAFE Circular 7, nor can we ensure you that such applications or update of
registration will be successful. If we or the participants of our share incentive plan who are PRC citizens fail to comply with SAFE
Circular 7, we and/or such participants of our share incentive plan may be subject to fines and legal sanctions, there may be additional
restrictions on the ability of such participants to exercise their share options or remit proceeds gained from sale of their shares into
China, and we may be prevented from further granting share incentive awards under our 2021 Share Incentive Plan or any future share incentive
plans to our employees or consultants who are PRC citizens.</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"><b><i>The enforcement of the PRC Labor Contract Law and other labor-related
regulations in the PRC may adversely affect 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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">The SCNPC enacted the Labor Contract Law in 2007,
and amended it on December 28, 2012. The Labor Contract Law introduced specific provisions related to fixed-term employment contracts,
part-time employment, probationary periods, consultation with labor unions and employee assemblies, employment without a written contract,
dismissal of employees, severance, and collective bargaining to enhance previous PRC labor laws. Under the Labor Contract Law, an employer
is obligated to sign an unlimited-term labor contract with any employee who has worked for the employer for ten consecutive years. Further,
if an employee requests or agrees to renew a fixed-term labor contract that has already been entered into twice consecutively, the resulting
contract, with certain exceptions, must have an unlimited term, subject to certain exceptions. With certain exceptions, an employer must
pay severance to an employee where a labor contract is terminated or expires. In addition, the PRC governmental authorities have continued
to introduce various new labor-related regulations since the effectiveness of the Labor Contract Law.</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: 0.25in">Under the PRC Social Insurance Law and the Administrative
Measures on Housing Fund, employees are required to participate in pension insurance, work-related injury insurance, medical insurance,
unemployment insurance, maternity insurance, and housing funds and employers are required, together with their employees or separately,
to pay the social insurance premiums and housing funds for their employees. However, certain of our affiliated entities did not make
adequate social insurance and housing fund for certain employees. As the interpretation and implementation of labor-related laws and
regulations are still evolving, we cannot assure you that our employment practices do not and will not violate labor-related laws and
regulations in China, which may subject us to labor disputes or government investigations. We cannot assure you that we have complied
or will be able to comply with all labor-related law and regulations regarding including those relating to obligations to make social
insurance payments and contribute to the housing funds. If we are deemed to have violated relevant labor laws and regulations, we could
be required to provide additional compensation to our employees and our business, financial condition and results of operations will
be adversely affected.</p><div>

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


</div><!-- Field: Page; Sequence: 43 --><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 -->36<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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-indent: 0.25in">Under the PRC Tort Law, employers shall bear
tortious liability for any injury or damage caused to other people by their employees in the course of their employment. Entities that
engage dispatched laborers shall bear tortious liability for any injury or damage caused to other people by such dispatched laborers
in the course of their work and during the dispatch period, and the dispatching party shall bear corresponding supplementary liabilities
if it is at fault. If the workers on our platform are deemed as our employees or dispatch employees by courts or arbitral tribunals,
we shall bear the responsibilities accordingly.</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: 0.25in">These laws designed to enhance labor protection
tend to increase our labor costs. In addition, as the interpretation and implementation of these regulations are still evolving, our
employment practices may not be at all times be deemed in compliance with the regulations. As a result, we could be subject to penalties
or incur significant liabilities in connection with labor disputes or investigations.</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"><b><i>Labor contract laws in China may adversely affect our results
of operations. </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: 0.25in">The current PRC Labor Contract Law imposes greater
liabilities on employers and significantly affects the cost of an employer&#8217;s decision to reduce its workforce. Further, it requires
certain terminations be based on the mandatory retirement age. In the event we decide to significantly change or decrease our workforce,
the Labor Contract Law could adversely affect our ability to enact such changes in a manner that is most advantageous to our business
or in a timely and cost-effective manner, thus materially and adversely affecting our financial condition and results of operations.</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"><b>Risks Related to our ADSs</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>The delisting of our ADSs from the NYSE may continue to have
a material adverse effect on the trading and price of our ADSs, and we cannot assure you that our ADSs will be relisted, or that once
relisted, they will remain listed.</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: 0.25in">On November 22, 2022, we were delisted from NYSE when the staff of
the New York Stock Exchange LLC filed a Form&#160;25 Notification of Delisting. The ADSs have since then been quoted on the OTC Pink Limited
Information under the symbol &#8220;FHSEY.&#8221; The delisting of our ADSs from the NYSE has had and may continue to have a material
adverse effect on us by, among other things, causing investors to dispose of our ADSs and limiting:</p><div>

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

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>the liquidity of our
                                            ADSs;</td></tr><tr style="vertical-align: top">
<td>&#160;</td><td>&#160;</td><td>&#160;</td></tr>
                                                                                                                                                       </table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>the market price of
                                            our ADSs;</td></tr><tr style="vertical-align: top">
<td>&#160;</td><td>&#160;</td><td>&#160;</td></tr>
                                                                                                                                                          </table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>the number of institutional
                                            and other investors that will consider investing in our ADSs;</td></tr><tr style="vertical-align: top">
<td>&#160;</td><td>&#160;</td><td>&#160;</td></tr>
                                                                                                                                                                                                                      </table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>the availability of
                                            information concerning the trading prices and volume of our ADSs;</td></tr><tr style="vertical-align: top">
<td>&#160;</td><td>&#160;</td><td>&#160;</td></tr>
                                                                                                                                                                                                                  </table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>the number of broker-dealers
                                            willing to execute trades in our ADSs; and</td></tr><tr style="vertical-align: top">
<td>&#160;</td><td>&#160;</td><td>&#160;</td></tr>
                                                                                                                                                                                                    </table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>our ability to obtain
                                            equity or debt financing for the continuation of our operations</td></tr><tr style="vertical-align: top">
<td>&#160;</td><td>&#160;</td><td>&#160;</td></tr>
                                                                                                                                                                                                                  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">The lack of an active trading market may limit
the liquidity of an investment in our ADSs, meaning you may not be able to sell our ADSs you own at times, or at prices, attractive to
you. Any of these factors may materially and adversely affect the price of our ADSs.</p><div>

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

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

</div><!-- Field: Page; Sequence: 44 --><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 -->37<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>The trading price of the ADSs has been and may continue to be
volatile, which could result in substantial losses to investors. </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: 0.25in">Our ADSs were listed on the NYSE, since our SEC-registered initial
public offering in March 2021. On November 22, 2022, we were delisted from the NYSE when the staff of the New York Stock Exchange LLC
filed a Form&#160;25 Notification of Delisting. The OTC market is a significantly more limited market than NYSE. The quotation of our
ADSs on the OTC market may result in a less liquid market available for existing and potential stockholders to trade our ADSs, could depress
the trading price of our ADSs and could have a long-term adverse impact on our ability to raise capital in the future.</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: 0.25in">The trading prices of the ADSs has been volatile
and could fluctuate widely due to factors beyond our control. This may happen because of broad market and industry factors, like the
performance and fluctuation in the market prices or the underperformance or deteriorating financial results of other companies based
in China that have listed their securities in the United States in recent years. The securities of some of these companies have experienced
significant volatility since their initial public offerings, including, in some cases, substantial price declines in their trading prices.
The trading performances of other Chinese companies&#8217; securities after their offerings, may affect the attitudes of investors toward
Chinese companies listed in the United States, which consequently may impact the trading performance of the ADSs, regardless of our actual
operating performance. In addition, any negative news or perceptions about inadequate corporate governance practices or fraudulent accounting,
corporate structure or other matters of other Chinese companies may also negatively affect the attitudes of investors towards Chinese
companies in general, including us, regardless of whether we have conducted any inappropriate activities. In addition, securities markets
may from time to time experience significant price and volume fluctuations that are not related to our operating performance, such as
the large decline in share prices in the United States, China and other jurisdictions in late 2008, early 2009 and the second half of
2011, which may have a material adverse effect on the market price of the ADSs.</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: 0.25in">In addition to the above factors, the price and
trading volume of the ADSs may be highly volatile due to multiple factors, including the following:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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">
    <td style="width: 0.25in; font-size: 10pt">&#160;</td>
    <td style="width: 0.25in; font-size: 10pt"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="font-size: 10pt"><span style="font-size: 10pt">regulatory developments affecting us, our users, or our industry;</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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">condition of the education industry;</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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">announcements of studies and reports relating to the quality of our services or those of our competitors;</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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">changes in the economic performance or market valuations of other education 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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">actual or anticipated fluctuations in our quarterly results of operations and changes or revisions
    of our expected results;</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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">changes in financial estimates by securities research analysts;</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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">announcements by us or our competitors of new services, acquisitions, strategic relationships,
    joint ventures or capital commitments;</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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">additions to or departures of our senior management;</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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">detrimental negative publicity about us, our management or our industry;</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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">fluctuations of exchange rates between the RMB and the U.S. 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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">release or expiry of lock-up or other transfer restrictions on our outstanding ordinary shares
    or ADSs; 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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">sales or perceived potential sales of additional ordinary shares or ADSs.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>


</div><!-- Field: Page; Sequence: 45 --><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 -->38<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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-indent: 0.25in"><span>Any of these
factors may result in large and sudden changes in the volume and price at which the ADSs will trade. The securities of some China-based
companies that have listed their securities in the United States have experienced significant volatility since their initial public offerings
in recent years, including, in some cases, substantial declines in the trading prices of their securities. The trading performances of
these companies&#8217; securities after their offerings may affect the attitudes of investors towards Chinese companies listed in the
United States in general, which consequently may impact the trading performance of the ADSs, regardless of our actual operating performance.
In addition, any negative news or perceptions about inadequate corporate governance practices or fraudulent accounting, corporate structure
or other matters of other Chinese companies may also negatively affect the attitudes of investors towards Chinese companies in general,
including us, regardless of whether we have engaged in any inappropriate activities. In particular, the global financial crisis, the ensuing
economic recessions and deterioration in the credit market in many countries have contributed and may continue to contribute to extreme
volatility in the global stock markets.</span></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: 0.25in"><span>Moreover,
there have been recent instances of extreme stock price run-ups followed by rapid price declines and strong stock price volatility with
a number of recent initial public offerings, particularly among companies with relatively smaller public floats. We may experience greater
stock price volatility, including aggressive price run-ups and declines, lower trading volume and less liquidity, compared with companies
with larger public floats. In particular, the ADSs may be subject to rapid and substantial price volatility, low volumes of trades and
large spreads in bid and ask prices. Such volatility, including any stock run-up, may be unrelated to our actual or expected operating
performance, financial condition or prospects, and industry, market or economic factors, which makes it difficult for prospective investors
to assess such rapidly changing value of the ADSs. In addition, if the trading volumes of the ADSs are low, persons buying or selling
in relatively small quantities may easily influence prices of the ADSs. This low volume of trades could also cause the price of the ADSs
to fluctuate significantly, with large percentage changes in price occurring in any trading day session. Holders of the ADSs may also
not be able to readily liquidate their investment or may be forced to sell at depressed prices due to such low-volume trading. As a result
of such volatility, investors may experience losses on their investment in the ADSs. Such volatility also could adversely affect our ability
to issue additional ADSs or other securities and our ability to obtain additional financing in the future, as well as our ability to retain
key employees, many of whom have been granted equity incentives. Furthermore, the potential extreme volatility may confuse the public
investors of the value of the ADSs, distort the market perception of the price of the ADSs, and our financial performance and public image,
and negatively affect the long-term liquidity of the ADSs, regardless of our actual or expected operating performance.</span></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: 0.25in"><span>In the past,
shareholders of public companies have often brought securities class action suits against those companies following periods of instability
in the market price of their securities. We and certain of our directors and officers have been named as defendants in a putative shareholder
class action lawsuit in the United States, as described in </span>&#8220;Item&#160;4. Information on the Company&#8212;B. Business Overview&#8212;Legal
Proceedings,&#8221; <span>and we may be named in similar lawsuits in the future. Such lawsuits could divert
a significant amount of our management&#8217;s attention and other resources from our business and operations and require us to incur
significant expenses to defend the suit, which could harm our results of operations. Any such class action suit, whether or not successful,
could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against
us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition and results of
operations.</span></p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Our dual-class share structure with different voting rights
will limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that
holders of our Class A ordinary shares and ADSs may view as beneficial. In addition, holders of our Class A ordinary shares may experience
loss of voting power and dilution due to future issuances and conversions of our Class B ordinary shares. </i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Our authorized and issued ordinary shares are
divided into Class A ordinary shares and Class B ordinary shares. In respect of matters requiring the votes of shareholders, holders
of Class B ordinary shares are entitled to 20 votes per share, while holders of Class A ordinary shares are entitled to one vote per
share based on our dual-class share structure. Each Class B ordinary share is convertible into one Class A ordinary share at any time
by the holder thereof, while Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances. Upon any
direct or indirect sale, transfer, assignment or disposition of such number of Class B ordinary shares by the holder thereof to any person
other than a designated holder (as defined in our memorandum and articles of association) or any person that is not an affiliate of such
holder, or upon a change of beneficial ownership of any Class B ordinary shares as a result of which any person who is not a designated
holder or any person who is not an affiliate of the holders of such ordinary shares becomes a beneficial owner of such ordinary shares,
such Class B ordinary shares are automatically and immediately converted into the same number of Class A ordinary shares.</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: 0.25in">As of the date of this annual report, Mr. Shaowei Zhang (our founder,
chairman and chief executive officer) and Ms. Yu Wu (his spouse) beneficially own all of our issued Class B ordinary shares. These Class
B ordinary shares constitute approximately 37.94% of our total issued and outstanding share capital and 92.30% of the aggregate voting
power of our total issued and outstanding share capital due to the disparate voting powers associated with our dual-class share structure.
See &#8220;Item 6. Directors, Senior Management and Employees&#8212;E. Share Ownership.&#8221; As a result of the dual-class share structure
and the concentration of ownership, holders of Class B ordinary shares will have considerable influence over matters such as decisions
regarding mergers, consolidations and the sale of all or substantially all of our assets, election of directors and other significant
corporate actions. Any future issuances of Class B ordinary shares may be dilutive to the voting power of holders of Class A ordinary
shares. Any conversions of Class B ordinary shares into Class A ordinary shares may dilute the percentage ownership of the existing holders
of Class A ordinary shares within their class of ordinary shares. Such conversions may increase the aggregate voting power of the existing
holders of Class A ordinary shares. In the event that we have multiple holders of Class B ordinary shares in the future and certain of
them convert their Class B ordinary shares into Class A ordinary shares, the remaining holders who retain their Class B ordinary shares
may experience increases in their relative voting power. Holders of Class B ordinary shares may take actions that are not in the best
interest of us or our other shareholders. This concentration of ownership may discourage, delay or prevent a change in control of our
company, which could have the effect of depriving our other shareholders of the opportunity to receive a premium for their shares as part
of a sale of our company and may reduce the price of our ADSs. This concentrated control will limit your ability to influence corporate
matters and could discourage others from pursuing any potential merger, takeover or other change of control transactions that holders
of Class A ordinary shares and ADSs may view as beneficial.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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"><b><i>Our dual-class share structure may adversely affect the trading
market for and the trading price of the ADSs. </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: 0.25in">Certain shareholder advisory firms have announced
changes to their eligibility criteria for inclusion of shares of public companies on certain stock market indices, including the S&amp;P
500, to exclude companies with multiple classes of shares and companies whose public shareholders hold no more than 5% of total voting
power from being added to such indices. In addition, several shareholder advisory firms have announced their opposition to the use of
multiple class structures. As a result, our dual-class share structure may prevent the inclusion of the ADSs representing Class A ordinary
shares in such indices and may cause shareholder advisory firms to publish negative commentary about our corporate governance practices
or otherwise seek to cause us to change our capital structure. Any such exclusion from indices could result in a less active trading
market for the ADSs. Any actions or publications by shareholder advisory firms critical of our corporate governance practices or capital
structure could also adversely affect the value of the ADSs.</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>If securities or industry analysts do not publish research or
reports about our business, or if they adversely change their recommendations regarding the ADSs, the market price for the ADSs and trading
volume could decline. </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: 0.25in">The trading market for the ADSs will be influenced
by research or reports that industry or securities analysts publish about our business. If research analysts do not establish and maintain
adequate research coverage or if one or more analysts who cover us downgrade the ADSs or publish inaccurate of unfavorable research about
our business, the market price for the ADSs would likely decline. If one or more of these analysts cease to cover us or fail to regularly
publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause the market price or trading
volume for the ADSs to decline.</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"><b><i>The sale or availability for sale of substantial amounts of
the ADSs could adversely affect their market price. </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: 0.25in"><span style="font-family: Times New Roman, Times, Serif">Sales
of substantial amounts of the ADSs in the public market, or the perception that these sales could occur, could adversely affect the market
price of the ADSs and could materially impair our ability to raise capital through equity offerings in the future. The ADSs sold in our
initial public offering were freely tradable without restriction or further registration under the Securities Act of 1933, as amended
(the &#8220;Securities Act&#8221;), and shares held by our existing shareholders may also be sold in the public market in the future subject
to the restrictions in Rule 144 and Rule 701 under the Securities Act and the applicable lock-up agreements. As of the date of this annual
report, there are 12,589,230 ADSs</span>&#160; <span style="font-family: Times New Roman, Times, Serif">(equivalent to 37,767,690 Class
A ordinary shares) outstanding. We cannot predict what effect, if any, market sales of securities held by our significant shareholders
or any other shareholder or the availability of these securities for future sale will have on the market price of the ADSs.</span></p><div>


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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Techniques employed by short sellers may drive down the market
price of the ADSs. </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: 0.25in">Short selling is the practice of selling securities
that the seller does not own but rather has borrowed from a third party with the intention of buying identical securities back at a later
date to return to the lender. The short seller hopes to profit from a decline in the value of the securities between the sale of the
borrowed securities and the purchase of the replacement shares, as the short seller expects to pay less in that purchase than it received
in the sale. As it is in the short seller&#8217;s interest for the price of the security to decline, many short sellers publish, or arrange
for the publication of, negative opinions regarding the relevant issuer and its business prospects in order to create negative market
momentum and generate profits for themselves after selling a security short. These short attacks have, in the past, led to selling of
shares in the market.</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: 0.25in">Public companies that have substantially all
of their operations in China have been the subject of short selling. Much of the scrutiny and negative publicity has centered on allegations
of a lack of effective internal control over financial reporting resulting in financial and accounting irregularities and mistakes, inadequate
corporate governance policies or a lack of adherence thereto and, in many cases, allegations of fraud. As a result, many of these companies
are now conducting internal and external investigations into the allegations and, in the interim, are subject to shareholder lawsuits
and/or SEC enforcement actions.</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: 0.25in">It is not clear what effect such negative publicity
could have on us. If we were to become the subject of any unfavorable allegations, whether such allegations are proven to be true or
untrue, we could have to expend a significant amount of resources to investigate such allegations and/or defend ourselves. While we would
strongly defend against any such short seller attacks, we may be constrained in the manner in which we can proceed against the relevant
short seller by principles of freedom of speech, applicable state law or issues of commercial confidentiality. Such a situation could
be costly and time-consuming, and could distract our management from growing our business. Even if such allegations are ultimately proven
to be groundless, allegations against us could materially and adversely affect our business, and any investment in the ADSs could be
greatly reduced or even rendered worthless.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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"><b><i>Because we cannot guarantee to pay dividends in the foreseeable
future, you must rely on price appreciation of the ADSs for return on your investment. </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: 0.25in">We approved and declared a cash dividend of US$0.0146
per ordinary share (US$0.0437 per ADS) in September 2022 and made payments in October 2022. However, we still intend to retain most, if
not all, of our available funds and any future earnings to fund the development and growth of our business. Therefore, you should not
rely on an investment in the ADSs as a source for any future dividend income.</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: 0.25in">Our board of directors has complete discretion
as to whether to distribute dividends, subject to certain restrictions under Cayman Islands law, namely that our company may only pay
dividends out of profits or share premium account, and provided always that in no circumstances may a dividend be paid if this would
result in our company being unable to pay its debts as they fall due in the ordinary course of business. In addition, our shareholders
may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our board of directors. Even if our
board of directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on our
future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us
from our subsidiaries, our financial condition, contractual restrictions and other factors deemed relevant by our board of directors.
Accordingly, the return on your investment in the ADSs will likely depend entirely upon any future price appreciation of the ADSs. There
is no guarantee that the ADSs would appreciate in value or even maintain the price at which you purchased the ADSs. You may not realize
a return on your investment in the ADSs or even lose your entire investment in the ADSs.</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"><b><i>Our memorandum and articles of association contain anti-takeover
provisions that could have a material adverse effect on the rights of holders of our ordinary shares and the ADSs. </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: 0.25in">Our memorandum and articles of association contain
provisions which could limit the ability of others to acquire control of our company or cause us to engage in change-of-control transactions.
These provisions could have the effect of depriving our shareholders of an opportunity to sell their shares at a premium over prevailing
market prices by discouraging third parties from seeking to obtain control of our company in a tender offer or similar transaction. Our
board of directors has the authority, without further action by our shareholders, to issue preferred shares in one or more series and
to fix their designations, powers, preferences, privileges, and relative participating, optional or special rights and the qualifications,
limitations or restrictions, including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences,
any or all of which may be greater than the rights associated with our ordinary shares, in the form of ADS or otherwise. Preferred shares
could be issued quickly with terms calculated to delay or prevent a change in control of our company or make removal of management more
difficult. If our board of directors decides to issue preferred shares, the price of the ADSs may fall and the voting and other rights
of the holders of our ordinary shares and ADSs may be materially and adversely affected.</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"><b><i>Forum selection provisions in our memorandum and articles of
association could limit the ability of holders of our Class A ordinary shares, ADSs or other securities to obtain a favorable judicial
forum for disputes with us, our directors and officers, and potentially others.</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: 0.25in">Our memorandum and articles of association provide
that the federal district courts of the United States are the exclusive forum within the United States for the resolution of any complaint
asserting a cause of action arising under the Securities Act and the Exchange Act. However, the enforceability of similar federal court
choice of forum provisions has been challenged in legal proceedings in the United States, and it is possible that a court could find
this type of provision to be inapplicable, unenforceable, or inconsistent with other documents that are relevant to the filing of such
lawsuits. If a court were to find the stipulated choice of forum provision contained in our memorandum and articles of association to
be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other forums or
jurisdictions. If upheld, the forum selection clause in our memorandum and articles of association may increase the costs for you or
limit your ability to bring a claim against us, our directors and officers, and potentially others in his or her preferred judicial forum,
and this limitation may discourage such lawsuits. In addition, the Securities Act provides that both federal and state courts have jurisdiction
over suits brought to enforce any duty or liability under the Securities Act or the rules and regulations thereunder. Accepting or consent
to this forum selection provision does not constitute a waiver by you of compliance with federal securities laws and the rules and regulations
thereunder. You may not waive compliance with federal securities laws and the rules and regulations thereunder. The exclusive forum provision
in our memorandum and articles of association will not operate so as to deprive the courts of the Cayman Islands from having jurisdiction
over matters relating to our internal affairs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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"><b><i>You may face difficulties in protecting your interests, and
your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law and conduct
our operations in China.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">We are an exempted company with limited liability incorporated under
the laws of the Cayman Islands. Our corporate affairs are governed by our memorandum and articles of association, as amended from time
to time, the Companies Act (As Revised) of the Cayman Islands, as amended, and the common law of the Cayman Islands. The rights of shareholders
to take action against the directors, actions by minority shareholders and the fiduciary responsibilities of our directors to us under
Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived
in part from comparatively limited judicial precedent in the Cayman Islands as well as from the common law of England, the decisions of
whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of our shareholders and the
fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or
judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities
laws than the United States. Some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate
law than the Cayman Islands. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action in
a federal court of the United States.</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: 0.25in">Shareholders of Cayman Islands exempted companies like us have no general
rights under Cayman Islands law to inspect corporate records (other than the memorandum and articles of associations, any special resolutions
passed by such companies, the register of mortgages and charges of such companies, and a list of current directors of such companies)
or to obtain copies of lists of shareholders of these companies. Our directors have discretion under our articles of association to determine
whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them
available to our shareholders. This may make it more difficult for you to obtain the information needed to establish any facts necessary
for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">In addition, we conduct our business operations
in China, and all of our directors and senior management are based in China. The SEC, U.S. Department of Justice and other authorities
often have substantial difficulties in bringing and enforcing actions against non-U.S. companies and non-U.S. persons, including company
directors and officers, in certain emerging markets, including China. Additionally, our public shareholders may have limited rights and
few practical remedies in China, as shareholder claims that are common in the United States, including class action securities law and
fraud claims, generally are difficult or impossible to pursue as a matter of law or practicality in many emerging markets, including
China.</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: 0.25in">As a result of all of the above, our public shareholders
may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors
or controlling shareholders than they would as public shareholders of a company incorporated in the United States. See Exhibit 2.4 to
this annual report.</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"><b><i>Certain judgments obtained against us by our shareholders may
not be enforceable.</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: 0.25in">We are a Cayman Islands exempted company and
all of our assets are located outside of the United States. Substantially all of our current operations are conducted in China. In addition,
most of our current directors and officers are nationals and residents of countries other than the United States. All or a substantial
portion of the assets of these persons are located outside the United States. As a result, it may be difficult or impossible for you
to bring an action against us or against these individuals in the United States in the event that you believe that your rights have been
infringed under the U.S. federal securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws
of the Cayman Islands and of China may render you unable to enforce a judgment against us, our assets, our directors and officers or
their assets.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>The voting rights of holders of ADSs are limited by the terms
of the deposit agreement, and you may not be able to exercise your right to direct how your Class A ordinary shares which are represented
by your ADSs are voted. </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: 0.25in">Holders of ADSs do not have the same rights as
our registered shareholders. As a holder of the ADSs, you will only be able to exercise the voting rights with respect to the underlying
Class A ordinary shares in accordance with the provisions of the deposit agreement. You will only be able to exercise the voting rights
which are carried by the Class A ordinary shares represented by your ADSs indirectly by giving voting instructions to the depositary
in accordance with the provisions of the deposit agreement. Under the deposit agreement, you must vote by giving voting instructions
to the depositary. If we request the depositary to ask for your instructions, then upon receipt of your voting instructions, the depositary
will try, as far as is practicable, to vote the underlying Class A ordinary shares which are represented by your ADSs in accordance with
your instructions. If we do not request the depositary to ask for your instructions, the depositary may still vote in accordance with
instructions you give, but it is not required to do so. You will not be able to directly exercise your right to vote with respect to
the underlying Class A ordinary shares represented by your ADSs unless you withdraw the shares and became the registered holder of such
shares prior to the record date for the general meeting. Under our second amended and restated memorandum and articles of association,
the minimum notice period required for convening a general meeting will be seven days. When a general meeting is convened, you may not
receive sufficient advance notice to withdraw the Class A ordinary shares underlying your ADSs and become the registered holder of such
shares to allow you to attend the general meeting and vote directly with respect to any specific matter or resolution to be considered
and voted upon at the general meeting. In addition, under our amended and restated memorandum and articles of association, for the purposes
of determining those shareholders who are entitled to attend and vote at any general meeting, our directors may close our register of
members and/or fix in advance a record date for such meeting, and such closure of our register of members or the setting of such a record
date may prevent you from withdrawing the Class A ordinary shares underlying your ADSs and becoming the registered holder of such shares
prior to the record date, so that you would not be able to attend the general meeting or to vote directly. If we ask for your instructions,
the depositary will notify you of the upcoming vote and will arrange to deliver our voting materials to you. We cannot assure you that
you will receive the voting materials in time to ensure that you can instruct the depositary to vote the underlying Class A ordinary
shares represented by your ADSs. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions
or for their manner of carrying out your voting instructions. This means that you may not be able to exercise your right to vote and
you may have no legal remedy if the shares underlying your ADSs are not voted as you requested.</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"><b><i>The depositary may give us a discretionary proxy to vote our
Class A ordinary shares underlying your ADSs if you do not vote at shareholders&#8217; meetings, which could adversely affect your interests
and the ability of our shareholders as a group to influence the management of our company. </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: 0.25in">Under the deposit agreement for the ADSs, if
you do not give voting instructions to the depositary to direct how the Class A ordinary shares underlying your ADSs are voted, upon
our request, the depositary will give us (or our nominee) a discretionary proxy to vote the Class A ordinary shares underlying your ADSs
at shareholders&#8217; meetings if:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">we timely provided the depositary with notice of meeting and related voting materials and requested
    it to solicit your instructions;</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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">we request the depositary to give a proxy;</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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">we have informed the depositary that there is no substantial opposition as to a matter to be voted
    on at the meeting; 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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">the matter subject to voting would not have a material adverse impact on shareholders.</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: 0.25in">The effect of this discretionary proxy is that
if you do not give voting instructions to the depositary to direct how the Class A ordinary shares underlying your ADSs are voted, you
cannot prevent the Class A ordinary shares underlying your ADSs from being voted, under the circumstances described above. This may make
it more difficult for shareholders to influence the management of our company. Holders of our ordinary shares are not subject to this
discretionary proxy.</p><div>

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


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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"><b><i>You may not receive cash dividends if the depositary decides
it is impractical to make them available to you. </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: 0.25in">The depositary has agreed to pay to you the cash
dividends or other distributions it or the custodian receives on our Class A ordinary shares or other deposited securities underlying
the ADSs, after deducting its fees and expenses. You will receive these distributions in proportion to the number of Class A ordinary
shares your ADSs represent. However, the depositary may, at its discretion, decide that it is inequitable or impractical to make a distribution
available to any holders of ADSs. For example, the depositary may determine that it is not practicable to distribute certain property
through the mail, or that the value of certain distributions may be less than the cost of mailing them. In these cases, the depositary
may decide not to distribute such property to you.</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"><b><i>You may experience dilution of your holdings due to inability
to participate in rights offerings. </i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">We may, from time to time, distribute rights
to our shareholders, including rights to acquire securities. Under the deposit agreement, the depositary will not distribute rights to
holders of ADSs unless the distribution and sale of rights and the securities to which these rights relate are either exempt from registration
under the Securities Act with respect to all holders of ADSs or are registered under the provisions of the Securities Act. The depositary
may, but is not required to, attempt to sell these undistributed rights to third parties, and may allow the rights to lapse. We may be
unable to establish an exemption from registration under the Securities Act, and we are under no obligation to file a registration statement
with respect to these rights or underlying securities or to endeavor to have a registration statement declared effective. Accordingly,
holders of ADSs may be unable to participate in our rights offerings and may experience dilution of their holdings as a result.</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"><b><i>You may be subject to limitations on transfer of your ADSs.
</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: 0.25in">Your ADSs are transferable on the books of the
depositary. However, the depositary may close its books at any time or from time to time when it deems expedient in connection with the
performance of its duties. The depositary may close its books from time to time for a number of reasons, including events in emergencies,
and on weekends and public holidays. The depositary may refuse to deliver, transfer or register transfers of the ADSs generally when
our share register or the books of the depositary are closed, or at any time if we or the depositary thinks it is advisable to do so
because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for
any other reason.</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"><b><i>ADS holders may not be entitled to a jury trial with respect
to claims arising under the deposit agreement, which could result in less favorable outcomes to the plaintiff(s) in any such action.
</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: 0.25in">The deposit agreement governing the ADSs representing
our Class A ordinary shares provides that, to the fullest extent permitted by law, ADS holders waive the right to a jury trial of any
claim they may have against us or the depositary arising out of or relating to our shares, the ADSs or the deposit agreement, including
any claim under the U.S. federal securities laws.</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: 0.25in">If we or the depositary opposed a jury trial
demand based on the waiver, the court would determine whether the waiver was enforceable based on the facts and circumstances of that
case in accordance with the applicable state and federal law. To our knowledge, the enforceability of a contractual pre-dispute jury
trial waiver in connection with claims arising under the federal securities laws has not been finally adjudicated by the United States
Supreme Court. However, we believe that a contractual pre-dispute jury trial waiver provision is generally enforceable, including under
the laws of the State of New York, which govern the deposit agreement, by a federal or state court in the City of New York, which has
non-exclusive jurisdiction over matters arising under the deposit agreement. In determining whether to enforce a contractual pre-dispute
jury trial waiver provision, courts will generally consider whether a party knowingly, intelligently and voluntarily waived the right
to a jury trial. We believe that this is the case with respect to the deposit agreement and the ADSs. It is advisable that you consult
legal counsel regarding the jury waiver provision before entering into the deposit agreement.</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: 0.25in">If you or any other holders or beneficial owners
of ADSs bring a claim against us or the depositary in connection with matters arising under the deposit agreement or the ADSs, including
claims under federal securities laws, you or such other holder or beneficial owner may not be entitled to a jury trial with respect to
such claims, which may have the effect of limiting and discouraging lawsuits against us and/or the depositary. If a lawsuit is brought
against us and/or the depositary under the deposit agreement, it may be heard only by a judge or justice of the applicable trial court,
which would be conducted according to different civil procedures and may result in different outcomes than a trial by jury would have
had, including results that could be less favorable to the plaintiff(s) in any such action.</p><div>

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


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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-indent: 0.25in">Nevertheless, if this jury trial waiver provision
is not permitted by applicable law, an action could proceed under the terms of the deposit agreement with a jury trial. No condition,
stipulation or provision of the deposit agreement or ADSs serves as a waiver by any holder or beneficial owner of ADSs or by us or the
depositary of compliance with any substantive provision of the U.S. federal securities laws and the rules and regulations promulgated
thereunder.</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"><b><i>We are a foreign private issuer within the meaning of the rules
under the Exchange Act, and as such we are exempt from certain provisions applicable to U.S. domestic public companies. </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: 0.25in">Because we are a foreign private issuer under
the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable
to U.S. domestic issuers, including:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">the rules under the Exchange Act requiring the filing of quarterly reports on Form 10-Q or current
    reports on Form 8-K with the SEC;</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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations
    in respect of a security registered under the Exchange Act;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">the sections of the Exchange Act requiring insiders to file public reports of their stock ownership
    and trading activities and liability for insiders who profit from trades made in a short period of time; and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">the selective disclosure rules by issuers of material nonpublic information under Regulation FD.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">We are required to file an annual report on Form
20-F within four months of the end of each fiscal year. Press releases relating to financial results and material events will also be
furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC will be less extensive
and less timely than that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections
or information that would be made available to you were you investing in a U.S. domestic issuer.</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"><b><i>We are an emerging growth company within the meaning of the
Securities Act and may take advantage of certain reduced reporting requirements. </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: 0.25in">We are an &#8220;emerging growth company,&#8221;
as defined in the JOBS Act, and we may take advantage of certain exemptions from requirements applicable to other public companies that
are not emerging growth companies including, most significantly, not being required to comply with the auditor attestation requirements
of Section 404 of the Sarbanes-Oxley Act of 2002 for so long as we remain an emerging growth company. As a result, if we elect not to
comply with such auditor attestation requirements, our investors may not have access to certain information they may deem important.
The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards
until such date that a private company is otherwise required to comply with such new or revised accounting standards.</p><div>

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


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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"><b><i>We incur significant costs as a result of being a public company,
particularly after we cease to qualify as an &#8220;emerging growth company.&#8221; </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: 0.25in">We incur significant legal, accounting and other
expenses as a result of being a public company. The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC,
impose various requirements on the corporate governance practices of public companies. We expect these rules and regulations to increase
our legal and financial compliance costs and to make some corporate activities more time-consuming and costly. As a company with less
than US$1.235 billion in revenues for our last fiscal year, we qualify as an &#8220;emerging growth company&#8221; pursuant to the JOBS
Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable
generally to public companies. After we are no longer an &#8220;emerging growth company&#8221;, we expect to incur significant expenses
and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of
2002 and the other rules and regulations of the SEC.</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: 0.25in">As a public company, we need to adopt policies
regarding internal controls and disclosure controls and procedures. We also expect that operating as a public company will make it more
difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy
limits and coverage or incur substantially higher costs to obtain the same or similar coverage. In addition, we will incur additional
costs associated with our public company reporting requirements. It may also be more difficult for us to find qualified persons to serve
on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these rules
and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing
of such costs.</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"><b><i>We may become a passive foreign investment company, which could
result in adverse U.S. federal income tax consequences to U.S. investors owning the ADSs or our ordinary shares. </i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">A non-U.S. corporation, such as our company, will
be considered a passive foreign investment company, or PFIC, for any taxable year if either (1) at least 75% of its gross income is passive
income for such taxable year or (2) at least 50% of the value of its assets (based on an average of the quarterly values of the assets
during such taxable year) is attributable to assets that produce or are held for the production of passive income (which includes cash
and cash equivalents). Although the law in this regard is not entirely clear, we treat our affiliated entities as being owned by us for
U.S. federal income tax purposes because we control their management decisions and are entitled to substantially all of the economic benefits
associated with them. As a result, we consolidate their results of operations in our consolidated U.S. GAAP financial statements. If it
were determined, however, that we are not the owner of our affiliated entities for U.S. federal income tax purposes, we would likely be
treated as a PFIC for the current taxable year and any subsequent taxable year.</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: 0.25in">Assuming that we are the owner of our affiliated
entities for U.S. federal income tax purposes, and based upon our current and projected income and assets, including the proceeds from
our initial public offering, and projections as to the value of our assets, we do not believe we were a PFIC for the taxable year ending
December 31, 2022. However, no assurance can be given in this regard because the determination of whether we will be or become a PFIC
is a factual determination made annually that will depend, in part, upon the composition of our income and assets. Fluctuations in the
market price of the ADSs may cause us to be classified as a PFIC for the current or future taxable years because the value of our assets
for purposes of the asset test, including the value of our goodwill and unbooked intangibles, may be determined by reference to the market
price of the ADSs from time to time (which has been and is likely to continue to be volatile). Among other factors, if our market capitalization
continues to decline or does not increase, we may be classified as a PFIC for our current taxable year ending December 31, 2023 or future
taxable years. Furthermore, the composition of our income and assets may also be affected by how, and how quickly, we use our liquid assets,
including the cash raised in our initial public offering. Under circumstances where our revenues from activities that produce passive
income significantly increases relative to our revenues from activities that produce non-passive income, or where we determine not to
deploy significant amounts of cash for active purposes, our risk of becoming classified as a PFIC may substantially increase. If we are
classified as a PFIC for any year, we generally would continue to be treated as a PFIC for all succeeding years for U.S. federal tax purposes.</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: 0.25in">If we were to become a PFIC, such characterization
could result in adverse U.S. federal income tax consequences to any U.S. Holder (as defined in &#8220;Item 10. Additional Information&#8212;E.
Taxation&#8212;U.S. Federal Income Tax Considerations&#8221;) of our ADSs or ordinary shares. For example, if we are a PFIC, U.S. Holders
may become subject to increased tax liabilities under U.S. federal income tax laws and regulations and will become subject to burdensome
reporting requirements. We cannot assure any investor that we will not be a PFIC for our 2023 taxable year or any future taxable year.
U.S. investors should consult their own tax advisors about the circumstances that may cause us to be classified as a PFIC and the consequences
if we are classified as a PFIC.</p><div>

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


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

</div><div><a id="a_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"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><span style="text-decoration:underline">A. History and Development of the Company</span></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">In September 2011, we established Long-Spring
Education Holding Group Limited, or Long-Spring Education, in the PRC, through which we operated our schools.</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: 0.25in">In September 2016, we established Long-Spring
Education Group (the former parent of our company), or the former parent, in the Cayman Islands. In the same month, we established First
High-School Group Hong Kong Limited, or First High-School HK, under the former parent in Hong Kong. In October 2016, First High-School
HK incorporated Yunnan Century Long-Spring Technology Co., Ltd., or Yunnan WFOE, in the PRC.</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: 0.25in">In November 2016, First High-School HK became
the offshore holding company of our group in Hong Kong through Yunnan WFOE by entering into a series of contractual arrangements with
Long-Spring Education and its shareholders. Such contractual arrangements were terminated and re-entered into in December 2018 to add
additional entities as parties to the contractual arrangements. See &#8220;&#8212;C. Organizational Structure&#8212;Our Contractual Arrangements&#8221;
for details.</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: 0.25in">In September 2018, we established First High-School
Education Group Co., Ltd., or First High-School Education, under the former parent as our proposed listing entity in the Cayman Islands.
In the same month, we established First High-School Education Group (BVI) Limited, or First High-School BVI, under the former parent
in the British Virgin Islands.</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: 0.25in">In August 2019, we transferred the ownership
of First High-School BVI to First High-School Education and then transferred the ownership of First High-School HK to First High-School
BVI in September 2019.</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: 0.25in">In January 2021, we completed our corporate restructuring
by issuing ordinary shares or redeemable ordinary shares to the respective shareholders of the former parent to generally mirror the
shareholding structure in the former parent, and immediately after the share issuance, the former parent surrendered our shares and ceased
to be our parent company.</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: 0.25in">On March 11, 2021, our ADSs commenced trading
on the NYSE under the symbol &#8220;FHS.&#8221; We raised approximately US$42.4 million in net proceeds from our initial public offering
after deducting underwriting discounts and commissions and offering expenses paid by us.</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: 0.25in">In May 2021, we acquired 51% equity interests
in Beijing Tomorrow Future Plus Education Technology Co., Ltd., a technology-driven education company that provides&#160;premium full-time
live AI online teaching services. In December 2022, for strategic reasons, we divested of our equity interest in Beijing Tomorrow Future
Plus Education Technology Co., Ltd.</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: 0.25in">In July 2021, our wholly-owned subsidiary, First
High-School HK, has entered into a strategic partnership agreement with Sichuan Fuhang Capital Equity Investment Fund Management Co.,
Ltd., to collaborate in establishing an education fund with a focus on online-merge-offline learning.</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: 0.25in">In November 2021, we established Beijing Long-Spring
Ordinary-Vocational Education Integration Development and Research Institute to actively carry out research on the integration of ordinary
and vocational education, and to promote the high-quality development of the related occupations.</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: 0.25in">In June 2022, our board of directors authorized
a share repurchase program under which our Company may repurchase up to RMB4.0 million of its Class A ordinary shares in the form of ADSs
during a twelve-month period commencing on July 15, 2022, to maximize value for shareholders.</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: 0.25in">In September 2022, our board of directors approved
a cash dividend of US$0.0146 per ordinary share (US$0.0437 per ADS). The amount of cash dividends distributed was approximately US$1.24
million in total, net of 10.0% withholding tax. The dividends were paid in October, 2022 to the holders of our ordinary shares (including
those represented by the ADSs) of record as of the close of business on October 11, 2022.</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: 0.25in">On November 7, 2022, we were notified by the NYSE
that the staff of the NYSE Regulation has determined to commence proceedings to delist the ADSs. Trading in the ADSs was suspended after
the market close on the NYSE on November 7, 2022. On November 22, 2022, we were delisted from the NYSE when the staff of the New York
Stock Exchange LLC filed a Form&#160;25 Notification of Delisting. The ADSs have since then been quoted on the OTC Pink Limited Information
under the symbol &#8220;FHSEY.&#8221;</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: 0.25in">Our principal executive offices are located at
No. 1-1, Tiyuan Road, Xishan District, Kunming, Yunnan Province 650228, People&#8217;s Republic of China. Our telephone number is +86-10-6255-5966.
Our registered office in the Cayman Islands is located at P.O. Box 309, Ugland House, Grand Cayman KY1-1104, Cayman Islands.</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: 0.25in">Our website is www.longspringedu.com. The information
contained on our website is not a part of, and will not be incorporated by reference into, this annual report. The SEC also maintains
a web site at www.sec.gov that contains reports, proxy and information statements, and other information regarding registrants that make
electronic filings with the SEC using its EDGAR system.</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: 0.25in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
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</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"><b><span style="text-decoration:underline">B. Business Overview</span></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">We are an education service provider primarily
focusing on high schools in Western China. We aspire to become a leader and innovator of private high school education in China, dedicated
to a comprehensive education management integrating education information consulting, education research project development, education
talent management, education technology management, education service management, and general vocational integration development services.
First High-School Education, our ultimate Cayman Islands holding company, does not have any substantive operations other than indirectly
controlling the affiliated entities through certain contractual arrangements.</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: 0.25in">We trace our history back to August 2012 when we established our first
school to provide after-school tutoring services. We have since developed a network of 21 schools for our continuing operations, offering
13 high school programs and three tutorial school programs for Gaokao repeaters, and five school management service programs as of December
31, 2022. In addition, we have also established Chinese-English bilingual programs for students interested in pursuing higher education
overseas. As of December 31, 2022, we had 17,336 high school students (including Gaokao repeaters) across our school network, and 8,487
public school students at schools to which we provide management services, for our continuing operations. We are dedicated to recruiting
teachers who hold sufficient academic credentials, are devoted and active professionals in their field, and are committed to improving
their students&#8217; academic performance. As of December 31, 2022, we had a total of 1,358 teachers in our schools for our continuing
operations, 99.7% of whom had a bachelor&#8217;s degree. As of the same date, we had a total of 45 principals and deputy principals across
our school network for our continuing operations, who are responsible for the strategic development and operation of our schools. We are
committed to investing in our teachers and principals and offer them opportunities to grow with us. We have designed systematic training
courses and established a comprehensive internal training system to assist our teachers and principals in their professional development,
including regular training sessions to discuss educational theories, methodologies and techniques.</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: 0.25in">We have a highly scalable, asset-light business
model premised on collaboration with third parties, including local governments and real estate developers. Our partners typically contribute
the land and school facilities. Our government partners also provide other forms of support, such as subsidies and preferential tax treatment.
In return, we provide educational resources, teachers and staff, and school management expertise. Our services raise local education standards
for the under-developed areas and often invigorate the local economy by attracting more talents to live and work in the area. We currently
operate 13 schools pursuant to cooperative arrangements with local governments. Operating private secondary schools under the current
regulatory regime requires stringent approvals from the relevant governments in China. As such, we believe that, with our proven track
record, our ability to maintain cooperative relationship with local governments to obtain not only the approval but also the support to
operate our schools has created strong entry barriers and underpins our long-term growth. We have also cooperated with the local governments
and a private school operator to provide management services for five schools in Yunnan province and Henan province for annual management
service fees. In addition to collaborating with local governments, we currently operate three schools by either leasing lands from or
collaborating with third parties. Our synergistic relationship with third parties allows us to launch new schools with relatively lower
upfront capital expenditures.</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: 0.25in">We have also developed a standardized and centralized
school management system. We have devised a series of standardized measures and protocols for each stage in a school&#8217;s development
and for a wide variety of scenarios in school management and operation, which we require all of our schools to consistently adhere to.
Our standardized and centralized management model allows us to secure control over key resources, including teaching methods, education
contents and school management experience, making our business success highly replicable and scalable.</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: 0.25in">We have experienced steady growth in our business.
For our continuing operations, our revenues were RMB306.2 million, RMB337.3 million and RMB342.5 million (US$49.7 million) in 2020, 2021
and 2022, respectively. Our net income was RMB80.9 million, RMB52.7 million and RMB38.4 million (US$5.6 million) in 2020, 2021 and 2022,
respectively. Our adjusted net income was RMB80.9 million, RMB52.7 million and RMB38.4 million (US$5.6 million) in 2020, 2021 and 2022,
respectively.</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"><b>Our Schools and Programs</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">We operate a network of 21 schools located in
Yunnan province, Guizhou province, Shaanxi province, and Henan province, offering 13 high school programs and three tutorial school programs
for Gaokao repeaters, and five school management service programs as of December 31, 2022.</p><div>

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


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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-indent: 0.25in">The following map sets forth the geographical locations of our schools
and the schools to which we provided management services as of December 31, 2022.</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="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><img alt="" src="image_001.jpg"/>&#160;</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: 0.25in">The following table sets forth the student enrollment,
capacity and utilization rate of our schools as categorized by the type of schools (including the schools to which we provided management
services).</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Tutorial schools</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-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">
    <td style="width: 0.25in"><span style="font-size: 10pt">(1)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">School utilization rate is calculated by dividing student enrollment
    with school capacity.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>


</div><!-- Field: Page; Sequence: 56 --><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 -->49<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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-indent: 0.25in">The following table sets forth certain key information about our schools
and the schools to which we provided management services.</p><div>

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

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: center">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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&#160;December&#160;31,</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; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</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: 0.25in"></p><div>

</div><!-- Field: Page; Sequence: 57 --><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 -->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: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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    <td style="padding-bottom: 1.5pt; text-align: center; vertical-align: top"><b>&#160;</b></td><td style="padding-bottom: 1.5pt"><b>&#160;</b></td>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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">
    <td style="width: 0px"></td>
    <td style="width: 24px"><span style="font-size: 10pt">(1)</span></td>
    <td><span style="font-size: 10pt">We combined Guizhou Mingde Tutorial School, which commenced operation in September 2020, with our
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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; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="text-align: left; padding-left: 0.125in; text-indent: -0.125in; vertical-align: top">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="vertical-align: top; text-align: center; padding-left: 0.1in">August 2023</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: center; padding-left: 0.1in">Honghe, Yunnan</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  </table><div>


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


</div><!-- Field: Page; Sequence: 58 --><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 -->51<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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-indent: 0.25in">As part of our cooperation with local governments
of communities, we admit a certain number of local students on behalf of the government as publicly-sponsored students. As of December
31, 2020, 2021 and 2022, the number of publicly-sponsored students in our schools for our continuing operations was 6,755, 7,993 and 8,293,
respectively, accounting for 43.2%, 47.1% and 47.8% of our total students for our continuing operations as of the same dates. We allow
publicly-sponsored students to pay lower tuition, typically at the level of public schools, and receive price difference or other forms
of support from local governments for such publicly-sponsored students.</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: 0.25in">We have cooperated with certain local governments
in China to provide management services for schools, including the followings.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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">&#9679;</td><td style="text-align: justify">Starting from September 2020, we have cooperated with the
local government of Xishuangbanna, Yunnan province, to provide management services for Xishuangbanna International Resort District Middle
School, a local public school.</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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">&#9679;</td><td style="text-align: justify"><p style="margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">Starting from August 2021, we have cooperated with the local government
of Yuanjiang county, Yunnan province, to provide management services for Yuanjiang County District High School, a local public school.</p></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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">&#9679;</td><td style="text-align: justify"><p style="margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">Starting from August 2022, we have cooperated with the local government
of Honghe autonomous prefecture and Luoping county, respectively in Yunnan province, to provide management services for Mengzi Long-Spring
Experimental Secondary School, a local private school, and Luoping County District High School, a local public school.</p></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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">&#9679;</td><td style="text-align: justify"><p style="margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">Starting from August 2022, we have cooperated with a private school
operator in Shangcai county, Henan province, to provide management services for Shangcai District High School, a local private school.</p></td>
</tr></table><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"><b><i>Our high schools </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: 0.25in">We operate 13 high schools in Yunnan province with a total of 16,265
students, and 1,747 teachers and supporting staff as of December 31, 2022.</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: 0.25in">All of our high schools are boarding schools,
and we have implemented strict daily study schedules on our students, aimed to improve their intellectual and well-rounded development.</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"><i>Curriculum design </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-indent: 0.25in">Our high schools deliver core curriculum designed
primarily pursuant to the standards set by national, provincial and local education authorities. Mandatory courses at our high schools
include Chinese, mathematics, English, physics, chemistry, biology, history, geography, politics, music, sports, arts, student psychology
and information technology. In addition to government-mandated core curriculum, we also deliver supplemental courses to enrich the interests
and dimensions of our students. We offer over 20 elective courses and extracurricular activities at our high schools, including model
airplane crafting, soilless cultivation, martial arts, African drums, start-up simulation, electric engineering mini-lab, Chinese literature,
robotic engineering, law, music and drawing, as well as various sports courses and foreign languages courses. We use course materials
written and compiled by our centralized curriculum development team for our elective courses, and exercise close supervision and offer
generous support to students attending our extracurricular activities.</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"><i>Academic assessment and achievement </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-indent: 0.25in">The final grades for students in our high schools
for each course represent a combination of written and oral exam results, class participation, and grades for quizzes, reports and homework
assignments. We conduct formal written and oral exams on a monthly basis, in addition to our mid-term and final exams. We sometimes participate
in city-wide and regional mid-term and final exams where students from all schools in the community use the same set of exam questions.</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: 0.25in">Trained with our standardized teaching methodologies and centrally
designed curricula and course materials, our students consistently achieve outstanding academic results. Many graduates were admitted
into first-tier universities in China and the world, including among others, Tsinghua University, Peking University, Zhejiang University,
Shanghai Jiao Tong University, Fudan University, University of College London, University of Edinburgh and University of Melbourne.</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"><i>Bilingual programs </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-indent: 0.25in">We have established Chinese-English bilingual
programs at Yunnan Long-Spring Foreign Language Secondary School for students interested in pursuing higher education overseas. We have
implemented a dual-track parallel education system which allows our students to access both Australian and Chinese curricula and to choose
between domestic and overseas higher education. For our Australian program, our three-year curriculum consists of six modules, including
South Australian international high school curriculum module, Chinese high school curriculum module, academic English curriculum module,
overseas school application preparation module, extracurricular activities module, and school-based elective curriculum module. For our
South Australian international high school curriculum module, we entered into various cooperative arrangements with the SACE Board of
South Australia, an independent statutory authority of the South Australian government, to provide curricula that meet the requirements
of South Australian Certificate of Education, or SACE, an internationally recognized qualification that paves the way for our graduates
to gain admissions into overseas universities with greater ease. Our cooperation with the SACE Board of South Australia enables us to
offer education service and deliver curricula to our students in the same way and at the same quality as high schools in South Australia.</p><div>

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


</div><!-- Field: Page; Sequence: 59 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->52<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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-indent: 0.25in">In addition, Yunnan Long-Spring Foreign Language
Secondary School has been authorized to offer the UK Advanced Levels courses (the &#8220;A-Level courses&#8221;), the Global Assessment
Certificate program (the &#8220;GAC program&#8221;), and the Advanced Placement courses (the &#8220;AP courses&#8221;), for students
interested in pursuing higher education in the United Kingdom and the United States. Yunnan Long-Spring Foreign Language Secondary School
is also an authorized ACT test center available for students to take the standardized test for college admissions in the United States.</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"><b><i>Our tutorial schools </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: 0.25in">We operate three tutorial schools in Yunnan province, Guizhou province,
and Shaanxi province, dedicated to providing full-time education to train Gaokao repeaters who wish to improve their performance in their
second Gaokao attempt. As of December 31, 2022, our tutorial schools had 1,071 students, and 70 teachers and supporting staff. We generally
require enrolled students to live in student dormitories during their course of study.</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"><i>Curriculum design </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-indent: 0.25in">Our tutorial schools deliver core curriculum
designed primarily pursuant to the standards set by national, provincial and local education authorities. Students enrolled in our tutorial
schools typically have a singular educational goal, which is to achieve improved academic performances on their second Gaokao attempts.
Therefore, our curriculum places a heavier emphasis on Gaokao subjects. Apart from Chinese, mathematics and English, which are mandatory
exam subjects for all students, we also offer courses on political science, history and geography to students pursuing the social sciences
track, and physics, chemistry and biology to those pursuing the natural sciences track.</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"><i>Academic assessment and achievement </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-indent: 0.25in">Our tutorial schools organize formal monthly
exams and final exams at the end of each semester. The monthly exams and final exams simulate the real Gaokao by using the same exam
papers, exam time, and adopting the same grading standards. Compared to high schools in our network, tutorial schools focus more on adopting
monthly and final exams as means to assess student performances, instead of using homework assignments, quizzes or other forms of informal
assessments.</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: 0.25in">In addition, we also participate in regional
and city-wide standard exams which simulate the exam structure and competitiveness of Gaokao. These cross-school assessments offer our
students a better understanding of their competitiveness among students both within and outside our school network against whom our students
must ultimately compete in the real Gaokao. We were able to help over 80% of our students raise 50 points or more (out of a full Gaokao
score of 750 in Yunnan province), in their second Gaokao attempt in 2022 through one-year tutoring with us, as compared to their initial
Gaokao scores in 2021</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"><b><i>Our school management service programs</i></b></p><div>

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



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Leveraging our established brand recognition and
proven track record in school operation, we serve public or private schools which are in need to improve their school operation efficiency.
Our services are tailored to the unique needs of the specific school in light of its local conditions. We provide services primarily in
five key areas, including student admission, teacher training, academic guidance, catering and lodging management, and teaching materials
supply services. As of December 31, 2022, we operated five school management service programs in Yunnan province and Henan province. As
of December 31, 2022, under our school management service programs, we had 8,487 students under management, and 70 teachers and supporting
staff providing services.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 21.3pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">For student admission service, we work as consultants
to the local school&#8217;s recruitment team to provide guidance on marketing through various media formats, communication with students
and parents, and the proper procedures in applying for relevant governmental approvals. For teacher training, we provide both online and
offline training programs to the local school teachers, sharing experience in curriculum design, test design and other lecturing practices.
For academic guidance, we send out accredited teachers to participate in semester-long exchange programs. Our teachers teach and lead
key classes to guide both local students and their teachers with our refined curriculum contents and design. For catering and lodging
management, we provide management services related to cafeteria, lodging, landscaping and other operational services. In addition, we
also supply teaching materials to their schools, including our test preparation books and other student related study materials.</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>Discontinued Operations</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Due to the effectiveness of the Implementation
Rules, we have concluded that we have lost control over the Affected Entities as from September 1, 2021, which primarily include the middle
schools providing compulsory education and the sponsor entities within China that are affected by the Implementation Rules. Consequently,
we classified the operation for the Affected Entities as discontinued operations. We have determined that, in substance, we had ceased
to recognize revenues for all activities related to the Affected Entities and had discontinued all business activities with such entities
by September 1, 2021 except for the continued provision of essential services to keep these schools in normal operations.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>


</div><!-- Field: Page; Sequence: 60 --><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 -->53<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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-indent: 0.25in">As of December 31, 2022, the Affected Entities
included nine middle schools in Yunnan province and Shaanxi province with a total of 8,434 students and 504 teachers. &#160;The following
table sets forth the student enrollment, capacity and utilization rate of the schools of our discontinued operations.</p><div>

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

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="10" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">As of December&#160;31,</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="10" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">As of December&#160;31,</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="10" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">As of December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">The following table sets forth certain key information
about each of the schools of our discontinued operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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</div><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"><b>Our Online Education Services</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">As a supplement to conventional school programs,
we provide online education services on third-party platforms to our students on a complimentary basis. Since 2018, we have collaborated
with third parties to build our online learning platform to implement online classes during school holidays, provide online tutorials
relating to college admission and online trainings for students participating in competitions. Our online learning platform also connects
parents with teachers and schools to enhance parent involvement.</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: 0.25in">During the COVID-19 outbreak in 2020, 2021 and
2022, we expanded our online courses based on our online learning platform. For example, we provide online tri-teacher lectures to promote
online educational resources sharing and synchronous teaching for our students from different locations within our school network. In
our online tri-teacher lectures, we invite external education consultants and experts to provide interdisciplinary online lectures to
inspire students. In collaboration with these consultants and experts, our teachers prepare the course materials and live-stream the
courses to our students. In this process, our teachers also ensure the implementation of teaching plans, instruct students with their
after-class exercises to supervise the progress of their study plans and offer guidance to the moral development of our students. Our
teachers for graduating classes in our high schools recorded a series of courses to assist the self-study of our graduating high school
students during the winter break. We also provided our graduating high school students with guidance in college admission and college
major selection through our online tutorials. In addition, we collaborated with People&#8217;s Daily Online to produce a live broadcast
entitled &#8220;The Same Class&#8221; to share the knowledge of COVID-19 prevention and control and the arrangement of online teaching
during the extended winter break for all of our students, their parents and our employees.</p><div>

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


</div><!-- Field: Page; Sequence: 61 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->54<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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-indent: 0.25in">Our online education services have become an
important enhancement to our schools and programs to diversify our teaching methods, encourage independent learning and enhance parent
involvement. We currently provide online education services and online tri-teacher lectures for nine of our schools, specifically Qiubei
Long-Spring Experimental Secondary School, Zhenxiong Long-Spring Advanced Secondary School, Xishuangbanna Long-Spring Experimental Secondary
School, Mengla Long-Spring Experimental Secondary School, Xinping Long-Spring Advanced Secondary School, Yunnan Yuxi Hengshui Experimental
High School, Qujing Hengshui Experimental Secondary School, Wenshan Long-Spring Experimental Secondary School and Yuanjiang County District
High School. We have eight schools offering all the courses and one school offering a majority of the courses. For our online tri-teacher
lectures provided at these schools, we cooperate with many external education consultants and experts who graduated from Peking University
or Tsinghua University with more than ten years of work experience on average and in-depth knowledge in the area of secondary education.
These external education consultants and experts provide online lectures and are responsible for a total of 2,200 students at these schools
as of December 31, 2022. Leveraging our online learning platform and the application of information technology, we have optimized our
staff costs incurred at the relevant schools.</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: 0.25in">Our experience in offering online education services
allows us to provide high-quality and effective education services and promote educational resources sharing. We may cooperate with other
online education service providers to deliver high-quality online courses to aspiring students in China, especially in Western China
and other regions with relatively inadequate high-quality public educational resources.</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"><b>Cooperative Arrangements with Third Parties</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">We have a highly scalable, asset-light business
model premised on collaboration with third parties, including local governments and real estate developers. Our partners typically contribute
the land and school facilities. Our government partners also provide other forms of support, such as subsidies and preferential tax treatment.
In return, we provide educational resources, teachers and staff, and school management expertise Pursuant to our cooperative arrangements
with local governments, we admit a certain number of local students on behalf of the government as publicly-sponsored students. These
students pay us tuition typically at the level of public schools, lower than the normal tuition we charge, and we receive the tuition
difference or other forms of support from local governments. We believe the local governments are willing to cooperate with us because
of our ability to provide high-quality educational resources to the local community as well as our strong management expertise and solid
reputation. Our services raise local education standards for the under-developed areas and often invigorate the local economy by attracting
more talents to live and work in the area. In recognition of our contribution, we were awarded the title of excellent private school
in Yunnan province in 2015.</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: 0.25in">We have established stable cooperative relationships
with several local governments, which have an average term of approximately 16 years. Operating private secondary schools under the current
regulatory regime requires stringent approvals from the relevant governments. As such, we believe that, with our proven track record,
our ability to maintain cooperative relationship with local governments to obtain not only the approval but also the support to operate
our schools has created strong entry barriers and underpins our long-term growth.</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: 0.25in">In addition to collaborating with local governments,
we currently operate three schools by leasing lands from third parties. We expect to launch new schools in the second half of 2023, including
high schools and vocational schools. Our synergistic relationship with third parties allows us to launch new schools with relatively
lower upfront capital expenditures.</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"><b>Our School Management System</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Standardization </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: 0.25in">We have developed a series of standardized measures
and protocols for each stage in a school&#8217;s development and for a wide variety of scenarios in school management and operation,
which we require all of our schools to consistently adhere to. These measures and protocols generally set out key operating procedures
on topics such as curriculum design and delivery, student admission and administration, teacher training, parent communication, logistics,
student affairs, finance, human resources, internal control and quality control.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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 -->55<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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-indent: 0.25in">For example, we adopted a set of standardized
teaching protocol named the &#8220;Three-Three-One Teaching Method,&#8221; pursuant to which our teachers follow a seven-step streamlined
teaching protocol to offer education services related to student motivation (Guide and Think), course delivery (Discuss and Present),
and student feedback (Comment, Test, and Practice). Other teaching methods include the &#8220;Five-step Review Process,&#8221; which
helps our students review course materials efficiently. These standardized measures play a critical role in assisting our school management
teams in monitoring and supervising the various aspects of the schools&#8217; daily operations. Our school management teams apply standardized
guidelines designed for each aspect of school operations, and are required to report the results generated from the application of these
standardized guidelines to the senior management team on a regular basis via teleconferences or in-person meetings.</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"><b><i>Centralization </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: 0.25in">We have assembled our experienced teaching talents
in our centralized curriculum development team to prepare our curriculum offerings and course materials, which are adopted by every school
in our network. By centralizing curriculum development activities, we ensure the consistency of quality of our education service across
all schools within our school network.</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: 0.25in">Our centralized school management system also
encompasses our centralized oversight and implementation of strict quality control measures. Since 2017, we have established eight management
centers: (1) Center for International Educational Exchange, (2) Information Center, (3) Center for Academic Research, (4) Center for
Admission and Graduation, (5) Center for Teaching Materials, (6) Center for Student Development, (7) Center for Teacher Development and
(8) Center for Curriculum Reform and Development. Each center is headed by seasoned professionals with extensive experience in their
respective areas of expertise. These centers ensure that our schools are under effective and efficient management according to our standardized
operating measures and protocols.</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: 0.25in">Our standardized and centralized management model
also allows us to secure control over key resources, including teaching methods, education contents and school management experience,
making our business highly replicable. We believe that our standardized and centralized management system enables us to quickly ramp
up newly opened schools which often lack know-hows and talents to independently achieve the operational results and student academic
performances of established schools. Unified application of our standardized and centralized measures and protocols also preserves our
culture and teaching methods in the newly opened schools and is also conducive to efficiently achieve success in school operations and
student academic performances.</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: 0.25in">In April 2018, we established Long-Spring Educational
Science and Research Academy to manage all of our schools, develop and implement corporate strategies, design and optimize our education
service offerings, train teachers, and discharge other managerial functions. The Long-Spring Educational Science and Research Academy
also established several teaching research groups and course preparation groups to develop standardized course materials and teaching
methods in order to maintain consistent teaching quality of our education programs across all schools in our network.</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"><b><i>Digitization </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: 0.25in">Our school management system also features the
concept of &#8220;digital campus&#8221; where we digitize various activities of campus administration and streamline every process of
school operations. We believe that our investment in educational technology distinguishes us from education service providers who only
observe traditional school management and teaching methods. We also believe that by pursuing and developing alternative school management
and teaching methods, we are better equipped to face the challenges in the marketplace, capitalize on new opportunities and deliver higher
quality education services.</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"><b>Our Students</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">We primarily admit students from local communities
where our schools are located. The number of students we admit is largely limited by the quota set by national, provincial, and local
education authorities. For our high schools, the quotas are generally based on the governments&#8217; evaluation of the capacity of each
of our schools.</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: 0.25in">We have implemented a selective admission process
for applicants to all of our schools. Our high schools participate in the unified admission procedure administered by local education
authorities and generally admit middle school graduates who applied for our schools through the unified admission procedure and who reach
or exceed our required Zhongkao exam scores. Our tutorial schools generally admit high school graduates who obtained our required scores
in their first Gaokao attempt but decided to try again in the following year instead of applying for colleges immediately.</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: 0.25in">Each of our high school is staffed with admission
managers who are deeply involved in our student admission processes, and are generally responsible for conducting market research and
attending various admission and marketing training programs, and preparing promotional materials. We also have an admission hotline dedicated
to answering any questions applicants may have about our schools and programs.</p><div>

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


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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"><b>Our Teachers</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">We have an excellent and committed team of teachers.
Our teachers are knowledgeable in their respective subject areas and the development trends in China&#8217;s education environment, which
enable them to design curricula and exam preparation programs that help our students achieve satisfactory exam results. As of December
31, 2022, we had a total of 1,358 teachers in our schools for our continuing operations, 99.7% of whom had a bachelor&#8217;s degree.
We require all our teachers of our high schools and tutorial schools to obtain the qualifications required by PRC regulatory authorities.
We also have teachers with work experience at many nationally well-regarded secondary schools in China, to coach our teachers to ensure
the consistent implementation of effective teaching methods within our school network.</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: 0.25in">We have a professional and dedicated team of
principals, who are responsible for the strategic development and operation of our schools. In addition to lateral hiring of experienced
principals, many of our school principals have grown with us and have acted in several capacities within our school network, often starting
as teachers. As of December 31, 2022, we had a total of 45 principals and deputy principals across our school network for our continuing
operations, among whom eight principals had a master&#8217;s or higher degree. As of the same date, 11 of our high school principals
were recognized as Advanced Secondary School Teachers.</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"><b><i>Teacher recruitment </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: 0.25in">As a part of our centralized management system,
we have established the Center for Human Recourses which is in charge of recruiting teachers and ensuring the overall teaching quality
of the newly recruited teachers. We recruit both college graduates and experienced teachers. Candidates without prior teaching experience
must hold a minimum of bachelor&#8217;s degree in the subject area they intend to teach, and score higher than the tier-1 university
cutoff score in Gaokao. Experienced teachers must hold a minimum of bachelor&#8217;s degree in the subject they intend to teach, and
bear the recommendations of reputable schools. Our Center for Human Resources evaluates their teaching skills and ethics through trial
lectures.</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: 0.25in">To recruit top college graduates, we organize
on-campus job fairs and post job openings online. We have also cooperated with reputable universities to ensure a steady supply of high-quality
teachers for our high schools. For example, we currently intend to recruit 264 teachers, with at least 40% holding a master&#8217;s degree
or above, from universities designated under the national Double First Class University Plan in China by 2023. We have also designated
top-tier universities, including among others, Peking University, Tsinghua University, Beijing Normal University, Southwest University
and Central China Normal University, as our target universities on which we focus our recruitment efforts. In addition, we have entered
into agreements with 11 universities in China, such as Xi&#8217;an Jiaotong University, Harbin Institute of Technology and Lanzhou University,
and provided exclusive internship and externship opportunities for their students and graduates.</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"><b><i>Teacher compensation </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: 0.25in">We offer competitive compensation packages to
our teachers. In addition to base salary, our teachers in graduating classes in our high schools also are entitled to performance-based
bonuses determined by the academic results achieved by their students. The average annual salary of our teachers of our high schools
and tutorial schools in Yunnan province were RMB138,824 and RMB163,878 in 2022, respectively.</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: 18pt">With the aid of our cooperative arrangements with
local governments, teachers in most of our high schools may also receive various forms of financial supports and perks from the local
governments in addition to compensation from us. See &#8220;&#8212;Cooperative Arrangements with Third Parties&#8221; for details. We
believe the competitive compensation packages and perks help us recruit and retain talented teachers who play a critical role in carrying
out our strategies, delivering our curricula, and helping our students succeed.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>


</div><!-- Field: Page; Sequence: 64 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->57<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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"><b><i>Teacher training </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: 0.25in">We attach great importance to training our teachers
and established the Long-Spring Educational Science and Research Academy to facilitate teacher trainings across our school network. In
addition to solidifying their teaching skills and widening their knowledge pool, our trainings also focus on developing our teachers&#8217;
professional responsibilities and ethics. Each newly-hired teacher is required to participate in a month-long training session which
focuses on ethics, student and classroom management, and teaching skills and methodologies. Specifically, we implement a three-phase
approach for the training of our newly-hired teachers:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">Phase I: we hold seminars on pedagogy and educational psychology, conduct teaching skill evaluation,
    and introduce our teaching methodologies and protocols. During this phase, we generally organize trainings at our headquarters.</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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">Phase II: we offer shadowing opportunities where newly-hired teachers observe experienced teachers&#8217;
    course delivery.</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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">Phase III: we assign a mentor for each newly-hired teacher to improve their teaching skills.</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: 0.25in">We also provide various training opportunities
to our teachers and principals, both at our headquarters and at the individual school level. For example, we have recently cooperated
with Tsinghua University to host training programs for our principals. We also plan to establish education research centers in Yunnan
province and Beijing to host training programs for teachers and promote research and development of educational methodologies. We require
our teachers to research and prepare for each class session. To ensure consistency across classrooms, our teachers must adhere to the
curriculum requirements developed by our centralized curriculum development team, and groups of teachers of the same subject attend joint
class-preparation sessions to ensure consistency in the content they deliver. In addition, we collaborate with well-known education and/or
research institutions to improve our teacher training capabilities.</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"><b><i>Teacher evaluation and promotion </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: 0.25in">We have set up a performance-based teacher compensation
system where teachers&#8217; compensation level is partially dependent on their performance. We consider various factors in evaluating
the performance for each teacher, including student average scores in the monthly exams, seniority, ethical behaviors and the managerial
functions they undertake.</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: 0.25in">In addition, we put in place a well-established
career path for our teachers, which we believe further incentivizes our teachers to improve their teaching skills and encourage loyalty.
Our decisions to promote teachers are based on each teacher&#8217;s individual performance and evaluation under the guidance issued by
local governments. Specifically, we consider our teachers&#8217; educational backgrounds, seniority, research capabilities, and knowledge
in teaching methodologies.</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"><b>Our Tuition</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">We typically charge our students tuition, boarding
fees, and other miscellaneous fees for meals, books, uniforms and other school supplies. Subject to applicable regulatory approvals,
we plan to adjust tuition in the future as our competitive positions change in the markets where we compete. The following table sets
forth the average tuition per student for our continuing operations by school type for the periods indicated.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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&#160;the&#160;Year&#160;ended
    December&#160;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">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold">&#160;</td>
    <td colspan="10" style="font-weight: bold; text-align: center">(in RMB)</td><td style="font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold"><span style="font-size: 10pt"><b>Average tuition per student of our schools<sup>(1)</sup></b></span></td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 64%; text-align: left; text-indent: -12pt; padding-left: 12pt">High schools</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">16,399</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">15,072</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">10,997</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -12pt; padding-left: 12pt">Tutorial schools for Gaokao repeaters</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">22,147</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">23,170</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">19,853</td><td style="text-align: left">&#160;</td></tr>
  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-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">
    <td style="width: 0px"></td>
    <td style="width: 0.25in"><span style="font-size: 10pt">(1)</span></td>
    <td><span style="font-size: 10pt">The average tuition per student equals to the total tuition income of our schools during a certain
    calendar year divided by the average student enrollment of such calendar year, which is arrived at by averaging the number of students
    enrolled as of the end of the previous and the concerned calendar years/periods.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>


</div><!-- Field: Page; Sequence: 65 --><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 -->58<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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-indent: 18pt">In determining the amount of tuition we charge,
we consider factors including the demand for our education programs, the cost of our operations, the geographical markets where our schools
are located, the tuition charged by our competitors, and our pricing strategy to gain market share. For details of our tuition, see &#8220;Item
5. Operating and Financial Review and Prospects&#8212;A. Operating Results&#8212;Key Components of Our Results of Operations&#8212;Revenues.&#8221;</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: 0.25in">We have established refund policies at each of
our schools for students who withdraw from our schools or transfer to a school outside our network. In general, prepaid tuition fees
and boarding fees can be refunded proportionately for the remaining year.</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"><b>Marketing</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">We primarily market our schools to students and
parents located near the regions where our respective schools are located. To attract high-quality students and increase student enrollment,
we utilize a variety of marketing methods, including:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt"><i>Referrals</i>. As we have developed a reputation for offering quality education, we rely strongly
    on word-of-mouth referrals by former students and their parents who are satisfied with our education services. We believe that our
    extensive and expanding alumni network will continue to offer a solid platform for referrals.</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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt"><i>Media advertising</i>. To reach a larger base of audience efficiently, we place advertisements
    about our schools through various media platforms, including newspapers, radio and online and mobile platforms.</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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt"><i>Promotional events.</i> From time to time, we introduce our programs to potential feeder schools,
    distribute information booklets and invite prospective students and their parents to visit our campuses, which allows us to reach
    potential students directly and enable the active engagement with them.</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>Competition</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">The education service market in China is rapidly
evolving and highly competitive. We compete primarily with public and private schools outside our network, especially those operating
in the same communities as our schools. We believe we are well-positioned to succeed in this market primarily due to our extensive operational
experiences, scalable asset-light business model, and our standardized and centralized school management system. Our competitive compensation
packages, supplemented by various forms of subsidies from local governments, enable us to recruit and retain talented teachers. Our students&#8217;
past success in Gaokao demonstrates the outstanding quality of our education services, and helps us build a strong and favorable reputation
among prospective students, which improved our ability to admit top students in the local communities.</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"><b>Properties and Facilities</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">All of our properties are located in China. We
currently occupy a total combined gross floor area of approximately 718,297 square meters of facilities for 13 properties provided by
local governments or entities through our cooperative arrangements with them. The terms of such properties range from nine to 21 years.
By utilizing the properties developed by local governments, we avoid significant capital expenditures in connection with land procurement
and facilities construction. See &#8220;&#8212;Cooperative Arrangements with Third Parties.&#8221; For relevant risks, see &#8220;Item
3. Key Information&#8212;D. Risk Factors&#8212;Risks Related to Our Business and Industry&#8212;Any unfavorable changes in our cooperative
relationships with third parties or favorable government policy treatment may adversely affect our business.&#8221;</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: 0.25in">We also lease three properties with a total combined
gross floor area of approximately 113,762 square meters in Yunnan province, Shaanxi province, and Guizhou province from third parties
to operate our schools. Our leases have terms of five years to 20 years.</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: 0.25in">We believe that the facilities which we currently
lease and occupy are adequate to meet our needs for the foreseeable future, and we believe that we will be able to obtain adequate facilities,
principally through leasing of additional properties, to accommodate our future expansion plans. For relevant risks, see &#8220;Item
3. Key Information&#8212;D. Risk Factors&#8212;Risks Related to Our Business and Industry&#8212;Failure to control rental costs, control
the quality, maintenance and management of the leased school premises, obtain leases at desired locations at reasonable prices or failure
to comply with the applicable PRC property laws and regulations regarding certain of our leased and owned premises could materially and
adversely affect our business.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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 -->59<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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"><b>Employees</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 18pt">We had 1,816 full-time employees for our continuing
operations as of December 31, 2022. All of our full-time employees are located in China. The following table sets forth the number of
our full-time employees for our continuing operations, categorized by function, as of December 31, 2022.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 88%; text-indent: -12pt; padding-left: 12pt">Teachers</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">1,358</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -12pt; padding-left: 12pt">Administrative staff</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">290</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -12pt; padding-left: 12pt">Supporting staff</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">168</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="font-weight: bold; padding-bottom: 4pt; text-indent: -12pt; padding-left: 12pt">Total</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; text-align: right">1,816</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: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Our administrative staff primarily comprise our
management and administrative personnel and principals. Our supporting staff primarily comprise personnel providing support and services
in connection with our students&#8217; campus life.</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: 0.25in">As required by PRC laws and regulations, we participate
in various employee social security plans for our employees that are administered by local governments, including housing, pension, medical
insurance and unemployment insurance. We believe we maintain a good working relationship with our employees.</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"><b>Intellectual Property</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Our schools hold copyrights to various course
materials that have been developed internally and provide a basis for improving the quality of our education service. Our strategic plan
calls for continued and extensive investment in maintaining and expanding these assets. We owned 51 trademarks in China as of December
31, 2022. We have registered 17 domain names, including www.longspringedu.com, as of the same date. To protect our intellectual properties,
we rely on a combination of trademark, copyright and trade secret laws. From time to time, we are required to obtain licenses with respect
to course materials owned by third parties for our education service, in particular for our Chinese-English bilingual programs which
require foreign-language educational materials.</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"><b>Insurance</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">We maintain various insurance policies, such
as school liability insurance, student life insurance, auto insurance and key-man life insurance to safeguard against risks and unexpected
events. We do not maintain business interruption insurance. See &#8220;Item 3. Key Information&#8212;D. Risk Factors&#8212;Risks Related
to Our Business and Industry&#8212;We have limited insurance coverage with respect to our business and operations.&#8221; We consider
our insurance coverage to be in line with the industry practice as well as the customary practice in China.</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"><b>Legal Proceedings</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">We and certain of our directors and officers have been named as defendants
in a putative shareholder class action lawsuit in captioned Dagan Investments LLC v. First High-School Education Group Co., Ltd. (Case
No. 1:22-cv-03831) filed on May 11, 2022 in the United States District Court for the Southern District of New York. The lead plaintiff
alleged in the complaint, in sum and substance, that our IPO registration and prospectus (the &#8220;Offering Documents&#8221;) were false
or misleading, in violation of Sections 11, 12(a)(2), and 15 of the Securities Act, in that the Offering Documents allegedly failed adequately
to warn investors, among other things, that the new rules, regulations and policies regarding private education to be implemented by the
Chinese government posed a material adverse threat to the Company and its business. The lead plaintiff purported to bring this action
on behalf of a class of similarly situated investors and seek monetary damages on behalf of the class. As of the date of this annual report,
we were in the process of preparing for the defends to be filed against the complaint. As the case is still in its preliminary stage,
we cannot predict its timing, outcome, potential damages, or expenses that may be incurred.&#160;</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: 0.25in">In addition, from time to time, we may become
a party to various legal or administrative proceedings arising in the ordinary course of our business, including actions with respect
to intellectual property infringement, breach of contract, labor and employment claims. See &#8220;Item 3. Key Information&#8212;D. Risk
Factors&#8212;Risks Related to Our Business and Industry&#8212;We may be subject to intellectual property infringement claims, which may
be expensive to defend and may disrupt our business and operations&#8221;, &#8220;&#8212;We may be involved in labor and employment related
disputes and legal claims from time to time arising out of our operations&#8221;, and &#8220;&#8212;We and certain of our directors and
officers have been named as defendants in a putative shareholder class action lawsuit, which could have a material adverse impact on our
business, financial condition, results of operation, cash flows and reputation.&#8221; We are currently not a party to, and we are not
aware of any threat of, any legal or administrative proceedings that, in the opinion of our management, are likely to have any material
and adverse effect on our business, financial condition, cash-flow or results of operations. However, litigation or any other legal or
administrative proceeding, regardless of the outcome, could result in substantial cost and diversion of our resources, including our management&#8217;s
time and attention.</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"><b>Regulations </b></p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Regulations on Foreign Investment in Education in the PRC </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><i>Regulations on Foreign Investment </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: 0.25in">Pursuant to the PRC Law on Wholly Foreign-invested
Enterprises, which was promulgated by the SCNPC on April 12, 1986, last amended on September 3, 2016 and became effective on October
1, 2016, where the incorporation of wholly foreign-invested enterprises does not involve the implementation of special administrative
measures for foreign investment access, the incorporation, separation, merger, or any other major change and the operation period of
such enterprises are subject to record-filing administration.</p><div>

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


</div><!-- Field: Page; Sequence: 67 --><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 -->60<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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-indent: 0.25in">The Implementation Rules on Wholly Foreign-invested
Enterprises of the PRC (the &#8220;Implementation Rules on Wholly Foreign-invested Enterprises&#8221;) was promulgated by the Ministry
of Foreign Trade and Economic Cooperation of the PRC (currently known as the MOFCOM) on December 12, 1990, amended by the State Council
on February 19, 2014, and became effective on March 1, 2014. According to the Implementation Rules on Wholly Foreign-invested Enterprises,
industries in which foreign investment is prohibited or restricted shall be regulated in accordance with the Provisions on Guiding the
Orientation of Foreign Investment and the Foreign Investment Industries Guidance Catalog.</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: 0.25in">According to the Foreign Investment Law of the
PRC (the &#8220;Foreign Investment Law&#8221;), adopted by the NPC on March 15, 2019 and came into effect on January 1, 2020, China shall
implement a management system of pre-establishment national treatment and a negative list for foreign investment. Under the pre-establishment
national treatment, the treatment given to foreign investors and their investments during investment access stage will not be lower than
that given to their domestic counterparts. The negative list refers to special administrative measures for foreign investment access
in specific industries as stipulated. China shall give national treatment to foreign investment beyond the negative list. The organization
form, institutional framework and standard of conduct of foreign-invested enterprises shall be subject to the provisions of the Company
Law and the Partnership Enterprise Law of the PRC, and other laws. Foreign investors shall not invest in any industry prohibited by the
negative list for foreign investment access. For any industry restricted by the negative list foreign investors shall conform to the
investment conditions as required in the negative list.</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: 0.25in">The Implementing Regulation for the Foreign Investment
Law of the PRC, adopted at the 74th executive meeting of the State Council on December 12, 2019 which came into effect on January 1,
2020, provides implementing measures and detailed rules to ensure the effective implementation of the Foreign Investment Law of the PRC.</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: 0.25in">The PRC Law on Sino-Foreign Equity Joint Ventures,
the PRC Law on Wholly Foreign-invested Enterprises and the PRC Law on Sino-Foreign Cooperative Joint Ventures were repealed simultaneously
as the Foreign Investment Law came into effect, and foreign-invested enterprises which were incorporated in accordance with such laws
before the implementation of the Foreign Investment Law may retain their original organization forms and other aspects for five years
upon the implementation hereof.</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: 0.25in">Subject to the Measures for Reporting of Foreign
Investment Information (the &#8220;Foreign Investment Information Measures&#8221;), which was jointly issued by the MOFCOM and the State
Administration for Market Regulation (the &#8220;SAMR&#8221;) on 30 December 2019 and came into effect on January 1, 2020. Beginning
on January 1, 2020, when foreign investors carry out investment activities directly or indirectly in China, foreign investors or foreign
invested enterprises shall submit investment information through the Enterprise Registration System and the National Enterprise Credit
Information Publicity System operated by the SAMR. Specifically, foreign investors or foreign-invested enterprises shall report their
establishments, modifications and cancellations and file their annual reports in accordance with the Foreign Investment Information Measures.
When a foreign-invested enterprise has completed filing of such reports, the relevant information will be passed by the competent market
regulation department to the competent commercial department, so the reports do not need to be submitted separately.</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"><b><i>Special Administrative Measures for Foreign Investment Access
(Negative List) (2021) </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: 0.25in">Under the 2021 Special Administrative Measures,
which was promulgated by the NDRC and the MOFCOM on December 27, 2021 and became effective on January 1, 2022, the Special Administrative
Measures for Foreign Investment Access (Negative List) (2020) shall be repealed simultaneously as its implementation.</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: 0.25in">Pursuant to the 2020 Special Administrative Measures,
high school education is a restricted industry for foreign investors, and foreign investors are only allowed to invest in high school
education in cooperation with a domestic party and the domestic party shall play a dominant role in the cooperation, which means the
principal or other chief executive officers of the school shall be PRC citizens and the representatives of the domestic party shall account
for no less than half of the total members of the board of directors, the executive council or the joint administration committee of
the Sino-foreign cooperative educational institution. In addition, pursuant to the 2021 Special Administrative Measures, foreign investors
are not allowed to invest in compulsory education.</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"><b><i>Regulations on Sino-Foreign Cooperation in Operating Schools
</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: 0.25in">Sino-foreign cooperation in operating schools
or training programs is specifically governed by the Regulation on Sino-Foreign Cooperative Education of the PRC (the &#8220;Sino-Foreign
Regulation&#8221;), which was promulgated by the State Council on March 1, 2003 and last amended on March 2, 2019, and the Implementation
Rules for the Regulation on Sino-Foreign Cooperative Education (the &#8220;Implementation Rules&#8221;), which was promulgated by the
MOE on June 2, 2004 and became effective on July 1, 2004.</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: 0.25in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">The Sino-Foreign Regulation and its Implementation
Rules apply to the activities of educational institutions established in the PRC cooperatively by foreign educational institutions and
PRC educational institutions, the students of which are to be admitted primarily among PRC citizens. The Sino-Foreign Regulation and
its Implementation Rules encourage substantive cooperation between foreign educational institutions with relevant qualifications and
experience in providing high-quality education and PRC educational institutions, to jointly operate various types of schools in the PRC,
with such cooperation in the industries of higher education and occupational education being encouraged. The foreign educational institution
must have relevant qualifications and experience at the same level and in the same category of education. Sino-foreign cooperation schools
are not permitted, however, in compulsory education, namely primary schools and middle schools, and military, police, political and other
kinds of education that are of a special nature in the PRC. Any Sino-foreign cooperation school and cooperation programs shall be approved
by relevant education authorities and obtain the Permit for Sino-foreign Cooperation in Operating School. A Sino-foreign cooperation
school established without the above approval or permit may be banned by relevant authorities, be ordered to refund the fees collected
from its students and be subject to a fine of no more than RMB100,000, while a Sino-foreign cooperation program established without such
approval or permit may also be banned and be ordered to refund the fees collected from its students.</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: 0.25in">On June 18, 2012, the MOE issued the Implementation
Opinions of the MOE on Encouraging and Guiding the Entry of Private Capital in the Field of Education and Promoting the Healthy Development
of Private Education to encourage private investment and foreign investment in the field of education. According to these opinions, the
proportion of foreign capital in a Sino-foreign cooperative educational institution shall be less than 50%.</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"><b>Regulations on Private Education in the PRC </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><i>Education Law of the PRC </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: 0.25in">On March 18, 1995, the NPC enacted the Education
Law of the PRC (the &#8220;Education Law&#8221;), which became effective on September 1, 1995. The Education Law sets forth provisions
relating to the fundamental education systems of the PRC, including a school education system comprising pre-school education, primary
education, secondary education and higher education, a system of nine-year compulsory education, a national education examination system,
and a system of education certificates. The Education Law stipulates that the government should formulate plans for the development of
education, and establishes and operates schools and other educational institutions. Furthermore, it provides that, in principle, enterprises,
social organizations and individuals are encouraged to establish and operate schools and other types of educational institutions in accordance
with PRC laws and regulations. On December 27, 2015, the SCNPC published the Decision on Amendment of the Education Law, which became
effective on June 1, 2016. The amended Educational Law narrowed the provision prohibiting the establishment or operation of schools or
other educational institutions for profit to include only schools or other educational institutions founded with governmental funds or
donated assets.</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: 0.25in">In addition, the Education Law stipulates the
basic requirements to be fulfilled for the establishment of schools or any other educational institution. It also provides that the establishment,
modification or termination of schools or any other educational institution shall, in accordance with the relevant PRC laws and regulations,
go through the process of examination, verification, approval, registration or filing.</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"><b><i>Law on Promoting Private Education </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: 0.25in">The Private Education Law was last amended and
became effective on December 29, 2018. Pursuant to the Private Education Law, private schools that provide diploma- and degree-oriented
education, preschool education, Self-Taught Higher Education Examination education and other cultural education shall be subject to examination
and approval by education authorities at or above the county level within the limits of their powers. Sponsors of private schools may
choose to establish non-profit or for-profit private schools at their own discretion. However, they may not establish for-profit private
schools providing compulsory education.</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: 0.25in"></p><div>

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</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"><b><i>Implementation Rules of the Law on Promoting Private Education
</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: 0.25in">According to the Implementation Rules which became
effective on April 1, 2004 and was amended on May 14, 2021 with an effective date of September 1, 2021, (1) foreign-invested enterprises
established in China and social organizations whose actual controllers are foreign parties shall not sponsor, participate in or actually
control private schools that provide compulsory education, (2) social organizations or individuals shall not control any private school
that provides compulsory education or any non-profit private school that provides pre-school education by means of, among others, merger,
acquisition and contractual arrangements; and (3) private schools providing compulsory education shall not conduct any transaction with
any related party. Where a private school other than private schools providing compulsory education conducts transactions with any related
party, it shall follow the principles of openness, fairness and equality, determine the reasonable fees and regulate the decision-making,
and shall not do detriment to the state interests, the interests of the school or the rights and interests of the teachers and students,
otherwise, there is a risk of being ordered to make corrections within a time limit, and the illegal gains, if any, shall be confiscated
after the fees collected are returned; if the circumstances are serious, the sponsor, actual controller and member of the decision-making
body or supervisory body shall not become the sponsor, actual controller or member of the decision-making body or supervisory body of
other private school within one to five years; if the circumstances are especially serious with adverse social impact, the sponsor, actual
controller and member of the decision-making body or supervisory body shall not become the sponsor, actual controller and members of
the decision-making body or supervisory body of other private school permanently; if a violation of public security administration is
constituted, the public security organ shall impose a public security administration punishment according to law; if a crime is constituted,
criminal responsibility shall be investigated in accordance with the law.</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"><b><i>Several Opinions on Encouraging Private Entities and Individuals
to Operate Schools and Promoting the Healthy Development of Private Education </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: 0.25in">According to the Several Opinions on Encouraging
Private Entities and Individuals to Operate Schools and Promoting the Healthy Development of Private Education, which was issued by the
State Council on December 29, 2016, innovative institutional mechanisms shall be implemented in the field of private education, which
include but are not limited to: (i) classified registration and management shall be applicable to private schools, and the sponsors of
private schools may, at their own discretion, choose to establish non-profit or for-profit private schools; (ii) government support policies
shall be applicable to private schools. The people&#8217;s government at all levels are responsible for formulating and improving support
policies for non-profit private schools including but not limited to government subsidies, government procurement services, fund incentives,
donation incentives and land allocation. Meanwhile, the people&#8217;s government at all levels may support the development of for-profit
private schools by ways including but not limited to government procurement services and preferential tax treatments in accordance with
economic and social development and public services requirements; and (iii) broaden the financing channels for private schools, encourage
and attract private funds to enter into the field of private education. Financial institutions are encouraged to provide loans to private
schools with the pledge of the schools&#8217; future operating income or intellectual property rights, while individuals or entities
are encouraged to make donations to non-profit private schools.</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: 18pt">As of the date of this annual report, certain local
governments, such as Yunnan province, Inner Mongolia Autonomous Region, Shaanxi province, Sichuan province, Guizhou province and Chongqing
municipal, have promulgated their local regulations relating to legal person registration and administration for private schools and certain
local governments, and have issued general guidance to encourage the development of private schools. Among these local regulations and
guidance, some local governments, such as Yunnan province, Inner Mongolia Autonomous Region, Shaanxi province, Sichuan province, Guizhou
province and Chongqing municipal, require the existing private schools to register either as for-profit or non-profit schools within a
specific time period.</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"><b><i>Implementation Rules on Classified Registration of Private Schools
</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: 0.25in">According to the Implementation Rules on Classified
Registration of Private Schools, which was issued jointly by the MOE, the Ministry of Human Resources and Social Security, the Ministry
of Civil Affairs, the State Commission Office of Public Sectors Reform and the SAIC on December 31, 2016 and became effective on the
same day, the establishment of private schools is subject to approval. Private Schools approved to be established shall apply for registration
certificate or business license in accordance with the classified registration regulations after they obtain the license for school operations
by competent government authorities.</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-align: center"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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"><b><i>Implementation Rules on the Supervision and Administration of
For-profit Private Schools </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: 0.25in">According to the Implementation Rules on the
Supervision and Administration of For-profit Private Schools, which was issued jointly by the MOE, the Ministry of Human Resources and
Social Security and the SAIC on December 31, 2016 and became effective on the same day, social organizations and individuals are permitted
to operate for-profit private colleges and universities and other universities, high schools and kindergartens while are prohibited from
operating for-profit private schools providing compulsory education.</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: 0.25in">According to the Implementation Rules on the
Supervision and Administration of For-profit Private Schools, social organizations and individuals operating for-profit private schools
shall have the financial resources appropriate to the level, type and scale of the school, and their net assets or monetary funds shall
be able to satisfy the costs of the school construction and development. Furthermore, social organizations operating for-profit private
schools shall be a legal person who is in good credit standing, and shall not be listed as an enterprise operating abnormally, in material
non-compliance with the laws, or being dishonest. Individuals operating for-profit private schools shall be PRC citizens who reside in
China, be in good credit standing without any criminal record and enjoy political rights and complete civil capacity.</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"><b><i>Notice on the Registration and Administration of the Name of
For-profit Private Schools </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: 0.25in">According to the Notice of the SAIC and the MOE
on the Registration and Administration of the Name of For-profit Private Schools, which was issued on August 31, 2017 and became effective
on September 1, 2017, for-profit private schools shall be registered as limited liability companies or joint-stock limited companies
according to the Company Law of the PRC and the Law on Promoting Private Education, and its name shall comply with the relevant laws
and regulations on company registration and education.</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"><b><i>Interim Measures on the Management of the Collection of Private
Education Fees </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: 0.25in">The Interim Measures on the Management of the
Collection of Private Education Fees, or Private Education Fees Collection Measures, was promulgated by the NDRC, the MOE and the Ministry
of Labor and Social Security (currently known as the Ministry of Human Resources and Social Security) on March 2, 2005. According to
the Private Education Fees Collection Measures and the Implementation Rules of the Law on Promoting Private Education, the types and
amounts of fees charged by private schools providing diploma- or degree-oriented education shall be examined by education authorities
or labor and social welfare authorities and approved by governmental pricing authorities; and, other private schools shall file its pricing
information with the governmental pricing authorities and publicly disclose such information. If a school raises its tuition levels without
obtaining proper approval or making the requisite filing with the relevant government pricing authorities, such school would be required
to return the additional tuition fees obtained through such raise and be held liable for compensation of any losses caused to the students
in accordance with relevant PRC laws.</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: 0.25in">The Several Opinions of the Central Committee
of the Communist Party of China and the State Council on Promoting the Price Mechanism Reform, which was issued on October 12, 2015,
allows for-profit private schools to determine their prices on their own, while the tuition-collecting policies of non-profit private
schools shall be determined by the provincial governments in a market-oriented manner and based on the local situations.</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: 0.25in">On July 12, 2016, Yunnan Development and Reform
Commission, Department of Education of Yunnan Province as well as Yunnan Provincial Department of Human Resources and Social Security
issued the Notice on the Implementation of Independent Pricing on Private Schools in Yunnan Province. According to this Notice, tuition
and boarding fees of the private schools in Yunnan province may be independently determined by the private schools according to the school-operating
cost, market demand and other factors, and be made available to the public.</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: 0.25in">On January 2, 2018, People&#8217;s Government
of Inner Mongolia Autonomous Region issued the Opinions on Encouraging Social Forces to Establish Education and Promoting the Healthy
Development of Private Education. Pursuant to this Opinions, fees of private schools are regulated by the market. Specific fee standards
are determined by the schools independently and implemented according to laws after being publicized to the public. Relevant authorities
shall strengthen the supervision during and after the event on the charging practices of private schools.</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: 0.25in">On July 16, 2018, People&#8217;s Government of
Guizhou province issued the Opinions on the Implementation of Supporting and Regulating Education by Social Forces and Promoting the
Healthy Development of Private Education. According to this Opinions, subject to the principles of fairness, openness, legitimacy and
good faith, the private schools providing academic education are entitled to determine the education fee rates on their own.</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: 0.25in"></p><div>

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</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: 0.25in">On January 14, 2018, People&#8217;s Government
of Shaanxi province issued the Opinions on the Implementation of Encouraging Social Forces to Establish Education and Promoting the Healthy
Development of Private Education. Pursuant to this Opinions, fees charged by non-profit private primary and secondary schools shall be
determined by local government in a market-oriented manner and based on the local situations, while for-profit private schools are allowed
to determine their prices on their own according to the market demand.</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: 0.25in">On August 17, 2020, MOE, NDRC, the Ministry of
Finance, and the State Administration for Industry and Commerce or the SAMR, and the General Administration of Press and Publication
jointly released the Opinions on Further Strengthening and Regulating the Administration of Education Fees (the &#8220;Opinions&#8221;),
effective as of the same date. The Opinions mainly stipulate the specific methods for non-profit private school&#8217;s fees shall be
formulated by the provincial people&#8217;s government; the fees of for-profit private schools shall be regulated by the market and determined
by the school themselves. For private schools established before November 7, 2016, the charging policies shall be managed as non-profit
private schools before the relevant procedures for classification registration are completed. In particular, it is strictly forbidden
for the sponsors of non-profit private schools and non-profit private Sino-foreign cooperative school sponsors to obtain proceeds from
school-running such as tuition income, distributing school balances (residual assets) or transferring proceeds from school running through
related-party transactions or affiliated parties or other means.</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"><b><i>Regulations on Compulsory Education </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: 0.25in">According to the Law for Compulsory Education
of the PRC, which was promulgated by the NPC on April 12, 1986 and last amended on December 29, 2018, a nine-year system of compulsory
education, including six years of primary school and three years of middle school, was adopted.</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: 0.25in">Further, the MOE issued the Reform Guideline
on the Curriculum System of Fundamental Education (Trial) on June 8, 2001, which became effective on the same day, pursuant to which
schools providing fundamental education shall follow a &#8220;state-local-school&#8221; three-tier curriculum system. In other words,
schools must follow the state curriculum standard for state courses while local education authorities have the power to determine the
curriculum standard for other courses, and schools may develop curriculums that are suitable for their specific needs.</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"><b><i>Regulations on After-School tutoring</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: 0.25in">On July 24, 2021, the General Office of State
Council and the General Office of Central Committee of the Communist Party of China jointly promulgated the Alleviating Burden Opinion,
which provides that, among other things, (1) local government authorities shall no longer approve new after-school tutoring institutions
providing tutoring services on academic subjects for students in compulsory education, and the existing after-school tutoring institutions
providing tutoring services on academic subjects shall be registered as non-profit&#894; (2) Academic AST Institutions are prohibited
from raising funds by listing on stock markets or conducting any capitalization activities and listed companies are prohibited from investing
in Academic AST Institutions through capital markets fund raising activities, or acquiring assets of Academic AST Institutions by paying
cash or issuing securities&#894; and (3) foreign capital is prohibited from controlling or participating in any Academic AST Institutions
through mergers and acquisitions, entrusted operation, joining franchise or variable interest entities.</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: 0.25in">Any violation of the foregoing shall be rectified.
Moreover, the Alleviating Burden Opinion specifies a series of operating requirements that after-school tutoring institutions must meet,
including, among other things, administration and supervision over academic subjects tutoring institutions for students on grade ten
to twelve shall be implemented by reference to the relevant provisions of the Alleviating Burden Opinion.</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"><b>Regulations on Intellectual Property in the PRC </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><i>Copyright </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: 0.25in">Pursuant to the Copyright Law of the PRC (the
&#8220;Copyright Law&#8221;), which was last amended on November 11, 2020 and became effective from June 1, 2021, copyrights include
personal rights such as the right of publication and attribution as well as property rights such as the right of production and distribution.
Reproducing, distributing, performing, projecting, broadcasting or compiling a work or communicating the same to the public via an information
network without permission from the owner of the copyright therein shall constitute copyright infringement unless otherwise provided
in the Copyright Law. The infringer shall, according to the circumstances of the case, undertake to cease the infringement, take remedial
actions, offer an apology, pay damages, etc.</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: 0.25in"></p><div>

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</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"><b><i>Trademark </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: 0.25in">Pursuant to the Trademark Law of the PRC (the
&#8220;Trademark Law&#8221;), which was amended on August 30, 2013 and became effective on May 1, 2014, and last amended on April 23,
2019 and became effective on November 1, 2019, the right to exclusive use of a registered trademark shall be limited to trademarks which
have been approved for registration and to goods for which the use of trademark has been approved. The validity period of a registered
trademark shall be ten years, counted from the date of approval of the registration. According to the Trademark Law, using a trademark
that is identical with or similar to a registered trademark in connection with the same or similar goods without the authorization of
the owner of the registered trademark constitutes an infringement. The infringer shall, in accordance with the relevant laws, undertake
to cease the infringement, take remedial actions, pay damages, etc.</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"><b><i>Domain Name </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: 0.25in">In accordance with the Measures on the Administration
of Internet Domain Names, which was promulgated by Ministry of Industry and Information Technology of the PRC (the &#8220;MIIT&#8221;),
on August 24, 2017 and came into effect on November 1, 2017, the Implementation Rules of China Internet Network Information Center on
Domain Name Registration, which was promulgated by China Internet Network Information Center on May 28, 2012 and came into effect on
May 29, 2012, domain name registrations are conducted through domain name service agencies established under relevant regulations, and
the applicant becomes a domain name holder upon successful registration. Pursuant to the Measures of the China Internet Network Information
Center on Domain Name Dispute Resolution, which was promulgated by China Internet Network Information Center on September 1, 2014 and
came into effect on the same date, domain name disputes shall be submitted to an organization authorized by China Internet Network Information
Center for resolution.</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"><b>Regulations on Foreign Exchange in the PRC </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: 0.25in">Pursuant to the Foreign Exchange Administration
Regulations of the PRC, as amended on August 5, 2008, RMB is freely convertible for current account items, including dividend distributions,
interest payments, trade-and service-related foreign exchange transactions, but not for capital account items, such as direct investments,
loans, repatriation of investments and investments in securities outside China, unless prior approval of the SAFE, is obtained and prior
registration with SAFE is made. On May 10, 2013, SAFE promulgated the Circular of SAFE on Printing and Distributing the Administrative
Provisions on Foreign Exchange in Domestic Direct Investment by Foreign Investors and Relevant Supporting Documents (the &#8220;SAFE
Circular 21&#8221;), which was amended on October 10, 2018. It provides for and simplifies the operational steps and regulations on foreign
exchange matters related to direct investment by foreign investors, including foreign exchange registration, account opening and use,
receipt and payment of funds, and settlement and sales of foreign exchange.</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: 0.25in">Pursuant to the Circular of the SAFE on Further
Improving and Adjusting Foreign Exchange Administration Policies for Direct Investment (the &#8220;SAFE Circular 59&#8221;), which was
promulgated on November 19, 2012 and became effective on December 17, 2012, and was further amended on May 4, 2015 and October 10, 2018,
approval is not required for the opening of an account entry in foreign exchange accounts under direct investment. The SAFE Circular
59 also simplifies the capital verification and confirmation formalities for foreign-invested entities, the foreign capital and foreign
exchange registration formalities required for the foreign investors to acquire equities from PRC parties, and further improves the administration
on exchange settlement of foreign exchange capital of foreign-invested entities.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Pursuant to the SAFE Circular 37, promulgated
and becoming effective on July 4, 2014, (1) a PRC resident shall register with the local SAFE branch before he or she contributes assets
or equity interests in an overseas special purpose vehicle (the &#8220;SPV&#8221;), that is directly established or controlled by the
PRC resident for the purpose of conducting investment or financing; and (2) following the initial registration, the PRC resident is required
to register with the local SAFE branch for any major change, in respect of the SPV, including, among other things, a change in the SPV&#8217;s
PRC resident shareholder(s), name of the SPV, term of operation, or any increase or reduction of the SPV&#8217;s registered capital,
share transfer or swap, and merger or division. Pursuant to the SAFE Circular 37, failure to comply with these registration procedures
may result in penalties.</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: 0.25in">Pursuant to the SAFE Circular on Further Simplifying
and Improving the Direct Investment-related Foreign Exchange Administration Policies (the &#8220;SAFE Circular 13&#8221;), which was
promulgated on February 13, 2015 and became effective on June 1, 2015, the foreign exchange registration under domestic direct investment
and under overseas direct investment is directly reviewed and conducted by banks in accordance with the SAFE Circular 13, and the SAFE
and its branches shall perform indirect regulation over the direct investment-related foreign exchange registration through banks.</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: 0.25in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><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"><b>Regulations on Loans to and Direct Investment in the PRC Entities
by Offshore Holding Companies </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: 0.25in">According to the Implementation Rules on the
Provisional Regulations on Statistics and Supervision of Foreign Debts promulgated by the SAFE on September 24, 1997 and the Interim
Provisions on the Management of Foreign Debts promulgated by the SAFE, the State Development Planning Commission (currently known as
the NDRC) and the MOF and becoming effective from March 1, 2003, loans by foreign companies to their subsidiaries in China, which accordingly
are foreign-invested enterprises, are considered foreign debts, and such loans must be registered with the local branches of the SAFE.
Under its provisions, the total amount of accumulated medium-term and long-term foreign debts and the balance of short-term debts borrowed
by a foreign-invested enterprise is limited to the difference between its total investment and the registered capital.</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"><b>Provisions on the Merger and Acquisition of Domestic Enterprises
by Foreign Investors (Revised in 2009) and Overseas Listings</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: 0.25in">Under the M&amp;A Rules, a foreign investor is
required to obtain necessary approvals when (1) such foreign investor acquires equity interests or subscribes for new equity interests
in a domestic enterprise through an increase of registered capital in the domestic enterprise and thereby converting it into a foreign-invested
enterprise, or (2) such foreign investor establishes a foreign-invested enterprise which purchases and operates the assets of a domestic
enterprise, or which purchases the assets of a domestic enterprise and injects such assets to establish a foreign-invested enterprise.
According to Article 11 of the M&amp;A Rules, where a domestic enterprise or individual, through foreign enterprise established or controlled
by it/him/her, acquires a domestic enterprise which is related to or connected with it/him/her, approval from the MOFCOM is required.</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: 0.25in">According to the Interim Administrative Measures
for the Record-filing of the Incorporation and Change of Foreign-invested Enterprises, the merger and acquisition of domestic enterprises
by foreign investors shall, if not involving special administrative measures for foreign investment access and affiliated mergers and
acquisitions, be subject to the record filing measures<b>.</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: 0.25in">Pursuant to the Manual of Guidance on Administration
for Foreign Investment Access, which was issued and became effective on December 18, 2008 by the Department of Foreign Investment Administration
of the MOFCOM, notwithstanding the fact that (1) the domestic shareholder is connected with the foreign investor or not, or (2) the foreign
investor is existing or new investor, the M&amp;A Rules shall not apply to the transfer of equity interests in an incorporated foreign-invested
enterprise from the domestic shareholders to the foreign investors.</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: 0.25in">On July&#160;6, 2021, the relevant PRC government
authorities issued the &#8220;Opinions on Severely Cracking Down on Illegal Securities Activities According to Law&#8221;, which were
made available to the public on July 6, 2021. These opinions emphasized the need to strengthen the administration over illegal securities
activities and the supervision on overseas listings by China-based companies. These opinions proposed to take effective measures, such
as promoting the construction of relevant regulatory systems, to deal with the risks and incidents facing China-based overseas-listed
companies and the demand for cybersecurity and data privacy protection. The aforementioned policies and any related implementation rules
to be enacted may subject us to additional compliance requirement in the future. As these opinions were recently issued, official guidance
to act upon, and interpretation thereof remain unclear in several respects at this time. Therefore, we cannot assure you that we will
remain fully compliant with all new regulatory requirements of these opinions or any future implementation rules on a timely basis, or
at all.</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: 0.25in">On February 17, 2023, the CSRC promulgated the
Overseas Listing Trial Measures and the related guidelines, which became effective on March 31, 2023. According to the Overseas Listing
Trial Measures, PRC domestic companies that seek to offer and list securities in overseas markets, either in direct or indirect means,
are required to fulfill the filing procedure with the CSRC and report relevant information. The Overseas Listing Trial Measures provides
that an overseas listing or offering is explicitly prohibited, if any of the following: (1)&#160;such securities offering and listing
is explicitly prohibited by provisions in laws, administrative regulations and relevant state rules; (2)&#160;the intended securities
offering and listing may endanger national security as reviewed and determined by competent authorities under the State Council in accordance
with law; (3)&#160;the domestic company intending to make the securities offering and listing, or its controlling shareholder(s)&#160;and
the actual controller, have committed relevant crimes such as corruption, bribery, embezzlement, misappropriation of property or undermining
the order of the socialist market economy during the latest three&#160;years; (4)&#160;the domestic company intending to make the securities
offering and listing is currently under investigations for suspicion of criminal offenses or major violations of laws and regulations,
and no conclusion has yet been made thereof; or (5)&#160;there are material ownership disputes over equity held by the domestic company&#8217;s
controlling shareholder(s)&#160;or by other shareholder(s)&#160;that are controlled by the controlling shareholder(s)&#160;and/or actual
controller.</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: 0.25in">The Overseas Listing Trial Measures also provides
that if the issuer meets both the following criteria, the overseas securities offering and listing conducted by such issuer will be deemed
as indirect overseas offering by PRC domestic companies: (1)&#160;50% or more of any of the issuer&#8217;s operating revenue, total profit,
total assets or net assets as documented in its audited consolidated financial statements for the most recent fiscal&#160;year is accounted
for by domestic companies; and (2)&#160;the main parts of the issuer&#8217;s business activities are conducted in mainland China, or its
main place(s)&#160;of business are located in mainland China, or the majority of senior management staff in charge of its business operations
and management are PRC citizens or have their usual material events in mainland China.</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: 0.25in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
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</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: 0.25in">The Overseas Listing Trial Measures further provides
that, initial public offerings or listings in overseas markets by domestic companies, either in direct or indirect form shall be filed
with the CSRC pursuant to the requirements of the Overseas Listing Trial Measures within three business days after the relevant application
is submitted overseas. The companies that had already been listed on overseas stock exchanges prior to March 31, 2023 or the companies
that had obtained the approval from overseas supervision administrations or stock exchanges for its offering and listing prior to March
31, 2023 and will complete their overseas offering and listing prior to September 30, 2023 are not required to make immediate filings
for its listing, but are required make filings for subsequent offerings in accordance with the Overseas Listing Trial Measures. Companies
that had already submitted an application for an initial public offering to overseas supervision administrations but had not yet obtained
the approval from overseas supervision administrations or stock exchanges for the offering and listing prior to March 31, 2023 may arrange
for the filing within a reasonable time period and should complete the filing procedure before such companies&#8217; overseas issuance
and listing. Companies, like us, that had already been listed overseas as of March 31, 2023 are not required to make immediate filing
with the CSRC but are required to file with the CSRC within three business days after the completion of subsequent securities offerings
in the same overseas market where its securities were previously offered and listed, or file the required filing materials with the CSRC
within three working days after the submission of relevant application for subsequent securities offerings and listings in other overseas
markets. In addition, an overseas listed company is required to report to the CSRC within three business days after the occurrence and
announcement of any of the following material events: (1) a change of control of the listed company; (2) the investigation, sanction or
other measures undertaken by any foreign securities regulatory agencies or authorities in respect of the listed company; (3) a change
of listing status or transfer of listing segment; and (4) the voluntary or mandatory delisting of the listed company. If there is any
material change of the principal business of the listed company after the overseas offering and listing so that the listed company is
no longer required to file with the CSRC, it shall file a specific report and a legal opinion issued by a domestic law firm to the CSRC
within three business days after the occurrence thereof.</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-align: justify; "><b>Regulations Relating
to Internet Information Security and Privacy Protection</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in; ">Internet
information in China is regulated from a national security standpoint. On June 10, 2021, the SCNPC promulgated the PRC Data Security Law,
which took effect on September 1, 2021. The PRC Data Security Law, among other things, requires data collection to be conducted in a legitimate
and proper manner, and stipulates that, for the purpose of data security, data processing activities must be conducted based on data classification
and hierarchical protection system. Furthermore, along with the promulgation of the Opinions on Strictly Combating Illegal Securities
Activities, overseas-listed China-based companies are experiencing a heightened scrutiny over their compliance with laws and regulations
regarding data security, cross-border data flow and management of confidential information from PRC regulatory 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: left; 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 aims at protecting the personal information rights and interests, regulating the processing of personal information,
ensuring the orderly and free flow of personal information in accordance with the law, and promoting the reasonable use of personal information.
According to the Personal Information Protection Law, personal information includes all kinds of identified or identifiable information
related to natural persons recorded by electronic or other means, but excludes de-identified information. The Personal Information Protection
Law also specified the rules for handling sensitive personal information, which includes biometrics, religious beliefs, specific identities,
medical health, financial accounts, trails and locations, and personal information of teenagers under fourteen years old and other personal
information, which, upon leakage or illegal usage, may easily infringe the personal dignity or harm safety of livelihood and property.
Personal information handlers shall bear responsibility for their personal information handling activities, and must adopt necessary measures
to safeguard the security of the personal information they handle. Otherwise, the personal information handlers will be ordered for rectification
or suspension or termination of provision of services, confiscation of illegal income, subject to fines or other penalties.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in; ">On
November 14, 2021, the CAC publicly solicited opinions on the Draft Data Security Regulations. According to the Draft Data Security Regulations,
data processors shall, in accordance with relevant state provisions, apply for cyber security review when carrying out the following activities:
(1) the merger, reorganization or separation of internet platform operators that have acquired a large number of data resources related
to national security, economic development or public interests, which affects or may affect national security, (2) data processors that
handle the personal information of more than one million people intends to be listed abroad, (3) the data processor intends to be listed
in Hong Kong, which affects or may affect national security, and (4) other data processing activities that affect or may affect national
security. However, the Draft Data Security Regulations provides no further explanation or interpretation for &#8220;affects or may affect
national security.&#8221; The PRC government authorities may have wide discretion in the interpretation of &#8220;affects or may affect
national security.&#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: left; text-indent: 0.5in; ">On
December 28, 2021, the Cyberspace Administration of China jointly with other 12 government authorities, issued the Measures for Cybersecurity
Review (2021), which became effective on February 15, 2022, and repealed the Cybersecurity Review Measures (2020) simultaneously. The
Measures for Cybersecurity Review (2021) provide that critical information infrastructure operators purchasing network products and services
and data processors carrying out data processing activities, which affect or may affect national security, shall apply for cybersecurity
review to the cyberspace administrations in accordance with the provisions thereunder. However, the scope of operators of &#8220;critical
information infrastructure&#8221; and the interpretation for &#8220;affect or may affect national security&#8221; under the current regulatory
regime remain unclear and are subject to the decisions of competent PRC regulatory 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: left; text-indent: 0.5in; ">On
July 7, 2022, the CAC promulgated the Security Assessment Measures to regulate outbound data transfer activities, protect the rights and
interests of personal information, safeguard national security and social public interests, and promote the cross-border security and
free flow of data. Furthermore, the Security Assessment Measures provide that the security assessment for outbound data transfers shall
follow principles of the combination of pre-assessment and continuous supervision and the combination of risk self-assessment and security
assessment, so as to prevent the security risks arising from outbound data transfers, and ensure the orderly and free flow of data according
to the law. For outbound data transfers that have been carried out prior to the implementation of the Security Assessment Measures, if
not in compliance with the Security Assessment Measures, rectification shall be completed within six months from the implementation of
the Security Assessment Measures.</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: center"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><span style="text-decoration:underline">C. Organizational Structure</span></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">We are a holding company that does not have any
substantive operations. We conduct our operations primarily through our subsidiaries and affiliated entities in China. For more information,
see &#8220;&#8212;Our Contractual Arrangements.&#8221;</p><div>


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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">The following diagram illustrates our simplified
corporate structure, including our principal subsidiaries, the VIE and other principal affiliated entities, 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: 0.25in">&#160;</p><div>

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

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

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; font-size: 10pt"><span style="font-size: 10pt">(1)</span></td>
    <td style="font-size: 10pt"><span style="font-size: 10pt">Mr. Shaowei Zhang and Ms. Yu Wu hold 86.76% and 9.64% equity interests
in Long-Spring Education, respectively. The remaining 3.6% equity interests of Long-Spring Education are held by five limited partnerships
established to hold interests for certain of our employees. </span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-size: 6pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px"><span style="font-size: 10pt">(2)</span></td>
    <td><span style="font-size: 10pt">The 10 schools comprise Kunming Xishan Long-Spring Experimental Secondary School, Kunming Chenggong
    Long-Spring Experimental Secondary School, Yiliang Long-Spring Experimental Secondary School, Qujing Hengshui Experimental Secondary
    School, Yunnan Yuxi Hengshui Experimental High School, Yunnan Hengshui Experimental Secondary School&#8212;Xishan School, Yunnan
    Long-Spring Foreign Language Secondary School, Zhenxiong Long-Spring Advanced Secondary School, Qiubei Long-Spring Experimental Secondary
    School, and Mengla Long-Spring Experimental Secondary School. </span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-size: 6pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px"><span style="font-size: 10pt">(3)</span></td>
    <td><span style="font-size: 10pt">We have registered Xinping Long-Spring Advanced Secondary School as Xinping Long-Spring Advanced
    Secondary School Co., Ltd., and Xishuangbanna Long-Spring Experimental Secondary School as Xishuangbanna Long-Spring Experimental
    Secondary School Co., Ltd., all of which were registered as for-profit private schools.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></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: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(4)</span></td>
    <td><p style="margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">As the private school operation permit for Hengshizhong Education Tutorial
School has been cancelled, we diverted its Gaokao repeater program and extra-curricular services related programs to Yunnan Long-Spring
Education Holding Group Hengshui Experimental Middle School Management Co., Ltd, Kunming Wuhua District Zhuorui Cultural Training School
Co., Ltd., and Kunming Guandu Hengshizhong Education Training School Co., Ltd. We have registered Guizhou Zunyi Tutorial School as Zunyi
Hengshi Education Technology Co., Ltd. We have registered Shaanxi Hengshi Tutorial School as Shaanxi Hengshi Hengzhong Education Technology
Co., Ltd.</p></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(5)</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The seven regional new vocational education companies comprise Guizhou New Vocational Education Technology Co., Ltd., Guangxi New Vocational Education Technology Co., Ltd., New Vocational Education (Hebei) Education Technology Co., Ltd., New Vocational Education (Henan) Education Technology Co., Ltd., New Vocational Education (Yunnan) Cultural Development Co., Ltd., New Vocational Education (Shandong) Cultural Development Co., Ltd., and New Vocational Education (Chengdu) Cultural Development Co., Ltd..</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Under the PRC laws, for-profit private schools
are registered as companies and the entities and individuals who establish them are registered as shareholders of such schools and non-profit
private schools are registered as private non-enterprise units and the entities and individuals who establish them are referred to as
&#8220;sponsors&#8221; rather than &#8220;owners&#8221; or &#8220;shareholders.&#8221; The rights of sponsors vis-&#224;-vis schools
are similar to the rights of shareholders vis-&#224;-vis companies with regard to legal and regulatory matters, but differ with regard
to the right of a sponsor to receive proceeds on investment and the right to the distribution of residual properties upon termination
and liquidation. For more information regarding school sponsorship and the difference between sponsorship and ownership under relevant
laws and regulations, see &#8220;Item 4. Information on the Company&#8212;B. Business Overview&#8212;Regulations&#8212;Regulations on
Private Education in the PRC.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24.45pt; text-indent: -1.95pt"><span style="font-size: 6pt">&#160;</span></p><div>

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

</div><!-- Field: Page; Sequence: 76 --><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="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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; text-indent: 18pt"></p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">The following table sets forth the details of
our significant subsidiaries, the VIE and schools/subsidiaries held by the VIE from our continuing operations.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 18pt"></p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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">
    <td style="border-bottom: black 1.5pt solid; width: 74%"><span style="font-size: 10pt"><b>Subsidiaries</b></span></td>
    <td style="width: 1%; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; width: 25%; text-align: center"><span style="font-size: 10pt"><b>Place of Incorporation</b></span></td></tr>
  <tr style="background-color: #CCEEFF">
    <td style="vertical-align: top"><span style="font-size: 10pt">First High-School Education Group BVI</span></td>
    <td>&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-size: 10pt">BVI</span></td></tr>
  <tr>
    <td style="vertical-align: top"><span style="font-size: 10pt">First High-School HK</span></td>
    <td>&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-size: 10pt">Hong Kong</span></td></tr>
  <tr style="background-color: #CCEEFF">
    <td style="vertical-align: top"><span style="font-size: 10pt">Yunnan Century Long-Spring Technology Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-size: 10pt">PRC</span></td></tr>
  <tr>
    <td style="vertical-align: top"><span style="font-size: 10pt">Yunnan Long-Spring Logistics Service Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-size: 10pt">PRC</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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="border-bottom: black 1.5pt solid; width: 74%"><span style="font-size: 10pt"><b>VIE</b></span></td>
    <td style="width: 1%; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; width: 25%; text-align: center"><span style="font-size: 10pt"><b>Place of Incorporation</b></span></td></tr>
  <tr style="background-color: #CCEEFF">
    <td style="vertical-align: top"><span style="font-size: 10pt">Long-Spring Education Holding Group Limited</span></td>
    <td>&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-size: 10pt">PRC</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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="border-bottom: black 1.5pt solid; width: 74%"><span style="font-size: 10pt"><b>Subsidiaries/schools held by the VIE</b></span></td>
    <td style="width: 1%; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; width: 25%; text-align: center"><span style="font-size: 10pt"><b>Place of Incorporation</b></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Kunming Xishan Long-Spring Experimental Secondary School</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">PRC</span></td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">Kunming Chenggong Long-Spring Experimental Secondary School</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">PRC</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Yiliang Long-Spring Experimental Secondary School</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">PRC</span></td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">Qujing Hengshui Experimental Secondary School</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">PRC</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Yunnan Yuxi Hengshui Experimental High School</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">PRC</span></td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">Yunnan Hengshui Experimental Secondary School&#8212;Xishan School</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">PRC</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Yunnan Long-Spring Foreign Language Secondary School</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">PRC</span></td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">Zhenxiong Long-Spring Advanced Secondary School</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">PRC</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Qiubei Long-Spring Experimental Secondary School</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">PRC</span></td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">Mengla Long-Spring Experimental Secondary School</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">PRC</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Xinping Long-Spring Advanced Secondary School Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">PRC</span></td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">Xishuangbanna Long-Spring Experimental Secondary School Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">PRC</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Yunnan Lihua Education Technology Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">PRC</span></td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">Wenshan Long-Spring Experimental Secondary School</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">PRC</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Yunnan Long-Spring Education Holding Group Hengshui Experimental Middle School Management Co.,
    Ltd</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">PRC</span></td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">Kunming Wuhua District Zhuorui Cultural Training School Co., Ltd</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">PRC</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Kunming Guandu Hengshizhong Education Training School Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">PRC</span></td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">Zunyi Hengshi Education Technology Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">PRC</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Shaanxi Hengshi Hengzhong Education Technology Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">PRC</span></td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">Yunnan Hengshun Property Service Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">PRC</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Beijing First High-Education Technology Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">PRC</span></td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">Beijing New Vocational Education Cultural Development Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">PRC</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Guangxi New Vocational Education Technology Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">PRC</span></td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">Guizhou New Vocational Education Technology Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">PRC</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">New Vocational Education (Hebei) Education Technology Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">PRC</span></td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">New Vocational Education (Henan) Education Technology Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">PRC</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">New Vocational Education (Chengdu) Cultural Development Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">PRC</span></td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">New Vocational Education (Shandong) Cultural Development Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">PRC</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">New Vocational Education (Yunnan) Cultural Development Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">PRC</span></td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">Beijing Hualing International Human Resource Co. Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">PRC</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>Our Contractual Arrangements</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: 0.25in">Current PRC laws and regulations restrict foreign
ownership in the private education industry in China. We are a company registered in the Cayman Islands. Yunnan WFOE is our PRC subsidiary
and a foreign-invested enterprise under PRC laws. To comply with PRC laws and regulations, we primarily operate in China through our
affiliated entities, based on a series of contractual arrangements by and among Yunnan WFOE, our affiliated entities, and the shareholders
of Long-Spring Education.</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: 0.25in">Our contractual arrangements with our affiliated
entities and the shareholders of Long-Spring Education permit us to (1) exercise effective control over the affiliated entities, (2)
receive substantially all of the economic benefits of our affiliated entities, and (3) have an exclusive call option to purchase all
or part of the equity interests in our affiliated entities when and to the extent permitted by PRC law.</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-align: center"></p><div>

</div><!-- Field: Page; Sequence: 77 --><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="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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-indent: 18pt">We do not have any equity interest in our affiliated
entities. However, as a result of these contractual arrangements, we control our affiliated entities through our PRC subsidiary, Yunnan
WFOE. As a result of our direct ownership in Yunnan WFOE and the contractual arrangements with our affiliated entities, we are the primary
beneficiary of our affiliated entities, and we have also consolidated their financial results in accordance with U.S. GAAP. For a detailed
description of the risks associated with our corporate structure, see &#8220;Item 3. Key Information&#8212;D. Risk Factors&#8212;Risks
Related to Our Corporate Structure&#8221; and &#8220;&#8212;Risks Related to Doing Business in China.&#8221;</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: 0.25in">The following is a summary of the material provisions
of these contractual arrangements with our affiliated entities and the shareholders of Long-Spring Education executed in December 2018.</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: 0.25in"><b><i>Exclusive Call Option Agreement.</i></b>
Pursuant to the exclusive call option agreement, the shareholders of Long-Spring Education unconditionally and irrevocably granted Yunnan
WFOE or its designated entity the right to purchase at any time all or part of their equity interests in the affiliated entities at the
lowest price applicable under PRC laws and regulations. Without Yunnan WFOE&#8217;s prior written consent, the shareholders of Long-Spring
Education also refrain from (1) selling, assigning, transferring, or otherwise disposing of the equity or sponsorship interest, (2) increasing
or reducing the capital investment, (3) dividing the affiliated entities into or merging it with other entities, (4) disposing of any
of the assets of the affiliated entities, (5) terminating or contradicting any material contract entered into by the affiliated entities,
(6) procuring the affiliated entities to enter into transactions that may have material impact on their assets, liabilities, operations,
equity structure, or other legal rights, (7) procuring the affiliated entities to declare or distribute profits and/or returns, (8) amending
the article of association of the affiliated entities, and (9) allowing the affiliated entities to undertake any material obligation
beyond normal business activities.</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: 0.25in"><b><i>School Sponsor&#8217;s and Directors&#8217;
Rights Entrustment Agreement. </i></b>Pursuant to the school sponsor&#8217;s and directors&#8217; rights entrustment agreement, the school
sponsors irrevocably authorized and entrusted Yunnan WFOE or its designated personnel to exercise all their rights as the school sponsor
of each school, including but not limited to the right to appoint and/or elect directors, council members, and supervisors of the school,
right to review the resolutions of the board of directors and the financial statement of the school, right to transfer school sponsor&#8217;s
interest, and right to decide whether the school would be for-profit or non-profit. Each director appointed by the sponsor of each school
unconditionally and irrevocably authorized and entrusted Yunnan WFOE to exercise all the rights as a director of the school, including
but not limited to the right to attend meetings of the board of directors and vote, right to sign board resolutions and other legal documents
and other rights of directors under the school&#8217;s articles of association and the applicable PRC laws.</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: 0.25in"><b><i>Shareholders&#8217; Rights Entrustment
Agreement. </i></b>Pursuant to the shareholders&#8217; rights entrustment agreement, each shareholder of Long-Spring Education irrevocably
authorized and entrusted Yunnan WFOE to exercise all the respective rights as shareholders of the affiliated entities, including but
not limited to the right to attend shareholder&#8217;s meeting and vote, right to sign shareholders&#8217; resolutions and other legal
documents, right to instruct the directors and other rights of shareholders under the school&#8217;s articles of association and the
applicable PRC laws.</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: 0.25in"><b><i>Power of Attorney.</i></b> Pursuant to
the school sponsors&#8217; power of attorney, each school sponsor authorized and appointed Yunnan WFOE as its agent to exercise on its
behalf a school sponsor&#8217;s rights. Pursuant to the directors&#8217; power of attorney, each director of Long-Spring Education authorized
and appointed Yunnan WFOE as his/her agent to exercise on his/her behalf a director&#8217;s rights. Pursuant to the shareholders&#8217;
power of attorney, each shareholder of Long-Spring Education authorized and appointed Yunnan WFOE as his/her/its agent to exercise on
his/her/its behalf a shareholder&#8217;s rights.</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: 0.25in"><b><i>Exclusive Technical Service and Management
Consultancy Agreement and Business Cooperation Agreement.</i></b> Pursuant to the exclusive technical service and management consultancy
agreement and business cooperation agreement, Yunnan WFOE provides exclusive technical services to the affiliated entities, including
software, website, and on-site technical support and training. It also provides exclusive management consultancy services such as staff
training, student admission support, internal management advisory, and market research and public relations. Each of the affiliated entities
pays Yunnan WFOE a service fee equal to the total amount of surplus of its operation. Yunnan WFOE also reserves the exclusive proprietary
rights to any technology or intellectual property developed in the course of the provision of services under the agreements. Without
the prior written consent of Yunnan WFOE, the affiliated entities cannot accept services provided by or establish similar cooperation
relationship with any third-party. The agreements will remain effective unless Yunnan WFOE and/or the designated entity fully exercised
its purchase rights pursuant to the exclusive call option agreement or unilaterally terminated by Yunnan WFOE with a 30-day advance notice.
Unless otherwise required by applicable PRC laws, the affiliated entities do not have any right to terminate the agreements.</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-align: center"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->71<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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-indent: 0.25in"><b><i>Equity Pledge Agreement.</i></b> Pursuant
to the equity pledge agreement, the shareholders of Long-Spring Education unconditionally and irrevocably pledged and granted first priority
security interests over all of his/her/its equity interest in the affiliated entities, as well as all related rights, to Yunnan WFOE
as security for performance of all the contractual arrangements. Without Yunnan WFOE&#8217;s prior written consent, the shareholders
of Long-Spring Education must not transfer the equity interest or create further pledge or encumbrance over the pledged equity interest.
They also waived any pre-emptive rights upon enforcement, and Yunnan WFOE can enforce upon default by transferring all or part of the
equity interest, selling the pledged equity interest, or disposing of the pledged equity interest in any other way to the extent permitted
by PRC laws and regulations.</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: 0.25in"><b><i>Spousal Undertaking.</i></b> Pursuant to
the spousal undertaking executed by the spouses of the shareholders of Long-Spring Education, the signing spouses consented to the contractual
arrangements with respect to the equity interest in Long-Spring Education, including its pledge, transfer, and disposal in any other
forms. The spouses will not participate in the operation, management, liquidation, or any other matters in relation to the affiliated
entities. They authorized the shareholders of Long-Spring Education to exercise their shareholding rights on behalf of them to ensure
the interest of Yunnan WFOE. This undertaking will not terminate until Yunnan WFOE and the spouses terminate it in writing.</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: 0.25in"><b><i>Loan Agreement.</i></b> Pursuant to the
loan agreement, Yunnan WFOE agreed to provide interest-free loans to Long-Spring Education. Each loan will be for an infinite term until
termination at the sole discretion of Yunnan WFOE. This agreement will terminate when all equity interests of the Long-Spring Education
are transferred to Yunnan WFOE.</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: 0.25in">In the opinion of our PRC legal counsel:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">except for the Affected Entities, the ownership structures of Yunnan WFOE and our affiliated entities
    in China, as of the date of this annual report, are not in violation of applicable PRC laws and regulations currently in effect;
    and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">the contractual arrangements among Yunnan WFOE, our affiliated entities, and the shareholders of
    Long-Spring Education, governed by PRC law are legal, valid and binding, and will not result in any violation of applicable PRC laws
    and regulations currently in effect, except that the clause or provision of the Exclusive Technical Service and Management Consultancy
    Agreement and Business Cooperation Agreement, in relation to related party transactions between a private school providing compulsory
    education and Yunnan WFOE, have been rendered not legally enforceable since September 1, 2021.</span></td></tr>
  </table><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: 18pt">However, our PRC legal counsel has also advised
us that there are substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations and
rules. Accordingly, the PRC regulatory authorities may take a view that is contrary to the opinion of our PRC legal counsel. It is uncertain
whether any new PRC laws or regulations relating to variable interest entity structures will be adopted or if adopted, what they would
provide. If we or our contractual arrangements are found to be in violation of any existing or future PRC laws or regulations, or fail
to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion to
take action in dealing with such violations or failures. For a detailed description of the risks associated with our corporate structure,
see &#8220;Item 3. Key Information&#8212;D. Risk Factors&#8212;Risks Related to Our Corporate Structure&#8221; and &#8220;&#8212;Risks
Related to Doing Business in China.&#8221;</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"><b><span style="text-decoration:underline">D. Property, Plant and Equipment</span></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Our principal executive offices are in Yunnan,
China. All of our properties are located in China. We currently occupy a total combined gross floor area of approximately 718,297 square
meters of facilities for 12 properties provided by local governments or entities through our cooperative arrangements with them. The terms
of such properties range from nine to 21 years. By utilizing the properties developed by local governments, we avoid significant capital
expenditures in connection with land procurement and facilities construction. We also leased three properties with a total combined gross
floor area of approximately 113,762 square meters in Yunnan province, Shaanxi province, and Guizhou province from third parties to operate
our schools. Our leases have terms of five to 20 years. We believe that the facilities which we currently lease and occupy are adequate
to meet our needs for the foreseeable future, and we believe that we will be able to obtain adequate facilities, principally through leasing
of additional properties, to accommodate our future expansion plans.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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 4A. UNRESOLVED STAFF COMMENTS</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">None.</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: 0.25in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

</div><div><a id="a_010"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">You should read the following discussion and analysis
of our financial condition and results of operations together with the consolidated financial statements and related notes included elsewhere
in this annual report. This discussion contains forward-looking statements based upon current plans, expectations and beliefs that involve
risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result
of various factors, including those set forth in the section of this annual report captioned &#8220;Item 3. Key Information&#8212;D. Risk
Factors&#8221; and in other parts of this annual report. Our fiscal year ends on December 31.</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"><b><span style="text-decoration:underline">A. Operating Results</span></b></p><div>

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

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 18pt">We are an education service provider primarily focusing
on high schools in Western China. We aspire to become a leader and innovator of private high school education in China, dedicated to a
comprehensive education management integrating education information consulting, education research project development, education talent
management, education technology management, education service management, and general vocational integration development services. First
High-School Education, our ultimate Cayman Islands holding company, does not have any substantive operations other than indirectly controlling
the affiliated entities through certain contractual arrangements. We trace our history back to August 2012 when we established our first
school to provide after-school tutoring services. We have since developed a network of 21 schools for our continuing operations, offering
13 high school programs, and three tutorial school programs for Gaokao repeaters, as of December 31, 2022. We also provided management
services to five schools as of the same date. We have also collaborated with local governments and other third parties in China and expect
to launch new schools offering high school programs and vocational programs in the second half of 2023<i>. </i>In addition, we have also
established Chinese-English bilingual programs for students interested in pursuing higher education overseas. As of December 31, 2022,
we had 25,823 high school students (including Gaokao repeaters) across our school network, and 8,487 public school students at schools
to which we provide management services, for our continuing operations.</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: 0.25in">On May 14, 2021, the PRC State Council promulgated
the amended Implementation Rules, which became effective on September 1, 2021. Pursuant to the Implementation Rules, (1) foreign-invested
enterprises established in China and social organizations whose actual controllers are foreign parties shall not sponsor, participate
in or actually control private schools that provide compulsory education, (2) social organizations or individuals shall not control any
private school that provides compulsory education or any non-profit private school that provides pre-school education by means of, among
others, merger, acquisition and contractual arrangements, and (3) private schools providing compulsory education shall not conduct any
transaction with any related party.</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: 0.25in">The Implementation Rules have had significant impacts on our business
and our results of operations. As a result of the effectiveness of the Implementation Rules, we have lost control over the Affected Entities
as from September 1, 2021, which primarily include the middle schools providing compulsory education and the sponsor entities within China
that are affected by the Implementation Rules. Consequently, we classified the operation for the Affected Entities as discontinued operations.
We have determined that, in substance, we had ceased to recognize revenues for all activities related to the Affected Entities and had
discontinued all business activities with such entities by September 1, 2021 except for the continued provision of essential services
to keep these schools in normal operations.</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: 0.25in">We have experienced steady growth in our business.
For our continuing operations, our revenues were RMB306.2 million, RMB337.3 million and RMB342.5 million (US$49.7 million) in 2020, 2021,
and 2022, respectively. Our net income was RMB80.9 million, RMB52.7 million and RMB38.4 million (US$5.6 million) in 2020, 2021 and 2022,
respectively. Our adjusted net income was RMB80.9 million, RMB52.7 million and RMB38.4 million (US$5.6 million) in 2020, 2021 and 2022,
respectively. For a detailed description of our non-GAAP measure, see &#8220;&#8212;Results of Operations&#8212;Non-GAAP financial measure.&#8221;</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"><b>Major Factors Affecting Our Results of Operations</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">We believe that our results of operations are
affected by general factors affecting the private education industry in China and company-specific factors, including the following.</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-align: center"></p><div>

</div><!-- Field: Page; Sequence: 80 --><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 -->73<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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"><b><i>Level of student enrollment </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: 18pt">Our revenues for our continuing operations consist primarily of tuition
and boarding fees from students enrolled at our schools. The level of students enrolled at our schools directly affects our revenues and
profitability. The total number of students enrolled at our schools for our continuing operations was 15,645, 16,972 and 17,336 as of
December 31, 2020, 2021 and 2022, respectively. Our student enrollment largely depends on a number of factors, including without limitation,
(1) our schools&#8217; reputation, which primarily reflects our education quality and our student academic results, (2) our admission
quotas as approved by the relevant government authorities from year to year, subject to adjustments by the relevant government authorities,
and (3) the ramp-up stage of our schools and the capacity for student enrollment at each of our schools. With the increase in the utilization
of our schools in the ramp-up stage and the expansion of our school network, we expect that our student enrollment will continue to increase
in the foreseeable future.</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"><b><i>Tuition and boarding fees </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: 18pt">Our results of operations are affected by the level
of tuition and boarding fees we charge our students. The tuition rate we charge is typically based on the demand for our education programs,
the cost of our operations, the geographical markets where we operate our schools, the average tuition level in the markets, and our pricing
strategy to gain market share. We generally seek to gradually increase our tuition and boarding fees without compromising our student
enrollment. While we are not required to obtain pre-approval from relevant authorities before raising our tuition and boarding fees, we
are generally required to file and record our price increase for our high schools with local governments, who in turn still maintain certain
level of control and oversight of our operation. We generally have more discretion in determining the tuition levels for our tutorial
schools. Our average tuition per student of our high schools was RMB15,072 and RMB10,997 in 2021 and 2022, respectively, and average tuition
per student of our tutorial schools for Gaokao repeaters was RMB23,170 and RMB 19,853 in 2021 and 2022, respectively. The decrease of
average tuition per student of our high schools and tutorial schools was primarily due to our expansion into lower-tier cities in Yunnan
province and elsewhere to enroll more students and continue to expand into these cities with varying average tuition per student. We might
continue to expand in these lower-tier cities, and we expect that our average tuition per student might be negatively affected as a result.</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: 0.25in">As part of our cooperation with local governments,
we admit a certain number of local students on behalf of the government as publicly-sponsored students. These students pay us tuition
at the level of public schools, which are usually lower than the normal tuition we charge. We allow publicly-sponsored students to pay
lower tuition and receive price difference or other forms of support from local governments for such publicly-sponsored students. We recognize
such price difference paid by governments as our revenues from governments in tuition income. As of December 31, 2020, 2021 and 2022,
the number of publicly-sponsored students in our schools was 6,755, 7,993 and 8,293, respectively, accounting for 43.2%, 47.1% and 47.8%
of our total students for our continuing operations as of the same dates.</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"><b><i>Utilization rate of our schools </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: 0.25in">School utilization rate, which is calculated
as the number of students enrolled in a school divided by the capacity of the school, has a direct impact on our profitability. Most
of our schools for our continuing operations have an operating history of less than five years, and most of them are still undergoing
the ramp-up process. The unutilized capacity at our recently-opened schools, which are still at the ramp-up stage, allows us to readily
increase student enrollment without incurring significant additional investment. For newly established schools, we only admit students
for the entry classes, such as the tenth grade for high schools, but not higher grades, upon the establishment of a new school, which
leads to a relatively lower utilization rate for such schools. With our existing students progressing into the next grades in school
and as we fill up new entry classes, the utilization rates of our newly established schools will increase accordingly. We are generally
able to fully ramp up our schools within three years of establishment. With the increase in the utilization of our schools in the ramp-up
stage, we expect that our student enrollment will continue to increase in the foreseeable future.</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-align: center"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->74<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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"><b><i>Ability to control costs and expenses </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: 0.25in">Our profitability also depends on our ability to control operating
costs and expenses. Our ability to drive the productivity of our teachers and enhance our operating efficiency affects our profitability.
Our cost of revenues for our continuing operations increased by 25.7% from RMB164.4 million in 2020 to RMB206.8 million in 2021 and further
by 3.3% to RMB213.6 million (US$31.0 million) in 2022. Our cost of revenues for our continuing operations primarily comprises staff costs,
rental fees, student-related expenses, depreciation and amortization. Our staff costs mainly consist of the salaries and other benefits
for our teachers, and accounted for 38.4%, 66.5% and 66.7% of our cost of revenues in 2020, 2021 and 2022, respectively. Our staff costs
increased primarily due to (1) increases in the headcount of publicly-sponsored teachers to (i) accommodate more publicly-sponsored students
enrolled in our existing schools as our students progressed into next grades and new entry classes were filled up; and (ii) support the
ramp-up of certain recently-opened new schools; and (2) increases in compensation levels of our teachers. The total number of our teachers
in our schools for our continuing operations was 1,346, 1,617 and 1,358 as of December 31, 2020, 2021 and 2022, respectively. As we continue
to ramp up our existing schools and expand our school network, we expect to continue to expand the headcount of our teachers and other
staff and provide competitive compensation to attract and retain teaching talents so as to support our growing school operations. As a
result, our staff costs could continue to increase in the foreseeable future.</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: 0.25in">Furthermore, our operating expenses include two
major components, selling and marketing expenses, and general and administrative expenses. We expect that we will incur additional expenses
associated with our overall growth and status as a public company. We also expect that we will benefit from economies of scale as we continue
to grow our business and increase our student base.</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: 0.25in">Our ability to drive the productivity of our
teachers and enhance our operating efficiency affects our profitability. We focus on providing quality education to our students and
have developed and implemented a standardized and centralized school management system to improve operating efficiency and profitability.</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"><b><i>Ability to expand our operations cost-effectively </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: 0.25in">We intend to expand our school network and enter
into new geographical markets with our asset-light business model. We seek to achieve this goal by establishing collaboration with more
local governments and other third parties, such as real estate developers. For our continuing operations, we currently operate 13 schools
pursuant to cooperative arrangements with local governments, operate three schools by leasing lands from third parties and expect to
launch new schools in the second half of 2023, which consist of high schools and vocational schools. We believe that our past performance
in school operations and student academic achievements put us in a favorable position in our future negotiations with local governments.
As local governments in different geographical markets may have different policies, such as pricing rules that govern the amount of tuition
fees we are able to charge, our ability to manage the collaboration with local governments, efficiently procure land, construct school
facilities and ramp up the school operation will impact our ability to expand our school network.</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: 18pt">In addition, we intend to collaborate with more third parties and explore
more school operation and management opportunities as a cost-effective way to diversify our business portfolio and spread positive word
of mouth for our brand. Starting from September 2020 and up to December 31, 2022, we have cooperated with local governments and a private
school operator to provide management services for five schools in Yunnan province and Henan province for annual management service fees.
Third-party school management services like this generally have a higher gross profit margin than operating our own schools, and we may
improve our overall profitability if we continue to expand third-party school management services.</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"><b><i>Strategic investments and acquisitions </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: 0.25in">We have expanded rapidly primarily through organic
growth. We have, in the past, acquired an underperforming high school and successfully turned it into a high-quality high school with
solid academic results. Leveraging our standardized and centralized school management system and our quality education service, we intend
to continue to pursue similar acquisition targets in the future when practicable and in compliance with regulatory requirements. We focus
primarily on the acquisition of high schools due to the enlarging high school education services market with enormous and sustainable
demand in high-quality high schools. We also target to acquire education company. In May 2021, we acquired 51% equity interests in Beijing
Tomorrow Future Plus Education Technology Co., Ltd., a technology-driven education company that provides&#160;premium full-time live AI
online teaching services. In December 2022, for management and economic reasons, we divested our equity interest in Beijing Tomorrow Future
Plus Education Technology Co., Ltd. Our overall financial condition and profitability could be affected by the different levels of profitability
of our acquisition targets.</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: 0.25in"></p><div>

</div><!-- Field: Page; Sequence: 82 --><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 -->75<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><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"><b><i>Seasonality </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: 0.25in">Our business is subject to seasonal fluctuations
as our costs and expenses vary significantly and do not necessarily correspond with our recognition of revenues. We generally require
students to pay tuition and boarding fees for each semester upfront prior to the commencement of the semester, and recognize revenues
for the tuition fees and boarding fees received proportionately over relevant period of the applicable program. We typically incur higher
upfront operating expenses in the third fiscal quarter for the commencement of school operations. We have historically incurred lower
net income in the first and third fiscal quarters, primarily due to our schools being closed due to winter and summer holidays.</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"><b><i>COVID-19 outbreak </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: 0.25in">Since the outbreak of COVID-19 throughout China
and other countries and regions, a series of precautionary and control measures have been implemented worldwide to contain the virus.
Many businesses and social activities in China and other countries and regions were severely disrupted, including school operations.
As a result of the government-mandated quarantine measures following the COVID-19 outbreak, our operation was adversely impacted in 2021.
In 2021, we experienced higher operating costs due to increased spending in COVID-19 related prevention and testing equipment. We paid
additional subsidies for our staff working during irregular shifts to accommodate local preventive and partial lock-down measures. In
addition, compared with 2020, we were required to pay corporate social insurance premiums. In February 2020, Ministry of Human Resources
and Social Security, Ministry of Finance, and State Administration of Taxation jointly announced Notice on the Exemption of the Payment
of Social Insurance Premiums for Companies in China, aiming to reduce corporate social insurance burden during COVID-19 outbreak. The
exemption period ended in December 2020, and therefore our cost of revenues in 2021 slightly increased compared to 2020.</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: 0.25in">Our tuition income increased by 6.3% from RMB245.5
million in 2020 to RMB261.1 million in 2021, and further by 7.9% to RMB281.8 million (US$40.9 million) in 2022. Our tuition income increased
in 2021 and 2022, primarily driven by the increased student enrollment and the more extra-curricular services offered.</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: 0.25in">We have not experienced material adverse impact
to our liquidity and cash flows since the COVID-19 outbreak. Except for the impact discussed above, we do not anticipate any prolonged
material adverse impact on our business, results of operations and financial condition from the COVID-19 outbreak, as the Chinese government
has gradually lifted the travel restrictions and other quarantine measures in China and economic activities have begun to recover and
return to normal nationwide. We are nonetheless closely monitoring the development of the COVID-19 outbreak and continuously evaluating
any potential impact on our business, results of operations and financial condition. See &#8220;Item 3. Key Information&#8212;D. Risk
Factors&#8212;Risks Related to Our Business and Industry&#8212;Any health pandemics, including the recent outbreak of COVID-19, and other
natural disasters and calamities, could have a material adverse effect on our business operations.&#8221;</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"><b>Key Operating Metrics</b></p><div>

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

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

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 64%; text-align: left">Total student enrollment</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">15,645</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">20</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"><b>&#160;</b>&#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: 83 --><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 -->76<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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"><b>Key Components of Our Results of Operations</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Revenues</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: 0.25in">Due to the effectiveness of the Implementation Rules, we have concluded
that we have lost control over the Affected Entities as from September 1, 2021, which primarily include the middle schools providing compulsory
education and the sponsor entities within China that are affected by the Implementation Rules. Consequently, we classified the operation
for the Affected Entities as discontinued operations. We have determined that, in substance, we had ceased to recognize revenues for all
activities related to the Affected Entities and had discontinued all business activities with such entities by September 1, 2021 except
for the continued provision of essential services to keep these schools in normal operations. In 2022, we had to discontinue some operations
due to regulatory changes and management decisions. Given such change, financial information for prior years was reclassified to conform
to the current year&#8217;s presentation.</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: 0.25in">We derive our revenues primarily from tuition
and boarding fees we charge the students enrolled in our high schools and tutorial schools. The following table sets forth a breakdown
of our revenues for our continuing operations by amounts and percentages for the periods presented.</p><div>

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


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

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px"><span style="font-size: 10pt">(1)</span></td>
    <td><span style="font-size: 10pt">Includes tuition from our schools including revenue from government
cooperative agreements of RMB26.1 million, RMB50.9 million and RMB42.1 million (US$6.1 million) in 2020, 2021 and 2022, respectively,
which represents government subsidies aimed to make up for the tuition difference for publicly-sponsored students of certain of our schools,
and miscellaneous fees charged to students.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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">
    <td style="width: 24px"><span style="font-size: 10pt">(2)</span></td>
    <td><span style="font-size: 10pt">Includes primarily income from the sale of education materials and income from meal catering services.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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">
    <td style="width: 24px"><span style="font-size: 10pt">(3)</span></td>
    <td><span style="font-size: 10pt">Includes primarily income from our boarding services.</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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px"><span style="font-size: 10pt">(4)</span></td>
    <td><span style="font-size: 10pt">Includes (i) income from management services provided to the various vendors of student catering
    services on campus and (ii) annual service fees from the local governments in exchange for school operation and management services
    we provided for two public schools in Yunnan province.</span></td></tr>
  </table><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: 0.25in">We generally require students to pay tuition
and boarding fees for each semester upfront prior to the commencement of the semester, and recognize revenues for the tuition and boarding
fees received proportionately over relevant period of the applicable program. We offer a partial refund if a student withdraws during
a semester. The following table sets forth the average tuition per student by school type for the periods indicated.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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 Year ended December&#160;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">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold">&#160;</td>
    <td colspan="10" style="font-weight: bold; text-align: center">(in RMB)</td><td style="font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>Average tuition per student of our schools(1)</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 64%; text-align: left; text-indent: -12pt; padding-left: 12pt">High schools</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">16,399</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">15,072</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">10,997</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -12pt; padding-left: 12pt">Tutorial schools for Gaokao repeaters</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">22,147</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">23,170</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">19,853</td><td style="text-align: left">&#160;</td></tr>
  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-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">
    <td style="width: 24px"><span style="font-size: 10pt">(1)</span></td>
    <td><span style="font-size: 10pt">The average tuition per student equals to the total tuition income of our schools during certain
    calendar year divided by the average student enrollment of such calendar year, which is arrived at by averaging the number of students
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">The increase in our student enrollment and the
increase in the utilization of our schools in the ramp-up stage will drive the growth of our revenues and generate cash inflows from
our operations. We expect our staff costs to increase to support our business growth, and we could become less profitable and experience
a decrease in gross profit margin if our staff costs increase faster than our revenues, such as in the school ramp-up period. Despite
the increase in our student enrollment, any decrease in the average tuition per student could also negatively affect our revenue growth.
Our profitability will depend on our ability to grow our business cost-effectively by increasing the average tuition per student, improving
our operational efficiency, continuing our expansion with an asset-light business model, and optimizing the cost structure of our new
schools.</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: 84 --><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>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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-indent: 0.25in">Specifically, we expect our student enrollment will continue to increase,
in line with the expansion of our school operations. However, our average tuition per student is greatly affected by the relative proportion
of our students in different cities. As the level of student enrollment of our schools located at lower-tier cities is expected to continue
to increase in Yunnan province and elsewhere along with our expansion into these cities, we expect that our average tuition per student
will to be negatively affected. Moreover, with the ramp-up of our existing schools and the expansion of our school network, we expect
that our staff costs will continue to increase, driven by an increase in teacher headcount and salary level. At the same time, our efforts
to diversify our business portfolio will contribute to our overall profitability positively. Starting from September 2020 and up to December
31, 2022, we have also cooperated with the local governments and a private school operator to provide management services for five schools
in Yunnan province and Henan province for annual management service fees. Third-party school management services like this generally have
a higher gross profit margin than operating our own schools.</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"><b><i>Cost of revenues</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: 0.25in">Our cost of revenues consists of campus-related
expenses (comprising primarily costs relating to teaching materials, supplies, low value consumables and campus repairs), staff costs
(comprising primarily salaries and other benefits for our teachers), rental fees, student-related expenses (comprising primarily costs
relating to grants and school supplies for students), depreciation and amortization of properties and equipment for our education function
and other costs.</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: 0.25in">The following tables set forth a breakdown of
our cost of revenues for our continuing operations by amounts and percentages for the periods presented.</p><div>

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

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="26" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">For the Year Ended December&#160;31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">11,371</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Operating expenses</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: 0.25in">Our operating expenses consist primarily of
selling and marketing expenses, and general and administrative expenses. Our operating income consists
primarily of government grants.</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"><i>Selling and marketing expenses </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-indent: 0.25in">Our selling and marketing expenses consist primarily
of expenses relating to student admission, advertising and brand promotion. Our selling and marketing expenses were RMB6.4 million, RMB6.4
million and RMB3.1 million (US$0.4 million) in 2020, 2021 and 2022, respectively, accounting for 2.1%, 1.8% and 0.91% of our revenues
for the same periods, respectively.</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: 0.25in">Our general and administrative expenses consist
primarily of share-based compensation, salaries and benefits for our administrative and management personnel, depreciation and amortization
of property and equipment for our management functions, and transaction costs in relation to previous financing activities. Our general
and administrative expenses were RMB43.5 million, RMB47.7 million and RMB54.6 million (US$7.9 million) in 2020, 2021 and 2022, respectively,
accounting for 14.2%, 14.1% and 15.9% of our revenues for the same periods, respectively.</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"><i>Government grants </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-indent: 0.25in">Our government grants consist primarily of general
government subsidies relating to our school operation. Our government grants were RMB4.3 million, RMB2.1 million and RMB2.0 million (US$0.3
million) in 2020, 2021 and 2022, respectively, accounting for 1.4%, 0.6% and 0.6% of our revenues for the same periods, respectively.</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-align: center"></p><div>

</div><!-- Field: Page; Sequence: 85 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->78<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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>Results of Operations</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">The following tables set forth a summary of our
consolidated results of operations by amount and as a percentage of total revenues for the periods indicated. This information should
be read together with our consolidated financial statements and related notes included elsewhere in this annual report. The results of
operations in any period are not necessarily indicative of the results that may be expected for any future period.</p><div>

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

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(43,485</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">(54,586</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(7,914</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(15.9</td><td style="text-align: left">)</td></tr>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">0.6</td><td style="text-align: left">&#160;</td></tr>
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  <tr style="vertical-align: bottom; ">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">1,124</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">0.4</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1,128</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">0.3</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1,422</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">206</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">0.4</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">(5,747</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(1.9</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(9,545</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(2.8</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(9,546</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(1,384</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(2.8</td><td style="text-align: left">)</td></tr>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(469</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(0.2</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(922</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(0.3</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(55</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(8</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(0.0</td><td style="text-align: left">)</td></tr>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">1,741</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">0.6</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">3,641</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1.1</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1,069</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">155</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">0.3</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">92,934</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">30.3</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">72,823</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">21.6</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">66,114</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">9,586</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">19.3</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(14,034</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">(4.6</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">(15,042</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(4.5</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(2,902</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">(5.8</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; text-align: right">78,900</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">25.8</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="border-bottom: Black 4pt double; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">(1.5</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">&#160;</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">(7,691</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">&#160;</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">(1,115</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">&#160;</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">(2.2</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="font-weight: bold; text-align: left; padding-bottom: 4pt; text-indent: -9pt; padding-left: 9pt">Net income</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
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    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">26.4</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">5,854</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-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">
    <td style="width: 24px"><span style="font-size: 10pt">(1)</span></td>
    <td style="text-align: left"><span style="font-size: 10pt">Represents government subsidies aimed to make up for the tuition difference
    for publicly-sponsored students of certain of our schools.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -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">
    <td style="width: 24px"><span style="font-size: 10pt">(2)</span></td>
    <td style="text-align: left"><span style="font-size: 10pt">Represents net income before share-based compensation expenses and
    transaction costs in relation to previous financing activities. See &#8220;&#8212;Non-GAAP Financial Measure&#8221; for
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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"></p><div>

</div><!-- Field: Page; Sequence: 86 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->79<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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"><b><i>Non-GAAP financial measure </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: 0.25in">In evaluating our business, we consider and use
one non-GAAP measure, adjusted net income, as a supplemental measure to review and assess our operating performance. The presentation
of the non-GAAP financial measure is not intended to be considered in isolation or as a substitute for the financial information prepared
and presented in accordance with U.S. GAAP. We define adjusted net income/(loss) as net income/(loss) excluding share-based compensation
expenses and transaction costs in relation to previous financing activities and income/(loss) from discontinued operations,
net of tax. Due to the impact of the Implementation Rules, the Affected Entities deconsolidated is classified as discontinued operations,
which is a non-recurring item.</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: 0.25in">We present the non-GAAP financial measure because
it is used by our management to evaluate our operating performance and formulate business plans. Adjusted net income enables our management
to assess our operating results without considering the impact of non-cash charges, including share-based compensation expenses, without
considering the impact of transaction costs in relation to previous financing activities, and without considering
the impact of non-recurring item, i.e. income/(loss) from discontinued operations. We also believe that the use of the non-GAAP measure
facilitates investors&#8217; assessment of our operating performance.</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: 0.25in">The non-GAAP financial measure is not defined
under U.S. GAAP and is not presented in accordance with U.S. GAAP. The non-GAAP financial measure has limitations as analytical tools.
One of the key limitations of using the non-GAAP financial measure is that it does not reflect all items of income and expense that affect
our operations. Share-based compensation expenses and transaction costs in relation to previous financing activities
have been and may continue to be incurred in our business and are not reflected in the presentation of adjusted net income. Further,
the non-GAAP measure may differ from the non-GAAP information used by other companies, including peer companies, and therefore their
comparability may be limited.</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: 0.25in">We compensate for these limitations by reconciling
the non-GAAP financial measure to the nearest U.S. GAAP performance measure, which should be considered when evaluating our performance.
We encourage you to review our financial information in its entirety and not rely on a single financial measure.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
    <td>Reconciliation of net income/(loss) to adjusted net income:</td><td>&#160;</td>
    <td colspan="14" style="text-align: center">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 52%; font-weight: bold; text-align: left">Net income</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td>Add:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><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">Share-based compensation expenses</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -0.1in; padding-left: 0.1in">Transaction costs in relation to previous financing activities</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.1in; padding-left: 0.1in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Tax effects of adjustments<sup>(1)</sup></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-indent: -0.1in; padding-left: 0.1in">Less:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><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">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="font-weight: bold; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Adjusted net income</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">80,919</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">52,693</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">38,406</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: 0.25in">&#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">
    <td style="width: 24px"><span style="font-size: 10pt">(1)</span></td>
    <td style="text-align: left"><span style="font-size: 10pt">Tax effects were determined based upon the nature, as well as the jurisdiction,
    of each reconciliation adjustment at the respective applicable income tax rate. There was no tax impact on the share-based compensation
    expenses adjustment because these expenses are non-deductible expenses for income tax.</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><i>Year Ended December 31, 2022 Compared to Year Ended December
31, 2021 </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"><i>Revenues </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-indent: 0.25in">Our revenues from continuing operations increased
by 1.5% from RMB337.3 million in 2021 to RMB342.5 million (US$49.7 million) in 2022, primarily driven by a mixed of factors including
student admission and the discontinuance and limited operation of some schools in our network.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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">
    <td style="width: 24px; font-size: 10pt">&#160;</td>
    <td style="width: 24px; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Tuition
    income. </i>Our tuition income increased by 7.9% from RMB261.1 million in 2021 to RMB281.8 million (US$40.9 million) in 2022, primarily
    driven by the increased student enrollment for our continuing operation.</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: center"></p><div>

</div><!-- Field: Page; Sequence: 87 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->80<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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><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">&#160;</td>
    <td style="width: 24px; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Income from student-related services. </i>Our income from student-related services decreased by 47.6% from RMB40.5 million in 2021 to RMB21.2 million (US$3.1 million) in 2022, primarily due to the decreased sales of meal catering services, and educational materials.</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"></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: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Boarding fees. </i>Our
    boarding fees decreased by 60.4% from RMB19.2 million in 2021 to RMB7.6 million (US$1.1 million) in 2022, primarily due to the decreased
    student enrollment and limited operation of some schools in our network.</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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Education and management
    service income. </i>Our revenue from education and management service income increased by 104.4% from RMB15.1 million in 2021 to
    RMB30.9 million (US$4.5 million) in 2022, primarily due to providing more schools with management services.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><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: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Others. </i>Our revenue
    from others decreased by 28.9% from RMB1.4 million in 2021 to RMB1.0 million (US$0.1 million) in 2022, primarily due to the decrease
    of certain one-off income.</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"><i>Cost of revenues</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-indent: 0.25in">Our cost of revenues increased by 3.3% from RMB206.8
million in 2021 to RMB213.6 million (US$31.0 million) in 2022, primarily due to our undertaking of an increased portion of the public-sponsored
teachers&#8217; compensation.</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"><i>Gross profit</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-indent: 0.25in">As a result of the foregoing, our gross profit
decreased by 1.3% from RMB130.5 million in 2021 to RMB128.9 million (US$18.7 million) in 2022, and our gross profit margin was 38.7% in
2021 compared to 37.6% in 2022.</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"><i>Operating expenses and income </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-indent: 0.25in">Our net operating expenses increased by 7.0% from
RMB52.0 million in 2021 to RMB55.7 million (US$8.1 million) in 2022, primarily due to the increase in general and administrative expenses.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td><p style="text-align: left; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><i>Selling and marketing expenses.</i> Our selling and marketing
        expenses decreased by 51.8% from RMB6.4 million in 2021 to RMB3.1million (US$0.4 million) in 2022, primarily due to the decreased
        expenses in brand promotion and marketing activities for our relatively mature school operation.</p></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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>General and administrative expenses</i>. Our general and administrative expenses increased by 14.5% from RMB47.7 million in 2021 to RMB54.6 million (US$7.9 million) in 2022, primarily due to (1) the discontinuance and limited operation of some schools in our network, and (2) expenses related to our new business expansions.</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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td><p style="text-align: left; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><i>Government grants.</i> Our operating income from government
        grants decreased by 2.9% from RMB2.1 million in 2021 to RMB2.0 million (US$0.3 million) in 2022, primarily due to the government&#8217;s
        tightened fiscal budget resulting in its delayed payments.</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: center"></p><div>

</div><!-- Field: Page; Sequence: 88 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->81<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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"><i>Income from operations </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-indent: 0.25in">As a result of the foregoing, our income from
operations decreased from RMB78.5 million in 2021 to RMB73.2 million (US$10.6 million) in 2022.</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"><i>Interest expense</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-indent: 0.25in">Our interest expense stayed even from RMB9.5 million
in 2021 to RMB9.5 million (US$1.4 million) in 2022, primarily due to the effective management of our loan level.</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"><i>Income tax expense</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-indent: 0.25in">Our income tax expense increased by 33.3% from
RMB15.0 million in 2021 to RMB20.0 million (US$2.9 million) in 2022, primarily due to the increased profitability in operations without
tax policy benefits.</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"><i>Net income </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-indent: 0.25in">As a result of the foregoing, we had net income
of RMB52.7 million in 2021 and RMB38.4 million (US$5.6 million) in 2022<b><i>. </i></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"><i>Adjusted net income </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-indent: 0.25in">Our adjusted net income decreased by 27.1% from
RMB52.7 million in the 2021 to RMB38.4 million (US$5.6 million) in 2022.</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"><b><i>Year Ended December 31, 2021 Compared to Year Ended December
31, 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"><i>Revenues </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-indent: 0.25in">Our revenues from continuing operations increased
by 10.1% from RMB306.2 million in 2020 to RMB337.3 million in 2021, primarily driven by a greater student enrollment due to the opening
of new schools and the increased number of students enrolled in our existing schools, along with the higher tuition income and boarding
fees.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Tuition income</i>. Our
                                                                                                                                                                        tuition income increased by 6.3% from RMB245.5 million in 2020 to RMB261.1 million in 2021, primarily driven by greater student
                                                                                                                                                                        enrollment at our schools and offering of more extra-curricular services.</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; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Income
from student-related services</i>. Our income from student-related services increased by 6.9% from RMB37.9 million in 2020 to RMB40.5
million in 2021, in line with the increase in our student enrollment.</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; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Boarding
fees</i>. Our boarding fees increased by 22.1% from RMB15.8 million in 2020 to RMB19.2 million in 2021, in line with the increase in
our student enrollment.</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; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Education
and management service income</i>. Our revenue from education and management service income increased by 716.9% from RMB1.8 million in
2020 to RMB15.1 million in 2021 primarily due to servicing more schools in our school network.</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; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Others</i>.
Our revenue from others decreased by 73.3% from RMB5.2 million in 2020 to RMB1.4 million in 2021, primarily due to the decrease of certain
one-off income.</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"><i>Cost of revenues</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-indent: 0.25in">Our cost of revenues increased by 25.8% from RMB164.4
million in 2020 to RMB206.8 million in 2021, primarily due to (1) a 118.0% increase in staff cost expenses from RMB63.1 million in 2020
to RMB137.5 million in 2021, as a result of (i) our undertaking of an increased portion of public-sponsored teachers&#8217; compensation;
(ii) an increase in the number of teachers from 1,346 as of December 31, 2020 to 1,617 as of December 31, 2021 to (a) accommodate more
students enrolled in our existing schools as our students progressed into next grades and new entry classes were filled up and (b) support
the ramp-up of certain recently-opened new schools; and (iii) an increase in the average compensation for our teachers primarily attributable
to bonuses for teachers teaching the graduating classes in our high schools; and (2) a 67.4% increase in student-related expenses from
RMB11.4 million in 2020 to RMB19.0 million in 2021 in line with the increase in our student enrollment; partially offset by a 66.1% decrease
in campus-related expenses from RMB70.1 million in 2020 to RMB23.8 million in 2021 due to reclassification of our discontinued schools
and operations.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><!-- Field: Page; Sequence: 89 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->82<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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"><i>Gross profit</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-indent: 0.25in">As a result of the foregoing, our gross
profit decreased by 8.0% from RMB141.9 million in 2020 to RMB130.5 million in 2021, and our gross profit margin was 46.3% in 2020
compared to 38.7% in 2021.</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"><i>Operating expenses and income </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-indent: 0.25in">Our operating expenses increased by 14.0% from
RMB45.6 million in 2020 to RMB52.0 million in 2021, primarily due to an increase in our general and administrative expenses.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Selling and marketing
                                                                                                                                                                        expenses</i>. Our selling and marketing expenses stayed relatively stable at RMB6.4 million in 2020 and RMB6.4 million in 2021,
                                                                                                                                                                        primarily due to our enhanced marketing efforts for schools opened in 2020.</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; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>General
and administrative expenses</i>. Our general and administrative expenses increased by 9.6% from RMB43.5 million in 2020 to RMB47.7 million
in 2021, primarily due to increased professional service fees and business travel expenses.</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; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Government
grants</i>. Our operating income from government grants decreased by 51.0% from RMB4.3 million in 2020 to RMB2.1 million in 2021, primarily
due to certain delay in payments from governments in 2021.</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"><i>Income from operations </i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 82.05pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">As a result of the foregoing, our income from
operations decreased from RMB96.3 million in 2020 to RMB78.5 million in 2021.</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"><i>Interest expense</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-indent: 0.25in">Our interest expense increased by 66.1% from RMB5.7
million in 2020 to RMB9.5 million in 2021, primarily due to the sale and leaseback arrangements we entered into in November 2021. In November
2021, we entered into a sale and leaseback arrangement with a financing leasing company for a net financing proceeds of RMB50.0 million.
Under the sale and leaseback arrangement, Long-Spring Education, as the lessee, sold certain equipment, including computers, projectors
and printers, to the lessor. Concurrent with the sale of the leased equipment, the lessee leased back all of the leased equipment sold
to the lessor for a lease term of three years. We consider the substance of the transaction to be debt financing in nature and no gain
or loss is recognized upon the sale of these assets.</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"><i>Income tax expense</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-indent: 0.25in">Our income tax expense increased by 7.2% at RMB14.0
million in 2020, to RMB15.0 million in 2021, primarily due to the increased profitability in operations without tax policy benefits.</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"><i>Net income </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-indent: 0.25in">As a result of the foregoing, we had net income of RMB80.9 million in 2020 and RMB52.7 million in 2021.&#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: center"></p><div>

</div><!-- Field: Page; Sequence: 90 --><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 -->83<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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"><i>Adjusted net income </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-indent: 0.25in">Our adjusted net income decreased by 34.9% from
RMB80.9 million in the 2020 to RMB52.7 million in 2021.</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"><b>Taxation</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Cayman Islands</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: 0.25in">We are incorporated in the Cayman Islands and
conduct our primary business operations through our subsidiaries and affiliated entities in China. Under the current laws of the Cayman
Islands, we are not subject to income or capital gains taxes. In addition, dividend payments are not subject to withholding tax in the
Cayman Islands.</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"><b><i>Hong Kong </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: 0.25in">Under the Hong Kong tax laws, the statutory income
tax rate is 16.5%. Subsidiaries in Hong Kong are exempted from income tax on their foreign-derived income and there are no withholding
taxes in Hong Kong on remittance of dividends.</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"><b><i>PRC</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: 0.25in">Our subsidiaries and affiliated entities incorporated
in China are generally subject to a statutory enterprise income tax rate of 25.0% with limited exceptions. According to Notice on Issues
Concerning Relevant Tax Policies in Deepening the Implantation of the Western Development Strategy jointly promulgated by the PRC Ministry
of Finance, the PRC General Administration of Customs and the SAT on July 27, 2011, enterprises located in Western China which have at
least 70% of their income from the businesses falling within the Category of Encouraged Industries in Western China may enjoy a preferential
income tax rate of 15% from January 1, 2011 to December 31, 2020. Yunnan WFOE, being a qualified enterprise located in Western China that
completed the necessary filing, enjoys a preferential income tax rate of 15% effective from 2017 to 2020, which is further extended another
10 years to 2030 if it continues to satisfy all the requirements pursuant to the relevant tax regulations in each of those years. Kunming
Xishan Long-Spring Experimental Secondary School and Yunnan Long-Spring Foreign Language Secondary School are entitled to a five-year
enterprise income tax exemptions for certain revenues that meets relevant legal requirements in from January 1, 2018 through December
31, 2022 and from January 1, 2019 through December 31, 2023, respectively, as determined by the local government authorities as non-profit
organizations. For the year ended December 31, 2022, our newly established schools which were qualified as small and micro enterprises
enjoyed the preferential tax rates of 5% or 10%, and our high-tech enterprises were subject to corporate income tax at a reduced rate
of 15%.</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"><b><span style="text-decoration:underline">B. Liquidity and Capital Resources </span></b></p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Historically, we have financed our operations
primarily through cash generated from our operating activities. As of December 31, 2020, 2021 and 2022, we had RMB136.9 million, RMB114.2
million and RMB105.3 million (US$15.3 million), respectively, in cash. All of our cash and restricted cash as of December 31, 2022 was
held in China. Our cash and restricted cash primarily consist of cash on hand and cash at banks and restricted cash in connection with
the bank loan. We intend to finance our future working capital requirements and capital expenditures from cash generated from operating
activities, funding from third-party financial institutions and the net proceeds we received from our initial public offering.</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: 0.25in">Although we consolidate the results of our affiliated
entities, we do not have direct access to the cash or future earnings of our affiliated entities or their respective subsidiaries. However,
a portion of the cash balances of our affiliated entities and their respective subsidiaries will be paid to us pursuant to our contractual
arrangements with our affiliated entities and their respective subsidiaries. For restrictions and limitations on liquidity and capital
resources as a result of our corporate structure, see &#8220;&#8212;Holding Company Structure.&#8221;</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-align: center"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->84<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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-indent: 0.25in">We have not encountered any difficulties in meeting
our cash obligations to date. When considering our liquidity position and our future capital resources and needs, we take into account
price controls set by local governments that may affect the tuition and boarding fees we are able to charge to students in our schools,
annual enrollment numbers approved for our schools, the economic benefits we have received from our subsidiaries and affiliated entities
attributable to the provision of services to these entities and the economic benefits we may receive from our subsidiaries and affiliated
entities directly through payments under our exclusive management services and business cooperation agreement. We believe that our current
available cash, anticipated cash flow from operations and expected funding from third-party financial institutions will be sufficient
to meet our working capital requirements and capital expenditures in the ordinary course of business for the next 12 months.</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: 0.25in">The following table sets forth a condensed summary
of our cash flows for the periods indicated.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">318</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(101,403</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(61,851</td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">136,953</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: 0.25in">&#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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">We generate cash from operating activities primarily
from tuition and boarding fees for our schools. We generally require students to pay tuition and boarding fees for each semester upfront
prior to the commencement of such semester. Tuition and boarding fees for schools are initially recorded under contract liabilities and
deferred revenue from governments. We recognize such amounts received as revenues proportionately over the relevant period in which the
students attend the applicable programs.</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"><i>Changes in cash flow from operating activities from 2021 to 2022</i></p><div>

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

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">We had net cash used in operating activities
from continuing operation of RMB84.7&#160;million (US$12.3 million) in 2022, compared to net cash used in operating activities from
continuing operation of RMB21.2&#160;million in 2021. The decrease in cash flow used in operating activities in 2022 is primarily a
result of:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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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    <td style="width: 0.25in; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)</span></td>
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to increased cost of revenues used in school operation in 2022;</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%; border-collapse: collapse">
  <tr style="vertical-align: top">
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    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">a RMB58.9 million (US$8.5 million) increase in accounts receivable
in 2022, as compared to a RMB4.0 million decrease in 2021, mainly due to certain delay in payments from governments cooperative arrangements</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%; border-collapse: collapse">
  <tr style="vertical-align: top">
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and other current assets, as compared to a RMB66.1 million increase in 2021, mainly due to more security deposits made to suppliers and
in relation with new school openings;</p></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>(4)</td>
    <td>a RMB0.3 million (US$49,005) decrease in advances from customers, as
compared to a RMB20.2 million increase in 2021, mainly due to less deposits received from customers and vendors; and</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: top">
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    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Partially offset by (1) a RMB19.4 million (US$2.8 million) increase in accrued expenses and other payables in 2022, as compared to a
RMB54.4 million decrease in 2021, mainly due to more delayed payments such as performance related wages incurred but yet to be made to
employees, and services and goods consumed but the invoice of which has not been received yet; and (2) a RMB10.7 million (US$1.5 million)
increase in account payable in 2022, as compared to a RMB5.1 million decrease in 2021, mainly due to more advances from customers.</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: 92 --><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 -->85<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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"><i>Changes in cash flow from operating activities from 2020 to 2021</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-indent: 0.25in">We had net cash used in operating activities from
continuing operation of RMB21.2&#160;million in 2021, compared to net cash used in operating activities from continuing operation of RMB29.9&#160;million
in 2020. The increase in cash flow from operating activities in 2021 is primarily a result of:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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">
    <td style="width: 0.25in; font-size: 10pt">&#160;</td>
    <td style="width: 0.25in; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)</span></td>
    <td style="font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">a RMB20.2 million increase in advances from customers, as compared to a RMB22.9 million decrease in 2021, mainly due to more deposits received from customers and vendors;</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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(2)</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">a RMB3.9 million decrease in accounts receivable in 2021, as compared to a RMB28.0 million increase in 2020, mainly due to improved payment invoicing and collection for our continuing operation; 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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(3)</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Partially offset by (1) a RMB28.2 million decrease in net income, mainly due to the increased cost of revenues used in school expansions in 2021; (2) a RMB66.1 million increase in advances to suppliers and other current assets in 2021, as compared to a RMB27.3 million increase in 2020, mainly due to more security deposits made to suppliers and in relation with new school openings; and (3) a RMB54.4 million decrease in accrued expenses and other payables in 2021, as compared to a RMB39.3 million decrease in 2020, mainly due to less delayed payments such as performance related wages incurred but yet to be made to employees, and services and goods consumed but the invoice of which has not been received yet.</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><i>Investing activities</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: 0.25in">For 2022, we had net cash generated from investing
activities from continuing operations of RMB26.1 million (US$3.8 million), primarily attributable to (1) disposal of subsidiaries, net
of cash RMB44.7 million (US$6.5 million), by netting the gains from, against excluding the cash account of, discontinued entities of Beijing
Hengyue Education Technology Co., Ltd., Ordos Hengyue Education Technology Co., Ltd., Ordos Hengshui Experimental High School, and Beijing
Tomorrow Future Plus Education Technology Co., Ltd.; (2) purchase of property and equipment of RMB17.8 million (US$2.6 million), related
to school operation; and (3) purchase of intangible assets of RMB0.8 million (US$0.1 million).</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: 0.25in">For 2021, we had net cash used in investing activities
from continuing operations of RMB67.9 million, primarily attributable to (1) acquisition of a subsidiary, net of cash RMB42.0 million,
relating to the acquisition of Yunnan Hengshun Property Service Co., Ltd., Kunming Chenggong Times Giant Tutorial School Co., Ltd., Wenshan
Century Times Giant Training School Co., Ltd., and Kunming Wuhua District Zhuorui Cultural Training School Co., Ltd.; (2) purchase of
school equipment of RMB24.2 million, and (3) purchase of intangible assets of RMB1.6 million.</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: 0.25in">For 2020, we had net cash used in investing activities
of RMB35.1 million, primarily attributable to (1) purchase of school equipment of RMB33.5 million, and (2) purchase of intangible assets
of RMB1.6 million.</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: 93 --><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 -->86<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><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"><b><i>Financing activities </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: 0.25in">For 2022, we had net cash used in financing activities
of RMB83.3 million (US$12.1 million), primarily attributable to (1) dividend to shareholders RMB6.4 million (US$0.9 million), (2) repayments
of principal amount of borrowings under financing arrangements and repayments of bank loans RMB150.2 million (US$21.8 million), (3) net
repayments of amounts due to related parties of RMB150.1 (US$21.8 million) million, and (4) payment for treasury stock RMB0.5 million
(US$0.08 million), partially offset by (1) net proceeds from borrowings under financing arrangements and bank loans of RMB101.8 million,
and (2) net proceeds from amounts due from related parties of RMB122.1 million.</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: 0.25in">For 2021, we had net cash generated from financing
activities of RMB134.2 million, primarily attributable to (1) net proceeds from borrowings under financing arrangements and bank loans
of RMB286.0 million, (2) prepayment for the issuance of common stock of RMB296.4 million, (3) net proceeds from amounts due from related
parties of RMB62.2 million, partially offset by (1) dividend to shareholders RMB166.7million, (2) repayments of principal amount of borrowings
under financing arrangements and repayments of bank loans RMB298.0 million, (3) net repayments of amounts due to related parties of RMB45.8
million.</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: 0.25in">For 2020, we had net cash used in financing activities
of RMB8.5 million, primarily attributable to (1) net repayments of amounts due to related parties of RMB151.0 million, and (2) dividend
to shareholders RMB42.3 million, partially offset by (1) net proceeds from borrowings under financing arrangements and bank loans of RMB139.4
million, (2) net proceeds from amounts due from related parties of RMB45.4 million.</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"><b>Capital Expenditures</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">We incurred capital expenditures of RMB35.1 million,
RMB25.9 million and RMB18.6 million (US$2.7 million) in 2020, 2021 and 2022, respectively, primarily in connection with our purchase of
school facilities and equipment. We intend to fund our future capital expenditures with our existing cash balance, proceeds from our initial
public offering and other financing alternatives. We will continue to incur capital expenditures to support the growth of our business.</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"><b>Holding Company Structure </b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">We are a holding company with no material operations
of our own. We conduct our operations primarily through our subsidiaries and affiliated entities in China. As a result, our ability to
pay dividends depends upon dividends paid by our PRC subsidiaries. If our PRC subsidiaries or any newly formed subsidiaries incur any
debt in the future, the instruments governing their debt may restrict their ability to pay dividends to us. Our PRC subsidiaries are permitted
to pay dividends to us only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations.
Under PRC law, each of our subsidiaries and affiliated entities is required to set aside at least 10% of its after-tax profits each year,
if any, to fund a statutory surplus reserve until such reserve reaches 50% of its registered capital. In addition, each of our PRC subsidiaries
may allocate a portion of its after-tax profits based on PRC accounting standards to enterprise expansion fund and staff bonus and welfare
fund at its discretion. Each of our affiliated entities may allocate a portion of its after-tax profits based on PRC accounting standards
to a discretionary surplus fund at its discretion. Although the statutory surplus reserves can be used 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. Remittance of dividends by a wholly foreign-owned company out of China is subject to examination by the banks. Our PRC subsidiaries
will not be able to pay dividends until they generate accumulated profits and meet the requirements for statutory reserve funds. Considering
that we have achieved net income in 2021, we approved and declared a cash dividend of US$0.0146 per ordinary share (US$0.0437 per or ADS)
in September 2022 and made payments in October 2022.</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: 0.25in">The following table sets forth the respective
revenue contributions for our continuing operations of (1)&#160;the affiliated entities, and (2)&#160;non-VIE consolidated entities,
for the periods indicated as a&#160;percentage of total revenues.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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">
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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; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">49,659</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: 0.25in">&#160;</p><div>

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

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

</div><!-- Field: Page; Sequence: 94 --><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 -->87<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">The following table sets forth the respective
asset contributions of (1)&#160;the affiliated entities, and (2)&#160;non-VIE consolidated entities, as of the dates indicated as a&#160;percentage
of total assets.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"></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-indent: 0.25in"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Financial Information Related to the Affiliated Entities</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The following balances of
the affiliated entities as of December 31, 2021 and 2022, were included in our consolidated balance sheet after the elimination of intercompany
balances, respectively.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><span style="font-size: 6pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td>&#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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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><span style="font-size: 6pt">&#160;</span></p><div>

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

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->88<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">The following amounts of the affiliated entities
for the years ended December 31, 2020, 2021 and 2022, were included in our consolidated statements of operations and consolidated statements
of cash flows after the elimination of intercompany balances.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(84,686</td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(61,851</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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</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"><b>Cash Flows Through Our Organization </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: 0.25in">We are a holding company with no business operations
of our own. We conduct our operations primarily through our PRC subsidiaries and affiliated entities in China. As a result, our ability
to pay dividends and to service any debt we may incur and pay our operating expenses principally depends on dividends paid by our PRC
subsidiaries.</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: 0.25in">Under applicable PRC laws and regulations, our
PRC subsidiaries are permitted 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 allocate at least 10% of their accumulated profits
each year, if any, to fund statutory reserves of up to 50% of the registered capital of the enterprise. Statutory reserves are not distributable
as cash dividends except in the event of liquidation.</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: 0.25in">If we intend to distribute dividends, we will
transfer the dividends to First High-School HK, our Hong Kong subsidiary, in accordance with the laws and regulations of the PRC, and
then First High-School HK will transfer the dividends to First High-School BVI, our BVI subsidiary, and further to First High-School
Education, the Cayman Islands holding company, and the dividends will be distributed from the First High-School Education to all shareholders
respectively in proportion to the shares they hold, regardless of whether the shareholders are U.S. investors or investors in other countries
or regions. For the fiscal years of 2020, 2021 and 2022, no dividends were declared and paid by our PRC subsidiaries.</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-align: center"></p><div>

</div><!-- Field: Page; Sequence: 96 --><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 -->89<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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"><b><span style="text-decoration:underline">Off-Balance Sheet Arrangements</span></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">We have not entered into any financial guarantees
or other commitments to guarantee the payment obligations of any third parties. In addition, we have not entered into any derivative
contracts that are indexed to our shares and classified as shareholders&#8217; equity or that are not reflected in our consolidated financial
statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves
as credit, liquidity or market risk support to such entity. Moreover, we do not have any variable interest in any unconsolidated entity
that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services
with us. </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"><b>Contractual Obligations</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">The following table sets forth our contractual
obligations as of December 31, 2022.</p><div>

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

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="22" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Payment Due by Period</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Total</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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  <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-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">We lease certain business premises for our schools
under non-cancellable operating leases that expire at various dates. We incurred rental expenses under operating leases of RMB0.2 million,
RMB2.1 million and RMB5.2 million (US$0.8 million) in 2020, 2021 and 2022, respectively.</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: 0.25in">As of December 31, 2022, we had a capital commitment
of RMB26.7 million (US$3.9 million) pursuant to a school cooperative agreement.</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: 0.25in">Other than as shown above, we did not have any
significant capital and other commitments, long-term obligations or guarantees as of December 31, 2022.</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"><b><span style="text-decoration:underline">C. Research and Development, Patents and Licenses, etc.</span></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">See &#8220;Item 4. Information on the Company&#8212;B.
Business Overview&#8212;Intellectual Property.&#8221;</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><span style="text-decoration:underline">D. Trend Information</span></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Other than as disclosed elsewhere in this annual
report, we are not aware of any trends, uncertainties, demands, commitments or events for the period from January 1, 2022 to December
31, 2022 that are reasonably likely to have a material adverse effect on our total revenues, profitability, liquidity, or capital resources,
or that caused the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.</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"><b><span style="text-decoration:underline">E. Critical Accounting Estimates </span></b></p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">We prepare our consolidated financial statements
in accordance with U.S. GAAP. The preparation of financial statements in conformity with U.S. GAAP requires management to make judgments,
estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported
amounts of revenues and expenses during the reporting period. We continually evaluate these judgments and estimates based on our own
experience, knowledge and assessment of current business and other conditions, our expectations regarding the future based on available
information and assumptions that we believe to be reasonable, which together form our basis for making judgments about matters that are
not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, our
actual results could differ from those estimates. Some of our accounting policies require a higher degree of judgment than others in
their application.</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: 0.25in"></p><div>

</div><!-- Field: Page; Sequence: 97 --><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 -->90<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><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: 0.25in">The selection of critical accounting policies,
the judgments and other uncertainties affecting application of those policies and the sensitivity of reported results to changes in conditions
and assumptions are factors that should be considered when reviewing our financial statements. We believe the following accounting policies
involve the most significant judgments and estimates used in the preparation of our financial statements.</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"><b><i>Consolidation of Variable Interest Entity </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: 0.25in">Prior to the effective of the Implementation
Rules, PRC laws and regulations had prohibited foreign ownership of companies and institutions providing compulsory education services
at primary and middle school levels, and restrict foreign investment in education services at the kindergarten and high school level.
In addition, the PRC government regulates the provision of education services through strict licensing requirements.</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: 0.25in">We are a company registered in the Cayman Islands.
Yunnan WFOE is our PRC subsidiary and a foreign-invested enterprise under PRC laws. To comply with PRC laws and regulations, we primarily
operate in China through our affiliated entities, based on a series of contractual arrangements by and among Yunnan WFOE, our affiliated
entities, and the shareholders of Long-Spring Education, including:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Exclusive Call Option Agreement;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9pt">&#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: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">School Sponsors&#8217; and Directors&#8217; Rights Entrustment Agreement;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9pt">&#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: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Shareholders&#8217; Rights Entrustment Agreement;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9pt">&#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: 24px">&#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 0pt 9pt">&#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: 24px">&#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 0pt 9pt">&#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: 24px">&#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 0pt 9pt">&#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: 24px">&#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 0pt 9pt">&#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: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Loan Agreement.</span></td></tr>
  </table><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: 0.25in">Our contractual arrangements with our affiliated
entities and the shareholders of Long-Spring Education permit us to (1) exercise effective control over the affiliated entities, (2)
receive substantially all of the economic benefits of our affiliated entities, and (3) have an exclusive call option to purchase all
or part of the equity interests in our affiliated entities when and to the extent permitted by PRC law.</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: 0.25in">Under the Implementation Rules, social organizations
and individuals are prohibited from controlling a private school that provides compulsory education by means of, among others, merger,
acquisition, and contractual arrangements, and a private school providing compulsory education is prohibited from conducting transactions
with its related parties. In particular, the prohibition over related party transactions has significantly affected the enforceability
of the exclusive management services and business cooperation agreements with affiliated entities providing compulsory education. Therefore,
we re-assessed our control over the Affected Entities. Based on the relevant accounting standard in accordance with U.S. GAAP, we have
concluded that we have lost control of the Affected Entities since September 1, 2021, in view of the significant uncertainties and restrictions
the Implementation Rules impose on our ability to direct the range of ongoing activities that would most significantly impact the returns
of those entities and to be exposed to returns that are commensurate with a controlling interest, and that such uncertainties and restrictions
already had a significant impact on our ability to direct and its economic exposure from involvement with such entities.</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: 0.25in">As advised by our PRC legal counsel, Beijing Zhongwen
Law Firm, except for the Affected Entities, the ownership structures of Yunnan WFOE and our affiliated entities in China are not in violation
of applicable PRC laws and regulations currently in effect; and the contractual arrangements among Yunnan WFOE, our affiliated entities,
and the shareholders of Long-Spring Education, governed by PRC law are legal, valid and binding, and will not result in any violation
of applicable PRC laws and regulations currently in effect, except that the clause or provision of the Exclusive Technical Service and
Management Consultancy Agreement and Business Cooperation Agreement, in relation to related party transactions between a private school
providing compulsory education and Yunnan WFOE, have been rendered not legally enforceable since September 1, 2021. However, our PRC legal
counsel has also advised us that there are substantial uncertainties regarding the interpretation and application of current and future
PRC laws, regulations and rules, and we cannot assure you that the PRC government would agree that our corporate structure or any of the
above contractual arrangements comply with current or future PRC laws or regulations. PRC laws and regulations governing the validity
of these contractual arrangements are uncertain and the relevant government authorities may have broad discretion in interpreting these
laws and regulations. For a detailed description of the risks associated with our corporate structure, see &#8220;Item 3. Key Information&#8212;D.
Risk Factors&#8212;Risks Related to Our Corporate Structure.&#8221; and &#8220;Item 3. Key Information&#8212;D. Risk Factors&#8212;Risks
Related to Doing Business in China.&#8221;</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: 0.25in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><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"><b><i>Revenue recognition</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: 0.25in">Revenue is recognized when control of promised
goods or services is transferred to our customers in an amount of consideration to which we expect to be entitled to in exchange for
those goods or services. We follow the five steps approach for revenue recognition under ASC Topic 606: (1) identify the contract(s)
with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction
price to the performance obligations in the contract, and (5) recognize revenue when (or as) we satisfy a performance obligation.</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: 0.25in">For contracts with customers that contain multiple
performance obligations, determining whether products and services are considered distinct performance obligations that should be accounted
for separately versus together may require significant judgment. The transaction price is allocated to the separate performance obligation
on a relative standalone selling price basis. The standalone selling price is determined based on overall pricing objectives, taking
into consideration market conditions, geographic locations and other factors.</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: 0.25in">The primary sources of our revenues are as follows:</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"><i>Formal education services </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-indent: 0.25in">Our revenue from continuing operations is principally
derived from the provision of boarding school educational services to students. We offer formal education program at the high school
level. The educational programs and services from discontinued operations consist of formal education program at the middle school level.</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: 0.25in">Tuition and accommodation fees received from
formal education services are generally paid in advance prior to the beginning of each semester. In very limited circumstances students
may, with special approval of the management, receive education first and pay their tuition in arrears.</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: 0.25in">Each contract with a student in respect of the
formal education services contains multiple performance obligations consisting of the provision of the curriculum education services,
after-school enrichment services, registration and transportation services (collectively as &#8220;educational services&#8221;), delivery
of educational books and related materials (collectively as &#8220;educational materials&#8221;), boarding services and meal catering
services. These performance obligations are distinct in the context of the contract. The consideration expected to be received is allocated
at contract inception among the performance obligations based on their stand-alone selling prices.</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: 0.25in">Revenue attributable to educational services
and boarding services is recognized over time, based on a straight-line basis over the school year, as customers simultaneously receive
and consume the benefits of these services throughout the service period. The portion of tuition and boarding payments received from
students but not earned is recorded contract liability and is reflected as a current liability as such amounts represent revenue that
we expect to earn within one year. The academic year of our school is generally from September to January of the following year and from
March to June. We determine that there is not a significant financing component based on the nature of the service being offered and
the purpose of the payment terms.</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: 0.25in">Revenue attributable to educational materials
and meal catering services is recognized at point in time, when the control of the educational materials or underlying goods is passed
to customers. We consider that it is acting as the principal in the transaction and recognizes revenue from sales of the educational
materials and meal catering services on a gross basis.</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"><i>Revenue from government cooperative arrangements </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-indent: 0.25in">We have entered into certain long-term cooperative
arrangements with local governments in areas where some of the schools are located. Pursuant to such arrangements, we are committed to
admit certain number of local students as &#8220;publicly-sponsored students&#8221; who pay the tuition fees based on the amounts charged
by a comparable public school. The difference between the fees charged by us to other students and the fees charged to publicly-sponsored
students are subsidized by the local governments in the form of lump sum funding payments in the first few years of the cooperative arrangements.
The government subsidies are recognized as &#8220;revenue from government cooperative arrangements&#8221; on a systematic basis when
there is reasonable assurance that they will be received and we will comply with the conditions attaching to the agreements. In particular,
revenue under these arrangements are recognized on a straight-line basis during the relevant school year, and over the estimated period
to which the subsidies relate, based on the difference in average tuition fee for private students and for publicly-sponsored students
and the number of publicly-sponsored students of each academic year. When we have received payments from the governments before educational
services are provided to these publicly-sponsored students, a deferred revenue from governments is recognized when the payments are received.</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: 0.25in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><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: 0.25in">Throughout the whole period of cooperative arrangements,
the governments also provide free access to certain buildings and dormitories and assign certain number of teachers who originally work
in other public schools to us. These subsidies are determined as non-monetary government grants in a nonreciprocal transfer for which
the fair value is not reliably estimable. Accordingly, we recognize the asset or services and the relevant grants at their nominal amounts
paid.</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"><i>Tuition income from training programs </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-indent: 0.25in">Revenue derived from providing Gaokao (the university
entrance examination in China) repeaters&#8217; education programs and other after-school is recognized over time, based on a straight-line
basis over the program service period, as customers simultaneously receive and consume the benefits of these services throughout the
service period.</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"><i>Education and management service fees </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-indent: 0.25in">Revenue derived from (1) the education and management
service provided to the third-party schools included logistic management services, school operation and management services and other
services. The promised services in each education and management service contract are combined and accounted as a single performance
obligation, as the promised services in a contract are not distinct and are considered as a significant integrated service, and (2) the
meal catering services are outsourced to certain vendors and we charge management service fee from these vendors. The revenue is recognized
on a straight-line basis over the period of the education and management service, as customers simultaneously receive and consume the
benefits of these services throughout the service period.</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: 0.25in">We have assessed all variable considerations
identified when determining the transaction price. In making such assessment, we may provide price concessions to the customers under
education and management services contracts and royalty contracts in order to enter into new contracts or collect payments. We include
the estimate of the concession in the amount of consideration to which it ultimately expects to be entitled.</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: 0.25in">VAT collected from customers is excluded from
revenue. Our PRC subsidiaries and affiliated entities are subject to VAT. The deductible input VAT balance is recorded in prepaid expenses
and other current assets, and VAT payable balance is recorded in the accrued expenses and other payables.</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"><b><i>Employee benefits </i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Pursuant to relevant PRC regulations, we are required to make contributions
to various defined contribution plans organized by municipal and provincial PRC governments. The contributions are made for each PRC employee
at rates ranging from 31% to 37% on employees&#8217; salaries, up to a maximum amount stipulated by local social security bureau. Contributions
to the defined contribution plans are charged to the consolidated statements of operations when the related service is provided.</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>Recent Accounting Pronouncements</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">For detailed discussion on recent accounting pronouncements,
see Note 2(w) and Note 2(x) to 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-indent: 0.25in">&#160;</p><div>

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

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><span style="text-decoration:underline">A. Directors and Executive Officers</span></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">The following table sets forth information regarding
our directors and 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: 0.25in">&#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: bottom">
    <td style="border-bottom: black 1.5pt solid; width: 30%"><span style="font-size: 10pt"><b>Directors and Executive Officers</b></span></td>
    <td style="width: 1%; text-align: center">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; width: 10%; text-align: center"><span style="font-size: 10pt"><b>Age</b></span></td>
    <td style="width: 1%; text-align: center">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; width: 58%; text-align: center"><span style="font-size: 10pt"><b>Position/Title</b></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-size: 10pt">Shaowei Zhang</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">39</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">Chairman and Chief Executive Officer</span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="text-align: justify"><span style="font-size: 10pt">Tommy Zhou</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">36</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">Director and Chief Financial Officer</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-size: 10pt">Pengwei Luo</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">47</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">Director</span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="text-align: justify"><span style="font-size: 10pt">Guangzhou Zhao</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">69</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">Independent Director</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-size: 10pt">Yuanlin Hu</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">51</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">Independent Director</span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="text-align: justify"><span style="font-size: 10pt">Jianping Zhang</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">68</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">Education Inspector</span></td></tr>
  </table><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: 0.25in"><i>Mr. Shaowei Zhang </i>is the founder of our
company. Mr. Zhang has served as the chairman of our board of directors and our chief executive officer since September 2018. Prior to
founding our company, Mr. Zhang established and served as the principal of Kunming Qihang Education and Training School and Kunming Epoch
Giant Tutorial School in 2006 and 2009, respectively. Mr. Zhang established Kunming College Student Private Tutorial Services Station
and Kunming Xindenuo Accounting Training Center in 2003 and 2004, respectively. Mr. Zhang serves as a member of the Yunnan Provincial
Committee of the Chinese People&#8217;s Political Consultative Conference and a director of Long-Spring Institute of Learning and Human
Development of Tsinghua University. Mr. Zhang received his bachelor&#8217;s degree in accounting in 2006 and his master&#8217;s degree
in business administration in 2012 from Kunming University of Science and Technology. Mr. Zhang is currently pursuing his doctorate degree
in education from Tsinghua University.</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: 0.25in"><i>Mr.&#160;Tommy Zhou</i> has served as our
chief financial officer since October 2021 and our director since December 2021. Mr. Zhou had served as the joint chief financial officer
of our company since September 2021.&#160;Prior to joining our company, Mr. Zhou had served as the senior vice president at Tianfeng
Securities Co., Ltd. (SHA: 601162) from November 2020 to August 2021. From July 2019 to October 2020, Mr. Zhou served as an associate
director at China Innovative Capital Management Ltd. From July 2016 to July 2019, Mr. Zhou served as an investment manager at Sunshine
Asset Management Corporation Limited. From June 2013 to June 2015, Mr. Zhou served at multiple positions, including the last position
as a financial accountant at The Northwestern Mutual Life Insurance Company. Mr. Zhou received his bachelor&#8217;s degree in Economic
History from University of British Columbia in 2010, and a master&#8217;s degree in business administration from The George Washington
University in 2014.</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: 0.25in"><i>Mr.&#160;Pengwei Luo</i> has served as our
director since May 2021. Mr.&#160;Luo is the founder and the managing director of Spring River Greater China Fund, which he founded in
2014. Mr.&#160;Luo manages and supervises the daily operation of ten asset management companies since July 2020. From 2010 to 2014, Mr.&#160;Luo
served as a portfolio manager at Yinhua Fund Management Co., Ltd. From 2005 to 2009, Mr.&#160;Luo served as a portfolio manager at the
asset management department at Huatai United Securities Co., Ltd. From 2002 to 2004, Mr.&#160;Luo worked as a project manager at the
investment banking group of Guotai Junan International Holdings Limited, a company listed on the Hong Kong Stock Exchange (stock code:
1788). Mr.&#160;Luo received a master&#8217;s degree in economics from Jiangxi University of Finance and Economics in 2001.</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: 0.25in"><i>Mr. Guangzhou Zhao</i> has served as our independent
director since March 2021. Mr. Zhao is currently a professor at Kunming University of Science and Technology. Mr. Zhao has served as
an independent director of the board of Yunnan Tin Co., Ltd. (SZSE: 000960) from 2012 to 2020. From 2003 to 2009, he served as an independent
director of the board of Kunming Horti-Expo Garden Co., Ltd. (SZSE: 002293, currently known as Yunnan Tourism Co., Ltd.). From 2006 to
2017, Mr. Zhao served as the president of Kunming University of Science and Technology Oxbridge College. From 1994 to 2006, he served
as the deputy dean of Kunming University of Science and Technology School of Management and Economics. From 1992 to 1994, he served as
the deputy division director of Office of Science and Technology Administration of Yunnan Institute of Technology (currently known as
Kunming University of Science and Technology). From 1988 to 1990, he served as the deputy division director of Department of Management
of Yunnan Institute of Technology. Mr. Zhao received his bachelor&#8217;s degree in design and manufacture of tractors from Yunnan Institute
of Technology in 1982 and his master&#8217;s degree from the System Science Institute of China Science Academy in 1988.</p><div>

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

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><i>Mr. Yuanlin Hu</i> has served as our independent
director since March 2021. Mr. Hu is currently a professor for management and economics and a PhD supervisor at Kunming University of
Science and Technology. Mr. Hu has served as an executive director of the eighth board of directors of Yunnan Province Accounting Society
since 2017. Mr. Hu has served as the dean of department of accounting and a director of financial management institute at Kunming University
of Science and Technology since 2013. Mr. Hu received his bachelor&#8217;s degree in economics from Zhongnan University of Finance and
Economics in 1995, his master&#8217;s degree and PhD in management from Kunming University of Science and Technology in 2001 and 2010,
respectively.</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: 0.25in"><i>Ms. Jianping Zhang</i> has served as our education
inspector since April 2014. Prior to joining us, Ms. Zhang served as the principal of the Zhongying Middle School of Kunming Zhonghui
Education Group from March 2010 to March 2014. Ms. Zhang served as the principal of Kunming Experimental Middle School from July 2004
to December 2009. In 2006, Ms. Zhang was recognized as &#8220;Outstanding Teacher&#8221; by Kunming Education Bureau. Ms. Zhang received
her bachelor&#8217;s degree in mathematics from Yunnan Normal University in February 1980.</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: 0.25in">The business address of our directors and executive
officers is: No. 1-1, Tiyuan Road, Xishan District, Kunming, Yunnan Province 650228, the People&#8217;s Republic of China. No family
relationship exists between any of our directors and executive officers.</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"><b><span style="text-decoration:underline">B. Compensation</span></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Compensation of Directors and Executive Officers </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: 0.25in">For 2022, the aggregate cash compensation to
directors and executive officers was approximately RMB1.7 million (US$0.2 million). This amount consisted only of cash and did not include
any share-based compensation or benefits in kind. Each of our directors and officers is entitled to reimbursement for all necessary and
reasonable expenses properly incurred in the course of employment or service. We have not set aside or accrued any amount to provide
pension, retirement or other similar benefits to our executive officers and directors. Our PRC subsidiaries and affiliated entities are
required by law to make contributions equal to certain percentages of each employee&#8217;s salary for his or her pension insurance,
medical insurance, unemployment insurance and other statutory benefits and a housing provident fund. Our board of directors may determine
compensation to be paid to the directors and the executive officers. The compensation committee will assist the directors in reviewing
and approving the compensation structure for the directors and the executive officers.</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: 0.25in">For information regarding share awards granted
to our directors and officers, see &#8220;&#8212;Share Incentive Plan.&#8221;</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"><b>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-indent: 0.25in">In January 2021, our board of directors approved
the 2021 Share Incentive Plan to attract and retain the best available personnel, provide additional incentives to employees, directors
and consultants and promote the success of our business. Under the 2021 Share Incentive Plan (the &#8220;2021 Plan&#8221;), the maximum
aggregate number of shares which may be issued pursuant to all awards under the 2021 Plan shall be 3,524,435 ordinary shares, which constitutes
5.0% of the total outstanding ordinary shares of our company on an as-converted basis as of the date of the adoption of the 2021 Plan.
As of the date of this annual report, we did not grant any option to purchase our ordinary shares.</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: 0.25in">The following paragraphs describe the principal
terms of the 2021 Plan.</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: 0.25in"><b><i>Types of awards.</i></b> The 2021 Plan
permits the awards of options, restricted shares, restricted share unit or any other type of awards that the committee decides.</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-align: center"></p><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><b><i>Plan administration.</i></b> Our board
of directors or a committee of one or more members of the board of directors will administer the 2021 Plan. The committee or the full
board of directors, as applicable, will determine the participants to receive awards, the type and number of awards to be granted to
each participant, and the terms and conditions of each award grant.</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: 0.25in"><b><i>Award agreement.</i></b> Awards granted
under the 2021 Plan are evidenced by an award agreement that sets forth terms, conditions and limitations for each award, which may include
the term of the award, the provisions applicable in the event of the grantee&#8217;s employment or service terminates, and our authority
to unilaterally or bilaterally amend, modify, suspend, cancel or rescind the award.</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: 0.25in"><b><i>Eligibility.</i></b> We may grant awards
to our employees, directors and consultants of our company. However, we may grant options that are intended to qualify as incentive share
options only to our employees and employees of our parent companies and subsidiaries.</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: 0.25in"><b><i>Vesting schedule.</i></b> In general, the
plan administrator determines the vesting schedule, which is specified in the relevant award agreement.</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: 0.25in"><b><i>Exercise of options.</i></b> The plan administrator
determines the exercise price for each award, which is stated in the award agreement. The vested portion of option will expire if not
exercised prior to the time as the plan administrator determines at the time of its grant. However, the maximum exercisable term is 10
years from the date of a grant.</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: 0.25in"><b><i>Transfer restrictions.</i></b> Awards may
not be transferred in any manner by the recipient except under limited circumstances, including by will or the laws of descent and distribution,
unless otherwise provided by the plan administrator.</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: 0.25in"><b><i>Termination and amendment of the 2021 Plan.
</i></b>Unless terminated earlier, the 2021 Plan has a term of 10 years. Our board of directors has the authority to amend or terminate
the plan. However, no such action may adversely affect in any material way any awards previously granted unless agreed by the recipient.</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"><b>Share Options</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">In April 2021, we granted an option and right
to buy an equivalent of 1,850,000 ADSs, as represented by our Class A ordinary shares during the option period for the full price equivalent
to US$10.00 per ADS to Spring River Greater China Fund, where Mr. Pengwei Luo is the founder and managing director. The option period
will expire on May 8, 2025, and must be exercised if our average listed price in any consecutive 30 business days is greater than US$15.00
per ADS. When evaluating the value of the option, we used the binomial option pricing model, and deemed that the option had no material
value as of December 31, 2022, since our listed price is sufficiently below the exercise price of US$10.00 per ADS and therefore recorded
no related compensation expenses.</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"><b><span style="text-decoration:underline">C. Board Practices</span></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>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-indent: 0.25in">Our board of directors consists of five directors.
A director is not required to hold any shares in our company to qualify to serve as a director. A director may vote with respect to any
contract, proposed contract or arrangement notwithstanding that he may be interested therein, and if he does so his vote shall be counted
and he may be counted in the quorum at any meeting of our directors at which any such contract or proposed contract or arrangement is
considered, provided (1) such director, if his interest (whether direct or indirect) in such contract or arrangement is material, has
declared the nature of his interest at the earliest meeting of the board at which it is practicable for him to do so, either specifically
or by way of a general notice and (2) if such contract or arrangement is a transaction with a related party, such transaction has been
approved by the audit committee. Our directors may exercise all the powers of the company to borrow money, mortgage or charge its undertaking,
property and uncalled capital, and issue debentures, debenture share and other securities whenever money is borrowed or as security for
any debt, liability or obligation of the company or of any third party. We have no service contract with any of our director providing
for benefits upon termination of employment.</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-align: center"></p><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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-indent: 0.25in">We have established three committees under the
board of directors: an audit committee, a compensation committee and a nominating and corporate governance committee. We have adopted
a charter for each of the three committees. Each committee&#8217;s members and functions are described below.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><b><i>Audit Committee</i></b>. Our audit committee
consists of Mr. Yuanlin Hu and Mr. Guangzhou Zhao, and is chaired by Mr. Yuanlin Hu. Each of the members of the audit committee meets
the independence standards under Rule 10A-3 under the Exchange Act. We have determined that Mr. Yuanlin Hu qualifies as an &#8220;audit
committee financial expert.&#8221;</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: 0.25in">The audit committee oversees our accounting and
financial reporting processes and the audits of the financial statements of our company. The audit committee is responsible for, among
other things:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-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">
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    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: left"><span style="font-size: 10pt">selecting the independent registered public accounting firm and pre-approving
    all auditing and non-auditing services permitted to be performed by the independent registered public accounting firm;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; 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="text-align: left; width: 24px">&#160;</td>
    <td style="text-align: left; width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: left"><span style="font-size: 10pt">reviewing with the independent registered public accounting firm any audit
    problems or difficulties and management&#8217;s response;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; 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="text-align: left; width: 24px">&#160;</td>
    <td style="text-align: left; width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: left"><span style="font-size: 10pt">reviewing and approving all proposed related party transactions, as defined
    in Item 404 of Regulation&#160;S-K under the Securities Act;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; 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="text-align: left; width: 24px">&#160;</td>
    <td style="text-align: left; width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: left"><span style="font-size: 10pt">discussing the annual audited financial statements with management and
    the independent registered public accounting firm;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; 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="text-align: left; width: 24px">&#160;</td>
    <td style="text-align: left; width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: left"><span style="font-size: 10pt">reviewing major issues as to the adequacy of our internal controls and
    any special audit steps adopted in light of material control deficiencies;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; 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="text-align: left; width: 24px">&#160;</td>
    <td style="text-align: left; width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: left"><span style="font-size: 10pt">reviewing and reassessing annually the adequacy of our audit committee
    charter;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; 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="text-align: left; width: 24px">&#160;</td>
    <td style="text-align: left; width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: left"><span style="font-size: 10pt">meeting separately and periodically with management and the independent
    registered public accounting firm;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; 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="text-align: left; width: 24px">&#160;</td>
    <td style="text-align: left; width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: left"><span style="font-size: 10pt">monitoring compliance with our code of business conduct and ethics, including
    reviewing the adequacy and effectiveness of our procedures to ensure proper compliance; and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; 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="text-align: left; width: 24px">&#160;</td>
    <td style="text-align: left; width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: left"><span style="font-size: 10pt">reporting regularly to the board.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 18pt"><b><i>Compensation Committee</i></b>. Our compensation
committee consists of Messrs. Shaowei Zhang, Guangzhou Zhao, and Yuanlin Hu, and is chaired by Mr. Shaowei Zhang.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0; text-indent: 0.25in">The compensation committee
assists the board in reviewing and approving the compensation structure, including all forms of compensation, relating to our directors
and executive officers. Our chief executive officer may not be present at any committee meeting during which their compensation is deliberated
upon. The compensation committee is responsible for, among other things:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0; 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">
    <td style="text-align: left; width: 24px">&#160;</td>
    <td style="text-align: left; width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: left"><span style="font-size: 10pt">reviewing and approving, or recommending to the board for its approval,
    the total compensation package for our chief executive officer and other executive officers;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; 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="text-align: left; width: 24px">&#160;</td>
    <td style="text-align: left; width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: left"><span style="font-size: 10pt">reviewing and recommending to the board for determination with respect
    to the compensation of our non-employee directors;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; 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="text-align: left; width: 24px">&#160;</td>
    <td style="text-align: left; width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: left"><span style="font-size: 10pt">reviewing periodically and approving any incentive compensation or equity
    plans, programs or similar arrangements; and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; 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="text-align: left; width: 24px">&#160;</td>
    <td style="text-align: left; width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: left"><span style="font-size: 10pt">selecting compensation consultant, legal counsel or other adviser only
    after taking into consideration all factors relevant to that person&#8217;s independence from management.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; 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: 18pt"><b><i>Nominating and Corporate Governance Committee</i></b>.
Our nominating and corporate governance committee consists of Messrs. Shaowei Zhang, Guangzhou Zhao, and Yuanlin Hu, and is chaired by
Mr. Shaowei Zhang.</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-align: center"></p><div>


</div><!-- Field: Page; Sequence: 104 --><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>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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-indent: 0.25in">The nominating and corporate governance committee
assists the board in selecting individuals qualified to become our directors and in determining the composition of the board and its
committees. The nominating and corporate governance committee is responsible for, among other things:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">recommending nominees to the board for election or re-election to the board, or for appointment
    to fill any vacancy on the board;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 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: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">reviewing annually with the board the current composition of the board with regards to characteristics
    such as independence, age, skills, experience and availability of service to us;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 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: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">selecting and recommending to the board the names of directors to serve as members of the audit
    committee and the compensation committee, as well as of the nominating and corporate governance committee itself;</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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">developing and reviewing the corporate governance principles adopted by the board and advising
    the board with respect to significant developments in the law and practice of corporate governance and our compliance with such laws
    and practices; 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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">evaluating the performance and effectiveness of the board as a whole.</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>Terms of Directors and Officers </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: 0.25in">Our directors may be elected by a resolution
of our board of directors, or by an ordinary resolution of our shareholders, pursuant to our memorandum and articles of association.
Our directors are not subject to a term of office and hold office until such time as they are removed from office by ordinary resolution
of the shareholders. A director will cease to be a director if, among other things, the director (1) becomes bankrupt or makes any arrangement
or composition with his creditors; (2) dies or is found by our company to be or becomes of unsound mind, (3) resigns his office by notice
in writing to the company, (4) without special leave of absence from our board, is absent from three consecutive board meetings and our
board of directors resolve that his office be vacated; (5) is prohibited by law from being a director; or (6) is removed from office
pursuant to any other provision of our memorandum and articles of association. Our officers are elected by and serve at the discretion
of the board of directors.</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"><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-indent: 0.25in">Under Cayman Islands law, our directors owe to
us fiduciary duties, including a duty of loyalty, a duty to act honestly and a duty to act in what they consider in good faith to be
in our best interests. Our directors must also exercise their powers only for a proper purpose. Our directors also owe to our company
a duty to act with skill and care. It was previously considered that a director need not exhibit in the performance of his duties a greater
degree of skill than may reasonably be expected from a person of his knowledge and experience. However, English and Commonwealth courts
have moved towards an objective standard with regard to the required skill and care and these authorities are likely to be followed in
the Cayman Islands. In fulfilling their duty of care to us, our directors must ensure compliance with our memorandum and articles of
association, as amended and restated from time to time, and the class rights vested thereunder in the holders of the shares. Our company
may have the right to seek damages if a duty owed by our directors is breached. A shareholder may in certain limited exceptional circumstances
have the right to seek damages in our name 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-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Our board of directors has all the powers necessary
for managing, and for directing and supervising, our business affairs. The functions and powers of our board of directors include, among
others:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-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">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">convening shareholders&#8217; annual general meetings and reporting its work to shareholders at
    such meetings;</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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">declaring dividends and distributions;</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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">appointing officers and determining the term of office and its responsibilities of the officers;</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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">exercising the borrowing powers of our company and mortgaging the property of our company; 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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">approving the transfer of shares in our company, including the registration of such shares in our
    share register.</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>Employment Agreements and Indemnification Agreements </b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">We have entered into employment agreements with
our executive officers. Each of our executive officers is employed for a specified time period, which will be automatically extended
for successive one-year terms unless either party gives the other party a prior written notice to terminate employment. We may terminate
the employment for cause, at any time, without advance notice or remuneration, for certain acts of the executive officer, including conviction
or pleading of guilty to a felony, fraud, misappropriation or embezzlement, negligent or dishonest act to our detriment, misconduct or
failure to perform his or her duty, disability, or death. An executive officer may terminate his or her employment at any time with a
one-month prior written notice if there is a material and substantial reduction in such executive officer&#8217;s existing authority
and responsibilities or at any time if the termination is approved by our board of directors.</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 -->98<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Each executive officer has agreed to hold, both
during and after the employment agreement expires, in strict confidence and not to use or disclose to anyone, any confidential information
of our company, except for the benefits of our company or to other employees of us who have a need to know such confidential information
in connection with our business. Each executive officer has also agreed to assign to us all his or her all inventions, improvements,
designs, original works of authorship, formulas, processes, compositions of matter, computer software programs, databases, mask works
and trade secrets.</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: 0.25in">Each executive officer has also agreed that,
during his or her term of employment and for a period of two years after terminating employment with us, such executive officer will
not, without our prior written consent, (1) approach our suppliers, clients, customers or contacts or other persons or entities introduced
to the executive officer in his or her capacity as a representative of us for the purpose of doing business with such persons or entities
that will harm our business relationships with these persons or entities; (2) assume employment with or provide services to any of our
competitors, or engage, whether as principal, partner, licensor or otherwise, any of our competitors, without our express consent; or
(3) seek directly or indirectly, to solicit the services of any of our employees who is employed by us on or after the date of the executive
officer&#8217;s termination, or in the year preceding such termination, without our express consent.</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: 0.25in">In addition, we have entered into indemnification
agreements with our directors and executive officers, pursuant to which we will agree to indemnify our directors and executive officers
against certain liabilities and expenses incurred by such persons in connection with claims made by reason of their being such a director
or executive officer.</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"><b><span style="text-decoration:underline">D. Employees</span></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 18pt">As of December 31, 2022, we had 1,816 full-time
employees for our continuing operations. The following table sets forth the breakdown of our employees for our continuing operations as
of December 31, 2022 by function.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold">Function</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Number of<br/> Employees</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">% of Total</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; text-align: justify">Teachers</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">1,358</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">74.7</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify">Administrative staff</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">290</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">16.0</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">Supporting staff</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">168</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">9.2</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="font-weight: bold; padding-bottom: 4pt">Total</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">1,816</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">100.0</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">&#160;</td></tr>
  </table><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Our administrative staff primarily comprise our
management and administrative personnel and principals. Our supporting staff primarily comprise personnel providing support and services
in connection with our students&#8217; campus life.</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: 0.25in">As required by PRC laws and regulations, we participate
in various employee social security plans for our employees that are administered by local governments, including housing, pension, medical
insurance and unemployment insurance. We believe we maintain a good working relationship with our employees.</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"><b><span style="text-decoration:underline">E. Share Ownership</span></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">The following table sets forth information concerning
the beneficial ownership of our ordinary shares, as of March 31, 2023, for:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">each of our directors and 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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">each person known to us to beneficially own 5% or more of our ordinary shares.&#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: 0.25in">The percentage of beneficial ownership in the
table below is calculated based on 86,838,700 ordinary shares, comprising 54,577,170 Class A ordinary shares and 32,261,530 Class B ordinary
shares outstanding as of March 31, 2023, but excludes the treasury shares and the ordinary shares reserved for issuance under our 2021
Share Incentive Plan.</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-align: center"></p><div>


</div><!-- Field: Page; Sequence: 106 --><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 -->99<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Beneficial ownership is determined in accordance
with the rules and regulations of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership
of that person, we have included shares that the person has the right to acquire within 60 days of March 31, 2023, including through
the exercise of any option, warrant or other right or the conversion of any other security. These shares, however, are not included in
the computation of the percentage ownership of any other person.</p><div>

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

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td>
    <td>&#160;</td>
    <td colspan="18" style="border-bottom: black 1.5pt solid; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Ordinary shares beneficially owned</b></span></td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="white-space: nowrap; text-align: center">&#160;</td>
    <td style="white-space: nowrap">&#160;</td>
    <td colspan="2" style="white-space: nowrap; border-bottom: black 1.5pt solid; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Class&#160;A<br/>
ordinary<br/>
shares</b></span></td>
    <td style="white-space: nowrap">&#160;</td>
    <td style="white-space: nowrap">&#160;</td>
    <td colspan="2" style="white-space: nowrap; border-bottom: black 1.5pt solid; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Class&#160;B<br/>
ordinary<br/>
shares</b></span></td>
    <td style="white-space: nowrap">&#160;</td>
    <td style="white-space: nowrap">&#160;</td>
    <td colspan="2" style="white-space: nowrap; border-bottom: black 1.5pt solid; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Total<br/>
ordinary<br/>
shares<br/>
on&#160;an&#160;<br/>
as-converted<br/>
basis</b></span></td>
    <td style="white-space: nowrap">&#160;</td>
    <td style="white-space: nowrap">&#160;</td>
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ordinary<br/>
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power***</b></span></td>
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  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 18pt; text-indent: -9pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Tommy Zhou</span></td>
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    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td>
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    <td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: #CCEEFF">
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    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">0.83</span></td>
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  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 18pt; text-indent: -9pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Guangzhou Zhao</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: #CCEEFF">
    <td style="padding-left: 18pt; text-indent: -9pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Yuanlin Hu</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: #CCEEFF">
    <td style="padding-left: 18pt; text-indent: -9pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Jianping Zhang</span></td>
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    <td style="border-bottom: black 1.5pt solid">&#160;</td>
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    <td>&#160;</td>
    <td style="border-bottom: black 1.5pt solid">&#160;</td>
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    <td>&#160;</td>
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    <td>&#160;</td>
    <td style="border-bottom: black 1.5pt solid">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*</span></td>
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    <td>&#160;</td>
    <td style="border-bottom: black 1.5pt solid">&#160;</td>
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    <td style="padding-left: 9pt; text-indent: -9pt">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: #CCEEFF">
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    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">93.15</span></td>
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  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 9pt; text-indent: -9pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Principal Shareholders:</b></span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: #CCEEFF">
    <td style="padding-left: 18pt; text-indent: -9pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Visionsky Group Limited<sup>(1)</sup></span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">27,769,020</span></td>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">27,769,020</span></td>
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    <td>&#160;</td>
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    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">79.36</span></td>
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  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 18pt; text-indent: -9pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Long-Spring Education Management Limited<sup>(3)</sup></span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">7,054,570</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">7,054,570</span></td>
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    <td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: #CCEEFF">
    <td style="padding-left: 18pt; text-indent: -9pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Long-Spring Education International Limited<sup>(4)</sup></span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4,770,250</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4,770,250</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">5.49</span></td>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*</span></td>
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  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 18pt; text-indent: -9pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Minglin Wu<sup>(5)</sup></span></td>
    <td>&#160;</td>
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    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4,470,760</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td>
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    <td>&#160;</td>
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    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4,470,760</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*</span></td>
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  <tr style="vertical-align: bottom; background-color: #CCEEFF">
    <td style="padding-left: 18pt; text-indent: -9pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Brightenwit Group Limited<sup>(1)</sup></span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4,492,510</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4,492,510</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">5.17</span></td>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">12.84</span></td>
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  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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">
    <td style="width: 0.25in"><span style="font-size: 10pt">*</span></td>
    <td><span style="font-size: 10pt">Aggregate number of shares accounts for less than 1% of our total ordinary shares on an&#160;as-converted&#160;basis
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  </table><div>

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

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-size: 10pt">**</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Except as indicated otherwise below, the business address of our directors
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    of China.</span></td></tr>
  </table><div>

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

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-size: 10pt">***</span></td>
    <td><span style="font-size: 10pt">For each person or group included in this column, percentage of total voting power represents voting
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    A and Class B ordinary shares as a single class. Each holder of our Class A ordinary shares is entitled to one vote per share. Each
    holder of our Class B ordinary shares is entitled to 20 votes per share. Our Class B ordinary shares are convertible at any time
    by the holder into Class A ordinary shares on a one-for-one basis, while Class A ordinary shares are not convertible into Class B
    ordinary shares under any circumstances.</span></td></tr>
  </table><div>

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

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">(1)</span></td><td style="text-align: left"><span style="font-size: 10pt">Represents (i) 27,769,020 Class
B ordinary shares directly held by Visionsky Group Limited, a British Virgin Islands company wholly owned by Mr.&#160;Shaowei Zhang;
(ii) 4,492,510 Class B ordinary shares directly held by Brightenwit Group Limited, a British Virgin Islands company wholly owned by Ms.
Yu Wu. Ms.&#160;Yu Wu is the spouse of Mr.&#160;Shaowei Zhang; (iii) 99,940 Class A ordinary shares directly held by Long-Spring Education
Management Limited, a British Virgin Islands company in which Mr.&#160;Shaowei Zhang has approximately 1.56% equity interest; (iv) 514,150
Class A ordinary shares directly held by Long-Spring Education Technology Limited, a British Virgin Islands company in which Mr.&#160;Shaowei
Zhang has approximately 24.64% equity interest; and (v) 68,870 Class A ordinary shares directly held by Long-Spring Education Consulting
Limited, a British Virgin Islands company in which Mr.&#160;Shaowei Zhang has approximately 23.08% equity interest. Mr.&#160;Shaowei
Zhang disclaims beneficial ownership of the ordinary shares held by Brightenwit Group Limited. Ms. Yu Wu disclaims beneficial ownership
of the ordinary shares held by Visionsky Group Limited. The registered office of Visionsky Group Limited, Brightenwit Group Limited,
Long-Spring Education Management Limited, Long-Spring Education Technology Limited and Long-Spring Education Consulting Limited is at
Craigmuir Chambers, Road Town, Tortola, VG 1110, British Virgin Islands.</span></td>
</tr></table><div>

</div><p style="margin-top: 0; margin-bottom: 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: 24px"><span style="font-size: 10pt">(2)</span></td>
    <td><span style="font-size: 10pt">Represents 5,840,676 Class A ordinary shares directly held by Spring River Greater China Fund,
    as reported in a Schedule 13G filed by them on April 29, 2021. Spring River Greater China Fund is a Cayman Islands company with the
    principal business office address at 12A1, OfficePlus@Mongkok, 998 Canton Road, Mongkok, Hong Kong. </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><!-- Field: Page; Sequence: 107 --><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 -->100<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

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

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">(3)</span></td><td style="text-align: left"><span style="font-size: 10pt">Represents 7,054,570 Class A ordinary
shares held by Long-Spring Education Management Limited. Long-Spring Education Management Limited is a British Virgin Islands company
wholly owned as to 1.56% by Mr. Shaowei Zhang (see footnote (1)) and certain non-management employees, including Kang Su (41.36%), Kai
Liu (16.71%), Yang Gui (10.20%), Bin Liu (9.49%), Chaomin Shi (9.49%), Shaodong Zhang (7.67%), Xuehua Zhang (1.84%), Hong Tan (0.71%)
and Baolong Song (0.71%), each of whose address is c/o Long-Spring Education Management Limited, Craigmuir Chambers, Road Town, Tortola,
VG 1110, British Virgin Islands. Each of the foregoing individuals may be deemed to have the voting and dispositive power over a portion
of the underlying ordinary shares in relation to his or her shareholding percentage in the entity.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0"></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="text-align: left; width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">(4)</span></td><td style="text-align: left"><span style="font-size: 10pt">Represents 4,770,250 Class A ordinary
shares held by Long-Spring Education International Limited. Long-Spring Education International Limited is a British Virgin Islands company
wholly owned by certain of our non-management employees, including Minglin Wu (90.85%), Kang Su (8.35%), Xiaoli Li (0.60%) and Qiong
Wang (0.20%), each of whose address is c/o Long-Spring Education International Limited, Craigmuir Chambers, Road Town, Tortola, VG 1110,
British Virgin Islands. Each of the foregoing individuals may be deemed to have the voting and dispositive power over a portion of the
underlying ordinary shares in relation to his or her shareholding percentage in the entity.</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: 0.25in">To our knowledge, as of March 31, 2023, a total
of 37,767,690 Class A ordinary shares are held by one record holder in the United States, which was The Bank of New York Mellon, the
depositary of the ADSs, representing approximately 43.5% of our total outstanding shares. None of our shareholders has informed us that
it is affiliated with a registered broker-dealer or is in the business of underwriting securities. We are not aware of any arrangement
that may, at a subsequent date, result in a change of control of our company.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><span style="text-decoration:underline">F. Disclosure of a Registrant&#8217;s Action to Recover Erroneously
Awarded Compensation</span></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: 0.25in">Not applicable.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><span style="text-decoration:underline">A. Major Shareholders</span></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 18pt">See &#8220;Item 6. Directors, Senior Management
and Employees&#8212;E. Share Ownership.&#8221;</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><span style="text-decoration:underline">B. Related Party Transactions </span></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Transactions with Certain Related Parties</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Advances to/repayment from/expenses paid on behalf of Mr. Shaowei
Zhang, his family members or his affiliated entities </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: 0.25in">We, from time to time, provide short-term financing
to Mr. Shaowei Zhang, his family members or affiliated entities to support their business operations and working capital needs. After
considering the cash on hand and forecasted cash flows to fund our operations, we provided financing to these parties during the periods
presented. The financing was provided in the form of interest-free advances or expenses paid on their behalf. The financing does not
have a fixed term and is repayable upon demand. The related party companies have historically repaid advances and expenses upon demand.
In 2020, 2021 and 2022, we provided short-term financing to Mr. Shaowei Zhang or his affiliated entities and his family members, including
primarily the following:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">Yunnan Huayiweiming Technology Co., Ltd.</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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">Yunnan Long-Spring Education Technology Co., Ltd.</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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">Kunming Chenggong Times Giant Tutorial School Co., Ltd.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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

</div><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">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">Long-Spring Education Group</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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">Yunnan Qidi Primary School</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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">Beijing Tomorrow Future Plus Education Technology Co., Ltd.</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">Beijing Long-Spring Education Technology Group Co., Ltd.</span></td></tr>
</table><div>

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

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

</div><!-- Field: Page; Sequence: 108 --><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 -->101<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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"></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: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">Yunnan Shaowei Education Information Consulting Co., Ltd.</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">Zunyi Huichuan District Long-Spring Jincheng Education Consulting Co., Ltd.</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">Mr. Shaodong Zhang</span></td></tr>

<tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td></tr>
<tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify">Lihua Family Education Technology (Beijing) Co., Ltd.</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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">&#9679;</td><td style="text-align: justify">Chengdu First Carbon New Technology Co., Ltd.</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; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify">Yunnan Three Three One Education Technology Co., Ltd.</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; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify">Zunyi Huichuan Hengshi Education and Training School</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; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify">Beijing Long-Spring International Education Technology Research
Institute</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; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify">Kunming Xinxiaoling Human Resources Co., Ltd.</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; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify">Mengzi Long-Spring Experimental Secondary School</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; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify">Shaanxi Long-Spring Enterprise Management Consulting Partnership
(Limited Partnership)</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; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify">Zunyi Huichuan Long-Spring Jincheng Education Consulting
Co., Ltd.</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; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify">Zunyi Huichuan District Changshui Jincheng Education Consulting
Co., Ltd.</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; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify">Campus Reserve Fund</td>
</tr></table><div>

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">As of December 31, 2020, 2021 and 2022, the remaining
balance of our financing to such related parties was RMB78.9 million, RMB11.7 million and RMB73.5 million, respectively.</p><div>

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Disposal of subsidiaries to Mr. Zhang&#8217;s affiliated entities
</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: 0.25in">In 2018, Yunnan Zhongchuang Education Tutorial
School sold certain of its business to Kunming Chenggong Times Giant Tutorial School Co., Ltd., an entity controlled by Mr. Shaowei Zhang,
at a consideration of RMB3.4 million. In 2018, Long-Spring Education sold its 100% equity interest in Beijing Long-Spring Education Technology
Co., Ltd. to Yunnan Long-Spring Education Technology Co., Ltd., an entity controlled by Mr. Shaowei Zhang, at a consideration of RMB0.7
million. In 2018, Long-Spring Education sold its 100% equity interest in Kunming Chenggong Times Giant Tutorial School Co., Ltd. to Yunnan
Long-Spring Education Technology Co., Ltd. at a consideration of nil. In June 2021, Yunnan Long-Spring Education Technology Co., Ltd.
sold its 100% equity interest in Kunming Chenggong Times Giant Tutorial School Co., Ltd., Wenshan Century Times Giant Tutorial School
Co., Ltd., and Kunming Wuhua District Zhuorui Cultural Training School Co., Ltd., all of which are entities controlled by Mr. Shaowei
Zhang, to Long-Spring Education at a consideration of RMB2.5 million, RMB12.5 million, RMB5.0 million, respectively. As of December 31,
2022, the remaining balance of the consideration amount was nil.</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"><b><i>Advances to certain senior management </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: 18pt">After considering the cash on hand and forecasted
cash flows to fund our operations, we provided financing in the form of interest-free advances to certain members of our senior management.
As of December 31, 2020, 2021 and 2022, the net remaining balance of our financing to such related parties was RMB2.1 million, RMB2.3
million and RMB9.1 million, respectively. These advances are secured either by credit or by their shares in the former parent or other
assets.</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: 0.25in"></p><div>

</div><!-- Field: Page; Sequence: 109 --><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 -->102<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><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"><b><i>Advances from/payment of advance from Mr. Zhang or his affiliated
entities </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: 0.25in">We, from time to time, receive short-term financing
from and receive payment from third parties on behalf of Mr. Shaowei Zhang or his affiliated entities and his family members to support
our business operations and working capital needs. The financing was provided in the form of interest-free loans. The advances and loans
do not have a fixed term and are repayable upon demand. We have historically repaid advances upon demand. In 2020, 2021 and 2022, we
have received short-term financing from and received payment from third parties on behalf of Mr. Shaowei Zhang or his affiliated entities
and his family members, including primarily the following:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">Long-Spring Education Group</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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">Yunnan Qidi Primary School</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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">Yunnan Three Three One Education Technology Co., Ltd.</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">Mr. Shaodong Zhang</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">Chengdu Longquanyi District Hengshi Education Training School Co., Ltd.</span></td></tr>
  </table><div>

</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>
</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>Yunnan Long-Spring
                                            Education Technology Co., Ltd.</td></tr></table><div>

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

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>Yunnan Preparatory
                                            School for Studying Abroad</td></tr></table><div>

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

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>Beijing Long-Spring
                                            International Education Technology Research Institute</td></tr></table><div>

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

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>Beijing Tomorrow Future
                                            Plus Education Technology Co., Ltd.</td></tr></table><div>

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

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>Lihua Family Education
                                            Technology (Beijing) Co., Ltd.</td></tr></table><div>

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

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>Chengdu First Carbon New
                                            Technology Co., Ltd.</td></tr></table><div>

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

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>Campus Reserve Fund</td></tr></table><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: 0.25in">As of December 31, 2020, 2021 and 2022, the remaining
balance of our advance loans from such related parties was RMB51.6 million, RMB17.9 million and RMB51.7 million, respectively.</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"><b>Contractual Arrangements </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: 18pt">See &#8220;Item 4. Information on the Company&#8212;C.
Organizational Structure&#8212;Our Contractual Arrangements.&#8221;</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"><b>Shareholders Agreement</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: 0.25in">In January 2021, we entered into a shareholders
agreement with certain holders of our ordinary shares, including Longwater Topco B.V., and our subsidiaries and affiliated entities.
The shareholders agreement provides certain special rights to Longwater Topco B.V., including right of first refusal and co-sale rights,
put option and drag-along rights, preemptive rights, and the right to appoint directors to our board of directors, and contains provisions
governing our board of directors and other corporate governance matters. The shareholders agreement (including the special rights thereunder)
was terminated in its entirety after our initial public offering, pursuant to a termination agreement that we concurrently signed with
the parties under the shareholders agreement.</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"><b>Registration Rights Agreement </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: 0.25in">We granted certain registration rights to Longwater
Topco B.V. Set forth below is a description of the registration rights granted under the registration rights agreement.</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: 0.25in"><i>Demand registration rights for registration
on Form F-1</i>. At any time or from time to time after six months following the closing of our initial public offering, holders of registrable
securities then outstanding have the right to demand that we file a registration statement of all registrable securities that the holders
request to be registered and included in such registration statement by written notice, provided that the anticipated aggregate gross
offering price pursuant to such demand registration shall be no less than US$5.0 million. Upon such request, we shall use our best efforts
to cause the registrable shares specified in the request to be registered and/or qualified for sale and distribution. We are obligated
to effect no more than three demand registrations on Form F-1.</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-align: center"></p><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><i>Demand registration rights for registration
on Form F-3.</i> If we qualify for registration on Form F-3, any registrable holder may make a written request to demand that we file
a registration statement on Form F-3, provided that the anticipated aggregate gross offering price pursuant to such registration shall
be no less than US$5.0 million. Upon such request, we shall use our best efforts to cause the registrable shares specified in the request
to be registered and/or qualified for sale and distribution by the registrable holder from time to time in accordance with the methods
of distribution elected by such registrable holder and set forth in the registration statement. We are obligated to consummate no more
than two registrations on Form F-3.</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: 0.25in"><i>Piggyback registration rights</i>. If we propose
to file a registration statement for a public offering of our securities, we shall promptly, but in no event less than 20 days prior
to the proposed date of filing of such registration statement, give each registrable holder written notice of such registration. We shall
offer such registrable holders the opportunity to register under such registration statement or include in such offering such number
of registrable shares as the registrable holders may request in writing delivered to the us within 10 days after the date that our notice
has been delivered.</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: 0.25in"><i>Expenses of registration</i>. We will generally
bear all registration expenses, other than underwriting discounts, selling commissions, expenses charged by the depositary bank, and
applicable transfer tax.</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: 0.25in"><i>Termination of registration rights</i>. The
demand registration rights shall terminate with respect to a registrable holder upon the earlier of (1) the date on which such registrable
holder holds no registrable share, or (2) the date that is the fifth anniversary following the consummation of our initial public offering.</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"><b>Employment Agreements and Indemnification Agreements </b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 18pt">See &#8220;Item 6. Directors, Senior Management
and Employees&#8212;C. Board Practices&#8212;Employment Agreements and Indemnification Agreements.&#8221;</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"><b>Share Incentive Plans </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: 18pt">See &#8220;Item 6. Directors, Senior Management
and Employees&#8212;B. Compensation&#8212;Share Incentive Plan.&#8221;</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"><b><span style="text-decoration:underline">C. Interests of Experts and Counsels</span></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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 8. FINANCIAL INFORMATION</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><span style="text-decoration:underline">A. Consolidated Statements and Other Financial Information</span></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">We have appended consolidated financial statements
filed as part of this annual report.</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: 18pt">Due to the effectiveness of the Implementation Rules, we have concluded
that we have lost control over the Affected Entities as from September 1, 2021, which primarily include the middle schools providing compulsory
education and the sponsor entities within China that are affected by the Implementation Rules. Consequently, we classified the operation
for the Affected Entities as discontinued operations. We have determined that, in substance, we had ceased to recognize revenues for all
activities related to the Affected Entities and had discontinued all business activities with such entities by September 1, 2021 except
for the continued provision of essential services to keep these schools in normal operations. In 2022, we had to discontinue some operations
due to regulatory changes and management decisions. Given such change, financial information for prior years was reclassified to conform
to the current year&#8217;s presentation.</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"><b>Legal and Other Proceedings </b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">See &#8220;Item&#160;4. Information on the Company&#8212;B. Business
Overview&#8212;Legal Proceedings.&#8221;</p><div>

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

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

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><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"><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-indent: 18pt">Our board of directors has complete discretion in
deciding the payment of any future dividends, subject to certain requirements of Cayman Islands law. In addition, our shareholders may
by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our board of directors. Under Cayman Islands
law, a Cayman Islands exempted company may pay a dividend out of either profit or share premium account, provided that in no circumstances
may a dividend be paid if this would result in the company being unable to pay its debts as they fall due in the ordinary course of business.
The declaration and payment of dividends will depend upon, among other things, our future operations and earnings, capital requirements
and surplus, our financial condition, contractual restrictions, general business conditions and other factors as our board of directors
may deem relevant. See &#8220;Item 10. Additional Information&#8212;B. Memorandum and Articles of Association.&#8221;</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: 0.25in">We declared dividends of US$24.2 million and
paid such dividends, together with the previously declared but unpaid amount of RMB10.4 million, totaling US$25.7 million, to Longwater
Topco B.V. in the amount of US$7.5 million and to other shareholders in the amount of US$18.2 million in the first quarter of 2021.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 18pt">We declared dividends of US$1.24 million, net of
10.0% withholding tax and paid such dividends to the holders of the our ordinary shares (including those represented by the ADSs) in October
2022.</p><div>

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 18pt">We are a holding company incorporated in the Cayman
Islands. We may rely on dividends from our subsidiaries in China for our cash requirements, including any payment of dividends to our
shareholders. PRC regulations may restrict the ability of our PRC subsidiaries to pay dividends to us or of our subsidiaries in China
to pay cash dividend payments to us. See &#8220;Item 3. Key Information&#8212;D. Risk Factors&#8212;Risks Related to Our Corporate Structure&#8212;We
may rely on dividends paid by our PRC subsidiaries to fund cash and financing requirements. Any limitation on the ability of our PRC subsidiaries
to pay dividends to us could have a material adverse effect on our ability to conduct our business and to pay dividends to holders of
the ADSs and our ordinary shares.&#8221;</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: 18pt">If we pay any dividends on our ordinary shares,
we will pay those dividends which are payable in respect of the ordinary shares underlying the ADSs to the depositary, as the registered
holder of such ordinary shares, and the depositary then will pay such amounts to the ADS holders in proportion to the ordinary shares
underlying the ADSs held by such ADS holders, subject to the terms of the deposit agreement, including the fees and expenses payable thereunder.
See &#8220;Item 12. Description of Securities Other than Equity Securities&#8212;D. American Depositary Shares.&#8221; Cash dividends
on our ordinary shares, if any, will be paid in U.S. dollars.</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"><b><span style="text-decoration:underline">B. Significant Changes</span></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Except as disclosed elsewhere in this annual
report, we have not experienced any significant changes since the date of our audited consolidated financial statements included in this
annual report.</p><div>

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

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

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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 9. THE OFFER AND LISTING</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><span style="text-decoration:underline">A. Offer and Listing Details </span></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: 18pt">The ADSs (each representing three Class A ordinary shares) were listed
for trading on the NYSE under the symbol &#8220;FHS&#8221; from March 2021 to November 2022. On November 7, 2022, we were notified by
the NYSE that the staff of the NYSE Regulation has determined to commence proceedings to delist the ADSs. Trading in the ADSs was suspended
after the market close on the NYSE on November 7, 2022. On November 22, 2022, we were delisted from the NYSE when the staff of the New
York Stock Exchange LLC filed a Form&#160;25 Notification of Delisting. The ADSs have since then been quoted on the OTC Pink Limited Information
under the symbol &#8220;FHSEY.&#8221;</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"><b><span style="text-decoration:underline">B. Plan of Distribution </span></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: 0.25in">Not applicable.</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"><b><span style="text-decoration:underline">C. Markets </span></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: 18pt">The ADSs are currently quoted on the OTC Pink Limited Information under
the symbol &#8220;FHSEY.&#8221;</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"><b><span style="text-decoration:underline">D. Selling Shareholders </span></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: 0.25in">Not applicable.</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"><b><span style="text-decoration:underline">E. Dilution </span></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: 0.25in">Not applicable.</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"><b><span style="text-decoration:underline">F. Expenses of the Issue </span></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: 0.25in">Not applicable.</p><div>

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><span style="text-decoration:underline">A. Share Capital </span></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: 0.25in">Not applicable.</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"><b><span style="text-decoration:underline">B. Memorandum and Articles of Association </span></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: 0.25in">We incorporate into this annual report our second
amended and restated memorandum and articles of association filed as Exhibit 1.1.</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"><b><span style="text-decoration:underline">C. Material Contracts </span></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: 0.25in">Material contracts other than in the ordinary
course of business are described in &#8220;Item 4. Information on the Company&#8221; and &#8220;Item 7. Major Shareholders and Related
Party Transactions&#8221; or elsewhere in this annual report.</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"><b><span style="text-decoration:underline">D. Exchange Controls </span></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: 0.25in">See &#8220;Item 4. Information on the Company&#8212;B.
Business Overview&#8212;Regulations&#8212;Regulations on Foreign Exchange in the PRC.&#8221;</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-align: center"></p><div>


</div><!-- Field: Page; Sequence: 113 --><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="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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"><b><span style="text-decoration:underline">E. Taxation </span></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>Cayman 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-indent: 0.25in">According to Maples and Calder (Hong Kong) LLP,
our Cayman Islands legal counsel, the Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income,
gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be
material to us levied by the government of the Cayman Islands except for stamp duties which may be applicable on instruments executed
in, or after execution brought within the jurisdiction of the Cayman Islands. The Cayman Islands is not party to any double tax treaties
applicable to payments to or by our company. There are no exchange control regulations or currency restrictions in the Cayman Islands.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Payments of dividends and capital in respect
of the shares will not be subject to taxation in the Cayman Islands and no withholding will be required on the payment of a dividend
or capital to any holder of the Shares, nor will gains derived from the disposal of the shares be subject to Cayman Islands income or
corporate tax.</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: 0.25in">No stamp duty is payable in respect of the issue
of the shares or on an instrument of transfer in respect of a share.</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"><b>PRC 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-indent: 0.25in">Under the PRC Enterprise Income Tax Law and its
implementation rules, an enterprise established under the laws of jurisdictions outside of the PRC with a &#8220;de facto management
body&#8221; within the PRC is considered a resident enterprise and will be subject to the enterprise income tax at the rate of 25% on
its global income. The implementation rules define the term &#8220;de facto management body&#8221; as the body that exercises full and
substantial control over and overall management of the business, productions, personnel, accounts and properties of an enterprise. In
April 2009, the SAT issued a circular, known as Circular 82, which provides certain specific criteria for determining whether the &#8220;de
facto management body&#8221; of a PRC-controlled enterprise that is incorporated offshore is located in China. Although this circular
only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals
or foreigners, the criteria set forth in the circular may reflect the SAT&#8217;s general position on how the &#8220;de facto management
body&#8221; test should be applied in determining the tax resident status of all offshore enterprises. According to Circular 82, an offshore
incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of
having its &#8220;de facto management body&#8221; in China only if all of the following conditions are met: (1) the senior management
and core management departments in charge of daily operations are located mainly within China; (2) decisions relating to the enterprise&#8217;s
financial and human resource matters are made or are subject to approval by organizations or personnel in China; (3) the enterprise&#8217;s
primary assets, accounting books, company seals, and board and shareholder resolutions, are located or maintained in China; and (4) at
least 50% of voting board members or senior executives habitually reside in China.</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: 0.25in">We do not believe that our Cayman Islands holding
company meets all of the conditions above. Our Cayman Islands holding company is not a PRC resident enterprise for PRC tax purpose. As
a holding company, its key assets are its ownership interests in its subsidiaries, and its key assets are located, and its records (including
the resolutions of its board of directors and the resolutions of its shareholders) are maintained, outside the PRC. For the same reasons,
we believe our other entities outside of China are not PRC resident enterprises either. However, the tax resident status of an enterprise
is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term &#8220;de
facto management body.&#8221; However, there can be no assurance that the PRC government will ultimately take a view that is consistent
with us.</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: 0.25in">Beijing Zhongwen Law Firm, our legal counsel
as to PRC law, has advised us that however, if the PRC tax authorities determine that our Cayman Islands holding company is a PRC resident
enterprise for enterprise income tax purposes, we may be required to withhold a 10% withholding tax from dividends we pay to our shareholders
that are non-resident enterprises, including the holders of the ADSs. In addition, non-resident enterprise shareholders (including the
ADS holders) may be subject to a 10% PRC tax on gains realized on the sale or other disposition of ADSs or ordinary shares, if such income
is treated as sourced from within the PRC. It is unclear whether our non-PRC individual shareholders (including the ADS holders) would
be subject to any PRC tax on dividends or gains obtained by such non-PRC individual shareholders in the event we are determined to be
a PRC resident enterprise. If any PRC tax were to apply to such dividends or gains, it would generally apply at a rate of 20% unless
a reduced rate is available under an applicable tax treaty. However, it is also unclear whether non-PRC shareholders of our Cayman Islands
holding company would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event
that our Cayman Islands holding company is treated as a PRC resident enterprise.</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-align: center"></p><div>


</div><!-- Field: Page; Sequence: 114 --><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>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Provided that our Cayman Islands holding company
is not deemed to be a PRC resident enterprise, holders of the ADSs and ordinary shares who are not PRC residents will not be subject
to PRC income tax on dividends distributed by us or gains realized from the sale or other disposition of our shares or ADSs. However,
under SAT Circular 7, where a non-resident enterprise conducts an &#8220;indirect transfer&#8221; by transferring taxable assets, including,
in particular, equity interests in a PRC resident enterprise, indirectly by disposing of the equity interests of an overseas holding
company, the non-resident enterprise, being the transferor, or the transferee or the PRC entity which directly owned such taxable assets
may report to the relevant tax authority such indirect transfer. Using a &#8220;substance over form&#8221; principle, the PRC tax authority
may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose
of reducing, avoiding or deferring PRC tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income
tax, and the transferor obligated to withhold the applicable taxes, currently at a rate of 10% for the transfer of equity interests in
a PRC resident enterprise. We and our non-PRC resident investors may be at risk of being required to file a return and being taxed under
SAT Circular 7, and we may be required to expend valuable resources to comply with SAT Circular 7, or to establish that we should not
be taxed under this circular. See &#8220;Item 3. Key Information&#8212;D. Risk Factors&#8212;Risks Related to Doing Business in China&#8212;If
we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences
to us and our non-PRC shareholders or the ADS holders.&#8221;</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"><b>U.S. Federal Income Taxation Considerations</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: 0.25in">The following discussion is a summary of U.S.
federal income tax considerations relating to the ownership and disposition of the ADSs or ordinary shares by a U.S. Holder, as defined
below, that holds the ADSs or ordinary shares as &#8220;capital assets&#8221; (generally, as property held for investment) under the U.S.
Internal Revenue Code of 1986, as amended (the Code&#8221;).</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: 0.25in">This discussion is based upon existing U.S. federal
income tax law, which is subject to differing interpretations or change, possibly with retroactive effect. No ruling has been sought
from the Internal Revenue Service (the &#8220;IRS&#8221;), with respect to any U.S. federal income tax consequences described below,
and there can be no assurance that the IRS or a court will not take a contrary position.</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: 0.25in">This discussion does not address all aspects
of U.S. federal income taxation that may be important to particular investors in light of their individual circumstances, including investors
subject to special tax rules, including:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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">
    <td style="width: 24px; font-size: 10pt">&#160;</td>
    <td style="width: 24px; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">banks and other financial institutions;</span></td></tr>
  </table><div>

</div><p style="margin-top: 0; margin-bottom: 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: 24px">&#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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#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;</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: 24px">&#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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td><p style="margin-top: 0; margin-bottom: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">dealers
or traders in securities;</span></p></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">U.S. expatriates and certain former citizens or residents of the United States;</span></td></tr>
  </table><div>

</div><p style="margin-top: 0; margin-bottom: 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: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">traders in securities or other persons that elect mark-to-market treatment;</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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">partnerships or other pass-through entities and their partners or investors;</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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; font-size: 10pt">&#160;</td>
    <td style="width: 24px; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">tax-exempt organizations (including private foundations and pension funds);</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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">investors that own (directly, indirectly, or constructively) 10% or more of our stock by vote or
    value;</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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; font-size: 10pt">&#160;</td>
    <td style="width: 24px">&#160;</td>
    <td>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">investors that hold their ADSs or ordinary shares as part of a
straddle, hedge, conversion, constructive sale or other integrated transaction;</p></td></tr>
  <tr style="vertical-align: top">
    <td style="font-size: 10pt">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="font-size: 10pt">&#160;</td>
    <td style="font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">investors who own stock in an individual retirement or other tax-deferred account;</span></td></tr>
  </table><div>

</div><p style="margin-top: 0; margin-bottom: 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: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">investors that have a functional currency other than the U.S. dollar; or</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; font-size: 10pt">&#160;</td>
    <td style="width: 24px; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">investors required to accelerate the recognition of any item of gross income with respect to the ADSs or Class A ordinary shares as a result of such income being recognized in an &#8220;applicable financial statement&#8221; (as defined in the Code).</span></td></tr>
  </table><div>

</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; text-indent: 0.25in">
</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">In addition, this discussion does not address
any U.S. state, local, alternative minimum tax, or non-U.S. tax considerations, or the additional Medicare tax on net investment income.
Each potential investor is urged to consult its tax advisor regarding the U.S. federal, state, local and non-U.S. income and other tax
considerations associated with an investment in our ADSs or ordinary shares.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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"><b><i>General </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: 0.25in">For purposes of this discussion, a &#8220;U.S.
Holder&#8221; is a beneficial owner of the ADSs or ordinary shares that is, for U.S. federal income tax purposes, (1) an individual who
is a citizen or resident of the United States, (2) a corporation (or other entity treated as a corporation for U.S. federal income tax
purposes) created in, or organized under the laws of, the United States or any state thereof or the District of Columbia, (3) an estate
the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source, or (4) a trust (a) the
administration of which is subject to the primary supervision of a U.S. court and which has one or more U.S. persons who have the authority
to control all substantial decisions of the trust or (b) that has otherwise elected to be treated as a United States person under the
Code.</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: 0.25in">If a partnership (or other entity or arrangement
treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of the ADSs or ordinary shares, the tax treatment
of a partner in the partnership will depend upon the status of the partner and the activities of the partnership. Partnerships and partners
of a partnership holding the ADSs or ordinary shares are urged to consult their tax advisors regarding an investment in the ADSs or ordinary
shares.</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: 0.25in">For U.S. federal income tax purposes, a U.S. Holder
of ADSs will generally be treated as the beneficial owner of the underlying shares represented by the ADSs.</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"><b><i>Passive Foreign Investment Company Considerations</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: 0.25in">A non-U.S. corporation, such as our company, will
be classified as a &#8220;passive foreign investment company,&#8221; or PFIC, for U.S. federal income tax purposes, if, in the case of
any particular taxable year, either (1) 75% or more of its gross income for such taxable year consists of certain types of &#8220;passive&#8221;
income or (2) 50% or more of the value of its assets (generally based on an average of the quarterly values of the assets) during such
taxable year is attributable to assets that produce or are held for the production of passive income. For this purpose, cash and cash
equivalents are categorized as a passive asset and the company&#8217;s unbooked intangibles associated with active business activities
may generally be classified as non-passive assets. Passive income generally includes, among other things, dividends, interest, rents,
royalties, and gains from the disposition of passive assets. We will be treated as owning our proportionate share of the assets and earning
our proportionate share of the income of any other non-U.S. corporation in which we own, directly or indirectly, 25% or more (by value)
of the stock. Although the law in this regard is unclear, we treat our affiliated entities as being beneficially owned by us for U.S.
federal income tax purposes because we control their management decisions, we are entitled to substantially all of the economic benefits
associated with these entities, and, as a result, we consolidate their results of operations in our U.S. GAAP financial statements.</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: 0.25in">Assuming that we are the owner of our affiliated
entities for U.S. federal income tax purposes, and based upon the asset and income composition for our fiscal year 2022, we do not believe
that we were a PFIC for our taxable year ended December 31, 2022. However, even if we were not a PFIC for our 2022 taxable year, changes
in the nature of our income or assets, or fluctuations in the market price of our ADSs, may cause us to become a PFIC for the current
or future taxable years. If the market price of our ADSs continues to decline or does not increase, we may be classified as a PFIC for
the current or future taxable years because the value of our assets for purposes of the asset test, including the value of our goodwill
and other unbooked intangibles, may be determined by reference to the market price of our ADSs, which is volatile and likely will continue
to be volatile. In addition, if it were determined that we are not the beneficial owner of our affiliated entities for U.S. federal income
tax purposes, we would be treated as a PFIC for our current taxable year ending December 31, 2023 and in future taxable years.</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="text-indent: 0.25in; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">Because there are uncertainties in the application of the relevant
rules and PFIC status is a factual determination made annually after the close of each fiscal year, there can be no assurance that we
will not be a PFIC for the current fiscal year ending December 31, 2023 or any future fiscal year or that the IRS will not take a contrary
position. If we were classified as a PFIC for any year during which a U.S. Holder held the ADSs or ordinary shares, we generally would
continue to be treated as a PFIC for all succeeding years during which such U.S. Holder held the ADSs or ordinary shares.</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-align: center"></p><div>


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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->109<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">The discussion below under &#8220;&#8212;Dividends&#8221;
and &#8220;&#8212;Sale or other disposition of ADSs or ordinary shares&#8221; is written on the basis that we will not be classified
as a PFIC for U.S. federal income tax purposes. The U.S. federal income tax rules that apply if we are classified as a PFIC for the current
taxable year or any subsequent taxable year are discussed below under &#8220;&#8212;Passive foreign investment company rules.&#8221;</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"><b><i>Dividends </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: 0.25in">Subject to the PFIC rules described below, any
cash distributions (including constructive distributions and the amount of any PRC tax withheld) paid on the ADSs or ordinary shares
out of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles, will generally be includible
in the gross income of a U.S. Holder as dividend income on the day actually or constructively received by the U.S. Holder, in the case
of ordinary shares, or by the depositary bank, in the case of ADSs. Because we do not intend to determine our earnings and profits on
the basis of U.S. federal income tax principles, any distribution will generally be treated as a &#8220;dividend&#8221; for U.S. federal
income tax purposes. Under current law, a non-corporate recipient of a dividend from a &#8220;qualified foreign corporation&#8221; will
generally be subject to tax on the dividend income at the lower applicable net capital gains rate rather than the marginal tax rates
generally applicable to ordinary income provided that certain holding period and other requirements are met.</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: 0.25in">A non-U.S. corporation (other than a corporation
that is classified as a PFIC for the taxable year in which the dividend is paid or the preceding taxable year) will generally be considered
to be a qualified foreign corporation (1) if it is eligible for the benefits of a comprehensive tax treaty with the United States which
the Secretary of Treasury of the United States determines is satisfactory for purposes of this provision and which includes an exchange
of information program, or (2) with respect to any dividend it pays on stock (or ADSs in respect of such stock) which is tradable on an
established securities market in the United States. The ADSs are currently quoted and tradeable on the OTC market, which we do not believe
is considered to be an established securities market. Since we do not expect that our ADSs or ordinary shares will be listed on established
securities markets, we do not expect either our ADSs or our ordinary shares to meet the conditions required for the reduced tax rate.
In the event we are deemed to be a PRC resident enterprise under the EIT Law, we may be eligible for the benefits of the Agreement Between
the Government of the United States of America and the Government of the People&#8217;s Republic of China for the Avoidance of Double
Taxation and the Prevention of Tax Evasion with Respect to Taxes on Income, or the U.S.-PRC income tax treaty (which the Secretary of
the Treasury of the United States has determined is satisfactory for this purpose and includes an exchange of information program), in
which case we would be treated as a qualified foreign corporation with respect to dividends paid on our ordinary shares or ADSs. U.S.
Holders are urged to consult their tax advisors regarding the availability of any potential reduced tax rate on dividends in their particular
circumstances. Dividends received on the ADSs or ordinary shares will not be eligible for the dividends received deduction allowed to
corporations.</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: 0.25in">For U.S. foreign tax credit purposes, dividends
paid on the ADSs or ordinary shares will generally be treated as income from foreign sources and will generally constitute passive category
income. In the event that we are deemed to be a PRC resident enterprise under the EIT Law, a U.S. Holder may be subject to PRC withholding
taxes on dividends paid, if any, on the ADSs or ordinary shares. A U.S. Holder may be eligible, subject to a number of complex limitations,
to claim a foreign tax credit in respect of any foreign withholding taxes imposed on dividends received on the ADSs or ordinary shares.
A U.S. Holder who does not elect to claim a foreign tax credit for foreign tax withheld may instead claim a deduction for U.S. federal
income tax purposes in respect of such withholding, but only for a taxable year in which such U.S. Holder elects to do so for all creditable
foreign income taxes. The rules governing the foreign tax credit are complex. U.S. Holders are urged to consult their tax advisors regarding
the availability of the foreign tax credit under their particular circumstances.</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"><b><i>Sale or Other Taxable Disposition of ADSs or ordinary shares
</i></b></p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Subject to the PFIC rules discussed below, a
U.S. Holder will generally recognize capital gain or loss, if any, upon the sale or other disposition of ADSs or ordinary shares in an
amount equal to the difference between the amount realized upon the disposition and the U.S. Holder&#8217;s adjusted tax basis in such
ADSs or ordinary shares. Any capital gain or loss will be long-term gain or loss if the ADSs or ordinary shares have been held for more
than one year and will generally be U.S. source gain or loss for U.S. foreign tax credit purposes. Long-term capital gains of non-corporate
taxpayers are currently eligible for reduced rates of taxation. In the event that we are treated as a PRC resident enterprise under the
EIT Law, and gain from the disposition of the ADSs or ordinary shares is subject to tax in the PRC, such gain may be treated as PRC source
gain for foreign tax credit purposes under the U.S.-PRC income tax treaty. The deductibility of a capital loss may be subject to limitations.
U.S. Holders are urged to consult their tax advisors regarding the tax consequences if a foreign tax is imposed on a disposition of the
ADSs or ordinary shares, including the availability of the foreign tax credit under their particular circumstances.</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-align: center"></p><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Passive Foreign Investment Company Rules </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: 0.25in">If we are classified as a PFIC for any taxable
year during which a U.S. Holder holds the ADSs or ordinary shares, unless the U.S. Holder is able to make a &#8220;mark-to-market&#8221;
election (as described below), the U.S. Holder will, except as discussed below, be subject to special tax rules that have a penalizing
effect, regardless of whether we remain a PFIC, on (1) any excess distribution that we make to the U.S. Holder (which generally means
any distribution paid during a taxable year to a U.S. Holder that is greater than 125% of the average annual distributions paid in the
three preceding taxable years or, if shorter, the U.S. Holder&#8217;s holding period for the ADSs or ordinary shares) and (2) any gain
realized on the sale or other disposition, including, under certain circumstances, a pledge, of ADSs or ordinary shares. Under the PFIC
rules:</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">the excess distribution and/or gain will be allocated ratably over the U.S. Holder&#8217;s holding
    period for the ADSs or ordinary shares;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 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: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">the amount of the excess distribution or gain allocated to the taxable year of the distribution
    or disposition and any taxable years in the U.S. Holder&#8217;s holding period prior to the first taxable year in which we are classified
    as a PFIC, or a pre-PFIC year, will be taxable as ordinary income; 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%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">the amount of the excess distribution or gain allocated to each taxable year other than the taxable
    year of the distribution or disposition or a pre-PFIC year, will be subject to tax at the highest tax rate in effect applicable to
    the individuals or corporations, and the interest charge generally applicable to underpayments of tax will be imposed on the resulting
    tax attributable to each such year.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">If we are a PFIC for any taxable year during
which a U.S. Holder holds the ADSs or ordinary shares and any of our non-U.S. subsidiaries is also a PFIC, such U.S. Holder would be
treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC for purposes of the application of these rules.
Each U.S. Holder is advised to consult its tax advisors regarding the application of the PFIC rules to any of our subsidiaries.</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: 0.25in">If we are a PFIC for any fiscal year during which
a U.S. Holder holds the ADSs or ordinary shares, we will continue to be treated as a PFIC with respect to such U.S. Holder for all succeeding
years during which the U.S. Holder holds the ADSs or ordinary shares, unless we were to cease to be a PFIC and the U.S. Holder makes
a &#8220;deemed sale&#8221; election with respect to the ADSs or ordinary shares. If such election is made, the U.S. Holder will be deemed
to have sold the ADSs or ordinary shares it holds at their fair market value and any gain from such deemed sale would be subject to the
rules described in the preceding two paragraphs. After the deemed sale election, so long as we do not become a PFIC in a subsequent fiscal
year, the ADSs or ordinary shares with respect to which such election was made will not be treated as shares in a PFIC and, as a result,
the U.S. Holder will not be subject to the rules described above with respect to any &#8220;excess distribution&#8221; the U.S. Holder
receives from us or any gain from an actual sale or other disposition of the ADSs or ordinary shares. Each U.S. Holder is strongly urged
to consult its tax advisors as to the possibility and consequences of making a deemed sale election if we are and then cease to be a
PFIC and such an election becomes available to the U.S. Holder.</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: 0.25in">As an alternative to the foregoing rules, if the
ADSs were &#8220;regularly traded&#8221; on a &#8220;qualified exchange,&#8221; as defined in applicable Treasury Regulations, a U.S.
Holder could make a mark-to-market election that would result in tax treatment different from the general tax treatment for PFICs described
in the preceding paragraph. However, because the prices of our ADSs are currently quoted on the OTC Pink Limited Information system, we
do not believe mark-to-market treatment of the ADSs is available for as long as the ADSs continue to be delisted from, or not regularly
traded on, the NYSE or any other qualified stock exchange. U.S. Holders that made (or wish to make) a mark-to-market election with respect
to a taxable year for which the election may be available should consult their tax advisers regarding the availability and advisability
of making the election in their particular circumstances and the effect the election would have on their income inclusion with respect
to, and the tax basis in, their ADSs.</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: 0.25in">If a mark-to-market election is able to be made
and is made, the U.S. Holder will generally (1) include as ordinary income for each taxable year that we are a PFIC the excess, if any,
of the fair market value of ADSs held at the end of the taxable year over the adjusted tax basis of such ADSs and (2) deduct as an ordinary
loss the excess, if any, of the adjusted tax basis of the ADSs over the fair market value of such ADSs held at the end of the taxable
year, but only to the extent of the net amount previously included in income as a result of the mark-to-market election. The U.S. Holder&#8217;s
adjusted tax basis in the ADSs would be adjusted to reflect any income or loss resulting from the mark-to-market election. If a U.S. Holder
makes an effective mark-to-market election, in each year that we are a PFIC any gain recognized upon the sale or other disposition of
the ADSs will be treated as ordinary income and loss will be treated as ordinary loss, but only to the extent of the net amount previously
included in income as a result of the mark-to-market election. Because our ordinary shares are not listed on a stock exchange, U.S. Holders
will not be able to make a mark-to-market election with respect to our ordinary shares.</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-align: center"></p><div>


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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->111<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">If a U.S. Holder makes a mark-to-market election
in respect of a corporation classified as a PFIC and such corporation ceases to be classified as a PFIC, the U.S. Holder will not be
required to take into account the mark-to-market gain or loss described above during any period that such corporation is not classified
as a PFIC.</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: 0.25in">Because a mark-to-market election cannot be made
for any lower-tier PFICs that we may own, a U.S. Holder who makes a mark-to-market election with respect to the ADSs may continue to be
subject to the general PFIC rules with respect to such U.S. Holder&#8217;s indirect interest in any of our non-U.S. subsidiaries or other
corporate entities in which we own equity interests that is classified as a PFIC for U.S. federal income tax purposes.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">We do not intend to provide information necessary
for U.S. Holders to make qualified electing fund elections, which, if available, would result in tax treatment different from the general
tax treatment for PFICs described above.</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: 0.25in">As discussed above under &#8220;&#8212;Dividends,&#8221;
dividends that we pay on the ADSs or ordinary shares will not be eligible for the reduced tax rate that applies to qualified dividend
income if we are classified as a PFIC for the taxable year in which the dividend is paid or the preceding taxable year. In addition,
if a U.S. Holder owns the ADSs or ordinary shares during any taxable year that we are a PFIC, the U.S. Holder must file an annual information
return with the IRS. Each U.S. Holder is urged to consult its tax advisor concerning the U.S. federal income tax consequences of holding,
and disposing ADSs or ordinary shares if we are or become a PFIC, including the possibility of making a mark-to-market election and the
unavailability of the qualified electing fund election.</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"><b><i>Information reporting </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: 0.25in">Certain U.S. Holders may be required to report
information to the IRS relating to an interest held by such holder in &#8220;specified foreign financial assets&#8221; (as defined in
the Code), including shares issued by a non-U.S. corporation, for any year in which the aggregate value of all specified foreign financial
assets exceeds US$50,000 (or a higher dollar amount prescribed by the IRS), subject to certain exceptions (including an exception for
shares held in custodial accounts maintained with a U.S. financial institution). These rules also impose penalties if a U.S. Holder is
required to submit such information to the IRS and fails to do so. U.S. Holders are urged to consult their own tax advisors regarding
foreign financial asset reporting obligations and their possible application to the holding of our ordinary shares or ADSs.</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: 0.25in">In addition, U.S. Holders may be subject to information
reporting to the IRS and backup withholding with respect to dividends on and proceeds from the sale or other disposition of the ADSs
or ordinary shares. Information reporting will apply to payments of dividends on, and to proceeds from the sale or other disposition
of, ordinary shares or ADSs by a paying agent within the United States to a U.S. Holder, other than U.S. Holders that are exempt from
information reporting and properly certify their exemption. A paying agent within the United States will be required to withhold at the
applicable statutory rate, currently 24%, in respect of any payments of dividends on, and the proceeds from the disposition of, ordinary
shares or ADSs within the United States to a U.S. Holder (other than U.S. Holders that are exempt from backup withholding and properly
certify their exemption) if the U.S. Holder fails to furnish its correct taxpayer identification number or otherwise fails to comply
with applicable backup withholding requirements. U.S. Holders who are required to establish their exempt status generally must provide
a properly completed IRS Form W-9.</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: 0.25in">Backup withholding is not an additional tax.
Amounts withheld as backup withholding may be credited against a U.S. Holder&#8217;s U.S. federal income tax liability. A U.S. Holder
generally may obtain a refund of any amounts withheld under the backup withholding rules by filing the appropriate claim for refund with
the IRS in a timely manner and furnishing any required information. Each U.S. Holder is advised to consult with its tax advisor regarding
the application of the U.S. information reporting rules to its particular circumstances.</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"><b><span style="text-decoration:underline">F. Dividends and Paying Agents </span></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: 0.25in">Not applicable.</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"><b><span style="text-decoration:underline">G. Statement by Experts </span></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: 0.25in">Not applicable.</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-align: center"></p><div>


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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->112<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><span style="text-decoration:underline">H. Documents on display </span></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: 0.25in">We have previously filed with the SEC our registration
statement on Form F-1 (File No. 333-252076), as amended, and a prospectus under the Securities Act with respect to our ordinary shares
represented by the ADSs.</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: 0.25in">We are subject to the periodic reporting and
other informational requirements of the Exchange Act. Under the Exchange Act, we are required to file reports and other information with
the SEC. Specifically, we are required to file annually a Form 20-F within four months after the end of each fiscal year. Copies of reports
and other information, when so filed, may be inspected without charge and may be obtained at prescribed rates at the public reference
facilities maintained by the SEC at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. The public may obtain information regarding
the Washington, D.C. Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a web site at <i>www.sec.gov
</i>that contains reports, proxy and information statements, and other information regarding registrants that make electronic filings
with the SEC using its EDGAR system.</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: 0.25in">As a foreign private issuer, we are exempt from
the rules of the Exchange Act prescribing the furnishing and content of quarterly reports and proxy statements, and our executive officers,
directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16
of the Exchange Act. In addition, we are not required under the Exchange Act to file periodic reports and financial statements with the
SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act.</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: 0.25in">We will furnish The Bank of New York Mellon,
the depositary, with our annual reports, which include a review of operations and annual audited consolidated financial statements prepared
in conformity with U.S. GAAP, and all notices of shareholders&#8217; meeting and other reports and communications that are made generally
available to our shareholders. The depositary makes such notices, reports and communications available to holders of ADSs and, upon our
request, mails to all record holders of ADSs the information contained in any notice of a shareholders&#8217; meeting received by the
depositary from us.</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"><b><span style="text-decoration:underline">I. Subsidiary Information </span></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: 0.25in">Not applicable.</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"><b><span style="text-decoration:underline">J. Annual Report to Security Holders</span></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: 0.25in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK </b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Foreign Exchange 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-indent: 0.25in">All of our net revenues and expenses are denominated
in Renminbi. We do not believe that we currently have any significant direct foreign exchange risk and have not used any derivative financial
instruments to hedge exposure to such risk. Although our exposure to foreign exchange risks should be limited in general, the value of
your investment in the ADSs will be affected by the exchange rate between U.S. dollar and Renminbi because the value of our business
is effectively denominated in Renminbi, while the ADSs will be traded in U.S. dollars.</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: 0.25in">The value of the Renminbi against the U.S. dollar
and other currencies is affected by changes in China&#8217;s political and economic conditions and by China&#8217;s foreign exchange
policies, among other things. In July 2005, the PRC government changed its decades-old policy of pegging the value of the Renminbi to
the U.S. dollar, and the Renminbi appreciated more than 20% against the U.S. dollar over the following three years. Between July 2008
and June 2010, this appreciation subsided and the exchange rate between the Renminbi and the U.S. dollar remained within a narrow band.
Since June 2010, the Renminbi has fluctuated against the U.S. dollar, at times significantly and unpredictably. While appreciating approximately
by 7% against the U.S. dollar in 2017, the Renminbi in 2018 depreciated approximately by 5% against the U.S. dollar. Since October 1,
2016, the Renminbi has joined the International Monetary Fund (IMF)&#8217;s basket of currencies that make up the Special Drawing Right
(SDR), along with the U.S. dollar, the Euro, the Japanese yen and the British pound. With the development of the foreign exchange market
and progress towards interest rate liberalization and Renminbi internationalization, the PRC government may in the future announce further
changes to the exchange rate system and there is no guarantee that the Renminbi will not appreciate or depreciate significantly in value
against the U.S. dollar in the future. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange
rate between the Renminbi and the U.S. dollar in the future.</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-align: center"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->113<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">To the extent that we need to convert U.S. dollars
into Renminbi for our operations, appreciation of Renminbi against the U.S. dollar would reduce the Renminbi amount we receive from the
conversion. Conversely, if we decide to convert Renminbi into U.S. dollars for the purpose of making payments for dividends on our ordinary
shares or ADSs, servicing our outstanding debt, or for other business purposes, appreciation of the U.S. dollar against the Renminbi
would reduce the U.S. dollar amounts available to us.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">In addition, very limited hedging options are
available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions in
an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future,
the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure or at all.
In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert Renminbi
into foreign currency.</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"><b>Credit Risk</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Our credit risk is primarily attributable to
cash in banks, cash and term deposits held at a related party finance entity, receivables due from related parties.</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: 0.25in">We had cash held by third-party financial institutions
located in the PRC, and Hong Kong SAR. The bank deposits with financial institutions in the PRC are insured by the government authority
for up to RMB500,000. The bank deposits with financial institutions in the Hong Kong SAR are insured by the government authority for up
to HK$500,000. We have not experienced any losses in uninsured bank deposits and do not believe that it is exposed to any significant
risks on cash held in bank accounts. To limit exposure to credit risk, we primarily place bank deposits with large financial institutions
in the PRC, and Hong Kong SAR with high-credit rating and quality.</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"><b>Liquidity Risk</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Liquidity risk is the risk that we will encounter
difficulty in meeting the obligations associated with our financial liabilities that are settled by delivering cash or other financial
assets. Our approach to managing liquidity is to ensure, as far as possible, that we will always have sufficient liquidity to meet our
liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to our reputation.</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"><b>Concentration of Credit 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-indent: 0.25in">Our credit risk arises from cash, other current
assets, other non-current assets and accounts receivable. The carrying amounts of these financial instruments represent the maximum amount
of loss due to credit risk. We expect that there is no significant credit risk associated with the cash which are held by reputable financial
institutions in the jurisdictions where our company, subsidiaries and affiliated entities are located. We believe that we are not exposed
to unusual risks as these financial institutions have high credit quality. We have no significant concentration of credit risk with respect
to other receivables. We conduct credit evaluations on our customers prior to delivery of goods or services. The assessment of customer
creditworthiness is primarily based on historical collection records, research of publicly available information and customer on-site
visits. Based on this analysis, we determine what credit terms, if any, to offer to each customer individually. If the assessment indicates
a likelihood of collection risk, we will not deliver the services or sell the products to the customer or require the customer to pay
cash or to make significant down payments. Historically, credit losses on accounts receivable have been insignificant.</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: 0.25in">As of December 31, 2022, substantially all of
our cash and cash equivalents and term deposits were deposited with financial institutions with high-credit ratings and quality.</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"><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-indent: 0.25in">Our exposure to interest rate risk primarily
relates to the interest income generated by excess cash, which is mostly held in interest-bearing bank deposits and wealth management
products. Interest-earning instruments carry a degree of interest rate risk. We have not been exposed to material risks due to changes
in interest rates, and we have not used any derivative financial instruments to manage our interest risk exposure.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Investments in both fixed rate and floating rate
interest earning instruments carry a degree of interest rate risk. Fixed rate securities may have their fair market value adversely impacted
due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall.</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: 0.25in"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->114<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

</div><div><a id="a_017"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><span style="text-decoration:underline">A. Debt Securities </span></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: 0.25in">Not applicable.</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"><b><span style="text-decoration:underline">B. Warrants and Rights </span></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: 0.25in">Not applicable.</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"><b><span style="text-decoration:underline">C. Other Securities </span></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: 0.25in">Not applicable.</p><div>

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><span style="text-decoration:underline">D. American Depositary Shares</span></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>Fees and Expenses the ADS Holders May Have to Pay </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: 0.25in">The Bank of New York Mellon, as depositary, will
register and deliver American Depositary Shares, also referred to as ADSs. Each ADS will represent three Class A ordinary shares (or
a right to receive Class A ordinary shares) deposited with The Hongkong and Shanghai Banking Corporation Limited, as custodian for the
depositary in Hong Kong. Each ADS will also represent any other securities, cash or other property that may be held by the depositary.
The deposited shares together with any other securities, cash or other property held by the depositary are referred to as the deposited
securities. The depositary&#8217;s office at which the ADSs will be administered and its principal executive office are located at 240
Greenwich Street, New York, New York 10286.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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: bottom">
    <td style="border-bottom: black 1.5pt solid; width: 50%"><span style="font-size: 10pt"><b>Persons depositing or withdrawing shares
    or ADS holders must pay:</b></span></td>
    <td style="width: 1%">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; text-align: left; width: 49%"><span style="font-size: 10pt"><b>For:</b></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">US$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)</span></td>
    <td>&#160;</td>
    <td><span style="font-size: 10pt">Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other
    property<br/>
    Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates</span></td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">US$0.05 (or less) per ADS</span></td>
    <td>&#160;</td>
    <td><span style="font-size: 10pt">Any cash distribution to ADS holders</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">A fee equivalent to the fee that would be payable if securities distributed to you had been shares
    and the shares had been deposited for issuance of ADSs</span></td>
    <td>&#160;</td>
    <td><span style="font-size: 10pt">Distribution of securities distributed to holders of deposited securities (including rights) that
    are distributed by the depositary to ADS holders</span></td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">US$0.05 (or less) per ADS per calendar year</span></td>
    <td>&#160;</td>
    <td><span style="font-size: 10pt">Depositary services</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Registration or transfer fees</span></td>
    <td>&#160;</td>
    <td><span style="font-size: 10pt">Transfer and registration of shares on our share register to or from the name of the depositary
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  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">Expenses of the depositary</span></td>
    <td>&#160;</td>
    <td><span style="font-size: 10pt">Cable (including SWIFT) and facsimile transmissions (when expressly provided in the deposit agreement)<br/>
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  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Taxes and other governmental charges the depositary or the custodian has to pay on any ADSs or
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    <td>&#160;</td>
    <td><span style="font-size: 10pt">As necessary</span></td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">Any charges incurred by the depositary or its agents for servicing the deposited securities</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: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Fees and Other Payments Made by the Depositary to Us </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: 0.25in">From time to time, the depositary may make payments
to us to reimburse us for costs and expenses generally arising out of establishment and maintenance of the ADS program, waive fees and
expenses for services provided to us by the depositary or share revenue from the fees collected from ADS holders. As of the date of this
annual report, we have not received any cash payment from The Bank of New York Mellon, the depositary for our ADS program.</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-align: center"></p><div>


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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->115<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

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

</div><div><a id="part2"></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; text-indent: 0.25in"><b>&#160;</b></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, DIVIDEND ARREARAGES AND DELINQUENCIES</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Not applicable.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">See &#8220;Item 10. Additional Information&#8221;
for a description of the rights of shareholders, which remain unchanged.</p><div>

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

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">The following &#8220;Use of Proceeds&#8221; information
relates to the registration statement on Form F-1 (File No. 333-252076), as amended, in relation to our initial public offering of 7,500,000
ADSs representing 22,500,000 Class A ordinary shares, at an initial offering price of US$10.00 per ADS. The registration statement was
declared effective by the SEC on March 10, 2021. Our initial public offering was closed on March 15, 2021. The Benchmark Company LLC,
Valuable Capital Limited and TFI Securities and Futures Limited were the representatives of the underwriters for our initial public offering.</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: 0.25in">We received net proceeds of approximately US$42.4
million from our initial public offering, after deducting underwriting discounts and commissions and offering expenses paid by us. Our
expenses incurred and paid to others in connection with the issuance and distribution of the ADSs in our offering totaled US$4.4 million,
which included US$4.2 million for underwriting discounts and commissions and US$0.2 million for other expenses. None of the transaction
expenses included payments to directors or officers of our company or their associates, persons owning more than 10% or more of our equity
securities or our affiliates. None of the net proceeds we received from the initial public offering were paid, directly or indirectly,
to any of our directors or officers or their associates, persons owning 10% or more of our equity securities or our affiliates.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">As of the date of this annual report, we have&#160;used&#160;all&#160;of
the net proceeds from our initial public offering for purposes disclosed in our registration statement on Form F-1.</p><div>

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

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Our management, with the participation of our
chief executive officer and our chief financial officer, has performed an evaluation of the effectiveness of our disclosure controls and
procedures, as defined in Rule 13a-15(e) under the Exchange Act, as of the end of the period covered by this annual report, as required
by Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our management has concluded that, as of December 31, 2022, our
disclosure controls and procedures were not effective as our management has identified a material weakness which is detailed under the
section entitled &#8220;&#8212;Internal Control Over Financial Reporting.&#8221;</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"><b>Management&#8217;s Annual Report on Internal Control over Financial
Reporting </b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Our management is responsible for establishing
and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. Our management
evaluated the effectiveness of our internal control over financial reporting, as required by Rule 13a-15(c) of the Exchange Act, based
on criteria established in the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework). Based on this evaluation, our management has concluded that our internal control over financial reporting
was not effective as of December 31, 2022 due to the existence of a material weakness, as described below.</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-align: center"></p><div>


</div><!-- Field: Page; Sequence: 123 --><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 -->116<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness
of our internal control over financial reporting to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.</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: 0.25in">A material weakness is a deficiency, or a combination
of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement
of the Company&#8217;s financial statements will not be prevented or detected on a timely basis. Our material weakness is that we did
not have sufficient financial reporting personnel with appropriate knowledge, experience and training of U.S. GAAP and SEC financial reporting
requirements to properly address complex U.S. GAAP accounting issues and prepare and review financial statements and related disclosures
in accordance with U.S. GAAP and reporting requirements set forth by the SEC.</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: 0.25in">Notwithstanding the identified material weakness,
management, including our chief executive officer and acting chief financial officer, believes the consolidated financial statements
included in this annual report on Form 20-F present fairly, in all material respects, our financial condition, results of operations
and cash flows in conformity with U.S. GAAP.</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>Attestation Report of the Registered Public Accounting Firm </b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">This annual report on Form 20-F does not include
an attestation report of our registered public accounting firm due to rules of the SEC where domestic and foreign registrants that are
&#8220;emerging growth companies&#8221; which we are, are not required to provide the auditor attestation report.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Changes in Internal Control Over Financial Reporting</b></p><p style="font: 10pt 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: 0.25in">In the course of auditing our consolidated financial
statements as of and for the years ended December 31, 2020, 2021 and 2022, we and our independent registered public accounting firm identified
one material weakness in our internal control over financial reporting as of December 31, 2022. As defined in the standards established
by the PCAOB, a &#8220;material weakness&#8221; is a deficiency, or a combination of deficiencies, in internal control, such that there
is a reasonable possibility that a material misstatement of our company&#8217;s annual or interim financial statements will not be prevented
or detected on a timely basis.</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: 0.25in">The material weakness that has been identified
relates to our lack of sufficient number of financial reporting personnel with appropriate knowledge, experience and training of U.S.
GAAP and SEC financial reporting requirements to properly address complex U.S. GAAP accounting issues and prepare and review financial
statements and related disclosures in accordance with U.S. GAAP and reporting requirements set forth by the SEC. Neither we nor our independent
registered public accounting firm undertook a comprehensive assessment of our internal control for purposes of identifying and reporting
material weaknesses and other control deficiencies in our internal control over financial reporting. Had we performed a formal assessment
of our internal control over financial reporting or had our independent registered public accounting firm performed an audit of our internal
control over financial reporting, additional deficiencies may have been identified. Following the identification of the material weakness,
we have taken measures and plan to continue to take remedial measures.</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: 0.25in">To remedy our identified material weakness, we
have adopted and plan to continue to adopt certain measures to improve our internal control over financial reporting, including (1) hiring
more qualified accounting personnel with extensive experience and knowledge in handling U.S. GAAP and SEC financial reporting requirements;
(2) providing regular and appropriate trainings for our accounting staff, especially trainings related to U.S. GAAP and SEC reporting
requirements; and (3) setting up performance measurement and reward plan for our accounting staff aligning with our objective of internal
control over financial reporting and our ethical value.</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: 0.25in">However, we cannot assure you that we will remediate our material weakness
in a timely manner. See &#8220;Item 3. Key Information&#8212;D. Risk Factors&#8212;Risks Related to Our Business and Industry&#8212;If
we fail to maintain an effective system of internal control over financial reporting, we may be unable to accurately report our financial
results or prevent fraud.&#8221;</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: 0.25in">As a company with less than US$1.235 billion in
revenue for our last fiscal year, we qualify as an &#8220;emerging growth company&#8221; pursuant to the JOBS Act. An emerging growth
company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies.
These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002 in the
assessment of the emerging growth company&#8217;s internal control over financial reporting.</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: 124 --><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 -->117<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Except for the measures to be adopted to improve
our internal control over financial reporting as described in this annual report, there were no changes in our internal control over
financial reporting during 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">It should be noted that while our management
believes that our disclosure controls and procedures provide a reasonable level of assurance, our management does not expect that our
disclosure controls and procedures or internal financial controls will prevent all errors or fraud. A control system, no matter how well
conceived or 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-indent: 0.25in">&#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 16A. AUDIT COMMITTEE FINANCIAL EXPERT</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Our board of directors has determined that Mr.
Yuanlin Hu, an independent director and the chairman of our audit committee, qualifies as an &#8220;audit committee financial expert&#8221;
within the meaning of the SEC rules, and that he meets the independence standards under Rule 10A-3 under the Exchange Act.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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 16B. CODE OF ETHICS</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Our board of directors has adopted a code of
business conduct and ethics that applies to all of our directors, officers and employees. We have filed our code of business conduct
and ethics as an exhibit to our registration statement on Form F-1 (File No. 333-252076) initially filed with the SEC on January 13,
2021, as amended, which was incorporated by reference thereto in this annual report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">The following table sets forth the aggregate fees
by categories specified below in connection with certain professional services rendered by KPMG Huazhen LLP and Audit Alliance LLP, our
independent registered public accounting firm, for the years ended December 31, 2021 and 2022, respectively. Save as disclosed below,
we did not pay any other fees to KPMG Huazhen LLP and Audit Alliance LLP during the periods indicated below.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">RMB</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">RMB</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">US$</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Audit fees<sup>(1)</sup></span></td><td>&#160;</td>
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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)">
    <td style="width: 64%; text-align: left; text-indent: -9pt; padding-left: 0.25in">KPMG Huazhen LLP</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">3,623</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">&#8212;</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">&#8212;</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 0.25in">Audit Alliance LLP</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">2,125</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="border-bottom: Black 4pt double; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; text-align: right">2,125</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; text-align: right">308</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: 0.25in">&#160;&#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: 24px"><span style="font-size: 10pt">(1)</span></td>
    <td><p style="margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">Audit fees represent the aggregate fees billed for each of the fiscal
years listed for professional services rendered for the audit of our annual consolidated financial statements, review of our interim condensed
consolidated financial statements, and assistance with and review of documents filed with the SEC. On December 15, 2021, we dismissed
KPMG Huazhen LLP and engaged Audit Alliance LLP as our independent registered public accounting firm. See &#8220;Item 16F. Change in Registrant&#8217;s
Certifying Accountant.</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-indent: 0.25in">Our audit committee is responsible for&#160;pre-approving&#160;all
audit and&#160;non-audit&#160;services provided by our independent registered public accounting firm.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Not applicable.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Not applicable.</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-align: center"></p><div>


</div><!-- Field: Page; Sequence: 125 --><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="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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 16F. CHANGE IN REGISTRANT&#8217;S CERTIFYING ACCOUNTANT</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">On December 15, 2021, we dismissed KPMG Huazhen
LLP, as our independent registered public accounting firm. On the same date, we appointed Audit Alliance LLP as our independent registered
public accounting firm in connection with the audit of our consolidated financial statements for the fiscal year ending December 31,
2021. The change of our independent registered public accounting firm had been approved by our audit committee and board of directors.</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: 0.25in">During the two fiscal years ended December 31,
2020, and the subsequent interim period through December 15, 2021, there were no: (1) disagreements with KPMG Huazhen LLP on any matter
of accounting principles or practices, financial statement disclosure, or auditing scope or procedures that, which disagreements if not
resolved to their satisfaction would have caused them to make reference in connection with their opinion to the subject matter of the
disagreement; or (2) reportable events, except that KPMG Huazhen LLP advised us of the material weakness in internal control over financial
reporting with respect to the lack of sufficient number of financial reporting personnel with appropriate knowledge, experience and training
of U.S. GAAP and SEC financial reporting requirements. The audit reports of KPMG Huazhen LLP on the consolidated financial statements
of our company as of and for the years ended December 31, 2019 and 2020 did not contain any adverse opinion or disclaimer of opinion,
nor were they qualified or modified as to uncertainty, audit scope, or accounting principles.</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: 0.25in">We provided KPMG Huazhen LLP with a copy of the
foregoing disclosure, and requested that KPMG Huazhen LLP furnish us with a letter addressed to the SEC stating whether it agrees with
the above statements, and if not, stating the respects in which it does not agree. A copy of the requested letter from KPMG Huazhen LLP
is attached as Exhibit 16.1 of the annual report on Form 20-F.</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: 0.25in">During the two fiscal years ended December 31,
2020 and the subsequent interim period through December 15, 2021, neither we nor anyone on behalf of us has consulted with Audit Alliance
LLP regarding (1) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit
opinion that might be rendered on our consolidated financial statements, and neither a written report nor oral advice was provided to
us that Audit Alliance LLP concluded was an important factor considered by us in reaching a decision as to any accounting, auditing,
or financial reporting issue, (2) any matter that was the subject of a disagreement pursuant to Item 16F(a)(1)(iv) of the instructions
to Form 20-F, or (3) any reportable event pursuant to Item 16F(a)(1)(v) of the instructions to Form 20-F.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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 16G. CORPORATE GOVERNANCE</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">As a Cayman Islands company previously listed on the NYSE, we were
subject to the NYSE corporate governance listing standards. However, NYSE rules permit a foreign private issuer like us to follow the
corporate governance practices of its home country. Certain corporate governance practices in the Cayman Islands, which is our home country,
may differ significantly from the NYSE corporate governance listing standards. To the extent that we choose to follow home country practice
in the future, our shareholders may be afforded less protection than they otherwise would enjoy under the NYSE corporate governance listing
standards applicable to U.S. domestic issuers.</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: 0.25in">On November 22, 2022, we were delisted from the NYSE when the staff
of the New York Stock Exchange LLC filed a Form&#160;25 Notification of Delisting. The ADSs are currently quoted on the OTC Pink Limited
Information under the symbol &#8220;FHSEY.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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 16H. MINE SAFETY DISCLOSURE</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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&#160;16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT
PREVENT INSPECTIONS&#160;</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Not applicable.</p><div>

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

</div><div><a id="item16j"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>ITEM&#160;16J. INSIDER TRADING POLICIES</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: 0.25in">Not applicable.</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-align: center"></p><div>


</div><!-- Field: Page; Sequence: 126 --><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="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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="part3"></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; text-indent: 0.25in"><b>&#160;</b></p><div>

</div><div><a id="a_030"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>ITEM 17. FINANCIAL STATEMENTS</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">We have elected to provide financial statements
pursuant to Item 18.</p><div>

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

</div><div><a id="a_031"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>ITEM 18. FINANCIAL STATEMENTS</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Our consolidated financial statements are included
at the end of this annual report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#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 19. EXHIBITS</b></p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><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="border-bottom: black 1.5pt solid; text-align: center"><span style="font-size: 10pt"><b>Exhibit No.</b></span></td>
    <td>&#160;</td>
    <td style="border-bottom: black 1.5pt solid; text-align: center"><span style="font-size: 10pt"><b>Description of Exhibit</b></span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: center">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="width: 10%; text-align: center"><span style="font-size: 10pt">1.1</span></td>
    <td style="width: 1%">&#160;</td>
    <td style="width: 89%"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1786182/000119312521126700/d165891dex11.htm">Second Amended and Restated Memorandum and Articles of Association of the Registrant, as currently in effect (incorporated by reference to Exhibit 1.1 of our annual report on Form 20-F (File No. 001-40150) filed with the SEC on April 22, 2021)</a></span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="text-align: center"><span style="font-size: 10pt">2.1</span></td>
    <td>&#160;</td>
    <td><a href="http://www.sec.gov/Archives/edgar/data/1786182/000119312521126700/d165891dex23.htm"><span style="font-size: 10pt">Registrant&#8217;s Specimen American Depositary Receipt (incorporated by reference to Exhibit 2.1 of our annual report on Form 20-F (File No. 001-40150) filed with the SEC on April 22, 2021)</span></a></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: center"><span style="font-size: 10pt">2.2</span></td>
    <td>&#160;</td>
    <td><a href="http://www.sec.gov/Archives/edgar/data/0001786182/000119312521008104/d778539dex42.htm"><span style="font-size: 10pt">Registrant&#8217;s Specimen Certificate for Class A Ordinary Shares (incorporated by reference to Exhibit 4.2 of our registration statement on Form F-1 (File No. 333-252076) initially filed with the SEC on January 13, 2021, as amended)</span></a></td></tr>
  <tr style="vertical-align: top; ">
    <td style="text-align: center"><span style="font-size: 10pt">2.3</span></td>
    <td>&#160;</td>
    <td><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1786182/000119312521126700/d165891dex23.htm">Deposit Agreement (incorporated by reference to Exhibit 2.3 of our annual report on Form 20-F (File No. 001-40150) filed with the SEC on April 22, 2021)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: center"><span style="font-size: 10pt">2.4</span></td>
    <td>&#160;</td>
    <td><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1786182/000119312521126700/d165891dex24.htm">Description of Securities (incorporated by reference to Exhibit 2.4 of our annual report on Form 20-F (File No. 001-40150) filed with the SEC on April 22, 2021)</a></span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="text-align: center"><span style="font-size: 10pt">4.1</span></td>
    <td>&#160;</td>
    <td><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1786182/000119312521008104/d778539dex101.htm">Form of Employment Agreement between the Registrant and each of its executive officers (incorporated by reference to Exhibit 10.1 of our registration statement on Form F-1 (File No. 333-252076) initially filed with the SEC on January 13, 2021, as amended)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: center"><span style="font-size: 10pt">4.2</span></td>
    <td>&#160;</td>
    <td><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1786182/000119312521008104/d778539dex102.htm">Form of Indemnification Agreement between the Registrant and each of its directors and executive officers (incorporated by reference to Exhibit 10.2 of our registration statement on Form F-1 (File No. 333-252076) initially filed with the SEC on January 13, 2021, as amended)</a></span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="text-align: center"><span style="font-size: 10pt">4.3</span></td>
    <td>&#160;</td>
    <td><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1786182/000119312521008104/d778539dex103.htm">English translation of exclusive technical service and management consultancy agreement among Yunnan WFOE and our affiliated entities, dated December 13, 2018 (incorporated by reference to Exhibit 10.3 of our registration statement on Form F-1 (File No. 333-252076) initially filed with the SEC on January 13, 2021, as amended)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: center"><span style="font-size: 10pt">4.3.1</span></td>
    <td>&#160;</td>
    <td><a href="http://www.sec.gov/Archives/edgar/data/1786182/000121390022024718/f20f2021ex4-3i_firsthighsch.htm"><span style="font-size: 10pt">Schedule of exclusive technical service and management consultancy agreement among Yunnan WFOE and our affiliated entities</span></a></td></tr>
  <tr style="vertical-align: top; ">
    <td style="text-align: center"><span style="font-size: 10pt">4.4</span></td>
    <td>&#160;</td>
    <td><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1786182/000119312521008104/d778539dex104.htm">English translation of business cooperation agreement among Yunnan WFOE, our affiliated entities, and the shareholders of Long-Spring Education, dated December 13, 2018 (incorporated by reference to Exhibit 10.4 of our registration statement on Form F-1 (File No. 333-252076) initially filed with the SEC on January 13, 2021, as amended)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: center"><span style="font-size: 10pt">4.5</span></td>
    <td>&#160;</td>
    <td><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1786182/000119312521008104/d778539dex105.htm">English translation of exclusive call option agreement among Yunnan WFOE, our affiliated entities, and the shareholders of Long-Spring Education, dated December 13, 2018 (incorporated by reference to Exhibit 10.5 of our registration statement on Form F-1 (File No. 333-252076) initially filed with the SEC on January 13, 2021, as amended)</a></span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="text-align: center"><span style="font-size: 10pt">4.5.1</span></td>
    <td>&#160;</td>
    <td><a href="http://www.sec.gov/Archives/edgar/data/1786182/000121390022024718/f20f2021ex4-5i_firsthighsch.htm"><span style="font-size: 10pt">Schedule of exclusive call option agreement among Yunnan WFOE, our affiliated entities, and the shareholders of Long-Spring Education</span></a></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: center"><span style="font-size: 10pt">4.6</span></td>
    <td>&#160;</td>
    <td><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1786182/000119312521008104/d778539dex106.htm">English translation of equity pledge agreement among Yunnan WFOE, Long-Spring Education, and the shareholders of Long-Spring Education, dated December 13, 2018 (incorporated by reference to Exhibit 10.6 of our registration statement on Form F-1 (File No. 333-252076) initially filed with the SEC on January 13, 2021, as amended)</a></span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="text-align: center"><span style="font-size: 10pt">4.7</span></td>
    <td>&#160;</td>
    <td><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1786182/000119312521008104/d778539dex107.htm">English translation of school sponsors&#8217; and directors&#8217; rights entrustment agreement among Yunnan WFOE, our schools, the sponsors of our schools, and the directors appointed by the sponsors of our schools, dated December 13, 2018 (incorporated by reference to Exhibit 10.7 of our registration statement on Form F-1 (File No. 333-252076) initially filed with the SEC on January 13, 2021, as amended)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: center"><span style="font-size: 10pt">4.7.1</span></td>
    <td>&#160;</td>
    <td><a href="http://www.sec.gov/Archives/edgar/data/1786182/000121390022024718/f20f2021ex4-7i_firsthighsch.htm"><span style="font-size: 10pt">Schedule of school sponsors&#8217; and directors&#8217; rights entrustment agreement among Yunnan WFOE, our schools, the sponsors of our schools, and the directors appointed by the sponsors of our schools</span></a></td></tr>
  <tr style="vertical-align: top; ">
    <td style="text-align: center"><span style="font-size: 10pt">4.8</span></td>
    <td>&#160;</td>
    <td><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1786182/000119312521008104/d778539dex108.htm">English translation of the executed form of power of attorney granted by the sponsors of our schools and a schedule of all executed power of attorney adopting the same form (incorporated by reference to Exhibit 10.8 of our registration statement on Form F-1 (File No. 333-252076) initially filed with the SEC on January 13, 2021, as amended)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: center"><span style="font-size: 10pt">4.8.1</span></td>
    <td>&#160;</td>
    <td><a href="http://www.sec.gov/Archives/edgar/data/1786182/000121390022024718/f20f2021ex4-8i_firsthighsch.htm"><span style="font-size: 10pt">Schedule of power of attorney granted by the sponsors of our schools</span></a></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: center"></p><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><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; background-color: rgb(204,238,255)">
    <td style="width: 10%; text-align: center"><span style="font-size: 10pt">4.9</span></td>
    <td style="width: 1%">&#160;</td>
    <td style="width: 89%"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1786182/000119312521008104/d778539dex109.htm">English translation of the executed form of power of attorney granted by directors appointed by the sponsors of our schools and a schedule of all executed power of attorney adopting the same form (incorporated by reference to Exhibit 10.9 of our registration statement on Form F-1 (File No. 333-252076) initially filed with the SEC on January 13, 2021, as amended)</a></span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="text-align: center"><span style="font-size: 10pt">4.9.1</span></td>
    <td>&#160;</td>
    <td><a href="http://www.sec.gov/Archives/edgar/data/1786182/000121390022024718/f20f2021ex4-9i_firsthighsch.htm"><span style="font-size: 10pt">Schedule of power of attorney granted by directors appointed by the sponsors of our schools</span></a></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: center"><span style="font-size: 10pt">4.10</span></td>
    <td>&#160;</td>
    <td><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1786182/000119312521008104/d778539dex1010.htm">English translation of shareholders&#8217; rights entrustment agreement among Yunnan WFOE, Long-Spring Education, and shareholders of Long-Spring Education, dated December 13, 2018 (incorporated by reference to Exhibit 10.10 of our registration statement on Form F-1 (File No. 333-252076) initially filed with the SEC on January 13, 2021, as amended)</a></span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="text-align: center"><span style="font-size: 10pt">4.11</span></td>
    <td>&#160;</td>
    <td><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1786182/000119312521008104/d778539dex1011.htm">English translation of the executed form of power of attorney granted by shareholders of Long-Spring Education and a schedule of all executed power of attorney adopting the same form (incorporated by reference to Exhibit 10.11 of our registration statement on Form F-1 (File No. 333-252076) initially filed with the SEC on January 13, 2021, as amended)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: center"><span style="font-size: 10pt">4.12</span></td>
    <td>&#160;</td>
    <td><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1786182/000119312521008104/d778539dex1012.htm">English translation of the executed form spousal undertaking granted by the spouse of each individual shareholder of Long-Spring Education and a schedule of all executed spousal undertaking adopting the same form (incorporated by reference to Exhibit 10.12 of our registration statement on Form F-1 (File No. 333-252076) initially filed with the SEC on January 13, 2021, as amended)</a></span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="text-align: center"><span style="font-size: 10pt">4.13</span></td>
    <td>&#160;</td>
    <td><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1786182/000119312521008104/d778539dex1013.htm">English translation of loan agreement among Yunnan WFOE, our schools, and Long-Spring Education, dated December 13, 2018 (incorporated by reference to Exhibit 10.13 of our registration statement on Form F-1 (File No. 333-252076) initially filed with the SEC on January 13, 2021, as amended)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: center"><span style="font-size: 10pt">4.14</span></td>
    <td>&#160;</td>
    <td><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1786182/000119312521008104/d778539dex1014.htm">2021 Share Incentive Plan (incorporated by reference to Exhibit 10.14 of our registration statement on Form F-1 (File No. 333-252076) initially filed with the SEC on January 13, 2021, as amended)</a></span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="text-align: center"><span style="font-size: 10pt">4.15</span></td>
    <td>&#160;</td>
    <td><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1786182/000119312521008104/d778539dex1015.htm">Subscription agreement, dated as of January 10, 2021, by and between the Registrant and Shanghai Ruihai Chuangfeng Industrial Development Co., Ltd. (incorporated by reference to Exhibit 10.15 of our registration statement on Form F-1 (File No. 333-252076) initially filed with the SEC on January 13, 2021, as amended)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: center"><span style="font-size: 10pt">8.1*</span></td>
    <td>&#160;</td>
    <td><span style="font-size: 10pt"><a href="f20f2022ex8-1_firsthigh.htm">List of Principal Subsidiaries and Affiliated Entities of the Registrant</a></span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="text-align: center"><span style="font-size: 10pt">11.1</span></td>
    <td>&#160;</td>
    <td><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1786182/000119312521008104/d778539dex991.htm">Code of Business Conduct and Ethics of the Registrant (incorporated by reference to Exhibit 99.1 of our registration statement on Form F-1 (File No. 333-252076) initially filed with the SEC on January 13, 2021, as amended)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: center"><span style="font-size: 10pt">12.1*</span></td>
    <td>&#160;</td>
    <td><a href="f20f2022ex12-1_firsthigh.htm">CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002</a></td></tr>
  <tr style="vertical-align: top; ">
    <td style="text-align: center"><span style="font-size: 10pt">12.2*</span></td>
    <td>&#160;</td>
    <td><a href="f20f2022ex12-2_firsthigh.htm">CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002</a></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: center"><span style="font-size: 10pt">13.1**</span></td>
    <td>&#160;</td>
    <td><a href="f20f2022ex13-1_firsthigh.htm">CEO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002</a></td></tr>
  <tr style="vertical-align: top; ">
    <td style="text-align: center"><span style="font-size: 10pt">13.2**</span></td>
    <td>&#160;</td>
    <td><a href="f20f2022ex13-2_firsthigh.htm">CFO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002</a></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: center"><span style="font-size: 10pt">15.1*</span></td>
    <td>&#160;</td>
    <td><a href="f20f2022ex15-1_firsthigh.htm">Consent of Beijing Zhongwen Law Firm</a></td></tr>
  <tr style="vertical-align: top; ">
    <td style="text-align: center"><span style="font-size: 10pt">15.2*</span></td>
    <td>&#160;</td>
    <td><a href="f20f2022ex15-2_firsthigh.htm">Consent of Audit Alliance LLP</a></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: center"><span style="font-size: 10pt">15.3*</span></td>
    <td>&#160;</td>
    <td><a href="f20f2022ex15-3_firsthigh.htm">Consent of Maples and Calder (Hong Kong) LLP</a></td></tr>
  <tr style="vertical-align: top; ">
    <td style="text-align: center"><span style="font-size: 10pt">16.1</span></td>
    <td>&#160;</td>
    <td><a href="http://www.sec.gov/Archives/edgar/data/1786182/000121390022024718/f20f2021ex16-1_firsthigh.htm">Letter from KPMG Huazhen LLP to the Securities and Exchange Commission (incorporated by reference to Exhibit 16.1 of our Annual Report on Form 20-F filed with the SEC on May 9, 2022).</a></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: center"><span style="font-size: 10pt">101.INS</span></td>
    <td>&#160;</td>
    <td><span style="font-size: 10pt">Inline XBRL Instance Document</span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="text-align: center"><span style="font-size: 10pt">101.SCH</span></td>
    <td>&#160;</td>
    <td><span style="font-size: 10pt">Inline XBRL Taxonomy Extension Schema Document.</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: center"><span style="font-size: 10pt">101.CAL</span></td>
    <td>&#160;</td>
    <td><span style="font-size: 10pt">Inline XBRL Taxonomy Extension Calculation Linkbase Document.</span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="text-align: center"><span style="font-size: 10pt">101.DEF</span></td>
    <td>&#160;</td>
    <td><span style="font-size: 10pt">Inline XBRL Taxonomy Definition Linkbase Document.</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: center"><span style="font-size: 10pt">101.LAB</span></td>
    <td>&#160;</td>
    <td><span style="font-size: 10pt">Inline XBRL Taxonomy Extension Label Linkbase Document.</span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="text-align: center"><span style="font-size: 10pt">101.PRE</span></td>
    <td>&#160;</td>
    <td><span style="font-size: 10pt">Inline XBRL Taxonomy Extension Presentation Linkbase Document</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: center"><span style="font-size: 10pt">104</span></td>
    <td>&#160;</td>
    <td><span style="font-size: 10pt">Inline XBRL for the cover page of this Annual Report on Form 20-F(embedded within the Inline XBRL document)</span></td></tr>
  </table><div>

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    <td style="width: 24px"><span style="font-size: 10pt">*</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Filed with this annual report on Form&#160;20-F</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    <td style="width: 24px"><span style="font-size: 10pt">**</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Furnished with this annual report on Form&#160;20-F</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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>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: 0.25in">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-align: justify; text-indent: 0.25in">&#160;</p><div>

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  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td colspan="2"><span style="font-size: 10pt">First High-School Education Group Co., Ltd.</span></td></tr>
  <tr>
    <td style="width: 60%">&#160;</td>
    <td style="width: 5%">&#160;</td>
    <td style="width: 35%">&#160;</td></tr>
  <tr>
    <td>&#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: top"><span style="font-size: 10pt">/s/ Shaowei Zhang</span></td></tr>
  <tr>
    <td>&#160;</td>
    <td style="vertical-align: top"><span style="font-size: 10pt">Name:&#160;</span></td>
    <td style="vertical-align: top"><span style="font-size: 10pt">Shaowei Zhang</span></td></tr>
  <tr>
    <td>&#160;</td>
    <td style="vertical-align: top"><span style="font-size: 10pt">Title:</span></td>
    <td style="vertical-align: top"><span style="font-size: 10pt">Chairman and Chief Executive Officer</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">Date: May 1, 2023</p><div>

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

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

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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: center; margin-top: 0pt; margin-bottom: 0pt"><b>FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD. AND SUBSIDIARIES</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><b>Index to Consolidated Financial Statements</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 439.9pt"></p><div>

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    <td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: center"><b>Page</b></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="width: 89%"><a href="#f_001"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Report of Independent Registered Public Accounting Firm</span></a></td>
    <td style="text-align: center; width: 11%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-2 </span></td></tr>
  <tr style="vertical-align: top; ">
    <td><a href="#f_002"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Consolidated Balance Sheets as of December 31, 2021 and 2022</span></a></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-3 </span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><a href="#f_005"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Consolidated Statements of Comprehensive Income/(Loss) for the years ended December 31, 2020, 2021 and 2022</span></a></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-6 </span></td></tr>
  <tr style="vertical-align: top; ">
    <td><a href="#f_008"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Consolidated Statements of Changes in Equity/(Deficit) for the years ended December 31, 2020, 2021 and 2022</span></a></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-7</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><a href="#f_006"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2021 and 2022</span></a></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-8</span></td></tr>
  <tr style="vertical-align: top; ">
    <td><a href="#f_007"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Notes to the Consolidated Financial Statements</span></a></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-10</span></td></tr>
  </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="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="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

</div><div><a id="f_001"></a></div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><b>Report of Independent Registered Public Accounting Firm</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">To the Board of Directors and Shareholders of First High-school Education
Group Co., Ltd.:</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">Opinion on the Financial Statements</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">We have audited the accompanying consolidated balance sheets of First
High-school Education Group Co., Ltd. (collectively, the &#8220;Company&#8221;) as of December 31, 2022 and 2021, the related consolidated
statements of income (loss), comprehensive income (loss), shareholders&#8217; equity, and cash flows for each of the years in the three-year
period ended December 31, 2022, and the related notes to the consolidated financial statements and schedule (collectively, the financial
statements). In our opinion, the financial statements present fairly, in all material respects, the financial positions of the Company
as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period
ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Basis for Opinion</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 1pt 0pt 0">These financial statements are the responsibility of the Company&#8217;s
management. Our responsibility is to express an opinion on the Company&#8217;s financial statements based on our audit. We are a public
accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 7pt 0pt 0">We conducted our audit in accordance with the standards of
the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform,
an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal
control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company&#8217;s internal
control over financial reporting. Accordingly, we express no such opinion.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 12pt 0pt 0">Our audit included performing procedures to assess the risks
of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">/s/ <ix:nonNumeric contextRef="c0" name="dei:AuditorName">Audit Alliance LLP</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">We have served as the Company&#8217;s auditor since 2021.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><ix:nonNumeric contextRef="c0" name="dei:AuditorLocation">Singapore</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">May 1, 2023</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">PCAOB ID Number <ix:nonNumeric contextRef="c0" name="dei:AuditorFirmId">3487</ix:nonNumeric></p><div>

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

</div><!-- Field: Page; Sequence: 131 --><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">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->2<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt"><b>FIRST
HIGH-SCHOOL EDUCATION GROUP CO., LTD.</b></span></p><div>

</div><div><a id="f_002"></a></div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt"><b>CONSOLIDATED BALANCE SHEETS</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt">(In
thousands of RMB, except share data and per share data, or otherwise noted)</span></p><div>



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

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#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">As of December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold; text-align: center">Assets</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold">Current assets</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><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"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:PropertyPlantAndEquipmentNet" scale="3" unitRef="cny">133,874</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; ">
    <td>Goodwill</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Deferred tax assets</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DeferredIncomeTaxAssetsNet" scale="3" unitRef="cny">14,744</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  </table><div>


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

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


</div><!-- Field: Page; Sequence: 132 --><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">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->3<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>FIRST HIGH-SCHOOL EDUCATION
GROUP CO., LTD.&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>CONSOLIDATED BALANCE SHEETS (CONTINUED)</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">(In thousands of RMB, except share data and per
share data, or otherwise noted)</p><div>

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

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <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">As of December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold; text-align: center">Liabilities and Equity</td><td>&#160;</td>
    <td colspan="2" style="text-align: center">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: center">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold">Current liabilities</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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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Borrowings under financing arrangements</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:OtherLiabilitiesNoncurrent" scale="3" unitRef="cny">7,989</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Deferred tax liabilities</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxAndOtherLiabilitiesNoncurrent" scale="3" unitRef="cny">2,185</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">Liability related to discontinued operation</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="-3" format="ixt:num-dot-decimal" name="fhs:LiabilityRelatedToDiscontinuedOperationinDollars" scale="3" unitRef="cny">23,907</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left; padding-bottom: 4pt; padding-left: 9pt">Total liabilities</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:Liabilities" scale="3" unitRef="cny">590,305</ix:nonFraction></td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
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  </table><div>


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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">See accompanying notes to consolidated financial
statements.</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: 133 --><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">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->4<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </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-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-size: 10pt"><b>FIRST
HIGH-SCHOOL EDUCATION GROUP CO., LTD.&#160;</b></span></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-size: 10pt">(In
thousands of RMB, except share data and per share data, or otherwise noted)</span></p><div>

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

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">As of December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold; text-align: center">Liabilities and Equity</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>Commitments and contingencies</td><td>&#160;</td>
    <td colspan="2"><div style="-sec-ix-hidden: hidden-fact-1">&#160;</div></td><td>&#160;</td><td>&#160;</td>
    <td colspan="2"><div style="-sec-ix-hidden: hidden-fact-2">&#160;</div></td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold">Equity</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:AdditionalPaidInCapitalCommonStock" scale="3" unitRef="cny">389,199</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: 8pt">Statutory reserves</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt; padding-left: 8pt">Non-controlling interests</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </table><div>


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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See accompanying notes to consolidated financial
statements.</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: 134 --><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">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->5<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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-top: 0pt; margin-bottom: 0pt; text-align: center"><b>FIRST HIGH-SCHOOL EDUCATION
GROUP CO., LTD.&#160;</b></p><div>

</div><div><a id="f_005"></a></div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><b>CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/ (LOSS)</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">(In thousands of RMB, except share data and per share data,
or otherwise noted)</p><div>

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

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="10" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Years Ended December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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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">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c6" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:SellingAndMarketingExpense" scale="3" unitRef="cny">6,398</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="font-weight: bold; text-align: left">Income from operations</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>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c6" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:InterestExpense" scale="3" unitRef="cny">5,747</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="font-weight: bold; text-align: left">Comprehensive income - continued 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">Comprehensive income/( loss) - discontinued operations</td><td style="font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="font-weight: bold; text-align: left">Comprehensive Income</td><td style="font-weight: bold">&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><b><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="fhs:ComprehensiveIncome" scale="3" unitRef="cny">40,374</ix:nonFraction></b></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: 7pt">Comprehensive income attributable to non-controlling interests</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:OtherComprehensiveIncomeLossNetOfTaxPortionAttributableToNoncontrollingInterest" scale="3" sign="-" unitRef="cny">1,081</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="font-weight: bold; text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Comprehensive income attribute to First High-school Education Group Co., Ltd.</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; ">
    <td style="font-weight: bold">Earnings per share:</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"><ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="fhs:BasicAndDilutedEarningsPerShareFromContinuedOperationinDollarsPerShare" scale="0" unitRef="cnyPershares">0.52</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c7" decimals="2" format="ixt:num-dot-decimal" name="fhs:BasicAndDilutedEarningsPerShareFromDiscontinuedOperationinDollarsPerShare" scale="0" sign="-" unitRef="cnyPershares">0.60</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="fhs:BasicAndDilutedEarningsPerShareFromDiscontinuedOperationinDollarsPerShare" scale="0" sign="-" unitRef="cnyPershares">0.09</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; padding-left: 7pt">Diluted Earnings per share:</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; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:IncomeLossFromContinuingOperationsPerDilutedShare" scale="0" unitRef="cnyPershares">0.51</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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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c6" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EarningsPerShareDiluted" scale="0" unitRef="cnyPershares">0.03</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EarningsPerShareDiluted" scale="0" sign="-" unitRef="cnyPershares">0.09</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="font-weight: bold">Weighted average number of ordinary share outstanding</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 7pt">Basic</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 7pt">Diluted</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c6" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding" scale="0" unitRef="shares">70,488,700</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c7" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding" scale="0" unitRef="shares">85,775,002</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding" scale="0" unitRef="shares">88,688,700</ix:nonFraction></td><td style="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="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">See accompanying notes to consolidated financial statements.</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><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 135 --><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">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->6<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>FIRST HIGH-SCHOOL EDUCATION
GROUP CO., LTD.&#160;</b></p><div>

</div><div><a id="f_008"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>CONSOLIDATED STATEMENTS OF CHANGES
IN EQUITY/ (DEFICIT)</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">(In thousands of RMB, except share data
and per share data, or otherwise noted)</p><div>

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

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

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="white-space: nowrap; padding-left: 0.125in; text-indent: -0.125in"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td>
    <td colspan="2" style="white-space: nowrap; text-align: center"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td>
    <td colspan="2" style="white-space: nowrap; text-align: center"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td>
    <td colspan="2" style="white-space: nowrap; text-align: center"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td>
    <td colspan="2" style="white-space: nowrap; text-align: center"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td>
    <td colspan="2" style="white-space: nowrap; text-align: center"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td>
    <td colspan="2" style="white-space: nowrap; text-align: center"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td>
    <td colspan="2" style="white-space: nowrap; text-align: center"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td>
    <td colspan="2" style="white-space: nowrap; text-align: center"><span style="font-size: 9pt"><b>Total</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td>
    <td colspan="2" style="white-space: nowrap; text-align: center"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td>
    <td colspan="2" style="white-space: nowrap; text-align: center"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td></tr>
  <tr style="vertical-align: bottom">
    <td style="white-space: nowrap; padding-left: 0.125in; text-indent: -0.125in"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td>
    <td colspan="2" style="white-space: nowrap; text-align: center"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td>
    <td colspan="2" style="white-space: nowrap; text-align: center"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td>
    <td colspan="2" style="white-space: nowrap; text-align: center"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td>
    <td colspan="2" style="white-space: nowrap; text-align: center"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td>
    <td colspan="2" style="white-space: nowrap; text-align: center"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td>
    <td colspan="2" style="white-space: nowrap; text-align: center"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td>
    <td colspan="2" style="white-space: nowrap; text-align: center"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td>
    <td colspan="2" style="white-space: nowrap; text-align: center"><span style="font-size: 9pt"><b>equity/(deficit)</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td>
    <td colspan="2" style="white-space: nowrap; text-align: center"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td>
    <td colspan="2" style="white-space: nowrap; text-align: center"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td></tr>
  <tr style="vertical-align: bottom">
    <td style="white-space: nowrap; padding-left: 0.125in; text-indent: -0.125in"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td>
    <td colspan="2" style="white-space: nowrap; text-align: center"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td>
    <td colspan="2" style="white-space: nowrap; text-align: center"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td>
    <td colspan="2" style="white-space: nowrap; text-align: center"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td>
    <td colspan="2" style="white-space: nowrap; text-align: center"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td>
    <td colspan="2" style="white-space: nowrap; text-align: center"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td>
    <td colspan="2" style="white-space: nowrap; text-align: center"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td>
    <td colspan="2" style="white-space: nowrap; text-align: center"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td>
    <td colspan="2" style="white-space: nowrap; text-align: center"><span style="font-size: 9pt"><b>attributable</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td>
    <td colspan="2" style="white-space: nowrap; text-align: center"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td>
    <td colspan="2" style="white-space: nowrap; text-align: center"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td></tr>
  <tr style="vertical-align: bottom">
    <td style="white-space: nowrap; padding-left: 0.125in; text-indent: -0.125in"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td>
    <td colspan="6" style="white-space: nowrap; text-align: center"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td>
    <td colspan="2" style="white-space: nowrap; text-align: center"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td>
    <td colspan="2" style="white-space: nowrap; text-align: center"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td>
    <td colspan="2" style="white-space: nowrap; text-align: center"><span style="font-size: 9pt"><b>Accumulated</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td>
    <td colspan="2" style="white-space: nowrap; text-align: center"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td>
    <td colspan="2" style="white-space: nowrap; text-align: center"><span style="font-size: 9pt"><b>Retained</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td>
    <td colspan="2" style="white-space: nowrap; text-align: center"><span style="font-size: 9pt"><b>to the</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td>
    <td colspan="2" style="white-space: nowrap; text-align: center"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap"><span style="font-size: 9pt"><b>&#160;</b></span></td>
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  <tr style="vertical-align: bottom">
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    <td colspan="2" style="border-bottom: Black 1.5pt solid; white-space: nowrap; text-align: center"><span style="font-size: 9pt"><b>(deficit)</b></span></td><td style="white-space: nowrap; padding-bottom: 1.5pt"><span style="font-size: 9pt"><b>&#160;</b></span></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; width: 45%; font-weight: bold; padding-bottom: 1.5pt"><span style="font-size: 9pt">Balance
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    <td style="border-bottom: Black 1.5pt solid; width: 0.5%; font-weight: bold; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="border-bottom: Black 1.5pt solid; width: 4%; font-weight: bold; text-align: right"><span style="-sec-ix-hidden: hidden-fact-7; font-size: 9pt">&#8212;</span></td><td style="width: 0.5%; padding-bottom: 1.5pt; font-weight: bold; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="width: 0.5%; font-weight: bold; padding-bottom: 1.5pt"><span style="font-size: 9pt">&#160;</span></td>
    <td style="border-bottom: Black 1.5pt solid; width: 0.5%; font-weight: bold; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="border-bottom: Black 1.5pt solid; width: 4%; font-weight: bold; text-align: right"><span style="-sec-ix-hidden: hidden-fact-8; font-size: 9pt">&#8212;</span></td><td style="width: 0.5%; padding-bottom: 1.5pt; font-weight: bold; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="width: 0.5%; font-weight: bold; padding-bottom: 1.5pt"><span style="font-size: 9pt">&#160;</span></td>
    <td style="border-bottom: Black 1.5pt solid; width: 0.5%; font-weight: bold; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="border-bottom: Black 1.5pt solid; width: 4%; font-weight: bold; text-align: right"><span style="font-size: 9pt"><ix:nonFraction contextRef="c10" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest" scale="3" unitRef="cny">221,791</ix:nonFraction></span></td><td style="width: 0.5%; padding-bottom: 1.5pt; font-weight: bold; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="width: 0.5%; font-weight: bold; padding-bottom: 1.5pt"><span style="font-size: 9pt">&#160;</span></td>
    <td style="border-bottom: Black 1.5pt solid; width: 0.5%; font-weight: bold; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="border-bottom: Black 1.5pt solid; width: 4%; font-weight: bold; text-align: right"><span style="-sec-ix-hidden: hidden-fact-9; font-size: 9pt">&#8212;</span></td><td style="width: 0.5%; padding-bottom: 1.5pt; font-weight: bold; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="width: 0.5%; font-weight: bold; padding-bottom: 1.5pt"><span style="font-size: 9pt">&#160;</span></td>
    <td style="border-bottom: Black 1.5pt solid; width: 0.5%; font-weight: bold; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="border-bottom: Black 1.5pt solid; width: 4%; font-weight: bold; text-align: right"><span style="font-size: 9pt"><ix:nonFraction contextRef="c12" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest" scale="3" unitRef="cny">29,101</ix:nonFraction></span></td><td style="width: 0.5%; padding-bottom: 1.5pt; font-weight: bold; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="width: 0.5%; font-weight: bold; padding-bottom: 1.5pt"><span style="font-size: 9pt">&#160;</span></td>
    <td style="border-bottom: Black 1.5pt solid; width: 0.5%; font-weight: bold; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="border-bottom: Black 1.5pt solid; width: 4%; font-weight: bold; text-align: right"><span style="font-size: 9pt">(<ix:nonFraction contextRef="c13" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest" scale="3" sign="-" unitRef="cny">180,769</ix:nonFraction></span></td><td style="width: 0.5%; padding-bottom: 1.5pt; font-weight: bold; text-align: left"><span style="font-size: 9pt">)</span></td><td style="width: 0.5%; font-weight: bold; padding-bottom: 1.5pt"><span style="font-size: 9pt">&#160;</span></td>
    <td style="border-bottom: Black 1.5pt solid; width: 0.5%; font-weight: bold; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="border-bottom: Black 1.5pt solid; width: 4%; font-weight: bold; text-align: right"><span style="font-size: 9pt"><ix:nonFraction contextRef="c14" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest" scale="3" unitRef="cny">70,123</ix:nonFraction></span></td><td style="width: 0.5%; padding-bottom: 1.5pt; font-weight: bold; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="width: 0.5%; font-weight: bold; padding-bottom: 1.5pt"><span style="font-size: 9pt">&#160;</span></td>
    <td style="border-bottom: Black 1.5pt solid; width: 0.5%; font-weight: bold; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="border-bottom: Black 1.5pt solid; width: 4%; font-weight: bold; text-align: right"><span style="font-size: 9pt"><ix:nonFraction contextRef="c15" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest" scale="3" unitRef="cny">86</ix:nonFraction></span></td><td style="width: 0.5%; padding-bottom: 1.5pt; font-weight: bold; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="width: 0.5%; font-weight: bold; padding-bottom: 1.5pt"><span style="font-size: 9pt">&#160;</span></td>
    <td style="border-bottom: Black 1.5pt solid; width: 0.5%; font-weight: bold; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="border-bottom: Black 1.5pt solid; width: 4%; font-weight: bold; text-align: right"><span style="font-size: 9pt"><ix:nonFraction contextRef="c16" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest" scale="3" unitRef="cny">70,209</ix:nonFraction></span></td><td style="width: 0.5%; padding-bottom: 1.5pt; font-weight: bold; text-align: left"><span style="font-size: 9pt">&#160;</span></td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><span style="font-size: 9pt">Net income from continuing
    operations</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 9pt">&#8212;</span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 9pt">&#8212;</span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-10; font-size: 9pt">&#8212;</span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-11; font-size: 9pt">&#8212;</span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-12; font-size: 9pt">&#8212;</span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-13; font-size: 9pt">&#8212;</span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 9pt"><ix:nonFraction contextRef="c21" decimals="-3" format="ixt:num-dot-decimal" name="fhs:NetIncomeFromContinuingOperationsAmount" scale="3" unitRef="cny">78,799</ix:nonFraction></span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 9pt"><ix:nonFraction contextRef="c22" decimals="-3" format="ixt:num-dot-decimal" name="fhs:NetIncomeFromContinuingOperationsAmount" scale="3" unitRef="cny">78,799</ix:nonFraction></span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 9pt"><ix:nonFraction contextRef="c23" decimals="-3" format="ixt:num-dot-decimal" name="fhs:NetIncomeFromContinuingOperationsAmount" scale="3" unitRef="cny">101</ix:nonFraction></span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><ix:nonFraction contextRef="c6" decimals="-3" format="ixt:num-dot-decimal" name="fhs:NetIncomeFromContinuingOperationsAmount" scale="3" unitRef="cny">78,900</ix:nonFraction></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></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"><span style="font-size: 9pt">Net income from discontinued
    operations</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 9pt">&#8212;</span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td><span style="font-size: 9pt">&#160;</span></td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><span style="font-size: 9pt">Distribution to the Parent</span></td><td><span style="font-size: 9pt">&#160;</span></td>
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    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-26; font-size: 9pt">&#8212;</span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td><span style="font-size: 9pt">&#160;</span></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"><span style="font-size: 9pt">Dividend declared</span></td><td><span style="font-size: 9pt">&#160;</span></td>
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    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 9pt">&#8212;</span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-27; font-size: 9pt">&#8212;</span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 9pt">(<ix:nonFraction contextRef="c18" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DividendsCommonStockCash" scale="3" unitRef="cny">157,663</ix:nonFraction></span></td><td style="text-align: left"><span style="font-size: 9pt">)</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-28; font-size: 9pt">&#8212;</span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-29; font-size: 9pt">&#8212;</span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-30; font-size: 9pt">&#8212;</span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 9pt">(<ix:nonFraction contextRef="c22" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DividendsCommonStockCash" scale="3" unitRef="cny">157,663</ix:nonFraction></span></td><td style="text-align: left"><span style="font-size: 9pt">)</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-31; font-size: 9pt">&#8212;</span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 9pt">(<ix:nonFraction contextRef="c6" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DividendsCommonStockCash" scale="3" unitRef="cny">157,663</ix:nonFraction></span></td><td style="text-align: left"><span style="font-size: 9pt">)</span></td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in; font-weight: bold; padding-bottom: 1.5pt"><span style="font-size: 9pt">Balance
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    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><span style="-sec-ix-hidden: hidden-fact-32; font-size: 9pt">&#8212;</span></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="font-weight: bold; padding-bottom: 1.5pt"><span style="font-size: 9pt">&#160;</span></td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><span style="-sec-ix-hidden: hidden-fact-33; font-size: 9pt">&#8212;</span></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="font-weight: bold; padding-bottom: 1.5pt"><span style="font-size: 9pt">&#160;</span></td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><span style="font-size: 9pt"><ix:nonFraction contextRef="c26" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest" scale="3" unitRef="cny">64,128</ix:nonFraction></span></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="font-weight: bold; padding-bottom: 1.5pt"><span style="font-size: 9pt">&#160;</span></td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><span style="font-size: 9pt"><ix:nonFraction contextRef="c27" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest" scale="3" unitRef="cny">144</ix:nonFraction></span></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="font-weight: bold; padding-bottom: 1.5pt"><span style="font-size: 9pt">&#160;</span></td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><span style="font-size: 9pt"><ix:nonFraction contextRef="c28" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest" scale="3" unitRef="cny">41,591</ix:nonFraction></span></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="font-weight: bold; padding-bottom: 1.5pt"><span style="font-size: 9pt">&#160;</span></td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><span style="font-size: 9pt">Net loss from discontinued
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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"><span style="font-size: 9pt">Other comprehensive income</span></td><td><span style="font-size: 9pt">&#160;</span></td>
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    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 9pt">&#8212;</span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-39; font-size: 9pt">&#8212;</span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-40; font-size: 9pt">&#8212;</span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 9pt"><ix:nonFraction contextRef="c38" decimals="-3" format="ixt:num-dot-decimal" name="fhs:TotalComprehensiveIncome" scale="3" unitRef="cny">318</ix:nonFraction></span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-41; font-size: 9pt">&#8212;</span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-42; font-size: 9pt">&#8212;</span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 9pt"><ix:nonFraction contextRef="c36" decimals="-3" format="ixt:num-dot-decimal" name="fhs:TotalComprehensiveIncome" scale="3" unitRef="cny">318</ix:nonFraction></span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-43; font-size: 9pt">&#8212;</span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 9pt"><ix:nonFraction contextRef="c7" decimals="-3" format="ixt:num-dot-decimal" name="fhs:TotalComprehensiveIncome" scale="3" unitRef="cny">318</ix:nonFraction></span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><span style="font-size: 9pt">Transfer to statutory reserve</span></td><td><span style="font-size: 9pt">&#160;</span></td>
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    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 9pt">&#8212;</span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-44; font-size: 9pt">&#8212;</span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-45; font-size: 9pt">&#8212;</span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-46; font-size: 9pt">&#8212;</span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 9pt"><ix:nonFraction contextRef="c34" decimals="-3" format="ixt:num-dot-decimal" name="fhs:TransferToStatutoryReserve" scale="3" unitRef="cny">7,469</ix:nonFraction></span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 9pt">(<ix:nonFraction contextRef="c35" decimals="-3" format="ixt:num-dot-decimal" name="fhs:TransferToStatutoryReserve" scale="3" sign="-" unitRef="cny">7,469</ix:nonFraction></span></td><td style="text-align: left"><span style="font-size: 9pt">)</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-47; font-size: 9pt">&#8212;</span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-48; font-size: 9pt">&#8212;</span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-49; font-size: 9pt">&#8212;</span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></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"><span style="font-size: 9pt">Issuance of common stocks-cash</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 9pt"><ix:nonFraction contextRef="c37" decimals="0" format="ixt:num-dot-decimal" id="ix_2_fact" name="us-gaap:StockIssuedDuringPeriodSharesNewIssues" scale="0" unitRef="shares">23,532,390</ix:nonFraction></span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 9pt">(<ix:nonFraction contextRef="c40" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:StockIssuedDuringPeriodSharesNewIssues" scale="0" sign="-" unitRef="shares">7,182,390</ix:nonFraction></span></td><td style="text-align: left"><span style="font-size: 9pt">)</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 9pt"><ix:nonFraction contextRef="c37" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:StockIssuedDuringPeriodValueNewIssues" scale="3" unitRef="cny">6</ix:nonFraction></span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 9pt"><ix:nonFraction contextRef="c33" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:StockIssuedDuringPeriodValueNewIssues" scale="3" unitRef="cny">325,071</ix:nonFraction></span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-50; font-size: 9pt">&#8212;</span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-51; font-size: 9pt">&#8212;</span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 9pt">&#8212;</span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 9pt"><ix:nonFraction contextRef="c36" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:StockIssuedDuringPeriodValueNewIssues" scale="3" unitRef="cny">325,077</ix:nonFraction></span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 9pt">&#8212;</span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 9pt"><ix:nonFraction contextRef="c7" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:StockIssuedDuringPeriodValueNewIssues" scale="3" unitRef="cny">325,077</ix:nonFraction></span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><span style="font-size: 9pt">Distribution to the Parent</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 9pt">&#8212;</span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td><span style="font-size: 9pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 9pt">&#8212;</span></td><td style="text-align: left"><span style="font-size: 9pt">&#160;</span></td><td><span style="font-size: 9pt">&#160;</span></td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; font-weight: bold; padding-bottom: 1.5pt"><span style="font-size: 9pt">Balance
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    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><span style="font-size: 9pt"><ix:nonFraction contextRef="c45" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest" scale="3" unitRef="cny">49,060</ix:nonFraction></span></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="font-weight: bold; padding-bottom: 1.5pt"><span style="font-size: 9pt">&#160;</span></td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><span style="font-size: 9pt">(<ix:nonFraction contextRef="c46" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest" scale="3" sign="-" unitRef="cny">207,713</ix:nonFraction></span></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left"><span style="font-size: 9pt">)</span></td><td style="font-weight: bold; padding-bottom: 1.5pt"><span style="font-size: 9pt">&#160;</span></td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><span style="font-size: 9pt"><ix:nonFraction contextRef="c47" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest" scale="3" unitRef="cny">231,014</ix:nonFraction></span></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="font-weight: bold; padding-bottom: 1.5pt"><span style="font-size: 9pt">&#160;</span></td>
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    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><span style="font-size: 9pt"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest" scale="3" unitRef="cny">230,364</ix:nonFraction></span></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left"><span style="font-size: 9pt">&#160;</span></td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left; padding-bottom: 1.5pt"><span style="font-size: 9pt">Net
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    <td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="padding-bottom: 1.5pt; text-align: right"><span style="font-size: 9pt">-</span></td><td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="padding-bottom: 1.5pt"><span style="font-size: 9pt">&#160;</span></td>
    <td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="padding-bottom: 1.5pt; text-align: right"><span style="font-size: 9pt">-</span></td><td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="padding-bottom: 1.5pt"><span style="font-size: 9pt">&#160;</span></td>
    <td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="padding-bottom: 1.5pt; text-align: right"><span style="font-size: 9pt">-</span></td><td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="padding-bottom: 1.5pt"><span style="font-size: 9pt">&#160;</span></td>
    <td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="padding-bottom: 1.5pt; text-align: right"><span style="-sec-ix-hidden: hidden-fact-67; font-size: 9pt">-</span></td><td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="padding-bottom: 1.5pt"><span style="font-size: 9pt">&#160;</span></td>
    <td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="padding-bottom: 1.5pt; text-align: right"><span style="-sec-ix-hidden: hidden-fact-68; font-size: 9pt">-</span></td><td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="padding-bottom: 1.5pt"><span style="font-size: 9pt">&#160;</span></td>
    <td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="padding-bottom: 1.5pt; text-align: right"><span style="-sec-ix-hidden: hidden-fact-69; font-size: 9pt">-</span></td><td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="padding-bottom: 1.5pt"><span style="font-size: 9pt">&#160;</span></td>
    <td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="padding-bottom: 1.5pt; text-align: right"><span style="font-size: 9pt"><ix:nonFraction contextRef="c52" decimals="-3" format="ixt:num-dot-decimal" name="fhs:NetIncomeFromContinuingOperationsAmount" scale="3" unitRef="cny">45,016</ix:nonFraction></span></td><td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="padding-bottom: 1.5pt"><span style="font-size: 9pt">&#160;</span></td>
    <td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="padding-bottom: 1.5pt; text-align: right"><span style="font-size: 9pt"><ix:nonFraction contextRef="c53" decimals="-3" format="ixt:num-dot-decimal" name="fhs:NetIncomeFromContinuingOperationsAmount" scale="3" unitRef="cny">45,016</ix:nonFraction></span></td><td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="padding-bottom: 1.5pt"><span style="font-size: 9pt">&#160;</span></td>
    <td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="padding-bottom: 1.5pt; text-align: right"><span style="font-size: 9pt"><ix:nonFraction contextRef="c54" decimals="-3" format="ixt:num-dot-decimal" name="fhs:NetIncomeFromContinuingOperationsAmount" scale="3" unitRef="cny">1,081</ix:nonFraction></span></td><td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="padding-bottom: 1.5pt"><span style="font-size: 9pt">&#160;</span></td>
    <td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="padding-bottom: 1.5pt; text-align: right"><span style="font-size: 9pt"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="fhs:NetIncomeFromContinuingOperationsAmount" scale="3" unitRef="cny">46,097</ix:nonFraction></span></td><td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 9pt">&#160;</span></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left; padding-bottom: 1.5pt"><span style="font-size: 9pt">Net
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="padding-bottom: 1.5pt; text-align: right"><span style="-sec-ix-hidden: hidden-fact-77; font-size: 9pt">-</span></td><td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="padding-bottom: 1.5pt"><span style="font-size: 9pt">&#160;</span></td>
    <td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="padding-bottom: 1.5pt; text-align: right"><span style="-sec-ix-hidden: hidden-fact-78; font-size: 9pt">-</span></td><td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 9pt">&#160;</span></td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left; padding-bottom: 1.5pt"><span style="font-size: 9pt">Issuance
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    <td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="padding-bottom: 1.5pt; text-align: right"><span style="font-size: 9pt">-</span></td><td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="padding-bottom: 1.5pt"><span style="font-size: 9pt">&#160;</span></td>
    <td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="padding-bottom: 1.5pt; text-align: right"><span style="font-size: 9pt">-</span></td><td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="padding-bottom: 1.5pt"><span style="font-size: 9pt">&#160;</span></td>
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    <td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="padding-bottom: 1.5pt; text-align: right"><span style="font-size: 9pt">-</span></td><td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="padding-bottom: 1.5pt"><span style="font-size: 9pt">&#160;</span></td>
    <td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="padding-bottom: 1.5pt; text-align: right"><span style="font-size: 9pt">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:StockIssuedDuringPeriodValueNewIssues" scale="3" sign="-" unitRef="cny">533</ix:nonFraction></span></td><td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 9pt">)</span></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="padding-bottom: 1.5pt; text-align: right"><span style="-sec-ix-hidden: hidden-fact-79; font-size: 9pt">-</span></td><td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="padding-bottom: 1.5pt"><span style="font-size: 9pt">&#160;</span></td>
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    <td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="padding-bottom: 1.5pt; text-align: right"><span style="-sec-ix-hidden: hidden-fact-80; font-size: 9pt">-</span></td><td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="padding-bottom: 1.5pt"><span style="font-size: 9pt">&#160;</span></td>
    <td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="padding-bottom: 1.5pt; text-align: right"><span style="-sec-ix-hidden: hidden-fact-81; font-size: 9pt">-</span></td><td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="padding-bottom: 1.5pt"><span style="font-size: 9pt">&#160;</span></td>
    <td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 9pt">&#160;</span></td><td style="padding-bottom: 1.5pt; text-align: right">(<ix:nonFraction contextRef="c52" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DividendsCommonStockCash" scale="3" unitRef="cny">8,564</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 9pt">)&#160;</span></td><td style="padding-bottom: 1.5pt"><span style="font-size: 9pt">&#160;</span></td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </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><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">*</td><td style="text-align: justify"><ix:footnote id="ix_0_footnote" xml:lang="en-US">Number of ordinary shares reflect on a retrospective basis the
effect of shares issued in connection with the Corporate Restructuring in January 2021.</ix:footnote> See accompanying notes to consolidated financial
statements.</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 16.5pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 16.5pt">Reclassification- certain reclassifications have been
made to the financial statements for the year ended December 31, 2021 to conform to the presentation for the year ended December 31, 2022,
with no effect on previously reported net income (loss).</p><div>

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


</div><!-- Field: Page; Sequence: 136 --><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">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->7<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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-top: 0pt; margin-bottom: 0pt; text-align: center"><b>FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.&#160;</b></p><div>

</div><div><a id="f_006"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>CONSOLIDATED STATEMENTS
OF CASH FLOWS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">(In thousands of RMB, except share data and per
share data, or otherwise noted)</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="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="10" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Years Ended December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold">Cash flows from operating activities:</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 64%; text-align: left; padding-left: 8pt">Net income</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-left: 16pt">Bad debt provision</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 1.5pt; padding-left: 8pt">Advances from customers</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="c6" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInContractWithCustomerLiability" scale="3" sign="-" unitRef="cny">22,907</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="font-weight: bold; text-align: left; padding-bottom: 1.5pt">Net Cash used in Operating Activities - Continuing Operations</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="font-weight: bold; text-align: left; padding-bottom: 1.5pt">Net Cash generated from Operating Activities - Discontinued Operations</td><td style="font-weight: bold; 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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See accompanying notes to consolidated financial
statements.</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: 137 --><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">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="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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-top: 0pt; margin-bottom: 0pt; text-align: center"><b>FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">(In thousands of RMB, except share data and per
share data, or otherwise noted)</p><div>

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

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="10" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Years Ended December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold">Cash flows from investing activities</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)">
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    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">(<ix:nonFraction contextRef="c6" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:PaymentsToAcquirePropertyPlantAndEquipment" scale="3" unitRef="cny">33,491</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; ">
    <td style="text-align: left; padding-left: 0.25in">Purchase of intangible 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; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-left: 0.25in">Treasury stock</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="fhs:TreasuryStock" scale="3" unitRef="cny">533</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-left: 0.25in">Repayment of amounts due to related parties, net</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c6" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromRepaymentsOfRelatedPartyDebt" scale="3" sign="-" unitRef="cny">151,000</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-left: 9pt">Proceeds from loan</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c6" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromOtherShortTermDebt" scale="3" unitRef="cny">139,421</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-bottom: 1.5pt; padding-left: 9pt">Repayment of loans</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="c7" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfBankDebt" scale="3" unitRef="cny">297,988</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfBankDebt" scale="3" unitRef="cny">150,151</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="font-weight: bold; text-align: left; padding-bottom: 1.5pt">Net cash generated from/(used in) financing activities - Continuing Operations</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="c6" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:NetCashProvidedByUsedInFinancingActivities" scale="3" sign="-" unitRef="cny">8,449</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="c7" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:NetCashProvidedByUsedInFinancingActivities" scale="3" unitRef="cny">134,185</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:NetCashProvidedByUsedInFinancingActivities" scale="3" sign="-" unitRef="cny">83,318</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left; padding-bottom: 1.5pt">Net cash generated from/(used in) financing activities - Discontinued Operations</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="c7" decimals="-3" format="ixt:num-dot-decimal" name="fhs:NetCashGeneratedFromFinancingActivities" scale="3" sign="-" unitRef="cny">10,614</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">-</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 1.5pt">Effect of exchange rate changes on cash</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="c6" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:EffectOfExchangeRateOnCashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents" scale="3" unitRef="cny">144</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="c7" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:EffectOfExchangeRateOnCashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents" scale="3" unitRef="cny">318</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:EffectOfExchangeRateOnCashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents" scale="3" unitRef="cny">1,968</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">Net increase in cash</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="c6" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalentsPeriodIncreaseDecreaseIncludingExchangeRateEffect" scale="3" unitRef="cny">91,023</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="c7" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalentsPeriodIncreaseDecreaseIncludingExchangeRateEffect" scale="3" unitRef="cny">78,647</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="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalentsPeriodIncreaseDecreaseIncludingExchangeRateEffect" scale="3" unitRef="cny">52,912</ix:nonFraction></td><td style="font-weight: bold; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 1.5pt">Cash at beginning of year</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="c32" decimals="-3" format="ixt:num-dot-decimal" name="fhs:CashAtBeginningOfYear" scale="3" unitRef="cny">117,333</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="c4" decimals="-3" format="ixt:num-dot-decimal" name="fhs:CashAtBeginningOfYear" scale="3" unitRef="cny">136,953</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="-3" format="ixt:num-dot-decimal" name="fhs:CashAtBeginningOfYear" scale="3" unitRef="cny">114,197</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">Cash at end of year</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="c32" decimals="-3" format="ixt:num-dot-decimal" name="fhs:CashAndRestrictedCashAtEndOfYear" scale="3" unitRef="cny">208,356</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="c4" decimals="-3" format="ixt:num-dot-decimal" name="fhs:CashAndRestrictedCashAtEndOfYear" scale="3" unitRef="cny">215,600</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="-3" format="ixt:num-dot-decimal" name="fhs:CashAndRestrictedCashAtEndOfYear" scale="3" unitRef="cny">167,109</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 4pt">Less: Cash and cash equivalents, from the discontinued operations, end of period</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c32" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalentsIncludingDisposalGroupAndDiscontinuedOperations" scale="3" unitRef="cny">71,403</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">&#160;</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalentsIncludingDisposalGroupAndDiscontinuedOperations" scale="3" unitRef="cny">101,403</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>
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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">See accompanying notes to consolidated financial
statements.</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: 138 --><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">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="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>FIRST HIGH-SCHOOL EDUCATION
GROUP CO., LTD.</b></p><div>

</div><div><a id="f_007"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">(In thousands of RMB, except share data and per
share data, or otherwise noted)</p><div>

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

</div><ix:nonNumeric contextRef="c0" continuedAt="_NatureOfOperations-c0_cont_1" escape="true" name="us-gaap:NatureOfOperations"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"><b>1</b></td><td><b>ORGANIZATION AND PRINCIPAL ACTIVITIES</b></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_NatureOfOperations-c0_cont_2" id="_NatureOfOperations-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 3pt 0pt 0.25in">First High-School Education Group Co., Ltd. (the &#8220;Company&#8221;)
was incorporated as an exempted company with limited liability in the Cayman Islands on September 19, 2018. The Company, its subsidiaries
and its consolidated variable interest entity and its subsidiaries (&#8220;VIEs&#8221;) (collectively as the &#8220;Group&#8221;) are
principally engaged in the provision of full spectrum private fundamental education and complementary education services, including middle
and high school and tutorial school in the People&#8217;s Republic of China (the &#8220;PRC&#8221;). The Company completed its initial
public offering (&#8220;IPO&#8221;) on the New York Stock Exchange on March 11, 2021. Prior to January 12, 2021, the Company was wholly-owned
by Long-Spring Education Group (the &#8220;Parent&#8221;). Upon completion of the corporate restructuring on January 12, 2021, Long-Spring
Education Group ceased to be the parent company of the Group.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 3pt 0pt 0.25in"><span style="font-size: 6pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_NatureOfOperations-c0_cont_3" id="_NatureOfOperations-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 3pt 0pt 0.25in">On November 22, 2022, the Company was delisted from the NYSE when the
staff of the New York Stock Exchange LLC filed a Form 25 Notification of Delisting. The ADSs have been quoted on the OTC Pink Limited
Information initially under the symbol &#8220;FHSEY.&#8221;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-size: 6pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_NatureOfOperations-c0_cont_4" id="_NatureOfOperations-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">As of December 31, 2022, the Company&#8217;s subsidiaries
and consolidated VIEs are as follows.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-size: 6pt">&#160;</span></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_NatureOfOperations-c0_cont_5" id="_NatureOfOperations-c0_cont_4"><ix:nonNumeric contextRef="c0" continuedAt="fhs_ScheduleOfVariableInterestEntitiesAndSubsidiariesTableTextBlock-c0_cont_1" escape="true" name="fhs:ScheduleOfVariableInterestEntitiesAndSubsidiariesTableTextBlock"><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="vertical-align: bottom; text-indent: -0.125in; padding-left: 0.125in; text-align: left"><b>&#160;</b></td><td style="text-align: center"><b>&#160;</b></td>
    <td style="text-align: center"><b>&#160;</b></td><td style="text-align: center"><b>&#160;</b></td>
    <td style="text-align: center"><b>&#160;</b></td><td style="text-align: center"><b>&#160;</b></td>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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    <td style="text-align: center">&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
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    <td style="vertical-align: bottom; text-indent: -0.125in; padding-left: 0.125in; width: 46%; text-align: left">First High-School Education Group (BVI) Limited <br/>
(&#8220;First High-School BVI&#8221;)</td><td style="text-align: center; width: 1%; vertical-align: top">&#160;</td>
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    <td style="text-align: left; text-indent: -0.125in; padding-left: 0.125in; vertical-align: bottom">&#160;</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td><td style="vertical-align: top; text-align: center">&#160;</td><td style="vertical-align: top; text-align: center">&#160;</td><td style="text-align: center; vertical-align: top">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="vertical-align: top; text-indent: -0.125in; padding-left: 0.125in; text-align: left">First High-School Group Hong Kong Limited<br/>
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</div><div>

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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><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">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="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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-top: 0pt; margin-bottom: 0pt; text-align: center"><b>FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">(In thousands of RMB, except share data and per
share data, or otherwise noted)</p><div>

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

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

</div><ix:continuation continuedAt="_NatureOfOperations-c0_cont_7" id="_NatureOfOperations-c0_cont_6"><ix:continuation continuedAt="fhs_ScheduleOfVariableInterestEntitiesAndSubsidiariesTableTextBlock-c0_cont_3" id="fhs_ScheduleOfVariableInterestEntitiesAndSubsidiariesTableTextBlock-c0_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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    <td style="padding-left: 0.125in; text-indent: -0.125in; vertical-align: top">&#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>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: bottom">&#160;</td>
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    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td></tr>
  <tr>
    <td style="padding-left: 0.125in; text-indent: -0.125in; vertical-align: top">&#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>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: bottom">&#160;</td>
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    <td style="vertical-align: top; text-align: right">&#160;</td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td></tr>
  <tr>
    <td style="padding-left: 0.125in; text-indent: -0.125in; vertical-align: top">&#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>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: bottom">&#160;</td>
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    <td style="vertical-align: bottom">&#160;</td>
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    <td style="padding-left: 0.125in; text-indent: -0.125in; vertical-align: top">&#160;</td>
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    <td style="vertical-align: bottom">&#160;</td>
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  <tr>
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  <tr>
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  <tr>
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  <tr>
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  <tr>
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  <tr>
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  <tr>
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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 id="_NatureOfOperations-c0_cont_7"><ix:continuation id="fhs_ScheduleOfVariableInterestEntitiesAndSubsidiariesTableTextBlock-c0_cont_3"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left">*</td><td style="text-align: justify"><ix:footnote id="ix_1_footnote" xml:lang="en-US">Formal education services include middle, high and international
school services.</ix:footnote> F-1</td>
</tr></table></ix:continuation></ix:continuation><div>

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

</div><!-- Field: Page; Sequence: 140 --><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">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->11<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 171.85pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><b>FIRST HIGH-SCHOOL EDUCATION
GROUP CO., LTD.</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">(In thousands of RMB, except share data and per share
data, or otherwise noted)</p><div>

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

</div><ix:nonNumeric contextRef="c0" continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_1" escape="true" name="us-gaap:SignificantAccountingPoliciesTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><b>2</b></td><td style="text-align: justify"><b>SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</b></td>
</tr></table><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="_BasisOfAccountingPolicyPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:BasisOfAccountingPolicyPolicyTextBlock"><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><i>(a)</i></b></td><td style="text-align: justify"><b><i>Basis of presentation</i></b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_3" id="_SignificantAccountingPoliciesTextBlock-c0_cont_2"><ix:continuation continuedAt="_BasisOfAccountingPolicyPolicyTextBlock-c0_cont_2" id="_BasisOfAccountingPolicyPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 14pt 0pt 0.25in">The accompanying consolidated financial statements have
been prepared in accordance with U.S. generally accepted accounting principles (&#8220;US GAAP&#8221;). The consolidated financial statements
are presented in Renminbi (&#8220;RMB&#8221;), rounded to the nearest thousand.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 14pt 0pt 0.25in">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_4" id="_SignificantAccountingPoliciesTextBlock-c0_cont_3"><ix:continuation id="_BasisOfAccountingPolicyPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 14pt 0pt 0.25in">The accompanying consolidated financial statements have
been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal
course of business. The realization of assets and the satisfaction of liabilities in the normal course of business are dependent on, among
other things, the Company&#8217;s ability to operate profitably, to generate cash flows from operations, and the Company&#8217;s ability
to pursue financing arrangements to support its working capital requirements.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_5" id="_SignificantAccountingPoliciesTextBlock-c0_cont_4"><ix:nonNumeric contextRef="c0" continuedAt="_ConsolidationPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:ConsolidationPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><b><i>Principles of consolidation of VIEs</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_6" id="_SignificantAccountingPoliciesTextBlock-c0_cont_5"><ix:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_2" id="_ConsolidationPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 14pt 0pt 0.25in">In order to comply with the PRC laws and regulations which prohibit
foreign ownership of companies and institutions in compulsory educational services at middle school levels and restrict foreign investment
in educational services businesses at the high school level, the Group operates its restricted business in the PRC through its VIEs, whose
equity interest are held by the founders of the Group. The Group obtained the control over these VIEs by entering into a series of contractual
agreements as detailed below:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_7" id="_SignificantAccountingPoliciesTextBlock-c0_cont_6"><ix:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_3" id="_ConsolidationPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><span style="text-decoration:underline">Exclusive Call Option Agreement</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_8" id="_SignificantAccountingPoliciesTextBlock-c0_cont_7"><ix:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_4" id="_ConsolidationPolicyTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 14pt 0pt 0.25in">Pursuant to the exclusive call option agreement, the
shareholders of Long-Spring Education Holding Group Limited (&#8220;Long-Spring Education&#8221;) unconditionally and irrevocably granted
Yunnan WFOE or its designated entity the right to purchase at any time all or part of their equity interests in Long-Spring Education
at the lowest price applicable under PRC laws and regulations. Without Yunnan WFOE&#8217;s prior written consent, the shareholders of
Long-Spring Education also refrain from (1) selling, assigning, transferring, or otherwise disposing of the equity or sponsorship interest,
(2) increasing or reducing the capital investment, (3) dividing the affiliated entities into or merging it with other entities, (4) disposing
of any of the assets of the affiliated entities, (5) terminating or contradicting any material contract entered into by the affiliated
entities, (6) procuring the affiliated entities to enter into transactions that may have material impact on their assets, liabilities,
operations, equity structure, or other legal rights, (7) procuring the affiliated entities to declare or distribute profits and/or returns,
(8) amending the article of association of the affiliated entities, and (9) allowing the affiliated entities to undertake any material
obligation beyond normal business activities.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p></ix:continuation></ix:continuation><div>

</div><div>

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

</div><!-- Field: Page; Sequence: 141 --><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">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->12<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>FIRST HIGH-SCHOOL EDUCATION GROUP CO.,
LTD.</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">(In thousands of RMB, except share data and per share data, or otherwise noted)</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_9" id="_SignificantAccountingPoliciesTextBlock-c0_cont_8"><ix:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_5" id="_ConsolidationPolicyTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><span style="text-decoration:underline">School Sponsor&#8217;s and Directors&#8217; Rights Entrustment Agreement</span></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_10" id="_SignificantAccountingPoliciesTextBlock-c0_cont_9"><ix:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_6" id="_ConsolidationPolicyTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 14pt 0pt 0.25in">Pursuant to the school sponsor&#8217;s and directors&#8217;
rights entrustment agreement, the school sponsors irrevocably authorized and entrusted Yunnan WFOE or its designated personnel to exercise
all their rights as the school sponsor of each school, including but not limited to the right to appoint and/or elect directors, council
members, and supervisors of the school, right to review the resolutions of the board of directors and the financial statement of the school,
right to transfer school sponsor&#8217;s interest, and right to decide whether the school would be for-profit or non-profit. Each director
appointed by the sponsor of each school unconditionally and irrevocably authorized and entrusted Yunnan WFOE to exercise all the rights
as a director of the school, including but not limited to the right to attend meetings of the board of directors and vote, right to sign
board resolutions and other legal documents and other rights of directors under the school&#8217;s articles of association and the applicable
PRC laws.</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_11" id="_SignificantAccountingPoliciesTextBlock-c0_cont_10"><ix:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_7" id="_ConsolidationPolicyTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><span style="text-decoration:underline">Shareholders&#8217; Rights Entrustment Agreement</span></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_12" id="_SignificantAccountingPoliciesTextBlock-c0_cont_11"><ix:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_8" id="_ConsolidationPolicyTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 14pt 0pt 0.25in">Pursuant to the shareholders&#8217; rights
entrustment agreement, each shareholder of Long-Spring Education irrevocably authorized and entrusted Yunnan WFOE to exercise all the
respective rights as shareholders of Long-Spring Education, including but not limited to the right to attend shareholder&#8217;s meeting
and vote, right to sign shareholders&#8217; resolutions and other legal documents, right to instruct the directors and other rights of
shareholders under the school&#8217;s articles of association and the applicable PRC laws.</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_13" id="_SignificantAccountingPoliciesTextBlock-c0_cont_12"><ix:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_9" id="_ConsolidationPolicyTextBlock-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><span style="text-decoration:underline">Power of Attorney</span></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_14" id="_SignificantAccountingPoliciesTextBlock-c0_cont_13"><ix:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_10" id="_ConsolidationPolicyTextBlock-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 14pt 0pt 0.25in">Pursuant to the school sponsors&#8217; power of attorney, each school
sponsor authorized and appointed Yunnan WFOE as its agent to exercise on its behalf a school sponsor&#8217;s rights. Pursuant to the directors&#8217;
power of attorney, each director of Long-Spring Education authorized and appointed Yunnan WFOE as his/her agent to exercise on his/her
behalf a director&#8217;s rights. Pursuant to the shareholders&#8217; power of attorney, each shareholder of Long-Spring Education authorized
and appointed Yunnan WFOE as his/her/its agent to exercise on his/her/its behalf a shareholder&#8217;s rights.</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_15" id="_SignificantAccountingPoliciesTextBlock-c0_cont_14"><ix:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_11" id="_ConsolidationPolicyTextBlock-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><span style="text-decoration:underline">Equity Pledge Agreement</span></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:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_12" id="_ConsolidationPolicyTextBlock-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 14pt 0pt 0.25in">Pursuant to the equity pledge agreement, the shareholders of
Long-Spring Education unconditionally and irrevocably pledged and granted first priority security interests over all of his/her/its equity
interest in Long-Spring Education, as well as all related rights, to Yunnan WFOE as security for performance of all the contractual arrangements.
Without Yunnan WFOE&#8217;s prior written consent, the shareholders of Long-Spring Education must not transfer the equity interest or
create further pledge or encumbrance over the pledged equity interest. They also waived any pre-emptive rights upon enforcement, and Yunnan
WFOE can enforce upon default by transferring all or part of the equity interest, selling the pledged equity interest, or disposing of
the pledged equity interest in any other way to the extent permitted by PRC laws and regulations.</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 --><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">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->13<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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: center; margin-top: 0pt; margin-bottom: 0pt"><b>FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">(In thousands of RMB, except share data and per share data,
or otherwise noted)</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_17" id="_SignificantAccountingPoliciesTextBlock-c0_cont_16"><ix:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_13" id="_ConsolidationPolicyTextBlock-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><span style="text-decoration:underline">Spousal Undertaking</span></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_18" id="_SignificantAccountingPoliciesTextBlock-c0_cont_17"><ix:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_14" id="_ConsolidationPolicyTextBlock-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 14pt 0pt 0.25in">Pursuant to the spousal undertaking executed by the spouses of the
shareholders of Long-Spring Education, the signing spouses consented to the contractual arrangements with respect to the equity interest
in Long-Spring Education, including its pledge, transfer, and disposal in any other forms. The spouses will not participate in the operation,
management, liquidation, or any other matters in relation to Long-Spring Education&#8217;s subsidiaries and affiliated schools. They authorized
the shareholders of Long-Spring Education to exercise their shareholding rights on behalf of them to ensure the interest of Yunnan WFOE.
This undertaking will not terminate until Yunnan WFOE and the spouses terminate it in writing.</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_19" id="_SignificantAccountingPoliciesTextBlock-c0_cont_18"><ix:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_15" id="_ConsolidationPolicyTextBlock-c0_cont_14"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><span style="text-decoration:underline">Loan Agreement</span></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_20" id="_SignificantAccountingPoliciesTextBlock-c0_cont_19"><ix:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_16" id="_ConsolidationPolicyTextBlock-c0_cont_15"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 14pt 0pt 0.25in">Pursuant to the loan agreement, Yunnan WFOE agreed to provide
interest-free loans to Long-Spring Education. Each loan will be for an infinite term until termination at the sole discretion of Yunnan
WFOE. This agreement will terminate when all equity interests of the Long-Spring Education are transferred to Yunnan WFOE.</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_21" id="_SignificantAccountingPoliciesTextBlock-c0_cont_20"><ix:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_17" id="_ConsolidationPolicyTextBlock-c0_cont_16"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 14pt 0pt 0.25in">The agreements that transfer economic benefits of Long-Spring Education
to the Group include:</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_22" id="_SignificantAccountingPoliciesTextBlock-c0_cont_21"><ix:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_18" id="_ConsolidationPolicyTextBlock-c0_cont_17"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><span style="text-decoration:underline">Exclusive Technical Service and Management Consultancy Agreement
and Business Cooperation Agreement</span></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_23" id="_SignificantAccountingPoliciesTextBlock-c0_cont_22"><ix:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_19" id="_ConsolidationPolicyTextBlock-c0_cont_18"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 14pt 0pt 0.25in">Pursuant to the exclusive technical service and management
consultancy agreement and business cooperation agreement, Yunnan WFOE provides exclusive technical services to Long-Spring Education VIEs,
including software, website, and on-site technical support and training. It also provides exclusive management consultancy services such
as staff training, student recruitment support, internal management advisory, and market research and public relations. Each of the Long-Spring
Education VIEs pays Yunnan WFOE a service fee equal to the total amount of surplus of its operation. Yunnan WFOE also reserves the exclusive
proprietary rights to any technology or intellectual property developed in the course of the provision of services under the agreements.
Without the prior written consent of Yunnan WFOE, Long-Spring Education VIEs cannot accept services provided by or establish similar cooperation
relationship with any third-party. The agreements will remain effective unless Yunnan WFOE and/or the designated entity fully exercised
its purchase rights pursuant to the exclusive call option agreement or unilaterally terminated by Yunnan WFOE with a 30-day advance notice.
Unless otherwise required by applicable PRC laws, Long-Spring Education VIEs do not have any right to terminate the agreements.</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_24" id="_SignificantAccountingPoliciesTextBlock-c0_cont_23"><ix:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_20" id="_ConsolidationPolicyTextBlock-c0_cont_19"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 14pt 0pt 0.25in">Under the above agreements, the shareholders of Long-Spring
Education irrevocably granted Yunnan WFOE the power to exercise all voting rights to which they were entitled. In addition, Yunnan WFOE
has the option to acquire all of the equity interests in Long-Spring Education, to the extent permitted by the PRC laws and regulations,
for nominal consideration. Finally, Yunnan WFOE is entitled to receive service fees for certain services to be provided to Long-Spring
Education.</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_25" id="_SignificantAccountingPoliciesTextBlock-c0_cont_24"><ix:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_21" id="_ConsolidationPolicyTextBlock-c0_cont_20"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 14pt 0pt 0.25in">The Exclusive Call Option Agreement and Power of Attorney
provide the Group with effective control over the Long-Spring Education, while the Equity Pledge Agreements secure the obligations of
the shareholders of Long-Spring Education under the relevant agreements.</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_26" id="_SignificantAccountingPoliciesTextBlock-c0_cont_25"><ix:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_22" id="_ConsolidationPolicyTextBlock-c0_cont_21"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 14pt 0pt 0.25in">Because the Group has (i) the power to direct the activities
of Long-Spring Education, that most significantly affect its economic performance and (ii) the right to receive substantially all of the
benefits from Long-Spring Education, the Group is deemed the primary beneficiary of Long-Spring Education. Accordingly, the Company consolidates
VIEs&#8217; financial results of operations, assets and liabilities in the Group&#8217;s consolidated financial statements.</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: 143 --><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">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->14<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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-top: 0pt; margin-bottom: 0pt; text-align: center"><b>FIRST HIGH-SCHOOL EDUCATION GROUP
CO., LTD.</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">(In thousands of RMB, except share data and per share data, or otherwise noted)</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_27" id="_SignificantAccountingPoliciesTextBlock-c0_cont_26"><ix:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_23" id="_ConsolidationPolicyTextBlock-c0_cont_22"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 14pt 0pt 0.25in">In December 2018, in connection with 2018 Share Incentive
Plan, certain management personnel and employees of the Group through establishment of limited partnership entities (&#8220;PRC Partnership
entities&#8221;) became legal shareholders of Long-Spring Education. The above VIE agreements (&#8220;2016 VIE Agreements&#8221;) were
terminated and concurrently, new contractual VIE Agreements were entered into among Long-Spring Education, Long-Spring Education&#8217;s
shareholders (including PRC Partnership entities) and Yunnan WFOE. The terms of the new contractual arrangements among Long-Spring Education,
PRC Partnership entities and Yunnan WFOE are identical to the terms of the 2016 VIE Agreements.</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_28" id="_SignificantAccountingPoliciesTextBlock-c0_cont_27"><ix:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_24" id="_ConsolidationPolicyTextBlock-c0_cont_23"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><i>Risks in relation to VIE structure</i></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_29" id="_SignificantAccountingPoliciesTextBlock-c0_cont_28"><ix:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_25" id="_ConsolidationPolicyTextBlock-c0_cont_24"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 14pt 0pt 0.25in">As Long-Spring Education VIEs were established as limited
liability companies or organizations under the PRC law, their creditors do not have recourse to the general credit of Yunnan WFOE for
the liabilities of Long-Spring Education VIEs, and Yunnan WFOE does not have the obligation to assume the liabilities of Long-Spring Education
VIEs.</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_30" id="_SignificantAccountingPoliciesTextBlock-c0_cont_29"><ix:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_26" id="_ConsolidationPolicyTextBlock-c0_cont_25"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 14pt 0pt 0.25in">The Group believes that the contractual arrangements with
Long-Spring Education VIEs are in compliance with the PRC law and are legally enforceable.</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_31" id="_SignificantAccountingPoliciesTextBlock-c0_cont_30"><ix:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_27" id="_ConsolidationPolicyTextBlock-c0_cont_26"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 14pt 0pt 0.25in">However, the contractual arrangements are subject to risks
and uncertainties, including:</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_32" id="_SignificantAccountingPoliciesTextBlock-c0_cont_31"><ix:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_28" id="_ConsolidationPolicyTextBlock-c0_cont_27"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="padding-right: 12pt">Long-Spring Education and their shareholders may have or develop interests that conflict with the Group&#8217;s
interests, which may lead them to pursue opportunities in violation of the aforementioned contractual arrangements. If the Group cannot
resolve any conflicts of interest or disputes between the Group and the shareholders of Long-Spring Education, the Group would have to
rely on legal proceedings, which could result in disruption of its business, and there may be substantial uncertainty as to the outcome
of any such legal proceedings.</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="_SignificantAccountingPoliciesTextBlock-c0_cont_33" id="_SignificantAccountingPoliciesTextBlock-c0_cont_32"><ix:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_29" id="_ConsolidationPolicyTextBlock-c0_cont_28"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="padding-right: 2pt">Long-Spring Education and their shareholders could fail to obtain the proper operating licenses or fail
to comply with other regulatory requirements. As a result, the PRC government could impose fines, new requirements or other penalties
on the VIEs or the Group, mandate a change in ownership structure or operations for the VIEs or the Group, restrict the VIEs or the Group&#8217;s
use of financing sources or otherwise restrict the VIEs or the Group&#8217;s ability to conduct business.</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="_SignificantAccountingPoliciesTextBlock-c0_cont_34" id="_SignificantAccountingPoliciesTextBlock-c0_cont_33"><ix:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_30" id="_ConsolidationPolicyTextBlock-c0_cont_29"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="padding-right: 21pt">The PRC government may declare the aforementioned contractual arrangements invalid. They may modify the
relevant regulations, have a different interpretation of such regulations, or otherwise determine that the Group or the VIEs have failed
to comply with the legal obligations required to effectuate such contractual arrangements.</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="_SignificantAccountingPoliciesTextBlock-c0_cont_35" id="_SignificantAccountingPoliciesTextBlock-c0_cont_34"><ix:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_31" id="_ConsolidationPolicyTextBlock-c0_cont_30"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="padding-right: 27pt">If the legal structure and contractual arrangements were found to be in violation of PRC laws and regulations,
the PRC government may restrict or prohibit the Group&#8217;s use of the proceeds of the additional public offering to finance the Group&#8217;s
business and operations in China.</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><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 14.65pt 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 144 --><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">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->15<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 14.65pt 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">(In thousands of RMB, except
share data and per share data, or otherwise noted)</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_36" id="_SignificantAccountingPoliciesTextBlock-c0_cont_35"><ix:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_32" id="_ConsolidationPolicyTextBlock-c0_cont_31"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 14pt 0pt 0.25in">The Group&#8217;s ability to conduct its business may be negatively
affected if the PRC government were to carry out of any of the aforementioned actions.</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:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_33" id="_ConsolidationPolicyTextBlock-c0_cont_32"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 14pt 0pt 0.25in"><span style="font-size: 10pt">There is no VIE in which the Group has a variable interest but is not the primary beneficiary.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_38" id="_SignificantAccountingPoliciesTextBlock-c0_cont_37"><ix:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_34" id="_ConsolidationPolicyTextBlock-c0_cont_33"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 14pt 0pt 0.25in"><span style="font-size: 10pt">The table sets forth the assets and liabilities of the VIEs included in the Company&#8217;s consolidated balance sheets:</span> </p><p style="margin: 0">&#160;</p></ix:continuation></ix:continuation><div>



</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_39" id="_SignificantAccountingPoliciesTextBlock-c0_cont_38"><ix:nonNumeric contextRef="c0" continuedAt="_ScheduleOfCondensedBalanceSheetTableTextBlock-c0_cont_1" escape="true" name="srt:ScheduleOfCondensedBalanceSheetTableTextBlock"><ix:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_35" id="_ConsolidationPolicyTextBlock-c0_cont_34"><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">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c159" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:AccountsPayableCurrent" scale="3" unitRef="cny">8,555</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; ">
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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: 0.125in">Amounts due to related parties</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="c159" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DueToRelatedPartiesCurrent" scale="3" unitRef="cny">3,027</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="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="c159" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DeferredIncomeTaxLiabilitiesNet" scale="3" unitRef="cny">1,315</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; ">
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</div><div>

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

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

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_40" id="_SignificantAccountingPoliciesTextBlock-c0_cont_39"><ix:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_36" id="_ConsolidationPolicyTextBlock-c0_cont_35"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Notes:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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<td style="width: 0.25in">(i):</td><td style="padding-right: 10pt"><ix:footnote id="ix_2_footnote" xml:lang="en-US">Amounts due from related parties consisted of (a) amounts due from related parties as disclosed in Note
21<span style="font-family: Times New Roman, Times, Serif">.</span></ix:footnote></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation></ix:continuation><div>

</div><div>

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<td style="width: 0.25in; text-align: left">(ii):</td><td style="text-align: justify"><ix:footnote id="ix_3_footnote" xml:lang="en-US">Amounts due to related parties consisted of (a) amounts due
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</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></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: 145 --><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">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->16<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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-top: 0pt; margin-bottom: 0pt; text-align: center"><b>FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">(In thousands of RMB, except
share data and per share data, or otherwise noted)</p><div>

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

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included in the Company&#8217;s consolidated statements of comprehensive income:</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:nonNumeric contextRef="c0" escape="true" name="srt:CondensedStatementOfComprehensiveIncomeTableTextBlock"><ix:continuation id="_ConsolidationPolicyTextBlock-c0_cont_39"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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    <td colspan="10" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Years Ended December 31,</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; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:nonNumeric></ix:continuation><div>



</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_45" id="_SignificantAccountingPoliciesTextBlock-c0_cont_44"><ix:nonNumeric contextRef="c0" continuedAt="_UseOfEstimates-c0_cont_1" escape="true" name="us-gaap:UseOfEstimates"><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><i>(c)</i></b></td><td style="text-align: justify"><b><i>Use of estimates</i></b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_46" id="_SignificantAccountingPoliciesTextBlock-c0_cont_45"><ix:continuation id="_UseOfEstimates-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">The preparation of consolidated financial statements in conformity
with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions
include, but are not limited to, estimate of standalone selling prices of each unit of accounting in multiple performance obligations,
estimate of the contract period of the government cooperative agreements, the useful lives of long-lived assets, the fair values of assets
acquired and liabilities assumed and the consideration transferred in a business combination, the fair value of the reporting unit for
the goodwill impairment test, the allowance for doubtful accounts receivable and other current assets, the realization of deferred income
tax assets, the fair value of share-based compensation awards and the recoverability of long-lived assets. Changes in facts and circumstances
may result in revised estimates. Actual results could differ from those estimates, and as such, differences may be material to the consolidated
financial statements.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_47" id="_SignificantAccountingPoliciesTextBlock-c0_cont_46"><ix:nonNumeric contextRef="c0" continuedAt="_CashAndCashEquivalentsPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:CashAndCashEquivalentsPolicyTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.15pt"></td><td style="width: 0.25in"><b><i>(d)</i></b></td><td><b><i>Cash, cash equivalents </i></b></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:nonNumeric></ix:continuation><div>

</div><div>

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hand, which have original maturities of three months or less when purchased and are subject to an insignificant risk of changes in value.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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</div><div>




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

</div><!-- Field: Page; Sequence: 146 --><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">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->17<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </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-top: 0pt; margin-bottom: 0pt; text-align: center"><b>FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">(In thousands of RMB, except share data and per
share data, or otherwise noted)</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_50" id="_SignificantAccountingPoliciesTextBlock-c0_cont_49"><ix:nonNumeric contextRef="c0" continuedAt="_FairValueOfFinancialInstrumentsPolicy-c0_cont_1" escape="true" name="us-gaap:FairValueOfFinancialInstrumentsPolicy"><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><i>(e)</i></b></td><td style="text-align: justify"><b><i>Fair value of financial instruments</i></b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_51" id="_SignificantAccountingPoliciesTextBlock-c0_cont_50"><ix:continuation continuedAt="_FairValueOfFinancialInstrumentsPolicy-c0_cont_2" id="_FairValueOfFinancialInstrumentsPolicy-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 11pt 0pt 0.25in">The Group utilizes valuation techniques that maximize the
use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Group determines fair value based on
assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering
market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable
inputs, which are categorized in one of the following levels:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_52" id="_SignificantAccountingPoliciesTextBlock-c0_cont_51"><ix:continuation continuedAt="_FairValueOfFinancialInstrumentsPolicy-c0_cont_3" id="_FairValueOfFinancialInstrumentsPolicy-c0_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 15.65pt"></td><td style="width: 15.35pt">&#9679;</td><td>Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity
at the measurement date.</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="_SignificantAccountingPoliciesTextBlock-c0_cont_53" id="_SignificantAccountingPoliciesTextBlock-c0_cont_52"><ix:continuation continuedAt="_FairValueOfFinancialInstrumentsPolicy-c0_cont_4" id="_FairValueOfFinancialInstrumentsPolicy-c0_cont_3"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 15.65pt"></td><td style="width: 15.35pt">&#9679;</td><td style="padding-right: 41pt">Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset
or liability, either directly or indirectly, for substantially the full term of the asset or liability.</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="_SignificantAccountingPoliciesTextBlock-c0_cont_54" id="_SignificantAccountingPoliciesTextBlock-c0_cont_53"><ix:continuation continuedAt="_FairValueOfFinancialInstrumentsPolicy-c0_cont_5" id="_FairValueOfFinancialInstrumentsPolicy-c0_cont_4"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 15.65pt"></td><td style="width: 15.35pt">&#9679;</td><td style="padding-right: 20pt">Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent
that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset
or liability at the measurement date.</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="_SignificantAccountingPoliciesTextBlock-c0_cont_55" id="_SignificantAccountingPoliciesTextBlock-c0_cont_54"><ix:continuation continuedAt="_FairValueOfFinancialInstrumentsPolicy-c0_cont_6" id="_FairValueOfFinancialInstrumentsPolicy-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 6pt 0pt 0.25in; text-align: justify">The carrying values of financial instruments,
which consist of cash, restricted cash, accounts receivable, net of allowance for doubtful accounts, amounts due from related parties,
prepaid expenses and other current assets, accounts payable, accrued expenses and other payables, bank loan and amounts due to related
parties are measured at amortized cost which approximates their fair value due to the short-term nature of these instruments.</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_56" id="_SignificantAccountingPoliciesTextBlock-c0_cont_55"><ix:continuation id="_FairValueOfFinancialInstrumentsPolicy-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 11pt 0pt 0.25in">The borrowings under financing arrangements is measured
at amortized cost. The fair value of these long-term debt obligations approximates their carrying value as the borrowing rates are similar
to the market rates that are currently available to the Group for financing obligations with similar terms and credit risks and represent
a level 2 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_57" id="_SignificantAccountingPoliciesTextBlock-c0_cont_56"><ix:nonNumeric contextRef="c0" continuedAt="fhs_ContractAssetsAndLiabilitiesPolicyTextBlock-c0_cont_1" escape="true" name="fhs:ContractAssetsAndLiabilitiesPolicyTextBlock"><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><i>(f)</i></b></td><td style="text-align: justify"><b><i>Contract balances</i></b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_58" id="_SignificantAccountingPoliciesTextBlock-c0_cont_57"><ix:continuation continuedAt="fhs_ContractAssetsAndLiabilitiesPolicyTextBlock-c0_cont_2" id="fhs_ContractAssetsAndLiabilitiesPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 7pt 0pt 0.25in">The timing of revenue recognition, billings and cash collections
result in accounts receivable, contract assets and contract liabilities. Accounts receivable are recorded at the billing amount, net of
an allowance for doubtful account and is recognized in the period when the Company&#8217;s right to consideration is unconditional. Amounts
collected on accounts receivable are included in net cash provided by operating activities in the consolidated statements of cash flows.
The Group maintains an allowance for doubtful accounts for estimated losses inherent in its accounts receivable portfolio. In establishing
the required allowance, management considers historical losses adjusted to take into account current market conditions and customers&#8217;
financial condition, the amount of receivables in dispute, the accounts receivable aging, and the customers&#8217; repayment patterns.
The Group reviews its allowance for doubtful accounts on a customer-by-customer basis. Account balances are charged off against the allowance
after all means of collection have been exhausted and the potential for recovery is considered remote. The Group does not have any off-balance-sheet
credit exposure related to its customers.</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: 147 --><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">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->18<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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-top: 0pt; margin-bottom: 0pt; text-align: center"><b>FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">(In thousands of RMB, except share data and per
share data, or otherwise noted)</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_59" id="_SignificantAccountingPoliciesTextBlock-c0_cont_58"><ix:continuation continuedAt="fhs_ContractAssetsAndLiabilitiesPolicyTextBlock-c0_cont_3" id="fhs_ContractAssetsAndLiabilitiesPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 9pt 0pt 0.25in">A contract liability is the obligation to provide services
or goods to a customer for which the Group has received consideration from the customer. If a customer pays the consideration before the
Group provides services or goods to the customer, a contract liability is recognized when the payment is made or the payment is due.</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_60" id="_SignificantAccountingPoliciesTextBlock-c0_cont_59"><ix:continuation id="fhs_ContractAssetsAndLiabilitiesPolicyTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 11pt 0pt 0.25in">A contract asset is the right to consideration in exchange
for goods or services that the entity has transferred to a customer when that right is conditioned on something other than the passage
of time (for example, the entity&#8217;s future performance).</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_61" id="_SignificantAccountingPoliciesTextBlock-c0_cont_60"><ix:nonNumeric contextRef="c0" continuedAt="_PropertyPlantAndEquipmentPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:PropertyPlantAndEquipmentPolicyTextBlock"><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><i>(g)</i></b></td><td style="text-align: justify"><b><i>Property and equipment</i></b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_62" id="_SignificantAccountingPoliciesTextBlock-c0_cont_61"><ix:continuation continuedAt="_PropertyPlantAndEquipmentPolicyTextBlock-c0_cont_2" id="_PropertyPlantAndEquipmentPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">Property and equipment are carried at cost less accumulated
depreciation and any recorded impairment.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_63" id="_SignificantAccountingPoliciesTextBlock-c0_cont_62"><ix:continuation continuedAt="_PropertyPlantAndEquipmentPolicyTextBlock-c0_cont_3" id="_PropertyPlantAndEquipmentPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 7pt 0pt 0.25in">Gains or losses arising from the disposal of an item of
property and equipment are determined based on the difference between the net disposal proceeds and the carrying amount of the item and
are recognized in profit or loss on the date of disposal.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_64" id="_SignificantAccountingPoliciesTextBlock-c0_cont_63"><ix:continuation continuedAt="_PropertyPlantAndEquipmentPolicyTextBlock-c0_cont_4" id="_PropertyPlantAndEquipmentPolicyTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">The estimated useful lives are presented below.</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_65" id="_SignificantAccountingPoliciesTextBlock-c0_cont_64"><ix:nonNumeric contextRef="c0" escape="true" name="fhs:ScheduleOfEstimatedUsefulLivesOfPropertyPlantAndEquipmentTableTextBlock"><ix:continuation continuedAt="_PropertyPlantAndEquipmentPolicyTextBlock-c0_cont_5" id="_PropertyPlantAndEquipmentPolicyTextBlock-c0_cont_4"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="border-bottom: Black 1.5pt solid; text-align: left; width: 45%"><b>Category</b></td>
    <td style="width: 2%">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: center; width: 53%"><span style="font-size: 10pt"><b>Estimated useful life</b></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Buildings</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt"><ix:nonNumeric contextRef="c164" format="ixt-sec:duryear" name="us-gaap:PropertyPlantAndEquipmentUsefulLife">18</ix:nonNumeric> - <ix:nonNumeric contextRef="c165" format="ixt-sec:duryear" name="us-gaap:PropertyPlantAndEquipmentUsefulLife">20</ix:nonNumeric> years</span></td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">Leasehold improvement</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt"><ix:nonNumeric contextRef="c166" name="us-gaap:PropertyPlantAndEquipmentEstimatedUsefulLives">Shorter of the lease term and the estimated useful lives of the assets</ix:nonNumeric></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Furniture and office equipment</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt"><ix:nonNumeric contextRef="c167" format="ixt-sec:duryear" name="us-gaap:PropertyPlantAndEquipmentUsefulLife">6</ix:nonNumeric> - <ix:nonNumeric contextRef="c168" format="ixt-sec:duryear" name="us-gaap:PropertyPlantAndEquipmentUsefulLife">10</ix:nonNumeric> years</span></td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">Electronic equipment</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt"><ix:nonNumeric contextRef="c169" format="ixt-sec:duryear" name="us-gaap:PropertyPlantAndEquipmentUsefulLife">4</ix:nonNumeric> - <ix:nonNumeric contextRef="c170" format="ixt-sec:duryear" name="us-gaap:PropertyPlantAndEquipmentUsefulLife">5</ix:nonNumeric> years</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Vehicles</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt"><ix:nonNumeric contextRef="c171" format="ixt-sec:duryear" name="us-gaap:PropertyPlantAndEquipmentUsefulLife">5</ix:nonNumeric> years</span></td></tr>
  </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_66" id="_SignificantAccountingPoliciesTextBlock-c0_cont_65"><ix:continuation id="_PropertyPlantAndEquipmentPolicyTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">Depreciation on property and equipment is calculated on the
straight-line method over the estimated useful lives of the assets.</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_67" id="_SignificantAccountingPoliciesTextBlock-c0_cont_66"><ix:nonNumeric contextRef="c0" continuedAt="_LesseeLeasesPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:LesseeLeasesPolicyTextBlock"><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><i>(h)</i></b></td><td style="text-align: justify"><b><i>Leases</i></b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_68" id="_SignificantAccountingPoliciesTextBlock-c0_cont_67"><ix:continuation continuedAt="_LesseeLeasesPolicyTextBlock-c0_cont_2" id="_LesseeLeasesPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">Leases are classified at the lease inception date as either
a capital lease or an operating lease. A lease is a capital lease if any of the following conditions exists: a) ownership is transferred
to the lessee by the end of the lease term, b) there is a bargain purchase option, c) the lease term is at least <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="fhs:LeaseTermAsAPercentageOfPropertiesRemainingEstimatedEconomicUsefulLives" scale="-2" unitRef="pure">75</ix:nonFraction>% of the property&#8217;s
estimated remaining economic life, or d) the present value of the minimum lease payments at the beginning of the lease term is <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="fhs:MinimumLeasePaymentsPercentage" scale="-2" unitRef="pure">90</ix:nonFraction>% or
more of the fair value of the leased property to the lessor at the inception date. The Group records a capital lease as an asset and an
obligation at an amount equal to the present value at the beginning of the lease term of minimum lease payments during the lease term.</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_69" id="_SignificantAccountingPoliciesTextBlock-c0_cont_68"><ix:continuation id="_LesseeLeasesPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 7pt 0pt 0.25in">Rental costs on operating leases are charged to expense
on a straight-line basis over the lease term. Certain operating leases contain rent holidays and escalating rent. Rent holidays and escalating
rent are considered in determining the straight-line rent expense to be recorded over the lease term. Rental costs associated with building
operating leases that are incurred during the construction of leasehold improvements and to otherwise ready the property for the Group&#8217;s
intended use are recognized as rental expenses and are not capitalized.</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: 148 --><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">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->19<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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




</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">(In thousands of RMB, except share data and per
share data, or otherwise noted)</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_70" id="_SignificantAccountingPoliciesTextBlock-c0_cont_69"><ix:nonNumeric contextRef="c0" continuedAt="_BusinessCombinationsPolicy-c0_cont_1" escape="true" name="us-gaap:BusinessCombinationsPolicy"><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><i>(i)</i></b></td><td style="text-align: justify"><b><i>Business combinations</i></b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_71" id="_SignificantAccountingPoliciesTextBlock-c0_cont_70"><ix:continuation id="_BusinessCombinationsPolicy-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 2pt 0pt 0.25in">Business combinations are recorded using the acquisition
method of accounting. The assets acquired, the liabilities assumed, and any non-controlling interests of the acquiree at the acquisition
date, if any, are measured at their fair values as of the acquisition date. Goodwill is recognized and measured as the excess of the total
consideration transferred plus the fair value of any non-controlling interest of the acquiree and fair value of previously held equity
interest in the acquiree, if any, at the acquisition date over the fair values of the identifiable net assets acquired. Liability-classified
contingent consideration is measured at fair value at the acquisition date, and is remeasured at fair value at each subsequent reporting
date (with changes in fair value recognized in the consolidated statement of comprehensive income/ (loss)) until the contingency is resolved.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_72" id="_SignificantAccountingPoliciesTextBlock-c0_cont_71"><ix:nonNumeric contextRef="c0" continuedAt="_IntangibleAssetsFiniteLivedPolicy-c0_cont_1" escape="true" name="us-gaap:IntangibleAssetsFiniteLivedPolicy"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="width: 0.25in"><b><i>(j)</i></b></td><td><b><i>Intangible assets</i></b></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 continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_73" id="_SignificantAccountingPoliciesTextBlock-c0_cont_72"><ix:continuation continuedAt="_IntangibleAssetsFiniteLivedPolicy-c0_cont_2" id="_IntangibleAssetsFiniteLivedPolicy-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 9pt 0pt 0.25in">Acquired intangible assets comprised of government cooperative
agreements and software. The government cooperative agreements acquired from business combination is recognized and measured at fair value
and the acquired software are measured at cost, less accumulated amortization and impairment. Amortization of finite-lived intangible
assets is computed using the straight-line method over the estimated useful lives. The amortization periods by intangible asset classes
are 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_74" id="_SignificantAccountingPoliciesTextBlock-c0_cont_73"><ix:nonNumeric contextRef="c0" escape="true" name="fhs:ScheduleOfEstimatedUsefulLivesOfOtherIntangibleAssetsTableTextBlock"><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">
    <td colspan="2"><span style="font-size: 10pt"><b>Category</b></span></td>
    <td style="text-align: center"><span style="font-size: 10pt"><b>Estimated useful life</b></span></td></tr>
  <tr style="vertical-align: bottom; background-color: #CCEEFF">
    <td style="border-top: Black 1.5pt solid; width: 55%"><span style="font-size: 10pt">Systems software</span></td>
    <td style="border-top: #CCEEFF 1pt solid; width: 2%">&#160;</td>
    <td style="border-top: Black 1.5pt solid; width: 43%; text-align: center"><span style="font-size: 10pt"><ix:nonNumeric contextRef="c172" format="ixt-sec:duryear" name="us-gaap:FiniteLivedIntangibleAssetUsefulLife">2</ix:nonNumeric>-<ix:nonNumeric contextRef="c173" format="ixt-sec:duryear" name="us-gaap:FiniteLivedIntangibleAssetUsefulLife">10</ix:nonNumeric> years</span></td></tr>
  </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_75" id="_SignificantAccountingPoliciesTextBlock-c0_cont_74"><ix:nonNumeric contextRef="c0" continuedAt="_GoodwillAndIntangibleAssetsGoodwillPolicy-c0_cont_1" escape="true" name="us-gaap:GoodwillAndIntangibleAssetsGoodwillPolicy"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="width: 0.25in"><b><i>(k)</i></b></td><td><b><i>Goodwill</i></b></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_76" id="_SignificantAccountingPoliciesTextBlock-c0_cont_75"><ix:continuation continuedAt="_GoodwillAndIntangibleAssetsGoodwillPolicy-c0_cont_2" id="_GoodwillAndIntangibleAssetsGoodwillPolicy-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.25in">Goodwill is an asset representing the future economic
benefits arising from other assets acquired in the acquisition that are not individually identified and separately recognized.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_77" id="_SignificantAccountingPoliciesTextBlock-c0_cont_76"><ix:continuation continuedAt="_GoodwillAndIntangibleAssetsGoodwillPolicy-c0_cont_3" id="_GoodwillAndIntangibleAssetsGoodwillPolicy-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 2pt 0pt 0.25in">Goodwill is not amortized but is tested for impairment annually
or more frequently if events or changes in circumstances indicate that it might be impaired. Goodwill is tested for impairment at the
reporting unit level on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than
not reduce the fair value of a reporting unit below its carrying value. These events or circumstances could include a significant change
in the business climate, legal factors, operating performance indicators, competition, or sale or disposition of a significant portion
of a reporting unit. Application of the goodwill impairment test requires judgment, including the identification of the reporting unit,
assignment of assets and liabilities to the reporting unit, assignment of goodwill to the reporting unit, and determination of the fair
value of each reporting unit.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_78" id="_SignificantAccountingPoliciesTextBlock-c0_cont_77"><ix:continuation id="_GoodwillAndIntangibleAssetsGoodwillPolicy-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">The Group has the option to perform a qualitative assessment
to determine whether it is more-likely-than not that the fair value of a reporting unit is less than its carrying value prior to performing
the two-step goodwill impairment test. If it is more-likely-than-not that the fair value of a reporting unit is greater than its carrying
amount, the two-step goodwill impairment test is not required. If the two-step goodwill impairment test is required, first, the fair value
of the reporting unit is compared with its carrying amount (including goodwill). If the fair value of the reporting unit is less than
its carrying amount, an indication of goodwill impairment exists for the reporting unit and the Group performs step two of the impairment
test (measurement). Under step two, an impairment loss is recognized for any excess of the carrying amount of the reporting unit&#8217;s
goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of
the reporting unit in a manner similar to a purchase price allocation and the residual fair value after this allocation is the implied
fair value of the reporting unit goodwill. No impairment losses were recorded for goodwill for the years ended December 31, 2020, 2021
and 2022.</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: 149 --><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">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->20<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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-top: 0pt; margin-bottom: 0pt; text-align: center"><b>FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">(In thousands of RMB, except share data and per
share data, or otherwise noted)</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_79" id="_SignificantAccountingPoliciesTextBlock-c0_cont_78"><ix:nonNumeric contextRef="c0" continuedAt="_ImpairmentOrDisposalOfLongLivedAssetsPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:ImpairmentOrDisposalOfLongLivedAssetsPolicyTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="width: 0.25in"><b><i>(l)</i></b></td><td><b><i>Impairment of long-lived assets</i></b></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_80" id="_SignificantAccountingPoliciesTextBlock-c0_cont_79"><ix:continuation id="_ImpairmentOrDisposalOfLongLivedAssetsPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 3pt 0pt 0.25in">Long-lived assets, such as property and equipment, intangible
assets subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the
Group first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying amount. If the carrying
amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the
extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques including discounted
cash flow models, quoted market values and third-party independent appraisals, as considered necessary. No impairment losses were recorded
for long-lived assets for the years ended December 31, 2020, 2021 and 2022.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_81" id="_SignificantAccountingPoliciesTextBlock-c0_cont_80"><ix:nonNumeric contextRef="c0" continuedAt="_CommitmentsAndContingenciesPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:CommitmentsAndContingenciesPolicyTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="width: 0.25in"><b><i>(m)</i></b></td><td><b><i>Commitment and contingencies</i></b></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_82" id="_SignificantAccountingPoliciesTextBlock-c0_cont_81"><ix:continuation id="_CommitmentsAndContingenciesPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 3pt 0pt 0.25in">Liabilities for loss contingencies arising from claims,
assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and
the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></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" continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:RevenueRecognitionPolicyTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="width: 0.25in"><b><i>(n)</i></b></td><td><b><i>Revenue recognition</i></b></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_84" id="_SignificantAccountingPoliciesTextBlock-c0_cont_83"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_2" id="_RevenueRecognitionPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 2pt 0pt 0.25in">Revenue is recognized when control of promised goods or
services is transferred to the Group&#8217;s students in an amount of consideration to which the Group expects to be entitled to in exchange
for those goods or services. The Group follows the five steps approach for revenue recognition under Accounting Standards Update (&#8220;ASU&#8221;)
No. 2104-09, <i>Revenue from Contracts with Customers (Topic 606)</i> (&#8220;Topic 606&#8221;): (i) identify the contract(s) with a customer,
(ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price
to the performance obligations in the contract, and (v) recognize revenue when (or as) the Group satisfies a performance obligation.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_85" id="_SignificantAccountingPoliciesTextBlock-c0_cont_84"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_3" id="_RevenueRecognitionPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">For contracts with customers that contain multiple performance
obligations, determining whether products and services are considered distinct performance obligations that should be accounted for separately
versus together may require significant judgment. The transaction price is allocated to the separate performance obligation on a relative
standalone selling price basis. The standalone selling price is determined based on overall pricing objectives, taking into consideration
market conditions, geographic locations and other factors.</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 15pt 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 150 --><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">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="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>FIRST HIGH-SCHOOL EDUCATION GROUP CO.,
LTD.</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">(In thousands of RMB, except share data and per share data, or otherwise noted)</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_86" id="_SignificantAccountingPoliciesTextBlock-c0_cont_85"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_4" id="_RevenueRecognitionPolicyTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1pt 0pt 0.25in">The primary sources of the Group&#8217;s revenues are 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_87" id="_SignificantAccountingPoliciesTextBlock-c0_cont_86"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_5" id="_RevenueRecognitionPolicyTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1pt 0pt 0.25in"><i>Formal education services</i></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_88" id="_SignificantAccountingPoliciesTextBlock-c0_cont_87"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_6" id="_RevenueRecognitionPolicyTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1pt 0pt 0.25in">The Group&#8217;s revenue is principally derived from the
provision of boarding school educational services to students. The Group offers formal education program at the middle school and high
school.</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_89" id="_SignificantAccountingPoliciesTextBlock-c0_cont_88"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_7" id="_RevenueRecognitionPolicyTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1pt 0pt 0.25in">Tuition and accommodation fees received from formal education
services are generally paid in advance prior to the beginning of each semester. In very limited circumstances students may, with special
approval of the management, receive education first and pay their tuition in arrears.</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_90" id="_SignificantAccountingPoliciesTextBlock-c0_cont_89"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_8" id="_RevenueRecognitionPolicyTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1pt 0pt 0.25in">Each contract with a student in respect of the formal education services
contains multiple performance obligations consisting of the provision of the curriculum education services, after-school enrichment services,
registration and transportation services (collectively as &#8220;educational services&#8221;), delivery of educational books and related
materials (collectively as &#8220;educational materials&#8221;), boarding services and meal catering services. These performance obligations
are distinct in the context of the contract. The consideration expected to be received is allocated at contract inception among the performance
obligations based on their stand-alone selling prices.</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_91" id="_SignificantAccountingPoliciesTextBlock-c0_cont_90"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_9" id="_RevenueRecognitionPolicyTextBlock-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1pt 0pt 0.25in">Revenue attributable to educational services and boarding
services is recognized over time, based on a straight-line basis over the school year, as students simultaneously receive and consume
the benefits of these services throughout the service period. The portion of tuition and boarding payments received from students but
not earned is recorded as contract liability and is reflected as a current liability as such amounts represent revenue that the Group
expects to earn within one year. The academic year of the Group&#8217;s school is generally from September to January of the following
year and from March to June. The Group determines that there is not a significant financing component based on the nature of the service
being offered and the purpose of the payment terms.</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_92" id="_SignificantAccountingPoliciesTextBlock-c0_cont_91"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_10" id="_RevenueRecognitionPolicyTextBlock-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1pt 0pt 0.25in">Revenue attributable to educational materials and meal catering
services is recognized at point in time, when the control of the educational materials or underlying goods is passed to customers. The
Group considers that it is acting as the principal in the transaction and recognizes revenue from sales of the educational materials and
meal catering services on a gross basis.</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_93" id="_SignificantAccountingPoliciesTextBlock-c0_cont_92"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_11" id="_RevenueRecognitionPolicyTextBlock-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1pt 0pt 0.25in"><i>Revenue from government cooperative arrangements</i></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_94" id="_SignificantAccountingPoliciesTextBlock-c0_cont_93"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_12" id="_RevenueRecognitionPolicyTextBlock-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1pt 0pt 0.25in">The Group has entered into certain long-term cooperative arrangements
with local governments in areas where some of the schools are located. Pursuant to such arrangements, the Group is committed to admit
certain number of local students as &#8220;publicly-sponsored students&#8221; who pay the tuition fees based on the amounts charged by
a comparable public school. The difference between the fees charged by the Group to other students and the fees charged to publicly-sponsored
students are subsidized by the local governments in the form of lump sum funding payments in the first few years of the cooperative arrangements.
The government subsidies are recognized as &#8220;revenue from government cooperative arrangements&#8221; on a systematic basis when there
is reasonable assurance that they will be received and the Group will comply with the conditions attaching to the agreements. In particular,
revenue under these arrangements are recognized on a straight-line basis during the relevant school year, and over the estimated period
to which the subsidies relate, based on the difference in average tuition fee for private students and for publicly-sponsored students
and the number of publicly-sponsored students of each academic year. When the Group has received payments from the governments before
educational services are provided to these publicly-sponsored students, a deferred revenue from governments is recognized when the payments
are received.</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 0pt 172pt"></p><div>

</div><!-- Field: Page; Sequence: 151 --><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">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->22<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><b>FIRST HIGH-SCHOOL EDUCATION
GROUP CO., LTD.</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">(In thousands of RMB, except share data and per share data,
or otherwise noted)</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_95" id="_SignificantAccountingPoliciesTextBlock-c0_cont_94"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_13" id="_RevenueRecognitionPolicyTextBlock-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1pt 0pt 0.25in">Throughout the whole period of cooperative arrangements,
the governments also provide free access to certain buildings and dormitories and assign certain number of teachers who originally work
in other public schools to the Group. These subsidies are determined as non-monetary government grants in a nonreciprocal transfer for
which the fair value is not reliably estimable. Accordingly, the Group recognizes the asset or services and the relevant grants at their
nominal amounts paid.</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_96" id="_SignificantAccountingPoliciesTextBlock-c0_cont_95"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_14" id="_RevenueRecognitionPolicyTextBlock-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><i>Tuition income from training programs</i></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_97" id="_SignificantAccountingPoliciesTextBlock-c0_cont_96"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_15" id="_RevenueRecognitionPolicyTextBlock-c0_cont_14"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 11pt 0pt 0.25in">Revenue derived from providing Gaokao (the university entrance
examination in China) repeaters&#8217; education programs and other after-school is recognized over time, based on a straight-line basis
over the program service period, as customers simultaneously receive and consume the benefits of these services throughout the service
period.</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_98" id="_SignificantAccountingPoliciesTextBlock-c0_cont_97"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_16" id="_RevenueRecognitionPolicyTextBlock-c0_cont_15"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><i>Education and management service fees</i></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_99" id="_SignificantAccountingPoliciesTextBlock-c0_cont_98"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_17" id="_RevenueRecognitionPolicyTextBlock-c0_cont_16"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 7pt 0pt 0.25in">Revenue derived from 1) the education and management service
provided to the third-party schools included logistic management services, school operation and management services and other services.
The promised services in each education and management service contract are combined and accounted as a single performance obligation,
as the promised services in a contract are not distinct and are considered as a significant integrated service, and 2) the meal catering
services are outsourced to certain vendors and the Group charges management service fee to these vendors. The revenue is recognized on
a straight-line basis over the period of the education and management service, as customers simultaneously receive and consume the benefits
of these services throughout the service period.</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_100" id="_SignificantAccountingPoliciesTextBlock-c0_cont_99"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_18" id="_RevenueRecognitionPolicyTextBlock-c0_cont_17"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 13pt 0pt 0.25in">The Group has assessed all variable considerations identified
when determining the transaction price. In making such assessment, the Group may provide price concessions to the customers under education
and management services contracts in order to enter into new contracts or collect payments. The Group includes the estimate of the concession
in the amount of consideration to which it ultimately expects to be entitled.</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_101" id="_SignificantAccountingPoliciesTextBlock-c0_cont_100"><ix:continuation id="_RevenueRecognitionPolicyTextBlock-c0_cont_18"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 3pt 0pt 0.25in">VAT collected from customers is excluded from revenue. The
Company&#8217;s PRC subsidiaries and VIEs are subject to VAT. The deductible input VAT balance is recorded in prepaid expenses and other
current assets, and VAT payable balance is recorded in the accrued expenses and other payables.</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_102" id="_SignificantAccountingPoliciesTextBlock-c0_cont_101"><ix:nonNumeric contextRef="c0" continuedAt="_CostOfSalesPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:CostOfSalesPolicyTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"><b><i>(o)</i></b></td><td><b><i>Cost of revenues</i></b></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_103" id="_SignificantAccountingPoliciesTextBlock-c0_cont_102"><ix:continuation id="_CostOfSalesPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">Cost of revenues consists primarily of salaries to instructors
and tutors, rental expenses for office and school space, depreciation and amortization of properties and equipment, teaching materials
and other costs directly attributable to the provision of the service revenue.</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>

</div><!-- Field: Page; Sequence: 152 --><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">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->23<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">(In thousands of RMB, except share data and per
share data, or otherwise noted)</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_104" id="_SignificantAccountingPoliciesTextBlock-c0_cont_103"><ix:nonNumeric contextRef="c0" continuedAt="_SellingGeneralAndAdministrativeExpensesPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:SellingGeneralAndAdministrativeExpensesPolicyTextBlock"><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><i>(p)</i></b></td><td style="text-align: justify"><b><i>Selling and marketing expenses</i></b></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 continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_105" id="_SignificantAccountingPoliciesTextBlock-c0_cont_104"><ix:continuation id="_SellingGeneralAndAdministrativeExpensesPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">Selling and marketing expense mainly consists of advertising
costs which are expensed as incurred. Advertising costs amounted to approximately RMB<ix:nonFraction contextRef="c6" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:AdvertisingExpense" scale="3" unitRef="cny">3,737</ix:nonFraction>, RMB<ix:nonFraction contextRef="c7" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:AdvertisingExpense" scale="3" unitRef="cny">2,986</ix:nonFraction> and RMB<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:AdvertisingExpense" scale="3" unitRef="cny">1,299</ix:nonFraction> for the years ended
December 31, 2020, 2021 and 2022, respectively.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_106" id="_SignificantAccountingPoliciesTextBlock-c0_cont_105"><ix:nonNumeric contextRef="c0" continuedAt="fhs_GovernmentGrantsPolicyTextBlock-c0_cont_1" escape="true" name="fhs:GovernmentGrantsPolicyTextBlock"><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><i>(q)</i></b></td><td style="text-align: justify"><b><i>Government grants</i></b></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 continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_107" id="_SignificantAccountingPoliciesTextBlock-c0_cont_106"><ix:continuation id="fhs_GovernmentGrantsPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 10pt 0pt 0.25in">Except for the subsidies received under the government
cooperative arrangements described in Note 2(n), government grants are recognized when received and when all the conditions for their
receipt have been met. Subsidies that compensate the Group for expenses incurred are recognized as a reduction of expenses in the consolidated
statements of comprehensive income/ (loss). Subsidies that are not associated with expenses are recognized as income from government grants.</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_108" id="_SignificantAccountingPoliciesTextBlock-c0_cont_107"><ix:nonNumeric contextRef="c0" continuedAt="_IncomeTaxPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:IncomeTaxPolicyTextBlock"><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><i>(r)</i></b></td><td style="text-align: justify"><b><i>Income tax</i></b></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 continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_109" id="_SignificantAccountingPoliciesTextBlock-c0_cont_108"><ix:continuation continuedAt="_IncomeTaxPolicyTextBlock-c0_cont_2" id="_IncomeTaxPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4pt 0pt 0.25in">Income taxes are accounted for under the liability method.
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. 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 that includes the enactment date.</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_110" id="_SignificantAccountingPoliciesTextBlock-c0_cont_109"><ix:continuation continuedAt="_IncomeTaxPolicyTextBlock-c0_cont_3" id="_IncomeTaxPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 3pt 0pt 0.25in">The Group reduces the carrying amounts of deferred tax assets
by a valuation allowance, if based on the available evidence, it is &#8220;more-likely-than-not&#8221; that such assets will not be realized.
Accordingly, the need to establish valuation allowances for deferred tax assets is assessed at each reporting period based on a &#8220;more-likely-than-not&#8221;
realization threshold. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses,
forecasts of futures profitability, the duration of statutory carry forward periods, the Group&#8217;s experience with operating loss
and tax credit carry forwards, if any, not expiring.</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_111" id="_SignificantAccountingPoliciesTextBlock-c0_cont_110"><ix:continuation id="_IncomeTaxPolicyTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5pt 0pt 0.25in">The Group recognizes the effect of income tax positions
only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount
that is greater than <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EffectiveIncomeTaxRateReconciliationTaxCreditsOther" scale="-2" unitRef="pure">50</ix:nonFraction>% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change
in judgment occurs. The Group records interest related to unrecognized tax benefits in income tax expense and penalties in general and
administrative expenses.</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_112" id="_SignificantAccountingPoliciesTextBlock-c0_cont_111"><ix:nonNumeric contextRef="c0" continuedAt="_ShareBasedCompensationOptionAndIncentivePlansPolicy-c0_cont_1" escape="true" name="us-gaap:ShareBasedCompensationOptionAndIncentivePlansPolicy"><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><i>(s)</i></b></td><td style="text-align: justify"><b><i>Share-based compensation</i></b></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 continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_113" id="_SignificantAccountingPoliciesTextBlock-c0_cont_112"><ix:continuation continuedAt="_ShareBasedCompensationOptionAndIncentivePlansPolicy-c0_cont_2" id="_ShareBasedCompensationOptionAndIncentivePlansPolicy-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">The Group accounts for the compensation cost from share-based
payment transactions with employees based on the grant-date fair value of the equity instrument issued. The grant-date fair value of the
award is recognized as compensation expense, net of forfeitures, over the period during which an employee is required to provide service
in exchange for the award, which is generally the vesting period. When no future services are required to be performed by the employee
in exchange for an award of equity instruments, and if such award does not contain a performance or market condition, the cost of the
award is expensed on the grant date. The Group elects to recognize forfeitures when they occur.</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: 153 --><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">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="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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: center; margin-top: 0pt; margin-bottom: 0pt"><b>FIRST HIGH-SCHOOL EDUCATION
GROUP CO., LTD.</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">(In thousands of RMB, except share data and per share data,
or otherwise noted)</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_114" id="_SignificantAccountingPoliciesTextBlock-c0_cont_113"><ix:continuation continuedAt="_ShareBasedCompensationOptionAndIncentivePlansPolicy-c0_cont_3" id="_ShareBasedCompensationOptionAndIncentivePlansPolicy-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">Share-based payment transactions with non-employees in which
goods or services are received in exchange for equity instruments are accounted for based on the fair value of the consideration received
or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date of the fair value of the
equity instrument issued is the earlier of either the date on which the counterparty&#8217;s performance is complete or the date at which
a commitment for performance by the counterparty to earn the equity instrument is reached.</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_115" id="_SignificantAccountingPoliciesTextBlock-c0_cont_114"><ix:continuation continuedAt="_ShareBasedCompensationOptionAndIncentivePlansPolicy-c0_cont_4" id="_ShareBasedCompensationOptionAndIncentivePlansPolicy-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">The award in the shares of the Parent
of the Group granted to employees and non-employees of the Group would be accounted for as employee and non-employee awards in the Group&#8217;s
consolidated financial statements. Compensation cost related to the grant of these share awards would be recorded at the Group level with
a corresponding credit to equity, representing Parent&#8217;s equity contribution.</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_116" id="_SignificantAccountingPoliciesTextBlock-c0_cont_115"><ix:continuation id="_ShareBasedCompensationOptionAndIncentivePlansPolicy-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">For further information on share-based compensation.</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_117" id="_SignificantAccountingPoliciesTextBlock-c0_cont_116"><ix:nonNumeric contextRef="c0" continuedAt="fhs_EmployeeBenefitsPolicyTextBlock-c0_cont_1" escape="true" name="fhs:EmployeeBenefitsPolicyTextBlock"><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><i>(t)</i></b></td><td style="text-align: justify"><b><i>Employee benefits</i></b></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 continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_118" id="_SignificantAccountingPoliciesTextBlock-c0_cont_117"><ix:continuation id="fhs_EmployeeBenefitsPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">Pursuant to relevant PRC regulations, the Group is required
to make contributions to various defined contribution plans organized by municipal and provincial PRC governments. The contributions are
made for each PRC employee at rates ranging from <ix:nonFraction contextRef="c157" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:DefinedContributionPlanEmployerMatchingContributionPercent" scale="-2" unitRef="pure">31</ix:nonFraction>% to <ix:nonFraction contextRef="c158" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:DefinedContributionPlanEmployerMatchingContributionPercent" scale="-2" unitRef="pure">37</ix:nonFraction>% on employees&#8217; salaries, up to a maximum amount specified by local social
security bureau. Contributions to the defined contribution plans are charged to the consolidated statements of comprehensive income/ (loss)
when the related service is provided.</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_119" id="_SignificantAccountingPoliciesTextBlock-c0_cont_118"><ix:nonNumeric contextRef="c0" continuedAt="_ForeignCurrencyTransactionsAndTranslationsPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:ForeignCurrencyTransactionsAndTranslationsPolicyTextBlock"><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><i>(u)</i></b></td><td style="text-align: justify"><b><i>Foreign currency translation and foreign currency risks</i></b></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 continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_120" id="_SignificantAccountingPoliciesTextBlock-c0_cont_119"><ix:continuation continuedAt="_ForeignCurrencyTransactionsAndTranslationsPolicyTextBlock-c0_cont_2" id="_ForeignCurrencyTransactionsAndTranslationsPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">The Group use RMB as its reporting currency. The functional
currency of the Company, First High-School BVI and First High-School HK is the USD, whereas the functional currency of its PRC subsidiaries
and consolidated VIEs is the RMB.</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_121" id="_SignificantAccountingPoliciesTextBlock-c0_cont_120"><ix:continuation continuedAt="_ForeignCurrencyTransactionsAndTranslationsPolicyTextBlock-c0_cont_3" id="_ForeignCurrencyTransactionsAndTranslationsPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">Foreign currency transactions during the period are translated
at the foreign exchange rates ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated
at the foreign exchange rates ruling at the end of the reporting period. Exchange gains and losses are recognized in profit or loss and
are reported in foreign currency exchange gain (loss) on a net basis.</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_122" id="_SignificantAccountingPoliciesTextBlock-c0_cont_121"><ix:continuation continuedAt="_ForeignCurrencyTransactionsAndTranslationsPolicyTextBlock-c0_cont_4" id="_ForeignCurrencyTransactionsAndTranslationsPolicyTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">The results of foreign operations are translated into RMB
at the exchange rates approximating the foreign exchange rates ruling at the dates of the transactions. Assets and liabilities are translated
at the exchange rates at the balance sheet date, equity accounts are translated at historical exchange rates and revenues, expenses, gains
and losses are translated using the average rate for the year.</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_123" id="_SignificantAccountingPoliciesTextBlock-c0_cont_122"><ix:continuation continuedAt="_ForeignCurrencyTransactionsAndTranslationsPolicyTextBlock-c0_cont_5" id="_ForeignCurrencyTransactionsAndTranslationsPolicyTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">Translation adjustments are reported in other comprehensive
income and accumulated in the translation adjustment component of equity until the sale or liquidation of the foreign entity.</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 6pt 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 154 --><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">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->25<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>FIRST HIGH-SCHOOL EDUCATION GROUP CO.,
LTD.</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">(In thousands of RMB, except share data and per
share data, or otherwise noted)</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_124" id="_SignificantAccountingPoliciesTextBlock-c0_cont_123"><ix:continuation id="_ForeignCurrencyTransactionsAndTranslationsPolicyTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1pt 0pt 0.25in">The RMB is not a freely convertible currency. The PRC
State Administration for Foreign Exchange, under the authority of the PRC government, controls the conversion of RMB to foreign currencies.
The value of the RMB is subject to changes of central government policies and international economic and political developments affecting
supply and demand in the China foreign exchange trading system market. The Group&#8217;s cash denominated in RMB amounted to approximately
RMB<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:InvestmentsAndCash" scale="3" unitRef="cny">114,197</ix:nonFraction> and RMB<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:InvestmentsAndCash" scale="3" unitRef="cny">105,258</ix:nonFraction> as of December 31, 2021 and 2022, respectively.</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_125" id="_SignificantAccountingPoliciesTextBlock-c0_cont_124"><ix:nonNumeric contextRef="c0" continuedAt="_ConcentrationRiskCreditRisk-c0_cont_1" escape="true" name="us-gaap:ConcentrationRiskCreditRisk"><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><i>(v)</i></b></td><td style="text-align: justify"><b><i>Concentration of credit risk</i></b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_126" id="_SignificantAccountingPoliciesTextBlock-c0_cont_125"><ix:continuation continuedAt="_ConcentrationRiskCreditRisk-c0_cont_2" id="_ConcentrationRiskCreditRisk-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 29pt 0pt 0.25in">The Group&#8217;s credit risk arises from cash, other
current assets and other non-current assets and accounts receivable. The carrying amounts of these financial instruments represent the
maximum amount of loss due to credit risk.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_127" id="_SignificantAccountingPoliciesTextBlock-c0_cont_126"><ix:continuation continuedAt="_ConcentrationRiskCreditRisk-c0_cont_3" id="_ConcentrationRiskCreditRisk-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 7pt 0pt 0.25in; text-align: justify">The Group expects that there is
no significant credit risk associated with the cash which are held by reputable financial institutions in the jurisdictions where the
Company, its subsidiaries and VIEs are located. The Group believes that it is not exposed to unusual risks as these financial institutions
have high credit quality.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_128" id="_SignificantAccountingPoliciesTextBlock-c0_cont_127"><ix:continuation continuedAt="_ConcentrationRiskCreditRisk-c0_cont_4" id="_ConcentrationRiskCreditRisk-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">The Group has no significant concentration of credit risk
with respect to its other receivables and prepayments.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_129" id="_SignificantAccountingPoliciesTextBlock-c0_cont_128"><ix:continuation id="_ConcentrationRiskCreditRisk-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1pt 0pt 0.25in">The Group conducts credit evaluations on its customers
prior to delivery of goods or services. The assessment of customer creditworthiness is primarily based on historical collection records,
research of publicly available information and customer on-site visits. Based on this analysis, the Group determines what credit terms,
if any, to offer to each customer individually. If the assessment indicates a likelihood of collection risk, the Group will not deliver
the services or sell the products to the customer or require the customer to pay cash or to make significant down payments. Historically,
credit losses on accounts receivable have been insignificant.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_130" id="_SignificantAccountingPoliciesTextBlock-c0_cont_129"><ix:nonNumeric contextRef="c0" continuedAt="fhs_RecentlyAdoptedAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_1" escape="true" name="fhs:RecentlyAdoptedAccountingPronouncementsPolicyPolicyTextBlock"><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><i>(w)</i></b></td><td style="text-align: justify"><b><i>Recently adopted accounting pronouncements</i></b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_131" id="_SignificantAccountingPoliciesTextBlock-c0_cont_130"><ix:continuation id="fhs_RecentlyAdoptedAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1pt 0pt 0.25in">In October 2018, the FASB issued ASU 2018-17, <i>Consolidation
(Topic 810): Targeted Improvements to the Related Party Guidance for Variable Interest Entities</i>. ASU 2018-17 changes how entities
evaluate decision-making fees under the variable interest entity guidance. To determine whether decision-making fees represent a variable
interest, an entity considers indirect interests held through related parties under common control on a proportional basis, rather than
in their entirety. The guidance is effective for the Group for periods beginning after December 15, 2020. Early adoption is allowed. The
Group adopted the standard on January 1, 2021 and the adoption of this standard did not have a material impact on the consolidated financial
statements.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_132" id="_SignificantAccountingPoliciesTextBlock-c0_cont_131"><ix:nonNumeric contextRef="c0" continuedAt="_NewAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:NewAccountingPronouncementsPolicyPolicyTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"><b><i>(x)</i></b></td><td style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><b><i>Recently issued accounting pronouncements</i></b></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_133" id="_SignificantAccountingPoliciesTextBlock-c0_cont_132"><ix:continuation continuedAt="_NewAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_2" id="_NewAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">Under the Jumpstart Our Business Startups Act of 2012,
as amended (&#8220;the JOBS Act&#8221;), the Company meets the definition of an emerging growth company, or EGC, and has elected the extended
transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards until
they would apply to private companies.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#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: 155 --><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">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="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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: center; margin-top: 0pt; margin-bottom: 0pt"><b>FIRST HIGH-SCHOOL EDUCATION
GROUP CO., LTD.</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">(In thousands of RMB, except share data and per share data,
or otherwise noted)</p><div>

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

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(Topic 740): Simplifying the Accounting for Income Taxes.</i> ASU 2019-12 key changes include hybrid tax regimes, intra-period tax allocation
exception, and interim-period accounting for enacted changes in tax law. Early adoption is permitted, including adoption in any interim
period or annual reports for which financial statements have not yet been made available for issuance. The guidance is effective for the
Group for annual periods beginning after December 15, 2021. The Group does not plan to early adopt this guidance and is evaluating the
impact of the new standard.</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_135" id="_SignificantAccountingPoliciesTextBlock-c0_cont_134"><ix:continuation continuedAt="_NewAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_4" id="_NewAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">In January 2017, FASB issued ASU No. 2017-04, <i>Intangibles&#8212;Goodwill
and Other (Topic 350): Simplifying the Test for Goodwill Impairment</i>. This ASU is to simplify the subsequent measurement of goodwill.
The ASU eliminates step 2 from the goodwill impairment test and the requirements for any reporting unit with a zero or negative carrying
amount to perform a qualitative assessment and, if it fails that qualitative test, to perform step 2 of the goodwill impairment test.
An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment
test is necessary. This ASU should be applied on a prospective basis. The amendments in this ASU are effective for the Group for its annual
or any interim goodwill impairment tests in fiscal years beginning after December 15, 2021. Early adoption is permitted. The Group does
not plan to early adopt this guidance and is evaluating the impact of the new standard.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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Losses (Topic 326), Measurement of Credit Losses on Financial Instruments</i> and issued a series of subsequent amendments to the initial
guidance. These ASUs require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the
net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis
of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. The measurement
of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and
reasonable and supportable forecasts that affect the collectability of the reported amount. These ASUs eliminates the probable initial
recognition threshold in current GAAP and, instead, reflects an entity&#8217;s current estimate of all expected credit losses. The amendments
in these ASUs are effective for the Group for its fiscal years beginning after December 15, 2022, with early adoption permitted. The Group
does not plan to early adopt this guidance and is evaluating the impact of the new standard.</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><!-- 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-top: 0pt; margin-bottom: 0pt; text-align: center"><b>FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">(In thousands of RMB, except share data and per
share data, or otherwise noted)</p><div>

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

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(Topic 842)</i>, which supersedes the guidance in ASC Topic 840, <i>Leases</i>. ASU 2016-02 requires, among other changes to the
lease accounting guidance, lessees to recognize most leases on-balance sheet via a right-of-use asset and lease liability, and
additional qualitative and quantitative disclosures. In July 2018, ASU No. 2018-10, <i>Codification Improvements to Topic 842,
Leases,</i> was issued to provide more detailed guidance and additional clarification for implementing ASU No. 2016-02. In July
2018, the FASB issued ASU No. 2018-11, </ix:continuation><i><ix:continuation id="_NewAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_6">Leases (Topic 842): Targeted Improvements, which provides an optional transition method in
addition to the existing modified retrospective transition method by allowing a cumulative effect adjustment to the opening balance
of retained earnings in the period of adoption. Furthermore, in June 2020, the FASB issued ASU No. 2020-05, Revenue from Contracts
with Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities, which defers the effective date of ASU No.
2016-02 for certain entities. This update is effective for the Group for annual reporting periods beginning after December 15, 2021
and interim periods within annual periods beginning after December 15, 2022.</ix:continuation> Early adoption is permitted. The Group does not plan to
early adopt this guidance and is evaluating the impact of the new standard.</i></p></ix:continuation><div>

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

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<td style="width: 0.25in; text-align: left"><b>3</b></td><td style="text-align: justify"><b>CONTRACT BALANCES</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>

</div><div>

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<td style="width: 0.25in; text-align: left">(a)</td><td style="text-align: justify">Accounts receivable, net</td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

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</div><div>

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</div><div>

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

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

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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: 157 --><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">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->28<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </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-top: 0pt; margin-bottom: 0pt; text-align: center"><b>FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">(In thousands of RMB, except share data and per
share data, or otherwise noted)</p><div>

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

</div><ix:continuation continuedAt="fhs_ContractBalancesDisclosureTextBlock-c0_cont_6" id="fhs_ContractBalancesDisclosureTextBlock-c0_cont_5"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
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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: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>


</div><div>

</div><ix:continuation id="fhs_ContractBalancesDisclosureTextBlock-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">The contract liabilities primarily relate to up-front payments
from the Group&#8217;s customers for the formal educational services and training programs.</p></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="fhs_PrepaidExpensesAndOtherCurrentAssetsDisclosureTextBlock-c0_cont_1" escape="true" name="fhs:PrepaidExpensesAndOtherCurrentAssetsDisclosureTextBlock"><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>4</b></td><td style="text-align: justify"><b>PREPAID EXPENSES AND OTHER CURRENT ASSETS</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><b>&#160;</b></p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="fhs_PrepaidExpensesAndOtherCurrentAssetsDisclosureTextBlock-c0_cont_2" id="fhs_PrepaidExpensesAndOtherCurrentAssetsDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in; margin-top: 0pt; margin-bottom: 0pt">Prepaid expenses and other current assets 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 id="fhs_PrepaidExpensesAndOtherCurrentAssetsDisclosureTextBlock-c0_cont_2"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:DeferredCostsCapitalizedPrepaidAndOtherAssetsDisclosureTextBlock"><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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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DepositsAssetsCurrent" scale="3" unitRef="cny">13,276</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="fhs:AllowanceForDoubtfulAccountsCurrent" scale="3" unitRef="cny">3,250</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: rgb(204,238,255)">
    <td style="text-align: left">Prepaid expenses and other current assets</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><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 158 --><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">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->29<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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-top: 0pt; margin-bottom: 0pt; text-align: center"><b>FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">(In thousands of RMB, except share data and per
share data, or otherwise noted)</p><div>

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

</div><ix:nonNumeric contextRef="c0" continuedAt="_PropertyPlantAndEquipmentDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:PropertyPlantAndEquipmentDisclosureTextBlock"><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>5</b></td><td style="text-align: justify"><b>PROPERTY AND EQUIPMENT, NET</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 370pt 0pt 0.25in">&#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-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in">Property and equipment 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="padding-bottom: 1.5pt"><b>&#160;</b></td><td style="padding-bottom: 1.5pt"><b>&#160;</b></td>
    <td colspan="6" style="border-bottom: Black 1.5pt solid; text-align: center"><b>As of December 31,</b></td><td style="padding-bottom: 1.5pt"><b>&#160;</b></td></tr>
  <tr style="vertical-align: bottom">
    <td><b>&#160;</b></td><td style="padding-bottom: 1.5pt"><b>&#160;</b></td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; text-align: center"><b>2021</b></td><td style="padding-bottom: 1.5pt"><b>&#160;</b></td><td style="padding-bottom: 1.5pt"><b>&#160;</b></td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; text-align: center"><b>2022</b></td><td style="padding-bottom: 1.5pt"><b>&#160;</b></td></tr>
  <tr style="vertical-align: bottom">
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    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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</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 10pt 0pt 0.25in">As of December 31, 2021 and 2022, certain furniture and
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</div><div>

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</div><div>

</div><ix:continuation id="_PropertyPlantAndEquipmentDisclosureTextBlock-c0_cont_5"><ix:nonNumeric contextRef="c0" escape="true" name="fhs:ScheduleOfDepreciationOfPropertyPlantAndEquipmentTableTextBlock"><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; ">
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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">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_IntangibleAssetsDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:IntangibleAssetsDisclosureTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><span style="font-size: 10pt"><b>6</b></span></td><td style="text-align: justify"><span style="font-size: 10pt"><b>INTANGIBLE ASSETS, NET</b></span></td>
</tr></table><p style="margin-top: 0; margin-bottom: 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-left: 0.25in; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt">Intangible assets
consisted of the following:</span></p><p style="margin: 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="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 4pt">Intangible assets, net</td><td style="padding-bottom: 4pt">&#160;</td>
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</div><div>




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

</div><!-- Field: Page; Sequence: 159 --><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">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="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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-top: 0pt; margin-bottom: 0pt; text-align: center"><b>FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.</b></p><div>



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



</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">(In thousands of RMB, except share data and per
share data, or otherwise noted)</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><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 0pt 0.25in; text-align: justify">Amortization of intangible assets were
approximately RMB<ix:nonFraction contextRef="c32" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IntangibleAssetsCurrent" scale="3" unitRef="cny">296</ix:nonFraction>, RMB<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IntangibleAssetsCurrent" scale="3" unitRef="cny">718</ix:nonFraction> and RMB<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IntangibleAssetsCurrent" scale="3" unitRef="cny">719</ix:nonFraction> for the years ended December 31, 2020, 2021 and 2022, respectively.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_IntangibleAssetsDisclosureTextBlock-c0_cont_5" id="_IntangibleAssetsDisclosureTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Estimated future amortization expense
related to these intangible assets is as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 28pt 0pt 16pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_IntangibleAssetsDisclosureTextBlock-c0_cont_5"><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">
    <td style="text-align: left">Fiscal year ending December 31, 2021</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">2024</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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<tr style="vertical-align: bottom">
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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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  </table></ix:nonNumeric></ix:continuation><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 28pt 0pt 16pt">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_BusinessCombinationDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:BusinessCombinationDisclosureTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>7</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>BUSINESS
COMBINATION AND GOODWILL</b></span></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessCombinationDisclosureTextBlock-c0_cont_2" id="_BusinessCombinationDisclosureTextBlock-c0_cont_1"><p style="margin-left: 0.25in; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">The movement of goodwill is set out as below: &#160;</p><p style="margin: 0">&#160;</p></ix:continuation><div>



</div><div>

</div><ix:continuation continuedAt="_BusinessCombinationDisclosureTextBlock-c0_cont_3" id="_BusinessCombinationDisclosureTextBlock-c0_cont_2"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfGoodwillTextBlock"><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; ">
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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="_BusinessCombinationDisclosureTextBlock-c0_cont_4" id="_BusinessCombinationDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in; margin-top: 0pt; margin-bottom: 0pt">The Group did not incur impairment loss on goodwill
for the years ended December 31, 2020, 2021 and 2022.&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation><div>

</div><div>


</div><!-- Field: Page; Sequence: 160 --><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">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->31<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><b>FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">(In thousands of RMB, except
share data and per share data, or otherwise noted)</p><div>

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

</div><ix:continuation continuedAt="_BusinessCombinationDisclosureTextBlock-c0_cont_5" id="_BusinessCombinationDisclosureTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in; margin-top: 0pt; margin-bottom: 0pt; text-align: left"><b><i>Yunnan Times Giant Acquisition</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessCombinationDisclosureTextBlock-c0_cont_6" id="_BusinessCombinationDisclosureTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in; margin-top: 0pt; margin-bottom: 0pt; text-align: left">On June 8, 2021, the Group acquired all
of the equity interests in Kunming Chenggong Times Giant Tutorial School Co., Ltd., Wenshan Times Giant Tutorial School Co., Ltd., and
Kunming Wuhua District Zhuorui Cultural Training School Co., Ltd. (collectively known as &#8220;Yunnan Times Giant&#8221;) for consideration
of RMB<ix:nonFraction contextRef="c197" decimals="-3" format="ixt:num-dot-decimal" name="fhs:EquityInterests" scale="3" unitRef="cny">2,500</ix:nonFraction>, RMB<ix:nonFraction contextRef="c198" decimals="-3" format="ixt:num-dot-decimal" name="fhs:EquityInterests" scale="3" unitRef="cny">12,500</ix:nonFraction>, and RMB<ix:nonFraction contextRef="c199" decimals="-3" format="ixt:num-dot-decimal" name="fhs:EquityInterests" scale="3" unitRef="cny">5,000</ix:nonFraction>, respectively, from an original shareholder that was controlled by a related party of the Company.</p><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessCombinationDisclosureTextBlock-c0_cont_7" id="_BusinessCombinationDisclosureTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in; margin-top: 0pt; margin-bottom: 0pt; text-align: left">Yunnan Times Giant is franchise of Giant Education Group in
Yunnan Province. Yunnan Times Giant mainly engaged in the services of middle school entrance examination, high school entrance examination,
and college entrance examination training and consulting services. The offered curriculum includes English, sports and arts, computer,
vocational skills training, and STEM education subjects. It is a leader in private training and education in China with strong team of
teachers, top elite management teams and high-quality educational resources.</p><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessCombinationDisclosureTextBlock-c0_cont_8" id="_BusinessCombinationDisclosureTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in; margin-top: 0pt; margin-bottom: 0pt; text-align: left">The identifiable assets acquired and
liabilities assumed in the business combination were recorded at their fair values on the acquisition date and consisted of the following
major items.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>



</div><ix:continuation continuedAt="_BusinessCombinationDisclosureTextBlock-c0_cont_9" id="_BusinessCombinationDisclosureTextBlock-c0_cont_8"><ix:nonNumeric contextRef="c0" continuedAt="_ScheduleOfBusinessAcquisitionsByAcquisitionTextBlock-c0_cont_1" escape="true" name="us-gaap:ScheduleOfBusinessAcquisitionsByAcquisitionTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><div>

</div><ix:continuation continuedAt="_BusinessCombinationDisclosureTextBlock-c0_cont_10" id="_BusinessCombinationDisclosureTextBlock-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in; margin-top: 0pt; margin-bottom: 0pt; text-align: left">The Company has included the operating
results of Yunnan Times Giant in its consolidated financial statements since the Acquisition Date. RMB<ix:nonFraction contextRef="c200" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:BusinessAcquisitionsProFormaRevenue" scale="3" unitRef="cny">5,356</ix:nonFraction> in net sales and RMB<ix:nonFraction contextRef="c200" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:BusinessAcquisitionsProFormaNetIncomeLoss" scale="3" unitRef="cny">228</ix:nonFraction> in
net loss of Yunnan Times Giant were included in the consolidated financial statements for the years ended December 31, 2021. Yunnan Times
Giant was under the same control with the Company before Acquisition.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in; margin-top: 0pt; margin-bottom: 0pt; text-align: left">&#160;</p></ix:continuation><div>

</div><div>



</div><ix:continuation continuedAt="_BusinessCombinationDisclosureTextBlock-c0_cont_11" id="_BusinessCombinationDisclosureTextBlock-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in; margin-top: 0pt; margin-bottom: 0pt; text-align: left"><b><i>Yunnan Hengshun Acquisition</i></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="_BusinessCombinationDisclosureTextBlock-c0_cont_12" id="_BusinessCombinationDisclosureTextBlock-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in; margin-top: 0pt; margin-bottom: 0pt; text-align: left">On April 30, 2021, the Group acquired
all of the equity interests in Yunnan Hengshun Property Services Co., Ltd. (&#8220;Yunnan Hengshun&#8221;), a campus focused general service
company for a consideration of RMB<ix:nonFraction contextRef="c201" decimals="-3" format="ixt:num-dot-decimal" name="fhs:EquityInterests" scale="3" unitRef="cny">24,500</ix:nonFraction> from an original shareholder that was controlled by a third party. The transaction was closed
on April 30, 2021.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessCombinationDisclosureTextBlock-c0_cont_13" id="_BusinessCombinationDisclosureTextBlock-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in; margin-top: 0pt; margin-bottom: 0pt; text-align: left">Yunnan Hengshun is a full general servicing company targeted
at campus management. The company offers campus specialized services of security, sanitation, landscaping, repairs and maintenance, food
and retail marketing, and lodging services.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

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

</div><!-- Field: Page; Sequence: 161 --><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">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->32<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">(In thousands of RMB,
except share data and per share data, or otherwise noted)</p><div>

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

</div><ix:continuation continuedAt="_BusinessCombinationDisclosureTextBlock-c0_cont_14" id="_BusinessCombinationDisclosureTextBlock-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in; margin-top: 0pt; margin-bottom: 0pt; text-align: left">The identifiable assets acquired and liabilities assumed
in the business combination were recorded at their fair values on the acquisition date and consisted of the following major items.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessCombinationDisclosureTextBlock-c0_cont_15" id="_BusinessCombinationDisclosureTextBlock-c0_cont_14"><ix:continuation id="_ScheduleOfBusinessAcquisitionsByAcquisitionTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 88%; padding-bottom: 1.5pt">Fair value of consideration</td><td style="width: 1%; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="font-style: italic; text-align: left">Recognized amounts of identifiable assets acquired and liabilities assumed:</td><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>Cash</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Property and equipment</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Accounts receivable</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c205" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:AccountsReceivableGrossCurrent" scale="3" unitRef="cny">1,467</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Other assets</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt">Other liabilities</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="c205" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:OtherLiabilitiesNoncurrent" scale="3" sign="-" unitRef="cny">28,466</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 4pt">Total identifiable net liabilities at fair value</td><td style="padding-bottom: 4pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 4pt">Goodwill</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">&#160;</p></ix:continuation></ix:continuation><div>


</div><div>

</div><ix:continuation id="_BusinessCombinationDisclosureTextBlock-c0_cont_15"><p style="font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in; margin-top: 0pt; margin-bottom: 0pt; text-align: left">The Company has included the operating results of Yunnan
Hengshun in its consolidated financial statements since the Acquisition Date. RMB<ix:nonFraction contextRef="c202" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:BusinessAcquisitionsProFormaRevenue" scale="3" unitRef="cny">14,582</ix:nonFraction> in net sales and RMB<ix:nonFraction contextRef="c202" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:BusinessAcquisitionsProFormaNetIncomeLoss" scale="3" unitRef="cny">6,666</ix:nonFraction> in net gain of Yunnan
Hengshun were included in the consolidated financial statements for the years ended December 31, 2021.</p></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="fhs_OtherAssetsNonCurrentTextBlock-c0_cont_1" escape="true" name="fhs:OtherAssetsNonCurrentTextBlock"><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>8</b></td><td style="text-align: justify"><b>OTHER NON-CURRENT ASSETS</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>



</div><div>

</div><ix:continuation continuedAt="fhs_OtherAssetsNonCurrentTextBlock-c0_cont_2" id="fhs_OtherAssetsNonCurrentTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in">Other non-current assets 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 id="fhs_OtherAssetsNonCurrentTextBlock-c0_cont_2"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfOtherAssetsNoncurrentTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; text-align: left">Loans to employees</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="fhs:LoansToEmployeesCurrent" scale="3" unitRef="cny">2,867</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
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    <td style="text-align: left">Deposits for financing arrangements</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="fhs:DepositsForFinancingArrangementNonCurrent" scale="3" unitRef="cny">6,700</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">School deposits</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="fhs:SchoolDeposits" scale="3" unitRef="cny">22,173</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Rental deposits</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:SecurityDeposit" scale="3" unitRef="cny">22,901</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="-3" format="ixt:num-dot-decimal" name="us-gaap:SecurityDeposit" scale="3" unitRef="cny">8,127</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; ">
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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>

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<td style="width: 0.25in; text-align: left"><b>9</b></td><td style="text-align: justify"><b>BORROWINGS UNDER FINANCING ARRANGEMENTS</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>



</div><div>

</div><ix:continuation continuedAt="_SubordinatedBorrowingsDisclosureTextBlock-c0_cont_2" id="_SubordinatedBorrowingsDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in">The balances of the Group&#8217;s borrowings under financing
arrangements are as following:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

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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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</div><div>

</div><ix:continuation continuedAt="_SubordinatedBorrowingsDisclosureTextBlock-c0_cont_4" id="_SubordinatedBorrowingsDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 0.25in">The Group entered into sale and leaseback contracts with
certain third-party financial institutions during 2020 and 2021. The lease items were mainly multi-media computers, video conference equipment,
computers and other teaching equipment. The Group considers the substance of these transactions to be debt financing in nature and no
gain or loss is recognized upon the sale. Thus, the Group recorded the cash receipt from these transactions as liabilities and accrued
the interest using the effective interest method.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>


</div><!-- Field: Page; Sequence: 162 --><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">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->33<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><b>FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">(In thousands of RMB, except
share data and per share data, or otherwise noted)</p><div>

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

</div><ix:continuation continuedAt="_SubordinatedBorrowingsDisclosureTextBlock-c0_cont_5" id="_SubordinatedBorrowingsDisclosureTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in">The detailed terms of these sale and leaseback contracts are summarized below:</p></ix:continuation><div>

</div><ix:continuation continuedAt="_SubordinatedBorrowingsDisclosureTextBlock-c0_cont_6" id="_SubordinatedBorrowingsDisclosureTextBlock-c0_cont_5"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in">(i)</td><td style="padding-right: 4pt">On August 14, 2020, the Group entered into sale and leaseback contracts with Haier Financial Leasing Co.,
Ltd. for a consideration of RMB<ix:nonFraction contextRef="c206" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:LeaseCost" scale="3" unitRef="cny">60,000</ix:nonFraction> repayable in thirteen instalments until August 31, 2023 with an effective interest rate of <ix:nonFraction contextRef="c207" decimals="3" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentInterestRateEffectivePercentage" scale="-2" unitRef="pure">7.4</ix:nonFraction>%
per annum. The Group recorded the cash receipts of RMB<ix:nonFraction contextRef="c207" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DepositLiabilitiesAccruedInterest" scale="3" unitRef="cny">57,800</ix:nonFraction> as a liability and accrued the interest using the effective interest method.
As of December 31, 2021 and 2022, the balance was RMB<ix:nonFraction contextRef="c208" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:SaleLeasebackTransactionNetBookValue" scale="3" unitRef="cny">29,256</ix:nonFraction> and RMB<ix:nonFraction contextRef="c209" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:SaleLeasebackTransactionNetBookValue" scale="3" unitRef="cny">3,366</ix:nonFraction> respectively.</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="_SubordinatedBorrowingsDisclosureTextBlock-c0_cont_7" id="_SubordinatedBorrowingsDisclosureTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">The Group paid an aggregate amount of RMB<ix:nonFraction contextRef="c209" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:Deposits" scale="3" unitRef="cny">1,700</ix:nonFraction> as deposits.
These amounts are recorded in prepaid expenses and other current assets and other non-current assets as of December 31, 2021 and 2022
respectively.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_SubordinatedBorrowingsDisclosureTextBlock-c0_cont_8" id="_SubordinatedBorrowingsDisclosureTextBlock-c0_cont_7"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in">(ii)</td><td style="padding-right: 4pt"><p style="margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">On November 1, 2021, the Group entered into sale and leaseback contracts with Chengtai Finance Leasing (Shanghai) Co., Ltd for an aggregated consideration of RMB<ix:nonFraction contextRef="c210" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:LeaseCost" scale="3" unitRef="cny">55,000</ix:nonFraction> repayable in twelve instalments until November 1, 2024 with an effective interest rate of <ix:nonFraction contextRef="c211" decimals="3" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentInterestRateEffectivePercentage" scale="-2" unitRef="pure">10.8</ix:nonFraction>% per annum. The Group recorded the cash receipt of RMB <ix:nonFraction contextRef="c211" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DepositLiabilitiesAccruedInterest" scale="3" unitRef="cny">51,750</ix:nonFraction> as a liability and accrued the interest using the effective interest method. As of December 31, 2021 and 2022, the balance was RMB<ix:nonFraction contextRef="c212" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:SaleLeasebackTransactionNetBookValue" scale="3" unitRef="cny">55,000</ix:nonFraction> and RMB<ix:nonFraction contextRef="c213" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:SaleLeasebackTransactionNetBookValue" scale="3" unitRef="cny">42,161</ix:nonFraction> respectively.</p></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 id="_SubordinatedBorrowingsDisclosureTextBlock-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">The Group paid an aggregate amount of RMB<ix:nonFraction contextRef="c7" decimals="-3" format="ixt:num-dot-decimal" name="fhs:AggregateAmount" scale="3" unitRef="cny">5,000</ix:nonFraction> as deposits.
These amounts are recorded in prepaid expenses and other current assets and other non-current assets as of December 31,2021 and 2022 respectively.</p></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="_LongTermDebtTextBlock-c0_cont_1" escape="true" name="us-gaap:LongTermDebtTextBlock"><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>10</b></td><td style="text-align: justify"><b>BANK LOAN</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p></ix:nonNumeric><div>



</div><div>

</div><ix:continuation continuedAt="_LongTermDebtTextBlock-c0_cont_2" id="_LongTermDebtTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">On April 16, 2021, the Company entered into a term loan credit limit
RMB<ix:nonFraction contextRef="c214" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:LineOfCreditFacilityMaximumBorrowingCapacity" scale="3" unitRef="cny">60,000</ix:nonFraction> with Guangdong Development Bank until <ix:nonNumeric contextRef="c215" format="ixt:date-monthname-day-year-en" name="us-gaap:DebtInstrumentIssuanceDate1">April 15, 2022</ix:nonNumeric> with an interest rate of <ix:nonFraction contextRef="c214" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:LongTermDebtPercentageBearingFixedInterestRate" scale="-2" unitRef="pure">5.25</ix:nonFraction>% per annum. During fiscal year 2021, the
borrowing amount was RMB<ix:nonFraction contextRef="c216" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:LineOfCreditFacilityRemainingBorrowingCapacity" scale="3" unitRef="cny">89,534</ix:nonFraction>, and the amount of RMB<ix:nonFraction contextRef="c216" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentCollateralAmount" scale="3" unitRef="cny">47,139</ix:nonFraction> has been repaid. During fiscal year 2022, the borrowing amount was RMB<ix:nonFraction contextRef="c217" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:LineOfCreditFacilityRemainingBorrowingCapacity" scale="3" unitRef="cny">10,680</ix:nonFraction>,
and amount of RMB<ix:nonFraction contextRef="c217" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentCollateralAmount" scale="3" unitRef="cny">53,075</ix:nonFraction> has been repaid. The short-term loan agreement was based on the Company&#8217;s credit standing and no securities
or guarantees were involved.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_LongTermDebtTextBlock-c0_cont_3" id="_LongTermDebtTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">On April 12, 2021, the Company entered into a short-term
loan agreement credit limit RMB<ix:nonFraction contextRef="c218" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:LineOfCreditFacilityMaximumBorrowingCapacity" scale="3" unitRef="cny">60,000</ix:nonFraction> with China CITIC Bank until <ix:nonNumeric contextRef="c219" format="ixt:date-monthname-day-year-en" name="us-gaap:DebtInstrumentIssuanceDate1">April 8, 2022</ix:nonNumeric> with an interest rate of <ix:nonFraction contextRef="c218" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:LongTermDebtPercentageBearingFixedInterestRate" scale="-2" unitRef="pure">4.65</ix:nonFraction>% per annum. During fiscal
year 2021, the borrowing amount was RMB<ix:nonFraction contextRef="c220" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:LineOfCreditFacilityRemainingBorrowingCapacity" scale="3" unitRef="cny">64,228</ix:nonFraction>, and the amount of RMB<ix:nonFraction contextRef="c220" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentCollateralAmount" scale="3" unitRef="cny">63,403</ix:nonFraction> has been repaid. During fiscal year 2022, the borrowing amount
was RMB<ix:nonFraction contextRef="c221" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:LineOfCreditFacilityRemainingBorrowingCapacity" scale="3" unitRef="cny">59,065</ix:nonFraction>, and the amount of RMB<ix:nonFraction contextRef="c222" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentCollateralAmount" scale="3" unitRef="cny">58,348</ix:nonFraction> has been repaid, and a balance of RMB<ix:nonFraction contextRef="c223" decimals="0" format="ixt:num-dot-decimal" name="fhs:RemainingBalance" scale="0" unitRef="pure">1,542</ix:nonFraction> remains. The short-term loan agreement was based
on the Company&#8217;s credit standing and no securities or guarantees were involved.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1pt 0pt 16pt">&#160;</p></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 0pt 0.25in">On July 4, 2022, the Company entered into a short-term loan agreement
credit limit RMB<ix:nonFraction contextRef="c224" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:LineOfCreditFacilityMaximumBorrowingCapacity" scale="3" unitRef="cny">60,000</ix:nonFraction> with Guangdong Development Bank until <ix:nonNumeric contextRef="c225" format="ixt:date-monthname-day-year-en" name="us-gaap:DebtInstrumentIssuanceDate1">July 3, 2023</ix:nonNumeric> with an interest rate of <ix:nonFraction contextRef="c224" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:LongTermDebtPercentageBearingFixedInterestRate" scale="-2" unitRef="pure">4.65</ix:nonFraction>% per annum. During fiscal year
2022, borrowing amount was RMB<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:LineOfCreditFacilityRemainingBorrowingCapacity" scale="3" unitRef="cny">32,030</ix:nonFraction>, and the balance remains. The short-term loan agreement was based on the Company&#8217;s credit standing
and no securities or guarantees were involved.</p></ix:continuation><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 1pt 0pt 16pt"><b>&#160;</b></p><div>


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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="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="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">(In thousands of RMB, except
share data and per share data, or otherwise noted)</p><div>

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

</div><ix:nonNumeric contextRef="c0" continuedAt="_AccountsPayableAndAccruedLiabilitiesDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:AccountsPayableAndAccruedLiabilitiesDisclosureTextBlock"><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>11</b></td><td style="text-align: justify"><b>ACCRUED EXPENSES AND OTHER PAYABLES</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif"></p></ix:nonNumeric><div>



</div><div>

</div><ix:continuation continuedAt="_AccountsPayableAndAccruedLiabilitiesDisclosureTextBlock-c0_cont_2" id="_AccountsPayableAndAccruedLiabilitiesDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif">Accrued expenses and other payables, current and non-current, consisted of the following:&#160;</p></ix:continuation><div>

</div><ix:continuation id="_AccountsPayableAndAccruedLiabilitiesDisclosureTextBlock-c0_cont_2"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfAccountsPayableAndAccruedLiabilitiesTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">As of December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; text-align: left">Accrued payroll and welfare benefits</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Government subsidies received on behalf of certain teachers and students</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:OtherLiabilities" scale="3" unitRef="cny">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">Other tax payables</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Deposits received</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ContractWithCustomerRefundLiability" scale="3" unitRef="cny">75</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">Accrued service fees</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:AccruedProfessionalFeesCurrentAndNoncurrent" scale="3" unitRef="cny">48</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="-3" format="ixt:num-dot-decimal" name="us-gaap:AccruedProfessionalFeesCurrentAndNoncurrent" scale="3" unitRef="cny">147</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Accrued utilities fees</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="fhs:AccruedServiceFeesCurrentAndNoncurrent" scale="3" unitRef="cny">37</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">Collection of teaching and auxiliary materials fee</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="fhs:CollectionOfTeachingAndAuxiliaryMaterialsFeeinDollars" scale="3" unitRef="cny">12,464</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Accrued expenses</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="-3" format="ixt:num-dot-decimal" name="us-gaap:PrepaidExpenseCurrentAndNoncurrent" scale="3" unitRef="cny">1,532</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 1.5pt">Others</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 4pt">Accrued expenses and other payables</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:AccountsPayableAndAccruedLiabilitiesCurrentAndNoncurrent" scale="3" unitRef="cny">34,760</ix:nonFraction></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: rgb(204,238,255)">
    <td>Including:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-left: 9pt">Current portion</td><td>&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

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<td style="width: 0.25in; text-align: left"><b>12</b></td><td style="text-align: justify"><b>LEASES</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><b>&#160;</b></p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_OperatingLeasesOfLesseeDisclosureTextBlock-c0_cont_2" id="_OperatingLeasesOfLesseeDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in; margin-top: 0pt; margin-bottom: 0pt"><b><i>Operating leases</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><b><i>&#160;</i></b></p></ix:continuation><div>

</div><div>



</div><ix:continuation continuedAt="_OperatingLeasesOfLesseeDisclosureTextBlock-c0_cont_3" id="_OperatingLeasesOfLesseeDisclosureTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in; margin-top: 0pt; margin-bottom: 0pt">The Group leases properties and other equipment that are
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</div><div>

</div><ix:continuation continuedAt="_OperatingLeasesOfLesseeDisclosureTextBlock-c0_cont_4" id="_OperatingLeasesOfLesseeDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in; margin-top: 0pt; margin-bottom: 0pt">Future minimum operating lease payments as of December
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</div><div>

</div><ix:continuation continuedAt="_OperatingLeasesOfLesseeDisclosureTextBlock-c0_cont_5" id="_OperatingLeasesOfLesseeDisclosureTextBlock-c0_cont_4"><ix:nonNumeric contextRef="c0" continuedAt="_ScheduleOfFutureMinimumRentalPaymentsForOperatingLeasesTableTextBlock-c0_cont_1" escape="true" name="us-gaap:ScheduleOfFutureMinimumRentalPaymentsForOperatingLeasesTableTextBlock"><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: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </table><p style="margin: 0">&#160;</p></ix:nonNumeric></ix:continuation><div>


</div><div>

</div><ix:continuation continuedAt="_OperatingLeasesOfLesseeDisclosureTextBlock-c0_cont_6" id="_OperatingLeasesOfLesseeDisclosureTextBlock-c0_cont_5"><ix:continuation id="_ScheduleOfFutureMinimumRentalPaymentsForOperatingLeasesTableTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">2025</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:OperatingLeasesFutureMinimumPaymentsDueInTwoAndThreeYears" scale="3" unitRef="cny">4,350</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:OperatingLeasesFutureMinimumPaymentsDueThereafter" scale="3" unitRef="cny">38,100</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation></ix:continuation><div>



</div><div>

</div><ix:continuation id="_OperatingLeasesOfLesseeDisclosureTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in; margin-top: 0pt; margin-bottom: 0pt">Rental expenses were approximately RMB<ix:nonFraction contextRef="c6" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:LeaseAndRentalExpense" scale="3" unitRef="cny">243</ix:nonFraction>, RMB<ix:nonFraction contextRef="c7" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:LeaseAndRentalExpense" scale="3" unitRef="cny">2,148</ix:nonFraction>, and
RMB<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:LeaseAndRentalExpense" scale="3" unitRef="cny">5,243</ix:nonFraction> for the years ended December 31, 2020, 2021 and 2022, respectively. The Group did not sublease any of its operating leases for
the years presented.</p></ix:continuation><div>

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


</div><!-- Field: Page; Sequence: 164 --><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">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="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </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-top: 0pt; margin-bottom: 0pt; text-align: center"><b>FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">(In thousands of RMB, except share data and
per share data, or otherwise noted)</p><div>

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

</div><ix:nonNumeric contextRef="c0" continuedAt="fhs_ShareCapitalTextBlock-c0_cont_1" escape="true" name="fhs:ShareCapitalTextBlock"><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>13</b></td><td style="text-align: justify"><b>SHARE CAPITAL</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><b>&#160;</b></p></ix:nonNumeric><div>



</div><div>

</div><ix:continuation continuedAt="fhs_ShareCapitalTextBlock-c0_cont_2" id="fhs_ShareCapitalTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in; margin-top: 0pt; margin-bottom: 0pt">On January 12, 2021, the Company issued <ix:nonFraction contextRef="c226" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesIssued" scale="0" unitRef="shares">70,488,700</ix:nonFraction> ordinary
shares to the respective shareholders of the Parent to mirror the shareholding structure of the Parent. At the same time, the Parent surrendered
<ix:nonFraction contextRef="c226" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:SharesIssued" scale="0" unitRef="shares">100,000</ix:nonFraction> issued shares in the Company pursuant to a form of surrender letter. Accordingly, all share and per share data shown in the consolidated
financial statements have been retrospectively revised to give effects to the nominal issuance of the <ix:nonFraction contextRef="c227" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:StockIssuedDuringPeriodSharesNewIssues" scale="0" unitRef="shares">70,488,700</ix:nonFraction> new shares and the surrender
of the <ix:nonFraction contextRef="c227" decimals="0" format="ixt:num-dot-decimal" name="fhs:StockIssuedDuringPeriodSharesOldIssues" scale="0" unitRef="shares">100,000</ix:nonFraction> old shares.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><b>&#160;</b></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="fhs_ShareCapitalTextBlock-c0_cont_3" id="fhs_ShareCapitalTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">On March 11, 2021, the Company issued <ix:nonFraction contextRef="c228" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:SharesIssued" scale="0" unitRef="shares">7,500,000</ix:nonFraction> American
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Shares, and received in consideration of USD <ix:nonFraction contextRef="c230" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:SaleOfStockConsiderationReceivedOnTransaction" scale="0" unitRef="usd">45,577</ix:nonFraction>, net of <ix:nonFraction contextRef="c231" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:SaleOfStockNumberOfSharesIssuedInTransaction" scale="0" unitRef="shares">2,500,000</ix:nonFraction> ADS proceed sold directly to Longwater Topco B.V., underwriting
commission and other related fees.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><b>&#160;</b></p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="fhs_ShareCapitalTextBlock-c0_cont_4" id="fhs_ShareCapitalTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in; margin-top: 0pt; margin-bottom: 0pt">The amount received of USD <ix:nonFraction contextRef="c232" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromCommissionsReceived" scale="0" unitRef="usd">45,577</ix:nonFraction> or RMB <ix:nonFraction contextRef="c232" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromCommissionsReceived" scale="3" unitRef="cny">296,386</ix:nonFraction>, subtract
ordinary shares of 6, was recorded as Paid-in Capital of RMB <ix:nonFraction contextRef="c232" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:AdjustmentsToAdditionalPaidInCapitalOther" scale="3" unitRef="cny">296,381</ix:nonFraction>.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><b>&#160;</b></p></ix:continuation><div>

</div><div>

</div><ix:continuation id="fhs_ShareCapitalTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in; margin-top: 0pt; margin-bottom: 0pt">Pursuant to subscription agreement dated January 10, 2021
with Shanghai Ruihai Chuangfeng Industrial Development Co., Ltd. (&#8220;CPP Investor&#8221;), a wholly-owned subsidiary of Harier Financial
Leasing Co., Ltd., CPP Investor agreed to purchase <ix:nonFraction contextRef="c233" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ExcessStockSharesIssued" scale="0" unitRef="shares">1,350,000</ix:nonFraction> Class A Ordinary Shares, equivalent to <ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="fhs:PurchasePriceValue" scale="0" unitRef="usd">450,000</ix:nonFraction> American Depositary Shares
(&#8220;ADS&#8221;), price per ADS of US$<ix:nonFraction contextRef="c234" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:SharesIssuedPricePerShare" scale="0" unitRef="usdPershares">10</ix:nonFraction> in an Initial Public Offering. The purchase totaled for aggregate net proceeds to the Company
of RMB<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="fhs:NetProceeds" scale="3" unitRef="cny">28,691</ix:nonFraction>, after deducting fees to the placement agent and other offering expenses payable by the Company.</p></ix:continuation><div>

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

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisposalGroupsIncludingDiscontinuedOperationsDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:DisposalGroupsIncludingDiscontinuedOperationsDisclosureTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><b>14</b></td><td style="text-align: justify"><span style="text-transform: uppercase"><b>Discontinued
                                            Operations</b></span></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><b>&#160;</b></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-left: 0.25in; margin-top: 0pt; margin-bottom: 0pt">On May 14, 2021, the PRC State Council announced the Implementation
Rules for Private Education Laws (the &#8220;Implementation Rules&#8221;), which became effective on September 1, 2021. Pursuant to the
Implementation Rules, (1) foreign-invested enterprises established in China and social organizations whose actual controllers are foreign
parties shall not sponsor, participate in or actually control private schools that provide compulsory education, (2) social organizations
or individuals shall not control any private school that provides compulsory education or any non-profit private school that provides
pre-school education by means of, among others, merger, acquisition and contractual arrangements, and (3) private schools providing compulsory
education shall not conduct any transaction with any related party. In addition, private school providing compulsory education shall not
conduct any transaction with any related party, and any other private school conducting any transaction with any related party shall follow
the principles of openness, fairness and impartiality, fix the price reasonably and regulate the decision-making, and shall not damage
the interests of the state and the school or the rights and interests of the teachers and students, which may impose restrictions on the
above-mentioned related party transactions. Such prohibition has significantly affected the enforceability of the exclusive management
services and business cooperation agreements with affiliated entities providing compulsory education.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><b>&#160;</b></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-left: 0.25in; margin-top: 0pt; margin-bottom: 0pt">The Implementation Rules have had significant impacts on our
business operations and our results of operations. After consultation with our PRC legal counsel, we reached the conclusion that, as a
result of the effectiveness of the Implementation Rules, we have lost control over the middle schools that are affected by the Implementation
Rules, and entities holding such middle school institutions or middle school programs (&#8220;Affected Entities&#8221;) as from September
1, 2021. Consequently, the contractual arrangements with the Affected Entities have become invalid since September 1, 2021, and we classified
the operation for the Affected Entities as discontinued operations. We have determined that, in substance, we had ceased to recognize
revenues for all activities related to the Affected Entities and had discontinued all business activities with such entities by September
1, 2021 while continuing to provide essential services to keep these schools open. Such discontinuation has had a material and adverse
impact on our business, financial condition and results of operations. Our ability to engage in the compulsory education in China has
been materially and adversely affected, and we cannot assure you that we will be able to restore such ability, which could materially
and adversely affect our business, prospects, results of operations and financial condition.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation><div>

</div><div>


</div><!-- Field: Page; Sequence: 165 --><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">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->36<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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-top: 0pt; margin-bottom: 0pt; text-align: center"><b>FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">(In thousands of RMB, except share data and per share data, or otherwise
noted)</p><div>

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

</div><ix:continuation continuedAt="_DisposalGroupsIncludingDiscontinuedOperationsDisclosureTextBlock-c0_cont_4" id="_DisposalGroupsIncludingDiscontinuedOperationsDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in; margin-top: 0pt; margin-bottom: 0pt">The Affected Entities are as follow: Kunming Xishan Long-Spring
Experimental Secondary School Middle School Program, Kunming Chenggong Long-Spring Experimental Secondary School Middle School Program,
Yiliang Long-Spring Experimental Secondary School Middle School Program, Yunnan Hengshui Experimental Secondary School&#8212;Xishan School
Middle School Program, Qujing Hengshui Experimental Secondary School Middle School Program, Yunnan Long-Spring Foreign Language Secondary
School Middle School Program, Xinping Hengshui Experimental Middle School, Zhenxiong Long-Spring Advanced Secondary School Middle School
Program, and Shaanxi Hengshi Middle School.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#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-left: 0.25in; margin-top: 0pt; margin-bottom: 0pt">On July 25, 2022, Shenyang Century Long-Spring Technology Co., Ltd.
was deregistered.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisposalGroupsIncludingDiscontinuedOperationsDisclosureTextBlock-c0_cont_6" id="_DisposalGroupsIncludingDiscontinuedOperationsDisclosureTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">On April 17, 2022, Long-Spring Education Holding Group Co.,
Ltd., entered into a Share Transfer Agreement (the &#8220;Agreement&#8221;) with Inner Mongolia Qingyi Consulting Service Co., Ltd., (the
&#8220;Buyer&#8221;). Pursuant to the terms of the Agreement, the Buyer purchased <ix:nonFraction contextRef="c235" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EquityMethodInvestmentOwnershipPercentage" scale="-2" unitRef="pure">100</ix:nonFraction>% ownership of Beijing Hengyue Education Technology
Co., Ltd. from Long-Spring Education Holding Group Co., Ltd., which value is primarily derived from Beijing Hengyue&#8217;s and wholly-owned
subsidiary Ordos Hengshui Experimental High School for a total price of RMB <ix:nonFraction contextRef="c236" decimals="-3" format="ixt:num-dot-decimal" name="fhs:SaleTransaction" scale="3" unitRef="cny">50,500</ix:nonFraction> (the &#8220;Sale Transaction&#8221;). The Sale Transaction
was closed on July 27, 2022. In accordance with ASC Topic 205, Presentation of Financial Statement Discontinued Operations (&#8220;ASC
Topic 205&#8221;), the Company presented the operation results of Beijing Hengyue and its subsidiaries as a discontinued operation, as
the Company believed that no continued cash flow would be generated by the discontinued component and that the Company would have no significant
continuing involvement in the operations of the discontinued component. The total assets of Beijing Hengyue were RMB<ix:nonFraction contextRef="c237" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:Assets" scale="3" unitRef="cny">120,481</ix:nonFraction> as of July
27, 2022 and the total liabilities of Beijing Hengyue were RMB<ix:nonFraction contextRef="c237" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:Liabilities" scale="3" unitRef="cny">68,657</ix:nonFraction> as of July 27, 2022, resulting in a loss on disposal of RMB<ix:nonFraction contextRef="c238" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DisposalGroupDeferredGainOnDisposal" scale="3" unitRef="cny">2,597</ix:nonFraction>.&#160;&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation><div>


</div><div>

</div><ix:continuation continuedAt="_DisposalGroupsIncludingDiscontinuedOperationsDisclosureTextBlock-c0_cont_7" id="_DisposalGroupsIncludingDiscontinuedOperationsDisclosureTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">On September 2, 2022, Long-Spring Education Holding Group
Co., Ltd., entered into a Share Transfer Agreement (the &#8220;Agreement&#8221;) with Yunnan Long-Spring Education Technology Co., Ltd.,
(the &#8220;Buyer&#8221;). Pursuant to the terms of the Agreement, the Buyer purchased <ix:nonFraction contextRef="c239" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:EquityMethodInvestmentOwnershipPercentage" scale="-2" unitRef="pure">82.44</ix:nonFraction>% ownership of Beijing Tomorrow Future Plus
Education Technology Co., Ltd. from Long-Spring Education Holding Group Co., Ltd., for a total price of RMB <ix:nonFraction contextRef="c240" decimals="-3" format="ixt:num-dot-decimal" name="fhs:SaleTransaction" scale="3" unitRef="cny">76,500</ix:nonFraction> (the &#8220;Sale Transaction&#8221;).
The Sale Transaction was closed on September 2, 2022. In accordance with ASC Topic 205, Presentation of Financial Statement Discontinued
Operations (&#8220;ASC Topic 205&#8221;), the Company presented the operation results of Beijing Tomorrow Future Plus Education Technology
Co., Ltd. as a discontinued operation, as the Company believed that no continued cash flow would be generated by the discontinued component
and that the Company would have no significant continuing involvement in the operations of the discontinued component. The total assets
of Beijing Tomorrow Future Plus Education Technology Co., Ltd. were RMB<ix:nonFraction contextRef="c241" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:Assets" scale="3" unitRef="cny">70,995</ix:nonFraction> as of September 2, 2022 and the total liabilities of Beijing
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</div><div>

</div><ix:continuation continuedAt="_DisposalGroupsIncludingDiscontinuedOperationsDisclosureTextBlock-c0_cont_8" id="_DisposalGroupsIncludingDiscontinuedOperationsDisclosureTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">On July 25, 2022, Long-Spring Education Holding Group Co.,
Ltd., entered into a Share Transfer Agreement (the &#8220;Agreement&#8221;) with Shenzhen Xiaoling Human Resources Co., Ltd., (the &#8220;Buyer&#8221;).
Pursuant to the terms of the Agreement, the Buyer purchased <ix:nonFraction contextRef="c242" decimals="2" format="ixt:num-dot-decimal" name="fhs:OwnershipPercentage" scale="-2" unitRef="pure">100</ix:nonFraction>% ownership of Sichuang Century Changshui Technology Co., Ltd. from Long-Spring
Education Holding Group Co., Ltd., for a total price of RMB <ix:nonFraction contextRef="c243" decimals="-3" format="ixt:num-dot-decimal" name="fhs:SaleTransaction" scale="3" unitRef="cny">3,000</ix:nonFraction> (the &#8220;Sale Transaction&#8221;). The Sale Transaction was closed
on July 25, 2022. In accordance with ASC Topic 205, Presentation of Financial Statement Discontinued Operations (&#8220;ASC Topic 205&#8221;),
the Company presented the operation results of Sichuang Century Changshui Technology Co., Ltd. as a discontinued operation, as the Company
believed that no continued cash flow would be generated by the discontinued component and that the Company would have no significant continuing
involvement in the operations of the discontinued component. The total assets of Sichuang Century Changshui Technology Co., Ltd. were
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2022, resulting in a gain on disposal of RMB<ix:nonFraction contextRef="c242" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DisposalGroupDeferredGainOnDisposal" scale="3" unitRef="cny">2,186</ix:nonFraction>.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisposalGroupsIncludingDiscontinuedOperationsDisclosureTextBlock-c0_cont_9" id="_DisposalGroupsIncludingDiscontinuedOperationsDisclosureTextBlock-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 15pt">Loss from discontinued operations
for fiscal years 2021 and 2022 was as follows:&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation><div>
</div><div>

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

</div><!-- Field: Page; Sequence: 166 --><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">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->37<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">(In thousands of RMB, except share data and per share data, or otherwise
noted)</p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#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; ">
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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; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  </table></ix:nonNumeric></ix:continuation><div>


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

</div><!-- Field: Page; Sequence: 167 --><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">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->38<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">(In thousands of RMB, except
share data and per share data, or otherwise noted)</p><div>

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

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<td style="width: 0.25in; text-align: left">15</td><td style="text-align: justify">REVENUES</td>
</tr></table><p style="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_RevenueFromContractWithCustomerTextBlock-c0_cont_2" id="_RevenueFromContractWithCustomerTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in; margin-top: 0pt; margin-bottom: 0pt">Revenues consisted of the following:</p><p style="font-size: 10pt; margin: 0">&#160;</p></ix:continuation><div>



</div><div>

</div><ix:continuation id="_RevenueFromContractWithCustomerTextBlock-c0_cont_2"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:DisaggregationOfRevenueTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="10" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Years Ended December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td>Formal education services</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)">
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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-size: 10pt; margin: 0">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:IncomeTaxDisclosureTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><b>16</b></td><td style="text-align: justify"><b>INCOME TAX</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><b>&#160;</b></p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_2" id="_IncomeTaxDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in; margin-top: 0pt; margin-bottom: 0pt"><b><i>Cayman Islands</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#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-left: 0.25in; margin-top: 0pt; margin-bottom: 0pt">Under the current laws of the Cayman Islands, the Company
is not subject to tax on income or capital gain. Additionally, upon payments of dividends to the shareholders, no Cayman Islands withholding
tax will be imposed.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_4" id="_IncomeTaxDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in; margin-top: 0pt; margin-bottom: 0pt"><b><i>British Virgin Islands</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#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-left: 0.25in; margin-top: 0pt; margin-bottom: 0pt">Under the current laws of the British Virgin Islands, First
High-School BVI is not subject to tax on their income or capital gains.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation><div>

</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-left: 0.25in; margin-top: 0pt; margin-bottom: 0pt">Additionally, upon payments of dividends to the shareholders,
no British Virgin Islands withholding tax will be imposed.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation><div>

</div><div>


</div><!-- Field: Page; Sequence: 168 --><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">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->39<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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>FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.</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">(In thousands of RMB, except share data and per share data, or otherwise noted)</p><div>

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

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_7" id="_IncomeTaxDisclosureTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 11pt 0pt 0.25in"><b><i>Hong Kong</i></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="_IncomeTaxDisclosureTextBlock-c0_cont_8" id="_IncomeTaxDisclosureTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 11pt 0pt 0.25in">Under the current Hong Kong Inland Revenue Ordinance, First
High-School HK is subject to Hong Kong profits tax at a rate of <ix:nonFraction contextRef="c273" decimals="3" format="ixt:num-dot-decimal" name="us-gaap:EffectiveIncomeTaxRateReconciliationAtFederalStatutoryIncomeTaxRate" scale="-2" unitRef="pure"><ix:nonFraction contextRef="c274" decimals="3" format="ixt:num-dot-decimal" name="us-gaap:EffectiveIncomeTaxRateReconciliationAtFederalStatutoryIncomeTaxRate" scale="-2" unitRef="pure"><ix:nonFraction contextRef="c275" decimals="3" format="ixt:num-dot-decimal" name="us-gaap:EffectiveIncomeTaxRateReconciliationAtFederalStatutoryIncomeTaxRate" scale="-2" unitRef="pure">16.5</ix:nonFraction></ix:nonFraction></ix:nonFraction>%. A Two-tiered Profits Tax rates regime was introduced since year
2018 where the first HK$<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="fhs:ProfitBeforeTax" scale="3" unitRef="hkd">2,000</ix:nonFraction> of assessable profits earned by a company will be taxed at half the current tax rate (<ix:nonFraction contextRef="c275" decimals="4" format="ixt:num-dot-decimal" name="fhs:CurrentTaxRate" scale="-2" unitRef="pure">8.25</ix:nonFraction>%) whilst the
remaining profits will continue to be taxed at <ix:nonFraction contextRef="c0" decimals="3" format="ixt:num-dot-decimal" name="fhs:GrossMarginPercentage" scale="-2" unitRef="pure">16.5</ix:nonFraction>%. There is an anti-fragmentation measure where each group will have to nominate only
one company in the group to benefit from the progressive rates. No provision for Hong Kong profits tax has been made as the Group had
no assessable profits derived from or earned in Hong Kong during the years ended December 31, 2020, 2021 and 2022. Additionally, upon
payments of dividends to the shareholders, no Hong Kong withholding tax will be imposed.</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_9" id="_IncomeTaxDisclosureTextBlock-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 11pt 0pt 0.25in"><b><i>PRC</i></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="_IncomeTaxDisclosureTextBlock-c0_cont_10" id="_IncomeTaxDisclosureTextBlock-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 11pt 0pt 0.25in">Under the PRC Enterprise Income Tax Law (&#8220;EIT Law&#8221;),
the Group&#8217;s PRC subsidiaries and affiliated schools are subject to the statutory income tax rate at <ix:nonFraction contextRef="c276" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EffectiveIncomeTaxRateReconciliationAtFederalStatutoryIncomeTaxRate" scale="-2" unitRef="pure">25</ix:nonFraction>% unless otherwise specified.</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_11" id="_IncomeTaxDisclosureTextBlock-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 11pt 0pt 0.25in">In accordance with the prevailing tax regulations, Yunnan
WFOE and Yunnan Zhongchuang Education Tutorial School were qualified to enjoy <ix:nonFraction contextRef="c277" decimals="2" format="ixt:num-dot-decimal" name="fhs:PreferentialIncomeTaxRatePercentage" scale="-2" unitRef="pure">15</ix:nonFraction>% preferential income tax rate under &#8220;Development
Plan for Western China&#8221; from 2017 to 2020 which is further extended by another 10 years to 2030 if they continue to satisfy all
the requirements pursuant to the relevant tax regulations in each of those years.</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 11pt 0pt 0.25in">According to the Implementation Rules for the Law for Promoting
Private Education in 2004 (the &#8220;2004 Implementing Rules&#8221;), private schools, whether requiring reasonable returns or not, may
enjoy preferential tax treatment. The 2004 Implementing Rules provide that the relevant authorities under the State Council may introduce
preferential tax treatments and related policies applicable to private schools requiring reasonable returns.</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_13" id="_IncomeTaxDisclosureTextBlock-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 11pt 0pt 0.25in">According to the Law of People&#8217;s Republic of China on the Promotion
of Private Education as revised in 2016 (&#8220;2016 Revised Private Education Law&#8221;), non-profit private schools will be entitled
to similar tax benefits as public schools. However, taxation policies of for-profit private schools are still unclear as more specific
provisions are to be introduced. As of the date of this consolidated financial statements, most of our schools are in transition period
for for-profit and non-profit election. As such, the Group is unable to determine the income tax impact as a result of the 2016 Revised
Private Education Law on the profitability of its affiliated schools in future fiscal years.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 242pt"></p><div>

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


</div><!-- Field: Page; Sequence: 169 --><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">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->40<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 5pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.</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">(In thousands of RMB, except share data and per
share data, or otherwise noted)</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-size: 5pt">&#160;</span></p><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_14" id="_IncomeTaxDisclosureTextBlock-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.5in">The applicable income tax rate of the Group&#8217;s affiliated
schools for the years ended December 31, 2020, 2021 and 2022 are summarized as below:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-size: 5pt">&#160;</span></p></ix:continuation><div>

</div><div>

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  <tr style="vertical-align: top">
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    <td style="border-bottom: Black 1.5pt solid; text-align: center; width: 6%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Note</b></span></td>
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  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Yunnan Hengshui Chenggong Experimental Secondary School</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(i)</span></td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(i)</span></td>
    <td>&#160;</td>
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    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Yunnan Hengshui Yiliang Experimental Secondary School</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(i)</span></td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(i)</span></td>
    <td>&#160;</td>
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    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Kunming Chenggong Long-Spring Experimental Secondary School</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(i)</span></td>
    <td>&#160;</td>
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  <tr style="vertical-align: top; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Yiliang Long-Spring Experimental Secondary School</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(i)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c296" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c297" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c298" name="fhs:DescriptionOfApplicableIncomeTaxRate">Income tax exemption</ix:nonNumeric></ix:nonNumeric></ix:nonNumeric></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Qujing Hengshui Experimental Secondary School</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(i)(iv)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c299" id="ix_35_fact" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c300" id="ix_36_fact" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c301" id="ix_37_fact" name="fhs:DescriptionOfApplicableIncomeTaxRate">Income tax exemption</ix:nonNumeric></ix:nonNumeric></ix:nonNumeric></span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Yunnan Yuxi Hengshui Experimental High School</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(i)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c302" id="ix_38_fact" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c303" id="ix_39_fact" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c304" id="ix_40_fact" name="fhs:DescriptionOfApplicableIncomeTaxRate">Income tax exemption</ix:nonNumeric></ix:nonNumeric></ix:nonNumeric></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Wenshan Long-Spring Experimental Secondary School</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(i)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c305" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c306" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c307" name="fhs:DescriptionOfApplicableIncomeTaxRate">Income tax exemption</ix:nonNumeric></ix:nonNumeric></ix:nonNumeric></span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Yunnan Yuxi Hengshui Experimental High School</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(i)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c302" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c303" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c304" name="fhs:DescriptionOfApplicableIncomeTaxRate">Income tax exemption</ix:nonNumeric></ix:nonNumeric></ix:nonNumeric></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Mengla Long-Spring Experimental Secondary School</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(i)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c308" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c309" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c310" name="fhs:DescriptionOfApplicableIncomeTaxRate">Income tax exemption</ix:nonNumeric></ix:nonNumeric></ix:nonNumeric></span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Qiubei Long-Spring Experimental Secondary School</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(i)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c311" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c312" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c313" name="fhs:DescriptionOfApplicableIncomeTaxRate">Income tax exemption</ix:nonNumeric></ix:nonNumeric></ix:nonNumeric></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Resorts District Hengshui Experimental Secondary School</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(ii)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c314" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c315" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c316" name="fhs:DescriptionOfApplicableIncomeTaxRate">Income tax exemption on certain income</ix:nonNumeric></ix:nonNumeric></ix:nonNumeric></span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Yunnan Long-Spring Foreign Language Secondary School</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(ii)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c317" id="ix_41_fact" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c318" id="ix_42_fact" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c319" id="ix_43_fact" name="fhs:DescriptionOfApplicableIncomeTaxRate">Income tax exemption on certain income</ix:nonNumeric></ix:nonNumeric></ix:nonNumeric></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Xinping Hengshui Experimental High School Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)(iv)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c320" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c321" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c322" name="fhs:DescriptionOfApplicableIncomeTaxRate">Preferential tax rate of small and micro enterprise</ix:nonNumeric></ix:nonNumeric></ix:nonNumeric></span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Guizhou Mingde Tutorial School</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c323" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c324" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c325" name="fhs:DescriptionOfApplicableIncomeTaxRate">Preferential tax rate of small and micro enterprise</ix:nonNumeric></ix:nonNumeric></ix:nonNumeric></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Yunnan Hengshui Zhenxiong High School</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c326" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c327" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c328" name="fhs:DescriptionOfApplicableIncomeTaxRate">Preferential tax rate of small and micro enterprise</ix:nonNumeric></ix:nonNumeric></ix:nonNumeric></span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Yunnan Hengshui Wenshan Experimental High School</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c329" id="ix_44_fact" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c330" id="ix_45_fact" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c331" id="ix_46_fact" name="fhs:DescriptionOfApplicableIncomeTaxRate">Preferential tax rate of small and micro enterprise</ix:nonNumeric></ix:nonNumeric></ix:nonNumeric></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Xishuangbanna Hengshui Experimental High School</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c332" id="ix_47_fact" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c333" id="ix_48_fact" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c334" id="ix_49_fact" name="fhs:DescriptionOfApplicableIncomeTaxRate">Preferential tax rate of small and micro enterprise</ix:nonNumeric></ix:nonNumeric></ix:nonNumeric></span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Yunnan Hengshui Qiubei Experimental High School</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c335" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c336" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c337" name="fhs:DescriptionOfApplicableIncomeTaxRate">Preferential tax rate of small and micro enterprise</ix:nonNumeric></ix:nonNumeric></ix:nonNumeric></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Mengla Hengshui Experimental High School</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c338" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c339" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c340" name="fhs:DescriptionOfApplicableIncomeTaxRate">Preferential tax rate of small and micro enterprise</ix:nonNumeric></ix:nonNumeric></ix:nonNumeric></span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Yunnan Long-Spring Logistics Service Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction contextRef="c341" decimals="2" format="ixt:num-dot-decimal" name="fhs:ApplicableIncomeTaxRate" scale="-2" unitRef="pure"><ix:nonFraction contextRef="c342" decimals="2" format="ixt:num-dot-decimal" name="fhs:ApplicableIncomeTaxRate" scale="-2" unitRef="pure"><ix:nonFraction contextRef="c343" decimals="2" format="ixt:num-dot-decimal" name="fhs:ApplicableIncomeTaxRate" scale="-2" unitRef="pure">25</ix:nonFraction></ix:nonFraction></ix:nonFraction>%</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Long-Spring Education Holding Group Limited</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction contextRef="c344" decimals="2" format="ixt:num-dot-decimal" name="fhs:ApplicableIncomeTaxRate" scale="-2" unitRef="pure"><ix:nonFraction contextRef="c345" decimals="2" format="ixt:num-dot-decimal" name="fhs:ApplicableIncomeTaxRate" scale="-2" unitRef="pure"><ix:nonFraction contextRef="c346" decimals="2" format="ixt:num-dot-decimal" name="fhs:ApplicableIncomeTaxRate" scale="-2" unitRef="pure">25</ix:nonFraction></ix:nonFraction></ix:nonFraction>%</span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Kunming Guandu Hengshizhong Education Training School Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c347" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c348" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c349" name="fhs:DescriptionOfApplicableIncomeTaxRate">Preferential tax rate of small and micro enterprise</ix:nonNumeric></ix:nonNumeric></ix:nonNumeric></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Chongqing Hengshi Education Technology Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c350" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c351" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c352" name="fhs:DescriptionOfApplicableIncomeTaxRate">Preferential tax rate of small and micro enterprise</ix:nonNumeric></ix:nonNumeric></ix:nonNumeric></span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Yunnan Hengshun Property Service Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c353" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c354" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c355" name="fhs:DescriptionOfApplicableIncomeTaxRate">Preferential tax rate of small and micro enterprise</ix:nonNumeric></ix:nonNumeric></ix:nonNumeric></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Kunming Chenggong Times Giant Tutorial School Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c356" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c357" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c358" name="fhs:DescriptionOfApplicableIncomeTaxRate">Preferential tax rate of small and micro enterprise</ix:nonNumeric></ix:nonNumeric></ix:nonNumeric></span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Kunming Wuhua District Zhuorei Culture Training School Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c359" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c360" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c361" name="fhs:DescriptionOfApplicableIncomeTaxRate">Preferential tax rate of small and micro enterprise</ix:nonNumeric></ix:nonNumeric></ix:nonNumeric></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Wenshan Century Times Giant Training School Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c362" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c363" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c364" name="fhs:DescriptionOfApplicableIncomeTaxRate">Preferential tax rate of small and micro enterprise</ix:nonNumeric></ix:nonNumeric></ix:nonNumeric></span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Zhengzhou Hengshi Hengzhong Education Technology Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c365" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c366" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c367" name="fhs:DescriptionOfApplicableIncomeTaxRate">Preferential tax rate of small and micro enterprise</ix:nonNumeric></ix:nonNumeric></ix:nonNumeric></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Shenzhen Hengshi Education Technology Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c368" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c369" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c370" name="fhs:DescriptionOfApplicableIncomeTaxRate">Preferential tax rate of small and micro enterprise</ix:nonNumeric></ix:nonNumeric></ix:nonNumeric></span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Xiamen Hengshi Education Technology Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c371" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c372" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c373" name="fhs:DescriptionOfApplicableIncomeTaxRate">Preferential tax rate of small and micro enterprise</ix:nonNumeric></ix:nonNumeric></ix:nonNumeric></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Shanxi Long-Spring Enterprise Management Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c374" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c375" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c376" name="fhs:DescriptionOfApplicableIncomeTaxRate">Preferential tax rate of small and micro enterprise</ix:nonNumeric></ix:nonNumeric></ix:nonNumeric></span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Mengzi Bainian Long-Spring Education Technology Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c377" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c378" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c379" name="fhs:DescriptionOfApplicableIncomeTaxRate">Preferential tax rate of small and micro enterprise</ix:nonNumeric></ix:nonNumeric></ix:nonNumeric></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Yunnan Long-Spring Education Holding Group Hengshui Experimental Middle School Management Co., Ltd</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c380" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c381" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c382" name="fhs:DescriptionOfApplicableIncomeTaxRate">Preferential tax rate of small and micro enterprise</ix:nonNumeric></ix:nonNumeric></ix:nonNumeric></span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Beijing New Vocational Education Cultural Development Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c383" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c384" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c385" name="fhs:DescriptionOfApplicableIncomeTaxRate">Preferential tax rate of small and micro enterprise</ix:nonNumeric></ix:nonNumeric></ix:nonNumeric></span></td></tr>
</table><p style="margin: 0">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>



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

</div><!-- Field: Page; Sequence: 170 --><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">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->41<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">(In thousands of RMB, except
share data and per share data, or otherwise noted)</p><div>

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


</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_16" id="_IncomeTaxDisclosureTextBlock-c0_cont_15"><ix:continuation continuedAt="fhs_DisclosureOfApplicableIncomeTaxRateTableTextBlock-c0_cont_2" id="fhs_DisclosureOfApplicableIncomeTaxRateTableTextBlock-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="border-bottom: Black 1.5pt solid; padding-left: 0.125in; text-indent: -0.125in; width: 50%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>School name</b></span></td>
    <td style="width: 2%">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: center; width: 6%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Note</b></span></td>
    <td style="width: 2%">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; width: 40%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Applicable income tax rate</b></span></td></tr>

<tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; width: 50%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">New Vocational Education (Yunnan) Cultural Development Co., Ltd.</span></td>
    <td style="width: 2%">&#160;</td>
    <td style="text-align: center; width: 6%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)</span></td>
    <td style="width: 2%">&#160;</td>
    <td style="width: 40%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c386" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c387" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c388" name="fhs:DescriptionOfApplicableIncomeTaxRate">Preferential tax rate of small and micro enterprise</ix:nonNumeric></ix:nonNumeric></ix:nonNumeric></span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Beijing First High-Education Technology Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c389" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c390" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c391" name="fhs:DescriptionOfApplicableIncomeTaxRate">Preferential tax rate of small and micro enterprise</ix:nonNumeric></ix:nonNumeric></ix:nonNumeric></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Zunyi Hengshi Education Technology Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c392" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c393" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c394" name="fhs:DescriptionOfApplicableIncomeTaxRate">Preferential tax rate of small and micro enterprise</ix:nonNumeric></ix:nonNumeric></ix:nonNumeric></span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Guizhou Long-Spring Century Technology Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c395" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c396" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c397" name="fhs:DescriptionOfApplicableIncomeTaxRate">Preferential tax rate of small and micro enterprise</ix:nonNumeric></ix:nonNumeric></ix:nonNumeric></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Guizhou Hengshizhong Technology Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c398" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c399" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c400" name="fhs:DescriptionOfApplicableIncomeTaxRate">Preferential tax rate of small and micro enterprise</ix:nonNumeric></ix:nonNumeric></ix:nonNumeric></span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Yunnan Lihua Education Technology Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c401" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c402" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c403" name="fhs:DescriptionOfApplicableIncomeTaxRate">Preferential tax rate of small and micro enterprise</ix:nonNumeric></ix:nonNumeric></ix:nonNumeric></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Zhenxiong Bainian Long-Spring Technology Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c404" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c405" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c406" name="fhs:DescriptionOfApplicableIncomeTaxRate">Preferential tax rate of small and micro enterprise</ix:nonNumeric></ix:nonNumeric></ix:nonNumeric></span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Xishuangbanna Long-Spring Experimental Secondary School Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction contextRef="c407" decimals="2" format="ixt:num-dot-decimal" name="fhs:ApplicableIncomeTaxRate" scale="-2" unitRef="pure"><ix:nonFraction contextRef="c408" decimals="2" format="ixt:num-dot-decimal" name="fhs:ApplicableIncomeTaxRate" scale="-2" unitRef="pure"><ix:nonFraction contextRef="c409" decimals="2" format="ixt:num-dot-decimal" name="fhs:ApplicableIncomeTaxRate" scale="-2" unitRef="pure">25</ix:nonFraction></ix:nonFraction></ix:nonFraction>%</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Shaanxi Century Long-Spring Education Technology Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c410" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c411" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c412" name="fhs:DescriptionOfApplicableIncomeTaxRate">Preferential tax rate of small and micro enterprise</ix:nonNumeric></ix:nonNumeric></ix:nonNumeric></span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Shaanxi Hengshi Hengzhong Education Technology Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c413" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c414" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c415" name="fhs:DescriptionOfApplicableIncomeTaxRate">Preferential tax rate of small and micro enterprise</ix:nonNumeric></ix:nonNumeric></ix:nonNumeric></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Zhenxiong Long-Spring Advanced Secondary School</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction contextRef="c416" decimals="2" format="ixt:num-dot-decimal" name="fhs:ApplicableIncomeTaxRate" scale="-2" unitRef="pure"><ix:nonFraction contextRef="c417" decimals="2" format="ixt:num-dot-decimal" name="fhs:ApplicableIncomeTaxRate" scale="-2" unitRef="pure"><ix:nonFraction contextRef="c418" decimals="2" format="ixt:num-dot-decimal" name="fhs:ApplicableIncomeTaxRate" scale="-2" unitRef="pure">25</ix:nonFraction></ix:nonFraction></ix:nonFraction>%</span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Beijing Hualing International Human Resources Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c419" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c420" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c421" name="fhs:DescriptionOfApplicableIncomeTaxRate">Preferential tax rate of small and micro enterprise</ix:nonNumeric></ix:nonNumeric></ix:nonNumeric></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Datong Hengshi Gaokao Tutorial School</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c422" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c423" name="fhs:DescriptionOfApplicableIncomeTaxRate"><ix:nonNumeric contextRef="c424" name="fhs:DescriptionOfApplicableIncomeTaxRate">Preferential tax rate of small and micro enterprise</ix:nonNumeric></ix:nonNumeric></ix:nonNumeric></span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Xinping Long-Spring Advanced Secondary School Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction contextRef="c425" decimals="2" format="ixt:num-dot-decimal" name="fhs:ApplicableIncomeTaxRate" scale="-2" unitRef="pure"><ix:nonFraction contextRef="c426" decimals="2" format="ixt:num-dot-decimal" name="fhs:ApplicableIncomeTaxRate" scale="-2" unitRef="pure"><ix:nonFraction contextRef="c427" decimals="2" format="ixt:num-dot-decimal" name="fhs:ApplicableIncomeTaxRate" scale="-2" unitRef="pure">25</ix:nonFraction></ix:nonFraction></ix:nonFraction>%</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Yunnan Century Long-Spring Technology Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction contextRef="c428" decimals="2" format="ixt:num-dot-decimal" name="fhs:ApplicableIncomeTaxRate" scale="-2" unitRef="pure"><ix:nonFraction contextRef="c429" decimals="2" format="ixt:num-dot-decimal" name="fhs:ApplicableIncomeTaxRate" scale="-2" unitRef="pure"><ix:nonFraction contextRef="c430" decimals="2" format="ixt:num-dot-decimal" name="fhs:ApplicableIncomeTaxRate" scale="-2" unitRef="pure">15</ix:nonFraction></ix:nonFraction></ix:nonFraction>%</span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Yunnan Zhongchuang Education Tutorial School</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)</span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction contextRef="c431" decimals="2" format="ixt:num-dot-decimal" name="fhs:ApplicableIncomeTaxRate" scale="-2" unitRef="pure"><ix:nonFraction contextRef="c432" decimals="2" format="ixt:num-dot-decimal" name="fhs:ApplicableIncomeTaxRate" scale="-2" unitRef="pure"><ix:nonFraction contextRef="c433" decimals="2" format="ixt:num-dot-decimal" name="fhs:ApplicableIncomeTaxRate" scale="-2" unitRef="pure">15</ix:nonFraction></ix:nonFraction></ix:nonFraction>%</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td>
    <td>&#160;</td>
    <td style="text-align: center">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td></tr>
</table><p style="margin: 0"><span style="font-size: 6pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

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

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

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_17" id="_IncomeTaxDisclosureTextBlock-c0_cont_16"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Notes:</span>&#160; </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-size: 6pt">&#160;</span></p></ix:continuation><div>



</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_18" id="_IncomeTaxDisclosureTextBlock-c0_cont_17"><ix:continuation id="fhs_DisclosureOfApplicableIncomeTaxRateTableTextBlock-c0_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">(i)</td><td style="text-align: left"><ix:footnote id="ix_6_footnote" xml:lang="en-US">As confirmed by the local tax authorities, these school are
exempt from income taxes for the years ended December 31, 2020, 2021 and 2022, respectively.</ix:footnote></td>
</tr>
<tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0in"></td><td style="width: 0.25in; text-align: left">(ii)</td><td style="text-align: left"><ix:footnote id="ix_7_footnote" xml:lang="en-US">Resorts District Hengshui Experimental Secondary School and
Yunnan Long-Spring Foreign Language Secondary School are entitled to a five-year enterprise income tax exemptions for certain revenue
that meets relevant legal requirements from January 1, 2018 through December 31, 2022 and from January 1, 2019 through December 31, 2023
respectively, as determined by the local government authorities as non-profit organizations.</ix:footnote></td>
</tr>
<tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0in"></td><td style="width: 0.25in; text-align: left">(iii)</td><td style="text-align: left"><ix:footnote id="ix_8_footnote" xml:lang="en-US">As these schools have not received confirmations from the local
tax authorities on income tax exemption, they are subject to the statutory income tax rate of <ix:nonFraction contextRef="c278" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EffectiveIncomeTaxRateReconciliationAtFederalStatutoryIncomeTaxRate" scale="-2" unitRef="pure"><ix:nonFraction contextRef="c7" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EffectiveIncomeTaxRateReconciliationAtFederalStatutoryIncomeTaxRate" scale="-2" unitRef="pure"><ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EffectiveIncomeTaxRateReconciliationAtFederalStatutoryIncomeTaxRate" scale="-2" unitRef="pure">25</ix:nonFraction></ix:nonFraction></ix:nonFraction>% for the years ended December 31, 2020,
2021 and 2022, respectively. High tech enterprises are subject to corporate income tax at a reduced rate of <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="fhs:EffectiveOfCorporateIncomeTaxRatePercentage" scale="-2" unitRef="pure">15</ix:nonFraction>%. For the year ended December
31, 2022, the newly established schools are qualified as small and micro enterprises, the preferential tax rates of <ix:nonFraction contextRef="c157" decimals="2" format="ixt:num-dot-decimal" name="fhs:PreferentialIncomeTaxRatePercentage" scale="-2" unitRef="pure">5</ix:nonFraction>% or <ix:nonFraction contextRef="c158" decimals="2" format="ixt:num-dot-decimal" name="fhs:PreferentialIncomeTaxRatePercentage" scale="-2" unitRef="pure">10</ix:nonFraction>% are applied.</ix:footnote></td>
</tr>
<tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0in"></td><td style="width: 0.25in; text-align: left">(iv)</td><td style="text-align: left"><p style="margin: 0pt 0; font: 10pt Times New Roman, Times, Serif"><ix:footnote id="ix_9_footnote" xml:lang="en-US">Under 2016 Revised Private Education Law, Qujing Hengshui Experimental
Secondary School have registered as non-profit schools in 2019 and are qualified for similar tax benefits as public schools, which entitle
them to income tax exemptions.</ix:footnote></p></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0"><span style="font-size: 6pt">&#160;</span></p></ix:continuation></ix:continuation><div>

</div><div>

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


</div><!-- Field: Page; Sequence: 171 --><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">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->42<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 172pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><b>FIRST HIGH-SCHOOL EDUCATION
GROUP CO., LTD.</b></p><div>

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

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_19" id="_IncomeTaxDisclosureTextBlock-c0_cont_18"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">(In thousands of RMB, except share data and per share data,
or otherwise noted)</p><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_20" id="_IncomeTaxDisclosureTextBlock-c0_cont_19"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.25in">Under the EIT Law and its implementation rules, an enterprise
established outside China with a &#8220;place of effective management&#8221; within China is considered a China resident enterprise for
Chinese enterprise income tax purposes. A China resident enterprise is generally subject to certain Chinese tax reporting obligations
and a uniform <ix:nonFraction contextRef="c279" decimals="2" format="ixt:num-dot-decimal" name="fhs:PreferentialIncomeTaxRatePercentage" scale="-2" unitRef="pure">25</ix:nonFraction>% enterprise income tax rate on its worldwide income. The implementation rules to the New EIT Law provide that non-resident
legal entities are considered PRC residents if substantial and overall management and control over the manufacturing and business operations,
personnel, accounting, properties, etc., occurs within the PRC. Despite the present uncertainties resulting from the limited PRC tax guidance
on the issue, the Company does not believe that the legal entities organized outside the PRC should be treated as China resident enterprises
for 2008 EIT law purposes.</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_21" id="_IncomeTaxDisclosureTextBlock-c0_cont_20"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 10pt 0pt 0.25in">If the PRC tax authorities subsequently determine that
the Company is deemed China resident enterprise, the Company will be subject to the PRC income tax at the rate of <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="fhs:PreferentialIncomeTaxRatePercentage" scale="-2" unitRef="pure">25</ix:nonFraction>%. Dividends paid
to non-PRC-resident corporate investor from profits earned by the PRC subsidiaries and VIEs on or after January 1, 2008 would be subject
to a withholding tax. The EIT law and its relevant regulations impose a withholding tax at <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="fhs:IncomeTaxWitholdingRate" scale="-2" unitRef="pure">10</ix:nonFraction>%, unless reduced by a tax treaty or agreement,
for dividends distributed by a PRC-resident enterprise to its non-PRC-resident corporate investor for earnings generated beginning on
January 1, 2008.</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_22" id="_IncomeTaxDisclosureTextBlock-c0_cont_21"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 10pt 0pt 0.25in">The Group does not file combined or consolidated tax returns,
therefore, losses from individual subsidiaries or the VIEs may not be used to offset other subsidiaries&#8217; or the VIEs&#8217; earnings
within the Group.</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_23" id="_IncomeTaxDisclosureTextBlock-c0_cont_22"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><i><span style="text-decoration:underline">Income taxes</span></i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_24" id="_IncomeTaxDisclosureTextBlock-c0_cont_23"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">The income before income taxes and the provision for
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</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_25" id="_IncomeTaxDisclosureTextBlock-c0_cont_24"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfEffectiveIncomeTaxRateReconciliationTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom; ">
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</div><div>

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    </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">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->43<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>FIRST HIGH-SCHOOL EDUCATION
GROUP CO., LTD.</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">(In thousands of RMB, except share data and per
share data, or otherwise noted)</p><div>

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

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_26" id="_IncomeTaxDisclosureTextBlock-c0_cont_25"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><i><span style="text-decoration:underline">Tax rate reconciliation</span></i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_27" id="_IncomeTaxDisclosureTextBlock-c0_cont_26"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 10pt 0pt 0.25in">The actual income tax expenses reported in the consolidated
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before income taxes due to the following:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 10pt 0pt 0.25in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_28" id="_IncomeTaxDisclosureTextBlock-c0_cont_27"><ix:nonNumeric contextRef="c0" escape="true" name="fhs:ScheduleOfEffectiveTaxRateAndStatutoryIncomeTaxRateApplicableToPRCOperationsTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 64%; text-align: left">Income before income taxes</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 10pt 0pt 0.25in"></p></ix:nonNumeric></ix:continuation><div>


</div><div>




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

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_29" id="_IncomeTaxDisclosureTextBlock-c0_cont_28"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 11pt 0pt 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i><span style="text-decoration:underline">Deferred
taxes</span></i></span></p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_30" id="_IncomeTaxDisclosureTextBlock-c0_cont_29"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 11pt 0pt 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
components of deferred tax assets and liabilities are as follows:</span> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_IncomeTaxDisclosureTextBlock-c0_cont_30"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfDeferredTaxAssetsAndLiabilitiesTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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    <td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">As of December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td>Deferred tax assets:</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Property and equipment</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Valuation allowance on deferred tax assets</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="-3" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxAssetsValuationAllowance" scale="3" unitRef="cny">1,184</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt">Deferred tax assets, net of valuation allowance</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxAssetsNet" scale="3" unitRef="cny">14,744</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Deferred tax liabilities:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Property and equipment</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxLiabilitiesPropertyPlantAndEquipment" scale="3" unitRef="cny">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="-3" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxLiabilitiesPropertyPlantAndEquipment" scale="3" unitRef="cny">969</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 1.5pt">Government grants</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="-3" format="ixt:num-dot-decimal" name="fhs:DeferredTaxLiabilitiesGovernmentGrants" scale="3" sign="-" unitRef="cny">1,216</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: 1.5pt">Total deferred tax liabilities</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="-3" format="ixt:num-dot-decimal" name="us-gaap:DisposalGroupIncludingDiscontinuedOperationDeferredTaxLiabilities" scale="3" unitRef="cny">2,185</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Net deferred tax</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Analysis as:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-left: 9pt">Deferred tax assets</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DeferredIncomeTaxAssetsNet" scale="3" unitRef="cny">14,744</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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    <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="-3" format="ixt:num-dot-decimal" name="us-gaap:DeferredIncomeTaxLiabilities" scale="3" unitRef="cny">2,185</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 4pt">Net deferred tax assets</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><!-- Field: Page; Sequence: 173 --><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">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->44<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><b>FIRST HIGH-SCHOOL EDUCATION
GROUP CO., LTD.</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">(In thousands of RMB, except share data and per share data,
or otherwise noted)</p><div>

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

</div><ix:nonNumeric contextRef="c0" continuedAt="fhs_DistributionOfProfitDisclosureTextBlock-c0_cont_1" escape="true" name="fhs:DistributionOfProfitDisclosureTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><b>17</b></td><td style="text-align: justify"><b>DISTRIBUTION OF PROFIT</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="fhs_DistributionOfProfitDisclosureTextBlock-c0_cont_2" id="fhs_DistributionOfProfitDisclosureTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><b><i>(a)</i></b></td><td style="text-align: justify"><b><i>Distribution of profits</i></b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:continuation><div>



</div><div>

</div><ix:continuation continuedAt="fhs_DistributionOfProfitDisclosureTextBlock-c0_cont_3" id="fhs_DistributionOfProfitDisclosureTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">According to the resolutions of the board of director of
First High-School HK on November 27, 2018, the dividends declared to the then shareholder were RMB<ix:nonFraction contextRef="c434" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:Dividends" scale="3" unitRef="cny">80,614</ix:nonFraction>. Dividends of RMB<ix:nonFraction contextRef="c435" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:PaymentsOfDividends" scale="3" unitRef="cny">27,880</ix:nonFraction> were
paid in November 2018 and unpaid dividends of RMB<ix:nonFraction contextRef="c436" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DividendsPayableCurrentAndNoncurrent" scale="3" unitRef="cny"><ix:nonFraction contextRef="c16" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DividendsPayableCurrentAndNoncurrent" scale="3" unitRef="cny">52,734</ix:nonFraction></ix:nonFraction> were recorded in amounts due to related parties as of December 31, 2018 and 2019,
respectively. The Group further paid out RMB<ix:nonFraction contextRef="c6" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:PaymentsOfDividends" scale="3" unitRef="cny">42,300</ix:nonFraction> in December 2020 with a remaining balance of RMB<ix:nonFraction contextRef="c32" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DividendsPayableCurrentAndNoncurrent" scale="3" unitRef="cny">10,434</ix:nonFraction> unpaid (&#8220;Unpaid 2018 Dividend&#8221;)
which was subsequently paid in March 2021.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:continuation><div>

</div><div>

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

</div><ix:continuation continuedAt="fhs_DistributionOfProfitDisclosureTextBlock-c0_cont_4" id="fhs_DistributionOfProfitDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">According to the resolutions of the board of director of First High-School
HK on December 25, 2020, the dividends declared to the then shareholder were US$<ix:nonFraction contextRef="c437" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:Dividends" scale="3" unitRef="usd">24,163</ix:nonFraction> (approximately RMB<ix:nonFraction contextRef="c437" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:Dividends" scale="3" unitRef="cny">157,663</ix:nonFraction>). Dividends of US$<ix:nonFraction contextRef="c438" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DividendsPayableCurrentAndNoncurrent" scale="3" unitRef="usd">24,163</ix:nonFraction>
were paid in March 2021.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="fhs_DistributionOfProfitDisclosureTextBlock-c0_cont_5" id="fhs_DistributionOfProfitDisclosureTextBlock-c0_cont_4"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><b><i>(b)</i></b></td><td style="text-align: justify"><b><i>Distribution to the Parent</i></b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:continuation><div>



</div><div>

</div><ix:continuation continuedAt="fhs_DistributionOfProfitDisclosureTextBlock-c0_cont_6" id="fhs_DistributionOfProfitDisclosureTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.25in">On December 9, 2020, the Parent entered into a Share Repurchase
Agreement with its shareholder, Longwater Topco B.V. (&#8220;Longwater&#8221;), pursuant to which the Parent agreed to repurchase <ix:nonFraction contextRef="c439" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:StockRepurchasedDuringPeriodShares" scale="0" unitRef="shares">718,239</ix:nonFraction>
of its shares from Longwater at a cash consideration of US$<ix:nonFraction contextRef="c439" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:StockRepurchasedDuringPeriodValue" scale="3" unitRef="usd">15,300</ix:nonFraction>, of which RMB<ix:nonFraction contextRef="c439" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:PaymentsForRepurchaseOfCommonStock" scale="3" unitRef="cny">89,083</ix:nonFraction> (approximate US$<ix:nonFraction contextRef="c440" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:PaymentsForRepurchaseOfCommonStock" scale="3" unitRef="usd">13,713</ix:nonFraction>) was paid by the Group on
the Parent&#8217;s behalf. The Group made the payment in December 2020 and has accounted for such payment as a distribution to the Parent
within equity.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="fhs_DistributionOfProfitDisclosureTextBlock-c0_cont_7" id="fhs_DistributionOfProfitDisclosureTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.25in; text-align: justify">On January, 2021, the Parent entered into
several agreements with the Group, pursuant to which the Group agreed to make distribution to the Parent of RMB<ix:nonFraction contextRef="c441" decimals="-3" format="ixt:num-dot-decimal" name="fhs:OffsetHistoricalAggregatedAmountsDueFromTheParent" scale="3" unitRef="cny">18,424</ix:nonFraction>, to offset historical
aggregated amounts due from the Parent. The distribution was made not in cash, but as offsets in January 2021 and was accounted for a
distribution to the Parent within equity.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="fhs_DistributionOfProfitDisclosureTextBlock-c0_cont_8" id="fhs_DistributionOfProfitDisclosureTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 13pt 0pt 0.25in">On June, 2021, the Group acquired all of the equity interests
in Kunming Chenggong Times Giant Tutorial School Co., Ltd., Wenshan Century Times Giant Training School Co., Ltd., and Kunming Wuhua District
Zhuorui Cultural Training School Co., Ltd. (collectively known as &#8220;Yunnan Times Giant&#8221;), the acquisition was made to a related
party of the Company (same control in nature), therefore the amount of RMB<ix:nonFraction contextRef="c442" decimals="-3" format="ixt:num-dot-decimal" name="fhs:NetIncome" scale="3" unitRef="cny">32,989</ix:nonFraction> is recorded as net income of the same controlled entity.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="fhs_DistributionOfProfitDisclosureTextBlock-c0_cont_9" id="fhs_DistributionOfProfitDisclosureTextBlock-c0_cont_8"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><b><i>(c)</i></b></td><td style="text-align: justify"><b><i>Reserves</i></b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:continuation><div>



</div><div>

</div><ix:continuation continuedAt="fhs_DistributionOfProfitDisclosureTextBlock-c0_cont_10" id="fhs_DistributionOfProfitDisclosureTextBlock-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5pt 0pt 0.25in">As stipulated by relevant PRC laws and regulations, the
Company&#8217;s subsidiaries and consolidated VIEs in the PRC must take appropriations from after-tax profit to non-distributive funds.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="fhs_DistributionOfProfitDisclosureTextBlock-c0_cont_11" id="fhs_DistributionOfProfitDisclosureTextBlock-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">These reserves include general reserve and the development
reserve.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="fhs_DistributionOfProfitDisclosureTextBlock-c0_cont_12" id="fhs_DistributionOfProfitDisclosureTextBlock-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">The general reserve requires annual appropriation <ix:nonFraction contextRef="c7" decimals="2" format="ixt:num-dot-decimal" name="fhs:ForeignInvestedEnterpriseMinimumRequiredPercentOfAnnualAfterTaxProfitGeneralReserve" scale="-2" unitRef="pure">10</ix:nonFraction>% of
after-tax profits as determined under PRC GAAP at each year-end until the balance reaches <ix:nonFraction contextRef="c7" decimals="2" format="ixt:num-dot-decimal" name="fhs:RequiredReservePercentOfRespectiveRegisteredCapital" scale="-2" unitRef="pure">50</ix:nonFraction>% of the PRC Company&#8217;s registered capital.
The other reserve is set aside at the company&#8217;s discretion. These reserves can only be used for general enterprise expansion and
are not distributable as cash dividends. The general reserve as of December 31, 2021 and 2022 were RMB<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="fhs:GeneralReserve" scale="3" unitRef="cny">5,095</ix:nonFraction> and RMB<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="fhs:GeneralReserve" scale="3" unitRef="cny">5,491</ix:nonFraction> respectively.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="fhs_DistributionOfProfitDisclosureTextBlock-c0_cont_13" id="fhs_DistributionOfProfitDisclosureTextBlock-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 12pt 0pt 0.25in">Each of the schools is required to appropriate <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="fhs:ForeignFinancialInstitutionsMandatedReservePercentOfAnnualAfterTaxProfitMinimum" scale="-2" unitRef="pure">25</ix:nonFraction>%, if
any, of its after-tax profits as determined under PRC GAAP to a non-distributable education development reserve for the construction or
maintenance of the school or procurement or upgrading of educational equipment. In accordance with the 2004 Implementing Rules, this reserve
can only be used for school construction, maintenance and upgrade of education equipment. The development reserve is restricted net assets
of the schools which are un-distributable to the Company in the form of dividends or loans. The education development reserve as of December
31, 2021 and 2022 were RMB<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="fhs:EducationDevelopmentReserve" scale="3" unitRef="cny">43,965</ix:nonFraction> and RMB<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="fhs:EducationDevelopmentReserve" scale="3" unitRef="cny">48,875</ix:nonFraction>, respectively.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 12pt 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="fhs_DistributionOfProfitDisclosureTextBlock-c0_cont_14" id="fhs_DistributionOfProfitDisclosureTextBlock-c0_cont_13"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><b><i>(d)</i></b></td><td style="text-align: justify"><b><i>Declared dividends</i></b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 12pt 0pt 0"><b><i>&#160;</i></b></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="fhs_DistributionOfProfitDisclosureTextBlock-c0_cont_15" id="fhs_DistributionOfProfitDisclosureTextBlock-c0_cont_14"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 12pt 0pt 0.25in">Pursuant to a board meeting dated December 25, 2020,
the Company declared a dividend of US$<ix:nonFraction contextRef="c443" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:Dividends" scale="3" unitRef="usd">24,163</ix:nonFraction> (approximately RMB<ix:nonFraction contextRef="c443" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:Dividends" scale="3" unitRef="cny">157,663</ix:nonFraction>) to the shareholders of the Company upon the consummation of the
Corporate Restructuring described in Note 22. Such dividend was paid in full in March 2021.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 12pt 0pt 0">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation id="fhs_DistributionOfProfitDisclosureTextBlock-c0_cont_15"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 12pt 0pt 0.25in">Pursuant to a board meeting dated September 30, 2022,
the Company declared a dividend of US$<ix:nonFraction contextRef="c444" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:Dividends" scale="3" unitRef="usd">1,240</ix:nonFraction> (approximately RMB<ix:nonFraction contextRef="c444" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:Dividends" scale="3" unitRef="cny">8,564</ix:nonFraction>) to the shareholders in Note 22. As December 31, 2022, RMB<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:PaymentsOfDividends" scale="3" unitRef="cny">6,432</ix:nonFraction> has
been paid. The remaining dividend will be paid in October 2023.</p></ix:continuation><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>


</div><!-- Field: Page; Sequence: 174 --><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">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->45<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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-top: 0pt; margin-bottom: 0pt; text-align: center"><b>FIRST HIGH-SCHOOL EDUCATION
GROUP CO., LTD.</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">(In thousands of RMB, except share data and per
share data, or otherwise noted)</p><div>

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

</div><ix:nonNumeric contextRef="c0" continuedAt="_EarningsPerShareTextBlock-c0_cont_1" escape="true" name="us-gaap:EarningsPerShareTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><b>18</b></td><td style="text-align: justify"><b>EARNINGS PER ORDINARY SHARE</b></td>
</tr></table><p style="font-size: 10pt; margin: 0">&#160;</p></ix:nonNumeric><div>



</div><div>

</div><ix:continuation id="_EarningsPerShareTextBlock-c0_cont_1"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfEarningsPerShareBasicAndDilutedTableTextBlock"><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: 9pt; text-align: center; text-indent: -9pt">&#160;</td>
    <td style="text-align: center">&#160;</td>
    <td colspan="10" style="border-bottom: black 1.5pt solid; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Years Ended December 31,</b></span></td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="padding-left: 9pt; text-align: center; text-indent: -9pt">&#160;</td>
    <td style="text-align: center">&#160;</td>
    <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>2020</b></span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center">&#160;</td>
    <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>2021</b></span></td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center">&#160;</td>
    <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>2022</b></span></td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="padding-left: 9pt; text-indent: -9pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Numerator</b></span></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: #CCEEFF">
    <td style="width: 64%; padding-left: 9pt; text-indent: -9pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Net income from continuing operations attributable to First High-school Education Group Co., Ltd.</span></td>
    <td style="width: 1%">&#160;</td>
    <td style="width: 1%">&#160;</td>
    <td style="width: 9%; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction contextRef="c6" decimals="-3" format="ixt:num-dot-decimal" name="fhs:NetIncomeFromContinuingOperation" scale="3" unitRef="cny">78,799</ix:nonFraction></span></td>
    <td style="width: 1%">&#160;</td>
    <td style="width: 1%">&#160;</td>
    <td style="width: 1%">&#160;</td>
    <td style="width: 9%; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction contextRef="c7" decimals="-3" format="ixt:num-dot-decimal" name="fhs:NetIncomeFromContinuingOperation" scale="3" unitRef="cny">57,781</ix:nonFraction></span></td>
    <td style="width: 1%">&#160;</td>
    <td style="width: 1%">&#160;</td>
    <td style="width: 1%">&#160;</td>
    <td style="width: 9%; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="fhs:NetIncomeFromContinuingOperation" scale="3" unitRef="cny">45,016</ix:nonFraction></span></td>
    <td style="width: 1%">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 9pt; text-indent: -9pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Net income (loss) from discontinued operations attributable to First High-school Education Group Co., Ltd.</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction contextRef="c6" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IncomeLossFromDiscontinuedOperationsNetOfTaxAttributableToReportingEntity" scale="3" unitRef="cny">2,019</ix:nonFraction></span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction contextRef="c7" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IncomeLossFromDiscontinuedOperationsNetOfTaxAttributableToReportingEntity" scale="3" sign="-" unitRef="cny">5,088</ix:nonFraction></span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
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</div><p style="margin: 0; font-size: 10pt">&#160;</p><div>


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

</div><ix:nonNumeric contextRef="c0" continuedAt="_SegmentReportingDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:SegmentReportingDisclosureTextBlock"><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>19</b></td><td style="text-align: justify"><b>SEGMENT INFORMATION</b></td>
</tr></table><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 2pt 0pt 0.25in">The Group has one operating segment, which is engaged in
provision of full spectrum private fundamental education and complementary education services. The Group&#8217;s chief operating decision
maker is the chief executive officer of the Group who reviews consolidated results when making decisions about allocating resources and
assessing performance of the Group. Accordingly, no reportable segment information is presented.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_SegmentReportingDisclosureTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">During the years ended December 31, 2020, 2021 and 2022, substantially
all of the Group&#8217;s operations and long-lived assets were in the PRC.</p></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="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:CommitmentsAndContingenciesDisclosureTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><b>20</b></td><td style="text-align: justify"><b>COMMITMENTS AND CONTINGENCIES</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_2" id="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><b><i>(a)</i></b></td><td style="text-align: justify"><b><i>Capital commitments</i></b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:continuation><div>



</div><div>

</div><ix:continuation continuedAt="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_3" id="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">Capital commitments outstanding as of December 31, 2021 and
2022 not provided for in the consolidated financial statements were as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 461pt"></p><div>

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

</div><ix:continuation continuedAt="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_4" id="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_3"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfFutureMinimumLeasePaymentsForCapitalLeasesTableTextBlock"><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="font-weight: bold; text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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    <td style="width: 76%; text-align: left; padding-bottom: 4pt"><p style="margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">Contracted for payable of student related uniform, luggage, and teaching
materials</p></td><td style="width: 1%; padding-bottom: 4pt">&#160;</td>
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</div><div>

</div><ix:continuation continuedAt="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_5" id="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_4"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><b><i>(b)</i></b></td><td style="text-align: justify"><b><i>Lease commitments</i></b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:continuation><div>



</div><div>

</div><ix:continuation id="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">The Group&#8217;s lease commitments are disclosed in Note
12.</p></ix:continuation><div>

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


</div><!-- Field: Page; Sequence: 175 --><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">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->46<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></p></div><div>
    </div><!-- Field: /Page --><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>FIRST HIGH-SCHOOL EDUCATION
GROUP CO., LTD.</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">(In thousands of RMB, except share data and per
share data, or otherwise noted)</p><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"><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>21</b></td><td style="text-align: justify"><b>RELATED PARTY TRANSACTIONS</b></td>
</tr></table><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 0pt 0.25in">As of December 31, 2022, the amounts due to the related parties
were consisted of the followings:</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"><ix:nonNumeric contextRef="c0" continuedAt="_ScheduleOfRelatedPartyTransactionsTableTextBlock-c0_cont_1" escape="true" name="us-gaap:ScheduleOfRelatedPartyTransactionsTableTextBlock"><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; ">
    <td style="vertical-align: top; padding-left: 0.125in; text-indent: -0.125in; text-align: left">Yunnan Preparatory School for Studying Abroad</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="vertical-align: top; padding-left: 0.125in; text-indent: -0.125in; text-align: left">Beijing Long-Spring International Education Technology Research Institute</td><td>&#160;</td>
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    <td style="vertical-align: top; text-align: left"><ix:nonNumeric contextRef="c452" name="us-gaap:NatureOfCommonOwnershipOrManagementControlRelationships">Entity significantly influenced by Mr. Zhang</ix:nonNumeric></td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="vertical-align: top; padding-left: 0.125in; text-indent: -0.125in; text-align: left">Beijing Tomorrow Future Plus Education Technology Co., Ltd.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c453" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DueToRelatedPartiesCurrentAndNoncurrent" scale="3" unitRef="usd">6</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="vertical-align: top; padding-left: 0.125in; text-indent: -0.125in; text-align: left">Lihua Family Education Technology (Beijing) Co., Ltd.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c455" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DueToRelatedPartiesCurrentAndNoncurrent" scale="3" unitRef="usd">7,446</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left"><ix:nonNumeric contextRef="c456" name="us-gaap:NatureOfCommonOwnershipOrManagementControlRelationships">Controlled by the same shareholder</ix:nonNumeric></td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="vertical-align: top; padding-left: 0.125in; text-indent: -0.125in; text-align: left">Chengdu First Carbon New Technology Co., Ltd.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c457" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DueToRelatedPartiesCurrentAndNoncurrent" scale="3" unitRef="usd">3</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left"><ix:nonNumeric contextRef="c458" name="us-gaap:NatureOfCommonOwnershipOrManagementControlRelationships">Controlled by the same shareholder</ix:nonNumeric></td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="vertical-align: top; padding-left: 0.125in; text-indent: -0.125in; text-align: left">Yunnan Three Three One Education Technology Co., Ltd.</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="padding-bottom: 4pt; vertical-align: top; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="padding-bottom: 4pt; text-align: left; vertical-align: top">&#160;</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 continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_4" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">As of December 31, 2022, the amounts due from the related
parties were consisted of the followings:</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_5" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_4"><ix:continuation continuedAt="_ScheduleOfRelatedPartyTransactionsTableTextBlock-c0_cont_2" id="_ScheduleOfRelatedPartyTransactionsTableTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="border-bottom: Black 1.5pt solid; padding-left: 0.125in; text-indent: -0.125in; text-align: left; font-weight: bold; vertical-align: top">Name</td><td style="padding-bottom: 1.5pt; text-align: center; font-weight: bold; vertical-align: bottom">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="vertical-align: top; padding-left: 0.125in; text-indent: -0.125in; width: 28%; text-align: left">Beijing Long-Spring Education Technology Group Co., Ltd.</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c462" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DueToRelatedPartiesCurrentAndNoncurrent" scale="3" unitRef="usd">29,969</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="vertical-align: top; width: 28%; text-align: left"><ix:nonNumeric contextRef="c463" name="us-gaap:NatureOfCommonOwnershipOrManagementControlRelationships">Entity controlled by Mr. Zhang*</ix:nonNumeric></td><td style="width: 1%">&#160;</td>
    <td style="vertical-align: top; width: 30%; text-align: left"><ix:nonNumeric contextRef="c463" name="fhs:RelatedPartyNote">Loan receivables*, interest free and payment on demand.</ix:nonNumeric></td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="vertical-align: top; padding-left: 0.125in; text-indent: -0.125in; text-align: left">Lihua Family Education Technology (Beijing) Co., Ltd.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c464" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DueToRelatedPartiesCurrentAndNoncurrent" scale="3" unitRef="usd">3,333</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left"><ix:nonNumeric contextRef="c465" name="us-gaap:NatureOfCommonOwnershipOrManagementControlRelationships">Controlled by the same shareholder</ix:nonNumeric></td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left"><ix:nonNumeric contextRef="c465" name="fhs:RelatedPartyNote">Loan receivables*, interest free and payment on demand.</ix:nonNumeric></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="vertical-align: top; padding-left: 0.125in; text-indent: -0.125in; text-align: left">Chengdu First Carbon New
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c466" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DueToRelatedPartiesCurrentAndNoncurrent" scale="3" unitRef="usd">5,192</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left"><ix:nonNumeric contextRef="c467" name="us-gaap:NatureOfCommonOwnershipOrManagementControlRelationships">Controlled by the same shareholder</ix:nonNumeric></td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left"><ix:nonNumeric contextRef="c467" name="fhs:RelatedPartyNote">Loan receivables*, interest free and payment on demand.</ix:nonNumeric></td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="vertical-align: top; padding-left: 0.125in; text-indent: -0.125in; text-align: left">Yunnan Three Three One Education Technology Co., Ltd.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c468" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DueToRelatedPartiesCurrentAndNoncurrent" scale="3" unitRef="usd">339</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left"><ix:nonNumeric contextRef="c469" name="us-gaap:NatureOfCommonOwnershipOrManagementControlRelationships">Controlled by the same shareholder</ix:nonNumeric></td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left"><ix:nonNumeric contextRef="c469" name="fhs:RelatedPartyNote">Loan receivables*, interest free and payment on demand.</ix:nonNumeric></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="vertical-align: top; padding-left: 0.125in; text-indent: -0.125in; text-align: left">Zunyi Huichuan Hengshi Education and Training School</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c470" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DueToRelatedPartiesCurrentAndNoncurrent" scale="3" unitRef="usd">139</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left"><ix:nonNumeric contextRef="c471" name="us-gaap:NatureOfCommonOwnershipOrManagementControlRelationships">Cooperative education projects</ix:nonNumeric></td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left"><ix:nonNumeric contextRef="c471" name="fhs:RelatedPartyNote">Loan receivables*, interest free and payment on demand.</ix:nonNumeric></td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="vertical-align: top; padding-left: 0.125in; text-indent: -0.125in; text-align: left">Yunnan Long-Spring Education Technology Co., Ltd.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c472" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DueToRelatedPartiesCurrentAndNoncurrent" scale="3" unitRef="usd">3,173</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left"><ix:nonNumeric contextRef="c473" name="us-gaap:NatureOfCommonOwnershipOrManagementControlRelationships">Controlled by the same shareholder Entity significantly influenced by Mr. Zhang</ix:nonNumeric></td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left"><ix:nonNumeric contextRef="c473" name="fhs:RelatedPartyNote">Loan receivables*, interest free and payment on demand.</ix:nonNumeric></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="vertical-align: top; padding-left: 0.125in; text-indent: -0.125in; text-align: left">Yunnan Huayiweiming Technology Co., Ltd.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c474" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DueToRelatedPartiesCurrentAndNoncurrent" scale="3" unitRef="usd">15,503</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left"><ix:nonNumeric contextRef="c475" name="us-gaap:NatureOfCommonOwnershipOrManagementControlRelationships">Entity significantly influenced by Mr. Zhang</ix:nonNumeric></td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left"><ix:nonNumeric contextRef="c475" name="fhs:RelatedPartyNote">Loan receivables*, interest free and payment on demand.</ix:nonNumeric></td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="vertical-align: top; padding-left: 0.125in; text-indent: -0.125in; text-align: left">Beijing Long-Spring International Education Technology Research Institute</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c476" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DueToRelatedPartiesCurrentAndNoncurrent" scale="3" unitRef="usd">25</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left"><ix:nonNumeric contextRef="c477" name="us-gaap:NatureOfCommonOwnershipOrManagementControlRelationships">Entity significantly influenced by Mr. Zhang</ix:nonNumeric></td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left"><ix:nonNumeric contextRef="c477" name="fhs:RelatedPartyNote">Loan receivables*, interest free and payment on demand.</ix:nonNumeric></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="vertical-align: top; padding-left: 0.125in; text-indent: -0.125in; text-align: left">Beijing Tomorrow Future Plus Education Technology Co., Ltd.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c478" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DueToRelatedPartiesCurrentAndNoncurrent" scale="3" unitRef="usd">1</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left"><ix:nonNumeric contextRef="c479" name="us-gaap:NatureOfCommonOwnershipOrManagementControlRelationships">Controlled by the same shareholder</ix:nonNumeric></td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left"><ix:nonNumeric contextRef="c479" name="fhs:RelatedPartyNote">Loan receivables*, interest free and payment on demand.</ix:nonNumeric></td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="vertical-align: top; padding-left: 0.125in; text-indent: -0.125in; text-align: left">Kunming Xinxiaoling Human Resources Co., Ltd.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c480" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DueToRelatedPartiesCurrentAndNoncurrent" scale="3" unitRef="usd">277</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left"><ix:nonNumeric contextRef="c481" name="us-gaap:NatureOfCommonOwnershipOrManagementControlRelationships">Controlled by the same shareholder</ix:nonNumeric></td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left"><ix:nonNumeric contextRef="c481" name="fhs:RelatedPartyNote">Loan receivables*, interest free and payment on demand.</ix:nonNumeric></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="vertical-align: top; padding-left: 0.125in; text-indent: -0.125in; text-align: left">Mengzi Long-Spring Experimental Secondary School</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c482" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DueToRelatedPartiesCurrentAndNoncurrent" scale="3" unitRef="usd">331</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left"><ix:nonNumeric contextRef="c483" name="us-gaap:NatureOfCommonOwnershipOrManagementControlRelationships">Cooperative education projects</ix:nonNumeric></td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left"><ix:nonNumeric contextRef="c483" name="fhs:RelatedPartyNote">Loan receivables*, interest free and payment on demand.</ix:nonNumeric></td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="vertical-align: top; padding-left: 0.125in; text-indent: -0.125in; text-align: left">Shaanxi Long-Spring Enterprise Management Consulting Partnership (Limited Partnership)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c484" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DueToRelatedPartiesCurrentAndNoncurrent" scale="3" unitRef="usd">10</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left"><ix:nonNumeric contextRef="c485" name="us-gaap:NatureOfCommonOwnershipOrManagementControlRelationships">Controlled by the same shareholder</ix:nonNumeric></td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left"><ix:nonNumeric contextRef="c485" name="fhs:RelatedPartyNote">Loan receivables*, interest free and payment on demand.</ix:nonNumeric></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-left: 0.125in; text-indent: -0.125in; vertical-align: top">Campus Reserve Fund</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c486" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DueToRelatedPartiesCurrentAndNoncurrent" scale="3" unitRef="usd">12,123</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left; vertical-align: top"><ix:nonNumeric contextRef="c487" name="us-gaap:NatureOfCommonOwnershipOrManagementControlRelationships">Management</ix:nonNumeric></td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left"><ix:nonNumeric contextRef="c487" name="fhs:RelatedPartyNote">Loan receivables*, interest free and payment on demand.</ix:nonNumeric></td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="vertical-align: top; padding-left: 0.125in; text-indent: -0.125in; text-align: left">Zunyi Huichuan Long-Spring Jincheng Education Consulting Co., Ltd.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c488" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DueToRelatedPartiesCurrentAndNoncurrent" scale="3" unitRef="usd">1,976</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left"><ix:nonNumeric contextRef="c489" name="us-gaap:NatureOfCommonOwnershipOrManagementControlRelationships">Controlled by the same shareholder</ix:nonNumeric></td><td>&#160;</td>
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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"></p><div>

</div><!-- Field: Page; Sequence: 176 --><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">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->47<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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-top: 0pt; margin-bottom: 0pt; text-align: center"><b>FIRST HIGH-SCHOOL EDUCATION
GROUP CO., LTD.</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">(In thousands of RMB, except share data and per
share data, or otherwise noted)</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_6" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">As of December 31, 2021, the amounts due to the related parties
were consisted of the followings:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&#160;</p></ix:continuation><div>

</div><div>

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</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 0pt 0.25in">As of December 31, 2021, the amounts due from the related
parties were consisted of the followings:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

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

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

</div><ix:nonNumeric contextRef="c0" continuedAt="_ScheduleOfDividendPaymentRestrictionsTextBlock-c0_cont_1" escape="true" name="us-gaap:ScheduleOfDividendPaymentRestrictionsTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>22</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>DIVIDEND
PAYABLES</b></span></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p></ix:nonNumeric><div>

</div><div>



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

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The remaining dividend will be paid in October 2023.</p></ix:continuation><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 2pt 0pt 0">&#160;</p><div>


</div><!-- Field: Page; Sequence: 177 --><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">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->48<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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>FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.</b></p><div>

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

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(In thousands of RMB, except share data and per share data, or otherwise noted)</p><div>

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

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<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><b>23</b></td><td style="text-align: justify"><b>SUBSEQUENT EVENTS</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation id="_ScheduleOfSubsequentEventsTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 20pt 0pt 0.25in">The Company has evaluated subsequent events through the
date of the issuance of the consolidated financial statements and no subsequent event is identified.</p></ix:continuation><div>

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

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<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><b>24</b></td><td style="text-align: justify"><b>RESTRICTED NET ASSETS</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_RestrictedAssetsDisclosureTextBlock-c0_cont_2" id="_RestrictedAssetsDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 3pt 0pt 0.25in">The Group&#8217;s ability to pay dividends is primarily
dependent on the Group receiving distributions of funds from its subsidiaries and VIEs. Relevant PRC statutory laws and regulations permit
payments of dividends by the Group&#8217;s subsidiaries and VIEs incorporated in the PRC only out of their retained earnings, if any,
as determined in accordance with PRC accounting standards and regulations. The results of operations reflected in the financial statements
prepared in accordance with US GAAP differ from those reflected in the statutory financial statements of the Group&#8217;s subsidiaries
and VIEs.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_RestrictedAssetsDisclosureTextBlock-c0_cont_3" id="_RestrictedAssetsDisclosureTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">In accordance with the PRC laws and regulations, statutory
reserve funds shall be made and can only be used for specific purposes and are not distributable as cash dividends. As a result of these
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</div><div>

</div><ix:continuation id="_RestrictedAssetsDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 28pt 0pt 0.25in">As of December 31, 2022, the total restricted net assets
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>25</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>CONDENSED
FINANCIAL STATEMENTS OF THE COMPANY</b></span></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock-c0_cont_2" id="_CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 22pt 0pt 0.25in">The Company performed a test on the restricted net assets
of its consolidated subsidiaries and VIEs (the &#8220;restricted net assets&#8221;) in accordance with Securities and Exchange Commission
Regulation S-X Rule 4-08 (e) (3), &#8220;General Notes to Financial Statements&#8221; and concluded that it was applicable to disclose
the condensed financial information of the Company.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

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


</div><!-- Field: Page; Sequence: 178 --><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">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->49<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><a href="#toc_001">Table of Contents</a></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>FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.</b></p><div>

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

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(In thousands of RMB, except share data and per
share data, or otherwise noted)</p><div>

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

</div><ix:continuation continuedAt="_CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock-c0_cont_3" id="_CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5pt 0pt 0.25in">The following condensed financial statements of the Company
have been prepared using the same accounting policies as set out in the Company&#8217;s consolidated financial statements except that
the Company used the equity method to account for its investment in its subsidiaries and VIEs. Such investment is presented on the separate
condensed balance sheets of the Company as &#8220;Investments in subsidiaries and VIEs&#8221;. The Company, its subsidiaries and VIEs
were included in the consolidated financial statements whereby the inter-company balances and transactions were eliminated upon consolidation.
The Company&#8217;s share of income/ (loss) from its subsidiaries and VIEs is reported as share of income/ (loss) from subsidiaries and
VIEs in the condensed financial statements. Certain information and footnote disclosures generally included in financial statements prepared
in accordance with US GAAP have been condensed and omitted.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock-c0_cont_4" id="_CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5pt 0pt 0.25in">As of December 31, 2022, there were no material commitments
or contingencies, significant provisions for&#160;long-term obligations or guarantees of the Company, except for those which have been separately
disclosed in the consolidated financial statements, if any.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock-c0_cont_5" id="_CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock-c0_cont_4"><p style="font: bold 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">Condensed Balance Sheets</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0">&#160;</p></ix:continuation><div>



</div><div>

</div><ix:continuation continuedAt="_CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock-c0_cont_6" id="_CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock-c0_cont_5"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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</div><p style="font: bold 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>




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</div><p style="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">F-50</p><div>

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

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
20-F
(Mark One)
☐
REGISTRATION
STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☒
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
December
31
,
2022
OR
☐
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☐
SHELL
COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report
For the transition period from              to
Commission file number:
001-40150
First High-School Education Group Co., Ltd.
(Exact Name of Registrant as specified in its charter)
N/A
(Translation of Registrant's name into English)
Cayman Islands
(Jurisdiction of incorporation or organization)
No. 1-1, Tiyuan Road, Xishan District
,
Kunming
, Yunnan Province
650228
,
People's Republic of
China
(Address of principal executive offices)
Tommy Zhou, Chief Financial Officer
Telephone:
+86
-
10-62555966
E-mail:
tommyzhou@dygz.com
No. 1-1, Tiyuan Road, Xishan District
,
Kunming
, Yunnan Province
650228
,
People's Republic of
China
(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.
None
(Title of Class)
Securities registered or to be registered pursuant to Section
12(g) of the Act.
Title of each class
Trading Symbol
American depositary shares, each representing three Class A ordinary shares, par value US$0.00001 per share
FHSEY
Class A ordinary shares, par value US$0.00001 per share
*
N/A
*
Not for trading, but only in connection with the quoting
of the American depositary shares on the
OTC market
.
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:
Class A ordinary shares, par value US$0.00001 each
54,577,170
were outstanding as of March 31, 2023
Class B ordinary shares, par value US$0.00001 each
32,261,530
were outstanding as of March 31, 2023
Indicate by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act. Yes
☐
No
☒
If this report is an annual or transition report, indicate by check
mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.  
Yes
☐
No
☒
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes
☒
No
☐
Indicate by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
☒
No
☐
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of "large accelerated filer,"
"accelerated filer" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
Accelerated filer
☐
Non-accelerated filer
☒
Emerging growth company
☒
If an emerging growth company that prepares its financial statements
in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.
☐
†The term "new or revised financial accounting standard"
refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on
and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section
404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
☐
If securities are registered pursuant to Section 12(b) of the Act,
indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to
previously issued financial statements.
☐
Indicate by check mark whether any of those error corrections are restatements
that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during
the relevant recovery period pursuant to §240.10D-1(b).
☐
Indicate by check mark which basis of accounting the registrant has
used to prepare the financial statements included in this filing:
U.S. GAAP
☒
International Financial Reporting Standards as issued by the International Accounting Standards Board
☐
Other
☐
If "Other" has been checked in response to the previous
question, indicate by check mark which financial statement item the registrant has elected to follow.   Item 17
☐
Item 18
☐
If this is an annual report, indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
☐
No
☒
(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
TABLE OF CONTENTS
INTRODUCTION
ii
FORWARD-LOOKING STATEMENTS
v
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
47
ITEM 4A. UNRESOLVED STAFF COMMENTS
72
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
73
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
94
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
101
ITEM 8. FINANCIAL INFORMATION
104
ITEM 9. THE OFFER AND LISTING
106
ITEM 10. ADDITIONAL INFORMATION
106
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
113
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
115
PART II
116
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
116
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
116
ITEM 15. CONTROLS AND PROCEDURES
116
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
118
ITEM 16B. CODE OF ETHICS
118
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
118
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
118
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
118
ITEM 16F. CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT
119
ITEM 16G. CORPORATE GOVERNANCE
119
ITEM 16H. MINE SAFETY DISCLOSURE
119
ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
119
ITEM 16J INSIDER TRADING POLICIES
119
PART III
120
ITEM 17. FINANCIAL STATEMENTS
120
ITEM 18. FINANCIAL STATEMENTS
120
ITEM 19.EXHIBITS
120
i
Table of Contents
INTRODUCTION
Unless we indicate otherwise and for the purpose
of this annual report only:
●
"ADRs" refers to
the American depositary receipts which, if issued, evidence the ADSs;
●
"ADSs" refers to
American depositary shares, each of which represents three Class A ordinary shares;
●
"Affected Entities"
refers to the middle schools that are affected by the Implementation Rules, and entities holding such middle school institutions or middle
school programs, which are listed in "Item 4. Information on the Company—C. Organizational Structure";
●
"affiliated entities"
refers to the entities that First High-School Education Group Co., Ltd. controls and consolidates through contractual arrangements, as
the context requires, including, collectively, Long-Spring Education Holding Group Limited, or Long-Spring Education, its subsidiaries
and our schools;
●
"CAGR" refers to
compound annual growth rate;
●
"China" or "PRC"
refers to the People's Republic of China, excluding, for the purpose of this annual report only, Taiwan and the special administrative
regions of Hong Kong and Macau;
●
"Class A ordinary shares"
refers to our Class A ordinary shares, par value US$0.00001 per share;
●
"Class B ordinary shares"
refers to our Class B ordinary shares, par value US$0.00001 per share;
●
"Double First Class University
Plan" refers to a tertiary education development initiative designed by the PRC government in 2015, which aims to comprehensively
develop elite Chinese universities into world-class institutions by the end of 2050 through developing and strengthening their individual
faculty departments;
●
"first-tier universities"
refers to the first batch of universities that enroll students after Gaokao. First-tier universities generally have stronger comprehensive
strengths, such as school facilities, academic resources and research capabilities, among other things, and frequently gain special support
from the PRC central and local governments. To be admitted into a first-tier university, interested high school graduates must achieve
certain high scores set by the relevant PRC provincial education authorities and select such university in their general university applications;
●
"Gaokao" refers
to the university entrance examinations administered in China;
●
"Gaokao repeaters"
refers to the high school graduates who fail to achieve satisfying results in Gaokao or be admitted to the universities of their choosing,
and elect to repeat the last year of high school and retake Gaokao in the following year;
●
"high school(s)"
refers to, for the purpose of this annual report, high school institutions or high school programs provided in our schools;
●
"Implementation Rules"
refers to the Implementation Rules for Private Education Laws, which was issued by the PRC State Council on May 14, 2021 and became effective
on September 1, 2021;
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●
"middle school(s)"
refer to, for the purpose of this annual report, middle school institutions or middle school programs provided in our schools that also
provide high school programs;
●
"ordinary shares"
refers to our ordinary shares, par value US$0.00001 per share and our Class A ordinary shares and Class B ordinary shares, par value
US$0.00001 per share;
●
"our schools" refers
to Kunming Xishan Long-Spring Experimental Secondary School (
formerly known as
Resort District
Hengshui Experimental Secondary School), Kunming Chenggong Long-Spring Experimental Secondary School (formerly known as Yunnan Hengshui
Chenggong Experimental Secondary School), Yiliang Long-Spring Experimental Secondary School (formerly known as Yunnan Hengshui Yiliang
Experimental Secondary School), Yunnan Hengshui Experimental Secondary School—Xishan School, Qujing Hengshui Experimental Secondary
School, Yunnan Yuxi Hengshui Experimental High School, Yunnan Long-Spring Foreign Language Secondary School, Xinping Long-Spring Advanced
Secondary School (formerly known as Xinping Hengshui Experimental High School), Xishuangbanna Long-Spring Experimental Secondary School
(formerly known as Xishuangbanna Hengshui Experimental High School), Qiubei Long-Spring Experimental Secondary School (formerly known
as Yunnan Hengshui Qiubei Experimental High School), Wenshan Long-Spring Experimental Secondary School (formerly known as Yunnan Hengshui
Wenshan Experimental High School), Zhenxiong Long-Spring Advanced Secondary School (formerly known as Yunnan Hengshui Zhenxiong High
School), Mengla Long-Spring Experimental Secondary School (formerly known as Mengla Hengshui Experimental High School), Hengshizhong
Education Tutorial School, Guizhou Zunyi Tutorial School, Shaanxi Hengshi Tutorial School, Xinping Hengshui Experimental Middle School,
and Shaanxi Hengshui Experimental Middle School, unless otherwise specified, before the deconsolidation of the Affected Entities, and
Kunming Xishan Long-Spring Experimental Secondary School, Kunming Chenggong Long-Spring Experimental Secondary School, Yiliang Long-Spring
Experimental Secondary School, Yunnan Hengshui Experimental Secondary School—Xishan School, Qujing Hengshui Experimental Secondary
School, Yunnan Yuxi Hengshui Experimental High School, Yunnan Long-Spring Foreign Language Secondary School, Xinping Long-Spring Advanced
Secondary School, Xishuangbanna Long-Spring Experimental Secondary School, Qiubei Long-Spring Experimental Secondary School, Wenshan
Long-Spring Experimental Secondary School, Zhenxiong Long-Spring Advanced Secondary School, Mengla Long-Spring Experimental Secondary
School, Hengshizhong Education Tutorial School, Guizhou Zunyi Tutorial School, and Shaanxi Hengshi Tutorial School, unless otherwise
specified, after the deconsolidation of the Affected Entities, as the context requires;
●
"RMB" or "Renminbi"
refers to the legal currency of China;
●
"tutorial school(s)"
refers to, for the purpose of this annual report, tutorial school programs for Gaokao repeaters, unless otherwise specified;
●
"US$," "U.S.
dollars," "$" or "dollars" refers to the legal currency of the United States of America;
●
"VIE" refers to
Long-Spring Education Holding Group Limited;
●
"Western China"
refers to Sichuan, Guizhou, Yunnan, Shaanxi, Gansu and Qinghai provinces, Inner Mongolia Autonomous Region, Tibet Autonomous Region,
Xinjiang Autonomous Region and Ningxia Autonomous Region and Chongqing municipality;
●
"we," "us,"
"our" or "our company" refers to First High-School Education Group Co., Ltd., its subsidiaries and its affiliated
entities; and
●
"Zhongkao" refers
to the high school entrance examinations administered in China.
We have made rounding adjustments to reach some
of the figures included in this annual report. Consequently, numerical figures shown as totals in some tables may not be arithmetic aggregations
of the figures that precede them.
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First High-School Education Group Co., Ltd., our
ultimate Cayman Islands holding company, does not have any substantive operations other than indirectly controlling Long-Spring Education,
the VIE which controls and holds our schools, collectively as the affiliated entities, through certain contractual arrangements. Investors
in the ADSs are purchasing equity securities of our ultimate Cayman Islands holding company rather than purchasing equity securities of
the affiliated entities. We conduct our business operations through both our subsidiaries and the affiliated entities, which we effectively
control through certain contractual arrangements. We, together with the affiliated entities, are subject to PRC laws relating to, among
others, restrictions over foreign investments in education services set out in the Negative List (2021 Version) promulgated by the Ministry
of Commerce ("MOFCOM"), and the National Development and Reform Commission ("NDRC"). As a result, we have to control
over the affiliated entities through contractual arrangements. The VIE structure is used to replicate foreign investment in China-based
companies where the PRC law prohibits direct foreign investment in the operating companies. Neither we nor our subsidiaries own any share
in the affiliated entities. Instead, we control and receive the economic benefits of the affiliated entities' business operation
through a series of contractual agreements with the affiliated entities. The contractual agreements with the affiliated entities are designed
to provide Yunnan Century Long-Spring Technology Co., Ltd. ("Yunnan WFOE") with the power, rights, and obligations equivalent
in all material respects to those it would possess as the principal equity holder of the affiliated entities, including absolute control
rights and the rights to the assets, property, and revenue of the affiliated entities. As a result of our direct ownership in Yunnan WFOE
and the contractual agreements with the affiliated entities, we are regarded as the primary beneficiary of the affiliated entities. Because
of our corporate structure, we are subject to risks due to uncertainty of the interpretation and the application of the PRC laws and regulations,
including but not limited to limitation on foreign ownership of private education entities, and regulatory review of oversea listing and
offering of securities of PRC companies through a special purpose vehicle, and the validity and enforcement of the contractual agreements.
We are also subject to the risks of uncertainty about any future actions of the PRC government in this regard. Our contractual agreements
may not be effective in providing control over the affiliated entities. We may also subject to sanctions imposed by PRC regulatory agencies
including Chinese Securities Regulatory Commission if we fail to comply with their rules and regulations.
We and the affiliated entities face various legal
and operational risks and uncertainties related to being based in and having significant operations in China. The PRC government has significant
authority to exert influence on the ability of a China-based company, such as us and the affiliated entities, to conduct its business,
accept foreign investments. For example, we and the affiliated entities face risks associated with regulatory approvals of offshore offerings,
oversight on cybersecurity and data privacy. Such risks could result in a material change in our operations and/or the value of the ADSs
or could significantly limit or completely hinder our ability to offer ADSs and/or other securities to investors and cause the value of
such securities to significantly decline or be worthless. The PRC government also has significant discretion over the conduct of the business
of us and the affiliated entities and may intervene with or influence our operations or the development of the private education industry
as it deems appropriate to further regulatory, political and societal goals. Furthermore, the PRC government has recently indicated an
intent to exert more oversight and control over overseas securities offerings and foreign investment in China-based companies like us.
Any such action, once taken by the PRC government, could significantly limit or completely hinder our ability to offer securities to investors
and cause the value of such securities to significantly decline or in extreme cases, become worthless. For relevant risks, see "Item
3. Key Information—D. Risk Factors—Risks Related to Doing Business in China."
Our financial statements contained in the annual
report on Form 20-F for the years ended December 31, 2020, 2021 and 2022 have been audited by an independent registered public accounting
firm that is headquartered in Singapore and has been inspected by the Public Company Accounting Oversight Board (United States) ("PCAOB")
on a regular basis, which was not included in the list of PCAOB Identified Firms of having been unable to be inspected or investigated
completely by the PCAOB in the PCAOB Determination Report issued in December 2021. We have not been identified by the U.S. Securities
and Exchange Commission (the "SEC") as a non-inspection registrant under the Holding Foreign Company Accountable Act (the
"HFCAA"), as of the date of this annual report.
Additionally, in August 2022, the China
Securities Regulatory Commission (the "CSRC"), the Ministry of Finance of the PRC
(the "MOF")
and
the PCAOB signed a Statement of Protocol (the "Statement of Protocol"), which establishes a specific and accountable framework
for the PCAOB to conduct inspections and investigations of PCAOB-governed accounting firms in mainland China and Hong Kong. On December
15, 2022, the PCAOB announced that it was able to secure complete access to inspect and investigate PCAOB-registered public accounting
firms headquartered in mainland China and Hong Kong completely in 2022. The PCAOB Board vacated its previous 2021 determinations that
the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong
Kong.
However, should PRC authorities obstruct or otherwise fail to facilitate the PCAOB's access in the future, the PCAOB
Board will consider the need to issue a new determination. In the event that future regulators in China take steps to restrict the audit
firm's access to working papers in mainland China or Hong Kong, or if the PCAOB is unable to fully inspect our audit working papers,
or if the PCAOB expands the scope of its determination so that we are subject to the HFCAA, it could restrict or limit our access to the
U.S. capital markets or in the over-the-counter trading market in the United States may be prohibited under the HFCAA. If, in the future,
we have been identified by the SEC for two consecutive years as a non-inspection registrant whose registered public accounting firm is
determined by the PCAOB that it is unable to inspect or investigate completely because of a position taken by one or more authorities
in China, the SEC may prohibit our shares or ADSs from being traded on a national securities exchange or in the over the counter trading
market in the United States. For more details about the risk on the HFCAA and its impact on us, see "Item 3. Key Information—D.
Risk Factors—Risks Related to Doing Business in China—Our shares and ADSs will be prohibited from trading in the OTC market
under the Holding Foreign Companies Accountable Act, if the PCAOB is unable to inspect or investigate completely our auditors for two
consecutive years. The cessation of trading of our ordinary shares, or the threat of their being prohibited from being traded, may materially
and adversely affect the value of your investment."
Our reporting currency is Renminbi. This annual
report contains translations of certain foreign currency amounts into U.S. dollars for the convenience of the reader. Unless otherwise
stated, all translations of Renminbi into U.S. dollars were made at RMB6.8972 to US$1.00, the noon buying rate on December 30, 2022 as
set forth in the H.10 statistical release of the U.S. Federal Reserve Board. We make no representation that the Renminbi or U.S. dollar
amounts referred to in this annual report could have been or could be converted into U.S. dollars or Renminbi at any particular rate or
at all.
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FORWARD-LOOKING STATEMENTS
This annual report contains forward-looking statements
about our current expectations and views of future events. These forward looking statements are made under the "safe-harbor"
provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements relate to events that involve known and unknown
risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from
those expressed or implied by these statements.
You can identify some of these forward-looking
statements by words or phrases such as "may," "will," "could," "expect," "anticipate,"
"aim," "estimate," "intend," "plan," "believe," "is/are likely to,"
"propose," "potential," "should," "continue" or other similar expressions. We have based
these forward-looking statements largely on our current expectations and projections about future events and financial trends that we
believe may affect our financial condition, results of operations, business strategy and financial needs. The forward-looking statements
included in this annual report relate to, among other things:
●
our mission, goals and strategies;
●
our ability to retain and grow
customer base;
●
our future business development,
financial condition and results of operations;
●
expected changes in our revenue,
costs or expenditures;
●
our ability to manage and expand
the sales network and other aspects of our operations;
●
our projected markets and growth
in markets;
●
our potential need for additional
capital and the availability of such capital;
●
competition in our industry;
●
relevant government policies
and regulations relating to our industry;
●
general economic and business
conditions globally and in China; and
●
assumptions underlying or related
to any of the foregoing.
You should read this annual report and the documents
that we refer to in this annual report completely and with the understanding that our actual future results may be materially different
from and worse than what we expect. Moreover, new risk factors and uncertainties emerge from time to time and it is not possible for our
management to predict all risk factors and uncertainties, 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 qualify all of our forward-looking statements by these cautionary statements.
This annual report also contains certain data
and information that we obtained from various government and private publications. Statistical data in these publications include projections
based on a number of assumptions. Failure of the market to grow at the projected rate may have a material adverse effect on our business
and the market price of the ADSs. In addition, projections or estimates about our business and financial prospects involve significant
risks and uncertainties. Furthermore, if any one or more of the assumptions underlying the market data are later found to be incorrect,
actual results may differ from the projections based on these assumptions. You should not place undue reliance on these forward-looking
statements.
The forward-looking statements made in this annual
report relate only to events or information as of the date on which the statements are made in this annual report. Except as required
by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information,
future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. Comparisons
of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless
specifically expressed as such, and should only be viewed as historical data.
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PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
A.
[Reserved]
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
Summary Risk Factors
Our business is subject to a number of risks,
including risks that may prevent us from achieving our business objectives or may adversely affect our business, financial condition,
results of operations, cash flows, and prospects. These risks are discussed more fully below and include, but are not limited to, risks
related to:
Risks related to our business and industry
●
our efforts to be in compliance
with the Implementation Rules materially and adversely affecting our business, financial condition, results of operations and prospect
in the future;
●
our limited operating history,
which makes it difficult to predict our prospects and our business and financial performance;
●
potential contractual disputes
in relation to the sponsorship in the schools that local governments may claim to have sponsor interests, which could cause us to lose
control of the affected schools if any such contractual dispute were to judicially determined against us;
●
new legislation or proposed
changes in the PRC regulatory requirements regarding private education, which may cast doubt on the legality of our contractual arrangements
and our revenue derived from the running of schools pursuant to our contractual arrangements;
●
our ability to execute our
growth strategies, continue to grow rapidly or manage our growth effectively, which may negatively affect our prospects and our business
and financial performance;
●
our ability to charge tuition
and boarding fees at sufficient levels to be profitable or increase our fee level, which may negatively affect our profitability;
●
our ability to enroll and retain
a sufficient number of students, which may negatively affect our profitability;
●
potential unfavorable changes
in our cooperative relationships with local governments or favorable government policy treatment, which could negatively affect our current
business model and/or result in disputes with the relevant local governments;
●
our ability to obtain all required
approvals, licenses and make all required registrations for our education services and business operations, which could subject us to
fines and penalties and order to cease operation in the case of non-compliance;
●
our ability to integrate businesses
we acquired or plan to acquire in the future, which may negatively affect our expansion;
●
our ability to attract and
retain a sufficient number of qualified teachers and principals, which could negatively affect our business if we experience a shortage
of high-quality teachers and principals;
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●
our ability to maintain the
market recognition of our brand and our reputation; and
●
accidents, injuries or other
harm at our school premises or otherwise arising from or in connection with our education services, which could subject us to tort liabilities.
Risks related to our corporate structure
●
compliance of the contractual
arrangements that establish our corporate structure for operating our business, which could subject us to penalties if the PRC government
finds that our corporate structure and contractual arrangements does not comply with applicable PRC laws and regulations;
●
uncertainties in the interpretation
of newly issued rules, regulatory actions and statements related to VIE and private schools, under which we may be unable to assert our
contractual rights over the assets of the affiliated entities;
●
failure by the VIE or its shareholders
to perform their obligations under our contractual arrangements with them, which could force us to rely on legal remedies under PRC laws
to enforce the contractual arrangements, which may not be effective;
●
uncertainties with respect
to the interpretation and implementation of the newly enacted Foreign Investment Law and its impact on the viability of our current corporate
structure, which could require us to take additional actions with respect to, or modify or unwind, our current contractual arrangements
to the extent required by any unfavorable interpretation or implementation; and
●
actual or potential conflicts
of interest of shareholders of the VIE with us, which could cause such shareholders not to act in the best interests of our company.
Risks related to doing business in China
●
changes in China's economic,
political or social conditions or government policies, laws and regulations, which could adversely affect the education services market
and harm our business;
●
uncertainties with respect
to the PRC legal system, which may affect our decisions on the policies and actions to be taken to comply with PRC laws and regulations;
●
any actions by the Chinese
government may cause us to make material changes to the operation of our PRC subsidiaries or the affiliated entities;
●
significant uncertainties in
the application and interpretation of the Law on Promoting Private Education, the Implementation Rules and their detailed implementation
rules and regulations;
●
increased regulatory scrutiny
focus on U.S.-listed companies with operations in China, which could add uncertainties to our business operations, share price and reputation;
and
●
difficulty for overseas regulators
to conduct investigations or collect evidence within China, which could increase difficulties you face in protecting your interests.
Risks related to the ADS
●
delisting of our ADSs from
NYSE, which may continue to have a material adverse effect on the trading and price of our ADSs;
●
volatility of the trading price
of the ADSs;
●
the sale or availability for
sale of substantial amounts of the ADSs; and
●
impact of our dual-class share
structure on the ability of holders of our Class A ordinary shares and ADSs to influence corporate matters, which, among other things,
will limit your ability to influence corporate matters and could discourage others from pursuing any favorable change of control transactions.
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Risks Related to Our Business and Industry
Our efforts to be in compliance with the Implementation Rules
has materially and adversely affected and may continue to materially and adversely affect our business, financial condition, results of
operations and prospect in the future.
On May 14, 2021, the PRC State Council promulgated
the amended Implementation Rules for Private Education Laws (the "Implementation Rules"), which became effective on September
1, 2021. Pursuant to the Implementation Rules, (1) foreign-invested enterprises established in China and social organizations whose actual
controllers are foreign parties shall not sponsor, participate in or actually control private schools that provide compulsory education,
(2) social organizations or individuals shall not control any private school that provides compulsory education or any non-profit private
school that provides pre-school education by means of, among others, merger, acquisition and contractual arrangements, and (3) private
schools providing compulsory education shall not conduct any transaction with any related party, and any other private school conducting
any transaction with any related party shall follow the principles of openness, fairness and impartiality, fix the price reasonably and
regulate the decision-making, and shall not damage the interests of the state and the school or the rights and interests of the teachers
and students, which may impose restrictions on the above-mentioned related party transactions. Such prohibition has significantly affected
the enforceability of the exclusive management services and business cooperation agreements with affiliated entities providing compulsory
education.
The Implementation Rules have had significant
impacts on our business operations and our results of operations. As a result of the effectiveness of the Implementation Rules, we have
lost control over the Affected Entities as from September 1, 2021, which primarily include the middle schools providing compulsory education
and the sponsor entities within China that are affected by the Implementation Rules. Consequently, we classified the operation for the
Affected Entities as discontinued operations. We have determined that, in substance, we had ceased to recognize revenues for all activities
related to the Affected Entities and had discontinued all business activities with such entities by September 1, 2021 except for the continued
provision of essential services to keep these schools in normal operations. Such discontinuation has had a material and adverse impact
on our business, financial condition and results of operations. Our ability to engage in the compulsory education in China has been materially
and adversely affected, and we cannot assure you that we will be able to restore such ability, which could materially and adversely affect
our business, prospects, results of operations and financial condition.
We have limited operating history, which makes it difficult to
predict our prospects and our business and financial performance.
We have a limited operating history of 10 years.
Although our first school established in 2012, the majority of our schools were established in or after 2017. Our limited operating history
may not serve as an adequate basis for evaluating our prospect and results of operations, including revenues, cash flows and operating
margins. We have encountered, and may continue to encounter in the future, risks, challenges and uncertainties associated with operating
a private education business, such as addressing regulatory compliance and uncertainty, engaging, training and retaining high-quality
teachers, and expanding our school network. If we do not manage these risks successfully, our operating and financial results may differ
materially from our expectations and our business and financial performance may suffer.
In addition, as some of our schools commenced
operations recently, they have not yet reached their full capacity. For newly established schools, we only admit students for the entry
classes, such as the tenth grade for high schools, but not higher grades, upon the establishment of a new school, which leads to a relatively
lower utilization rate for such schools. With our existing students progressing into the next grades in school and as we fill up new entry
classes, the utilization rates of our newly established schools will increase accordingly. We cannot assure you that we will be able to
successfully increase the utilization rate for the schools that are in the ramp-up stage, which may materially and adversely affect our
business growth and profitability.
If local governments claim to have sponsor interests in certain
of our schools, we could be subject to contractual disputes in relation to the sponsorship in those schools or the entry into contractual
arrangements over those schools.
We primarily collaborate with local governments
to establish and operate our schools. The cooperative arrangements for a total of 15 schools provide that the local governments retain
ownership in the affected schools' "ownership assets" without defining what constitutes such assets. It is possible
that "ownership assets" could be interpreted in a way to include sponsor interest, in which case, the local governments may
have a claim over the sponsor interest in the affected schools. We have obtained written statements from local governments for all of
the seven schools confirming our understanding that "ownership assets" refer to real estate and tangible assets that local
governments provided.
In addition, the school operation permits for
Yunnan Hengshui Experimental Secondary School—Xishan School and Yunnan Yuxi Hengshui Experimental High School provide that the local
governments and Long-Spring Education are co-sponsors of such schools. We have obtained written statements for Yunnan Hengshui Experimental
Secondary School—Xishan School and Yunnan Yuxi Hengshui Experimental High School from the local governments confirming our understanding
that the sponsor interests of such schools belong to Long-Spring Education. As of the date of this annual report, we are in the process
of amending these permits to designate Long-Spring Education as the sole sponsor.
Furthermore, according to the list released by
People's Government of Xishan District on March 30, 2022 and our recent communication with such government authority, Yunnan Hengshui
Experimental Secondary School—Xishan School may be turned into a public school upon further determination. As of the date of this
annual report, we are in the process of communicating with the competent authorities on such matter.
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To the extent that any local government has a
claim over the sponsor interest in or control over any of our schools, we could be subject to contractual disputes. For example, the government
claimants could argue that they have de facto sponsor interest in the affected schools per our cooperative arrangements and that the entry
into the contractual arrangements in relation to the affected schools have infringed their interests. If the government claimants successfully
persuaded the court to rule in their favor, we could lose control over the affected schools and may be unable to receive the full rights
and economic benefits of any or all of those schools, in which case we would no longer be able to include the operating results of those
schools in our consolidated financial statements, which in turn would materially and adversely affect business, results of operation and
financial condition.
Uncertainties exist in relation to new legislation or proposed
changes in the PRC regulatory requirements regarding private education, which may materially and adversely affect our group structure,
our business, financial condition and results of operation.
Pursuant to the Law on Promoting Private Education of the PRC (the
"Private Education Law"), last amended and becoming effective on December 29, 2018, sponsors of private schools may choose
to establish schools in China as either non-profit or for-profit schools. Sponsors are not permitted to establish for-profit schools that
provide compulsory education services, which cover grades one to nine. Sponsors of for-profit private schools are entitled to retain the
profits from their schools and the operating surplus may be allocated to the sponsors pursuant to the PRC Company Law and other relevant
laws and regulations. Sponsors of non-profit private schools are not entitled to any distribution of profits from their schools and all
revenues must be used for the operation of the schools. For further details, see "Item 4. Information on the Company—B. Business
Overview—Regulations—Regulations on Private Education in the PRC—The Law on Promoting Private Education." Our
school sponsors have registered Xinping Long-Spring Advanced Secondary School, and Xishuangbanna Long-Spring Experimental Secondary School
as for-profit private schools and have registered Kunming Chenggong Long-Spring Experimental Secondary School, Yiliang Long-Spring Experimental
Secondary School, Qujing Hengshui Experimental Secondary School, Xinping Hengshui Experimental Middle School, Qiubei Long-Spring Experimental
Secondary School, and Wenshan Long-Spring Experimental Secondary School as non-profit private schools, while have not submitted classified
registration materials for the rest of our schools as for-profit or non-profit educational institutions. We cannot assure you that our
current intention to register some of our schools as non-profit educational institutions will not materially and adversely affect our
business, financial condition and results of operations. As a holding company, our ability to generate profits, pay dividends and other
cash distributions to our shareholders under the Private Education Law is affected by many factors, including but not limited to the characterizations
of our schools as for-profit or non-profit schools, the profitability of our schools and other affiliated entities, and our ability to
receive dividends and other distributions from our wholly-owned PRC subsidiary, Yunnan WFOE, which in turn depends on the service fees
paid to Yunnan WFOE from our schools and other affiliated entities. If our schools are unable to be registered as for-profit private education
entities, the approval of which is subject to the discretion of government authorities, our contractual arrangements with such schools
may be subject to more stringent scrutiny. Furthermore, pursuant to the Private Education Law, sponsors are not permitted to establish
for-profit schools if such schools provide compulsory education services, which cover grades one to nine. Nevertheless, during the reporting
period, compulsory education services accounted for a significant portion of our student base as well as revenue.
In addition, the Opinions on Further Strengthening
and Regulating the Administration of Education Fees (the "Opinions"), which were issued on August 17, 2020 by the MOE, the
National Development and Reform Commission, the Ministry of Finance, the State Administration of Market Regulation and the National Press
and Publication Administration, reiterate the provision from the decision that the sponsors of non-profit privately-run schools may not
obtain proceeds from the running of schools. The Opinions further provide that the sponsors of non-profit privately-run schools and non-profit
Sino-foreign cooperative educators may not obtain proceeds from the running of schools such as tuition income, distributing school balances
(residual assets) or transferring proceeds from the running of schools through related-party transactions or affiliated parties or other
means. The Opinions have not specified (1) whether the contractual arrangements fall within the activities of transferring the proceeds
from the running of schools through profit privately-run schools and non-profit Sino-foreign cooperative educators may not obtain proceeds
from the running of schools such as tuition income, distributing school balances (residual assets) or transferring proceeds from the running
of schools through related-party transactions or affiliated parties or other means, (2) the relevant legal consequences of engaging in
activities through contractual arrangements, or (3) the scope of proceeds from the running of schools by listing other possible income
sources such as meal and accommodation services.
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We are entitled to the tuition and boarding fees
to be paid by our schools that are largely derived from the proceeds from the running of schools pursuant to our contractual arrangements.
See "Item 4. Information on the Company—C. Organizational Structure—Our Contractual Arrangements." If any law
and regulation that may be promulgated in the future further defines the contractual arrangements, including ours, as related-party transactions
transferring proceeds from the running of schools, we may not obtain the part of the tuition and boarding fees under our contractual arrangements
that is funded by proceeds from the running of schools. As advised by our PRC legal counsel, Beijing Zhongwen Law Firm, the Opinions do
not affect the legality of our contractual arrangements in accordance with applicable PRC laws and regulations, as the provisions under
the Opinions did not render the contractual arrangements invalid under the Civil Code of the PRC. As of the date of this annual report,
however, we have not sought declaration from the relevant government authorities as to the legality of our contractual agreements under
the Opinions, and we are not aware of any official administrative or judicial declaration on, or interpretation of, the Opinions, especially
as applied to contractual or other similar arrangements under which we operate. We are also not aware of when official administrative
or judicial declaration or interpretation on that matter will be released, if at all, and we cannot assure you that the Opinions will
not be interpreted, or further laws and regulations will not be promulgated, in a way that would affect or impair our ability to retain
the tuition and boarding fees under the contractual arrangements in the future. Our business, financial condition and results of operations
would be materially and adversely affected if we are unable to obtain any or all of the tuition and boarding fees to be paid by our schools
under the contractual arrangements.
We may not be able to execute our growth strategies, continue
to grow rapidly or manage our growth effectively.
We have experienced steady growth and expansion
since the establishment of our first secondary school in 2014. We plan to continue to expand our operations in different geographic locations
in China primarily by (1) entering into partnerships with local governments and independent third parties; (2) establishing new self-owned
schools; and (3) acquiring additional schools if there are suitable targets.
However, we may not be able to continue to grow
as we did in the past due to uncertainties involved in the process as follows:
●
we may not be able to attract
and retain a sufficient number of students for our existing and new schools;
●
we may not be able to hire,
retain and train qualified teachers, and attract and retain management, administrative and marketing personnel for our existing and new
schools;
●
we may be unable to optimize
our student's academic performance as expected;
●
we may be unable to adequately
update our operational, administrative and technological systems and strengthen our financial and management controls to support our
future expansion;
●
we may be unable to keep strengthening
our operational, administrative and technological systems, our financial and management controls;
●
the development and acquisitions
of new schools may be delayed or affected as a result of many factors, such as delays in obtaining government approvals or licenses,
and changes in applicable laws and regulations, some of which are beyond our control;
●
we may not be able to maintain
and enhance our brand name and reputation;
●
we may be unable to successfully
execute new growth strategies; and
●
we may be unable to successfully
integrate entities we have established or acquired into our operations.
These risks may increase significantly as we expand
into new geographical areas. We may find it difficult to manage our financial resources, implement uniform education standard and operational
policies and maintain consistency across our network. There are no guarantees that we will be able to effectively manage any future growth
in an efficient, cost-effective and timely manner, or at all. Our growth in a relatively short period of time is not necessarily indicative
of results that we may achieve in the future. In addition, local governments and cooperative partners may have interests which are
not entirely in line with ours and may consider their own interests or the interests of other stakeholders of schools in making cooperation
decisions, and as a result, we may be unable to execute our expansion plan and growth strategies in a cost-effective or timely manner,
or at all. Any failure in our management and execution of our expansion plan may materially and adversely affect our ability to capitalize
on new business opportunities, which in turn may have a material adverse effect on our business, financial condition and results of operations.
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These risks may increase significantly as we expand
into new geographical areas. We may find it difficult to manage our financial resources, implement uniform education standard and operational
policies and maintain consistency across our network. There are no guarantees that we will be able to effectively manage any future growth
in an efficient, cost-effective and timely manner, or at all. Our growth in a relatively short period of time is not necessarily indicative
of results that we may achieve in the future. In addition, local governments and cooperative partners may have interests which are not
entirely in line with ours and may consider their own interests or the interests of other stakeholders of schools in making cooperation
decisions, and as a result, we may be unable to execute our expansion plan and growth strategies in a cost-effective or timely manner,
or at all. Any failure in our management and execution of our expansion plan may materially and adversely affect our ability to capitalize
on new business opportunities, which in turn may have a material adverse effect on our business, financial condition and results of operations.
We may be unable to charge tuition and boarding fees at sufficient
levels to be profitable or increase our fee level.
Our revenues are primarily driven by our tuition and boarding fees.
For 2020, 2021 and 2022, tuition income accounted for 80.2%, 77.4% and 82.3% of our total revenues, respectively, and our boarding fees
accounted for 5.1%, 5.7% and 2.2% of our total revenues, respectively, for the same periods. Subject to applicable regulatory requirements,
we determine our tuition and boarding fee rates based on many factors, including market supply and demands for our education, our cost
of operations, the quality of education services we provide, the geographic area we operate in, and general economic conditions of the
PRC. Although we have been able to increase the tuition and boarding fees we charge our students at certain schools in the past, we cannot
guarantee that we will be able to maintain or increase our tuition in the future without adversely affecting the demand for our education
services. Our competitive advantage might be adversely affected if we fail to implement the optimal pricing strategy to maintain our profitability,
which could adversely affect our student enrollments and consequently our revenues and cash flow.
As part of our cooperation with local governments,
we admit a certain number of local students on behalf of the government as publicly-sponsored students. These students pay us tuition
typically at the level of public schools, which are usually lower than the normal tuition we charge, and under our cooperative arrangements
with local governments for certain of our schools, we may receive government subsidies to make up for the tuition difference. As of December
31, 2020, 2021 and 2022, the number of publicly-sponsored students in our schools was 6,755, 7,993 and 8,293, respectively, accounting
for 43.2%, 47.1% and 47.8% of our total students for our continuing operations as of the same dates. We have limited discretion in increasing
the tuition for publicly-sponsored students, and the government subsidies have an upper limit which we may gradually use up over a number
of years. We intend to re-negotiate with the local governments to obtain additional government subsidies to cover the tuition difference
for the publicly-sponsored students after we use up the upper limit or our cooperative arrangements with local governments expire. If
our re-negotiation efforts fail, or if we cannot collect the outstanding amount of government subsidies on time, we would be unable to
make up for the price difference for publicly-sponsored students, which would materially and adversely affect our profitability.
The tuition and boarding fees we charge are subject
to regulatory restrictions. While we are not required to obtain pre-approval from relevant authorities before raising our tuition and
boarding fees in Yunnan province, China where most of our schools are located, we are generally required to file and record our price
increase with local governments, who in turn still maintain certain level of control and oversight of our operation. We might also be
inspected by relevant pricing authorities in the future, which could result in negative adjustments in our tuition and boarding fees and
material disruption of our operations.
Furthermore, the tuition we may charge is subject
to a number of other factors, such as the perception of our brand, the academic results achieved by our students, our ability to hire
qualified teachers, and local economic conditions. Any significant deterioration in these factors could have a material adverse effect
on our ability to charge tuition at levels for us to remain profitable.
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If we fail to enroll and retain a sufficient number of students,
our business could be materially and adversely affected.
Our ability to continue to enroll and retain students
for our schools is critical to the continued success and growth of our business. The success of our efforts to enroll and retain students
will depend on several factors, including our ability to:
●
enhance existing education
programs and services to respond to market changes and student demands;
●
develop new programs and services
that appeal to our students and their parents;
●
maintain and enhance our reputation
and brand recognition as a leading school operator;
●
expand our school network and
geographic reach;
●
effectively market our schools
and programs to a broader base of prospective students;
●
manage our growth while maintaining
consistency of our teaching quality;
●
maintain cooperative relationships
with local governments; and
●
respond to increasing competition
in the market.
In addition, local and provincial government authorities
may impose restrictions on the number of students we can enroll. Our business, financial condition and results of operations could be
materially and adversely affected if we cannot maintain or increase our student base as we expand our school network.
Our ability to maintain sufficient cash to fund our operations
depends on our financing activities.
Our ability to maintain sufficient cash to fund
our operations depends on our financing activities. In August 2020 and November 2021, we entered into sale and leaseback arrangements
with certain financing leasing companies for net financing proceeds of RMB93.5 million and RMB50.0 million (US$7.8 million), respectively.
Under the sale and leaseback arrangements, Yunnan WFOE, Long-Spring Education, Yunnan Long-Spring Logistics Service Co., Ltd. and ten
of our schools, or collectively the lessees, sold certain equipment, including computers, projectors and printers, to the lessors. Concurrent
with the sale of the leased equipment, the lessees lease back all of the leased equipment sold to the lessor for a lease term of two or
three years. We consider the substance of the transaction to be debt financing in nature and no gain or loss is recognized upon the sale
of these assets. If the lessees fail to make lease payments in full and timely or there be any material adverse change in our business,
the lessor has the right to immediately collect the total lease payments, request for penalty on late payment, and/or retrieve the leased
equipment. As a result, our ability to maintain sufficient cash to fund our operations could be diminished, which may materially and adversely
affect our business, financial condition and results of operations.
Any unfavorable changes in our cooperative relationships with
third parties or favorable government policy treatment may adversely affect our business.
Our asset-light business model, under which we
form mutually beneficial cooperative arrangements with third parties, including local governments and real estate developers, has allowed
us to grow rapidly and expand with light capital commitments and have more flexibility in our allocation of financial resources. Under
such arrangements, our partners contributed or leased to us land and/or school facilities, and our government partners also granted to
us favorable tax treatments or other forms of favorable government policies or support, while we contributed our expertise in operating
private schools, teachers, as well as operating expenses of the schools and capital expenditures to construct and renovate school facilities.
If our relationship with our partners deteriorates
or favorable government policies and support cease to be available, we may incur substantial amount of expenses in connection with our
infrastructure, promotion, and other matters relating to school establishment and operations, which may materially and adversely affect
our business, financial condition and results of operations. We may also be unable to form cooperative relationship with third parties
in the geographic areas we plan to enter and expand into, which would materially and adversely affect our ability to grow as quickly as
planned or maintain historical growth rates.
The cooperative arrangements for five schools
within our network have provided that the local government has the right to appoint a majority of a school's board of supervisors,
which shall be the supreme decision-making body in school management. As of the date of this annual report, we obtained written statements
from local governments for four of such schools confirming that the school council or board of director should be the decision-making
body for such schools. To the extent any of these local governments changes their view toward our collaborative relationships and claims
to have control in these schools, we could be subject to contractual disputes with the local governments in relation to the management
of such schools.
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We are also required to meet certain academic
performance targets pursuant to the cooperative agreements. If we fail to meet such performance targets, we may be found in breach of
the agreements and be unable to continue our cooperation with the relevant governments, which may materially and adversely affect our
relationship with the relevant governments, as well as our business, financial condition and results of operations. We may also be unable
to enter into similar cooperation agreements with third parties in the future, which may materially and adversely affect our business,
financial condition and results of operations.
We may be unable to obtain all required approvals, licenses and
make all required registrations for our education services and business operations, and may be subject to fines and penalties if the operations
of our business do not comply with applicable PRC laws and regulation.
In order to conduct our business and operate our
schools in China, we are required to obtain and maintain various approvals, licenses and permits and fulfill registration and filing requirements.
For example, to establish and operate a school in the PRC, we are required to obtain a private school operation permit from the local
education bureau and register with the local civil affairs bureau to obtain a certificate of registration for a privately-run non-enterprise
unit for a non-profit school, or register with the local market supervision and administration department to obtain a business license
for a for-profit school. Such local regulatory authorities may also conduct annual inspection of our schools. We currently hold valid
private school operation permits for all of our operating schools except for Shaanxi Hengshi Tutorial School and Shaanxi Hengshui Experimental
Middle School, which are still in the process of obtaining a private school operation permit and registering with the local market supervision
and administration department or the local civil affairs bureau, and Hengshizhong Education Tutorial School for which the private school
operation permit has been cancelled. For such schools which conduct business before we can obtain a private school operation permit, we
may be subject to order to cease our operation, refund the income we collected and a fine ranging from one to five times of the income
the sponsor collected. We cannot guarantee that all of our existing schools will be able to renew their permits, or that all of our newly
opened schools will be able to receive operation permits in a timely manner or at all, which may materially and adversely affect our business
and results of operations.
A total of 14 of our schools have not set up their
own on-site medical clinics, all of such schools are in the process of engaging third-party hospitals and/or medical clinics with valid
practice license to provide healthcare services on campus, and recruiting a sufficient number of medical care personnel. However, we cannot
assure you that we may be able to obtain all relevant practice licenses, retain third-party licensed medical care providers or otherwise
fully comply with the relevant laws and regulations relating to on-site medical clinics at all of our current locations in a timely manner
or at all, and we may be subject to orders to rectify within a specified period of time.
While we intend to obtain all requisite permits,
approvals and complete the necessary filings, renewals and registrations on a timely basis for our schools, there is no assurance that
we will be able to obtain all required permits given the significant amount of discretion the local PRC authorities may have in interpreting,
implementing and enforcing relevant rules and regulations, as well as other factors that are beyond our control and anticipation. If we
fail to receive required permits in a timely manner or obtain or renew any permits and certificates, we may be subject to fines, confiscation
of the gains derived from our non-compliant operations, the suspension of our non-compliant operations or disgorgement of our profits
to compensate for any economic loss suffered by our students or other relevant parties, which may materially and adversely affect our
business and results of operations.
We may not be able to successfully integrate businesses we acquired
or plan to acquire in the future, which may adversely affect our business growth.
We have expanded rapidly primarily through organic
growth. We have, in the past, acquired an underperforming high school and successfully turned it into a high-quality high school with
solid academic results. We may attempt to make similar acquisitions in the future. The integration of acquired schools is complicated
and time-consuming and requires significant resource commitment, standardized integration process, and adequate planning and implementation.
We may not successfully integrate the schools we acquire in a timely manner and may not effectively and efficiently manage our expansion,
which would have a material adverse effect on our financial condition and results of operations. In addition, as advised by our PRC legal
counsel, our plan to pursue further expansion through acquisitions could be affected by regulatory uncertainty in connection with the
Private Education Law and related implementation rules.
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We may be unable to engage with the Affected Entities to provide
education services as we expected.
Following the effectiveness of the Implementation
Rules, we have been engaging with the relevant government authorities and external advisors to seek full compliance with the Implementation
Rules and other applicable PRC laws and regulations. However, we are exploring the possibility of continuing to engage with the Affected
Entities in future cooperation on mutually acceptable terms and in full compliance with the Implementation Rules and other applicable
PRC laws and regulations. The future cooperation may involve our provision of management services to the Affected Entities, such as consultation
for school operation, catering and accommodation, property management and maintenance, administrative management, student admission and
school branding. However, the future cooperation with the Affected Entities, if any, will be arm's length transactions on mutually
acceptable terms, and we cannot assure you that the cooperation under contemplation will be specifically permitted by competent government
authorities or that we will be able to agree on commercial terms satisfactory to us, and as such, we may be unable to effectuate the cooperation
with the Affected Entities as we expect.
We may not be able to attract and retain a sufficient number
of qualified teachers and principals.
As an education service provider, our ability
to recruit and retain qualified teachers and principals is crucial to the quality of our education and services and our brand and reputation.
To ensure our successful operation and growth, we need to retain and continue to hire high-quality teachers specialized in specific subjects
that are able to teach the courses we offer or plan to offer to our students, as well as high-quality principals who are able to effectively
manage the operation of our schools. We must provide competitive compensation and benefits packages to attract and retain qualified candidates.
However, there is no guarantee that we would be able to keep recruiting teachers and principals meeting the high standards in the future,
or retain our current, high-quality teachers and principals, especially when we seek a more rapid expansion plan to meet the growing demands
for our services. Furthermore, under our business model, we may not be able to provide extensive training to our newly hired teachers
for them to familiarize with our teaching methods and to retain existing teachers who can provide such trainings. A shortage of high-quality
teachers and principals, a decrease in the quality of our teachers' and principals' performance, whether actual or perceived,
or a significant increase in the cost to engage or retain high-quality teachers and principals would have a material adverse effect on
our business, financial condition and results of operations.
We may not be able to maintain the market recognition of our
brand and our reputation.
Our success depends heavily on our reputation.
We might face potential difficulties in maintaining our reputation and brand recognition, which could adversely affect our student enrollments
and results of operations. Our ability to maintain our brand and reputation could be affected by many factors, some of which are beyond
our control, including: our ability to deliver satisfactory academic results, the teaching quality of our teachers, the academic quality
and achievements of our students, news report about our company, our schools or our partners, results of government inspections or compliance
with relevant regulations, unauthorized use or other infringement of our copyright and brand by third party, campus incidents, especially
safety incidents, and any kind of disruption of our education services.
We have developed our student base mainly through
word-of-mouth referrals. Our other promotion efforts include participating in education fairs organized by local governments and distributing
relevant promotional materials in connection with such fairs. However, we cannot guarantee that our promotional efforts will be enough
to maintain or enhance our reputation in the marketplace to remain competitive. Our promotional efforts may be insufficient to enhance
our brand recognition and reputation and we may incur excessive expenses for our promotions, which may adversely affect our business.
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Accidents, injuries or other harm at our school premises or otherwise
arising from or in connection with our education services may adversely affect our reputation and subject us to liabilities.
We may be subject to liabilities arising from
accidents or injuries or other harm to students or other people on our school premises, including those caused by or otherwise arising
in connection with our school facilities, employees or education services. We could also face claims alleging that we were negligent,
provided inadequate maintenance to our school facilities or supervision of our employees and therefore may be held liable for accidents
or injuries suffered by our students or other people at our schools. In addition, if any of our students or our employees or contractors
commits unlawful acts or displays seriously inappropriate behavior, we could face allegations that we failed to provide adequate security,
supervision or were otherwise responsible for his or her actions, even if such acts or behavior may occur off our school premises. As
an education services provider, we may be held liable for other accidents, injuries or other harm in relation to our education services
and students, such as commuting to our schools and extracurricular activities. We may also be subject to liabilities arising from out-of-school
activities or events which we organize or involve in. As a result, our schools may be perceived to be unsafe, which may discourage prospective
students from applying to or attending our schools.
Our schools have also outsourced the operation
of all of our meal catering services to third parties since September 2017. We cannot assure you that we will be able to maintain the
quality of food or monitor the meal preparation process to ensure its quality, that service providers adhere to food quality standards,
or that no incidents resulted from food quality will occur in the future. In the event of incidents arising from poor quality food that
result in any serious health violations or medical emergencies, such as mass food poisonings, our business and reputation could be materially
and adversely affected.
Furthermore, although we maintain certain liability
insurance, the insurance coverage may not be adequate to fully protect us from these kinds of claims and liabilities. In addition, we
may not be able to obtain liability insurance in the future at reasonable prices or at all. A liability claim against us or any of our
employees could adversely affect our reputation, student enrollment and retention, and teacher recruitment and retention. Such a claim,
even if unsuccessful, could create unfavorable publicity, incur substantial expenses for us and divert the time and resources of our management,
all of which may have a material and adverse effect on our business, prospects, financial condition and results of operations.
Failure to adequately and promptly respond to changes in examination
systems, admission standards, test materials, teaching methods and regulation changes in the PRC could render our education services less
attractive to students.
Our reputation, student enrollment, and results
of operations depend in part on our ability to prepare our students for various tests and examinations, such as Gaokao. Admission and
assessment processes undergo continuous changes, in terms of subject and skill focus, question type, examination format and the manner
in which the processes are administered. We are therefore required to continually update and enhance our curricula, course materials and
teaching methods. Any failure to respond to the changes in a timely and cost-effective manner will adversely impact our students'
academic performance and the marketability of our education services, which would have a material adverse effect on our business, financial
condition and results of operations.
Regulations and policies that decrease the weight
of scholastic competition achievements in the admissions process mandated by government authorities or adopted by schools or affect the
number of students participating in Gaokao or Zhongkao may have an impact on our student enrollments and teaching methods. For example,
the Ministry of Education of the PRC (the "MOE"), issued certain implementing opinions in January 2014 to clarify that local
educational administrative departments at all levels, public schools and private schools are not allowed to use examinations to select
their students for admission to middle schools from primary schools. As a result, we may need to adjust our teaching methods to accommodate
a student body of a potentially wide competency range. Failure to track and respond to these changes in a timely and cost-effective manner
would render our courses, services and products less attractive to students, which may materially and adversely affect our reputation
and ability to continue to attract students.
If we fail to help our students achieve their academic goals,
student and parent satisfaction with our education services may decline.
The success of our business depends on our ability
to deliver quality school experiences and help our students achieve their academic goals. Our schools may not be able to meet the expectations
of our students and their parents in terms of students' academic performance. A student may not be able to attain the level of academic
improvement that he or she seeks and his or her performance may otherwise not progress or decline due to reasons beyond our control. We
may not be able to provide education that is satisfactory to all of our students and their parents, and student and parent satisfaction
with our services may decline. In addition, we cannot guarantee that our students will be admitted to higher levels of education institutions
of their choice. Any of the foregoing could result in a student's withdrawal from our schools, and dissatisfied students or their
parents may attempt to persuade other students or prospective students not to attend our schools. If our ability to retain students decreases
significantly or if we otherwise fail to continue to enroll and retain new students, our business, financial condition and results of
operations may be materially and adversely affected.
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We face intense competition in the PRC education industry and
we may fail to compete effectively.
The private education sector in China is rapidly
evolving, highly fragmented and competitive, and we expect competition in this sector to persist and intensify. We compete with public
schools and other private schools that offer similar programs in each geographic market where we operate our schools. In particular, we
face significant competition from public schools and other private schools in Yunnan province, China. Although our business model and
cooperative relationship with local governments helped us receive favorable regulatory treatments, we may fail to compete effectively
with public schools that may enjoy more substantial financial and policy support from the local governments. Additionally, our competitors
may adopt similar curriculums, school management approaches and marketing strategies, with different pricing and service packages that
may be more appealing than ours to students and parents in the relevant regions. Some of our competitors might be able to dedicate more
resources than we can to the development and improvement of their schools and respond more quickly than we can to the changes in student
demands, testing materials, admission standards, market needs and new technologies. As such, we may be required to lower our tuition and
boarding fees or increase our spending in order to maintain our competitiveness and retain or attract students and qualified teachers
or pursue new market opportunities. If we are unable to successfully compete for new students, attract and retain competent teachers or
other key personnel, maintain or increase our tuition level, enhance the quality of our education services or maintain our operations
in a cost-effective manner, our business and/or results of operations may be materially and adversely affected.
Our business may be disrupted if we lose the services of our
senior management and other key personnel.
Our continued success depends in part on the expertise
and dedication of our senior management team and other key personnel. We rely on our senior management and school administrators for the
efficient and effective operation of our schools and the execution of our business plans, which is vital for us to compete in the education
industry. We may experience changes in our senior management in the future for reasons beyond our control. We may not be able to retain
our directors, senior management, or other key management personnel, who might either join our competitors or start their own businesses
that directly compete with us. If we lose one or more of our directors, senior management, or other key management personnel, we might
not be able to hire qualified candidates to fill the gap in a timely manner and our business could be materially disrupted or otherwise
adversely affected.
Our school premises and facilities are subject to extensive governmental
approvals and compliance requirements.
The construction and usage of our school premises
requires various permits, certificates and approvals, including, for example, land use rights certificates, construction permits, public
health permits and certificates for passing fire control assessments. As of the date of this annual report, we leased three business premises
for our schools and were provided with 12 business premises by governments pursuant to our cooperative arrangements with them. For premises
we leased from or were provided for use by local governments or entities associated with local governments, the lessors or premise providers
failed to obtain the relevant land use rights certificates, construction planning approvals or construction permits, or failed to pass
the relevant environmental protection verification, fire control assessment or inspection for completion of construction, or failed to
provide us with the authorization to lease the premises. If the government authorities suspend the use of such premises or require measures
to be taken to rectify the defects or any of our lease agreements is invalidated due to the defects of such premises, or if any third
party successfully challenges our use of the affected premises, the operation of the affected schools could be interrupted and we may
need to relocate those schools, which would incur additional expenses and our business and results of operations may be materially and
adversely affected.
We have also encountered, and may in the future
encounter, problems in fulfilling the conditions precedent to the receipt of the permits, certificates and approvals for our self-built
premises. As of the date of this annual report, we built four business properties for our schools on the leased or provided premises.
For our self-built school premises which we have already put in use, the lessors or premise providers have not obtained the relevant land
use rights certificates, construction planning approval or construction permits, or passed environmental protection verification, fire
control assessment and inspection for completion of construction primarily because the lessors or premise providers failed to fulfill
the conditions precedent to completing such procedures, and we may be subject to fines and/or temporary suspension of the usage of the
affected school premises before the defects are rectified. If the lessors, premise providers or we ourselves are not able to rectify the
defects in a timely manner, or fail to obtain requisite permits, certificates or approvals for campuses and school premises we plan to
develop in the future, we may become subject to administrative fines and other penalties, which could disrupt our business and cause us
to incur additional expenses.
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A significant portion of our schools are not in compliance with
fire safety regulations.
According to the PRC fire safety laws and regulations,
construction projects and decoration projects are generally required to obtain fire safety permits or complete fire safety filings except
for certain statutory exemptions. As of the date of this annual report, we leased three business premises for our schools, were provided
with 12 business premises by governments pursuant to our cooperative arrangements with them, and built four business properties for our
schools on the leased or provided premises. As the four business properties were built on the leased or provided premises, we do not control
the ownership licenses of the business properties. As of the date of this annual report, we have obtained fire safety permits or written
evidence for passing the fire safety inspection for five of our schools. For the schools that we have not obtained the fire safety permits
or written evidence for passing the fire safety inspection nor made the requisite fire safety filings, it is primarily because the lessors
or premise providers failed to fulfill the condition precedent to completing such procedures. We have, however, arranged periodic inspections
for all of the premises by third-party fire control assessment institutions and obtained verification reports that our school premises
have met the technical requirements for the fire safety inspections. We cannot assure you that the lessors, the premise providers or we
ourselves would be able to obtain the fire safety permits, rectify the defects or otherwise fully comply with the relevant fire safety
laws and regulations at all of our current locations in a timely manner or at all. Given the relevant lessors or premise providers have
the legal obligation to obtain fire safety permits or complete fire safety filings, we cannot assure you that such lessor or premise provider
can meet the conditions precedents to obtaining such permits or completing such filings, over which we have little control. We may be
subject to orders to rectify within a specified period of time or to suspend operations for such non-compliance. As a result, we may not
be able to occupy certain of our current locations and may be ordered to relocate our operations to other locations that comply with the
relevant fire safety laws and regulations, and we cannot assure you that such alternative locations will be available on commercially
reasonable terms or at all, which could materially and adversely affect our business, results of operations and financial conditions.
Failure to control rental costs, control the quality, maintenance
and management of the leased school premises, obtain leases at desired locations at reasonable prices or failure to comply with the applicable
PRC property laws and regulations regarding certain of our leased and owned premises could materially and adversely affect our business.
As of the date of this annual report, we leased
three premises and have been provided with 12 premises by governments pursuant to our cooperative arrangements with a total gross floor
area of approximately 718,297 square meters for our school operations. These school premises, including the associated school buildings
and facilities, were developed and/or maintained by our landlords or the providers. Accordingly, we are not in a position to effectively
control the quality, maintenance and management of such premises, buildings and facilities. In the event that the quality of the school
premises, buildings and facilities deteriorates, or if any or all of our landlords or providers fail to properly maintain and renovate
such premises, buildings or facilities in a timely manner, or at all, the operation of our schools could be materially and adversely affected.
In addition, if any of our landlords terminates the existing lease agreements, refuses to continue to lease the premises to our schools
when such lease agreements expire, or increase rent to the level not acceptable to us, or the providers refuse to continue to provide
the premises for our use, we will be forced to relocate our schools to other locations, we may not be able to find suitable premises for
such relocation without incurring significant time and costs, or at all. If this occurs, our business, results of operations and financial
condition could be materially and adversely affected, and our students, teachers and staff may also be negatively affected by such relocation.
We did not receive from the lessors of some of
our leased premises copies of the title certificates or obtain proof of authorization to lease or provide the premises for our use from
land providers for certain of our school premises. As of the date of this annual report, we are not aware of any actions, claims or investigations
threatened against us or our lessors or premise providers with respect to the defects in our land use interests. However, if any of our
leases or cooperative arrangements is terminated as a result of challenges by third parties or government authorities for lack of title
certificates or proof of authorization to lease, while we do not expect to be subject to any fines or penalties, we may be forced to relocate
the affected schools and incur additional expenses relating to such relocation, or we may not be able to find suitable premises for relocation
at all.
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Under the applicable PRC laws and regulations,
the parties to a lease agreement are required to register and file the executed lease agreement with the relevant government authorities.
As of the date of this annual report, all the lease agreements for the leased properties that we occupy are not registered or filed. As
advised by our PRC counsel, while the failure to complete the lease registration will not affect the legal effectiveness of the lease
agreements according to PRC law, the relevant real estate administrative authorities may require the parties to the lease agreements to
complete lease registration within a prescribed period of time and the failure to do so may subject the parties to fines ranging from
RMB1,000 to RMB10,000 for each non-registered lease. While we have not been subject to any penalties or disciplinary action related to
the failure to register our lease agreements, we cannot assure you that we will not be subject to penalties or other disciplinary actions
for our past and future non-compliance. The failure to comply with the applicable PRC property laws and regulations regarding certain
of our leased premises may cause us to make relocations and be subject to fines and suspension of business, which may materially and adversely
affect our business, financial condition and results of operations.
We face uncertainties with respect to the development of regulatory
requirements on operating licenses and permits for our online education services in China.
As a supplement to conventional school programs,
we provide online education services on third-party platforms to our students on a complimentary basis. See "Item 4. Information
on the Company—B. Business Overview—Our Online Education Services." As advised by our PRC legal counsel, the launch
of the courses developed by us on third-party online platforms and the use of the education resources available thereon by our students
and teachers do not involve any activities in relation to the provision of basic or value-added telecommunication services, and therefore
we are not required to obtain additional approvals, licenses or permits for the online education services we currently provide, except
for those we already obtained.
However, we may be required to apply for and obtain
additional licenses or permits, or make additional registration and filings for our online education services, as the interpretation and
implementation of current PRC laws and regulations are still evolving, and new laws and regulations may also be promulgated. There can
be no assurance that once required, we will be able to obtain all the required approvals, licenses, permits and complete all necessary
filings and registrations on a timely basis for our online education services, given the significant amount of discretion the PRC authorities
may have in interpreting, implementing and enforcing relevant rules and regulations, as well as other factors beyond our control and anticipation.
If we fail to obtain required approvals, licenses and permits or complete necessary registrations and filings in a timely manner, we may
be subject to fines or suspension of our non-compliant operations, and we may be forced to cease the provision of online education services
in whole or in part, which could adversely affect our overall teaching results and appeal to students.
Our business is subject to seasonal fluctuations, which may cause
our operating results to fluctuate from quarter to quarter. This may result in volatility and adversely affect the price of the ADSs.
We have experienced, and expect to continue to
experience, seasonal fluctuations in our results of operations, primarily due to seasonal changes in service days, student enrollments
and influence of the summer and winter breaks. We generally require students to pay tuition and boarding fees for each semester upfront
prior to the commencement of such semester, and recognize revenues for the tuition fees and boarding fees received proportionately over
relevant period of the applicable program. However, the timing of our recording of our costs and expenses do not necessarily correspond
with the timing of our recognition of revenues. Our interim results, growth rates and profitability may not be indicative of our annual
results or our future results, and our historical interim and annual results, growth rates and profitability may not be indicative of
our future performance for the corresponding periods. These fluctuations could result in volatility and adversely affect the price of
the ADSs.
Termination of our cooperative relationship with Hebei Hengshui
High School may adversely affect our business.
We have partnered with Hebei Hengshui High School,
a well-regarded benchmark of secondary schools in China, in developing a series of standardized measures and protocols for each stage
in a school's development and for a wide variety of scenarios in school management and operation, which we require all of our schools
to consistently adhere to. We also have teachers with work experience at Hebei Hengshui High School to coach our teachers to ensure the
consistent implementation of effective teaching methods within our school network. If the cooperation is terminated by Hebei Hengshui
High School, or if any unforeseeable events cause us to terminate our cooperation with Hebei Hengshui High School, we may be required
to change the names of our schools and may be unable to recruit additional high-quality teachers laterally from Hebei Hengshui High School
and ensure our overall teaching quality and the operation of our education system could be materially and adversely affected.
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Failure to adequately protect our intellectual property could
materially and adversely affect our business.
Unauthorized use of any of our intellectual property
may adversely affect our business and reputation. We rely on a combination of copyright, trademark and trade secrets laws to protect our
intellectual property rights. Nevertheless, third parties may obtain and use our intellectual property without due authorization. The
practice of intellectual property rights enforcement action by the PRC regulatory authorities is in its early stage of development and
is subject to significant uncertainty. We may also need to resort to litigation and other legal proceedings to enforce our intellectual
property rights. Any such action, litigation or other legal proceedings could result in substantial costs and diversion of our management's
attention and resources and could disrupt our business. In addition, there is no assurance that we will be able to enforce our intellectual
property rights effectively or otherwise prevent others from the unauthorized use of our intellectual property. Failure to adequately
protect our intellectual property could materially and adversely affect our brand name and reputation, our business, financial condition
and results of operations.
We may be subject to intellectual property infringement claims,
which may be expensive to defend and may disrupt our business and operations.
We cannot assure you that our operations or any
aspects of our business do not or will not infringe upon or otherwise violate trademarks, patents, copyrights, know-how or other intellectual
property rights held by third parties. From time to time, we may be subject to legal proceedings and claims relating to the intellectual
property rights of others. In addition, there may be third-party trademarks, patents, copyrights, know-how or other intellectual property
rights that are infringed by our products, services or other aspects of our business without our awareness. Holders of such intellectual
property rights may seek to enforce such intellectual property rights against us in China, the United States or other jurisdictions. If
any third-party infringement claims are brought against us, we may be forced to divert management's time and other resources from
our business and operations to defend against these claims, regardless of their merits.
Additionally, the application and interpretation
of China's intellectual property right laws and the procedures and standards for granting trademarks, patents, copyrights, know-how
or other intellectual property rights in China are still evolving and are uncertain, and we cannot assure you that PRC courts or regulatory
authorities would agree with our analysis. If we were found to have violated the intellectual property rights of others, we may be subject
to liability for our infringement activities or may be prohibited from using such intellectual property, and we may incur licensing fees
or be forced to develop alternatives of our own. As a result, our business, financial condition, results of operations and prospects may
be materially and adversely affected.
We may be involved in labor and employment related disputes and
legal claims from time to time arising out of our operations.
We may, from time to time, be involved in labor
and employment related disputes with and subject to such claims by school personnel and other employees. We cannot assure you that any
of the labor and employment related legal actions will be resolved in our favor. We may be subject to uncertainties as to the outcome
of such legal proceedings and our business operations may be disrupted. Such legal or other proceedings involving us may, among other
impacts, incur significant costs for us, divert our management and other resources, disrupt our business operations, draw negative publicity
against us or damage our reputation. As a result, our business, financial condition and results of operations may be materially and adversely
affected.
We and certain of our directors and officers have been named
as defendants in a putative shareholder class action lawsuit, which could have a material adverse impact on our business,
financial condition, results of operation, cash flows and reputation.
We will have to defend against the putative shareholder class action
lawsuit described in "Item 4. Information on the Company—B. Business Overview—Legal Proceedings," including
any appeals of such lawsuit should our initial defense be unsuccessful. We are currently unable to estimate the timing, possible outcome
or loss or possible range of loss, if any, associated with the resolution of the lawsuit. There can be no assurance that we will be able
to prevail in our defense or reverse any unfavorable judgment on appeal, and we may decide to settle such lawsuit on unfavorable terms.
Any adverse outcome of the case, including any plaintiff's appeal of a judgment in the lawsuit, could have a material adverse effect
on our business, financial condition, results of operation, cash flows and reputation. The litigation process may utilize a significant
portion of our resources and divert management's attention from the day-to-day operations of our company, which could harm our results
of operations and require us to incur significant expenses to defend the suit. In addition, there can be no assurance that our insurance
carriers will cover all or part of the defense costs, or any liabilities that may arise from these matters. We also may be subject to
claims for indemnification related to these matters, and we cannot predict the impact that indemnification claims may have on our business
or financial results
.
Our brand image, business and results of operations may be adversely
impacted by students and employees' misconduct and improper activities, many of which are beyond our control.
We have limited control over the behavior of our
students, our teachers and other employees. To the extent any improper behavior is associated with our schools and education services,
our ability to protect our brand image and reputation may be limited. In addition, if any of our students or employees suffer or allege
to have suffered physical, financial or emotional harm following contact initiated in connection with our education services, we may face
civil lawsuits or other liabilities initiated by the affected student and employees, or governmental or regulatory actions against us.
In response to allegations of illegal or inappropriate activities in connection with our education services or any negative media coverage
about us, PRC governmental authorities may intervene and hold us liable for non-compliance with PRC laws and regulations concerning the
dissemination of information on the internet and subject us to administrative penalties or other sanctions, such as requiring us to restrict
or discontinue some of the education services provided by us. As a result, our business may suffer and our brand image, student base,
results of operations and financial condition may be materially and adversely affected.
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We are exposed to the risk of other types of employee
fraud or other misconduct. Other types of employee misconduct include intentionally failing to comply with government regulations, engaging
in unauthorized activities and misrepresentation to our students, which could harm our reputation. It is not always possible to deter
employee misconduct, and the precautions we take to prevent and detect this activity may not be effective in controlling unknown or unmanaged
risks or losses, which could harm our business, financial condition and results of operations.
We recorded share-based compensation, and we may grant share-based
awards in the future, which may result in increased share-based compensation expense.
We recorded share-based compensation of RMB177.8
million in 2018 for our directors, officers and employees and certain external consultants for their services performed. We may grant
share-based awards pursuant to our 2021 Share Incentive Plan and other share incentive plans to be adopted in the future, which we believe
will help us attract and retain key personnel and employees. As a result, our expenses associated with share-based compensation may increase,
which may have an adverse effect on our results of operations and financial condition.
Unauthorized disclosure of personal data that we collect and
retain due to a system failure or otherwise could expose us to liabilities and adversely affect our reputation and business.
We maintain records that include personal data,
such as academic and medical records, address and family information. If the security measures we use to protect personal data are ineffective
due to a system failure or other reasons, we could be liable for claims of invasion of privacy, impersonation, unauthorized purchases
or other claims. In addition, we could be held liable for the misuse of personal data, fraudulent or otherwise, by our employees, independent
consultants or third-party contractors.
We could incur significant expenses in connection
with rectifying any security breaches, settling any resulting claims and providing additional protection to prevent additional breaches.
In addition, any failure to protect personal information may adversely impact our ability to attract and retain students, harm our reputation
and materially adversely affect our business, prospects and results of operations.
Any health pandemics, including the recent outbreak of COVID-19,
and other natural disasters and calamities, could have a material adverse effect on our business operations.
We are vulnerable to health pandemics, including
COVID-19, Ebola virus diseases, H1N1 flu, H7N9 flu, avian flu, Severe Acute Respiratory Syndrome (SARS) and other epidemics. For example,
COVID-19 has
significantly affected China and many other countries
. On March 11, 2020, the
World Health Organization declared COVID-19 a global pandemic. Many businesses and social activities in China and other countries and
regions were severely disrupted, including school operations. Such disruption and the potential slowdown of China's economy could
have a material adverse effect on our business, results of operations and financial condition.
As a result of the government-mandated quarantine
measures following the COVID-19 outbreak, the spring semester of 2020 at all the secondary schools in China, including ours, was postponed,
and we have resorted to various alternative teaching methods, including live streaming, to resume basic teaching activities. See "Item
4. Information on the Company—B. Business Overview—Our Online Education Services." On March 31, 2020, the MOE also announced
that Gaokao would be postponed by one month until July 2020 due to the COVID-19 outbreak. We have re-opened our high schools for graduating
classes and our tutorial school programs since late March 2020 and re-opened our other classes in late April 2020. To reduce the risk
of infection and contain the virus spread, we have implemented a series of control measures, including body temperature monitoring of
our students and staff and periodical sanitization of school facilities. We have also expanded our school schedule with longer school
hours and extended the spring semester to catch up with our teaching plans. The delayed school openings and the alternative teaching activities
could adversely affect our student enrollment, our teaching results and our students' academic performance.
In 2022, we experienced higher operating costs due
to increased spending in COVID-19 related prevention and testing equipment. We paid additional subsidies for our staff working during
irregular shifts to accommodate local preventive and partial lock-down measures. In addition, compared with 2020, we were required to
pay higher corporate social insurance premiums. In February 2020, Ministry of Human Resources and Social Security, Ministry of Finance,
and State Administration of Taxation jointly announced Notice on the Exemption of the Payment of Social Insurance Premiums for Companies
in China, a notice aiming to reduce corporate social insurance burden during COVID-19 outbreak. The exemption period ended in December
2020, and therefore our cost of revenues in 2021 slightly increased compared to 2020. In 2022, our schools experienced temporary closures
due to the COVID-19 outbreak. Furthermore, the COVID-19 outbreak related traveling and gathering restrictions in China in had an adverse
impact on our student admission campaigns in 2021 and 2022. Our student admission officers had to rely on higher portion of video calls
and online marketing measures, whereas the quality of student admission might be negatively affected. All of the foregoing impacts of
COVID-19 outbreak could materially and adversely affect our business, results of operations and financial condition. See "Item 5.
Operating and Financial Review and Prospects—A. Operating Results— Major Factors Affecting Our Results of Operations—COVID-19
outbreak."
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Many of the
restrictive measures previously adopted by the PRC governments at various levels to control the spread of the COVID-19 virus have been
revoked or replaced with more flexible measures since December 2022. Moreover, there has been and may continue to be an increase
in COVID-19 cases in China, and as a result, we experienced temporary disruption to our operations where many of our students, teachers
and other staff were infected with COVID-19 in December 2022. To the extent that future waves of COVID-19 disrupt normal business
operations in China, we may face operational challenges with our services. The extent to which the COVID-19 pandemic impacts
our results of operations will depend on future developments, which are highly uncertain, including the availability and effectiveness
of any new vaccines and the emergence of any new COVID-19 variants, among others.
We will pay close attention to the
development of the outbreak of COVID-19 and continuously evaluate its impact on our business, results of operations and financial condition,
which we believe will depend on the duration of the pandemic and the government's responsive measures.
In addition, other natural disasters and calamities,
such as fire, floods, typhoons, earthquakes, power loss, telecommunications failures, wars, riots, terrorist attacks or similar events,
could cause severe disruption of our operations or those of our industry customers, which could materially and adversely affect our business,
results of operations and financial condition.
We have limited insurance coverage with respect to our business
and operations.
We are exposed to various risks associated with
our business and operations, and we have limited insurance coverage. We are exposed to risks including, among other things, accidents
or injuries in our schools, loss of key management and personnel, business interruption, natural disasters, terrorist attacks and social
instability or any other events beyond our control. The insurance industry in China is still at an early stage of development, and as
a result insurance companies in China offer limited business-related insurance products. We do not have any business interruption insurance,
or key-man life insurance. Any business interruption, legal proceeding or natural disaster or other events beyond our control could result
in substantial costs and diversion of our resources, which may materially and adversely affect our business, financial condition and results
of operations.
If we fail to maintain an effective system of internal control
over financial reporting, we may be unable to accurately report our financial results or prevent fraud.
As a public company, we are subject to the reporting
requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"), and the rules and regulations
of the applicable listing and corporate governance standards of the
over-the-counter market (the
"OTC" market)
. We expect that the requirements of these rules and regulations will continue to increase our legal,
accounting, and financial compliance costs, make some activities more difficult, time-consuming and costly and place significant strain
on our personnel, systems and resources.
The Sarbanes-Oxley Act requires, among other things,
that we maintain effective disclosure controls and procedures and internal control over financial reporting. Commencing with our fiscal
year ended December 31, 2021, we must perform system and process evaluation and testing of our internal control over financial reporting
to allow management to report on the effectiveness of our internal control over financial reporting in our Form 20-F filing for that year,
as required by Section 404 of the Sarbanes-Oxley Act. In addition, once we cease to be an "emerging growth company" as the
term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness of our
internal control over financial reporting.
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In the course of auditing our consolidated financial
statements that are included elsewhere in this annual report, we and our independent registered public accounting firm identified one
material weakness in our internal control over financial reporting, in accordance with the standards established by the PCAOB.
The material weakness that has been identified
relates to our lack of sufficient number of financial reporting personnel with appropriate knowledge, experience and training of U.S.
GAAP and SEC financial reporting requirements to properly address complex U.S. GAAP accounting issues and prepare and review financial
statements and related disclosures in accordance with U.S. GAAP and reporting requirements set forth by the SEC. To remedy our identified
material weakness, we have adopted and plan to continue to adopt certain measures to improve our internal control over financial reporting,
including (1) hiring more qualified accounting personnel with extensive experience and knowledge in handling U.S. GAAP and SEC financial
reporting requirements; (2) providing regular and appropriate trainings for our accounting staff, especially trainings related to U.S.
GAAP and SEC reporting requirements; and (3) setting up performance measurement and reward plan for our accounting staff aligning with
our objective of internal control over financial reporting and our ethical value. However, the implementation of these measures may not
fully address these weakness and deficiencies in our internal control over financial reporting, and we cannot conclude that they have
been fully remedied. Our failure to correct these weakness and deficiencies or our failure to discover and address any other weakness
and deficiencies could result in inaccuracies in our financial statements and 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 could significantly
hinder our ability to prevent fraud.
We cannot assure you that there will not be additional
material weaknesses or any significant deficiencies in our internal control over financial reporting in the future. Any failure to maintain
internal control over financial reporting could severely inhibit our ability to accurately report our financial condition, results of
operations or cash flows. If we are unable to conclude that our internal control over financial reporting is effective, or if our independent
registered public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial
reporting once that firm begins its Section 404 reviews, investors may lose confidence in the accuracy and completeness of our financial
reports, the market price of the ADSs could decline, and we could be subject to sanctions or investigations by the SEC or other regulatory
authorities. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other
effective control systems required of public companies, could also restrict our future access to the capital markets. See "Item
15. Controls and Procedures—Management's Annual Report on Internal Control over Financial Reporting" and "Item
15. Controls and Procedures—Internal Control Over Financial Reporting."
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Risks Related to Our Corporate Structure
If the PRC government finds that our corporate structure and
contractual arrangements does not comply with applicable PRC laws and regulations, we could be subject to severe penalties and our business
may be materially and adversely affected.
We are a Cayman Islands company and thus, we are
classified as a foreign enterprise under the PRC laws. Foreign investment in the education industry in the PRC is extensively regulated
and subject to numerous restrictions. Under the Special Administrative Measures for Foreign Investment Access (Negative List) (2021)(the
"2021 Special Administrative Measures"), foreign investors are prohibited from investing in primary and middle schools in
the PRC for students in grades one through nine. High school is also restricted industries for foreign investors, and foreign investors
are only allowed to invest in such industries in cooperative ways with domestic investors, provided that domestic investors play a dominant
role in such cooperation. Furthermore, under the Implementation Opinions of the MOE on Encouraging and Guiding the Entry of Private Capital
in the Field of Education and Promoting the Healthy Development of Private Education, which was issued by the MOE on June 18, 2012, the
foreign portion of the total investment in a Sino-foreign joint venture high school should be below 50%. According to relevant regulations,
the foreign investors invested in high schools must be foreign education institutions, with relevant educational qualification and high
quality of education. See "Item 4. Information on the Company—B. Business Overview—Regulations—Regulations on
Foreign Investment in Education in the PRC" for details. Accordingly, our wholly-owned subsidiary, Yunnan WFOE, in China is currently
ineligible to apply for the required education licenses and permits in China for the operation of primary and middle schools. In order
to establish the structure for operating our business in China, we entered into a series of arrangements in which our wholly-owned subsidiary,
Yunnan WFOE, receives full economic benefits from our schools. For a description of these contractual arrangements, see "Item 4.
Information on the Company—C. Organizational Structure—Our Contractual Arrangements." We expect to continue to rely
on our contractual arrangements to operate our education business.
On July 24, 2021, the General Office of State
Council and the General Office of Central Committee of the Communist Party of China jointly promulgated the Opinions on Further Alleviating
the Burden of Homework and After-School Tutoring for Students in Compulsory Education (the "Alleviating Burden Opinion"),
which provides, among others, that (1) Academic AST Institutions are prohibited from raising funds by listing on stock markets or conducting
any capitalization activities; and (2) foreign capital is prohibited from controlling or participating in any Academic AST Institutions
through mergers and acquisitions, entrusted operation, joining franchise or variable interest entities. The Alleviating Burden Opinion
provides that any violation of the foregoing shall be rectified. The Alleviating Burden Opinion further states that the administration
and supervision over academic subjects tutoring institutions for students on grade ten to twelve shall be implemented by reference to
the relevant provisions of the Alleviating Burden Opinion. It remains uncertain as to how and to what extent the administration over academic
subjects tutoring institutions for students on grade ten to twelve will be implemented by reference of the Alleviating Burden Opinion.
If our corporate structure and contractual arrangements
are found to be in violation of any PRC laws or regulations, or if we are found to be required but failed to obtain any of the permits
or approvals for our private education business, the relevant PRC regulatory authorities, including the MOE, which regulates the education
industry in China, the MOFCOM, which regulates the foreign investment in China, and the Ministry of Civil Affairs, which regulates the
registration of schools in China, would have broad discretion in imposing fines or punishments upon us for such violations, including:
●
revoking the business and operating
licenses of us and/or our affiliated entities;
●
discontinuing or restricting
any related-party transactions between us and/or our affiliated entities;
●
imposing fines and penalties,
or imposing additional requirements for our operations which we or our affiliated entities may not be able to comply with;
●
revoking the preferential tax
treatment available to us;
●
requiring us to restructure
the ownership and control structure or our current schools;
●
requiring us to restructure
our operations in such a way as to compel us to establish new entities, re-apply for the necessary licenses or relocate our businesses,
staff and assets; or
●
restricting or prohibiting
our use of the proceeds from overseas offerings to finance our business and operations in China, particularly the expansion of our business
through strategic acquisitions.
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As of the date of this annual report, similar
ownership structure and contractual arrangements were used by many China-based companies listed overseas, including a number of education
companies listed in the United States. To our knowledge, none of the fines or punishments listed above has been imposed on any of these
public companies, including companies in the education industry. However, we cannot assure you that such fines or punishments will not
be imposed on us or any other companies in the future. If any of the above fines or punishments is imposed on us, our business, financial
condition and results of operations could be materially and adversely affected. If any of these penalties results in our inability to
direct the activities of Long-Spring Education and its schools and subsidiaries that most significantly impact their economic performance,
and/or failure to receive the economic benefits from Long-Spring Education and its schools and subsidiaries, we may not be able to consolidate
Long-Spring Education and its schools and subsidiaries in our financial statements in accordance with U.S. GAAP. However, we do not believe
that such actions would result in the liquidation or dissolution of our company, our wholly-owned subsidiaries in China or Long-Spring
Education or its schools or subsidiaries.
In addition, pursuant to the Implementation Rules,
(1) foreign-invested enterprises established in China and social organizations whose actual controllers are foreign parties shall not
sponsor, participate in or actually control private schools that provide compulsory education, (2) social organizations or individuals
shall not control any private school that provides compulsory education or any non-profit private school that provides pre-school education
by means of, among others, merger, acquisition and contractual arrangements, and (3) private schools providing compulsory education shall
not conduct any transaction with any related party. Where any other private school conducts any transaction with any related party, it
shall follow the principles of openness, fairness and impartiality, fix the reasonable tuition and fees and regulate the decision-making,
and shall not damage the state interests, the interests of the school or the rights and interests of the teachers and students, otherwise,
there is a risk of being ordered to make corrections within a time limit, and the illegal gains, if any, shall be confiscated after the
fees collected are returned; if the circumstances are serious, the sponsor, actual controller and member of the decision-making body or
supervisory body shall not become the sponsor, actual controller or member of the decision-making body or supervisory body of other private
school within one to five years; if the circumstances are especially serious with adverse social impact, the sponsor, actual controller
and member of the decision-making body or supervisory body shall not become the sponsor, actual controller and members of the decision-making
body or supervisory body of other private school permanently; if a violation of public security administration is constituted, the public
security organ shall impose a public security administration punishment according to law; if a crime is constituted, criminal responsibility
shall be investigated in accordance with the law.
These regulations may challenge the enforcement
of our contractual arrangements that establish our corporate structure for operating our business, for example, the clause or provision
of the exclusive management services and business cooperation agreement in relation to related party transactions between Yunnan WFOE
and the affiliated entities to the extent concerning private schools offering compulsory education have been rendered not legally enforceable
since September 1, 2021. Furthermore, our contractual arrangements may not be enforceable in the PRC if the PRC government authorities
take a view that such contracts contravene any mandatory provision of PRC laws and administrative regulations or are otherwise not enforceable
due to offending public order or good morals. In the event we are unable to enforce these contractual arrangements, for our continuing
operations, we may not be able to exert effective control over the affiliated entities and its shareholders, and our ability to conduct
our business may be materially and adversely affected. We are continuously assessing the impact of relevant regulations on our business
and making necessary measures and efforts to comply with the requirements under these regulations and implementations, including restructuring
corporate structure or unwinding contractual arrangements. However, the relevant authorities have yet to promulgate any detailed implementation
rules and regulations under the Implementation Rules, it is still unclear whether the above provisions have any retrospective effect for
contractual arrangements over private compulsory education schools existing before September 1, 2021, therefore, there remains uncertainty
as to when and how the Implementation Rules will become specifically applied to our business.
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Uncertainties exist with respect to the interpretation and implementation
of the newly enacted Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance,
business, financial condition, results of operations and prospects.
On March 15, 2019, the National People's
Congress of the PRC (the "NPC") promulgated the Foreign Investment Law, which came into effect on January 1, 2020 and replaced
the trio of existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign
Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law. 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 investments. However, since it is relatively new, uncertainties
still exist in relation to its interpretation and implementation, and failure to take timely and appropriate measures to cope with the
regulatory-compliance challenges could result in material and adverse effect on us. For instance, though the Foreign Investment Law does
not explicitly classify contractual arrangements as a form of foreign investment, it contains a catch-all provision under the definition
of "foreign investment", which includes investments made by foreign investors in China through means stipulated in laws or
administrative regulations or other methods prescribed by the State Council of the PRC (the "State Council"). Therefore, it
still leaves leeway for future laws, administrative regulations or provisions promulgated by the Stale Council to provide for contractual
arrangements as a form of foreign investment, at which time it will be uncertain whether our contractual arrangements will be deemed to
be in violation of the market access requirements for foreign investment in the PRC and if yes, how our contractual arrangements should
be dealt with. In addition, if future laws, administrative regulations or provisions prescribed by the State Council mandate further actions
to be taken by companies with respect to existing contractual arrangements, we may face substantial uncertainties as to whether we can
complete such actions in a timely manner, or at all. In the worst-case scenario, we may be required to unwind our existing contractual
arrangements and/or dispose of the relevant business operations, which could have a material and adverse effect on our current corporate
structure, corporate governance, business, financial condition and results of operations.
We rely on contractual arrangements with Long-Spring Education
and its shareholders for our business operations in China, which may not be as effective as direct ownership in providing control.
We have relied and expect to continue to rely on
contractual arrangements with Long-Spring Education and its shareholders to operate our business in China. For a description of these
contractual arrangements, see "Item 4. Information on the Company—C. Organizational Structure—Our Contractual Arrangements."
These contractual arrangements may not be as effective as direct equity ownership in providing us with control over our affiliate entities.
Any failure by our affiliated entities, to perform their obligations under the contractual arrangements would have a material adverse
effect on the financial position and performance of our company.
If we had direct ownership of Long-Spring Education,
we would be able to exercise our rights as a shareholder to effect changes in the board of directors of Long-Spring Education, which in
turn could implement changes, subject to any applicable fiduciary obligations, at the management and operational level. However, under
the current contractual arrangements, we rely on the performance by our affiliated entities and their shareholders or sponsors of their
obligations under the contracts to exercise control over our affiliated entities. The shareholders or sponsors of our affiliated entities
may not act in the best interests of our company or may not perform their obligations under these contracts. Such risks exist throughout
the period in which we intend to operate certain portion of our business through the contractual arrangements with Long-Spring Education.
If any dispute relating to these contracts remains unresolved, we will have to enforce our rights under these contracts through the operations
of PRC law and arbitration, litigation and other legal proceedings and therefore will be subject to uncertainties in the PRC legal system.
See "—Any failure by our affiliated entities and their shareholders or sponsors to perform their obligations under our contractual
arrangements with them would have a material and adverse effect on our business." As a result, uncertainties in the commercial arbitration
system or legal system in China could limit our ability to enforce these contractual arrangements. In addition, if the legal structure
and the contractual arrangements were found to violate any existing or future PRC laws and regulations, we may be subject to fines or
other legal or administrative sanctions. Therefore, our contractual arrangements with Long-Spring Education and its shareholders may not
be as effective in ensuring our control over the relevant portion of our business operations as direct ownership would be.
If the imposition of government actions causes
us to lose our right to direct the activities of our affiliated entities or our right to receive substantially all the economic benefits
and residual returns from our affiliated entities and we are not able to restructure our ownership structure and operations in a satisfactory
manner, we would no longer be able to consolidate the financial results of our affiliated entities.
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Furthermore, we are a holding company incorporated
in the Cayman Islands. As a holding company with no material operations of our own, we conduct a substantial majority of our operations
through our subsidiaries established in China, the VIE, and its subsidiaries in China. We control and receive the economic benefits of
the VIE and its subsidiaries' business operations through certain contractual arrangements. Our ADSs on the OTC market represents
shares of our offshore holding company instead of shares of the VIE or its subsidiaries in China. We may not be able to continue to satisfy
the applicable requirements and rules with respect to such structure.
If the PRC government determines that the contractual arrangements
constituting part of the VIE structure do not comply with PRC regulations, or if these regulations change or are interpreted differently
in the future, we may be unable to assert our contractual rights over the assets of the VIE, and our ADSs or ordinary shares may decline
in value or become worthless.
Investors in the ADSs are not purchasing equity
securities of our subsidiaries that have substantive business operations in China but instead are purchasing equity securities of a Cayman
Islands holding company. We are a Cayman Islands holding company that conducts all of its operations and operates its business in China
through its PRC subsidiaries and the affiliated entities through contractual agreements. Such structure involves unique risks to investors
in the ADSs.
Recently, the PRC government adopted a series
of regulatory actions and issued statements to regulate business operations in China, including those related to VIE and private schools,
which may challenge the validity of our contractual arrangements. In the event that the PRC government determines that the contractual
arrangements constituting part of the VIE structure do not comply with PRC regulations, or if these regulations change or are interpreted
differently in the future, we may be unable to assert our contractual rights over the assets of the VIE, and our ADSs or ordinary shares
may decline in value or become worthless.
On May 14, 2021, the PRC State Council promulgated
the amended Implementation Rules, which became effective on September 1, 2021. Under the Implementation Rules, social organizations and
individuals are prohibited from controlling a private school that provides compulsory education by means of, among others, merger, acquisition,
and contractual arrangements, and a private school providing compulsory education is prohibited from conducting transactions with its
related parties. In particular, the prohibition over related party transactions has significantly affected the enforceability of the exclusive
management services and business cooperation agreements with affiliated entities providing compulsory education. Therefore, we re-assessed
our control over the Affected Entities. Based on the relevant accounting standard in accordance with U.S. GAAP, we have concluded that
we have lost control of the Affected Entities since September 1, 2021, in view of the significant uncertainties and restrictions the Implementation
Rules impose on our ability to direct the range of ongoing activities that would most significantly impact the returns of those entities
and to be exposed to returns that are commensurate with a controlling interest, and that such uncertainties and restrictions already had
a significant impact on our ability to direct and its economic exposure from involvement with such entities.
Except for the Affected Entities, the contractual
arrangements enable us to: (1) exercise effective control over the affiliated entities; (2) receive substantially all of the economic
benefits of the affiliated entities in consideration for the services provided by us; and (3) have an exclusive option to purchase all
of the equity interests in the affiliated entities when and to the extent permitted under PRC law. Therefore, we are able to consolidate
the financial results of the affiliated entities in our consolidated financial statements. However, our PRC legal counsel has advised
us that as there are substantial uncertainties regarding the interpretation and application of PRC laws and regulations, and we cannot
assure you that the PRC government would agree that our corporate structure or any of the above contractual arrangements comply with current
or future PRC laws or regulations. PRC laws and regulations governing the enforcement of these contractual arrangements are uncertain
and the relevant government authorities may have broad discretion in interpreting these laws and regulations.
Any failure by our affiliated entities and their shareholders
or sponsors to perform their obligations under our contractual arrangements with them would have a material and adverse effect on our
business.
Our affiliated entities and their shareholders
or sponsors may fail to take certain actions required for our business or to follow our instructions despite their contractual obligations
to do so. In addition, there might be a risk that the shareholders of the performing parties to the contractual arrangements may raise
objections to the arrangements. If they fail to perform their obligations under their respective agreements with us, we may have to rely
on legal remedies under PRC law, including seeking specific performance or injunctive relief, which may not be effective. For example,
if the shareholders of Long-Spring Education were to refuse to transfer their equity interests in Long-Spring Education to us or our designee
if we exercise the purchase option pursuant to these contractual arrangements, or if they were otherwise to act in bad faith toward us,
then we may have to take legal actions to compel them to perform their contractual obligations.
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All the agreements under our contractual arrangements
are governed by PRC law and provide for the resolution of disputes through arbitration in China. Accordingly, these contracts would be
interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. The legal system in
the PRC is not as developed as in some other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system
could limit our ability to enforce these contractual arrangements. Meanwhile, there are very few precedents and little formal guidance
as to how contractual arrangements in the context of a consolidated variable interest entity should be interpreted or enforced under PRC
law. There remain significant uncertainties regarding the ultimate outcome of such arbitration should legal action become necessary. In
addition, under PRC law, rulings by arbitrators are final, parties cannot appeal the arbitration results in courts, and if the losing
parties fail to carry out the arbitration awards within a prescribed time limit, the prevailing parties may only enforce the arbitration
awards in PRC courts through arbitration award recognition proceedings, which would require additional expenses and delay. Moreover, our
contractual arrangements provided that arbitrators may award remedies over the shares and/or assets of our affiliated entities in China,
injunctive relief and/or winding up of our affiliated entities, and that courts of competent jurisdictions are empowered to grant interim
remedies in support of the arbitration pending the formation of an arbitral tribunal. However, under PRC law, arbitrators have no power
to grant injunctive relief and may not directly issue a provisional or final liquidation order to protect assets or equity interest involved
in case of disputes. In addition, interim remedies or enforcement orders granted by foreign courts in the United States and the Cayman
Islands may not be recognized or enforceable in China. In the event we are unable to enforce our contractual arrangements, or if we suffer
significant delay or other obstacles in the process of enforcing these contractual arrangements, we may not be able to exert effective
control over our affiliate entities, and our ability to conduct our business may be negatively affected. See "—Risks Related
to Doing Business in China—Uncertainties with respect to the PRC legal system could have a material adverse effect on us."
The shareholders of Long-Spring Education may have actual or
potential conflicts of interest with us and not act in the best interests of our company.
The shareholders of Long-Spring Education may
have actual or potential conflicts of interest with us. These shareholders may breach, or cause Long-Spring Education to breach, or refuse
to renew, the existing contractual arrangements we have with them and Long-Spring Education, which would have a material and adverse effect
on our ability to effectively control Long-Spring Education and receive economic benefits from it. For example, the shareholders may be
able to cause our agreements with Long-Spring Education to be performed in a manner adverse to us by, among other things, failing to remit
payments due under the contractual arrangements to us on a timely basis. We cannot assure you that when conflicts of interest arise any
or all of these shareholders will act in the best interests of our company or such conflicts will be resolved in our favor. Currently,
we do not have any arrangements to address potential conflicts of interest between these shareholders and our company. If we cannot resolve
any conflict of interest or dispute between us and these shareholders, we would have to rely on legal proceedings, which could result
in disruption of our business and subject us to substantial uncertainty as to the outcome of any such legal proceedings.
Contractual arrangements between our affiliated entities and
us may be subject to scrutiny by the PRC tax authorities and a finding that we or our affiliated entities owe additional taxes could materially
reduce our net income and the value of your investment.
Under PRC laws and regulations, transactions between
related parties should be conducted on an arm's-length basis and may be subject to audit or challenge by the PRC tax authorities.
We could face material adverse tax consequences if the PRC tax authorities determine that the contractual arrangements between us and
our affiliated entities are not conducted on an arm's-length basis and adjust the income of our affiliated entities through the
transfer pricing adjustment. A transfer pricing adjustment could, among other things, result in, for PRC tax purposes, increased tax liabilities
of our affiliated entities. In addition, the PRC tax authorities may require us to disgorge our prior tax benefits, and require us to
pay additional taxes for prior tax years and impose late payment fees and other penalties on our affiliated entities for underpayment
of prior taxes. To date, similar contractual arrangements have been used by many public companies, including companies listed in the United
States, and, to our knowledge, the PRC tax authorities have not imposed any material penalties on those companies. However, we cannot
assure you that such penalties will not be imposed on any other companies or us in the future. Our net income may be reduced if the tax
liabilities of our affiliated entities materially increase or if they are found to be subject to additional tax obligations, late payment
fees or other penalties.
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If any of our affiliated entities becomes the subject of a bankruptcy
or liquidation proceeding, we may lose the ability to use and enjoy assets held by such entity, which could materially and adversely affect
our business, financial condition and results of operations.
We currently conduct our operations in China through
contractual arrangements with our affiliated entities and the shareholders of Long-Spring Education. As part of these arrangements, substantially
all of our education-related assets that are important to the operation of our business are held by our affiliated entities. If any of
these entities goes bankrupt and all or part of their assets become subject to liens or rights of third-party creditors, we may be unable
to continue some or all of our business activities, which could materially and adversely affect our business, financial condition and
results of operations. If any of our affiliated entities undergoes a voluntary or involuntary liquidation proceeding, its equity owner
or third-party creditors may claim rights relating to some or all of these assets, which would hinder our ability to operate our business
and could materially and adversely affect our business, our ability to generate revenues and the market price of the ADSs.
We may rely on dividends paid by our PRC subsidiaries to fund
cash and financing requirements. Any limitation on the ability of our PRC subsidiaries to pay dividends to us could have a material adverse
effect on our ability to conduct our business and to pay dividends to holders of the ADSs and our ordinary shares.
We are a holding company, and we may rely on dividends
to be paid by our PRC subsidiaries for our cash and financing requirements, including the funds necessary to pay dividends and other cash
distributions to the holders of the ADSs and our ordinary shares and service any debt we may incur. If our PRC subsidiaries incur debt
on their own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions
to us.
Pursuant to the Law on Promoting Private Education,
sponsors of for-profit private schools are entitled to retain the profits from their schools and the operating surplus may be allocated
to the sponsors pursuant to the PRC company law and other relevant laws and regulations. Sponsors of non-profit private schools are not
entitled to any distribution of profits from their schools and all revenue must be used for the operation of the schools. According to
Implementation Rules, a non-profit private school should allocate no less than 10% of its audited annual non-restricted net asset increase,
or a for-profit private school should allocate no less than 10% of its audited annual net income, to its development, respectively. Under
PRC laws and regulations, wholly foreign-owned enterprises in the PRC, such as Yunnan WFOE, may pay dividends only out of their accumulated
profits as determined in accordance with PRC accounting standards and regulations. In addition, a wholly foreign-owned enterprise is required
to set aside at least 10% of its after-tax profits each year, after making up previous years' accumulated losses, if any, to fund
certain statutory reserve funds, until the aggregate amount of such a fund reaches 50% of its registered capital. At the discretion of
the wholly foreign-owned enterprise, it may allocate a portion of its after-tax profits based on PRC accounting standards to staff welfare
and bonus funds. These reserve funds and staff welfare and bonus funds are not distributable as cash dividends. However, the relevant
authorities have yet to promulgate any detailed implementation rules and regulations under the Implementation Rules. We remain uncertain
as to the timing and substance of the rules under the Law on Promoting Private Education and Implementation Rules to be promulgated, and
how such rules will impact our operation. Furthermore, if our subsidiaries or the affiliated entities in China incur debt on their own
behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments to us. Any
limitation on the ability of our wholly-owned PRC subsidiaries to pay dividends or make other distributions to us could materially and
adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise
fund and conduct our business.
PRC regulation of loans and direct investment by offshore holding
companies to PRC entities may delay or prevent us from making loans or additional capital contributions to our PRC subsidiaries and affiliated
entities, which could harm our liquidity and our ability to fund and expand our business.
As an offshore holding company of our PRC subsidiaries
and affiliated entities, we may (1) make loans to our PRC subsidiaries and affiliated entities, (2) make additional capital
contributions to our PRC subsidiaries, (3) establish new PRC subsidiaries and make capital contributions to these new PRC subsidiaries,
and (4) acquire offshore entities with business operations in China in an offshore transaction. However, most of these uses are subject
to PRC regulations and approvals. For example:
●
loans by us to our wholly-owned
subsidiaries in China, which are foreign-invested enterprises, cannot exceed statutory limits, which is the difference between the total
investment amount and the registered capital of our wholly-owned subsidiaries, and must be registered with the State Administration of
Foreign Exchange of the PRC, or SAFE, or its local counterparts;
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●
loans by us to our affiliated
entities, which are domestic PRC entities, over a certain threshold must be approved by the relevant government authorities and must
also be registered with SAFE or its local counterparts; and
●
capital contributions to our
wholly-owned subsidiaries in China must be filed with MOFCOM or its local counterparts and must also be registered with the local bank
authorized by SAFE.
As a result of the requirements and limitations
outlined above, the amount of funds that we can directly contribute to our operations in China through Yunnan WFOE, is limited. In addition,
on March 30, 2015, SAFE promulgated the Circular of the SAFE on Reforming the Administrative Measures of Settlement of Foreign Exchange
Capital of Foreign-invested Enterprises (the "SAFE Circular 19"), a notice regulating the conversion by a foreign-invested
company of its capital contribution in foreign currency into Renminbi. The notice requires that the capital of a foreign-invested company
settled in Renminbi converted from foreign currencies shall be used only for purposes within the business scope as approved by the applicable
government authorities and may not be used for equity investments in China unless such activity is set forth in the business scope or
is otherwise permissible under PRC laws or regulations. In addition, SAFE strengthened its oversight of the flow and use of such capital
of a foreign-invested company settled in Renminbi converted from foreign currencies. The use of such Renminbi capital may not be changed
without SAFE's approval, and may not in any case be used to repay Renminbi loans if the proceeds of such loans have not otherwise
been used. Violations of the SAFE Circular 19 will result in severe penalties including hefty fines. As a result, the SAFE Circular 19
may significantly limit our ability to transfer the net proceeds from our initial public offering and future overseas offering to our
operations in China through our PRC subsidiaries, which may adversely affect our ability to expand our business. On February 13, 2015,
the SAFE promulgated the Circular on Further Simplifying and Improving the Direct Investment-related Foreign Exchange Administration Policies
(the "SAFE Circular 13"), which was effective on June 1, 2015. Pursuant to the SAFE Circular 13, the registration of existing
equity is required in lieu of annual foreign exchange inspection of direct investment. The SAFE Circular 13 also grants the authority
to banks to examine and process foreign exchange registration with respect to both domestic and overseas direct investments.
We expect that PRC laws and regulations may continue
to limit our use of proceeds from our overseas offering or from other financing sources. We cannot assure you that we will be able to
obtain these government registrations or approvals on a timely basis, if at all, with respect to future loans or capital contributions
by us to our entities in China. If we fail to receive such registrations or approvals, our ability to use the proceeds from our initial
public offering and future overseas offerings and foreign currency to capitalize our PRC operations may be hindered, which could adversely
affect our liquidity and our ability to fund and expand our business.
Risks Related to Doing Business in China
PRC economic, political and social conditions, as well as changes
in any government policies, laws and regulations, could adversely affect the overall economy in China or the education services market,
which could harm our business.
Our revenues are all sourced from China. Accordingly,
our business, prospects, financial condition and results of operations are subject, to a significant extent, to economic, political and
legal developments in China.
The PRC economy differs from the economies of
most developed countries in many respects. Although the PRC economy has been transitioning from a planned economy to a more market-oriented
economy since the late 1970s, the PRC government continues to play a significant role in regulating the industry. The PRC government continues
to exercise significant control over China's economic growth through allocating resources, controlling the incurrence and oversight
and discretion over the conduct of our business and may intervene with or influence our operations as the government deems appropriate
to further regulatory, political and societal goals. The PRC government has recently published new policies that significantly affected
certain industries such as the education and internet industries, and we cannot rule out the possibility that it will in the future release
regulations or policies regarding our industry that could adversely affect our business, financial condition and results of operations.
Changes in any of these policies, laws and regulations could adversely affect the economy in China or the market for education services,
especially for Gaokao and Zhongkao, which could harm our business. Furthermore, the PRC government has recently indicated an intent to
exert more oversight and control over overseas securities offerings and other capital markets activities and foreign investment in China-based
companies like us. Any such action, once taken by the PRC government, could significantly limit or completely hinder our ability to offer
or continue to offer securities to investors and cause the value of such securities to significantly decline or in extreme cases, become
worthless.
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While the PRC economy has experienced significant
growth over the past decades, growth has been uneven, both geographically and among various sectors of the economy. In addition, the rate
of growth has been slowing since 2012, and the impact of COVID-19 on the Chinese and global economies in 2020 is likely to be severe.
In particular, the National Bureau of Statistics of China reported a 6.8% drop and a 3.2% growth in GDP for the first and second quarters
of 2020, respectively, compared with the respective periods of 2019. Any adverse changes in economic conditions in China, in the policies
of the PRC government or in the laws and regulations in China could have a material adverse effect on the overall economic growth of China.
Any significant slowdown in China's economic growth may cause our potential students to delay or cancel their plans to enroll in
our schools, which in turn could reduce our revenues. The PRC government has implemented various measures to stimulate economic growth
and guide the allocation of resources. Some of these measures may benefit the overall PRC economy, but may have a negative effect on us.
For example, our financial condition and results of operations may be adversely affected by government control over capital investments
or changes in tax regulations. In addition, in the past, the PRC government has implemented certain measures, including interest rate
adjustment, to control the pace of economic growth. These measures may cause decreased economic activity in China, which may adversely
affect our business and results of operations. In addition, the increased global focus on social, ethical and environmental issues may
lead to China's adoption of more stringent standards in these areas, which may adversely impact the operations of China-based companies
including us.
Furthermore, our company, the VIE and its subsidiaries,
and our investors may face uncertainty about future actions by the government of China that could significantly affect the affiliated
entities and its subsidiaries' financial performance and operations, including the enforceability of the contractual arrangements.
As of the date of this report, neither our company nor the VIE has received or has been denied permission from Chinese authorities to
list on U.S. exchanges. However, there is no guarantee that our company or VIE will receive or not be denied permission from Chinese authorities
to list on U.S. exchanges in the future.
Uncertainties with respect to the PRC legal system could have
a material adverse effect on us.
The PRC legal system is a civil law system based
on written statutes. Unlike the common law system, prior court decisions in a civil law system may be cited as reference but have limited
precedential value. Since 1979, newly introduced PRC laws and regulations have significantly enhanced the protections of interest relating
to foreign investments in China. However, since these laws and regulations are relatively new and the PRC legal system continues to evolve
rapidly, the interpretations of such laws and regulations may not always be consistent, and enforcement of these laws and regulations
involves significant uncertainties, any of which could limit the available legal protections.
In addition, the PRC administrative and judicial
authorities have significant discretion in interpreting, implementing or enforcing statutory rules and contractual terms, and it may be
more difficult to predict the outcome of administrative and judicial proceedings and the level of legal protection we may enjoy in the
PRC than under some more developed legal systems. These uncertainties may affect our decisions on the policies and actions to be taken
to comply with PRC laws and regulations, and may affect our ability to enforce our contractual rights, property (including intellectual
property) or tort rights. In addition, the regulatory uncertainties may be exploited through unmerited legal actions or threats in an
attempt to extract payments or benefits from us. Such uncertainties may therefore increase our operating expenses and costs, and materially
and adversely affect our business and results of operations.
Any actions by the Chinese government, including any decision
to intervene or influence the operations of our PRC subsidiaries or the affiliated entities or to exert control over any offering of securities
conducted overseas and/or foreign investment in China-based issuers, may cause us to make material changes to the operations of our PRC
subsidiaries or the VIE, may limit or completely hinder our ability to offer or continue to offer securities to investors, and may cause
the value of such securities to significantly decline or be worthless.
The Chinese government has exercised and continues
to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. The ability
of our subsidiaries and affiliated entities to operate in China may be impaired by changes in its laws and regulations, including those
relating to education, taxation, land use rights, foreign investment limitations, and other matters.
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The central or local governments of China may
impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts on
our part to ensure our PRC subsidiaries and the affiliated entities' compliance with such regulations or interpretations. As such,
our PRC subsidiaries and the affiliated entities may be subject to various government actions and regulatory interference in the provinces
in which they operate. They could be subject to regulation by various political and regulatory entities, including various local and municipal
agencies and government sub-divisions. They may incur increased costs necessary to comply with existing and newly adopted laws and regulations
or penalties for any failure to comply.
Furthermore, it is uncertain when and whether
we 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 later denied or rescinded. Although we believe that our company, our PRC subsidiaries, and the VIE, are
currently not required to obtain permission from any Chinese authorities, and none of them has received any notice of denial of permission
to list on the U.S. exchange, our operations could be adversely affected, directly or indirectly, by existing or future laws and regulations
relating to our business or industry, particularly in the event permission to list on U.S. exchanges may be later required, or withheld
or rescinded once given.
Accordingly, government actions in the future,
including any decision to intervene or influence the operations of our PRC subsidiaries or the affiliated entities at any time, or to
exert control over an offering of securities conducted overseas and/or foreign investment in China-based issuers, may cause us to make
material changes to the operations of our PRC subsidiaries or the VIE, may limit or completely hinder our ability to offer or continue
to offer securities to investors, and/or may cause the value of such securities to significantly decline or be worthless.
Based on the recent development of PRC law, there is significant
uncertainty about the application and interpretation of the Law on Promoting Private Education, the Implementation Rules and their detailed
implementation rules and regulations. We may be subject to significant limitations on our ability to engage in the private education business,
acquire private schools, or receive payments from the VIE and may otherwise be materially and adversely affected by changes in PRC laws
and regulations.
Pursuant to the Law on Promoting Private Education,
sponsors of private schools may choose to establish schools as either non-profit or for-profit schools. Sponsors are not permitted to
establish for-profit schools that provide compulsory education services, which covers grades one to nine and which accounts for a significant
portion of our students as well as revenue during the reporting period. Sponsors of for-profit private schools are entitled to retain
the profits from their schools and any operating surplus may be allocated to the sponsors pursuant to the PRC company law and other relevant
laws and regulations. Sponsors of non-profit private schools are not entitled to any distribution of profits from their schools and all
revenue must be used for the operation of the schools.
As a holding company, our ability to generate
profits, pay dividends and other cash distributions to our shareholders under the Law on Promoting Private Education, the Implementation
Rules and other relevant laws and regulations are affected by many factors, including whether our schools are characterized as for-profit
or non-profit schools, the profitability of our schools, and our ability to receive dividends and other distributions from our PRC subsidiary,
Yunnan WFOE, which in turn depends on the service fees paid to Yunnan WFOE from the affiliated entities. Yunnan WFOE has respectively
entered into exclusive management services and business cooperation agreements with the affiliated entities and each of the shareholders
of Long-Spring Education, pursuant to which Yunnan WFOE has the exclusive right to provide comprehensive technical and business support
services to the affiliated entities. As advised by our PRC counsel, as of the date of this annual report, except for the Affected Entities,
our right to receive the service fees from our schools and other affiliated entities did not, to our knowledge, contravene any PRC laws
and regulations then in force. Likewise, the payment of service fees under our contractual arrangements should not be regarded as the
distribution of returns, dividends or profits to the sponsors of our schools under the PRC laws and regulations then in force.
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However, according to the Implementation Rules,
which came into force and effect beginning September 1, 2021, (1) foreign-invested enterprises established in China and social organizations
whose actual controllers are foreign parties shall not sponsor, participate in, or actually control private schools that provide compulsory
education; (2) social organizations or individuals shall not control any private school that provides compulsory education or any non-profit
private school that provides pre-school education by means of, among others, merger, acquisition and contractual arrangements; and (3)
private schools providing compulsory education shall not conduct any transaction with any related party. Where any other private school
conducts any transaction with any related party, it shall follow the principles of openness, fairness and impartiality, fix reasonable
tuition and fees and regulate the decision-making, and shall not damage the state and the school or the rights and interests of the teachers
and students, otherwise, there is a risk of being ordered to make corrections within a time limit, and the illegal gains, if any, shall
be confiscated after the fees collected are returned; if the circumstances are serious, the sponsor, actual controller and member of
the decision-making body or supervisory body shall not become the sponsor, actual controller or member of the decision-making body or
supervisory body of other private school within one to five years; if the circumstances are especially serious with adverse social impact,
the sponsor, actual controller and member of the decision-making body or supervisory body shall not become the sponsor, actual controller
and members of the decision-making body or supervisory body of other private school permanently; if a violation of public security administration
is constituted, the public security organ shall impose a public security administration punishment according to law; if a crime is constituted,
criminal responsibility shall be investigated in accordance with the law.
Therefore, a private school providing compulsory
education is prohibited from conducting transactions with its related parties. As a result, the clause or provision of the exclusive
management services and business cooperation agreements, in relation to related party transactions between a private school providing
compulsory education and Yunnan WFOE, have been rendered not legally enforceable since September 1, 2021. Since September 1, 2021, we
have ceased our transactions with the Affected Entities, to the extent practicable. However, to keep these private schools providing
compulsory education open, we continued to provide essential services without recognizing any revenues relating to such activities to
schools providing compulsory education in our discontinued operation, which are key to the normal daily operation of these schools. As
date of this annual report, schools providing compulsory education that we continue to provide services to have not received any further
rectification requirements or penalty notices from the relevant competent authority, and we are currently unable to assess, with any
certainty, the risks of penalty associated with our continued provision of such essential services. We are continuously assessing the
impact of relevant regulations on our business and making necessary measures and efforts to comply with the requirements under these
regulations and implementations, including restructuring corporate structure or unwinding contractual arrangements.
In particular, the enforcement of our contractual
arrangements may be challenged, and our corporate structure may need to be restructured to comply with the new regulations, which may
be time-consuming and expensive and impose additional restrictions on our business expansion and may further adversely affect our business
operations and results of operations. See "—Risks Related to Our Corporate Structure—If the PRC government finds that
our corporate structure and contractual arrangements does not comply with applicable PRC laws and regulations, we could be subject to
severe penalties and our business may be materially and adversely affected."
Our shares and ADSs will be prohibited from trading in the OTC
market under the Holding Foreign Companies Accountable Act, if the PCAOB is unable to inspect or investigate completely our auditors
for two consecutive years. The cessation of trading of our ordinary shares, or the threat of their being prohibited from being traded,
may materially and adversely affect the value of your investment.
Pursuant to the HFCAA, if the SEC determines that we have filed audit
reports issued by a registered public accounting firm that has not been subject to inspections by the PCAOB for two consecutive years,
the SEC will prohibit our shares and ADSs from being traded in the OTC market in the United States. On December 2, 2021, the
SEC adopted final amendments to its rules implementing the HFCAA, which include requirements to disclose information, including the auditor
name and location, the percentage of shares of the issuer owned by governmental entities, whether governmental entities in the applicable
foreign jurisdiction with respect to the auditor has a controlling financial interest with respect to the issuer, the name of each official
of the Chinese Communist Party who is a member of the board of the issuer, and whether the articles of incorporation of the issuer contains
any charter of the Chinese Communist Party. These amendments also establish procedures the SEC will follow in identifying issuers and
prohibiting trading by certain issuers under the HFCAA. In March 2022, the SEC issued its first "Conclusive list of issuers identified
under the HFCAA," which indicates that those companies are now formally subject to the delisting provisions if they remain on the
list for two consecutive years. We have not been identified by the SEC as a commission-identified issuer under the HFCAA as of the date
of this annual report.
Our current auditor, Audit Alliance LLP, the independent registered
public accounting firm that issues the audit report included elsewhere in this annual report and is headquartered in Singapore, is a firm
registered with the PCAOB, and, as of the date of this annual report, was not included in the list of PCAOB Identified Firms in the PCAOB
Determination Report issued in December 2021. The PCAOB currently has access to inspect the working papers of our auditor. However, the
recent developments would add uncertainties to our trading or future offering of our securities in the United States, and we cannot assure
you whether 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 they relate to the audit of our financial statements. To the extent this status changes in the future and our auditor's
audit documentation related to their audit reports for our Company is inaccessible for inspection by the PCAOB or if the PCAOB is unable
to inspect or investigate our auditor completely because of a position taken by an authority in a foreign jurisdiction, trading in our
shares could be prohibited under the HFCAA, and, as a result, our shares could be suspended or prohibited from trading in the OTC market.
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Our ability to retain an auditor subject to PCAOB inspection and investigation,
including but not limited to inspection of the audit working papers related to us, may depend on the relevant positions of U.S. and Chinese
regulators. With respect to audits of companies with operations in China, such as our company, there are uncertainties about the ability
of auditors of such companies to fully cooperate with a request by the PCAOB for audit working papers in China without the approval of
Chinese authorities. In August 2022, the CSRC, the MOF, and the PCAOB signed a Statement of Protocol (the "Statement of Protocol"),
which establishes a specific and accountable framework for the PCAOB to conduct inspections and investigations of PCAOB-governed accounting
firms in mainland China and Hong Kong. On December 15, 2022, the PCAOB announced that it was able to secure complete access to inspect
and investigate PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong completely in 2022. The PCAOB Board
vacated its previous 2021 determinations that the PCAOB was unable to inspect or investigate completely registered public accounting firms
headquartered in mainland China and Hong Kong. However, should PRC authorities obstruct or otherwise fail to facilitate the PCAOB's
access in the future, the PCAOB Board will consider the need to issue a new determination. In the event that future regulators in China
take steps to restrict the audit firm's access to working papers in mainland China or Hong Kong, or if the PCAOB is unable to fully
inspect our audit working papers, or if the PCAOB expands the scope of its determination so that we are subject to the HFCAA, it could
restrict or limit our access to the U.S. capital markets or in the OTC market in the United States may be prohibited under the HFCAA.
If our ADSs are prohibited from trading in the OTC market in the United States, there is no certainty that we will be able to list our
Ordinary Shares on a securities exchange outside the United States or that a market for our Ordinary Shares will develop outside the U.S.
Such a prohibition would significantly affect our ability to raise capital on terms acceptable to us, or at all, which would have a material
adverse impact on our business, financial condition and prospects.
If the settlement reached between the SEC and the "big
four" PRC-based accounting firms concerning the manner in which the SEC may seek access to audit working papers from audits in
China of US-listed companies is not or cannot be performed in a manner acceptable to authorities in China and the United States, we may
be unable to timely file future financial statements in compliance with the requirements of the Exchange Act in the future.
In December 2012, the SEC brought administrative
proceedings against the "big four" PRC-based accounting firms, alleging that they had violated U.S. securities laws
and the SEC's rules and regulations thereunder by failing to provide to the SEC the firms' audit work papers and other documents
related to certain other PRC-based companies that are publicly traded in the United States.
On January 22, 2014, the administrative
law judge presiding over the matter rendered an initial decision that each of the firms had violated the SEC's rules of practice
by failing to produce audit papers and other documents to the SEC. The initial decision censured each of the firms and barred them from
practicing before the SEC for a period of six months. The decision was neither final nor legally effective until reviewed and approved
by the SEC, and on February 12, 2014, the PRC-based accounting firms appealed to the SEC against this decision.
On February 6, 2015, the four PRC-based accounting
firms each agreed to a censure and to pay a fine to the SEC to settle the dispute and avoid suspension of their ability to practice before
the SEC and audit U.S.-listed companies. The settlement required the firms to follow detailed procedures and to seek to provide the SEC
with access to PRC-based firms' audit documents via the CSRC. Under the terms of the settlement, the underlying proceeding against
the four PRC-based accounting firms was deemed dismissed with prejudice four years after entry of the settlement. The four-year
mark occurred on February 6, 2019. Despite the Statement of Protocol, it remains uncertain whether the SEC will further challenge
the four PRC-based accounting firms' compliance with U.S. laws in connection with U.S. regulatory requests for audit
work papers or if the results of such a challenge would result in the SEC imposing penalties such as suspensions.
In the past we had engaged certain Chinese affiliates
of the "big four" accounting firms as our independent registered public accounting firm. While we did not do so for the fiscal
year ended December 31, 2022, we cannot assure you that we will not engage or otherwise rely on their audits in the future. If the accounting
firm we engage were denied, even temporarily, the ability to practice before the SEC, and we were unable to timely find another registered
public accounting firm to audit and issue an opinion on our financial statements, our financial statements could be determined not to
be in compliance with the requirements of the Exchange Act. Such a determination could ultimately lead to the quoting of our ordinary
shares on the OTC market or deregistration from the SEC, or both, which would substantially reduce or effectively terminate the trading
of our ADSs in the United States. Moreover, any negative news about any such future proceedings against these accounting firms may cause
investor uncertainty regarding China-based, United States-listed companies and the market price of our ADSs may be adversely affected.
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Failure to comply with governmental regulations and other legal
obligations concerning data protection and cybersecurity may materially and adversely affect our business, as we routinely collect and
store data during the conduct of our business.
We routinely collect and store data during our
operations. We store basic personal information such as students' name, age, birthday and other personal information, and use such data
for the purposes of facilitating students in the examination application and national census and statistics related reporting process
only. We are subject to PRC laws and regulations governing the collecting, storing, sharing, using, processing, disclosure and protection
of data on the Internet and mobile platforms as well as cybersecurity. On August 17, 2021, the state council promulgated the Regulations
on Protection of Critical Information Infrastructure, which became effective on September 1, 2021. Pursuant to the Regulations on Protection
of Critical Information Infrastructure, critical information infrastructure shall mean any important network facilities or information
systems of an important industry or field, such as public communication and information service, energy, communications, water conservation,
finance, public services, e-government affairs and national defense science, which may endanger national security, peoples' livelihoods
and public interest in the event of damage, function loss or data leakage. In addition, relevant administration departments of each critical
industry and sector, or Protection Departments, shall be responsible to formulate eligibility criteria and determine the critical information
infrastructure operator in the respective industry or sector. The operators shall be informed about the final determination as to whether
they are categorized as critical information infrastructure operators. On December 28, 2021, the Cyberspace Administration of China jointly
with other 12 government authorities, issued the Measures for Cybersecurity Review (2021), which became effective on February 15, 2022,
and repealed the Cybersecurity Review Measures (2020) simultaneously. The Measures for Cybersecurity Review (2021) provide that critical
information infrastructure operators purchasing network products and services and data processors carrying out data processing activities,
which affect or may affect national security, shall apply for cybersecurity review to the cyberspace administrations in accordance with
the provisions thereunder. As of the date of this annual report, no detailed rules or implementation have been issued by any Protection
Departments and we have not been informed that we are identified as a critical information infrastructure operator by any governmental
authorities. We will closely monitor the rule-making process and will assess and determine whether we are required to apply for the cybersecurity
review.
On August 20, 2021, the Standing Committee of
the National People's Congress (the "SCNPC") promulgated the Personal Information Protection Law, which became effective
on November 1, 2021. The Personal Information Protection Law aims at protecting the personal information rights and interests, regulating
the processing of personal information, ensuring the orderly and free flow of personal information in accordance with the law, and promoting
the reasonable use of personal information. According to the Personal Information Protection Law, personal information includes all kinds
of identified or identifiable information related to natural persons recorded by electronic or other means, but excludes de-identified
information. The Personal Information Protection Law also specified the rules for handling sensitive personal information, which includes
biometrics, religious beliefs, specific identities, medical health, financial accounts, trails and locations, and personal information
of teenagers under fourteen years old and other personal information, which, upon leakage or illegal usage, may easily infringe the personal
dignity or harm safety of livelihood and property. Personal information handlers shall bear responsibility for their personal information
handling activities, and must adopt necessary measures to safeguard the security of the personal information they handle. Otherwise, the
personal information handlers will be ordered for rectification or suspension or termination of provision of services, confiscation of
illegal income, subject to fines or other penalties.
We cannot predict the impact of these new laws
and regulations, if any, at this stage, and we will closely monitor and assess any development in the rule-making process. Therefore,
it remains uncertain whether the proposed measures will be applicable to our business, or whether the future regulatory changes would
impose additional restrictions on companies like us. Failure to comply with the cybersecurity and data privacy requirements in a timely
manner, or at all, may subject us to government enforcement actions and investigations, fines, penalties, suspension of our non-compliant
operations, among other sanctions. As a result, we may be required to upgrade or change our service offerings and other aspects of our
business to comply with such laws and regulations.
We have adopted various measures to ensure compliance
with privacy and data protection regulations. However, our security control may not prevent the improper leakage of personal data and
confidential information. Additionally, we cannot assure you that we will be able to address any vulnerabilities in our systems that we
may become aware of in the future. In particular, we could be subject to attacks on our systems by external parties or fraudulent or inappropriate
behaviors by our employees, third-party providers or other business partners. Third parties may also gain access to our data using computer
malware, viruses, spamming, phishing attacks or other means. A security breach that leads to leakage of data and information of our users,
even though anonymized, could still subject us to legal liabilities, regulatory sanctions, reputational damage and loss of user confidence.
In addition, data breaches or any misconduct during the process of collection, analysis, and storage of data, could result in a violation
of applicable data privacy and protection laws and regulations in China, and subject us to regulatory actions, investigations or litigations.
Even if these actions, investigations or litigations do not result in any liability to us, we could incur significant costs in investigating
and defending against them, and could be subject to negative publicity about our privacy and data protection practices, which may affect
our reputation in the marketplace. Potential risks related to our collection and use of data could require us to implement measures to
reduce our exposure to liability, which may require us to expend substantial resources. As a result, our business, results of operations
and financial condition could be materially and adversely affected.
The filing procedure with the CSRC shall be fulfilled and the
approval of other PRC government authorities may be required in connection with our future offshore offering under PRC law, and, we cannot
predict whether or for how long we will be able to complete the filing procedure with the CSRC and obtain such approval or complete such
filing, if required.
The Regulations on Mergers and Acquisitions of Domestic
Companies by Foreign Investors (the "M&A Rules"), adopted by six PRC regulatory agencies in 2006 and amended in 2009,
include, among other things, provisions that purport to require that an offshore special purpose vehicle, formed for the purpose of an
overseas listing of securities through acquisitions of domestic enterprises in China or assets and controlled by enterprises or individuals
in China, to obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle's securities on an
overseas stock exchange. On September 21, 2006, pursuant to the M&A Rules and other PRC laws, the CSRC published on its
official website relevant guidance regarding its approval of the listing and trading of special purpose vehicles' securities on
overseas stock exchanges, including a list of application materials. However, substantial uncertainty remains regarding the scope and
applicability of the M&A Rules to offshore special purpose vehicles. We completed our initial public offering on March 11, 2021.
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On July 6, 2021, the relevant PRC government
authorities issued the Opinions on Severely Cracking Down on Illegal Securities Activities According to Law, which were made available
to the public on July 6, 2021. These opinions emphasized the need to strengthen the administration over illegal securities activities
and the supervision on overseas listings by China-based companies. These opinions proposed to take effective measures, such as promoting
the construction of relevant regulatory systems, to deal with the risks and incidents facing China-based overseas-listed companies and
the demand for cybersecurity and data privacy protection. The aforementioned policies and any related implementation rules to be enacted
may subject us to additional compliance requirement in the future. As these opinions were recently issued, official guidance to act upon,
and interpretation thereof remain unclear in several respects at this time. Therefore, we cannot assure you that we will remain fully
compliant with all new regulatory requirements of these opinions or any future implementation rules on a timely basis, or at all.
On February 17, 2023, the CSRC promulgated the
Trial Measures of the Overseas Securities Offering and Listing by Domestic Companies (the "Overseas Listing Trial Measures")
and the related guidelines, which became effective on March 31, 2023. According to the Overseas Listing Trial Measures, PRC domestic companies
that seek to offer and list securities in overseas markets, either in direct or indirect means, are required to fulfill the filing procedure
with the CSRC and report relevant information. The Overseas Listing Trial Measures provides that an overseas listing or offering is explicitly
prohibited, if any of the following: (1) such securities offering and listing is explicitly prohibited by provisions in laws, administrative
regulations and relevant state rules; (2) the intended securities offering and listing may endanger national security as reviewed
and determined by competent authorities under the State Council in accordance with law; (3) the domestic company intending to make
the securities offering and listing, or its controlling shareholder(s) and the actual controller, have committed relevant crimes
such as corruption, bribery, embezzlement, misappropriation of property or undermining the order of the socialist market economy during
the latest three years; (4) the domestic company intending to make the securities offering and listing is currently under investigations
for suspicion of criminal offenses or major violations of laws and regulations, and no conclusion has yet been made thereof; or (5) there
are material ownership disputes over equity held by the domestic company's controlling shareholder(s) or by other shareholder(s) that
are controlled by the controlling shareholder(s) and/or actual controller.
The Overseas Listing Trial Measures also provides
that if the issuer meets both the following criteria, the overseas securities offering and listing conducted by such issuer will be deemed
as indirect overseas offering by PRC domestic companies: (1) 50% or more of any of the issuer's operating revenue, total profit,
total assets or net assets as documented in its audited consolidated financial statements for the most recent fiscal year is accounted
for by domestic companies; and (2) the main parts of the issuer's business activities are conducted in mainland China, or its
main place(s) of business are located in mainland China, or the majority of senior management staff in charge of its business operations
and management are PRC citizens or have their usual material events in mainland China.
The Overseas Listing Trial Measures further provides that, initial
public offerings or listings in overseas markets by domestic companies, either in direct or indirect form shall be filed with the CSRC
pursuant to the requirements of the Overseas Listing Trial Measures within three business days after the relevant application is submitted
overseas. The companies that had already been listed on overseas stock exchanges prior to March 31, 2023 or the companies that had obtained
the approval from overseas supervision administrations or stock exchanges for its offering and listing prior to March 31, 2023 and will
complete their overseas offering and listing prior to September 30, 2023 are not required to make immediate filings for its listing, but
are required make filings for subsequent offerings in accordance with the Overseas Listing Trial Measures. Companies that had already
submitted an application for an initial public offering to overseas supervision administrations but had not yet obtained the approval
from overseas supervision administrations or stock exchanges for the offering and listing prior to March 31, 2023 may arrange for the
filing within a reasonable time period and should complete the filing procedure before such companies' overseas issuance and listing.
Companies, like us, that had already been listed overseas as of March 31, 2023 are not required to make immediate filing with the CSRC
but are required to file with the CSRC within three business days after the completion of subsequent securities offerings in the same
overseas market where its securities were previously offered and listed, or file the required filing materials with the CSRC within three
working days after the submission of relevant application for subsequent securities offerings and listings in other overseas markets.
In addition, an overseas listed company is required to report to the CSRC within three business days after the occurrence and announcement
of any of the following material events: (1) a change of control of the listed company; (2) the investigation, sanction or other measures
undertaken by any foreign securities regulatory agencies or authorities in respect of the listed company; (3) a change of listing status
or transfer of listing segment; and (4) the voluntary or mandatory delisting of the listed company. If there is any material change of
the principal business of the listed company after the overseas offering and listing so that the listed company is no longer required
to file with the CSRC, it shall file a specific report and a legal opinion issued by a domestic law firm to the CSRC within three business
days after the occurrence thereof.
If we do not receive prior approval or complete the filing, to the
extent it is required, for any of our future offerings of securities overseas or up-listing to the New York Stock Exchange (the "NYSE")
or the NASDAQ Stock Market, or to maintain the trading status of our ADSs, or if we inadvertently conclude that such prior approval or
any filing is not required, the CSRC or other PRC regulatory agencies may take actions requiring us, or making it advisable for us, not
to proceed with such offering or maintain the trading status of our ADSs. Any failure to obtain or delay in obtaining approvals and completing
filing procedures from the CSRC or other regulatory authorities or other procedures, including the cybersecurity review, for our offshore
offerings, or a rescission of any such approval or filing if obtained by us, or if we are unable to comply with any new approval requirements
or regulatory requirements which might be adopted for offerings that we have completed prior to the publication of the above-referenced
opinions, would subject us to sanctions by the CSRC or other PRC regulatory authorities. These regulatory authorities may impose fines
and penalties on our operations in China, limit our ability to pay dividends outside of China, limit our operating privileges in China,
delay or restrict the repatriation of the proceeds from our offshore offerings into China or take other actions that could materially
and adversely affect our business, financial condition, results of operations, and prospects, as well as the trading price of our securities.
The CSRC or other PRC regulatory authorities also may take actions requiring us, or making it advisable for us, to halt our offshore offerings
before settlement and delivery of the shares offered. Consequently, if investors engage in market trading or other activities in anticipation
of and prior to settlement and delivery, they do so at the risk that settlement and delivery may not occur. In addition, if the CSRC or
other regulatory authorities later promulgate new rules or explanations requiring that we obtain their approvals or accomplish the required
filing or other regulatory procedures for our prior offshore offerings, we may be unable to obtain a waiver of such approval requirements,
if and when procedures are established to obtain such a waiver. Any uncertainties or negative publicity regarding such approval requirement
could materially and adversely affect our business, prospects, financial condition, reputation, and the trading price of our securities.
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It may be difficult for overseas regulators to conduct investigations
or collect evidence within China.
Shareholder claims or regulatory investigations
that are common in jurisdictions outside China are difficult to pursue as a matter of law or practicality in China. For example, in China,
there are significant legal and other obstacles to providing information needed for regulatory investigations or litigation initiated
outside China. Although the authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities
of another country or region to implement cross-border supervision and administration, such cooperation with the securities regulatory
authorities in the United States or other jurisdictions may not be efficient in the absence of a mutual and practical cooperation mechanism.
Furthermore, according to Article 177 of the PRC Securities Law, or Article 177, which became effective in March 2020, no overseas securities
regulator is allowed to directly conduct investigation or evidence collection activities within the territory of the PRC, and without
the consent by the Chinese securities regulatory authorities and the other competent governmental agencies, no entity or individual may
provide documents or materials related to securities business to any foreign party. While detailed interpretation of or implementation
rules under Article 177 has yet to be promulgated, the inability of an overseas securities regulator to directly conduct investigation
or evidence collection activities within China and the potential obstacles for information provision may further increase difficulties
you face in protecting your interests. See "—Risks Related to our ADSs—You may face difficulties in protecting your
interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands
law and conduct our operations in China" for risks associated with investing in us as a Cayman Islands company.
The discontinuation of any preferential tax treatment currently
available to us, in particular the tax exempt status of our schools, could materially and adversely affect our results of operations.
Prior to the Private Education Law taking effect
on December 29, 2018, private schools for which the school sponsors do not require returns are eligible to enjoy the same preferential
tax treatment as public schools according to the Implementation Rules of the Law on Promoting Private Education. Pursuant to the Private
Education Law, a non-profit private school may enjoy the same preferential tax treatments as public schools in accordance with the relevant
PRC laws and regulations. Our school sponsors have registered Xinping Long-Spring Advanced Secondary School and Xishuangbanna Long-Spring
Experimental Secondary School as for-profit private education institutions and have registered Kunming Chenggong Long-Spring Experimental
Secondary School, Yiliang Long-Spring Experimental Secondary School, Qujing Hengshui Experimental Secondary School, Xinping Hengshui Experimental
Middle School, Qiubei Long-Spring Experimental Secondary School, and Wenshan Long-Spring Experimental Secondary School as non-profit private
schools. We have not made decisions to register some of our schools as for-profit or non-profit schools as we are currently in the transition
period during which no registration election is required. There is a possibility that the PRC government may promulgate relevant tax regulations
that will eliminate such preferential tax treatment, or the local tax bureaus may change their policy, in each such case, we will be subject
to PRC enterprise income tax going forward. The discontinuation of any preferential tax treatment currently available to us or the determination
of any of the relevant tax authorities that any of the preferential tax treatment we have enjoyed or currently enjoy is not in compliance
with the PRC laws would cause our effective tax rate to increase, which would increase our tax expenses and reduce our net profit.
We may be subject to potential tax penalty and surcharge for
the enterprise income tax payable in PRC.
As of the date of this annual report, our nine
schools have not paid enterprise income tax for revenues generated from formal education services and three of these nine schools and
another one school have not paid enterprise income tax for revenues generated from informal education services, among which we have obtained
confirmation letters from or conducted interview with the PRC tax authorities for six of these schools to confirm that such schools are
not required to pay enterprise income tax. As of the date of this annual report, we have not obtained confirmation letters from the PRC
tax authorities for the remaining four schools, and we may be subject to additional tax liabilities if deemed payable by the relevant
PRC tax authorities. If any of our schools is deemed to have failed to pay enterprise income tax within the prescribed time limit, we
may be subject to tax penalty and related surcharges and our business, financial condition and results of operations could be materially
and adversely affected.
If we are classified as a PRC resident enterprise for PRC income
tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders or the ADS holders.
Under the PRC Enterprise Income Tax Law and its
implementation rules, an enterprise established under the laws of jurisdictions outside of the PRC with its "de facto management
body" within the PRC is considered a "resident enterprise" and will be subject to PRC enterprise income tax on its
global income at the rate of 25%. The implementation rules define the term "de facto management body" as the body that exercises
full and substantial control and overall management over the business, productions, personnel, accounts and properties of an enterprise.
In 2009, the State Administration of Taxation (the "SAT") issued a circular, known as SAT Circular 82, which provides certain
specific criteria for determining whether the "de facto management body" of a PRC-controlled enterprise that is incorporated
offshore is located in China. Although this circular only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise
groups, not those controlled by PRC individuals or foreigners, the criteria set forth in the circular may reflect the SAT's general
position on how the "de facto management body" text should be applied in determining the tax resident status of all offshore
enterprises. According to SAT Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group
will be regarded as a PRC tax resident by virtue of having its "de facto management body" in China and will be subject to
PRC enterprise income tax on its global income only if all of the following conditions are met: (1) the senior management and core management
departments in charge of daily operations are located mainly within the PRC; (2) decisions relating to the enterprise's financial
and human resource matters are made or are subject to approval by organizations or personnel in the PRC; (3) the enterprise's primary
assets, accounting books, company seals, and board and shareholder resolutions, are located or maintained in the PRC; and (4) at least
50% of voting board members or senior executives habitually reside in the PRC.
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We believe none of our entities outside of China
is a PRC resident enterprise for PRC tax purposes. However, the tax resident status of an enterprise is subject to determination by the
PRC tax authorities and uncertainties remain with respect to the interpretation of the term "de facto management body." If
the PRC tax authorities determine that First High-School Education Group Co., Ltd. is a PRC resident enterprise for enterprise income
tax purposes, we may be required to withhold a 10% withholding tax from dividends we pay to our shareholders that are non-resident enterprises,
including the holders of the ADSs. In addition, non-resident enterprise shareholders (including the ADS holders) may be subject to PRC
tax at a rate of 10% on gains realized on the sale or other disposition of ADSs or ordinary shares at a rate of 10%, if such income is
treated as sourced from within the PRC. Furthermore, if PRC tax authorities determine that we are a PRC resident enterprise for enterprise
income tax purposes, dividends paid to our non-PRC individual shareholders (including the ADS holders) and any gain realized on the transfer
of ADSs or ordinary shares by such shareholders may be subject to PRC tax at a rate of 20% (which, in the case of dividends, may be withheld
at source by us), if such gains are deemed to be from PRC sources. These rates may be reduced by an applicable tax treaty, but it is
unclear whether non-PRC shareholders of First High-School Education Group Co., Ltd. would be able to claim the benefits of any tax treaties
between their country of tax residence and the PRC in the event that First High-School Education Group Co., Ltd. is treated as a PRC
resident enterprise. Any such tax may reduce the returns on your investment in the ADSs.
We face uncertainties with respect to indirect transfer of equity
interests in PRC resident enterprises by their non-PRC holding companies.
In February 2015, the SAT issued the Bulletin
on Issues of Enterprise Income Tax on Indirect Transfers of Assets by Non-PRC Resident Enterprises or Bulletin 7. Pursuant to Bulletin
7, an "indirect transfer" of PRC assets, including a transfer of equity interests in an unlisted non-PRC holding company
of a PRC resident enterprise, by non-PRC resident enterprises may be re-characterized and treated as a direct transfer of the underlying
PRC assets, if such arrangement does not have a reasonable commercial purpose and was established for the purpose of avoiding payment
of PRC enterprise income tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax, and
the transferee or other person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a
rate of 10% for the transfer of equity interests in a PRC resident enterprise.
On October 17, 2017, the SAT issued the Announcement
of the SAT on Issues Concerning the Withholding of Non-resident Enterprise Income Tax at Source, or Bulletin 37, which came into effect
on December 1, 2017 and further amended on June 15, 2018. The Bulletin 37 further clarifies the practice and procedure of the withholding
of nonresident enterprise income tax.
There is uncertainty as to the application of
Bulletin 37 or previous rules under Bulletin 7. We face uncertainties on our offshore restructuring transactions or sale of the shares
of our offshore subsidiaries, where non-resident enterprises, as the transferors, were involved. Under Bulletin 37 and Bulletin 7, our
company may be subject to filing obligations or taxes if our company is the transferor in such transactions, and may be subject to withholding
obligations if our company is the transferee in such transactions. As a result, we and our non-PRC shareholders may have the risk of
being taxed for the disposition of our ordinary shares or ADS and may be required to spend valuable resources to comply with Bulletin
7 and Bulletin 37 or to establish that we or our non-PRC shareholders should not be taxed as an indirect transfer, which may have a material
adverse effect on our financial condition and results of operations or the investment by non-PRC investors in us.
The custodians or authorized users of our controlling non-tangible
assets, including chops and seals, may fail to fulfill their responsibilities, or misappropriate or misuse these assets.
Under the PRC law, legal documents for corporate
transactions, including agreements and contracts are executed using the chop or seal of the signing entity or with the signature of a
legal representative whose designation is registered and filed with relevant PRC market regulation administrative authorities.
In order to secure the use of our chops and seals,
we have established internal control procedures and rules for using these chops and seals. In any event that the chops and seals are
intended to be used, the responsible personnel will submit the application through our office automation system and the application will
be verified and approved by authorized employees in accordance with our internal control procedures and rules. In addition, in order
to maintain the physical security of our chops, we generally have them stored in secured locations accessible only to authorized employees.
Although we monitor such authorized employees, the procedures may not be sufficient to prevent all instances of abuse or negligence.
There is a risk that our employees could abuse their authority, for example, by entering into a contract not approved by us or seeking
to gain control of one of our subsidiaries or our affiliated entities or their subsidiaries. If any employee obtains, misuses or misappropriates
our chops and seals or other controlling non-tangible assets for whatever reason, we could experience disruption to our normal business
operations. We may have to take corporate or legal action, which could involve significant time and resources to resolve and divert management
from our operations.
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Restrictions on currency exchange may limit our ability to receive
and use our revenues effectively.
The PRC government imposes controls on the convertibility
of the Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. We receive substantially all
of our revenues in Renminbi. Under our current corporate structure, our Cayman Islands holding company may rely on dividend payments
from our PRC subsidiaries to fund any cash and financing requirements we may have. Under existing PRC foreign exchange regulations, payments
of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions,
can be made in foreign currencies without prior approval of the SAFE, by complying with certain procedural requirements. Specifically,
under the existing exchange restrictions, without prior approval of SAFE, cash generated from the operations of our PRC subsidiaries
in China may be used to pay dividends to our company. However, approval from or registration with appropriate government authorities
is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment
of loans denominated in foreign currencies. As a result, we need to obtain SAFE approval to use cash generated from the operations of
our PRC subsidiaries and affiliated entities to pay off their respective debt in a currency other than Renminbi owed to entities outside
China, or to make other capital expenditure payments outside China in a currency other than Renminbi.
In light of the flood of capital outflows of
China in 2016 due to the weakening Renminbi, the PRC government has imposed more restrictive foreign exchange policies and stepped up
scrutiny of major outbound capital movement including overseas direct investment. More restrictions and substantial vetting process are
put in place by SAFE to regulate cross-border transactions falling under the capital account. If any of our shareholders regulated by
such policies fails to satisfy the applicable overseas direct investment filing or approval requirement timely or at all, it may be subject
to penalties from the relevant PRC authorities. The PRC government may at its discretion further restrict access in the future to foreign
currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies
to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders, including holders
of the ADSs.
Our subsidiaries and affiliated entities in China are subject
to restrictions on making dividends and other payments to us.
We are a holding company and rely principally
on dividends paid by our subsidiaries in China for our cash needs, including paying dividends and other cash distributions to our shareholders
to the extent we choose to do so, servicing any debt we may incur and paying our operating expenses. The income for our PRC subsidiaries,
especially Long-Spring Education, in turn depends on the service fees paid by the affiliated entities. Current PRC regulations permit
our subsidiaries in China to pay dividends to us only out of their accumulated profits, if any, determined in accordance with Chinese
accounting standards and regulations. Under the applicable requirements of PRC law, our PRC subsidiaries may only distribute dividends
after they have made allowances to fund certain statutory reserves. These reserves are not distributable as cash dividends. Pursuant
to the Law on Promoting Private Education, sponsors of for-profit private schools are entitled to retain the profits from their schools
and the operating surplus may be allocated to the sponsors pursuant to the PRC company law and other relevant laws and regulations. Sponsors
of non-profit private schools are not entitled to any distribution of profits from their schools and all revenue must be used for the
operation of the schools. According to Implementation Rules, a non-profit private school should allocate no less than 10% of its audited
annual non-restricted net asset increase, or a for-profit private school should allocate no less than 10% of its audited annual net income,
to its development, respectively. In addition, prior to the specific Implementation Rules being promulgated by the State Council and
other relevant regulations promulgated by other local and regional governments, at the end of each fiscal year, each of our schools
that are private schools in China is required to allocate a certain amount to its development fund for the construction or maintenance
of the school properties or purchase or upgrade of school facilities. In particular, our schools that require reasonable returns must
allocate no less than 25.0% of their annual net income, and our schools that do not require reasonable returns must allocate no less
than 25.0% of their annual increase in the net assets of the school for such purposes. However, the relevant authorities have yet to
promulgate any detailed implementation rules and regulations under the Implementation Rules. We remain uncertain as to the timing and
substance of the rules under the Law on Promoting Private Education and Implementation Rules to be promulgated, and how such rules will
impact our operation. Furthermore, if our subsidiaries or the affiliated entities in China incur debt on their own behalf in the future,
the instruments governing the debt may restrict their ability to pay dividends or make other payments to us. Any such restrictions may
materially affect such entities' ability to make dividends or make payments, in service fees or otherwise, to us, which may materially
and adversely affect our business, financial condition and results of operations.
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Fluctuations in exchange rates could have a material adverse
effect on our results of operations and the value of your investment.
The value of the Renminbi against the U.S. dollar
and other currencies is affected by changes in China's political and economic conditions and China's foreign exchange policies,
among other things. In 2005, the PRC government changed its decades-old policy of pegging the value of the Renminbi to the U.S. dollar,
and the Renminbi appreciated more than 20% against the U.S. dollar over the following three years. Between July 2008 and June 2010, this
appreciation halted and the exchange rate between Renminbi and the U.S. dollar remained within a narrow band. Since June 2010, Renminbi
has fluctuated against the U.S. dollar, at times significantly and unpredictably. On November 30, 2015, the Executive Board of IMF completed
the regular five-year review of the basket of currencies that make up the Special Drawing Right (the "SDR"), and decided
that with effect from October 1, 2016, Renminbi is determined to be a freely usable currency and will be included in the SDR basket as
a fifth currency, along with the U.S. dollar, the Euro, the Japanese yen and the British pound. In the fourth quarter of 2016, the Renminbi
has depreciated significantly against the backdrop of a surging U.S. dollar and persistent capital outflows from China. This depreciation
halted in 2017, and the RMB appreciated approximately 7% against the U.S. dollar during this one-year period. In 2018, a new round of
RMB depreciation emerged under the influence of a strong U.S. dollar and the trade friction between China and the United States. With
the development of the foreign exchange market and progress towards interest rate liberalization and Renminbi internationalization, the
PRC government may in the future announce further changes to the exchange rate system and we cannot assure you that Renminbi will not
appreciate or depreciate significantly in value against the U.S. dollar in the future. It is difficult to predict how market forces or
PRC or U.S. government policy may impact the exchange rate between Renminbi and the U.S. dollar in the future.
Significant revaluation of the Renminbi may have
a material adverse effect on your investment. For example, to the extent that we need to convert U.S. dollars we receive from our overseas
offering into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi
amount we would receive from the conversion. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of making
payments for dividends on our ordinary shares or the ADSs or for other business purposes, appreciation of the U.S. dollar against the
Renminbi would have a negative effect on the U.S. dollar amount available to us.
Very limited hedging options are available in
China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any material hedging transactions in an
effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future,
the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure or at all.
In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert Renminbi
into foreign currency.
The M&A Rules and certain other PRC regulations establish
complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue
growth through acquisitions in China.
The Provisions on the Merger and Acquisition
of Domestic Enterprises by Foreign Investors (the "M&A Rules") adopted by six PRC regulatory agencies in 2006 and amended
in 2009, and some other regulations and rules concerning mergers and acquisitions established additional procedures and requirements
that could make merger and acquisition activities by foreign investors more time-consuming and complex, including requirements in some
instances that the MOFCOM, be notified in advance of any change-of-control transaction in which a foreign investor takes control of a
PRC domestic enterprise. Moreover, the Anti-Monopoly Law requires that the MOFCOM shall be notified in advance of any concentration of
undertaking if certain thresholds are triggered. In addition, the security review rules issued by the MOFCOM that became effective in
September 2011 specify that mergers and acquisitions by foreign investors that raise "national defense and security" concerns
and mergers and acquisitions through which foreign investors may acquire de facto control over domestic enterprises that raise "national
security" concerns are subject to strict review by the MOFCOM, and the rules prohibit any activities attempting to bypass a security
review, including by structuring the transaction through a proxy or contractual control arrangement. In the future, we may grow our business
by acquiring complementary businesses. Complying with the requirements of the above-mentioned regulations and other relevant rules to
complete such transactions could be time-consuming, and any required approval processes, including obtaining approval from the MOFCOM
or its local counterparts may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our
business or maintain our market share.
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PRC regulations relating to the establishment of offshore special
purpose 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, limit our PRC subsidiaries' ability to increase its registered capital
or distribute profits to us, or may otherwise adversely affect us.
The SAFE promulgated the Circular on Relevant
Issues Relating to Foreign Exchange Administration of Overseas Investment and Financing and Return Investments Conducted by Domestic
Residents through Overseas Special Purpose Vehicles (the "SAFE Circular 37"), in July 2014 that requires PRC residents or
entities to register with SAFE or its local branch in connection with their establishment or control of an offshore entity established
for the purpose of overseas investment or financing with such PRC residents or entities' legally owned assets or equity interests
in domestic enterprises or offshore assets or interests. On February 13, 2015, SAFE issued SAFE Circular 13, which took effect on June
1, 2015, pursuant to which, the power to accept SAFE registration was delegated from local SAFE to local qualified banks where the assets
or interest in the domestic entity was located. In addition, such PRC residents or entities must update their SAFE registrations when
the offshore special purpose vehicle undergoes material events relating to any change of basic information (including change of such
PRC citizens or residents, name and operation term), increases or decreases in investment amount, transfers or exchanges of shares, or
mergers or divisions.
SAFE Circular 37 is issued to replace the Circular
on Relevant Issues Relating to Foreign Exchange Administration of Financing and Roundtrip Investments by Domestic Residents via Overseas
Special Purpose Vehicles, or SAFE Circular 75.
If our shareholders who are PRC residents or
entities do not complete their registration with the local SAFE branches, our PRC subsidiaries may be prohibited from distributing their
profits and proceeds from any reduction in capital, share transfer or liquidation to us, and we may be restricted in our ability to contribute
additional capital to our PRC subsidiaries. Moreover, failure to comply with the SAFE registration described above could result in liability
under PRC laws for evasion of applicable foreign exchange restrictions.
We have used our best efforts to notify PRC residents
or entities who directly or indirectly hold shares in our Cayman Islands holding company and who are known to us as being PRC residents
to complete the foreign exchange registrations. However, we may not be informed of the identities of all the PRC residents or entities
holding direct or indirect interest in our company, nor can we compel our beneficial owners to comply with SAFE registration requirements.
As of the date of this annual report, all PRC residents known to us that currently hold direct or indirect ownership interests in our
company completed the registration with SAFE as required by the SAFE Circular 37, except for Mr. Shaowei Zhang, who is in the process
of updating his SAFE registration for his equity position in the offshore special purpose vehicles, including Long-Spring Education Management
Limited, Long-Spring Education Technology Limited, and Long-Spring Education Consulting Limited. However, we may not at all times be
fully aware or informed of the identities of all our shareholders or beneficial owners that are required to make or update such registration,
and we cannot compel our beneficial owners to comply with SAFE registration requirements. As a result, we cannot assure you that all
other shareholders or beneficial owners of ours who are PRC residents or entities have complied with, and will in the future make, obtain
or update any applicable registrations or approvals required by SAFE regulations. Failure by such shareholders or beneficial owners to
comply with SAFE regulations, or failure by us to amend the foreign exchange registrations of our PRC subsidiaries, could subject us
to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit our PRC subsidiaries' ability to
make distributions or pay dividends to us or affect our ownership structure, which could adversely affect our business and prospects.
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Failure to comply with PRC regulations regarding the registration
requirements for employee stock ownership plans or share option plans may subject the PRC plan participants or us to fines and other
legal or administrative sanctions.
Pursuant to SAFE Circular 37, PRC residents who
participate in share incentive plans in overseas non-publicly-listed companies due to their position as director, senior management or
employees of the PRC subsidiaries of the overseas companies may submit applications to SAFE or its local branches for the foreign exchange
registration with respect to offshore special purpose companies. Our directors, executive officers and other employees who are PRC residents
and who have been granted share-based awards may have to follow SAFE Circular 37 to apply for the foreign exchange registration before
our company becomes an overseas listed company. In February 2012, SAFE promulgated the Notices on Issues Concerning the Foreign Exchange
Administration for Domestic Individuals Participating in Stock Incentive Plans of Overseas Publicly-Listed Companies, or SAFE Circular
7. Under SAFE Circular 7 and other relevant rules and regulations, PRC residents who participate in stock incentive plan in an overseas
publicly-listed company are required to register with SAFE or its local branches and complete certain other procedures. Participants
of a stock incentive plan who are PRC residents must retain a qualified PRC agent, which could be a PRC subsidiary of such overseas publicly
listed company or another qualified institution selected by such PRC subsidiary, to conduct the SAFE registration and other procedures
with respect to the stock incentive plan on behalf of its participants. Such participants must also retain an overseas entrusted institution
to handle matters in connection with their exercise of share-based awards, the purchase and sale of corresponding shares or interests
and fund transfers. In addition, the PRC agent is required to amend the SAFE registration with respect to the stock incentive plan if
there is any material change to the stock incentive plan, the PRC agent or the overseas entrusted institution, or any other material
changes.
We did not grant any share options to our employees
or consultants under our 2021 Share Incentive Plan as of the date of this annual report but may do so in the future. When we do, from
time to time, we need to apply for or update our registration with SAFE or its local branches on behalf of our employees or consultants
who receive options or other equity-based incentive grants under our share incentive plan or material changes in our share incentive
plan. However, we may not always be able to make applications or update our registration on behalf of our employees or consultants who
hold any type of share incentive awards in compliance with SAFE Circular 7, nor can we ensure you that such applications or update of
registration will be successful. If we or the participants of our share incentive plan who are PRC citizens fail to comply with SAFE
Circular 7, we and/or such participants of our share incentive plan may be subject to fines and legal sanctions, there may be additional
restrictions on the ability of such participants to exercise their share options or remit proceeds gained from sale of their shares into
China, and we may be prevented from further granting share incentive awards under our 2021 Share Incentive Plan or any future share incentive
plans to our employees or consultants who are PRC citizens.
The enforcement of the PRC Labor Contract Law and other labor-related
regulations in the PRC may adversely affect our business, financial condition and results of operations.
The SCNPC enacted the Labor Contract Law in 2007,
and amended it on December 28, 2012. The Labor Contract Law introduced specific provisions related to fixed-term employment contracts,
part-time employment, probationary periods, consultation with labor unions and employee assemblies, employment without a written contract,
dismissal of employees, severance, and collective bargaining to enhance previous PRC labor laws. Under the Labor Contract Law, an employer
is obligated to sign an unlimited-term labor contract with any employee who has worked for the employer for ten consecutive years. Further,
if an employee requests or agrees to renew a fixed-term labor contract that has already been entered into twice consecutively, the resulting
contract, with certain exceptions, must have an unlimited term, subject to certain exceptions. With certain exceptions, an employer must
pay severance to an employee where a labor contract is terminated or expires. In addition, the PRC governmental authorities have continued
to introduce various new labor-related regulations since the effectiveness of the Labor Contract Law.
Under the PRC Social Insurance Law and the Administrative
Measures on Housing Fund, employees are required to participate in pension insurance, work-related injury insurance, medical insurance,
unemployment insurance, maternity insurance, and housing funds and employers are required, together with their employees or separately,
to pay the social insurance premiums and housing funds for their employees. However, certain of our affiliated entities did not make
adequate social insurance and housing fund for certain employees. As the interpretation and implementation of labor-related laws and
regulations are still evolving, we cannot assure you that our employment practices do not and will not violate labor-related laws and
regulations in China, which may subject us to labor disputes or government investigations. We cannot assure you that we have complied
or will be able to comply with all labor-related law and regulations regarding including those relating to obligations to make social
insurance payments and contribute to the housing funds. If we are deemed to have violated relevant labor laws and regulations, we could
be required to provide additional compensation to our employees and our business, financial condition and results of operations will
be adversely affected.
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Under the PRC Tort Law, employers shall bear
tortious liability for any injury or damage caused to other people by their employees in the course of their employment. Entities that
engage dispatched laborers shall bear tortious liability for any injury or damage caused to other people by such dispatched laborers
in the course of their work and during the dispatch period, and the dispatching party shall bear corresponding supplementary liabilities
if it is at fault. If the workers on our platform are deemed as our employees or dispatch employees by courts or arbitral tribunals,
we shall bear the responsibilities accordingly.
These laws designed to enhance labor protection
tend to increase our labor costs. In addition, as the interpretation and implementation of these regulations are still evolving, our
employment practices may not be at all times be deemed in compliance with the regulations. As a result, we could be subject to penalties
or incur significant liabilities in connection with labor disputes or investigations.
Labor contract laws in China may adversely affect our results
of operations.
The current PRC Labor Contract Law imposes greater
liabilities on employers and significantly affects the cost of an employer's decision to reduce its workforce. Further, it requires
certain terminations be based on the mandatory retirement age. In the event we decide to significantly change or decrease our workforce,
the Labor Contract Law could adversely affect our ability to enact such changes in a manner that is most advantageous to our business
or in a timely and cost-effective manner, thus materially and adversely affecting our financial condition and results of operations.
Risks Related to our ADSs
The delisting of our ADSs from the NYSE may continue to have
a material adverse effect on the trading and price of our ADSs, and we cannot assure you that our ADSs will be relisted, or that once
relisted, they will remain listed.
On November 22, 2022, we were delisted from NYSE when the staff of
the New York Stock Exchange LLC filed a Form 25 Notification of Delisting. The ADSs have since then been quoted on the OTC Pink Limited
Information under the symbol "FHSEY." The delisting of our ADSs from the NYSE has had and may continue to have a material
adverse effect on us by, among other things, causing investors to dispose of our ADSs and limiting:
●
the liquidity of our
                                            ADSs;
●
the market price of
                                            our ADSs;
●
the number of institutional
                                            and other investors that will consider investing in our ADSs;
●
the availability of
                                            information concerning the trading prices and volume of our ADSs;
●
the number of broker-dealers
                                            willing to execute trades in our ADSs; and
●
our ability to obtain
                                            equity or debt financing for the continuation of our operations
The lack of an active trading market may limit
the liquidity of an investment in our ADSs, meaning you may not be able to sell our ADSs you own at times, or at prices, attractive to
you. Any of these factors may materially and adversely affect the price of our ADSs.
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The trading price of the ADSs has been and may continue to be
volatile, which could result in substantial losses to investors.
Our ADSs were listed on the NYSE, since our SEC-registered initial
public offering in March 2021. On November 22, 2022, we were delisted from the NYSE when the staff of the New York Stock Exchange LLC
filed a Form 25 Notification of Delisting. The OTC market is a significantly more limited market than NYSE. The quotation of our
ADSs on the OTC market may result in a less liquid market available for existing and potential stockholders to trade our ADSs, could depress
the trading price of our ADSs and could have a long-term adverse impact on our ability to raise capital in the future.
The trading prices of the ADSs has been volatile
and could fluctuate widely due to factors beyond our control. This may happen because of broad market and industry factors, like the
performance and fluctuation in the market prices or the underperformance or deteriorating financial results of other companies based
in China that have listed their securities in the United States in recent years. The securities of some of these companies have experienced
significant volatility since their initial public offerings, including, in some cases, substantial price declines in their trading prices.
The trading performances of other Chinese companies' securities after their offerings, may affect the attitudes of investors toward
Chinese companies listed in the United States, which consequently may impact the trading performance of the ADSs, regardless of our actual
operating performance. In addition, any negative news or perceptions about inadequate corporate governance practices or fraudulent accounting,
corporate structure or other matters of other Chinese companies may also negatively affect the attitudes of investors towards Chinese
companies in general, including us, regardless of whether we have conducted any inappropriate activities. In addition, securities markets
may from time to time experience significant price and volume fluctuations that are not related to our operating performance, such as
the large decline in share prices in the United States, China and other jurisdictions in late 2008, early 2009 and the second half of
2011, which may have a material adverse effect on the market price of the ADSs.
In addition to the above factors, the price and
trading volume of the ADSs may be highly volatile due to multiple factors, including the following:
●
regulatory developments affecting us, our users, or our industry;
●
condition of the education industry;
●
announcements of studies and reports relating to the quality of our services or those of our competitors;
●
changes in the economic performance or market valuations of other education companies;
●
actual or anticipated fluctuations in our quarterly results of operations and changes or revisions
    of our expected results;
●
changes in financial estimates by securities research analysts;
●
announcements by us or our competitors of new services, acquisitions, strategic relationships,
    joint ventures or capital commitments;
●
additions to or departures of our senior management;
●
detrimental negative publicity about us, our management or our industry;
●
fluctuations of exchange rates between the RMB and the U.S. dollar;
●
release or expiry of lock-up or other transfer restrictions on our outstanding ordinary shares
    or ADSs; and
●
sales or perceived potential sales of additional ordinary shares or ADSs.
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Any of these
factors may result in large and sudden changes in the volume and price at which the ADSs will trade. The securities of some China-based
companies that have listed their securities in the United States have experienced significant volatility since their initial public offerings
in recent years, including, in some cases, substantial declines in the trading prices of their securities. The trading performances of
these companies' securities after their offerings may affect the attitudes of investors towards Chinese companies listed in the
United States in general, which consequently may impact the trading performance of the ADSs, regardless of our actual operating performance.
In addition, any negative news or perceptions about inadequate corporate governance practices or fraudulent accounting, corporate structure
or other matters of other Chinese companies may also negatively affect the attitudes of investors towards Chinese companies in general,
including us, regardless of whether we have engaged in any inappropriate activities. In particular, the global financial crisis, the ensuing
economic recessions and deterioration in the credit market in many countries have contributed and may continue to contribute to extreme
volatility in the global stock markets.
Moreover,
there have been recent instances of extreme stock price run-ups followed by rapid price declines and strong stock price volatility with
a number of recent initial public offerings, particularly among companies with relatively smaller public floats. We may experience greater
stock price volatility, including aggressive price run-ups and declines, lower trading volume and less liquidity, compared with companies
with larger public floats. In particular, the ADSs may be subject to rapid and substantial price volatility, low volumes of trades and
large spreads in bid and ask prices. Such volatility, including any stock run-up, may be unrelated to our actual or expected operating
performance, financial condition or prospects, and industry, market or economic factors, which makes it difficult for prospective investors
to assess such rapidly changing value of the ADSs. In addition, if the trading volumes of the ADSs are low, persons buying or selling
in relatively small quantities may easily influence prices of the ADSs. This low volume of trades could also cause the price of the ADSs
to fluctuate significantly, with large percentage changes in price occurring in any trading day session. Holders of the ADSs may also
not be able to readily liquidate their investment or may be forced to sell at depressed prices due to such low-volume trading. As a result
of such volatility, investors may experience losses on their investment in the ADSs. Such volatility also could adversely affect our ability
to issue additional ADSs or other securities and our ability to obtain additional financing in the future, as well as our ability to retain
key employees, many of whom have been granted equity incentives. Furthermore, the potential extreme volatility may confuse the public
investors of the value of the ADSs, distort the market perception of the price of the ADSs, and our financial performance and public image,
and negatively affect the long-term liquidity of the ADSs, regardless of our actual or expected operating performance.
In the past,
shareholders of public companies have often brought securities class action suits against those companies following periods of instability
in the market price of their securities. We and certain of our directors and officers have been named as defendants in a putative shareholder
class action lawsuit in the United States, as described in
"Item 4. Information on the Company—B. Business Overview—Legal
Proceedings,"
and we may be named in similar lawsuits in the future. Such lawsuits could divert
a significant amount of our management's attention and other resources from our business and operations and require us to incur
significant expenses to defend the suit, which could harm our results of operations. Any such class action suit, whether or not successful,
could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against
us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition and results of
operations.
Our dual-class share structure with different voting rights
will limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that
holders of our Class A ordinary shares and ADSs may view as beneficial. In addition, holders of our Class A ordinary shares may experience
loss of voting power and dilution due to future issuances and conversions of our Class B ordinary shares.
Our authorized and issued ordinary shares are
divided into Class A ordinary shares and Class B ordinary shares. In respect of matters requiring the votes of shareholders, holders
of Class B ordinary shares are entitled to 20 votes per share, while holders of Class A ordinary shares are entitled to one vote per
share based on our dual-class share structure. Each Class B ordinary share is convertible into one Class A ordinary share at any time
by the holder thereof, while Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances. Upon any
direct or indirect sale, transfer, assignment or disposition of such number of Class B ordinary shares by the holder thereof to any person
other than a designated holder (as defined in our memorandum and articles of association) or any person that is not an affiliate of such
holder, or upon a change of beneficial ownership of any Class B ordinary shares as a result of which any person who is not a designated
holder or any person who is not an affiliate of the holders of such ordinary shares becomes a beneficial owner of such ordinary shares,
such Class B ordinary shares are automatically and immediately converted into the same number of Class A ordinary shares.
As of the date of this annual report, Mr. Shaowei Zhang (our founder,
chairman and chief executive officer) and Ms. Yu Wu (his spouse) beneficially own all of our issued Class B ordinary shares. These Class
B ordinary shares constitute approximately 37.94% of our total issued and outstanding share capital and 92.30% of the aggregate voting
power of our total issued and outstanding share capital due to the disparate voting powers associated with our dual-class share structure.
See "Item 6. Directors, Senior Management and Employees—E. Share Ownership." As a result of the dual-class share structure
and the concentration of ownership, holders of Class B ordinary shares will have considerable influence over matters such as decisions
regarding mergers, consolidations and the sale of all or substantially all of our assets, election of directors and other significant
corporate actions. Any future issuances of Class B ordinary shares may be dilutive to the voting power of holders of Class A ordinary
shares. Any conversions of Class B ordinary shares into Class A ordinary shares may dilute the percentage ownership of the existing holders
of Class A ordinary shares within their class of ordinary shares. Such conversions may increase the aggregate voting power of the existing
holders of Class A ordinary shares. In the event that we have multiple holders of Class B ordinary shares in the future and certain of
them convert their Class B ordinary shares into Class A ordinary shares, the remaining holders who retain their Class B ordinary shares
may experience increases in their relative voting power. Holders of Class B ordinary shares may take actions that are not in the best
interest of us or our other shareholders. This concentration of ownership may discourage, delay or prevent a change in control of our
company, which could have the effect of depriving our other shareholders of the opportunity to receive a premium for their shares as part
of a sale of our company and may reduce the price of our ADSs. This concentrated control will limit your ability to influence corporate
matters and could discourage others from pursuing any potential merger, takeover or other change of control transactions that holders
of Class A ordinary shares and ADSs may view as beneficial.
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Our dual-class share structure may adversely affect the trading
market for and the trading price of the ADSs.
Certain shareholder advisory firms have announced
changes to their eligibility criteria for inclusion of shares of public companies on certain stock market indices, including the S&P
500, to exclude companies with multiple classes of shares and companies whose public shareholders hold no more than 5% of total voting
power from being added to such indices. In addition, several shareholder advisory firms have announced their opposition to the use of
multiple class structures. As a result, our dual-class share structure may prevent the inclusion of the ADSs representing Class A ordinary
shares in such indices and may cause shareholder advisory firms to publish negative commentary about our corporate governance practices
or otherwise seek to cause us to change our capital structure. Any such exclusion from indices could result in a less active trading
market for the ADSs. Any actions or publications by shareholder advisory firms critical of our corporate governance practices or capital
structure could also adversely affect the value of the ADSs.
If securities or industry analysts do not publish research or
reports about our business, or if they adversely change their recommendations regarding the ADSs, the market price for the ADSs and trading
volume could decline.
The trading market for the ADSs will be influenced
by research or reports that industry or securities analysts publish about our business. If research analysts do not establish and maintain
adequate research coverage or if one or more analysts who cover us downgrade the ADSs or publish inaccurate of unfavorable research about
our business, the market price for the ADSs would likely decline. If one or more of these analysts cease to cover us or fail to regularly
publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause the market price or trading
volume for the ADSs to decline.
The sale or availability for sale of substantial amounts of
the ADSs could adversely affect their market price.
Sales
of substantial amounts of the ADSs in the public market, or the perception that these sales could occur, could adversely affect the market
price of the ADSs and could materially impair our ability to raise capital through equity offerings in the future. The ADSs sold in our
initial public offering were freely tradable without restriction or further registration under the Securities Act of 1933, as amended
(the "Securities Act"), and shares held by our existing shareholders may also be sold in the public market in the future subject
to the restrictions in Rule 144 and Rule 701 under the Securities Act and the applicable lock-up agreements. As of the date of this annual
report, there are 12,589,230 ADSs
(equivalent to 37,767,690 Class
A ordinary shares) outstanding. We cannot predict what effect, if any, market sales of securities held by our significant shareholders
or any other shareholder or the availability of these securities for future sale will have on the market price of the ADSs.
Techniques employed by short sellers may drive down the market
price of the ADSs.
Short selling is the practice of selling securities
that the seller does not own but rather has borrowed from a third party with the intention of buying identical securities back at a later
date to return to the lender. The short seller hopes to profit from a decline in the value of the securities between the sale of the
borrowed securities and the purchase of the replacement shares, as the short seller expects to pay less in that purchase than it received
in the sale. As it is in the short seller's interest for the price of the security to decline, many short sellers publish, or arrange
for the publication of, negative opinions regarding the relevant issuer and its business prospects in order to create negative market
momentum and generate profits for themselves after selling a security short. These short attacks have, in the past, led to selling of
shares in the market.
Public companies that have substantially all
of their operations in China have been the subject of short selling. Much of the scrutiny and negative publicity has centered on allegations
of a lack of effective internal control over financial reporting resulting in financial and accounting irregularities and mistakes, inadequate
corporate governance policies or a lack of adherence thereto and, in many cases, allegations of fraud. As a result, many of these companies
are now conducting internal and external investigations into the allegations and, in the interim, are subject to shareholder lawsuits
and/or SEC enforcement actions.
It is not clear what effect such negative publicity
could have on us. If we were to become the subject of any unfavorable allegations, whether such allegations are proven to be true or
untrue, we could have to expend a significant amount of resources to investigate such allegations and/or defend ourselves. While we would
strongly defend against any such short seller attacks, we may be constrained in the manner in which we can proceed against the relevant
short seller by principles of freedom of speech, applicable state law or issues of commercial confidentiality. Such a situation could
be costly and time-consuming, and could distract our management from growing our business. Even if such allegations are ultimately proven
to be groundless, allegations against us could materially and adversely affect our business, and any investment in the ADSs could be
greatly reduced or even rendered worthless.
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Because we cannot guarantee to pay dividends in the foreseeable
future, you must rely on price appreciation of the ADSs for return on your investment.
We approved and declared a cash dividend of US$0.0146
per ordinary share (US$0.0437 per ADS) in September 2022 and made payments in October 2022. However, we still intend to retain most, if
not all, of our available funds and any future earnings to fund the development and growth of our business. Therefore, you should not
rely on an investment in the ADSs as a source for any future dividend income.
Our board of directors has complete discretion
as to whether to distribute dividends, subject to certain restrictions under Cayman Islands law, namely that our company may only pay
dividends out of profits or share premium account, and provided always that in no circumstances may a dividend be paid if this would
result in our company being unable to pay its debts as they fall due in the ordinary course of business. In addition, our shareholders
may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our board of directors. Even if our
board of directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on our
future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us
from our subsidiaries, our financial condition, contractual restrictions and other factors deemed relevant by our board of directors.
Accordingly, the return on your investment in the ADSs will likely depend entirely upon any future price appreciation of the ADSs. There
is no guarantee that the ADSs would appreciate in value or even maintain the price at which you purchased the ADSs. You may not realize
a return on your investment in the ADSs or even lose your entire investment in the ADSs.
Our memorandum and articles of association contain anti-takeover
provisions that could have a material adverse effect on the rights of holders of our ordinary shares and the ADSs.
Our memorandum and articles of association contain
provisions which could limit the ability of others to acquire control of our company or cause us to engage in change-of-control transactions.
These provisions could have the effect of depriving our shareholders of an opportunity to sell their shares at a premium over prevailing
market prices by discouraging third parties from seeking to obtain control of our company in a tender offer or similar transaction. Our
board of directors has the authority, without further action by our shareholders, to issue preferred shares in one or more series and
to fix their designations, powers, preferences, privileges, and relative participating, optional or special rights and the qualifications,
limitations or restrictions, including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences,
any or all of which may be greater than the rights associated with our ordinary shares, in the form of ADS or otherwise. Preferred shares
could be issued quickly with terms calculated to delay or prevent a change in control of our company or make removal of management more
difficult. If our board of directors decides to issue preferred shares, the price of the ADSs may fall and the voting and other rights
of the holders of our ordinary shares and ADSs may be materially and adversely affected.
Forum selection provisions in our memorandum and articles of
association could limit the ability of holders of our Class A ordinary shares, ADSs or other securities to obtain a favorable judicial
forum for disputes with us, our directors and officers, and potentially others.
Our memorandum and articles of association provide
that the federal district courts of the United States are the exclusive forum within the United States for the resolution of any complaint
asserting a cause of action arising under the Securities Act and the Exchange Act. However, the enforceability of similar federal court
choice of forum provisions has been challenged in legal proceedings in the United States, and it is possible that a court could find
this type of provision to be inapplicable, unenforceable, or inconsistent with other documents that are relevant to the filing of such
lawsuits. If a court were to find the stipulated choice of forum provision contained in our memorandum and articles of association to
be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other forums or
jurisdictions. If upheld, the forum selection clause in our memorandum and articles of association may increase the costs for you or
limit your ability to bring a claim against us, our directors and officers, and potentially others in his or her preferred judicial forum,
and this limitation may discourage such lawsuits. In addition, the Securities Act provides that both federal and state courts have jurisdiction
over suits brought to enforce any duty or liability under the Securities Act or the rules and regulations thereunder. Accepting or consent
to this forum selection provision does not constitute a waiver by you of compliance with federal securities laws and the rules and regulations
thereunder. You may not waive compliance with federal securities laws and the rules and regulations thereunder. The exclusive forum provision
in our memorandum and articles of association will not operate so as to deprive the courts of the Cayman Islands from having jurisdiction
over matters relating to our internal affairs.
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You may face difficulties in protecting your interests, and
your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law and conduct
our operations in China.
We are an exempted company with limited liability incorporated under
the laws of the Cayman Islands. Our corporate affairs are governed by our memorandum and articles of association, as amended from time
to time, the Companies Act (As Revised) of the Cayman Islands, as amended, and the common law of the Cayman Islands. The rights of shareholders
to take action against the directors, actions by minority shareholders and the fiduciary responsibilities of our directors to us under
Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived
in part from comparatively limited judicial precedent in the Cayman Islands as well as from the common law of England, the decisions of
whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of our shareholders and the
fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or
judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities
laws than the United States. Some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate
law than the Cayman Islands. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action in
a federal court of the United States.
Shareholders of Cayman Islands exempted companies like us have no general
rights under Cayman Islands law to inspect corporate records (other than the memorandum and articles of associations, any special resolutions
passed by such companies, the register of mortgages and charges of such companies, and a list of current directors of such companies)
or to obtain copies of lists of shareholders of these companies. Our directors have discretion under our articles of association to determine
whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them
available to our shareholders. This may make it more difficult for you to obtain the information needed to establish any facts necessary
for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.
In addition, we conduct our business operations
in China, and all of our directors and senior management are based in China. The SEC, U.S. Department of Justice and other authorities
often have substantial difficulties in bringing and enforcing actions against non-U.S. companies and non-U.S. persons, including company
directors and officers, in certain emerging markets, including China. Additionally, our public shareholders may have limited rights and
few practical remedies in China, as shareholder claims that are common in the United States, including class action securities law and
fraud claims, generally are difficult or impossible to pursue as a matter of law or practicality in many emerging markets, including
China.
As a result of all of the above, our public shareholders
may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors
or controlling shareholders than they would as public shareholders of a company incorporated in the United States. See Exhibit 2.4 to
this annual report.
Certain judgments obtained against us by our shareholders may
not be enforceable.
We are a Cayman Islands exempted company and
all of our assets are located outside of the United States. Substantially all of our current operations are conducted in China. In addition,
most of our current directors and officers are nationals and residents of countries other than the United States. All or a substantial
portion of the assets of these persons are located outside the United States. As a result, it may be difficult or impossible for you
to bring an action against us or against these individuals in the United States in the event that you believe that your rights have been
infringed under the U.S. federal securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws
of the Cayman Islands and of China may render you unable to enforce a judgment against us, our assets, our directors and officers or
their assets.
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The voting rights of holders of ADSs are limited by the terms
of the deposit agreement, and you may not be able to exercise your right to direct how your Class A ordinary shares which are represented
by your ADSs are voted.
Holders of ADSs do not have the same rights as
our registered shareholders. As a holder of the ADSs, you will only be able to exercise the voting rights with respect to the underlying
Class A ordinary shares in accordance with the provisions of the deposit agreement. You will only be able to exercise the voting rights
which are carried by the Class A ordinary shares represented by your ADSs indirectly by giving voting instructions to the depositary
in accordance with the provisions of the deposit agreement. Under the deposit agreement, you must vote by giving voting instructions
to the depositary. If we request the depositary to ask for your instructions, then upon receipt of your voting instructions, the depositary
will try, as far as is practicable, to vote the underlying Class A ordinary shares which are represented by your ADSs in accordance with
your instructions. If we do not request the depositary to ask for your instructions, the depositary may still vote in accordance with
instructions you give, but it is not required to do so. You will not be able to directly exercise your right to vote with respect to
the underlying Class A ordinary shares represented by your ADSs unless you withdraw the shares and became the registered holder of such
shares prior to the record date for the general meeting. Under our second amended and restated memorandum and articles of association,
the minimum notice period required for convening a general meeting will be seven days. When a general meeting is convened, you may not
receive sufficient advance notice to withdraw the Class A ordinary shares underlying your ADSs and become the registered holder of such
shares to allow you to attend the general meeting and vote directly with respect to any specific matter or resolution to be considered
and voted upon at the general meeting. In addition, under our amended and restated memorandum and articles of association, for the purposes
of determining those shareholders who are entitled to attend and vote at any general meeting, our directors may close our register of
members and/or fix in advance a record date for such meeting, and such closure of our register of members or the setting of such a record
date may prevent you from withdrawing the Class A ordinary shares underlying your ADSs and becoming the registered holder of such shares
prior to the record date, so that you would not be able to attend the general meeting or to vote directly. If we ask for your instructions,
the depositary will notify you of the upcoming vote and will arrange to deliver our voting materials to you. We cannot assure you that
you will receive the voting materials in time to ensure that you can instruct the depositary to vote the underlying Class A ordinary
shares represented by your ADSs. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions
or for their manner of carrying out your voting instructions. This means that you may not be able to exercise your right to vote and
you may have no legal remedy if the shares underlying your ADSs are not voted as you requested.
The depositary may give us a discretionary proxy to vote our
Class A ordinary shares underlying your ADSs if you do not vote at shareholders' meetings, which could adversely affect your interests
and the ability of our shareholders as a group to influence the management of our company.
Under the deposit agreement for the ADSs, if
you do not give voting instructions to the depositary to direct how the Class A ordinary shares underlying your ADSs are voted, upon
our request, the depositary will give us (or our nominee) a discretionary proxy to vote the Class A ordinary shares underlying your ADSs
at shareholders' meetings if:
●
we timely provided the depositary with notice of meeting and related voting materials and requested
    it to solicit your instructions;
●
we request the depositary to give a proxy;
●
we have informed the depositary that there is no substantial opposition as to a matter to be voted
    on at the meeting; and
●
the matter subject to voting would not have a material adverse impact on shareholders.
The effect of this discretionary proxy is that
if you do not give voting instructions to the depositary to direct how the Class A ordinary shares underlying your ADSs are voted, you
cannot prevent the Class A ordinary shares underlying your ADSs from being voted, under the circumstances described above. This may make
it more difficult for shareholders to influence the management of our company. Holders of our ordinary shares are not subject to this
discretionary proxy.
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You may not receive cash dividends if the depositary decides
it is impractical to make them available to you.
The depositary has agreed to pay to you the cash
dividends or other distributions it or the custodian receives on our Class A ordinary shares or other deposited securities underlying
the ADSs, after deducting its fees and expenses. You will receive these distributions in proportion to the number of Class A ordinary
shares your ADSs represent. However, the depositary may, at its discretion, decide that it is inequitable or impractical to make a distribution
available to any holders of ADSs. For example, the depositary may determine that it is not practicable to distribute certain property
through the mail, or that the value of certain distributions may be less than the cost of mailing them. In these cases, the depositary
may decide not to distribute such property to you.
You may experience dilution of your holdings due to inability
to participate in rights offerings.
We may, from time to time, distribute rights
to our shareholders, including rights to acquire securities. Under the deposit agreement, the depositary will not distribute rights to
holders of ADSs unless the distribution and sale of rights and the securities to which these rights relate are either exempt from registration
under the Securities Act with respect to all holders of ADSs or are registered under the provisions of the Securities Act. The depositary
may, but is not required to, attempt to sell these undistributed rights to third parties, and may allow the rights to lapse. We may be
unable to establish an exemption from registration under the Securities Act, and we are under no obligation to file a registration statement
with respect to these rights or underlying securities or to endeavor to have a registration statement declared effective. Accordingly,
holders of ADSs may be unable to participate in our rights offerings and may experience dilution of their holdings as a result.
You may be subject to limitations on transfer of your ADSs.
Your ADSs are transferable on the books of the
depositary. However, the depositary may close its books at any time or from time to time when it deems expedient in connection with the
performance of its duties. The depositary may close its books from time to time for a number of reasons, including events in emergencies,
and on weekends and public holidays. The depositary may refuse to deliver, transfer or register transfers of the ADSs generally when
our share register or the books of the depositary are closed, or at any time if we or the depositary thinks it is advisable to do so
because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for
any other reason.
ADS holders may not be entitled to a jury trial with respect
to claims arising under the deposit agreement, which could result in less favorable outcomes to the plaintiff(s) in any such action.
The deposit agreement governing the ADSs representing
our Class A ordinary shares provides that, to the fullest extent permitted by law, ADS holders waive the right to a jury trial of any
claim they may have against us or the depositary arising out of or relating to our shares, the ADSs or the deposit agreement, including
any claim under the U.S. federal securities laws.
If we or the depositary opposed a jury trial
demand based on the waiver, the court would determine whether the waiver was enforceable based on the facts and circumstances of that
case in accordance with the applicable state and federal law. To our knowledge, the enforceability of a contractual pre-dispute jury
trial waiver in connection with claims arising under the federal securities laws has not been finally adjudicated by the United States
Supreme Court. However, we believe that a contractual pre-dispute jury trial waiver provision is generally enforceable, including under
the laws of the State of New York, which govern the deposit agreement, by a federal or state court in the City of New York, which has
non-exclusive jurisdiction over matters arising under the deposit agreement. In determining whether to enforce a contractual pre-dispute
jury trial waiver provision, courts will generally consider whether a party knowingly, intelligently and voluntarily waived the right
to a jury trial. We believe that this is the case with respect to the deposit agreement and the ADSs. It is advisable that you consult
legal counsel regarding the jury waiver provision before entering into the deposit agreement.
If you or any other holders or beneficial owners
of ADSs bring a claim against us or the depositary in connection with matters arising under the deposit agreement or the ADSs, including
claims under federal securities laws, you or such other holder or beneficial owner may not be entitled to a jury trial with respect to
such claims, which may have the effect of limiting and discouraging lawsuits against us and/or the depositary. If a lawsuit is brought
against us and/or the depositary under the deposit agreement, it may be heard only by a judge or justice of the applicable trial court,
which would be conducted according to different civil procedures and may result in different outcomes than a trial by jury would have
had, including results that could be less favorable to the plaintiff(s) in any such action.
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Nevertheless, if this jury trial waiver provision
is not permitted by applicable law, an action could proceed under the terms of the deposit agreement with a jury trial. No condition,
stipulation or provision of the deposit agreement or ADSs serves as a waiver by any holder or beneficial owner of ADSs or by us or the
depositary of compliance with any substantive provision of the U.S. federal securities laws and the rules and regulations promulgated
thereunder.
We are a foreign private issuer within the meaning of the rules
under the Exchange Act, and as such we are exempt from certain provisions applicable to U.S. domestic public companies.
Because we are a foreign private issuer under
the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable
to U.S. domestic issuers, including:
●
the rules under the Exchange Act requiring the filing of quarterly reports on Form 10-Q or current
    reports on Form 8-K with the SEC;
●
the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations
    in respect of a security registered under the Exchange Act;
●
the sections of the Exchange Act requiring insiders to file public reports of their stock ownership
    and trading activities and liability for insiders who profit from trades made in a short period of time; and
●
the selective disclosure rules by issuers of material nonpublic information under Regulation FD.
We are required to file an annual report on Form
20-F within four months of the end of each fiscal year. Press releases relating to financial results and material events will also be
furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC will be less extensive
and less timely than that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections
or information that would be made available to you were you investing in a U.S. domestic issuer.
We are an emerging growth company within the meaning of the
Securities Act and may take advantage of certain reduced reporting requirements.
We are an "emerging growth company,"
as defined in the JOBS Act, and we may take advantage of certain exemptions from requirements applicable to other public companies that
are not emerging growth companies including, most significantly, not being required to comply with the auditor attestation requirements
of Section 404 of the Sarbanes-Oxley Act of 2002 for so long as we remain an emerging growth company. As a result, if we elect not to
comply with such auditor attestation requirements, our investors may not have access to certain information they may deem important.
The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards
until such date that a private company is otherwise required to comply with such new or revised accounting standards.
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We incur significant costs as a result of being a public company,
particularly after we cease to qualify as an "emerging growth company."
We incur significant legal, accounting and other
expenses as a result of being a public company. The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC,
impose various requirements on the corporate governance practices of public companies. We expect these rules and regulations to increase
our legal and financial compliance costs and to make some corporate activities more time-consuming and costly. As a company with less
than US$1.235 billion in revenues for our last fiscal year, we qualify as an "emerging growth company" pursuant to the JOBS
Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable
generally to public companies. After we are no longer an "emerging growth company", we expect to incur significant expenses
and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of
2002 and the other rules and regulations of the SEC.
As a public company, we need to adopt policies
regarding internal controls and disclosure controls and procedures. We also expect that operating as a public company will make it more
difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy
limits and coverage or incur substantially higher costs to obtain the same or similar coverage. In addition, we will incur additional
costs associated with our public company reporting requirements. It may also be more difficult for us to find qualified persons to serve
on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these rules
and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing
of such costs.
We may become a passive foreign investment company, which could
result in adverse U.S. federal income tax consequences to U.S. investors owning the ADSs or our ordinary shares.
A non-U.S. corporation, such as our company, will
be considered a passive foreign investment company, or PFIC, for any taxable year if either (1) at least 75% of its gross income is passive
income for such taxable year or (2) at least 50% of the value of its assets (based on an average of the quarterly values of the assets
during such taxable year) is attributable to assets that produce or are held for the production of passive income (which includes cash
and cash equivalents). Although the law in this regard is not entirely clear, we treat our affiliated entities as being owned by us for
U.S. federal income tax purposes because we control their management decisions and are entitled to substantially all of the economic benefits
associated with them. As a result, we consolidate their results of operations in our consolidated U.S. GAAP financial statements. If it
were determined, however, that we are not the owner of our affiliated entities for U.S. federal income tax purposes, we would likely be
treated as a PFIC for the current taxable year and any subsequent taxable year.
Assuming that we are the owner of our affiliated
entities for U.S. federal income tax purposes, and based upon our current and projected income and assets, including the proceeds from
our initial public offering, and projections as to the value of our assets, we do not believe we were a PFIC for the taxable year ending
December 31, 2022. However, no assurance can be given in this regard because the determination of whether we will be or become a PFIC
is a factual determination made annually that will depend, in part, upon the composition of our income and assets. Fluctuations in the
market price of the ADSs may cause us to be classified as a PFIC for the current or future taxable years because the value of our assets
for purposes of the asset test, including the value of our goodwill and unbooked intangibles, may be determined by reference to the market
price of the ADSs from time to time (which has been and is likely to continue to be volatile). Among other factors, if our market capitalization
continues to decline or does not increase, we may be classified as a PFIC for our current taxable year ending December 31, 2023 or future
taxable years. Furthermore, the composition of our income and assets may also be affected by how, and how quickly, we use our liquid assets,
including the cash raised in our initial public offering. Under circumstances where our revenues from activities that produce passive
income significantly increases relative to our revenues from activities that produce non-passive income, or where we determine not to
deploy significant amounts of cash for active purposes, our risk of becoming classified as a PFIC may substantially increase. If we are
classified as a PFIC for any year, we generally would continue to be treated as a PFIC for all succeeding years for U.S. federal tax purposes.
If we were to become a PFIC, such characterization
could result in adverse U.S. federal income tax consequences to any U.S. Holder (as defined in "Item 10. Additional Information—E.
Taxation—U.S. Federal Income Tax Considerations") of our ADSs or ordinary shares. For example, if we are a PFIC, U.S. Holders
may become subject to increased tax liabilities under U.S. federal income tax laws and regulations and will become subject to burdensome
reporting requirements. We cannot assure any investor that we will not be a PFIC for our 2023 taxable year or any future taxable year.
U.S. investors should consult their own tax advisors about the circumstances that may cause us to be classified as a PFIC and the consequences
if we are classified as a PFIC.
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ITEM 4. INFORMATION ON THE COMPANY
A. History and Development of the Company
In September 2011, we established Long-Spring
Education Holding Group Limited, or Long-Spring Education, in the PRC, through which we operated our schools.
In September 2016, we established Long-Spring
Education Group (the former parent of our company), or the former parent, in the Cayman Islands. In the same month, we established First
High-School Group Hong Kong Limited, or First High-School HK, under the former parent in Hong Kong. In October 2016, First High-School
HK incorporated Yunnan Century Long-Spring Technology Co., Ltd., or Yunnan WFOE, in the PRC.
In November 2016, First High-School HK became
the offshore holding company of our group in Hong Kong through Yunnan WFOE by entering into a series of contractual arrangements with
Long-Spring Education and its shareholders. Such contractual arrangements were terminated and re-entered into in December 2018 to add
additional entities as parties to the contractual arrangements. See "—C. Organizational Structure—Our Contractual Arrangements"
for details.
In September 2018, we established First High-School
Education Group Co., Ltd., or First High-School Education, under the former parent as our proposed listing entity in the Cayman Islands.
In the same month, we established First High-School Education Group (BVI) Limited, or First High-School BVI, under the former parent
in the British Virgin Islands.
In August 2019, we transferred the ownership
of First High-School BVI to First High-School Education and then transferred the ownership of First High-School HK to First High-School
BVI in September 2019.
In January 2021, we completed our corporate restructuring
by issuing ordinary shares or redeemable ordinary shares to the respective shareholders of the former parent to generally mirror the
shareholding structure in the former parent, and immediately after the share issuance, the former parent surrendered our shares and ceased
to be our parent company.
On March 11, 2021, our ADSs commenced trading
on the NYSE under the symbol "FHS." We raised approximately US$42.4 million in net proceeds from our initial public offering
after deducting underwriting discounts and commissions and offering expenses paid by us.
In May 2021, we acquired 51% equity interests
in Beijing Tomorrow Future Plus Education Technology Co., Ltd., a technology-driven education company that provides premium full-time
live AI online teaching services. In December 2022, for strategic reasons, we divested of our equity interest in Beijing Tomorrow Future
Plus Education Technology Co., Ltd.
In July 2021, our wholly-owned subsidiary, First
High-School HK, has entered into a strategic partnership agreement with Sichuan Fuhang Capital Equity Investment Fund Management Co.,
Ltd., to collaborate in establishing an education fund with a focus on online-merge-offline learning.
In November 2021, we established Beijing Long-Spring
Ordinary-Vocational Education Integration Development and Research Institute to actively carry out research on the integration of ordinary
and vocational education, and to promote the high-quality development of the related occupations.
In June 2022, our board of directors authorized
a share repurchase program under which our Company may repurchase up to RMB4.0 million of its Class A ordinary shares in the form of ADSs
during a twelve-month period commencing on July 15, 2022, to maximize value for shareholders.
In September 2022, our board of directors approved
a cash dividend of US$0.0146 per ordinary share (US$0.0437 per ADS). The amount of cash dividends distributed was approximately US$1.24
million in total, net of 10.0% withholding tax. The dividends were paid in October, 2022 to the holders of our ordinary shares (including
those represented by the ADSs) of record as of the close of business on October 11, 2022.
On November 7, 2022, we were notified by the NYSE
that the staff of the NYSE Regulation has determined to commence proceedings to delist the ADSs. Trading in the ADSs was suspended after
the market close on the NYSE on November 7, 2022. On November 22, 2022, we were delisted from the NYSE when the staff of the New York
Stock Exchange LLC filed a Form 25 Notification of Delisting. The ADSs have since then been quoted on the OTC Pink Limited Information
under the symbol "FHSEY."
Our principal executive offices are located at
No. 1-1, Tiyuan Road, Xishan District, Kunming, Yunnan Province 650228, People's Republic of China. Our telephone number is +86-10-6255-5966.
Our registered office in the Cayman Islands is located at P.O. Box 309, Ugland House, Grand Cayman KY1-1104, Cayman Islands.
Our website is www.longspringedu.com. The information
contained on our website is not a part of, and will not be incorporated by reference into, this annual report. The SEC also maintains
a web site at www.sec.gov that contains reports, proxy and information statements, and other information regarding registrants that make
electronic filings with the SEC using its EDGAR system.
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B. Business Overview
We are an education service provider primarily
focusing on high schools in Western China. We aspire to become a leader and innovator of private high school education in China, dedicated
to a comprehensive education management integrating education information consulting, education research project development, education
talent management, education technology management, education service management, and general vocational integration development services.
First High-School Education, our ultimate Cayman Islands holding company, does not have any substantive operations other than indirectly
controlling the affiliated entities through certain contractual arrangements.
We trace our history back to August 2012 when we established our first
school to provide after-school tutoring services. We have since developed a network of 21 schools for our continuing operations, offering
13 high school programs and three tutorial school programs for Gaokao repeaters, and five school management service programs as of December
31, 2022. In addition, we have also established Chinese-English bilingual programs for students interested in pursuing higher education
overseas. As of December 31, 2022, we had 17,336 high school students (including Gaokao repeaters) across our school network, and 8,487
public school students at schools to which we provide management services, for our continuing operations. We are dedicated to recruiting
teachers who hold sufficient academic credentials, are devoted and active professionals in their field, and are committed to improving
their students' academic performance. As of December 31, 2022, we had a total of 1,358 teachers in our schools for our continuing
operations, 99.7% of whom had a bachelor's degree. As of the same date, we had a total of 45 principals and deputy principals across
our school network for our continuing operations, who are responsible for the strategic development and operation of our schools. We are
committed to investing in our teachers and principals and offer them opportunities to grow with us. We have designed systematic training
courses and established a comprehensive internal training system to assist our teachers and principals in their professional development,
including regular training sessions to discuss educational theories, methodologies and techniques.
We have a highly scalable, asset-light business
model premised on collaboration with third parties, including local governments and real estate developers. Our partners typically contribute
the land and school facilities. Our government partners also provide other forms of support, such as subsidies and preferential tax treatment.
In return, we provide educational resources, teachers and staff, and school management expertise. Our services raise local education standards
for the under-developed areas and often invigorate the local economy by attracting more talents to live and work in the area. We currently
operate 13 schools pursuant to cooperative arrangements with local governments. Operating private secondary schools under the current
regulatory regime requires stringent approvals from the relevant governments in China. As such, we believe that, with our proven track
record, our ability to maintain cooperative relationship with local governments to obtain not only the approval but also the support to
operate our schools has created strong entry barriers and underpins our long-term growth. We have also cooperated with the local governments
and a private school operator to provide management services for five schools in Yunnan province and Henan province for annual management
service fees. In addition to collaborating with local governments, we currently operate three schools by either leasing lands from or
collaborating with third parties. Our synergistic relationship with third parties allows us to launch new schools with relatively lower
upfront capital expenditures.
We have also developed a standardized and centralized
school management system. We have devised a series of standardized measures and protocols for each stage in a school's development
and for a wide variety of scenarios in school management and operation, which we require all of our schools to consistently adhere to.
Our standardized and centralized management model allows us to secure control over key resources, including teaching methods, education
contents and school management experience, making our business success highly replicable and scalable.
We have experienced steady growth in our business.
For our continuing operations, our revenues were RMB306.2 million, RMB337.3 million and RMB342.5 million (US$49.7 million) in 2020, 2021
and 2022, respectively. Our net income was RMB80.9 million, RMB52.7 million and RMB38.4 million (US$5.6 million) in 2020, 2021 and 2022,
respectively. Our adjusted net income was RMB80.9 million, RMB52.7 million and RMB38.4 million (US$5.6 million) in 2020, 2021 and 2022,
respectively.
Our Schools and Programs
We operate a network of 21 schools located in
Yunnan province, Guizhou province, Shaanxi province, and Henan province, offering 13 high school programs and three tutorial school programs
for Gaokao repeaters, and five school management service programs as of December 31, 2022.
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Table of Contents
The following map sets forth the geographical locations of our schools
and the schools to which we provided management services as of December 31, 2022.
The following table sets forth the student enrollment,
capacity and utilization rate of our schools as categorized by the type of schools (including the schools to which we provided management
services).
Student enrollment
School capacity
School utilization rate
(1)
As of December 31,
As of December 31,
As of December 31,
2020
2021
2022
2020
2021
2022
2020
2021
2022
High schools
14,104
15,613
16,265
30,955
29,895
28,360
45.6
%
52.2
%
57.4
%
Tutorial schools
1,541
1,359
1,071
2,472
2,701
2,000
62.3
%
50.3
%
53.6
%
School management service programs
997
2,735
8,487
—
—
—
—
—
—
Total
16,642
19,707
25,823
30,427
32,596
30,360
46.8
%
52.1
%
57.1
%
(1)
School utilization rate is calculated by dividing student enrollment
    with school capacity.
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Table of Contents
The following table sets forth certain key information about our schools
and the schools to which we provided management services.
Student
enrollment
School capacity
Commencement
Education
As of December 31,
As of
December 31,
High Schools
date of operation
Location
programs
2020
2021
2022
2022
Kunming Xishan Long-Spring Experimental Secondary
    School
September 2014
Kunming,
Yunnan
High School
1,231
1,218
1,465
1,480
Kunming Chenggong Long-Spring
    Experimental Secondary School
(1)
September 2015
Kunming,
Yunnan
High School
1,428
1,230
1,159
1,500
Yiliang Long-Spring Experimental Secondary School
September 2016
Kunming,
Yunnan
High School
975
1,038
941
1,580
Yunnan Hengshui Experimental Secondary School—Xishan
    School
September 2016
Kunming,
Yunnan
High School
1,431
1,363
696
1,450
Qujing Hengshui Experimental Secondary School
September 2017
Qujing,
Yunnan
High School
2,883
2,161
1,601
3,800
Yunnan Yuxi Hengshui Experimental High School
September 2017
Yuxi,
Yunnan
High School
2,921
3,210
3,083
3,480
Yunnan Long-Spring Foreign Language Secondary School
September 2017
Kunming,
Yunnan
High School
521
497
370
860
Xinping Long-Spring Advanced Secondary School
September 2019
Yuxi,
Yunnan
High School
974
1,314
1,746
1,780
Xishuangbanna Long-Spring Experimental Secondary School
September 2020
Jinghong,
Yunnan
High School
397
640
678
850
Qiubei Long-Spring Experimental Secondary School
September 2020
Qiubei,
Yunnan
High School
150
547
910
1,200
Wenshan Long-Spring Experimental Secondary School
September 2020
Wenshan,
Yunnan
High School
191
580
874
2,880
Zhenxiong Long-Spring Advanced Secondary School
September 2020
Zhenxiong,
Yunnan
High School
354
648
954
4,500
Mengla Long-Spring Experimental Secondary School
September 2020
Mengla,
Yunnan
High School
648
1,167
1,788
3,000
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Student
enrollment
School
capacity
Commencement
Education
As of December 31,
As of
December 31,
Tutorial Schools
date of operation
Location
programs
2020
2021
2022
2022
Hengshizhong Education Tutorial School
July 2019
Kunming,
Yunnan
Tutorial
School
1,453
1,174
611
800
Guizhou Zunyi Tutorial School
(1)
September 2020
Guiyang,
Guizhou
Tutorial
School
88
74
136
300
Shaanxi Hengshi Tutorial School
September 2021
Yangling,
Shaanxi
Tutorial
School
—
111
324
900
(1)
We combined Guizhou Mingde Tutorial School, which commenced operation in September 2020, with our
    newly established Guizhou Zunyi Tutorial School in August 2021 for our convenience of school operation in Guizhou.
Student
enrollment
School
capacity
School Management
Commencement
Education
As of
    December 31,
As of
December 31,
Service Programs
date of operation
Location
programs
2020
2021
2022
2022
Xishuangbanna Long-Spring Experimental Secondary School
August 2022
Kunming,
Yunnan
Middle
School
997
875
696
N/A
Yuanjiang County District High School
August 2022
Yuxi, Yunnan
Middle School and High School
—
1,860
1,657
N/A
Shangcai County District High School
August 2023
Zhumadian, Henan
Middle School and High School
—
—
2,458
N/A
Luoping County District High School
August 2023
Qujing, Yunnan
Middle School and High School
—
—
3,399
N/A
Honghe Long-Spring Experimental Secondary School
August 2023
Honghe, Yunnan
High School
—
—
277
N/A
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As part of our cooperation with local governments
of communities, we admit a certain number of local students on behalf of the government as publicly-sponsored students. As of December
31, 2020, 2021 and 2022, the number of publicly-sponsored students in our schools for our continuing operations was 6,755, 7,993 and 8,293,
respectively, accounting for 43.2%, 47.1% and 47.8% of our total students for our continuing operations as of the same dates. We allow
publicly-sponsored students to pay lower tuition, typically at the level of public schools, and receive price difference or other forms
of support from local governments for such publicly-sponsored students.
We have cooperated with certain local governments
in China to provide management services for schools, including the followings.
●
Starting from September 2020, we have cooperated with the
local government of Xishuangbanna, Yunnan province, to provide management services for Xishuangbanna International Resort District Middle
School, a local public school.
●
Starting from August 2021, we have cooperated with the local government
of Yuanjiang county, Yunnan province, to provide management services for Yuanjiang County District High School, a local public school.
●
Starting from August 2022, we have cooperated with the local government
of Honghe autonomous prefecture and Luoping county, respectively in Yunnan province, to provide management services for Mengzi Long-Spring
Experimental Secondary School, a local private school, and Luoping County District High School, a local public school.
●
Starting from August 2022, we have cooperated with a private school
operator in Shangcai county, Henan province, to provide management services for Shangcai District High School, a local private school.
Our high schools
We operate 13 high schools in Yunnan province with a total of 16,265
students, and 1,747 teachers and supporting staff as of December 31, 2022.
All of our high schools are boarding schools,
and we have implemented strict daily study schedules on our students, aimed to improve their intellectual and well-rounded development.
Curriculum design
Our high schools deliver core curriculum designed
primarily pursuant to the standards set by national, provincial and local education authorities. Mandatory courses at our high schools
include Chinese, mathematics, English, physics, chemistry, biology, history, geography, politics, music, sports, arts, student psychology
and information technology. In addition to government-mandated core curriculum, we also deliver supplemental courses to enrich the interests
and dimensions of our students. We offer over 20 elective courses and extracurricular activities at our high schools, including model
airplane crafting, soilless cultivation, martial arts, African drums, start-up simulation, electric engineering mini-lab, Chinese literature,
robotic engineering, law, music and drawing, as well as various sports courses and foreign languages courses. We use course materials
written and compiled by our centralized curriculum development team for our elective courses, and exercise close supervision and offer
generous support to students attending our extracurricular activities.
Academic assessment and achievement
The final grades for students in our high schools
for each course represent a combination of written and oral exam results, class participation, and grades for quizzes, reports and homework
assignments. We conduct formal written and oral exams on a monthly basis, in addition to our mid-term and final exams. We sometimes participate
in city-wide and regional mid-term and final exams where students from all schools in the community use the same set of exam questions.
Trained with our standardized teaching methodologies and centrally
designed curricula and course materials, our students consistently achieve outstanding academic results. Many graduates were admitted
into first-tier universities in China and the world, including among others, Tsinghua University, Peking University, Zhejiang University,
Shanghai Jiao Tong University, Fudan University, University of College London, University of Edinburgh and University of Melbourne.
Bilingual programs
We have established Chinese-English bilingual
programs at Yunnan Long-Spring Foreign Language Secondary School for students interested in pursuing higher education overseas. We have
implemented a dual-track parallel education system which allows our students to access both Australian and Chinese curricula and to choose
between domestic and overseas higher education. For our Australian program, our three-year curriculum consists of six modules, including
South Australian international high school curriculum module, Chinese high school curriculum module, academic English curriculum module,
overseas school application preparation module, extracurricular activities module, and school-based elective curriculum module. For our
South Australian international high school curriculum module, we entered into various cooperative arrangements with the SACE Board of
South Australia, an independent statutory authority of the South Australian government, to provide curricula that meet the requirements
of South Australian Certificate of Education, or SACE, an internationally recognized qualification that paves the way for our graduates
to gain admissions into overseas universities with greater ease. Our cooperation with the SACE Board of South Australia enables us to
offer education service and deliver curricula to our students in the same way and at the same quality as high schools in South Australia.
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In addition, Yunnan Long-Spring Foreign Language
Secondary School has been authorized to offer the UK Advanced Levels courses (the "A-Level courses"), the Global Assessment
Certificate program (the "GAC program"), and the Advanced Placement courses (the "AP courses"), for students
interested in pursuing higher education in the United Kingdom and the United States. Yunnan Long-Spring Foreign Language Secondary School
is also an authorized ACT test center available for students to take the standardized test for college admissions in the United States.
Our tutorial schools
We operate three tutorial schools in Yunnan province, Guizhou province,
and Shaanxi province, dedicated to providing full-time education to train Gaokao repeaters who wish to improve their performance in their
second Gaokao attempt. As of December 31, 2022, our tutorial schools had 1,071 students, and 70 teachers and supporting staff. We generally
require enrolled students to live in student dormitories during their course of study.
Curriculum design
Our tutorial schools deliver core curriculum
designed primarily pursuant to the standards set by national, provincial and local education authorities. Students enrolled in our tutorial
schools typically have a singular educational goal, which is to achieve improved academic performances on their second Gaokao attempts.
Therefore, our curriculum places a heavier emphasis on Gaokao subjects. Apart from Chinese, mathematics and English, which are mandatory
exam subjects for all students, we also offer courses on political science, history and geography to students pursuing the social sciences
track, and physics, chemistry and biology to those pursuing the natural sciences track.
Academic assessment and achievement
Our tutorial schools organize formal monthly
exams and final exams at the end of each semester. The monthly exams and final exams simulate the real Gaokao by using the same exam
papers, exam time, and adopting the same grading standards. Compared to high schools in our network, tutorial schools focus more on adopting
monthly and final exams as means to assess student performances, instead of using homework assignments, quizzes or other forms of informal
assessments.
In addition, we also participate in regional
and city-wide standard exams which simulate the exam structure and competitiveness of Gaokao. These cross-school assessments offer our
students a better understanding of their competitiveness among students both within and outside our school network against whom our students
must ultimately compete in the real Gaokao. We were able to help over 80% of our students raise 50 points or more (out of a full Gaokao
score of 750 in Yunnan province), in their second Gaokao attempt in 2022 through one-year tutoring with us, as compared to their initial
Gaokao scores in 2021
Our school management service programs
Leveraging our established brand recognition and
proven track record in school operation, we serve public or private schools which are in need to improve their school operation efficiency.
Our services are tailored to the unique needs of the specific school in light of its local conditions. We provide services primarily in
five key areas, including student admission, teacher training, academic guidance, catering and lodging management, and teaching materials
supply services. As of December 31, 2022, we operated five school management service programs in Yunnan province and Henan province. As
of December 31, 2022, under our school management service programs, we had 8,487 students under management, and 70 teachers and supporting
staff providing services.
For student admission service, we work as consultants
to the local school's recruitment team to provide guidance on marketing through various media formats, communication with students
and parents, and the proper procedures in applying for relevant governmental approvals. For teacher training, we provide both online and
offline training programs to the local school teachers, sharing experience in curriculum design, test design and other lecturing practices.
For academic guidance, we send out accredited teachers to participate in semester-long exchange programs. Our teachers teach and lead
key classes to guide both local students and their teachers with our refined curriculum contents and design. For catering and lodging
management, we provide management services related to cafeteria, lodging, landscaping and other operational services. In addition, we
also supply teaching materials to their schools, including our test preparation books and other student related study materials.
Discontinued Operations
Due to the effectiveness of the Implementation
Rules, we have concluded that we have lost control over the Affected Entities as from September 1, 2021, which primarily include the middle
schools providing compulsory education and the sponsor entities within China that are affected by the Implementation Rules. Consequently,
we classified the operation for the Affected Entities as discontinued operations. We have determined that, in substance, we had ceased
to recognize revenues for all activities related to the Affected Entities and had discontinued all business activities with such entities
by September 1, 2021 except for the continued provision of essential services to keep these schools in normal operations.
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As of December 31, 2022, the Affected Entities
included nine middle schools in Yunnan province and Shaanxi province with a total of 8,434 students and 504 teachers.  The following
table sets forth the student enrollment, capacity and utilization rate of the schools of our discontinued operations.
Student enrollment
School capacity
School
    utilization rate
(1
As of December 31,
As of December 31,
As of December 31,
2020
2021
2022
2020
2021
2022
2020
2021
2022
Middle schools
8,637
9,552
8,434
10,319
11,750
12,133
83.7
%
81.3
%
69.5
%
(1)
School utilization rate is calculated by dividing student enrollment
    with school capacity.
The following table sets forth certain key information
about each of the schools of our discontinued operations.
Student enrollment
School capacity
Commencement
Education
As of December 31,
As of
December 31,
Schools
date of operation
Location
programs
2020
2021
2022
2022
Kunming Xishan Long-Spring Experimental Secondary
    School
September 2014
Kunming,
Yunnan
Middle School
1,067
1,064
938
1,003
Kunming Chenggong Long-Spring Experimental
    Secondary School
(1)
September 2015
Kunming,
Yunnan
Middle School
1,437
1,786
1,681
2,030
Yiliang Long-Spring Experimental Secondary School
September 2016
Kunming,
Yunnan
Middle School
1,551
1,436
1,320
1,500
Yunnan Hengshui Experimental Secondary School—Xishan School
September 2016
Kunming,
Yunnan
Middle School
1,727
1,748
1,208
1,800
Qujing Hengshui Experimental Secondary School
September 2017
Qujing,
Yunnan
Middle School
1,571
1,466
961
2,400
Yunnan Long-Spring Foreign Language Secondary School
September 2017
Kunming,
Yunnan
Middle School
622
750
541
700
Xinping Hengshui Experimental Middle School
September 2019
Yuxi,
Yunnan
Middle School
662
980
912
1,000
Zhenxiong Long-Spring Advanced Secondary School
September 2020
Zhenxiong, Yunan
Middle School
—
—
116
500
Shaanxi Hengshui Experimental Middle School
September 2021
Xianyang,
Shaanxi
Middle School
—
322
757
1,200
Our Online Education Services
As a supplement to conventional school programs,
we provide online education services on third-party platforms to our students on a complimentary basis. Since 2018, we have collaborated
with third parties to build our online learning platform to implement online classes during school holidays, provide online tutorials
relating to college admission and online trainings for students participating in competitions. Our online learning platform also connects
parents with teachers and schools to enhance parent involvement.
During the COVID-19 outbreak in 2020, 2021 and
2022, we expanded our online courses based on our online learning platform. For example, we provide online tri-teacher lectures to promote
online educational resources sharing and synchronous teaching for our students from different locations within our school network. In
our online tri-teacher lectures, we invite external education consultants and experts to provide interdisciplinary online lectures to
inspire students. In collaboration with these consultants and experts, our teachers prepare the course materials and live-stream the
courses to our students. In this process, our teachers also ensure the implementation of teaching plans, instruct students with their
after-class exercises to supervise the progress of their study plans and offer guidance to the moral development of our students. Our
teachers for graduating classes in our high schools recorded a series of courses to assist the self-study of our graduating high school
students during the winter break. We also provided our graduating high school students with guidance in college admission and college
major selection through our online tutorials. In addition, we collaborated with People's Daily Online to produce a live broadcast
entitled "The Same Class" to share the knowledge of COVID-19 prevention and control and the arrangement of online teaching
during the extended winter break for all of our students, their parents and our employees.
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Our online education services have become an
important enhancement to our schools and programs to diversify our teaching methods, encourage independent learning and enhance parent
involvement. We currently provide online education services and online tri-teacher lectures for nine of our schools, specifically Qiubei
Long-Spring Experimental Secondary School, Zhenxiong Long-Spring Advanced Secondary School, Xishuangbanna Long-Spring Experimental Secondary
School, Mengla Long-Spring Experimental Secondary School, Xinping Long-Spring Advanced Secondary School, Yunnan Yuxi Hengshui Experimental
High School, Qujing Hengshui Experimental Secondary School, Wenshan Long-Spring Experimental Secondary School and Yuanjiang County District
High School. We have eight schools offering all the courses and one school offering a majority of the courses. For our online tri-teacher
lectures provided at these schools, we cooperate with many external education consultants and experts who graduated from Peking University
or Tsinghua University with more than ten years of work experience on average and in-depth knowledge in the area of secondary education.
These external education consultants and experts provide online lectures and are responsible for a total of 2,200 students at these schools
as of December 31, 2022. Leveraging our online learning platform and the application of information technology, we have optimized our
staff costs incurred at the relevant schools.
Our experience in offering online education services
allows us to provide high-quality and effective education services and promote educational resources sharing. We may cooperate with other
online education service providers to deliver high-quality online courses to aspiring students in China, especially in Western China
and other regions with relatively inadequate high-quality public educational resources.
Cooperative Arrangements with Third Parties
We have a highly scalable, asset-light business
model premised on collaboration with third parties, including local governments and real estate developers. Our partners typically contribute
the land and school facilities. Our government partners also provide other forms of support, such as subsidies and preferential tax treatment.
In return, we provide educational resources, teachers and staff, and school management expertise Pursuant to our cooperative arrangements
with local governments, we admit a certain number of local students on behalf of the government as publicly-sponsored students. These
students pay us tuition typically at the level of public schools, lower than the normal tuition we charge, and we receive the tuition
difference or other forms of support from local governments. We believe the local governments are willing to cooperate with us because
of our ability to provide high-quality educational resources to the local community as well as our strong management expertise and solid
reputation. Our services raise local education standards for the under-developed areas and often invigorate the local economy by attracting
more talents to live and work in the area. In recognition of our contribution, we were awarded the title of excellent private school
in Yunnan province in 2015.
We have established stable cooperative relationships
with several local governments, which have an average term of approximately 16 years. Operating private secondary schools under the current
regulatory regime requires stringent approvals from the relevant governments. As such, we believe that, with our proven track record,
our ability to maintain cooperative relationship with local governments to obtain not only the approval but also the support to operate
our schools has created strong entry barriers and underpins our long-term growth.
In addition to collaborating with local governments,
we currently operate three schools by leasing lands from third parties. We expect to launch new schools in the second half of 2023, including
high schools and vocational schools. Our synergistic relationship with third parties allows us to launch new schools with relatively
lower upfront capital expenditures.
Our School Management System
Standardization
We have developed a series of standardized measures
and protocols for each stage in a school's development and for a wide variety of scenarios in school management and operation,
which we require all of our schools to consistently adhere to. These measures and protocols generally set out key operating procedures
on topics such as curriculum design and delivery, student admission and administration, teacher training, parent communication, logistics,
student affairs, finance, human resources, internal control and quality control.
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For example, we adopted a set of standardized
teaching protocol named the "Three-Three-One Teaching Method," pursuant to which our teachers follow a seven-step streamlined
teaching protocol to offer education services related to student motivation (Guide and Think), course delivery (Discuss and Present),
and student feedback (Comment, Test, and Practice). Other teaching methods include the "Five-step Review Process," which
helps our students review course materials efficiently. These standardized measures play a critical role in assisting our school management
teams in monitoring and supervising the various aspects of the schools' daily operations. Our school management teams apply standardized
guidelines designed for each aspect of school operations, and are required to report the results generated from the application of these
standardized guidelines to the senior management team on a regular basis via teleconferences or in-person meetings.
Centralization
We have assembled our experienced teaching talents
in our centralized curriculum development team to prepare our curriculum offerings and course materials, which are adopted by every school
in our network. By centralizing curriculum development activities, we ensure the consistency of quality of our education service across
all schools within our school network.
Our centralized school management system also
encompasses our centralized oversight and implementation of strict quality control measures. Since 2017, we have established eight management
centers: (1) Center for International Educational Exchange, (2) Information Center, (3) Center for Academic Research, (4) Center for
Admission and Graduation, (5) Center for Teaching Materials, (6) Center for Student Development, (7) Center for Teacher Development and
(8) Center for Curriculum Reform and Development. Each center is headed by seasoned professionals with extensive experience in their
respective areas of expertise. These centers ensure that our schools are under effective and efficient management according to our standardized
operating measures and protocols.
Our standardized and centralized management model
also allows us to secure control over key resources, including teaching methods, education contents and school management experience,
making our business highly replicable. We believe that our standardized and centralized management system enables us to quickly ramp
up newly opened schools which often lack know-hows and talents to independently achieve the operational results and student academic
performances of established schools. Unified application of our standardized and centralized measures and protocols also preserves our
culture and teaching methods in the newly opened schools and is also conducive to efficiently achieve success in school operations and
student academic performances.
In April 2018, we established Long-Spring Educational
Science and Research Academy to manage all of our schools, develop and implement corporate strategies, design and optimize our education
service offerings, train teachers, and discharge other managerial functions. The Long-Spring Educational Science and Research Academy
also established several teaching research groups and course preparation groups to develop standardized course materials and teaching
methods in order to maintain consistent teaching quality of our education programs across all schools in our network.
Digitization
Our school management system also features the
concept of "digital campus" where we digitize various activities of campus administration and streamline every process of
school operations. We believe that our investment in educational technology distinguishes us from education service providers who only
observe traditional school management and teaching methods. We also believe that by pursuing and developing alternative school management
and teaching methods, we are better equipped to face the challenges in the marketplace, capitalize on new opportunities and deliver higher
quality education services.
Our Students
We primarily admit students from local communities
where our schools are located. The number of students we admit is largely limited by the quota set by national, provincial, and local
education authorities. For our high schools, the quotas are generally based on the governments' evaluation of the capacity of each
of our schools.
We have implemented a selective admission process
for applicants to all of our schools. Our high schools participate in the unified admission procedure administered by local education
authorities and generally admit middle school graduates who applied for our schools through the unified admission procedure and who reach
or exceed our required Zhongkao exam scores. Our tutorial schools generally admit high school graduates who obtained our required scores
in their first Gaokao attempt but decided to try again in the following year instead of applying for colleges immediately.
Each of our high school is staffed with admission
managers who are deeply involved in our student admission processes, and are generally responsible for conducting market research and
attending various admission and marketing training programs, and preparing promotional materials. We also have an admission hotline dedicated
to answering any questions applicants may have about our schools and programs.
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Our Teachers
We have an excellent and committed team of teachers.
Our teachers are knowledgeable in their respective subject areas and the development trends in China's education environment, which
enable them to design curricula and exam preparation programs that help our students achieve satisfactory exam results. As of December
31, 2022, we had a total of 1,358 teachers in our schools for our continuing operations, 99.7% of whom had a bachelor's degree.
We require all our teachers of our high schools and tutorial schools to obtain the qualifications required by PRC regulatory authorities.
We also have teachers with work experience at many nationally well-regarded secondary schools in China, to coach our teachers to ensure
the consistent implementation of effective teaching methods within our school network.
We have a professional and dedicated team of
principals, who are responsible for the strategic development and operation of our schools. In addition to lateral hiring of experienced
principals, many of our school principals have grown with us and have acted in several capacities within our school network, often starting
as teachers. As of December 31, 2022, we had a total of 45 principals and deputy principals across our school network for our continuing
operations, among whom eight principals had a master's or higher degree. As of the same date, 11 of our high school principals
were recognized as Advanced Secondary School Teachers.
Teacher recruitment
As a part of our centralized management system,
we have established the Center for Human Recourses which is in charge of recruiting teachers and ensuring the overall teaching quality
of the newly recruited teachers. We recruit both college graduates and experienced teachers. Candidates without prior teaching experience
must hold a minimum of bachelor's degree in the subject area they intend to teach, and score higher than the tier-1 university
cutoff score in Gaokao. Experienced teachers must hold a minimum of bachelor's degree in the subject they intend to teach, and
bear the recommendations of reputable schools. Our Center for Human Resources evaluates their teaching skills and ethics through trial
lectures.
To recruit top college graduates, we organize
on-campus job fairs and post job openings online. We have also cooperated with reputable universities to ensure a steady supply of high-quality
teachers for our high schools. For example, we currently intend to recruit 264 teachers, with at least 40% holding a master's degree
or above, from universities designated under the national Double First Class University Plan in China by 2023. We have also designated
top-tier universities, including among others, Peking University, Tsinghua University, Beijing Normal University, Southwest University
and Central China Normal University, as our target universities on which we focus our recruitment efforts. In addition, we have entered
into agreements with 11 universities in China, such as Xi'an Jiaotong University, Harbin Institute of Technology and Lanzhou University,
and provided exclusive internship and externship opportunities for their students and graduates.
Teacher compensation
We offer competitive compensation packages to
our teachers. In addition to base salary, our teachers in graduating classes in our high schools also are entitled to performance-based
bonuses determined by the academic results achieved by their students. The average annual salary of our teachers of our high schools
and tutorial schools in Yunnan province were RMB138,824 and RMB163,878 in 2022, respectively.
With the aid of our cooperative arrangements with
local governments, teachers in most of our high schools may also receive various forms of financial supports and perks from the local
governments in addition to compensation from us. See "—Cooperative Arrangements with Third Parties" for details. We
believe the competitive compensation packages and perks help us recruit and retain talented teachers who play a critical role in carrying
out our strategies, delivering our curricula, and helping our students succeed.
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Teacher training
We attach great importance to training our teachers
and established the Long-Spring Educational Science and Research Academy to facilitate teacher trainings across our school network. In
addition to solidifying their teaching skills and widening their knowledge pool, our trainings also focus on developing our teachers'
professional responsibilities and ethics. Each newly-hired teacher is required to participate in a month-long training session which
focuses on ethics, student and classroom management, and teaching skills and methodologies. Specifically, we implement a three-phase
approach for the training of our newly-hired teachers:
●
Phase I: we hold seminars on pedagogy and educational psychology, conduct teaching skill evaluation,
    and introduce our teaching methodologies and protocols. During this phase, we generally organize trainings at our headquarters.
●
Phase II: we offer shadowing opportunities where newly-hired teachers observe experienced teachers'
    course delivery.
●
Phase III: we assign a mentor for each newly-hired teacher to improve their teaching skills.
We also provide various training opportunities
to our teachers and principals, both at our headquarters and at the individual school level. For example, we have recently cooperated
with Tsinghua University to host training programs for our principals. We also plan to establish education research centers in Yunnan
province and Beijing to host training programs for teachers and promote research and development of educational methodologies. We require
our teachers to research and prepare for each class session. To ensure consistency across classrooms, our teachers must adhere to the
curriculum requirements developed by our centralized curriculum development team, and groups of teachers of the same subject attend joint
class-preparation sessions to ensure consistency in the content they deliver. In addition, we collaborate with well-known education and/or
research institutions to improve our teacher training capabilities.
Teacher evaluation and promotion
We have set up a performance-based teacher compensation
system where teachers' compensation level is partially dependent on their performance. We consider various factors in evaluating
the performance for each teacher, including student average scores in the monthly exams, seniority, ethical behaviors and the managerial
functions they undertake.
In addition, we put in place a well-established
career path for our teachers, which we believe further incentivizes our teachers to improve their teaching skills and encourage loyalty.
Our decisions to promote teachers are based on each teacher's individual performance and evaluation under the guidance issued by
local governments. Specifically, we consider our teachers' educational backgrounds, seniority, research capabilities, and knowledge
in teaching methodologies.
Our Tuition
We typically charge our students tuition, boarding
fees, and other miscellaneous fees for meals, books, uniforms and other school supplies. Subject to applicable regulatory approvals,
we plan to adjust tuition in the future as our competitive positions change in the markets where we compete. The following table sets
forth the average tuition per student for our continuing operations by school type for the periods indicated.
For the Year ended
    December 31,
2020
2021
2022
(in RMB)
Average tuition per student of our schools
(1)
High schools
16,399
15,072
10,997
Tutorial schools for Gaokao repeaters
22,147
23,170
19,853
(1)
The average tuition per student equals to the total tuition income of our schools during a certain
    calendar year divided by the average student enrollment of such calendar year, which is arrived at by averaging the number of students
    enrolled as of the end of the previous and the concerned calendar years/periods.
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In determining the amount of tuition we charge,
we consider factors including the demand for our education programs, the cost of our operations, the geographical markets where our schools
are located, the tuition charged by our competitors, and our pricing strategy to gain market share. For details of our tuition, see "Item
5. Operating and Financial Review and Prospects—A. Operating Results—Key Components of Our Results of Operations—Revenues."
We have established refund policies at each of
our schools for students who withdraw from our schools or transfer to a school outside our network. In general, prepaid tuition fees
and boarding fees can be refunded proportionately for the remaining year.
Marketing
We primarily market our schools to students and
parents located near the regions where our respective schools are located. To attract high-quality students and increase student enrollment,
we utilize a variety of marketing methods, including:
●
Referrals
. As we have developed a reputation for offering quality education, we rely strongly
    on word-of-mouth referrals by former students and their parents who are satisfied with our education services. We believe that our
    extensive and expanding alumni network will continue to offer a solid platform for referrals.
●
Media advertising
. To reach a larger base of audience efficiently, we place advertisements
    about our schools through various media platforms, including newspapers, radio and online and mobile platforms.
●
Promotional events.
From time to time, we introduce our programs to potential feeder schools,
    distribute information booklets and invite prospective students and their parents to visit our campuses, which allows us to reach
    potential students directly and enable the active engagement with them.
Competition
The education service market in China is rapidly
evolving and highly competitive. We compete primarily with public and private schools outside our network, especially those operating
in the same communities as our schools. We believe we are well-positioned to succeed in this market primarily due to our extensive operational
experiences, scalable asset-light business model, and our standardized and centralized school management system. Our competitive compensation
packages, supplemented by various forms of subsidies from local governments, enable us to recruit and retain talented teachers. Our students'
past success in Gaokao demonstrates the outstanding quality of our education services, and helps us build a strong and favorable reputation
among prospective students, which improved our ability to admit top students in the local communities.
Properties and Facilities
All of our properties are located in China. We
currently occupy a total combined gross floor area of approximately 718,297 square meters of facilities for 13 properties provided by
local governments or entities through our cooperative arrangements with them. The terms of such properties range from nine to 21 years.
By utilizing the properties developed by local governments, we avoid significant capital expenditures in connection with land procurement
and facilities construction. See "—Cooperative Arrangements with Third Parties." For relevant risks, see "Item
3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—Any unfavorable changes in our cooperative
relationships with third parties or favorable government policy treatment may adversely affect our business."
We also lease three properties with a total combined
gross floor area of approximately 113,762 square meters in Yunnan province, Shaanxi province, and Guizhou province from third parties
to operate our schools. Our leases have terms of five years to 20 years.
We believe that the facilities which we currently
lease and occupy are adequate to meet our needs for the foreseeable future, and we believe that we will be able to obtain adequate facilities,
principally through leasing of additional properties, to accommodate our future expansion plans. For relevant risks, see "Item
3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—Failure to control rental costs, control
the quality, maintenance and management of the leased school premises, obtain leases at desired locations at reasonable prices or failure
to comply with the applicable PRC property laws and regulations regarding certain of our leased and owned premises could materially and
adversely affect our business."
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Employees
We had 1,816 full-time employees for our continuing
operations as of December 31, 2022. All of our full-time employees are located in China. The following table sets forth the number of
our full-time employees for our continuing operations, categorized by function, as of December 31, 2022.
Teachers
1,358
Administrative staff
290
Supporting staff
168
Total
1,816
Our administrative staff primarily comprise our
management and administrative personnel and principals. Our supporting staff primarily comprise personnel providing support and services
in connection with our students' campus life.
As required by PRC laws and regulations, we participate
in various employee social security plans for our employees that are administered by local governments, including housing, pension, medical
insurance and unemployment insurance. We believe we maintain a good working relationship with our employees.
Intellectual Property
Our schools hold copyrights to various course
materials that have been developed internally and provide a basis for improving the quality of our education service. Our strategic plan
calls for continued and extensive investment in maintaining and expanding these assets. We owned 51 trademarks in China as of December
31, 2022. We have registered 17 domain names, including www.longspringedu.com, as of the same date. To protect our intellectual properties,
we rely on a combination of trademark, copyright and trade secret laws. From time to time, we are required to obtain licenses with respect
to course materials owned by third parties for our education service, in particular for our Chinese-English bilingual programs which
require foreign-language educational materials.
Insurance
We maintain various insurance policies, such
as school liability insurance, student life insurance, auto insurance and key-man life insurance to safeguard against risks and unexpected
events. We do not maintain business interruption insurance. See "Item 3. Key Information—D. Risk Factors—Risks Related
to Our Business and Industry—We have limited insurance coverage with respect to our business and operations." We consider
our insurance coverage to be in line with the industry practice as well as the customary practice in China.
Legal Proceedings
We and certain of our directors and officers have been named as defendants
in a putative shareholder class action lawsuit in captioned Dagan Investments LLC v. First High-School Education Group Co., Ltd. (Case
No. 1:22-cv-03831) filed on May 11, 2022 in the United States District Court for the Southern District of New York. The lead plaintiff
alleged in the complaint, in sum and substance, that our IPO registration and prospectus (the "Offering Documents") were false
or misleading, in violation of Sections 11, 12(a)(2), and 15 of the Securities Act, in that the Offering Documents allegedly failed adequately
to warn investors, among other things, that the new rules, regulations and policies regarding private education to be implemented by the
Chinese government posed a material adverse threat to the Company and its business. The lead plaintiff purported to bring this action
on behalf of a class of similarly situated investors and seek monetary damages on behalf of the class. As of the date of this annual report,
we were in the process of preparing for the defends to be filed against the complaint. As the case is still in its preliminary stage,
we cannot predict its timing, outcome, potential damages, or expenses that may be incurred.
In addition, from time to time, we may become
a party to various legal or administrative proceedings arising in the ordinary course of our business, including actions with respect
to intellectual property infringement, breach of contract, labor and employment claims. See "Item 3. Key Information—D. Risk
Factors—Risks Related to Our Business and Industry—We may be subject to intellectual property infringement claims, which may
be expensive to defend and may disrupt our business and operations", "—We may be involved in labor and employment related
disputes and legal claims from time to time arising out of our operations", and "—We and certain of our directors and
officers have been named as defendants in a putative shareholder class action lawsuit, which could have a material adverse impact on our
business, financial condition, results of operation, cash flows and reputation." We are currently not a party to, and we are not
aware of any threat of, any legal or administrative proceedings that, in the opinion of our management, are likely to have any material
and adverse effect on our business, financial condition, cash-flow or results of operations. However, litigation or any other legal or
administrative proceeding, regardless of the outcome, could result in substantial cost and diversion of our resources, including our management's
time and attention.
Regulations
Regulations on Foreign Investment in Education in the PRC
Regulations on Foreign Investment
Pursuant to the PRC Law on Wholly Foreign-invested
Enterprises, which was promulgated by the SCNPC on April 12, 1986, last amended on September 3, 2016 and became effective on October
1, 2016, where the incorporation of wholly foreign-invested enterprises does not involve the implementation of special administrative
measures for foreign investment access, the incorporation, separation, merger, or any other major change and the operation period of
such enterprises are subject to record-filing administration.
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The Implementation Rules on Wholly Foreign-invested
Enterprises of the PRC (the "Implementation Rules on Wholly Foreign-invested Enterprises") was promulgated by the Ministry
of Foreign Trade and Economic Cooperation of the PRC (currently known as the MOFCOM) on December 12, 1990, amended by the State Council
on February 19, 2014, and became effective on March 1, 2014. According to the Implementation Rules on Wholly Foreign-invested Enterprises,
industries in which foreign investment is prohibited or restricted shall be regulated in accordance with the Provisions on Guiding the
Orientation of Foreign Investment and the Foreign Investment Industries Guidance Catalog.
According to the Foreign Investment Law of the
PRC (the "Foreign Investment Law"), adopted by the NPC on March 15, 2019 and came into effect on January 1, 2020, China shall
implement a management system of pre-establishment national treatment and a negative list for foreign investment. Under the pre-establishment
national treatment, the treatment given to foreign investors and their investments during investment access stage will not be lower than
that given to their domestic counterparts. The negative list refers to special administrative measures for foreign investment access
in specific industries as stipulated. China shall give national treatment to foreign investment beyond the negative list. The organization
form, institutional framework and standard of conduct of foreign-invested enterprises shall be subject to the provisions of the Company
Law and the Partnership Enterprise Law of the PRC, and other laws. Foreign investors shall not invest in any industry prohibited by the
negative list for foreign investment access. For any industry restricted by the negative list foreign investors shall conform to the
investment conditions as required in the negative list.
The Implementing Regulation for the Foreign Investment
Law of the PRC, adopted at the 74th executive meeting of the State Council on December 12, 2019 which came into effect on January 1,
2020, provides implementing measures and detailed rules to ensure the effective implementation of the Foreign Investment Law of the PRC.
The PRC Law on Sino-Foreign Equity Joint Ventures,
the PRC Law on Wholly Foreign-invested Enterprises and the PRC Law on Sino-Foreign Cooperative Joint Ventures were repealed simultaneously
as the Foreign Investment Law came into effect, and foreign-invested enterprises which were incorporated in accordance with such laws
before the implementation of the Foreign Investment Law may retain their original organization forms and other aspects for five years
upon the implementation hereof.
Subject to the Measures for Reporting of Foreign
Investment Information (the "Foreign Investment Information Measures"), which was jointly issued by the MOFCOM and the State
Administration for Market Regulation (the "SAMR") on 30 December 2019 and came into effect on January 1, 2020. Beginning
on January 1, 2020, when foreign investors carry out investment activities directly or indirectly in China, foreign investors or foreign
invested enterprises shall submit investment information through the Enterprise Registration System and the National Enterprise Credit
Information Publicity System operated by the SAMR. Specifically, foreign investors or foreign-invested enterprises shall report their
establishments, modifications and cancellations and file their annual reports in accordance with the Foreign Investment Information Measures.
When a foreign-invested enterprise has completed filing of such reports, the relevant information will be passed by the competent market
regulation department to the competent commercial department, so the reports do not need to be submitted separately.
Special Administrative Measures for Foreign Investment Access
(Negative List) (2021)
Under the 2021 Special Administrative Measures,
which was promulgated by the NDRC and the MOFCOM on December 27, 2021 and became effective on January 1, 2022, the Special Administrative
Measures for Foreign Investment Access (Negative List) (2020) shall be repealed simultaneously as its implementation.
Pursuant to the 2020 Special Administrative Measures,
high school education is a restricted industry for foreign investors, and foreign investors are only allowed to invest in high school
education in cooperation with a domestic party and the domestic party shall play a dominant role in the cooperation, which means the
principal or other chief executive officers of the school shall be PRC citizens and the representatives of the domestic party shall account
for no less than half of the total members of the board of directors, the executive council or the joint administration committee of
the Sino-foreign cooperative educational institution. In addition, pursuant to the 2021 Special Administrative Measures, foreign investors
are not allowed to invest in compulsory education.
Regulations on Sino-Foreign Cooperation in Operating Schools
Sino-foreign cooperation in operating schools
or training programs is specifically governed by the Regulation on Sino-Foreign Cooperative Education of the PRC (the "Sino-Foreign
Regulation"), which was promulgated by the State Council on March 1, 2003 and last amended on March 2, 2019, and the Implementation
Rules for the Regulation on Sino-Foreign Cooperative Education (the "Implementation Rules"), which was promulgated by the
MOE on June 2, 2004 and became effective on July 1, 2004.
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The Sino-Foreign Regulation and its Implementation
Rules apply to the activities of educational institutions established in the PRC cooperatively by foreign educational institutions and
PRC educational institutions, the students of which are to be admitted primarily among PRC citizens. The Sino-Foreign Regulation and
its Implementation Rules encourage substantive cooperation between foreign educational institutions with relevant qualifications and
experience in providing high-quality education and PRC educational institutions, to jointly operate various types of schools in the PRC,
with such cooperation in the industries of higher education and occupational education being encouraged. The foreign educational institution
must have relevant qualifications and experience at the same level and in the same category of education. Sino-foreign cooperation schools
are not permitted, however, in compulsory education, namely primary schools and middle schools, and military, police, political and other
kinds of education that are of a special nature in the PRC. Any Sino-foreign cooperation school and cooperation programs shall be approved
by relevant education authorities and obtain the Permit for Sino-foreign Cooperation in Operating School. A Sino-foreign cooperation
school established without the above approval or permit may be banned by relevant authorities, be ordered to refund the fees collected
from its students and be subject to a fine of no more than RMB100,000, while a Sino-foreign cooperation program established without such
approval or permit may also be banned and be ordered to refund the fees collected from its students.
On June 18, 2012, the MOE issued the Implementation
Opinions of the MOE on Encouraging and Guiding the Entry of Private Capital in the Field of Education and Promoting the Healthy Development
of Private Education to encourage private investment and foreign investment in the field of education. According to these opinions, the
proportion of foreign capital in a Sino-foreign cooperative educational institution shall be less than 50%.
Regulations on Private Education in the PRC
Education Law of the PRC
On March 18, 1995, the NPC enacted the Education
Law of the PRC (the "Education Law"), which became effective on September 1, 1995. The Education Law sets forth provisions
relating to the fundamental education systems of the PRC, including a school education system comprising pre-school education, primary
education, secondary education and higher education, a system of nine-year compulsory education, a national education examination system,
and a system of education certificates. The Education Law stipulates that the government should formulate plans for the development of
education, and establishes and operates schools and other educational institutions. Furthermore, it provides that, in principle, enterprises,
social organizations and individuals are encouraged to establish and operate schools and other types of educational institutions in accordance
with PRC laws and regulations. On December 27, 2015, the SCNPC published the Decision on Amendment of the Education Law, which became
effective on June 1, 2016. The amended Educational Law narrowed the provision prohibiting the establishment or operation of schools or
other educational institutions for profit to include only schools or other educational institutions founded with governmental funds or
donated assets.
In addition, the Education Law stipulates the
basic requirements to be fulfilled for the establishment of schools or any other educational institution. It also provides that the establishment,
modification or termination of schools or any other educational institution shall, in accordance with the relevant PRC laws and regulations,
go through the process of examination, verification, approval, registration or filing.
Law on Promoting Private Education
The Private Education Law was last amended and
became effective on December 29, 2018. Pursuant to the Private Education Law, private schools that provide diploma- and degree-oriented
education, preschool education, Self-Taught Higher Education Examination education and other cultural education shall be subject to examination
and approval by education authorities at or above the county level within the limits of their powers. Sponsors of private schools may
choose to establish non-profit or for-profit private schools at their own discretion. However, they may not establish for-profit private
schools providing compulsory education.
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Implementation Rules of the Law on Promoting Private Education
According to the Implementation Rules which became
effective on April 1, 2004 and was amended on May 14, 2021 with an effective date of September 1, 2021, (1) foreign-invested enterprises
established in China and social organizations whose actual controllers are foreign parties shall not sponsor, participate in or actually
control private schools that provide compulsory education, (2) social organizations or individuals shall not control any private school
that provides compulsory education or any non-profit private school that provides pre-school education by means of, among others, merger,
acquisition and contractual arrangements; and (3) private schools providing compulsory education shall not conduct any transaction with
any related party. Where a private school other than private schools providing compulsory education conducts transactions with any related
party, it shall follow the principles of openness, fairness and equality, determine the reasonable fees and regulate the decision-making,
and shall not do detriment to the state interests, the interests of the school or the rights and interests of the teachers and students,
otherwise, there is a risk of being ordered to make corrections within a time limit, and the illegal gains, if any, shall be confiscated
after the fees collected are returned; if the circumstances are serious, the sponsor, actual controller and member of the decision-making
body or supervisory body shall not become the sponsor, actual controller or member of the decision-making body or supervisory body of
other private school within one to five years; if the circumstances are especially serious with adverse social impact, the sponsor, actual
controller and member of the decision-making body or supervisory body shall not become the sponsor, actual controller and members of
the decision-making body or supervisory body of other private school permanently; if a violation of public security administration is
constituted, the public security organ shall impose a public security administration punishment according to law; if a crime is constituted,
criminal responsibility shall be investigated in accordance with the law.
Several Opinions on Encouraging Private Entities and Individuals
to Operate Schools and Promoting the Healthy Development of Private Education
According to the Several Opinions on Encouraging
Private Entities and Individuals to Operate Schools and Promoting the Healthy Development of Private Education, which was issued by the
State Council on December 29, 2016, innovative institutional mechanisms shall be implemented in the field of private education, which
include but are not limited to: (i) classified registration and management shall be applicable to private schools, and the sponsors of
private schools may, at their own discretion, choose to establish non-profit or for-profit private schools; (ii) government support policies
shall be applicable to private schools. The people's government at all levels are responsible for formulating and improving support
policies for non-profit private schools including but not limited to government subsidies, government procurement services, fund incentives,
donation incentives and land allocation. Meanwhile, the people's government at all levels may support the development of for-profit
private schools by ways including but not limited to government procurement services and preferential tax treatments in accordance with
economic and social development and public services requirements; and (iii) broaden the financing channels for private schools, encourage
and attract private funds to enter into the field of private education. Financial institutions are encouraged to provide loans to private
schools with the pledge of the schools' future operating income or intellectual property rights, while individuals or entities
are encouraged to make donations to non-profit private schools.
As of the date of this annual report, certain local
governments, such as Yunnan province, Inner Mongolia Autonomous Region, Shaanxi province, Sichuan province, Guizhou province and Chongqing
municipal, have promulgated their local regulations relating to legal person registration and administration for private schools and certain
local governments, and have issued general guidance to encourage the development of private schools. Among these local regulations and
guidance, some local governments, such as Yunnan province, Inner Mongolia Autonomous Region, Shaanxi province, Sichuan province, Guizhou
province and Chongqing municipal, require the existing private schools to register either as for-profit or non-profit schools within a
specific time period.
Implementation Rules on Classified Registration of Private Schools
According to the Implementation Rules on Classified
Registration of Private Schools, which was issued jointly by the MOE, the Ministry of Human Resources and Social Security, the Ministry
of Civil Affairs, the State Commission Office of Public Sectors Reform and the SAIC on December 31, 2016 and became effective on the
same day, the establishment of private schools is subject to approval. Private Schools approved to be established shall apply for registration
certificate or business license in accordance with the classified registration regulations after they obtain the license for school operations
by competent government authorities.
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Implementation Rules on the Supervision and Administration of
For-profit Private Schools
According to the Implementation Rules on the
Supervision and Administration of For-profit Private Schools, which was issued jointly by the MOE, the Ministry of Human Resources and
Social Security and the SAIC on December 31, 2016 and became effective on the same day, social organizations and individuals are permitted
to operate for-profit private colleges and universities and other universities, high schools and kindergartens while are prohibited from
operating for-profit private schools providing compulsory education.
According to the Implementation Rules on the
Supervision and Administration of For-profit Private Schools, social organizations and individuals operating for-profit private schools
shall have the financial resources appropriate to the level, type and scale of the school, and their net assets or monetary funds shall
be able to satisfy the costs of the school construction and development. Furthermore, social organizations operating for-profit private
schools shall be a legal person who is in good credit standing, and shall not be listed as an enterprise operating abnormally, in material
non-compliance with the laws, or being dishonest. Individuals operating for-profit private schools shall be PRC citizens who reside in
China, be in good credit standing without any criminal record and enjoy political rights and complete civil capacity.
Notice on the Registration and Administration of the Name of
For-profit Private Schools
According to the Notice of the SAIC and the MOE
on the Registration and Administration of the Name of For-profit Private Schools, which was issued on August 31, 2017 and became effective
on September 1, 2017, for-profit private schools shall be registered as limited liability companies or joint-stock limited companies
according to the Company Law of the PRC and the Law on Promoting Private Education, and its name shall comply with the relevant laws
and regulations on company registration and education.
Interim Measures on the Management of the Collection of Private
Education Fees
The Interim Measures on the Management of the
Collection of Private Education Fees, or Private Education Fees Collection Measures, was promulgated by the NDRC, the MOE and the Ministry
of Labor and Social Security (currently known as the Ministry of Human Resources and Social Security) on March 2, 2005. According to
the Private Education Fees Collection Measures and the Implementation Rules of the Law on Promoting Private Education, the types and
amounts of fees charged by private schools providing diploma- or degree-oriented education shall be examined by education authorities
or labor and social welfare authorities and approved by governmental pricing authorities; and, other private schools shall file its pricing
information with the governmental pricing authorities and publicly disclose such information. If a school raises its tuition levels without
obtaining proper approval or making the requisite filing with the relevant government pricing authorities, such school would be required
to return the additional tuition fees obtained through such raise and be held liable for compensation of any losses caused to the students
in accordance with relevant PRC laws.
The Several Opinions of the Central Committee
of the Communist Party of China and the State Council on Promoting the Price Mechanism Reform, which was issued on October 12, 2015,
allows for-profit private schools to determine their prices on their own, while the tuition-collecting policies of non-profit private
schools shall be determined by the provincial governments in a market-oriented manner and based on the local situations.
On July 12, 2016, Yunnan Development and Reform
Commission, Department of Education of Yunnan Province as well as Yunnan Provincial Department of Human Resources and Social Security
issued the Notice on the Implementation of Independent Pricing on Private Schools in Yunnan Province. According to this Notice, tuition
and boarding fees of the private schools in Yunnan province may be independently determined by the private schools according to the school-operating
cost, market demand and other factors, and be made available to the public.
On January 2, 2018, People's Government
of Inner Mongolia Autonomous Region issued the Opinions on Encouraging Social Forces to Establish Education and Promoting the Healthy
Development of Private Education. Pursuant to this Opinions, fees of private schools are regulated by the market. Specific fee standards
are determined by the schools independently and implemented according to laws after being publicized to the public. Relevant authorities
shall strengthen the supervision during and after the event on the charging practices of private schools.
On July 16, 2018, People's Government of
Guizhou province issued the Opinions on the Implementation of Supporting and Regulating Education by Social Forces and Promoting the
Healthy Development of Private Education. According to this Opinions, subject to the principles of fairness, openness, legitimacy and
good faith, the private schools providing academic education are entitled to determine the education fee rates on their own.
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On January 14, 2018, People's Government
of Shaanxi province issued the Opinions on the Implementation of Encouraging Social Forces to Establish Education and Promoting the Healthy
Development of Private Education. Pursuant to this Opinions, fees charged by non-profit private primary and secondary schools shall be
determined by local government in a market-oriented manner and based on the local situations, while for-profit private schools are allowed
to determine their prices on their own according to the market demand.
On August 17, 2020, MOE, NDRC, the Ministry of
Finance, and the State Administration for Industry and Commerce or the SAMR, and the General Administration of Press and Publication
jointly released the Opinions on Further Strengthening and Regulating the Administration of Education Fees (the "Opinions"),
effective as of the same date. The Opinions mainly stipulate the specific methods for non-profit private school's fees shall be
formulated by the provincial people's government; the fees of for-profit private schools shall be regulated by the market and determined
by the school themselves. For private schools established before November 7, 2016, the charging policies shall be managed as non-profit
private schools before the relevant procedures for classification registration are completed. In particular, it is strictly forbidden
for the sponsors of non-profit private schools and non-profit private Sino-foreign cooperative school sponsors to obtain proceeds from
school-running such as tuition income, distributing school balances (residual assets) or transferring proceeds from school running through
related-party transactions or affiliated parties or other means.
Regulations on Compulsory Education
According to the Law for Compulsory Education
of the PRC, which was promulgated by the NPC on April 12, 1986 and last amended on December 29, 2018, a nine-year system of compulsory
education, including six years of primary school and three years of middle school, was adopted.
Further, the MOE issued the Reform Guideline
on the Curriculum System of Fundamental Education (Trial) on June 8, 2001, which became effective on the same day, pursuant to which
schools providing fundamental education shall follow a "state-local-school" three-tier curriculum system. In other words,
schools must follow the state curriculum standard for state courses while local education authorities have the power to determine the
curriculum standard for other courses, and schools may develop curriculums that are suitable for their specific needs.
Regulations on After-School tutoring
On July 24, 2021, the General Office of State
Council and the General Office of Central Committee of the Communist Party of China jointly promulgated the Alleviating Burden Opinion,
which provides that, among other things, (1) local government authorities shall no longer approve new after-school tutoring institutions
providing tutoring services on academic subjects for students in compulsory education, and the existing after-school tutoring institutions
providing tutoring services on academic subjects shall be registered as non-profit; (2) Academic AST Institutions are prohibited
from raising funds by listing on stock markets or conducting any capitalization activities and listed companies are prohibited from investing
in Academic AST Institutions through capital markets fund raising activities, or acquiring assets of Academic AST Institutions by paying
cash or issuing securities; and (3) foreign capital is prohibited from controlling or participating in any Academic AST Institutions
through mergers and acquisitions, entrusted operation, joining franchise or variable interest entities.
Any violation of the foregoing shall be rectified.
Moreover, the Alleviating Burden Opinion specifies a series of operating requirements that after-school tutoring institutions must meet,
including, among other things, administration and supervision over academic subjects tutoring institutions for students on grade ten
to twelve shall be implemented by reference to the relevant provisions of the Alleviating Burden Opinion.
Regulations on Intellectual Property in the PRC
Copyright
Pursuant to the Copyright Law of the PRC (the
"Copyright Law"), which was last amended on November 11, 2020 and became effective from June 1, 2021, copyrights include
personal rights such as the right of publication and attribution as well as property rights such as the right of production and distribution.
Reproducing, distributing, performing, projecting, broadcasting or compiling a work or communicating the same to the public via an information
network without permission from the owner of the copyright therein shall constitute copyright infringement unless otherwise provided
in the Copyright Law. The infringer shall, according to the circumstances of the case, undertake to cease the infringement, take remedial
actions, offer an apology, pay damages, etc.
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Trademark
Pursuant to the Trademark Law of the PRC (the
"Trademark Law"), which was amended on August 30, 2013 and became effective on May 1, 2014, and last amended on April 23,
2019 and became effective on November 1, 2019, the right to exclusive use of a registered trademark shall be limited to trademarks which
have been approved for registration and to goods for which the use of trademark has been approved. The validity period of a registered
trademark shall be ten years, counted from the date of approval of the registration. According to the Trademark Law, using a trademark
that is identical with or similar to a registered trademark in connection with the same or similar goods without the authorization of
the owner of the registered trademark constitutes an infringement. The infringer shall, in accordance with the relevant laws, undertake
to cease the infringement, take remedial actions, pay damages, etc.
Domain Name
In accordance with the Measures on the Administration
of Internet Domain Names, which was promulgated by Ministry of Industry and Information Technology of the PRC (the "MIIT"),
on August 24, 2017 and came into effect on November 1, 2017, the Implementation Rules of China Internet Network Information Center on
Domain Name Registration, which was promulgated by China Internet Network Information Center on May 28, 2012 and came into effect on
May 29, 2012, domain name registrations are conducted through domain name service agencies established under relevant regulations, and
the applicant becomes a domain name holder upon successful registration. Pursuant to the Measures of the China Internet Network Information
Center on Domain Name Dispute Resolution, which was promulgated by China Internet Network Information Center on September 1, 2014 and
came into effect on the same date, domain name disputes shall be submitted to an organization authorized by China Internet Network Information
Center for resolution.
Regulations on Foreign Exchange in the PRC
Pursuant to the Foreign Exchange Administration
Regulations of the PRC, as amended on August 5, 2008, RMB is freely convertible for current account items, including dividend distributions,
interest payments, trade-and service-related foreign exchange transactions, but not for capital account items, such as direct investments,
loans, repatriation of investments and investments in securities outside China, unless prior approval of the SAFE, is obtained and prior
registration with SAFE is made. On May 10, 2013, SAFE promulgated the Circular of SAFE on Printing and Distributing the Administrative
Provisions on Foreign Exchange in Domestic Direct Investment by Foreign Investors and Relevant Supporting Documents (the "SAFE
Circular 21"), which was amended on October 10, 2018. It provides for and simplifies the operational steps and regulations on foreign
exchange matters related to direct investment by foreign investors, including foreign exchange registration, account opening and use,
receipt and payment of funds, and settlement and sales of foreign exchange.
Pursuant to the Circular of the SAFE on Further
Improving and Adjusting Foreign Exchange Administration Policies for Direct Investment (the "SAFE Circular 59"), which was
promulgated on November 19, 2012 and became effective on December 17, 2012, and was further amended on May 4, 2015 and October 10, 2018,
approval is not required for the opening of an account entry in foreign exchange accounts under direct investment. The SAFE Circular
59 also simplifies the capital verification and confirmation formalities for foreign-invested entities, the foreign capital and foreign
exchange registration formalities required for the foreign investors to acquire equities from PRC parties, and further improves the administration
on exchange settlement of foreign exchange capital of foreign-invested entities.
Pursuant to the SAFE Circular 37, promulgated
and becoming effective on July 4, 2014, (1) a PRC resident shall register with the local SAFE branch before he or she contributes assets
or equity interests in an overseas special purpose vehicle (the "SPV"), that is directly established or controlled by the
PRC resident for the purpose of conducting investment or financing; and (2) following the initial registration, the PRC resident is required
to register with the local SAFE branch for any major change, in respect of the SPV, including, among other things, a change in the SPV's
PRC resident shareholder(s), name of the SPV, term of operation, or any increase or reduction of the SPV's registered capital,
share transfer or swap, and merger or division. Pursuant to the SAFE Circular 37, failure to comply with these registration procedures
may result in penalties.
Pursuant to the SAFE Circular on Further Simplifying
and Improving the Direct Investment-related Foreign Exchange Administration Policies (the "SAFE Circular 13"), which was
promulgated on February 13, 2015 and became effective on June 1, 2015, the foreign exchange registration under domestic direct investment
and under overseas direct investment is directly reviewed and conducted by banks in accordance with the SAFE Circular 13, and the SAFE
and its branches shall perform indirect regulation over the direct investment-related foreign exchange registration through banks.
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Regulations on Loans to and Direct Investment in the PRC Entities
by Offshore Holding Companies
According to the Implementation Rules on the
Provisional Regulations on Statistics and Supervision of Foreign Debts promulgated by the SAFE on September 24, 1997 and the Interim
Provisions on the Management of Foreign Debts promulgated by the SAFE, the State Development Planning Commission (currently known as
the NDRC) and the MOF and becoming effective from March 1, 2003, loans by foreign companies to their subsidiaries in China, which accordingly
are foreign-invested enterprises, are considered foreign debts, and such loans must be registered with the local branches of the SAFE.
Under its provisions, the total amount of accumulated medium-term and long-term foreign debts and the balance of short-term debts borrowed
by a foreign-invested enterprise is limited to the difference between its total investment and the registered capital.
Provisions on the Merger and Acquisition of Domestic Enterprises
by Foreign Investors (Revised in 2009) and Overseas Listings
Under the M&A Rules, a foreign investor is
required to obtain necessary approvals when (1) such foreign investor acquires equity interests or subscribes for new equity interests
in a domestic enterprise through an increase of registered capital in the domestic enterprise and thereby converting it into a foreign-invested
enterprise, or (2) such foreign investor establishes a foreign-invested enterprise which purchases and operates the assets of a domestic
enterprise, or which purchases the assets of a domestic enterprise and injects such assets to establish a foreign-invested enterprise.
According to Article 11 of the M&A Rules, where a domestic enterprise or individual, through foreign enterprise established or controlled
by it/him/her, acquires a domestic enterprise which is related to or connected with it/him/her, approval from the MOFCOM is required.
According to the Interim Administrative Measures
for the Record-filing of the Incorporation and Change of Foreign-invested Enterprises, the merger and acquisition of domestic enterprises
by foreign investors shall, if not involving special administrative measures for foreign investment access and affiliated mergers and
acquisitions, be subject to the record filing measures
.
Pursuant to the Manual of Guidance on Administration
for Foreign Investment Access, which was issued and became effective on December 18, 2008 by the Department of Foreign Investment Administration
of the MOFCOM, notwithstanding the fact that (1) the domestic shareholder is connected with the foreign investor or not, or (2) the foreign
investor is existing or new investor, the M&A Rules shall not apply to the transfer of equity interests in an incorporated foreign-invested
enterprise from the domestic shareholders to the foreign investors.
On July 6, 2021, the relevant PRC government
authorities issued the "Opinions on Severely Cracking Down on Illegal Securities Activities According to Law", which were
made available to the public on July 6, 2021. These opinions emphasized the need to strengthen the administration over illegal securities
activities and the supervision on overseas listings by China-based companies. These opinions proposed to take effective measures, such
as promoting the construction of relevant regulatory systems, to deal with the risks and incidents facing China-based overseas-listed
companies and the demand for cybersecurity and data privacy protection. The aforementioned policies and any related implementation rules
to be enacted may subject us to additional compliance requirement in the future. As these opinions were recently issued, official guidance
to act upon, and interpretation thereof remain unclear in several respects at this time. Therefore, we cannot assure you that we will
remain fully compliant with all new regulatory requirements of these opinions or any future implementation rules on a timely basis, or
at all.
On February 17, 2023, the CSRC promulgated the
Overseas Listing Trial Measures and the related guidelines, which became effective on March 31, 2023. According to the Overseas Listing
Trial Measures, PRC domestic companies that seek to offer and list securities in overseas markets, either in direct or indirect means,
are required to fulfill the filing procedure with the CSRC and report relevant information. The Overseas Listing Trial Measures provides
that an overseas listing or offering is explicitly prohibited, if any of the following: (1) such securities offering and listing
is explicitly prohibited by provisions in laws, administrative regulations and relevant state rules; (2) the intended securities
offering and listing may endanger national security as reviewed and determined by competent authorities under the State Council in accordance
with law; (3) the domestic company intending to make the securities offering and listing, or its controlling shareholder(s) and
the actual controller, have committed relevant crimes such as corruption, bribery, embezzlement, misappropriation of property or undermining
the order of the socialist market economy during the latest three years; (4) the domestic company intending to make the securities
offering and listing is currently under investigations for suspicion of criminal offenses or major violations of laws and regulations,
and no conclusion has yet been made thereof; or (5) there are material ownership disputes over equity held by the domestic company's
controlling shareholder(s) or by other shareholder(s) that are controlled by the controlling shareholder(s) and/or actual
controller.
The Overseas Listing Trial Measures also provides
that if the issuer meets both the following criteria, the overseas securities offering and listing conducted by such issuer will be deemed
as indirect overseas offering by PRC domestic companies: (1) 50% or more of any of the issuer's operating revenue, total profit,
total assets or net assets as documented in its audited consolidated financial statements for the most recent fiscal year is accounted
for by domestic companies; and (2) the main parts of the issuer's business activities are conducted in mainland China, or its
main place(s) of business are located in mainland China, or the majority of senior management staff in charge of its business operations
and management are PRC citizens or have their usual material events in mainland China.
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The Overseas Listing Trial Measures further provides
that, initial public offerings or listings in overseas markets by domestic companies, either in direct or indirect form shall be filed
with the CSRC pursuant to the requirements of the Overseas Listing Trial Measures within three business days after the relevant application
is submitted overseas. The companies that had already been listed on overseas stock exchanges prior to March 31, 2023 or the companies
that had obtained the approval from overseas supervision administrations or stock exchanges for its offering and listing prior to March
31, 2023 and will complete their overseas offering and listing prior to September 30, 2023 are not required to make immediate filings
for its listing, but are required make filings for subsequent offerings in accordance with the Overseas Listing Trial Measures. Companies
that had already submitted an application for an initial public offering to overseas supervision administrations but had not yet obtained
the approval from overseas supervision administrations or stock exchanges for the offering and listing prior to March 31, 2023 may arrange
for the filing within a reasonable time period and should complete the filing procedure before such companies' overseas issuance
and listing. Companies, like us, that had already been listed overseas as of March 31, 2023 are not required to make immediate filing
with the CSRC but are required to file with the CSRC within three business days after the completion of subsequent securities offerings
in the same overseas market where its securities were previously offered and listed, or file the required filing materials with the CSRC
within three working days after the submission of relevant application for subsequent securities offerings and listings in other overseas
markets. In addition, an overseas listed company is required to report to the CSRC within three business days after the occurrence and
announcement of any of the following material events: (1) a change of control of the listed company; (2) the investigation, sanction or
other measures undertaken by any foreign securities regulatory agencies or authorities in respect of the listed company; (3) a change
of listing status or transfer of listing segment; and (4) the voluntary or mandatory delisting of the listed company. If there is any
material change of the principal business of the listed company after the overseas offering and listing so that the listed company is
no longer required to file with the CSRC, it shall file a specific report and a legal opinion issued by a domestic law firm to the CSRC
within three business days after the occurrence thereof.
Regulations Relating
to Internet Information Security and Privacy Protection
Internet
information in China is regulated from a national security standpoint. On June 10, 2021, the SCNPC promulgated the PRC Data Security Law,
which took effect on September 1, 2021. The PRC Data Security Law, among other things, requires data collection to be conducted in a legitimate
and proper manner, and stipulates that, for the purpose of data security, data processing activities must be conducted based on data classification
and hierarchical protection system. Furthermore, along with the promulgation of the Opinions on Strictly Combating Illegal Securities
Activities, overseas-listed China-based companies are experiencing a heightened scrutiny over their compliance with laws and regulations
regarding data security, cross-border data flow and management of confidential information from PRC regulatory authorities.
On
August 20, 2021, the SCNPC promulgated the Personal Information Protection Law, which became effective on November 1, 2021. The Personal
Information Protection Law aims at protecting the personal information rights and interests, regulating the processing of personal information,
ensuring the orderly and free flow of personal information in accordance with the law, and promoting the reasonable use of personal information.
According to the Personal Information Protection Law, personal information includes all kinds of identified or identifiable information
related to natural persons recorded by electronic or other means, but excludes de-identified information. The Personal Information Protection
Law also specified the rules for handling sensitive personal information, which includes biometrics, religious beliefs, specific identities,
medical health, financial accounts, trails and locations, and personal information of teenagers under fourteen years old and other personal
information, which, upon leakage or illegal usage, may easily infringe the personal dignity or harm safety of livelihood and property.
Personal information handlers shall bear responsibility for their personal information handling activities, and must adopt necessary measures
to safeguard the security of the personal information they handle. Otherwise, the personal information handlers will be ordered for rectification
or suspension or termination of provision of services, confiscation of illegal income, subject to fines or other penalties.
On
November 14, 2021, the CAC publicly solicited opinions on the Draft Data Security Regulations. According to the Draft Data Security Regulations,
data processors shall, in accordance with relevant state provisions, apply for cyber security review when carrying out the following activities:
(1) the merger, reorganization or separation of internet platform operators that have acquired a large number of data resources related
to national security, economic development or public interests, which affects or may affect national security, (2) data processors that
handle the personal information of more than one million people intends to be listed abroad, (3) the data processor intends to be listed
in Hong Kong, which affects or may affect national security, and (4) other data processing activities that affect or may affect national
security. However, the Draft Data Security Regulations provides no further explanation or interpretation for "affects or may affect
national security." The PRC government authorities may have wide discretion in the interpretation of "affects or may affect
national security."
On
December 28, 2021, the Cyberspace Administration of China jointly with other 12 government authorities, issued the Measures for Cybersecurity
Review (2021), which became effective on February 15, 2022, and repealed the Cybersecurity Review Measures (2020) simultaneously. The
Measures for Cybersecurity Review (2021) provide that critical information infrastructure operators purchasing network products and services
and data processors carrying out data processing activities, which affect or may affect national security, shall apply for cybersecurity
review to the cyberspace administrations in accordance with the provisions thereunder. However, the scope of operators of "critical
information infrastructure" and the interpretation for "affect or may affect national security" under the current regulatory
regime remain unclear and are subject to the decisions of competent PRC regulatory authorities.
On
July 7, 2022, the CAC promulgated the Security Assessment Measures to regulate outbound data transfer activities, protect the rights and
interests of personal information, safeguard national security and social public interests, and promote the cross-border security and
free flow of data. Furthermore, the Security Assessment Measures provide that the security assessment for outbound data transfers shall
follow principles of the combination of pre-assessment and continuous supervision and the combination of risk self-assessment and security
assessment, so as to prevent the security risks arising from outbound data transfers, and ensure the orderly and free flow of data according
to the law. For outbound data transfers that have been carried out prior to the implementation of the Security Assessment Measures, if
not in compliance with the Security Assessment Measures, rectification shall be completed within six months from the implementation of
the Security Assessment Measures.
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C. Organizational Structure
We are a holding company that does not have any
substantive operations. We conduct our operations primarily through our subsidiaries and affiliated entities in China. For more information,
see "—Our Contractual Arrangements."
The following diagram illustrates our simplified
corporate structure, including our principal subsidiaries, the VIE and other principal affiliated entities, as of the date of this annual
report.
(1)
Mr. Shaowei Zhang and Ms. Yu Wu hold 86.76% and 9.64% equity interests
in Long-Spring Education, respectively. The remaining 3.6% equity interests of Long-Spring Education are held by five limited partnerships
established to hold interests for certain of our employees.
(2)
The 10 schools comprise Kunming Xishan Long-Spring Experimental Secondary School, Kunming Chenggong
    Long-Spring Experimental Secondary School, Yiliang Long-Spring Experimental Secondary School, Qujing Hengshui Experimental Secondary
    School, Yunnan Yuxi Hengshui Experimental High School, Yunnan Hengshui Experimental Secondary School—Xishan School, Yunnan
    Long-Spring Foreign Language Secondary School, Zhenxiong Long-Spring Advanced Secondary School, Qiubei Long-Spring Experimental Secondary
    School, and Mengla Long-Spring Experimental Secondary School.
(3)
We have registered Xinping Long-Spring Advanced Secondary School as Xinping Long-Spring Advanced
    Secondary School Co., Ltd., and Xishuangbanna Long-Spring Experimental Secondary School as Xishuangbanna Long-Spring Experimental
    Secondary School Co., Ltd., all of which were registered as for-profit private schools.
(4)
As the private school operation permit for Hengshizhong Education Tutorial
School has been cancelled, we diverted its Gaokao repeater program and extra-curricular services related programs to Yunnan Long-Spring
Education Holding Group Hengshui Experimental Middle School Management Co., Ltd, Kunming Wuhua District Zhuorui Cultural Training School
Co., Ltd., and Kunming Guandu Hengshizhong Education Training School Co., Ltd. We have registered Guizhou Zunyi Tutorial School as Zunyi
Hengshi Education Technology Co., Ltd. We have registered Shaanxi Hengshi Tutorial School as Shaanxi Hengshi Hengzhong Education Technology
Co., Ltd.
(5)
The seven regional new vocational education companies comprise Guizhou New Vocational Education Technology Co., Ltd., Guangxi New Vocational Education Technology Co., Ltd., New Vocational Education (Hebei) Education Technology Co., Ltd., New Vocational Education (Henan) Education Technology Co., Ltd., New Vocational Education (Yunnan) Cultural Development Co., Ltd., New Vocational Education (Shandong) Cultural Development Co., Ltd., and New Vocational Education (Chengdu) Cultural Development Co., Ltd..
Under the PRC laws, for-profit private schools
are registered as companies and the entities and individuals who establish them are registered as shareholders of such schools and non-profit
private schools are registered as private non-enterprise units and the entities and individuals who establish them are referred to as
"sponsors" rather than "owners" or "shareholders." The rights of sponsors vis-à-vis schools
are similar to the rights of shareholders vis-à-vis companies with regard to legal and regulatory matters, but differ with regard
to the right of a sponsor to receive proceeds on investment and the right to the distribution of residual properties upon termination
and liquidation. For more information regarding school sponsorship and the difference between sponsorship and ownership under relevant
laws and regulations, see "Item 4. Information on the Company—B. Business Overview—Regulations—Regulations on
Private Education in the PRC."
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The following table sets forth the details of
our significant subsidiaries, the VIE and schools/subsidiaries held by the VIE from our continuing operations.
Subsidiaries
Place of Incorporation
First High-School Education Group BVI
BVI
First High-School HK
Hong Kong
Yunnan Century Long-Spring Technology Co., Ltd.
PRC
Yunnan Long-Spring Logistics Service Co., Ltd.
PRC
VIE
Place of Incorporation
Long-Spring Education Holding Group Limited
PRC
Subsidiaries/schools held by the VIE
Place of Incorporation
Kunming Xishan Long-Spring Experimental Secondary School
PRC
Kunming Chenggong Long-Spring Experimental Secondary School
PRC
Yiliang Long-Spring Experimental Secondary School
PRC
Qujing Hengshui Experimental Secondary School
PRC
Yunnan Yuxi Hengshui Experimental High School
PRC
Yunnan Hengshui Experimental Secondary School—Xishan School
PRC
Yunnan Long-Spring Foreign Language Secondary School
PRC
Zhenxiong Long-Spring Advanced Secondary School
PRC
Qiubei Long-Spring Experimental Secondary School
PRC
Mengla Long-Spring Experimental Secondary School
PRC
Xinping Long-Spring Advanced Secondary School Co., Ltd.
PRC
Xishuangbanna Long-Spring Experimental Secondary School Co., Ltd.
PRC
Yunnan Lihua Education Technology Co., Ltd.
PRC
Wenshan Long-Spring Experimental Secondary School
PRC
Yunnan Long-Spring Education Holding Group Hengshui Experimental Middle School Management Co.,
    Ltd
PRC
Kunming Wuhua District Zhuorui Cultural Training School Co., Ltd
PRC
Kunming Guandu Hengshizhong Education Training School Co., Ltd.
PRC
Zunyi Hengshi Education Technology Co., Ltd.
PRC
Shaanxi Hengshi Hengzhong Education Technology Co., Ltd.
PRC
Yunnan Hengshun Property Service Co., Ltd.
PRC
Beijing First High-Education Technology Co., Ltd.
PRC
Beijing New Vocational Education Cultural Development Co., Ltd.
PRC
Guangxi New Vocational Education Technology Co., Ltd.
PRC
Guizhou New Vocational Education Technology Co., Ltd.
PRC
New Vocational Education (Hebei) Education Technology Co., Ltd.
PRC
New Vocational Education (Henan) Education Technology Co., Ltd.
PRC
New Vocational Education (Chengdu) Cultural Development Co., Ltd.
PRC
New Vocational Education (Shandong) Cultural Development Co., Ltd.
PRC
New Vocational Education (Yunnan) Cultural Development Co., Ltd.
PRC
Beijing Hualing International Human Resource Co. Ltd.
PRC
Our Contractual Arrangements
Current PRC laws and regulations restrict foreign
ownership in the private education industry in China. We are a company registered in the Cayman Islands. Yunnan WFOE is our PRC subsidiary
and a foreign-invested enterprise under PRC laws. To comply with PRC laws and regulations, we primarily operate in China through our
affiliated entities, based on a series of contractual arrangements by and among Yunnan WFOE, our affiliated entities, and the shareholders
of Long-Spring Education.
Our contractual arrangements with our affiliated
entities and the shareholders of Long-Spring Education permit us to (1) exercise effective control over the affiliated entities, (2)
receive substantially all of the economic benefits of our affiliated entities, and (3) have an exclusive call option to purchase all
or part of the equity interests in our affiliated entities when and to the extent permitted by PRC law.
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We do not have any equity interest in our affiliated
entities. However, as a result of these contractual arrangements, we control our affiliated entities through our PRC subsidiary, Yunnan
WFOE. As a result of our direct ownership in Yunnan WFOE and the contractual arrangements with our affiliated entities, we are the primary
beneficiary of our affiliated entities, and we have also consolidated their financial results in accordance with U.S. GAAP. For a detailed
description of the risks associated with our corporate structure, see "Item 3. Key Information—D. Risk Factors—Risks
Related to Our Corporate Structure" and "—Risks Related to Doing Business in China."
The following is a summary of the material provisions
of these contractual arrangements with our affiliated entities and the shareholders of Long-Spring Education executed in December 2018.
Exclusive Call Option Agreement.
Pursuant to the exclusive call option agreement, the shareholders of Long-Spring Education unconditionally and irrevocably granted Yunnan
WFOE or its designated entity the right to purchase at any time all or part of their equity interests in the affiliated entities at the
lowest price applicable under PRC laws and regulations. Without Yunnan WFOE's prior written consent, the shareholders of Long-Spring
Education also refrain from (1) selling, assigning, transferring, or otherwise disposing of the equity or sponsorship interest, (2) increasing
or reducing the capital investment, (3) dividing the affiliated entities into or merging it with other entities, (4) disposing of any
of the assets of the affiliated entities, (5) terminating or contradicting any material contract entered into by the affiliated entities,
(6) procuring the affiliated entities to enter into transactions that may have material impact on their assets, liabilities, operations,
equity structure, or other legal rights, (7) procuring the affiliated entities to declare or distribute profits and/or returns, (8) amending
the article of association of the affiliated entities, and (9) allowing the affiliated entities to undertake any material obligation
beyond normal business activities.
School Sponsor's and Directors'
Rights Entrustment Agreement.
Pursuant to the school sponsor's and directors' rights entrustment agreement, the school
sponsors irrevocably authorized and entrusted Yunnan WFOE or its designated personnel to exercise all their rights as the school sponsor
of each school, including but not limited to the right to appoint and/or elect directors, council members, and supervisors of the school,
right to review the resolutions of the board of directors and the financial statement of the school, right to transfer school sponsor's
interest, and right to decide whether the school would be for-profit or non-profit. Each director appointed by the sponsor of each school
unconditionally and irrevocably authorized and entrusted Yunnan WFOE to exercise all the rights as a director of the school, including
but not limited to the right to attend meetings of the board of directors and vote, right to sign board resolutions and other legal documents
and other rights of directors under the school's articles of association and the applicable PRC laws.
Shareholders' Rights Entrustment
Agreement.
Pursuant to the shareholders' rights entrustment agreement, each shareholder of Long-Spring Education irrevocably
authorized and entrusted Yunnan WFOE to exercise all the respective rights as shareholders of the affiliated entities, including but
not limited to the right to attend shareholder's meeting and vote, right to sign shareholders' resolutions and other legal
documents, right to instruct the directors and other rights of shareholders under the school's articles of association and the
applicable PRC laws.
Power of Attorney.
Pursuant to
the school sponsors' power of attorney, each school sponsor authorized and appointed Yunnan WFOE as its agent to exercise on its
behalf a school sponsor's rights. Pursuant to the directors' power of attorney, each director of Long-Spring Education authorized
and appointed Yunnan WFOE as his/her agent to exercise on his/her behalf a director's rights. Pursuant to the shareholders'
power of attorney, each shareholder of Long-Spring Education authorized and appointed Yunnan WFOE as his/her/its agent to exercise on
his/her/its behalf a shareholder's rights.
Exclusive Technical Service and Management
Consultancy Agreement and Business Cooperation Agreement.
Pursuant to the exclusive technical service and management consultancy
agreement and business cooperation agreement, Yunnan WFOE provides exclusive technical services to the affiliated entities, including
software, website, and on-site technical support and training. It also provides exclusive management consultancy services such as staff
training, student admission support, internal management advisory, and market research and public relations. Each of the affiliated entities
pays Yunnan WFOE a service fee equal to the total amount of surplus of its operation. Yunnan WFOE also reserves the exclusive proprietary
rights to any technology or intellectual property developed in the course of the provision of services under the agreements. Without
the prior written consent of Yunnan WFOE, the affiliated entities cannot accept services provided by or establish similar cooperation
relationship with any third-party. The agreements will remain effective unless Yunnan WFOE and/or the designated entity fully exercised
its purchase rights pursuant to the exclusive call option agreement or unilaterally terminated by Yunnan WFOE with a 30-day advance notice.
Unless otherwise required by applicable PRC laws, the affiliated entities do not have any right to terminate the agreements.
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Equity Pledge Agreement.
Pursuant
to the equity pledge agreement, the shareholders of Long-Spring Education unconditionally and irrevocably pledged and granted first priority
security interests over all of his/her/its equity interest in the affiliated entities, as well as all related rights, to Yunnan WFOE
as security for performance of all the contractual arrangements. Without Yunnan WFOE's prior written consent, the shareholders
of Long-Spring Education must not transfer the equity interest or create further pledge or encumbrance over the pledged equity interest.
They also waived any pre-emptive rights upon enforcement, and Yunnan WFOE can enforce upon default by transferring all or part of the
equity interest, selling the pledged equity interest, or disposing of the pledged equity interest in any other way to the extent permitted
by PRC laws and regulations.
Spousal Undertaking.
Pursuant to
the spousal undertaking executed by the spouses of the shareholders of Long-Spring Education, the signing spouses consented to the contractual
arrangements with respect to the equity interest in Long-Spring Education, including its pledge, transfer, and disposal in any other
forms. The spouses will not participate in the operation, management, liquidation, or any other matters in relation to the affiliated
entities. They authorized the shareholders of Long-Spring Education to exercise their shareholding rights on behalf of them to ensure
the interest of Yunnan WFOE. This undertaking will not terminate until Yunnan WFOE and the spouses terminate it in writing.
Loan Agreement.
Pursuant to the
loan agreement, Yunnan WFOE agreed to provide interest-free loans to Long-Spring Education. Each loan will be for an infinite term until
termination at the sole discretion of Yunnan WFOE. This agreement will terminate when all equity interests of the Long-Spring Education
are transferred to Yunnan WFOE.
In the opinion of our PRC legal counsel:
●
except for the Affected Entities, the ownership structures of Yunnan WFOE and our affiliated entities
    in China, as of the date of this annual report, are not in violation of applicable PRC laws and regulations currently in effect;
    and
●
the contractual arrangements among Yunnan WFOE, our affiliated entities, and the shareholders of
    Long-Spring Education, governed by PRC law are legal, valid and binding, and will not result in any violation of applicable PRC laws
    and regulations currently in effect, except that the clause or provision of the Exclusive Technical Service and Management Consultancy
    Agreement and Business Cooperation Agreement, in relation to related party transactions between a private school providing compulsory
    education and Yunnan WFOE, have been rendered not legally enforceable since September 1, 2021.
However, our PRC legal counsel has also advised
us that there are substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations and
rules. Accordingly, the PRC regulatory authorities may take a view that is contrary to the opinion of our PRC legal counsel. It is uncertain
whether any new PRC laws or regulations relating to variable interest entity structures will be adopted or if adopted, what they would
provide. If we or our contractual arrangements are found to be in violation of any existing or future PRC laws or regulations, or fail
to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion to
take action in dealing with such violations or failures. For a detailed description of the risks associated with our corporate structure,
see "Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure" and "—Risks
Related to Doing Business in China."
D. Property, Plant and Equipment
Our principal executive offices are in Yunnan,
China. All of our properties are located in China. We currently occupy a total combined gross floor area of approximately 718,297 square
meters of facilities for 12 properties provided by local governments or entities through our cooperative arrangements with them. The terms
of such properties range from nine to 21 years. By utilizing the properties developed by local governments, we avoid significant capital
expenditures in connection with land procurement and facilities construction. We also leased three properties with a total combined gross
floor area of approximately 113,762 square meters in Yunnan province, Shaanxi province, and Guizhou province from third parties to operate
our schools. Our leases have terms of five to 20 years. We believe that the facilities which we currently lease and occupy are adequate
to meet our needs for the foreseeable future, and we believe that we will be able to obtain adequate facilities, principally through leasing
of additional properties, to accommodate our future expansion plans.
ITEM 4A. UNRESOLVED STAFF COMMENTS
None.
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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
You should read the following discussion and analysis
of our financial condition and results of operations together with the consolidated financial statements and related notes included elsewhere
in this annual report. This discussion contains forward-looking statements based upon current plans, expectations and beliefs that involve
risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result
of various factors, including those set forth in the section of this annual report captioned "Item 3. Key Information—D. Risk
Factors" and in other parts of this annual report. Our fiscal year ends on December 31.
A. Operating Results
Overview
We are an education service provider primarily focusing
on high schools in Western China. We aspire to become a leader and innovator of private high school education in China, dedicated to a
comprehensive education management integrating education information consulting, education research project development, education talent
management, education technology management, education service management, and general vocational integration development services. First
High-School Education, our ultimate Cayman Islands holding company, does not have any substantive operations other than indirectly controlling
the affiliated entities through certain contractual arrangements. We trace our history back to August 2012 when we established our first
school to provide after-school tutoring services. We have since developed a network of 21 schools for our continuing operations, offering
13 high school programs, and three tutorial school programs for Gaokao repeaters, as of December 31, 2022. We also provided management
services to five schools as of the same date. We have also collaborated with local governments and other third parties in China and expect
to launch new schools offering high school programs and vocational programs in the second half of 2023
.
In addition, we have also
established Chinese-English bilingual programs for students interested in pursuing higher education overseas. As of December 31, 2022,
we had 25,823 high school students (including Gaokao repeaters) across our school network, and 8,487 public school students at schools
to which we provide management services, for our continuing operations.
On May 14, 2021, the PRC State Council promulgated
the amended Implementation Rules, which became effective on September 1, 2021. Pursuant to the Implementation Rules, (1) foreign-invested
enterprises established in China and social organizations whose actual controllers are foreign parties shall not sponsor, participate
in or actually control private schools that provide compulsory education, (2) social organizations or individuals shall not control any
private school that provides compulsory education or any non-profit private school that provides pre-school education by means of, among
others, merger, acquisition and contractual arrangements, and (3) private schools providing compulsory education shall not conduct any
transaction with any related party.
The Implementation Rules have had significant impacts on our business
and our results of operations. As a result of the effectiveness of the Implementation Rules, we have lost control over the Affected Entities
as from September 1, 2021, which primarily include the middle schools providing compulsory education and the sponsor entities within China
that are affected by the Implementation Rules. Consequently, we classified the operation for the Affected Entities as discontinued operations.
We have determined that, in substance, we had ceased to recognize revenues for all activities related to the Affected Entities and had
discontinued all business activities with such entities by September 1, 2021 except for the continued provision of essential services
to keep these schools in normal operations.
We have experienced steady growth in our business.
For our continuing operations, our revenues were RMB306.2 million, RMB337.3 million and RMB342.5 million (US$49.7 million) in 2020, 2021,
and 2022, respectively. Our net income was RMB80.9 million, RMB52.7 million and RMB38.4 million (US$5.6 million) in 2020, 2021 and 2022,
respectively. Our adjusted net income was RMB80.9 million, RMB52.7 million and RMB38.4 million (US$5.6 million) in 2020, 2021 and 2022,
respectively. For a detailed description of our non-GAAP measure, see "—Results of Operations—Non-GAAP financial measure."
Major Factors Affecting Our Results of Operations
We believe that our results of operations are
affected by general factors affecting the private education industry in China and company-specific factors, including the following.
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Level of student enrollment
Our revenues for our continuing operations consist primarily of tuition
and boarding fees from students enrolled at our schools. The level of students enrolled at our schools directly affects our revenues and
profitability. The total number of students enrolled at our schools for our continuing operations was 15,645, 16,972 and 17,336 as of
December 31, 2020, 2021 and 2022, respectively. Our student enrollment largely depends on a number of factors, including without limitation,
(1) our schools' reputation, which primarily reflects our education quality and our student academic results, (2) our admission
quotas as approved by the relevant government authorities from year to year, subject to adjustments by the relevant government authorities,
and (3) the ramp-up stage of our schools and the capacity for student enrollment at each of our schools. With the increase in the utilization
of our schools in the ramp-up stage and the expansion of our school network, we expect that our student enrollment will continue to increase
in the foreseeable future.
Tuition and boarding fees
Our results of operations are affected by the level
of tuition and boarding fees we charge our students. The tuition rate we charge is typically based on the demand for our education programs,
the cost of our operations, the geographical markets where we operate our schools, the average tuition level in the markets, and our pricing
strategy to gain market share. We generally seek to gradually increase our tuition and boarding fees without compromising our student
enrollment. While we are not required to obtain pre-approval from relevant authorities before raising our tuition and boarding fees, we
are generally required to file and record our price increase for our high schools with local governments, who in turn still maintain certain
level of control and oversight of our operation. We generally have more discretion in determining the tuition levels for our tutorial
schools. Our average tuition per student of our high schools was RMB15,072 and RMB10,997 in 2021 and 2022, respectively, and average tuition
per student of our tutorial schools for Gaokao repeaters was RMB23,170 and RMB 19,853 in 2021 and 2022, respectively. The decrease of
average tuition per student of our high schools and tutorial schools was primarily due to our expansion into lower-tier cities in Yunnan
province and elsewhere to enroll more students and continue to expand into these cities with varying average tuition per student. We might
continue to expand in these lower-tier cities, and we expect that our average tuition per student might be negatively affected as a result.
As part of our cooperation with local governments,
we admit a certain number of local students on behalf of the government as publicly-sponsored students. These students pay us tuition
at the level of public schools, which are usually lower than the normal tuition we charge. We allow publicly-sponsored students to pay
lower tuition and receive price difference or other forms of support from local governments for such publicly-sponsored students. We recognize
such price difference paid by governments as our revenues from governments in tuition income. As of December 31, 2020, 2021 and 2022,
the number of publicly-sponsored students in our schools was 6,755, 7,993 and 8,293, respectively, accounting for 43.2%, 47.1% and 47.8%
of our total students for our continuing operations as of the same dates.
Utilization rate of our schools
School utilization rate, which is calculated
as the number of students enrolled in a school divided by the capacity of the school, has a direct impact on our profitability. Most
of our schools for our continuing operations have an operating history of less than five years, and most of them are still undergoing
the ramp-up process. The unutilized capacity at our recently-opened schools, which are still at the ramp-up stage, allows us to readily
increase student enrollment without incurring significant additional investment. For newly established schools, we only admit students
for the entry classes, such as the tenth grade for high schools, but not higher grades, upon the establishment of a new school, which
leads to a relatively lower utilization rate for such schools. With our existing students progressing into the next grades in school
and as we fill up new entry classes, the utilization rates of our newly established schools will increase accordingly. We are generally
able to fully ramp up our schools within three years of establishment. With the increase in the utilization of our schools in the ramp-up
stage, we expect that our student enrollment will continue to increase in the foreseeable future.
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Ability to control costs and expenses
Our profitability also depends on our ability to control operating
costs and expenses. Our ability to drive the productivity of our teachers and enhance our operating efficiency affects our profitability.
Our cost of revenues for our continuing operations increased by 25.7% from RMB164.4 million in 2020 to RMB206.8 million in 2021 and further
by 3.3% to RMB213.6 million (US$31.0 million) in 2022. Our cost of revenues for our continuing operations primarily comprises staff costs,
rental fees, student-related expenses, depreciation and amortization. Our staff costs mainly consist of the salaries and other benefits
for our teachers, and accounted for 38.4%, 66.5% and 66.7% of our cost of revenues in 2020, 2021 and 2022, respectively. Our staff costs
increased primarily due to (1) increases in the headcount of publicly-sponsored teachers to (i) accommodate more publicly-sponsored students
enrolled in our existing schools as our students progressed into next grades and new entry classes were filled up; and (ii) support the
ramp-up of certain recently-opened new schools; and (2) increases in compensation levels of our teachers. The total number of our teachers
in our schools for our continuing operations was 1,346, 1,617 and 1,358 as of December 31, 2020, 2021 and 2022, respectively. As we continue
to ramp up our existing schools and expand our school network, we expect to continue to expand the headcount of our teachers and other
staff and provide competitive compensation to attract and retain teaching talents so as to support our growing school operations. As a
result, our staff costs could continue to increase in the foreseeable future.
Furthermore, our operating expenses include two
major components, selling and marketing expenses, and general and administrative expenses. We expect that we will incur additional expenses
associated with our overall growth and status as a public company. We also expect that we will benefit from economies of scale as we continue
to grow our business and increase our student base.
Our ability to drive the productivity of our
teachers and enhance our operating efficiency affects our profitability. We focus on providing quality education to our students and
have developed and implemented a standardized and centralized school management system to improve operating efficiency and profitability.
Ability to expand our operations cost-effectively
We intend to expand our school network and enter
into new geographical markets with our asset-light business model. We seek to achieve this goal by establishing collaboration with more
local governments and other third parties, such as real estate developers. For our continuing operations, we currently operate 13 schools
pursuant to cooperative arrangements with local governments, operate three schools by leasing lands from third parties and expect to
launch new schools in the second half of 2023, which consist of high schools and vocational schools. We believe that our past performance
in school operations and student academic achievements put us in a favorable position in our future negotiations with local governments.
As local governments in different geographical markets may have different policies, such as pricing rules that govern the amount of tuition
fees we are able to charge, our ability to manage the collaboration with local governments, efficiently procure land, construct school
facilities and ramp up the school operation will impact our ability to expand our school network.
In addition, we intend to collaborate with more third parties and explore
more school operation and management opportunities as a cost-effective way to diversify our business portfolio and spread positive word
of mouth for our brand. Starting from September 2020 and up to December 31, 2022, we have cooperated with local governments and a private
school operator to provide management services for five schools in Yunnan province and Henan province for annual management service fees.
Third-party school management services like this generally have a higher gross profit margin than operating our own schools, and we may
improve our overall profitability if we continue to expand third-party school management services.
Strategic investments and acquisitions
We have expanded rapidly primarily through organic
growth. We have, in the past, acquired an underperforming high school and successfully turned it into a high-quality high school with
solid academic results. Leveraging our standardized and centralized school management system and our quality education service, we intend
to continue to pursue similar acquisition targets in the future when practicable and in compliance with regulatory requirements. We focus
primarily on the acquisition of high schools due to the enlarging high school education services market with enormous and sustainable
demand in high-quality high schools. We also target to acquire education company. In May 2021, we acquired 51% equity interests in Beijing
Tomorrow Future Plus Education Technology Co., Ltd., a technology-driven education company that provides premium full-time live AI
online teaching services. In December 2022, for management and economic reasons, we divested our equity interest in Beijing Tomorrow Future
Plus Education Technology Co., Ltd. Our overall financial condition and profitability could be affected by the different levels of profitability
of our acquisition targets.
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Seasonality
Our business is subject to seasonal fluctuations
as our costs and expenses vary significantly and do not necessarily correspond with our recognition of revenues. We generally require
students to pay tuition and boarding fees for each semester upfront prior to the commencement of the semester, and recognize revenues
for the tuition fees and boarding fees received proportionately over relevant period of the applicable program. We typically incur higher
upfront operating expenses in the third fiscal quarter for the commencement of school operations. We have historically incurred lower
net income in the first and third fiscal quarters, primarily due to our schools being closed due to winter and summer holidays.
COVID-19 outbreak
Since the outbreak of COVID-19 throughout China
and other countries and regions, a series of precautionary and control measures have been implemented worldwide to contain the virus.
Many businesses and social activities in China and other countries and regions were severely disrupted, including school operations.
As a result of the government-mandated quarantine measures following the COVID-19 outbreak, our operation was adversely impacted in 2021.
In 2021, we experienced higher operating costs due to increased spending in COVID-19 related prevention and testing equipment. We paid
additional subsidies for our staff working during irregular shifts to accommodate local preventive and partial lock-down measures. In
addition, compared with 2020, we were required to pay corporate social insurance premiums. In February 2020, Ministry of Human Resources
and Social Security, Ministry of Finance, and State Administration of Taxation jointly announced Notice on the Exemption of the Payment
of Social Insurance Premiums for Companies in China, aiming to reduce corporate social insurance burden during COVID-19 outbreak. The
exemption period ended in December 2020, and therefore our cost of revenues in 2021 slightly increased compared to 2020.
Our tuition income increased by 6.3% from RMB245.5
million in 2020 to RMB261.1 million in 2021, and further by 7.9% to RMB281.8 million (US$40.9 million) in 2022. Our tuition income increased
in 2021 and 2022, primarily driven by the increased student enrollment and the more extra-curricular services offered.
We have not experienced material adverse impact
to our liquidity and cash flows since the COVID-19 outbreak. Except for the impact discussed above, we do not anticipate any prolonged
material adverse impact on our business, results of operations and financial condition from the COVID-19 outbreak, as the Chinese government
has gradually lifted the travel restrictions and other quarantine measures in China and economic activities have begun to recover and
return to normal nationwide. We are nonetheless closely monitoring the development of the COVID-19 outbreak and continuously evaluating
any potential impact on our business, results of operations and financial condition. See "Item 3. Key Information—D. Risk
Factors—Risks Related to Our Business and Industry—Any health pandemics, including the recent outbreak of COVID-19, and other
natural disasters and calamities, could have a material adverse effect on our business operations."
Key Operating Metrics
As of December 31,
2020
2021
2022
Summary Operating Data for our Continuing Operations:
Total student enrollment
15,645
16,972
17,336
Total number of teachers
1,346
1,617
1,358
Total number of schools
18
20
16
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Key Components of Our Results of Operations
Revenues
Due to the effectiveness of the Implementation Rules, we have concluded
that we have lost control over the Affected Entities as from September 1, 2021, which primarily include the middle schools providing compulsory
education and the sponsor entities within China that are affected by the Implementation Rules. Consequently, we classified the operation
for the Affected Entities as discontinued operations. We have determined that, in substance, we had ceased to recognize revenues for all
activities related to the Affected Entities and had discontinued all business activities with such entities by September 1, 2021 except
for the continued provision of essential services to keep these schools in normal operations. In 2022, we had to discontinue some operations
due to regulatory changes and management decisions. Given such change, financial information for prior years was reclassified to conform
to the current year's presentation.
We derive our revenues primarily from tuition
and boarding fees we charge the students enrolled in our high schools and tutorial schools. The following table sets forth a breakdown
of our revenues for our continuing operations by amounts and percentages for the periods presented.
Year Ended December 31,
2020
2021
2022
RMB
%
RMB
%
RMB
US$
%
(in thousands, except for percentages)
Tuition income
(1)
245,525
80.2
261,095
77.4
281,829
40,861
82.3
Income from student-related services
(2)
37,865
12.4
40,468
12.0
21,205
3,074
6.2
Boarding fees
(3)
15,768
5.1
19,248
5.7
7,609
1,103
2.2
Education and management service income
(4)
1,849
0.6
15,104
4.5
30,868
4,475
9.0
Others
5,238
1.7
1,399
0.4
995
144
0.3
Total
306,245
100.0
337,314
100.0
342,506
49,659
100.0
(1)
Includes tuition from our schools including revenue from government
cooperative agreements of RMB26.1 million, RMB50.9 million and RMB42.1 million (US$6.1 million) in 2020, 2021 and 2022, respectively,
which represents government subsidies aimed to make up for the tuition difference for publicly-sponsored students of certain of our schools,
and miscellaneous fees charged to students.
(2)
Includes primarily income from the sale of education materials and income from meal catering services.
(3)
Includes primarily income from our boarding services.
(4)
Includes (i) income from management services provided to the various vendors of student catering
    services on campus and (ii) annual service fees from the local governments in exchange for school operation and management services
    we provided for two public schools in Yunnan province.
We generally require students to pay tuition
and boarding fees for each semester upfront prior to the commencement of the semester, and recognize revenues for the tuition and boarding
fees received proportionately over relevant period of the applicable program. We offer a partial refund if a student withdraws during
a semester. The following table sets forth the average tuition per student by school type for the periods indicated.
For the Year ended December 31,
2020
2021
2022
(in RMB)
Average tuition per student of our schools(1)
High schools
16,399
15,072
10,997
Tutorial schools for Gaokao repeaters
22,147
23,170
19,853
(1)
The average tuition per student equals to the total tuition income of our schools during certain
    calendar year divided by the average student enrollment of such calendar year, which is arrived at by averaging the number of students
    enrolled as of the end of the previous and the concerned calendar years/periods.
The increase in our student enrollment and the
increase in the utilization of our schools in the ramp-up stage will drive the growth of our revenues and generate cash inflows from
our operations. We expect our staff costs to increase to support our business growth, and we could become less profitable and experience
a decrease in gross profit margin if our staff costs increase faster than our revenues, such as in the school ramp-up period. Despite
the increase in our student enrollment, any decrease in the average tuition per student could also negatively affect our revenue growth.
Our profitability will depend on our ability to grow our business cost-effectively by increasing the average tuition per student, improving
our operational efficiency, continuing our expansion with an asset-light business model, and optimizing the cost structure of our new
schools.
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Specifically, we expect our student enrollment will continue to increase,
in line with the expansion of our school operations. However, our average tuition per student is greatly affected by the relative proportion
of our students in different cities. As the level of student enrollment of our schools located at lower-tier cities is expected to continue
to increase in Yunnan province and elsewhere along with our expansion into these cities, we expect that our average tuition per student
will to be negatively affected. Moreover, with the ramp-up of our existing schools and the expansion of our school network, we expect
that our staff costs will continue to increase, driven by an increase in teacher headcount and salary level. At the same time, our efforts
to diversify our business portfolio will contribute to our overall profitability positively. Starting from September 2020 and up to December
31, 2022, we have also cooperated with the local governments and a private school operator to provide management services for five schools
in Yunnan province and Henan province for annual management service fees. Third-party school management services like this generally have
a higher gross profit margin than operating our own schools.
Cost of revenues
Our cost of revenues consists of campus-related
expenses (comprising primarily costs relating to teaching materials, supplies, low value consumables and campus repairs), staff costs
(comprising primarily salaries and other benefits for our teachers), rental fees, student-related expenses (comprising primarily costs
relating to grants and school supplies for students), depreciation and amortization of properties and equipment for our education function
and other costs.
The following tables set forth a breakdown of
our cost of revenues for our continuing operations by amounts and percentages for the periods presented.
For the Year Ended December 31,
2020
2021
2022
RMB
% of
Revenues
RMB
% of
Revenues
RMB
US$
% of
Revenues
(in thousands, except for percentages)
Staff costs
63,094
20.6
137,514
40.8
142,497
20,660
41.6
Campus-related expenses
70,122
22.9
23,791
7.1
30,166
4,374
8.8
Student-related expenses
11,371
3.7
19,030
5.6
15,782
2,288
4.6
Rental fees
13,753
4.5
18,424
5.5
13,434
1,948
3.9
Depreciation and amortization
5,658
1.9
8,010
2.4
11,743
1,703
3.4
Others
356
0.1
-
-
-
-
-
Total
164,354
53.7
206,769
61.3
213,622
30,972
62.4
Operating expenses
Our operating expenses consist primarily of
selling and marketing expenses, and general and administrative expenses. Our operating income consists
primarily of government grants.
Selling and marketing expenses
Our selling and marketing expenses consist primarily
of expenses relating to student admission, advertising and brand promotion. Our selling and marketing expenses were RMB6.4 million, RMB6.4
million and RMB3.1 million (US$0.4 million) in 2020, 2021 and 2022, respectively, accounting for 2.1%, 1.8% and 0.91% of our revenues
for the same periods, respectively.
Our general and administrative expenses consist
primarily of share-based compensation, salaries and benefits for our administrative and management personnel, depreciation and amortization
of property and equipment for our management functions, and transaction costs in relation to previous financing activities. Our general
and administrative expenses were RMB43.5 million, RMB47.7 million and RMB54.6 million (US$7.9 million) in 2020, 2021 and 2022, respectively,
accounting for 14.2%, 14.1% and 15.9% of our revenues for the same periods, respectively.
Government grants
Our government grants consist primarily of general
government subsidies relating to our school operation. Our government grants were RMB4.3 million, RMB2.1 million and RMB2.0 million (US$0.3
million) in 2020, 2021 and 2022, respectively, accounting for 1.4%, 0.6% and 0.6% of our revenues for the same periods, respectively.
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Results of Operations
The following tables set forth a summary of our
consolidated results of operations by amount and as a percentage of total revenues for the periods indicated. This information should
be read together with our consolidated financial statements and related notes included elsewhere in this annual report. The results of
operations in any period are not necessarily indicative of the results that may be expected for any future period.
For the Year Ended December 31,
2020
2021
2022
RMB
% of
Revenues
RMB
% of
Revenues
RMB
US$
% of
Revenues
Continuing Operations
Revenues
Revenue from customers
280,187
91.5
300,084
89.0
300,395
43,553
87.7
Revenue from government cooperative agreements
(1)
26,058
8.5
37,230
11.0
42,111
6,106
12.3
Total revenues
306,245
100.0
337,314
100.0
342,506
49,659
100.0
Cost of revenues
(164,354
)
(53.7
)
(206,769
)
(61.3
)
(213,622
)
(30,972
)
(62.4
)
Gross profit
141,891
46.3
130,545
38.7
128,884
18,686
37.6
Operating expenses and income
Selling and marketing expenses
(6,398
)
(2.1
)
(6,440
)
(1.9
)
(3,101
)
(450
)
(0.9
)
General and administrative expenses
(43,485
)
(14.2
)
(47,667
)
(14.1
)
(54,586
)
(7,914
)
(15.9
)
Government grants
4,277
1.4
2,097
0.9
2,036
295
0.6
Bad debt provision
—
—
(14
)
(0.0
)
(9)
(1)
(0.0)
Income from operations
45,606
14.9
78,521
23.3
73,224
10,616
21.4
Other income/ (expenses):
Interest income
1,124
0.4
1,128
0.3
1,422
206
0.4
Interest expense
(5,747
)
(1.9
)
(9,545
)
(2.8
)
(9,546
)
(1,384
)
(2.8
)
Foreign currency exchange (loss)/gain, net
(469
)
(0.2
)
(922
)
(0.3
)
(55
)
(8
)
(0.0
)
Others, net
1,741
0.6
3,641
1.1
1,069
155
0.3
Income before income taxes
92,934
30.3
72,823
21.6
66,114
9,586
19.3
Income tax expenses
(14,034
)
(4.6
)
(15,042
)
(4.5
)
(20,017
)
(2,902
)
(5.8
)
Net income from continuing operations
78,900
25.8
57,781
17.1
46,097
6,683
13.5
Income/(loss) from discontinued operations, net of tax
2,019
0.7
(5,088
)
(1.5
)
(7,691
)
(1,115
)
(2.2
)
Net income
80,919
26.4
52,693
15.6
38,406
5,568
11.2
Comprehensive income
80,962
26.4
53,011
17.2
40,374
5,854
11.8
Non-GAAP Financial Measures
Adjusted net income
(2)
80,919
26.4
52,693
15.6
38,406
5,568
11.2
(1)
Represents government subsidies aimed to make up for the tuition difference
    for publicly-sponsored students of certain of our schools.
(2)
Represents net income before share-based compensation expenses and
    transaction costs in relation to previous financing activities. See "—Non-GAAP Financial Measure" for
    details.
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Non-GAAP financial measure
In evaluating our business, we consider and use
one non-GAAP measure, adjusted net income, as a supplemental measure to review and assess our operating performance. The presentation
of the non-GAAP financial measure is not intended to be considered in isolation or as a substitute for the financial information prepared
and presented in accordance with U.S. GAAP. We define adjusted net income/(loss) as net income/(loss) excluding share-based compensation
expenses and transaction costs in relation to previous financing activities and income/(loss) from discontinued operations,
net of tax. Due to the impact of the Implementation Rules, the Affected Entities deconsolidated is classified as discontinued operations,
which is a non-recurring item.
We present the non-GAAP financial measure because
it is used by our management to evaluate our operating performance and formulate business plans. Adjusted net income enables our management
to assess our operating results without considering the impact of non-cash charges, including share-based compensation expenses, without
considering the impact of transaction costs in relation to previous financing activities, and without considering
the impact of non-recurring item, i.e. income/(loss) from discontinued operations. We also believe that the use of the non-GAAP measure
facilitates investors' assessment of our operating performance.
The non-GAAP financial measure is not defined
under U.S. GAAP and is not presented in accordance with U.S. GAAP. The non-GAAP financial measure has limitations as analytical tools.
One of the key limitations of using the non-GAAP financial measure is that it does not reflect all items of income and expense that affect
our operations. Share-based compensation expenses and transaction costs in relation to previous financing activities
have been and may continue to be incurred in our business and are not reflected in the presentation of adjusted net income. Further,
the non-GAAP measure may differ from the non-GAAP information used by other companies, including peer companies, and therefore their
comparability may be limited.
We compensate for these limitations by reconciling
the non-GAAP financial measure to the nearest U.S. GAAP performance measure, which should be considered when evaluating our performance.
We encourage you to review our financial information in its entirety and not rely on a single financial measure.
Year Ended December 31,
2020
2021
2022
RMB
RMB
RMB
US$
(in thousands)
Reconciliation of net income/(loss) to adjusted net income:
Net income
80,919
52,693
38,406
5,568
Add:
Share-based compensation expenses
—
—
—
—
Transaction costs in relation to previous financing activities
—
—
—
—
Tax effects of adjustments
(1)
—
—
—
—
Less:
Income from discontinued operations, net of tax
—
—
—
—
Adjusted net income
80,919
52,693
38,406
5,568
(1)
Tax effects were determined based upon the nature, as well as the jurisdiction,
    of each reconciliation adjustment at the respective applicable income tax rate. There was no tax impact on the share-based compensation
    expenses adjustment because these expenses are non-deductible expenses for income tax.
Year Ended December 31, 2022 Compared to Year Ended December
31, 2021
Revenues
Our revenues from continuing operations increased
by 1.5% from RMB337.3 million in 2021 to RMB342.5 million (US$49.7 million) in 2022, primarily driven by a mixed of factors including
student admission and the discontinuance and limited operation of some schools in our network.
●
Tuition
    income.
Our tuition income increased by 7.9% from RMB261.1 million in 2021 to RMB281.8 million (US$40.9 million) in 2022, primarily
    driven by the increased student enrollment for our continuing operation.
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●
Income from student-related services.
Our income from student-related services decreased by 47.6% from RMB40.5 million in 2021 to RMB21.2 million (US$3.1 million) in 2022, primarily due to the decreased sales of meal catering services, and educational materials.
●
Boarding fees.
Our
    boarding fees decreased by 60.4% from RMB19.2 million in 2021 to RMB7.6 million (US$1.1 million) in 2022, primarily due to the decreased
    student enrollment and limited operation of some schools in our network.
●
Education and management
    service income.
Our revenue from education and management service income increased by 104.4% from RMB15.1 million in 2021 to
    RMB30.9 million (US$4.5 million) in 2022, primarily due to providing more schools with management services.
●
Others.
Our revenue
    from others decreased by 28.9% from RMB1.4 million in 2021 to RMB1.0 million (US$0.1 million) in 2022, primarily due to the decrease
    of certain one-off income.
Cost of revenues
Our cost of revenues increased by 3.3% from RMB206.8
million in 2021 to RMB213.6 million (US$31.0 million) in 2022, primarily due to our undertaking of an increased portion of the public-sponsored
teachers' compensation.
Gross profit
As a result of the foregoing, our gross profit
decreased by 1.3% from RMB130.5 million in 2021 to RMB128.9 million (US$18.7 million) in 2022, and our gross profit margin was 38.7% in
2021 compared to 37.6% in 2022.
Operating expenses and income
Our net operating expenses increased by 7.0% from
RMB52.0 million in 2021 to RMB55.7 million (US$8.1 million) in 2022, primarily due to the increase in general and administrative expenses.
●
Selling and marketing expenses.
Our selling and marketing
        expenses decreased by 51.8% from RMB6.4 million in 2021 to RMB3.1million (US$0.4 million) in 2022, primarily due to the decreased
        expenses in brand promotion and marketing activities for our relatively mature school operation.
●
General and administrative expenses
. Our general and administrative expenses increased by 14.5% from RMB47.7 million in 2021 to RMB54.6 million (US$7.9 million) in 2022, primarily due to (1) the discontinuance and limited operation of some schools in our network, and (2) expenses related to our new business expansions.
●
Government grants.
Our operating income from government
        grants decreased by 2.9% from RMB2.1 million in 2021 to RMB2.0 million (US$0.3 million) in 2022, primarily due to the government's
        tightened fiscal budget resulting in its delayed payments.
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Income from operations
As a result of the foregoing, our income from
operations decreased from RMB78.5 million in 2021 to RMB73.2 million (US$10.6 million) in 2022.
Interest expense
Our interest expense stayed even from RMB9.5 million
in 2021 to RMB9.5 million (US$1.4 million) in 2022, primarily due to the effective management of our loan level.
Income tax expense
Our income tax expense increased by 33.3% from
RMB15.0 million in 2021 to RMB20.0 million (US$2.9 million) in 2022, primarily due to the increased profitability in operations without
tax policy benefits.
Net income
As a result of the foregoing, we had net income
of RMB52.7 million in 2021 and RMB38.4 million (US$5.6 million) in 2022
.
Adjusted net income
Our adjusted net income decreased by 27.1% from
RMB52.7 million in the 2021 to RMB38.4 million (US$5.6 million) in 2022.
Year Ended December 31, 2021 Compared to Year Ended December
31, 2020
Revenues
Our revenues from continuing operations increased
by 10.1% from RMB306.2 million in 2020 to RMB337.3 million in 2021, primarily driven by a greater student enrollment due to the opening
of new schools and the increased number of students enrolled in our existing schools, along with the higher tuition income and boarding
fees.
●
Tuition income
. Our
                                                                                                                                                                        tuition income increased by 6.3% from RMB245.5 million in 2020 to RMB261.1 million in 2021, primarily driven by greater student
                                                                                                                                                                        enrollment at our schools and offering of more extra-curricular services.
●
Income
from student-related services
. Our income from student-related services increased by 6.9% from RMB37.9 million in 2020 to RMB40.5
million in 2021, in line with the increase in our student enrollment.
●
Boarding
fees
. Our boarding fees increased by 22.1% from RMB15.8 million in 2020 to RMB19.2 million in 2021, in line with the increase in
our student enrollment.
●
Education
and management service income
. Our revenue from education and management service income increased by 716.9% from RMB1.8 million in
2020 to RMB15.1 million in 2021 primarily due to servicing more schools in our school network.
●
Others
.
Our revenue from others decreased by 73.3% from RMB5.2 million in 2020 to RMB1.4 million in 2021, primarily due to the decrease of certain
one-off income.
Cost of revenues
Our cost of revenues increased by 25.8% from RMB164.4
million in 2020 to RMB206.8 million in 2021, primarily due to (1) a 118.0% increase in staff cost expenses from RMB63.1 million in 2020
to RMB137.5 million in 2021, as a result of (i) our undertaking of an increased portion of public-sponsored teachers' compensation;
(ii) an increase in the number of teachers from 1,346 as of December 31, 2020 to 1,617 as of December 31, 2021 to (a) accommodate more
students enrolled in our existing schools as our students progressed into next grades and new entry classes were filled up and (b) support
the ramp-up of certain recently-opened new schools; and (iii) an increase in the average compensation for our teachers primarily attributable
to bonuses for teachers teaching the graduating classes in our high schools; and (2) a 67.4% increase in student-related expenses from
RMB11.4 million in 2020 to RMB19.0 million in 2021 in line with the increase in our student enrollment; partially offset by a 66.1% decrease
in campus-related expenses from RMB70.1 million in 2020 to RMB23.8 million in 2021 due to reclassification of our discontinued schools
and operations.
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Gross profit
As a result of the foregoing, our gross
profit decreased by 8.0% from RMB141.9 million in 2020 to RMB130.5 million in 2021, and our gross profit margin was 46.3% in 2020
compared to 38.7% in 2021.
Operating expenses and income
Our operating expenses increased by 14.0% from
RMB45.6 million in 2020 to RMB52.0 million in 2021, primarily due to an increase in our general and administrative expenses.
●
Selling and marketing
                                                                                                                                                                        expenses
. Our selling and marketing expenses stayed relatively stable at RMB6.4 million in 2020 and RMB6.4 million in 2021,
                                                                                                                                                                        primarily due to our enhanced marketing efforts for schools opened in 2020.
●
General
and administrative expenses
. Our general and administrative expenses increased by 9.6% from RMB43.5 million in 2020 to RMB47.7 million
in 2021, primarily due to increased professional service fees and business travel expenses.
●
Government
grants
. Our operating income from government grants decreased by 51.0% from RMB4.3 million in 2020 to RMB2.1 million in 2021, primarily
due to certain delay in payments from governments in 2021.
Income from operations
As a result of the foregoing, our income from
operations decreased from RMB96.3 million in 2020 to RMB78.5 million in 2021.
Interest expense
Our interest expense increased by 66.1% from RMB5.7
million in 2020 to RMB9.5 million in 2021, primarily due to the sale and leaseback arrangements we entered into in November 2021. In November
2021, we entered into a sale and leaseback arrangement with a financing leasing company for a net financing proceeds of RMB50.0 million.
Under the sale and leaseback arrangement, Long-Spring Education, as the lessee, sold certain equipment, including computers, projectors
and printers, to the lessor. Concurrent with the sale of the leased equipment, the lessee leased back all of the leased equipment sold
to the lessor for a lease term of three years. We consider the substance of the transaction to be debt financing in nature and no gain
or loss is recognized upon the sale of these assets.
Income tax expense
Our income tax expense increased by 7.2% at RMB14.0
million in 2020, to RMB15.0 million in 2021, primarily due to the increased profitability in operations without tax policy benefits.
Net income
As a result of the foregoing, we had net income of RMB80.9 million in 2020 and RMB52.7 million in 2021.
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Adjusted net income
Our adjusted net income decreased by 34.9% from
RMB80.9 million in the 2020 to RMB52.7 million in 2021.
Taxation
Cayman Islands
We are incorporated in the Cayman Islands and
conduct our primary business operations through our subsidiaries and affiliated entities in China. Under the current laws of the Cayman
Islands, we are not subject to income or capital gains taxes. In addition, dividend payments are not subject to withholding tax in the
Cayman Islands.
Hong Kong
Under the Hong Kong tax laws, the statutory income
tax rate is 16.5%. Subsidiaries in Hong Kong are exempted from income tax on their foreign-derived income and there are no withholding
taxes in Hong Kong on remittance of dividends.
PRC
Our subsidiaries and affiliated entities incorporated
in China are generally subject to a statutory enterprise income tax rate of 25.0% with limited exceptions. According to Notice on Issues
Concerning Relevant Tax Policies in Deepening the Implantation of the Western Development Strategy jointly promulgated by the PRC Ministry
of Finance, the PRC General Administration of Customs and the SAT on July 27, 2011, enterprises located in Western China which have at
least 70% of their income from the businesses falling within the Category of Encouraged Industries in Western China may enjoy a preferential
income tax rate of 15% from January 1, 2011 to December 31, 2020. Yunnan WFOE, being a qualified enterprise located in Western China that
completed the necessary filing, enjoys a preferential income tax rate of 15% effective from 2017 to 2020, which is further extended another
10 years to 2030 if it continues to satisfy all the requirements pursuant to the relevant tax regulations in each of those years. Kunming
Xishan Long-Spring Experimental Secondary School and Yunnan Long-Spring Foreign Language Secondary School are entitled to a five-year
enterprise income tax exemptions for certain revenues that meets relevant legal requirements in from January 1, 2018 through December
31, 2022 and from January 1, 2019 through December 31, 2023, respectively, as determined by the local government authorities as non-profit
organizations. For the year ended December 31, 2022, our newly established schools which were qualified as small and micro enterprises
enjoyed the preferential tax rates of 5% or 10%, and our high-tech enterprises were subject to corporate income tax at a reduced rate
of 15%.
B. Liquidity and Capital Resources
Historically, we have financed our operations
primarily through cash generated from our operating activities. As of December 31, 2020, 2021 and 2022, we had RMB136.9 million, RMB114.2
million and RMB105.3 million (US$15.3 million), respectively, in cash. All of our cash and restricted cash as of December 31, 2022 was
held in China. Our cash and restricted cash primarily consist of cash on hand and cash at banks and restricted cash in connection with
the bank loan. We intend to finance our future working capital requirements and capital expenditures from cash generated from operating
activities, funding from third-party financial institutions and the net proceeds we received from our initial public offering.
Although we consolidate the results of our affiliated
entities, we do not have direct access to the cash or future earnings of our affiliated entities or their respective subsidiaries. However,
a portion of the cash balances of our affiliated entities and their respective subsidiaries will be paid to us pursuant to our contractual
arrangements with our affiliated entities and their respective subsidiaries. For restrictions and limitations on liquidity and capital
resources as a result of our corporate structure, see "—Holding Company Structure."
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We have not encountered any difficulties in meeting
our cash obligations to date. When considering our liquidity position and our future capital resources and needs, we take into account
price controls set by local governments that may affect the tuition and boarding fees we are able to charge to students in our schools,
annual enrollment numbers approved for our schools, the economic benefits we have received from our subsidiaries and affiliated entities
attributable to the provision of services to these entities and the economic benefits we may receive from our subsidiaries and affiliated
entities directly through payments under our exclusive management services and business cooperation agreement. We believe that our current
available cash, anticipated cash flow from operations and expected funding from third-party financial institutions will be sufficient
to meet our working capital requirements and capital expenditures in the ordinary course of business for the next 12 months.
The following table sets forth a condensed summary
of our cash flows for the periods indicated.
For the Year Ended December 31,
2020
2021
2022
RMB
RMB
RMB
US$
(in thousands)
Net cash used in operating activities—Continuing Operations
(29,912
)
(21,175
)
(84,686
)
(12,278
)
Net cash generated from operating activities—Discontinued Operations
134,735
109,545
85,275
12,364
Net cash generated from/(used) in investing activities—Continuing Operations
(35,126
)
(67,857
)
26,087
3,782
Net cash generated from/(used in) investing activities—Discontinued Operations
16,089
(65,755
)
107,586
15,599
Net cash generated from/(used in) financing activities —Continuing Operations
(8,449
)
134,185
(83,318
)
(12,080
)
Net cash generated from/(used in) financing activities —Discontinued Operations
13,542
(10,614
)
-
Effect of exchange rate changes on cash
144
318
1,968
285
Net increase in cash
91,023
78,647
52,912
7,672
Cash at the beginning of the year
117,333
136,953
114,197
16,557
Cash at the end of the year
208,356
215,600
167,109
24,229
Less: Cash and cash equivalents from the discontinued operations, end of period
(71,403
)
(101,403
)
(61,851
)
(8,968
)
Cash and cash equivalents, from the continuing operations end of period
136,953
114,197
105,258
15,261
Operating activities
We generate cash from operating activities primarily
from tuition and boarding fees for our schools. We generally require students to pay tuition and boarding fees for each semester upfront
prior to the commencement of such semester. Tuition and boarding fees for schools are initially recorded under contract liabilities and
deferred revenue from governments. We recognize such amounts received as revenues proportionately over the relevant period in which the
students attend the applicable programs.
Changes in cash flow from operating activities from 2021 to 2022
We had net cash used in operating activities
from continuing operation of RMB84.7 million (US$12.3 million) in 2022, compared to net cash used in operating activities from
continuing operation of RMB21.2 million in 2021. The decrease in cash flow used in operating activities in 2022 is primarily a
result of:
(1)
a RMB14.3 million (US$2.1 million) decrease in net income, mainly due
to increased cost of revenues used in school operation in 2022;
(2)
a RMB58.9 million (US$8.5 million) increase in accounts receivable
in 2022, as compared to a RMB4.0 million decrease in 2021, mainly due to certain delay in payments from governments cooperative arrangements
(3)
a RMB127.6 million (US$18.5 million) increase in advances to suppliers
and other current assets, as compared to a RMB66.1 million increase in 2021, mainly due to more security deposits made to suppliers and
in relation with new school openings;
(4)
a RMB0.3 million (US$49,005) decrease in advances from customers, as
compared to a RMB20.2 million increase in 2021, mainly due to less deposits received from customers and vendors; and
(5)
Partially offset by (1) a RMB19.4 million (US$2.8 million) increase in accrued expenses and other payables in 2022, as compared to a
RMB54.4 million decrease in 2021, mainly due to more delayed payments such as performance related wages incurred but yet to be made to
employees, and services and goods consumed but the invoice of which has not been received yet; and (2) a RMB10.7 million (US$1.5 million)
increase in account payable in 2022, as compared to a RMB5.1 million decrease in 2021, mainly due to more advances from customers.
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Changes in cash flow from operating activities from 2020 to 2021
We had net cash used in operating activities from
continuing operation of RMB21.2 million in 2021, compared to net cash used in operating activities from continuing operation of RMB29.9 million
in 2020. The increase in cash flow from operating activities in 2021 is primarily a result of:
(1)
a RMB20.2 million increase in advances from customers, as compared to a RMB22.9 million decrease in 2021, mainly due to more deposits received from customers and vendors;
(2)
a RMB3.9 million decrease in accounts receivable in 2021, as compared to a RMB28.0 million increase in 2020, mainly due to improved payment invoicing and collection for our continuing operation; and
(3)
Partially offset by (1) a RMB28.2 million decrease in net income, mainly due to the increased cost of revenues used in school expansions in 2021; (2) a RMB66.1 million increase in advances to suppliers and other current assets in 2021, as compared to a RMB27.3 million increase in 2020, mainly due to more security deposits made to suppliers and in relation with new school openings; and (3) a RMB54.4 million decrease in accrued expenses and other payables in 2021, as compared to a RMB39.3 million decrease in 2020, mainly due to less delayed payments such as performance related wages incurred but yet to be made to employees, and services and goods consumed but the invoice of which has not been received yet.
Investing activities
For 2022, we had net cash generated from investing
activities from continuing operations of RMB26.1 million (US$3.8 million), primarily attributable to (1) disposal of subsidiaries, net
of cash RMB44.7 million (US$6.5 million), by netting the gains from, against excluding the cash account of, discontinued entities of Beijing
Hengyue Education Technology Co., Ltd., Ordos Hengyue Education Technology Co., Ltd., Ordos Hengshui Experimental High School, and Beijing
Tomorrow Future Plus Education Technology Co., Ltd.; (2) purchase of property and equipment of RMB17.8 million (US$2.6 million), related
to school operation; and (3) purchase of intangible assets of RMB0.8 million (US$0.1 million).
For 2021, we had net cash used in investing activities
from continuing operations of RMB67.9 million, primarily attributable to (1) acquisition of a subsidiary, net of cash RMB42.0 million,
relating to the acquisition of Yunnan Hengshun Property Service Co., Ltd., Kunming Chenggong Times Giant Tutorial School Co., Ltd., Wenshan
Century Times Giant Training School Co., Ltd., and Kunming Wuhua District Zhuorui Cultural Training School Co., Ltd.; (2) purchase of
school equipment of RMB24.2 million, and (3) purchase of intangible assets of RMB1.6 million.
For 2020, we had net cash used in investing activities
of RMB35.1 million, primarily attributable to (1) purchase of school equipment of RMB33.5 million, and (2) purchase of intangible assets
of RMB1.6 million.
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Financing activities
For 2022, we had net cash used in financing activities
of RMB83.3 million (US$12.1 million), primarily attributable to (1) dividend to shareholders RMB6.4 million (US$0.9 million), (2) repayments
of principal amount of borrowings under financing arrangements and repayments of bank loans RMB150.2 million (US$21.8 million), (3) net
repayments of amounts due to related parties of RMB150.1 (US$21.8 million) million, and (4) payment for treasury stock RMB0.5 million
(US$0.08 million), partially offset by (1) net proceeds from borrowings under financing arrangements and bank loans of RMB101.8 million,
and (2) net proceeds from amounts due from related parties of RMB122.1 million.
For 2021, we had net cash generated from financing
activities of RMB134.2 million, primarily attributable to (1) net proceeds from borrowings under financing arrangements and bank loans
of RMB286.0 million, (2) prepayment for the issuance of common stock of RMB296.4 million, (3) net proceeds from amounts due from related
parties of RMB62.2 million, partially offset by (1) dividend to shareholders RMB166.7million, (2) repayments of principal amount of borrowings
under financing arrangements and repayments of bank loans RMB298.0 million, (3) net repayments of amounts due to related parties of RMB45.8
million.
For 2020, we had net cash used in financing activities
of RMB8.5 million, primarily attributable to (1) net repayments of amounts due to related parties of RMB151.0 million, and (2) dividend
to shareholders RMB42.3 million, partially offset by (1) net proceeds from borrowings under financing arrangements and bank loans of RMB139.4
million, (2) net proceeds from amounts due from related parties of RMB45.4 million.
Capital Expenditures
We incurred capital expenditures of RMB35.1 million,
RMB25.9 million and RMB18.6 million (US$2.7 million) in 2020, 2021 and 2022, respectively, primarily in connection with our purchase of
school facilities and equipment. We intend to fund our future capital expenditures with our existing cash balance, proceeds from our initial
public offering and other financing alternatives. We will continue to incur capital expenditures to support the growth of our business.
Holding Company Structure
We are a holding company with no material operations
of our own. We conduct our operations primarily through our subsidiaries and affiliated entities in China. As a result, our ability to
pay dividends depends upon dividends paid by our PRC subsidiaries. If our PRC subsidiaries or any newly formed subsidiaries incur any
debt in the future, the instruments governing their debt may restrict their ability to pay dividends to us. Our PRC subsidiaries are permitted
to pay dividends to us only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations.
Under PRC law, each of our subsidiaries and affiliated entities is required to set aside at least 10% of its after-tax profits each year,
if any, to fund a statutory surplus reserve until such reserve reaches 50% of its registered capital. In addition, each of our PRC subsidiaries
may allocate a portion of its after-tax profits based on PRC accounting standards to enterprise expansion fund and staff bonus and welfare
fund at its discretion. Each of our affiliated entities may allocate a portion of its after-tax profits based on PRC accounting standards
to a discretionary surplus fund at its discretion. Although the statutory surplus reserves can be used 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. Remittance of dividends by a wholly foreign-owned company out of China is subject to examination by the banks. Our PRC subsidiaries
will not be able to pay dividends until they generate accumulated profits and meet the requirements for statutory reserve funds. Considering
that we have achieved net income in 2021, we approved and declared a cash dividend of US$0.0146 per ordinary share (US$0.0437 per or ADS)
in September 2022 and made payments in October 2022.
The following table sets forth the respective
revenue contributions for our continuing operations of (1) the affiliated entities, and (2) non-VIE consolidated entities,
for the periods indicated as a percentage of total revenues.
As of December 31,
2020
2021
2022
RMB
% of
total
revenues
RMB
% of
total
revenues
RMB
US$
% of
total
revenues
(in thousands, except percentages)
The affiliated entities
253,271
82.7
%
307,348
91.1
%
230,238
33,381
67.2
%
non-VIE consolidated entities
52,974
17.3
%
29,966
8.9
%
112,268
16,277
32.8
%
Total revenues
306,245
100.0
%
337,314
100.0
%
342,506
49,659
100.0
%
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The following table sets forth the respective
asset contributions of (1) the affiliated entities, and (2) non-VIE consolidated entities, as of the dates indicated as a percentage
of total assets.
As of December 31,
2020
2021
2022
RMB
% of total
asset
RMB
% of total
asset
RMB
US$
% of total
asset
(in thousands, except percentages)
The affiliated entities
445,221
69.8
%
330,748
40.3
%
465,603
67,506
65.3
%
Non-VIE consolidated entities
192,258
30.2
%
489,921
59.7
%
246,876
35,794
34.7
%
Total asset
637,479
100.0
%
820,669
100.0
%
712,479
103,300
100.0
%
Financial Information Related to the Affiliated Entities
The following balances of
the affiliated entities as of December 31, 2021 and 2022, were included in our consolidated balance sheet after the elimination of intercompany
balances, respectively.
As of December 31,
2021
2022
RMB
RMB
US$
(in thousands)
Current assets
Cash
102,179
96,558
14,000
Accounts receivable, net of allowance for doubtful accounts
17,296
41,441
6,008
Amounts due from related parties
10,873
41,123
5,962
Prepaid expenses and other current assets
49,939
135,121
19,591
Total current assets
180,287
314,243
45,561
Property and equipment, net
56,967
67,405
9,773
Intangible assets, net
160
141
20
Goodwill
30,348
30,348
4,400
Deferred tax assets
8,498
6,290
912
Other non-current assets
54,488
47,176
6,840
Total non-current asset
150,461
151,360
21,945
Total assets
330,748
465,603
67,506
Current liabilities
Contract liabilities
131,840
135,703
19,675
Borrowings under financing arrangements
40,078
20,540
2,978
Bank loan
43,219
33,572
4,867
Accounts payable
8,555
10,615
1,539
Accrued expenses and other payables
24,354
48,211
6,990
Income tax payables
10,086
9,409
1,364
Amounts due to related parties
3,027
45,781
6,638
Total current liabilities
261,159
303,831
44,051
Deferred revenue
121
113
16
Borrowings under financing arrangements
44,178
24,987
3,623
Other payables
7,989
1,270
184
Deferred tax liabilities
1,315
4,285
621
Total non-current liabilities
53,482
30,542
4,428
Total liabilities
314,641
334,373
48,480
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The following amounts of the affiliated entities
for the years ended December 31, 2020, 2021 and 2022, were included in our consolidated statements of operations and consolidated statements
of cash flows after the elimination of intercompany balances.
For the year ended December 31,
2020
2021
2022
RMB
RMB
RMB
US$
(in thousands)
Revenue from continuing operations of the affiliated entities
306,245
337,314
342,506
49,659
Revenue from discontinued operations of Affected Entities
139,589
169,541
91,457
13,260
Net income from continuing operations of the affiliated entities after elimination of intercompany transactions
78,900
57,781
46,097
6,683
Net income/(loss) from discontinued operations of Affected Entities
2,019
(5,088
)
(7,691
)
(1,115
)
Net income
80,919
52,693
38,406
5,568
Net cash (used in)/generated from operating activities of the affiliated entities
(29,912
)
(21,175
)
(84,686
)
(12,278
)
Net cash generated from operating activities of Affected Entities
134,735
109,545
85,275
12,364
Net cash used in investing activities from operating activities of the affiliated entities
(35,126
)
(67,857
)
26,087
3,782
Net cash used in investing activities of Affected Entities
16,089
(65,755
)
107,586
15,599
Net cash generated from financing activities from operating activities of the affiliated entities
(8,449
)
134,185
(83,318
)
(12,080
)
Net cash generated from financing activities of Affected Entities
13,542
(10,614
)
-
-
Effect of exchange rate changes on cash
144
318
1,968
285
Net increase in cash and cash equivalents and restricted cash
91,023
78,647
52,912
7,672
Cash and cash equivalents and restricted cash at beginning of year
117,333
136,953
114,197
16,557
Cash and cash equivalents and restricted cash at end of year
208,356
215,600
167,107
24,229
Less: Cash and cash equivalents of Affected Entities, end of period
(71,403
)
(101,103
)
(61,851
)
(8,968
)
Cash and cash equivalents, of the affiliated entities, end of period
136,953
114,197
105,258
15,261
Cash Flows Through Our Organization
We are a holding company with no business operations
of our own. We conduct our operations primarily through our PRC subsidiaries and affiliated entities in China. As a result, our ability
to pay dividends and to service any debt we may incur and pay our operating expenses principally depends on dividends paid by our PRC
subsidiaries.
Under applicable PRC laws and regulations, our
PRC subsidiaries are permitted 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 allocate at least 10% of their accumulated profits
each year, if any, to fund statutory reserves of up to 50% of the registered capital of the enterprise. Statutory reserves are not distributable
as cash dividends except in the event of liquidation.
If we intend to distribute dividends, we will
transfer the dividends to First High-School HK, our Hong Kong subsidiary, in accordance with the laws and regulations of the PRC, and
then First High-School HK will transfer the dividends to First High-School BVI, our BVI subsidiary, and further to First High-School
Education, the Cayman Islands holding company, and the dividends will be distributed from the First High-School Education to all shareholders
respectively in proportion to the shares they hold, regardless of whether the shareholders are U.S. investors or investors in other countries
or regions. For the fiscal years of 2020, 2021 and 2022, no dividends were declared and paid by our PRC subsidiaries.
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Off-Balance Sheet Arrangements
We have not entered into any financial guarantees
or other commitments to guarantee the payment obligations of any third parties. In addition, we have not entered into any derivative
contracts that are indexed to our shares and classified as shareholders' equity or that are not reflected in our consolidated financial
statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves
as credit, liquidity or market risk support to such entity. Moreover, we do not have any variable interest in any unconsolidated entity
that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services
with us.
Contractual Obligations
The following table sets forth our contractual
obligations as of December 31, 2022.
Payment Due by Period
Total
Less than
one year
One to
three years
Three to
five years
More than
five years
RMB
US$
RMB
RMB
RMB
RMB
(in thousands)
Operating lease commitments
65,130
9,443
9,630
13,050
13,050
29,400
We lease certain business premises for our schools
under non-cancellable operating leases that expire at various dates. We incurred rental expenses under operating leases of RMB0.2 million,
RMB2.1 million and RMB5.2 million (US$0.8 million) in 2020, 2021 and 2022, respectively.
As of December 31, 2022, we had a capital commitment
of RMB26.7 million (US$3.9 million) pursuant to a school cooperative agreement.
Other than as shown above, we did not have any
significant capital and other commitments, long-term obligations or guarantees as of December 31, 2022.
C. Research and Development, Patents and Licenses, etc.
See "Item 4. Information on the Company—B.
Business Overview—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 for the period from January 1, 2022 to December
31, 2022 that are reasonably likely to have a material adverse effect on our total revenues, profitability, liquidity, or capital resources,
or that caused the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.
E. Critical Accounting Estimates
We prepare our consolidated financial statements
in accordance with U.S. GAAP. The preparation of financial statements in conformity with U.S. GAAP requires management to make judgments,
estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported
amounts of revenues and expenses during the reporting period. We continually evaluate these judgments and estimates based on our own
experience, knowledge and assessment of current business and other conditions, our expectations regarding the future based on available
information and assumptions that we believe to be reasonable, which together form our basis for making judgments about matters that are
not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, our
actual results could differ from those estimates. Some of our accounting policies require a higher degree of judgment than others in
their application.
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The selection of critical accounting policies,
the judgments and other uncertainties affecting application of those policies and the sensitivity of reported results to changes in conditions
and assumptions are factors that should be considered when reviewing our financial statements. We believe the following accounting policies
involve the most significant judgments and estimates used in the preparation of our financial statements.
Consolidation of Variable Interest Entity
Prior to the effective of the Implementation
Rules, PRC laws and regulations had prohibited foreign ownership of companies and institutions providing compulsory education services
at primary and middle school levels, and restrict foreign investment in education services at the kindergarten and high school level.
In addition, the PRC government regulates the provision of education services through strict licensing requirements.
We are a company registered in the Cayman Islands.
Yunnan WFOE is our PRC subsidiary and a foreign-invested enterprise under PRC laws. To comply with PRC laws and regulations, we primarily
operate in China through our affiliated entities, based on a series of contractual arrangements by and among Yunnan WFOE, our affiliated
entities, and the shareholders of Long-Spring Education, including:
●
Exclusive Call Option Agreement;
●
School Sponsors' and Directors' Rights Entrustment Agreement;
●
Shareholders' Rights Entrustment Agreement;
●
Power of Attorney;
●
Exclusive Technical Service and Management Consultancy Agreement and Business Cooperation Agreement;
●
Equity Pledge Agreement;
●
Spousal Undertaking; and
●
Loan Agreement.
Our contractual arrangements with our affiliated
entities and the shareholders of Long-Spring Education permit us to (1) exercise effective control over the affiliated entities, (2)
receive substantially all of the economic benefits of our affiliated entities, and (3) have an exclusive call option to purchase all
or part of the equity interests in our affiliated entities when and to the extent permitted by PRC law.
Under the Implementation Rules, social organizations
and individuals are prohibited from controlling a private school that provides compulsory education by means of, among others, merger,
acquisition, and contractual arrangements, and a private school providing compulsory education is prohibited from conducting transactions
with its related parties. In particular, the prohibition over related party transactions has significantly affected the enforceability
of the exclusive management services and business cooperation agreements with affiliated entities providing compulsory education. Therefore,
we re-assessed our control over the Affected Entities. Based on the relevant accounting standard in accordance with U.S. GAAP, we have
concluded that we have lost control of the Affected Entities since September 1, 2021, in view of the significant uncertainties and restrictions
the Implementation Rules impose on our ability to direct the range of ongoing activities that would most significantly impact the returns
of those entities and to be exposed to returns that are commensurate with a controlling interest, and that such uncertainties and restrictions
already had a significant impact on our ability to direct and its economic exposure from involvement with such entities.
As advised by our PRC legal counsel, Beijing Zhongwen
Law Firm, except for the Affected Entities, the ownership structures of Yunnan WFOE and our affiliated entities in China are not in violation
of applicable PRC laws and regulations currently in effect; and the contractual arrangements among Yunnan WFOE, our affiliated entities,
and the shareholders of Long-Spring Education, governed by PRC law are legal, valid and binding, and will not result in any violation
of applicable PRC laws and regulations currently in effect, except that the clause or provision of the Exclusive Technical Service and
Management Consultancy Agreement and Business Cooperation Agreement, in relation to related party transactions between a private school
providing compulsory education and Yunnan WFOE, have been rendered not legally enforceable since September 1, 2021. However, our PRC legal
counsel has also advised us that there are substantial uncertainties regarding the interpretation and application of current and future
PRC laws, regulations and rules, and we cannot assure you that the PRC government would agree that our corporate structure or any of the
above contractual arrangements comply with current or future PRC laws or regulations. PRC laws and regulations governing the validity
of these contractual arrangements are uncertain and the relevant government authorities may have broad discretion in interpreting these
laws and regulations. For a detailed description of the risks associated with our corporate structure, see "Item 3. Key Information—D.
Risk Factors—Risks Related to Our Corporate Structure." and "Item 3. Key Information—D. Risk Factors—Risks
Related to Doing Business in China."
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Revenue recognition
Revenue is recognized when control of promised
goods or services is transferred to our customers in an amount of consideration to which we expect to be entitled to in exchange for
those goods or services. We follow the five steps approach for revenue recognition under ASC Topic 606: (1) identify the contract(s)
with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction
price to the performance obligations in the contract, and (5) recognize revenue when (or as) we satisfy a performance obligation.
For contracts with customers that contain multiple
performance obligations, determining whether products and services are considered distinct performance obligations that should be accounted
for separately versus together may require significant judgment. The transaction price is allocated to the separate performance obligation
on a relative standalone selling price basis. The standalone selling price is determined based on overall pricing objectives, taking
into consideration market conditions, geographic locations and other factors.
The primary sources of our revenues are as follows:
Formal education services
Our revenue from continuing operations is principally
derived from the provision of boarding school educational services to students. We offer formal education program at the high school
level. The educational programs and services from discontinued operations consist of formal education program at the middle school level.
Tuition and accommodation fees received from
formal education services are generally paid in advance prior to the beginning of each semester. In very limited circumstances students
may, with special approval of the management, receive education first and pay their tuition in arrears.
Each contract with a student in respect of the
formal education services contains multiple performance obligations consisting of the provision of the curriculum education services,
after-school enrichment services, registration and transportation services (collectively as "educational services"), delivery
of educational books and related materials (collectively as "educational materials"), boarding services and meal catering
services. These performance obligations are distinct in the context of the contract. The consideration expected to be received is allocated
at contract inception among the performance obligations based on their stand-alone selling prices.
Revenue attributable to educational services
and boarding services is recognized over time, based on a straight-line basis over the school year, as customers simultaneously receive
and consume the benefits of these services throughout the service period. The portion of tuition and boarding payments received from
students but not earned is recorded contract liability and is reflected as a current liability as such amounts represent revenue that
we expect to earn within one year. The academic year of our school is generally from September to January of the following year and from
March to June. We determine that there is not a significant financing component based on the nature of the service being offered and
the purpose of the payment terms.
Revenue attributable to educational materials
and meal catering services is recognized at point in time, when the control of the educational materials or underlying goods is passed
to customers. We consider that it is acting as the principal in the transaction and recognizes revenue from sales of the educational
materials and meal catering services on a gross basis.
Revenue from government cooperative arrangements
We have entered into certain long-term cooperative
arrangements with local governments in areas where some of the schools are located. Pursuant to such arrangements, we are committed to
admit certain number of local students as "publicly-sponsored students" who pay the tuition fees based on the amounts charged
by a comparable public school. The difference between the fees charged by us to other students and the fees charged to publicly-sponsored
students are subsidized by the local governments in the form of lump sum funding payments in the first few years of the cooperative arrangements.
The government subsidies are recognized as "revenue from government cooperative arrangements" on a systematic basis when
there is reasonable assurance that they will be received and we will comply with the conditions attaching to the agreements. In particular,
revenue under these arrangements are recognized on a straight-line basis during the relevant school year, and over the estimated period
to which the subsidies relate, based on the difference in average tuition fee for private students and for publicly-sponsored students
and the number of publicly-sponsored students of each academic year. When we have received payments from the governments before educational
services are provided to these publicly-sponsored students, a deferred revenue from governments is recognized when the payments are received.
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Throughout the whole period of cooperative arrangements,
the governments also provide free access to certain buildings and dormitories and assign certain number of teachers who originally work
in other public schools to us. These subsidies are determined as non-monetary government grants in a nonreciprocal transfer for which
the fair value is not reliably estimable. Accordingly, we recognize the asset or services and the relevant grants at their nominal amounts
paid.
Tuition income from training programs
Revenue derived from providing Gaokao (the university
entrance examination in China) repeaters' education programs and other after-school is recognized over time, based on a straight-line
basis over the program service period, as customers simultaneously receive and consume the benefits of these services throughout the
service period.
Education and management service fees
Revenue derived from (1) the education and management
service provided to the third-party schools included logistic management services, school operation and management services and other
services. The promised services in each education and management service contract are combined and accounted as a single performance
obligation, as the promised services in a contract are not distinct and are considered as a significant integrated service, and (2) the
meal catering services are outsourced to certain vendors and we charge management service fee from these vendors. The revenue is recognized
on a straight-line basis over the period of the education and management service, as customers simultaneously receive and consume the
benefits of these services throughout the service period.
We have assessed all variable considerations
identified when determining the transaction price. In making such assessment, we may provide price concessions to the customers under
education and management services contracts and royalty contracts in order to enter into new contracts or collect payments. We include
the estimate of the concession in the amount of consideration to which it ultimately expects to be entitled.
VAT collected from customers is excluded from
revenue. Our PRC subsidiaries and affiliated entities are subject to VAT. The deductible input VAT balance is recorded in prepaid expenses
and other current assets, and VAT payable balance is recorded in the accrued expenses and other payables.
Employee benefits
Pursuant to relevant PRC regulations, we are required to make contributions
to various defined contribution plans organized by municipal and provincial PRC governments. The contributions are made for each PRC employee
at rates ranging from 31% to 37% on employees' salaries, up to a maximum amount stipulated by local social security bureau. Contributions
to the defined contribution plans are charged to the consolidated statements of operations when the related service is provided.
Recent Accounting Pronouncements
For detailed discussion on recent accounting pronouncements,
see Note 2(w) and Note 2(x) to our consolidated financial statements included elsewhere in this annual report.
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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Directors and Executive Officers
The following table sets forth information regarding
our directors and executive officers as of the date of this annual report.
Directors and Executive Officers
Age
Position/Title
Shaowei Zhang
39
Chairman and Chief Executive Officer
Tommy Zhou
36
Director and Chief Financial Officer
Pengwei Luo
47
Director
Guangzhou Zhao
69
Independent Director
Yuanlin Hu
51
Independent Director
Jianping Zhang
68
Education Inspector
Mr. Shaowei Zhang
is the founder of our
company. Mr. Zhang has served as the chairman of our board of directors and our chief executive officer since September 2018. Prior to
founding our company, Mr. Zhang established and served as the principal of Kunming Qihang Education and Training School and Kunming Epoch
Giant Tutorial School in 2006 and 2009, respectively. Mr. Zhang established Kunming College Student Private Tutorial Services Station
and Kunming Xindenuo Accounting Training Center in 2003 and 2004, respectively. Mr. Zhang serves as a member of the Yunnan Provincial
Committee of the Chinese People's Political Consultative Conference and a director of Long-Spring Institute of Learning and Human
Development of Tsinghua University. Mr. Zhang received his bachelor's degree in accounting in 2006 and his master's degree
in business administration in 2012 from Kunming University of Science and Technology. Mr. Zhang is currently pursuing his doctorate degree
in education from Tsinghua University.
Mr. Tommy Zhou
has served as our
chief financial officer since October 2021 and our director since December 2021. Mr. Zhou had served as the joint chief financial officer
of our company since September 2021. Prior to joining our company, Mr. Zhou had served as the senior vice president at Tianfeng
Securities Co., Ltd. (SHA: 601162) from November 2020 to August 2021. From July 2019 to October 2020, Mr. Zhou served as an associate
director at China Innovative Capital Management Ltd. From July 2016 to July 2019, Mr. Zhou served as an investment manager at Sunshine
Asset Management Corporation Limited. From June 2013 to June 2015, Mr. Zhou served at multiple positions, including the last position
as a financial accountant at The Northwestern Mutual Life Insurance Company. Mr. Zhou received his bachelor's degree in Economic
History from University of British Columbia in 2010, and a master's degree in business administration from The George Washington
University in 2014.
Mr. Pengwei Luo
has served as our
director since May 2021. Mr. Luo is the founder and the managing director of Spring River Greater China Fund, which he founded in
2014. Mr. Luo manages and supervises the daily operation of ten asset management companies since July 2020. From 2010 to 2014, Mr. Luo
served as a portfolio manager at Yinhua Fund Management Co., Ltd. From 2005 to 2009, Mr. Luo served as a portfolio manager at the
asset management department at Huatai United Securities Co., Ltd. From 2002 to 2004, Mr. Luo worked as a project manager at the
investment banking group of Guotai Junan International Holdings Limited, a company listed on the Hong Kong Stock Exchange (stock code:
1788). Mr. Luo received a master's degree in economics from Jiangxi University of Finance and Economics in 2001.
Mr. Guangzhou Zhao
has served as our independent
director since March 2021. Mr. Zhao is currently a professor at Kunming University of Science and Technology. Mr. Zhao has served as
an independent director of the board of Yunnan Tin Co., Ltd. (SZSE: 000960) from 2012 to 2020. From 2003 to 2009, he served as an independent
director of the board of Kunming Horti-Expo Garden Co., Ltd. (SZSE: 002293, currently known as Yunnan Tourism Co., Ltd.). From 2006 to
2017, Mr. Zhao served as the president of Kunming University of Science and Technology Oxbridge College. From 1994 to 2006, he served
as the deputy dean of Kunming University of Science and Technology School of Management and Economics. From 1992 to 1994, he served as
the deputy division director of Office of Science and Technology Administration of Yunnan Institute of Technology (currently known as
Kunming University of Science and Technology). From 1988 to 1990, he served as the deputy division director of Department of Management
of Yunnan Institute of Technology. Mr. Zhao received his bachelor's degree in design and manufacture of tractors from Yunnan Institute
of Technology in 1982 and his master's degree from the System Science Institute of China Science Academy in 1988.
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Mr. Yuanlin Hu
has served as our independent
director since March 2021. Mr. Hu is currently a professor for management and economics and a PhD supervisor at Kunming University of
Science and Technology. Mr. Hu has served as an executive director of the eighth board of directors of Yunnan Province Accounting Society
since 2017. Mr. Hu has served as the dean of department of accounting and a director of financial management institute at Kunming University
of Science and Technology since 2013. Mr. Hu received his bachelor's degree in economics from Zhongnan University of Finance and
Economics in 1995, his master's degree and PhD in management from Kunming University of Science and Technology in 2001 and 2010,
respectively.
Ms. Jianping Zhang
has served as our education
inspector since April 2014. Prior to joining us, Ms. Zhang served as the principal of the Zhongying Middle School of Kunming Zhonghui
Education Group from March 2010 to March 2014. Ms. Zhang served as the principal of Kunming Experimental Middle School from July 2004
to December 2009. In 2006, Ms. Zhang was recognized as "Outstanding Teacher" by Kunming Education Bureau. Ms. Zhang received
her bachelor's degree in mathematics from Yunnan Normal University in February 1980.
The business address of our directors and executive
officers is: No. 1-1, Tiyuan Road, Xishan District, Kunming, Yunnan Province 650228, the People's Republic of China. No family
relationship exists between any of our directors and executive officers.
B. Compensation
Compensation of Directors and Executive Officers
For 2022, the aggregate cash compensation to
directors and executive officers was approximately RMB1.7 million (US$0.2 million). This amount consisted only of cash and did not include
any share-based compensation or benefits in kind. Each of our directors and officers is entitled to reimbursement for all necessary and
reasonable expenses properly incurred in the course of employment or service. We have not set aside or accrued any amount to provide
pension, retirement or other similar benefits to our executive officers and directors. Our PRC subsidiaries and affiliated entities are
required by law to make contributions equal to certain percentages of each employee's salary for his or her pension insurance,
medical insurance, unemployment insurance and other statutory benefits and a housing provident fund. Our board of directors may determine
compensation to be paid to the directors and the executive officers. The compensation committee will assist the directors in reviewing
and approving the compensation structure for the directors and the executive officers.
For information regarding share awards granted
to our directors and officers, see "—Share Incentive Plan."
Share Incentive Plan
In January 2021, our board of directors approved
the 2021 Share Incentive Plan to attract and retain the best available personnel, provide additional incentives to employees, directors
and consultants and promote the success of our business. Under the 2021 Share Incentive Plan (the "2021 Plan"), the maximum
aggregate number of shares which may be issued pursuant to all awards under the 2021 Plan shall be 3,524,435 ordinary shares, which constitutes
5.0% of the total outstanding ordinary shares of our company on an as-converted basis as of the date of the adoption of the 2021 Plan.
As of the date of this annual report, we did not grant any option to purchase our ordinary shares.
The following paragraphs describe the principal
terms of the 2021 Plan.
Types of awards.
The 2021 Plan
permits the awards of options, restricted shares, restricted share unit or any other type of awards that the committee decides.
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Plan administration.
Our board
of directors or a committee of one or more members of the board of directors will administer the 2021 Plan. The committee or the full
board of directors, as applicable, will determine the participants to receive awards, the type and number of awards to be granted to
each participant, and the terms and conditions of each award grant.
Award agreement.
Awards granted
under the 2021 Plan are evidenced by an award agreement that sets forth terms, conditions and limitations for each award, which may include
the term of the award, the provisions applicable in the event of the grantee's employment or service terminates, and our authority
to unilaterally or bilaterally amend, modify, suspend, cancel or rescind the award.
Eligibility.
We may grant awards
to our employees, directors and consultants of our company. However, we may grant options that are intended to qualify as incentive share
options only to our employees and employees of our parent companies and subsidiaries.
Vesting schedule.
In general, the
plan administrator determines the vesting schedule, which is specified in the relevant award agreement.
Exercise of options.
The plan administrator
determines the exercise price for each award, which is stated in the award agreement. The vested portion of option will expire if not
exercised prior to the time as the plan administrator determines at the time of its grant. However, the maximum exercisable term is 10
years from the date of a grant.
Transfer restrictions.
Awards may
not be transferred in any manner by the recipient except under limited circumstances, including by will or the laws of descent and distribution,
unless otherwise provided by the plan administrator.
Termination and amendment of the 2021 Plan.
Unless terminated earlier, the 2021 Plan has a term of 10 years. Our board of directors has the authority to amend or terminate
the plan. However, no such action may adversely affect in any material way any awards previously granted unless agreed by the recipient.
Share Options
In April 2021, we granted an option and right
to buy an equivalent of 1,850,000 ADSs, as represented by our Class A ordinary shares during the option period for the full price equivalent
to US$10.00 per ADS to Spring River Greater China Fund, where Mr. Pengwei Luo is the founder and managing director. The option period
will expire on May 8, 2025, and must be exercised if our average listed price in any consecutive 30 business days is greater than US$15.00
per ADS. When evaluating the value of the option, we used the binomial option pricing model, and deemed that the option had no material
value as of December 31, 2022, since our listed price is sufficiently below the exercise price of US$10.00 per ADS and therefore recorded
no related compensation expenses.
C. Board Practices
Board of Directors
Our board of directors consists of five directors.
A director is not required to hold any shares in our company to qualify to serve as a director. A director may vote with respect to any
contract, proposed contract or arrangement notwithstanding that he may be interested therein, and if he does so his vote shall be counted
and he may be counted in the quorum at any meeting of our directors at which any such contract or proposed contract or arrangement is
considered, provided (1) such director, if his interest (whether direct or indirect) in such contract or arrangement is material, has
declared the nature of his interest at the earliest meeting of the board at which it is practicable for him to do so, either specifically
or by way of a general notice and (2) if such contract or arrangement is a transaction with a related party, such transaction has been
approved by the audit committee. Our directors may exercise all the powers of the company to borrow money, mortgage or charge its undertaking,
property and uncalled capital, and issue debentures, debenture share and other securities whenever money is borrowed or as security for
any debt, liability or obligation of the company or of any third party. We have no service contract with any of our director providing
for benefits upon termination of employment.
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Committees of the Board of Directors
We have established three committees under the
board of directors: an audit committee, a compensation committee and a nominating and corporate governance committee. We have adopted
a charter for each of the three committees. Each committee's members and functions are described below.
Audit Committee
. Our audit committee
consists of Mr. Yuanlin Hu and Mr. Guangzhou Zhao, and is chaired by Mr. Yuanlin Hu. Each of the members of the audit committee meets
the independence standards under Rule 10A-3 under the Exchange Act. We have determined that Mr. Yuanlin Hu qualifies as an "audit
committee financial expert."
The audit committee oversees our accounting and
financial reporting processes and the audits of the financial statements of our company. The audit committee is responsible for, among
other things:
●
selecting the independent registered public accounting firm and pre-approving
    all auditing and non-auditing services permitted to be performed by the independent registered public accounting firm;
●
reviewing with the independent registered public accounting firm any audit
    problems or difficulties and management's response;
●
reviewing and approving all proposed related party transactions, as defined
    in Item 404 of Regulation S-K under the Securities Act;
●
discussing the annual audited financial statements with management and
    the independent registered public accounting firm;
●
reviewing major issues as to the adequacy of our internal controls and
    any special audit steps adopted in light of material control deficiencies;
●
reviewing and reassessing annually the adequacy of our audit committee
    charter;
●
meeting separately and periodically with management and the independent
    registered public accounting firm;
●
monitoring compliance with our code of business conduct and ethics, including
    reviewing the adequacy and effectiveness of our procedures to ensure proper compliance; and
●
reporting regularly to the board.
Compensation Committee
. Our compensation
committee consists of Messrs. Shaowei Zhang, Guangzhou Zhao, and Yuanlin Hu, and is chaired by Mr. Shaowei Zhang.
The compensation committee
assists the board in reviewing and approving the compensation structure, including all forms of compensation, relating to our directors
and executive officers. Our chief executive officer may not be present at any committee meeting during which their compensation is deliberated
upon. The compensation committee is responsible for, among other things:
●
reviewing and approving, or recommending to the board for its approval,
    the total compensation package for our chief executive officer and other executive officers;
●
reviewing and recommending to the board for determination with respect
    to the compensation of our non-employee directors;
●
reviewing periodically and approving any incentive compensation or equity
    plans, programs or similar arrangements; and
●
selecting compensation consultant, legal counsel or other adviser only
    after taking into consideration all factors relevant to that person's independence from management.
Nominating and Corporate Governance Committee
.
Our nominating and corporate governance committee consists of Messrs. Shaowei Zhang, Guangzhou Zhao, and Yuanlin Hu, and is chaired by
Mr. Shaowei Zhang.
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The nominating and corporate governance committee
assists the board in selecting individuals qualified to become our directors and in determining the composition of the board and its
committees. The nominating and corporate governance committee is responsible for, among other things:
●
recommending nominees to the board for election or re-election to the board, or for appointment
    to fill any vacancy on the board;
●
reviewing annually with the board the current composition of the board with regards to characteristics
    such as independence, age, skills, experience and availability of service to us;
●
selecting and recommending to the board the names of directors to serve as members of the audit
    committee and the compensation committee, as well as of the nominating and corporate governance committee itself;
●
developing and reviewing the corporate governance principles adopted by the board and advising
    the board with respect to significant developments in the law and practice of corporate governance and our compliance with such laws
    and practices; and
●
evaluating the performance and effectiveness of the board as a whole.
Terms of Directors and Officers
Our directors may be elected by a resolution
of our board of directors, or by an ordinary resolution of our shareholders, pursuant to our memorandum and articles of association.
Our directors are not subject to a term of office and hold office until such time as they are removed from office by ordinary resolution
of the shareholders. A director will cease to be a director if, among other things, the director (1) becomes bankrupt or makes any arrangement
or composition with his creditors; (2) dies or is found by our company to be or becomes of unsound mind, (3) resigns his office by notice
in writing to the company, (4) without special leave of absence from our board, is absent from three consecutive board meetings and our
board of directors resolve that his office be vacated; (5) is prohibited by law from being a director; or (6) is removed from office
pursuant to any other provision of our memorandum and articles of association. Our officers are elected by and serve at the discretion
of the board of directors.
Duties of Directors
Under Cayman Islands law, our directors owe to
us fiduciary duties, including a duty of loyalty, a duty to act honestly and a duty to act in what they consider in good faith to be
in our best interests. Our directors must also exercise their powers only for a proper purpose. Our directors also owe to our company
a duty to act with skill and care. It was previously considered that a director need not exhibit in the performance of his duties a greater
degree of skill than may reasonably be expected from a person of his knowledge and experience. However, English and Commonwealth courts
have moved towards an objective standard with regard to the required skill and care and these authorities are likely to be followed in
the Cayman Islands. In fulfilling their duty of care to us, our directors must ensure compliance with our memorandum and articles of
association, as amended and restated from time to time, and the class rights vested thereunder in the holders of the shares. Our company
may have the right to seek damages if a duty owed by our directors is breached. A shareholder may in certain limited exceptional circumstances
have the right to seek damages in our name if a duty owed by our directors is breached.
Our board of directors has all the powers necessary
for managing, and for directing and supervising, our business affairs. The functions and powers of our board of directors include, among
others:
●
convening shareholders' annual general meetings and reporting its work to shareholders at
    such meetings;
●
declaring dividends and distributions;
●
appointing officers and determining the term of office and its responsibilities of the officers;
●
exercising the borrowing powers of our company and mortgaging the property of our company; and
●
approving the transfer of shares in our company, including the registration of such shares in our
    share register.
Employment Agreements and Indemnification Agreements
We have entered into employment agreements with
our executive officers. Each of our executive officers is employed for a specified time period, which will be automatically extended
for successive one-year terms unless either party gives the other party a prior written notice to terminate employment. We may terminate
the employment for cause, at any time, without advance notice or remuneration, for certain acts of the executive officer, including conviction
or pleading of guilty to a felony, fraud, misappropriation or embezzlement, negligent or dishonest act to our detriment, misconduct or
failure to perform his or her duty, disability, or death. An executive officer may terminate his or her employment at any time with a
one-month prior written notice if there is a material and substantial reduction in such executive officer's existing authority
and responsibilities or at any time if the termination is approved by our board of directors.
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Each executive officer has agreed to hold, both
during and after the employment agreement expires, in strict confidence and not to use or disclose to anyone, any confidential information
of our company, except for the benefits of our company or to other employees of us who have a need to know such confidential information
in connection with our business. Each executive officer has also agreed to assign to us all his or her all inventions, improvements,
designs, original works of authorship, formulas, processes, compositions of matter, computer software programs, databases, mask works
and trade secrets.
Each executive officer has also agreed that,
during his or her term of employment and for a period of two years after terminating employment with us, such executive officer will
not, without our prior written consent, (1) approach our suppliers, clients, customers or contacts or other persons or entities introduced
to the executive officer in his or her capacity as a representative of us for the purpose of doing business with such persons or entities
that will harm our business relationships with these persons or entities; (2) assume employment with or provide services to any of our
competitors, or engage, whether as principal, partner, licensor or otherwise, any of our competitors, without our express consent; or
(3) seek directly or indirectly, to solicit the services of any of our employees who is employed by us on or after the date of the executive
officer's termination, or in the year preceding such termination, without our express consent.
In addition, we have entered into indemnification
agreements with our directors and executive officers, pursuant to which we will agree to indemnify our directors and executive officers
against certain liabilities and expenses incurred by such persons in connection with claims made by reason of their being such a director
or executive officer.
D. Employees
As of December 31, 2022, we had 1,816 full-time
employees for our continuing operations. The following table sets forth the breakdown of our employees for our continuing operations as
of December 31, 2022 by function.
Function
Number of
Employees
% of Total
Teachers
1,358
74.7
Administrative staff
290
16.0
Supporting staff
168
9.2
Total
1,816
100.0
Our administrative staff primarily comprise our
management and administrative personnel and principals. Our supporting staff primarily comprise personnel providing support and services
in connection with our students' campus life.
As required by PRC laws and regulations, we participate
in various employee social security plans for our employees that are administered by local governments, including housing, pension, medical
insurance and unemployment insurance. We believe we maintain a good working relationship with our employees.
E. Share Ownership
The following table sets forth information concerning
the beneficial ownership of our ordinary shares, as of March 31, 2023, for:
●
each of our directors and executive officers; and
●
each person known to us to beneficially own 5% or more of our ordinary shares.
The percentage of beneficial ownership in the
table below is calculated based on 86,838,700 ordinary shares, comprising 54,577,170 Class A ordinary shares and 32,261,530 Class B ordinary
shares outstanding as of March 31, 2023, but excludes the treasury shares and the ordinary shares reserved for issuance under our 2021
Share Incentive Plan.
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Beneficial ownership is determined in accordance
with the rules and regulations of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership
of that person, we have included shares that the person has the right to acquire within 60 days of March 31, 2023, including through
the exercise of any option, warrant or other right or the conversion of any other security. These shares, however, are not included in
the computation of the percentage ownership of any other person.
Ordinary shares beneficially owned
Class A
ordinary
shares
Class B
ordinary
shares
Total
ordinary
shares
on an
as-converted
basis
Percentage of
total
ordinary
shares on an
as-converted
basis
Percentage of
total voting
power***
Directors and Executive Officers**:
Shaowei Zhang
(1)
682,960
32,261,530
32,944,490
37.94
%
92.30
%
Tommy Zhou
—
—
—
—
—
Pengwei Luo
(2)
5,840,676
—
5,840,676
6.73
%
0.83
%
Guangzhou Zhao
—
—
—
—
—
Yuanlin Hu
—
—
—
—
—
Jianping Zhang
*
—
*
*
*
All Directors and Executive Officers as a Group
6,623,466
32,261,530
38,884,996
44.78
%
93.15
%
Principal Shareholders:
Visionsky Group Limited
(1)
—
27,769,020
27,769,020
31.98
%
79.36
%
Long-Spring Education Management Limited
(3)
7,054,570
—
7,054,570
8.12
%
1.01
%
Long-Spring Education International Limited
(4)
4,770,250
—
4,770,250
5.49
%
*
Minglin Wu
(5)
4,470,760
—
4,470,760
5.15
%
*
Brightenwit Group Limited
(1)
—
4,492,510
4,492,510
5.17
%
12.84
%
*
Aggregate number of shares accounts for less than 1% of our total ordinary shares on an as-converted basis
    outstanding as of the date of this annual report.
**
Except as indicated otherwise below, the business address of our directors
    and executive officers is No. 1-1, Tiyuan Road, Xishan District, Kunming, Yunnan Province 650228, the People's Republic
    of China.
***
For each person or group included in this column, percentage of total voting power represents voting
    power based on both Class A and Class B ordinary shares held by such person or group with respect to all of our outstanding Class
    A and Class B ordinary shares as a single class. Each holder of our Class A ordinary shares is entitled to one vote per share. Each
    holder of our Class B ordinary shares is entitled to 20 votes per share. Our Class B ordinary shares are convertible at any time
    by the holder into Class A ordinary shares on a one-for-one basis, while Class A ordinary shares are not convertible into Class B
    ordinary shares under any circumstances.
(1)
Represents (i) 27,769,020 Class
B ordinary shares directly held by Visionsky Group Limited, a British Virgin Islands company wholly owned by Mr. Shaowei Zhang;
(ii) 4,492,510 Class B ordinary shares directly held by Brightenwit Group Limited, a British Virgin Islands company wholly owned by Ms.
Yu Wu. Ms. Yu Wu is the spouse of Mr. Shaowei Zhang; (iii) 99,940 Class A ordinary shares directly held by Long-Spring Education
Management Limited, a British Virgin Islands company in which Mr. Shaowei Zhang has approximately 1.56% equity interest; (iv) 514,150
Class A ordinary shares directly held by Long-Spring Education Technology Limited, a British Virgin Islands company in which Mr. Shaowei
Zhang has approximately 24.64% equity interest; and (v) 68,870 Class A ordinary shares directly held by Long-Spring Education Consulting
Limited, a British Virgin Islands company in which Mr. Shaowei Zhang has approximately 23.08% equity interest. Mr. Shaowei
Zhang disclaims beneficial ownership of the ordinary shares held by Brightenwit Group Limited. Ms. Yu Wu disclaims beneficial ownership
of the ordinary shares held by Visionsky Group Limited. The registered office of Visionsky Group Limited, Brightenwit Group Limited,
Long-Spring Education Management Limited, Long-Spring Education Technology Limited and Long-Spring Education Consulting Limited is at
Craigmuir Chambers, Road Town, Tortola, VG 1110, British Virgin Islands.
(2)
Represents 5,840,676 Class A ordinary shares directly held by Spring River Greater China Fund,
    as reported in a Schedule 13G filed by them on April 29, 2021. Spring River Greater China Fund is a Cayman Islands company with the
    principal business office address at 12A1, OfficePlus@Mongkok, 998 Canton Road, Mongkok, Hong Kong.
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(3)
Represents 7,054,570 Class A ordinary
shares held by Long-Spring Education Management Limited. Long-Spring Education Management Limited is a British Virgin Islands company
wholly owned as to 1.56% by Mr. Shaowei Zhang (see footnote (1)) and certain non-management employees, including Kang Su (41.36%), Kai
Liu (16.71%), Yang Gui (10.20%), Bin Liu (9.49%), Chaomin Shi (9.49%), Shaodong Zhang (7.67%), Xuehua Zhang (1.84%), Hong Tan (0.71%)
and Baolong Song (0.71%), each of whose address is c/o Long-Spring Education Management Limited, Craigmuir Chambers, Road Town, Tortola,
VG 1110, British Virgin Islands. Each of the foregoing individuals may be deemed to have the voting and dispositive power over a portion
of the underlying ordinary shares in relation to his or her shareholding percentage in the entity.
(4)
Represents 4,770,250 Class A ordinary
shares held by Long-Spring Education International Limited. Long-Spring Education International Limited is a British Virgin Islands company
wholly owned by certain of our non-management employees, including Minglin Wu (90.85%), Kang Su (8.35%), Xiaoli Li (0.60%) and Qiong
Wang (0.20%), each of whose address is c/o Long-Spring Education International Limited, Craigmuir Chambers, Road Town, Tortola, VG 1110,
British Virgin Islands. Each of the foregoing individuals may be deemed to have the voting and dispositive power over a portion of the
underlying ordinary shares in relation to his or her shareholding percentage in the entity.
To our knowledge, as of March 31, 2023, a total
of 37,767,690 Class A ordinary shares are held by one record holder in the United States, which was The Bank of New York Mellon, the
depositary of the ADSs, representing approximately 43.5% of our total outstanding shares. None of our shareholders has informed us that
it is affiliated with a registered broker-dealer or is in the business of underwriting securities. We are not aware of any arrangement
that may, at a subsequent date, result in a change of control of our company.
F. Disclosure of a Registrant's Action to Recover Erroneously
Awarded Compensation
Not applicable.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. Major Shareholders
See "Item 6. Directors, Senior Management
and Employees—E. Share Ownership."
B. Related Party Transactions
Transactions with Certain Related Parties
Advances to/repayment from/expenses paid on behalf of Mr. Shaowei
Zhang, his family members or his affiliated entities
We, from time to time, provide short-term financing
to Mr. Shaowei Zhang, his family members or affiliated entities to support their business operations and working capital needs. After
considering the cash on hand and forecasted cash flows to fund our operations, we provided financing to these parties during the periods
presented. The financing was provided in the form of interest-free advances or expenses paid on their behalf. The financing does not
have a fixed term and is repayable upon demand. The related party companies have historically repaid advances and expenses upon demand.
In 2020, 2021 and 2022, we provided short-term financing to Mr. Shaowei Zhang or his affiliated entities and his family members, including
primarily the following:
●
Yunnan Huayiweiming Technology Co., Ltd.
●
Yunnan Long-Spring Education Technology Co., Ltd.
●
Kunming Chenggong Times Giant Tutorial School Co., Ltd.
●
Long-Spring Education Group
●
Yunnan Qidi Primary School
●
Beijing Tomorrow Future Plus Education Technology Co., Ltd.
●
Beijing Long-Spring Education Technology Group Co., Ltd.
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●
Yunnan Shaowei Education Information Consulting Co., Ltd.
●
Zunyi Huichuan District Long-Spring Jincheng Education Consulting Co., Ltd.
●
Mr. Shaodong Zhang
●
Lihua Family Education Technology (Beijing) Co., Ltd.
●
Chengdu First Carbon New Technology Co., Ltd.
●
Yunnan Three Three One Education Technology Co., Ltd.
●
Zunyi Huichuan Hengshi Education and Training School
●
Beijing Long-Spring International Education Technology Research
Institute
●
Kunming Xinxiaoling Human Resources Co., Ltd.
●
Mengzi Long-Spring Experimental Secondary School
●
Shaanxi Long-Spring Enterprise Management Consulting Partnership
(Limited Partnership)
●
Zunyi Huichuan Long-Spring Jincheng Education Consulting
Co., Ltd.
●
Zunyi Huichuan District Changshui Jincheng Education Consulting
Co., Ltd.
●
Campus Reserve Fund
As of December 31, 2020, 2021 and 2022, the remaining
balance of our financing to such related parties was RMB78.9 million, RMB11.7 million and RMB73.5 million, respectively.
Disposal of subsidiaries to Mr. Zhang's affiliated entities
In 2018, Yunnan Zhongchuang Education Tutorial
School sold certain of its business to Kunming Chenggong Times Giant Tutorial School Co., Ltd., an entity controlled by Mr. Shaowei Zhang,
at a consideration of RMB3.4 million. In 2018, Long-Spring Education sold its 100% equity interest in Beijing Long-Spring Education Technology
Co., Ltd. to Yunnan Long-Spring Education Technology Co., Ltd., an entity controlled by Mr. Shaowei Zhang, at a consideration of RMB0.7
million. In 2018, Long-Spring Education sold its 100% equity interest in Kunming Chenggong Times Giant Tutorial School Co., Ltd. to Yunnan
Long-Spring Education Technology Co., Ltd. at a consideration of nil. In June 2021, Yunnan Long-Spring Education Technology Co., Ltd.
sold its 100% equity interest in Kunming Chenggong Times Giant Tutorial School Co., Ltd., Wenshan Century Times Giant Tutorial School
Co., Ltd., and Kunming Wuhua District Zhuorui Cultural Training School Co., Ltd., all of which are entities controlled by Mr. Shaowei
Zhang, to Long-Spring Education at a consideration of RMB2.5 million, RMB12.5 million, RMB5.0 million, respectively. As of December 31,
2022, the remaining balance of the consideration amount was nil.
Advances to certain senior management
After considering the cash on hand and forecasted
cash flows to fund our operations, we provided financing in the form of interest-free advances to certain members of our senior management.
As of December 31, 2020, 2021 and 2022, the net remaining balance of our financing to such related parties was RMB2.1 million, RMB2.3
million and RMB9.1 million, respectively. These advances are secured either by credit or by their shares in the former parent or other
assets.
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Advances from/payment of advance from Mr. Zhang or his affiliated
entities
We, from time to time, receive short-term financing
from and receive payment from third parties on behalf of Mr. Shaowei Zhang or his affiliated entities and his family members to support
our business operations and working capital needs. The financing was provided in the form of interest-free loans. The advances and loans
do not have a fixed term and are repayable upon demand. We have historically repaid advances upon demand. In 2020, 2021 and 2022, we
have received short-term financing from and received payment from third parties on behalf of Mr. Shaowei Zhang or his affiliated entities
and his family members, including primarily the following:
●
Long-Spring Education Group
●
Yunnan Qidi Primary School
●
Yunnan Three Three One Education Technology Co., Ltd.
●
Mr. Shaodong Zhang
●
Chengdu Longquanyi District Hengshi Education Training School Co., Ltd.
●
Yunnan Long-Spring
                                            Education Technology Co., Ltd.
●
Yunnan Preparatory
                                            School for Studying Abroad
●
Beijing Long-Spring
                                            International Education Technology Research Institute
●
Beijing Tomorrow Future
                                            Plus Education Technology Co., Ltd.
●
Lihua Family Education
                                            Technology (Beijing) Co., Ltd.
●
Chengdu First Carbon New
                                            Technology Co., Ltd.
●
Campus Reserve Fund
As of December 31, 2020, 2021 and 2022, the remaining
balance of our advance loans from such related parties was RMB51.6 million, RMB17.9 million and RMB51.7 million, respectively.
Contractual Arrangements
See "Item 4. Information on the Company—C.
Organizational Structure—Our Contractual Arrangements."
Shareholders Agreement
In January 2021, we entered into a shareholders
agreement with certain holders of our ordinary shares, including Longwater Topco B.V., and our subsidiaries and affiliated entities.
The shareholders agreement provides certain special rights to Longwater Topco B.V., including right of first refusal and co-sale rights,
put option and drag-along rights, preemptive rights, and the right to appoint directors to our board of directors, and contains provisions
governing our board of directors and other corporate governance matters. The shareholders agreement (including the special rights thereunder)
was terminated in its entirety after our initial public offering, pursuant to a termination agreement that we concurrently signed with
the parties under the shareholders agreement.
Registration Rights Agreement
We granted certain registration rights to Longwater
Topco B.V. Set forth below is a description of the registration rights granted under the registration rights agreement.
Demand registration rights for registration
on Form F-1
. At any time or from time to time after six months following the closing of our initial public offering, holders of registrable
securities then outstanding have the right to demand that we file a registration statement of all registrable securities that the holders
request to be registered and included in such registration statement by written notice, provided that the anticipated aggregate gross
offering price pursuant to such demand registration shall be no less than US$5.0 million. Upon such request, we shall use our best efforts
to cause the registrable shares specified in the request to be registered and/or qualified for sale and distribution. We are obligated
to effect no more than three demand registrations on Form F-1.
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Demand registration rights for registration
on Form F-3.
If we qualify for registration on Form F-3, any registrable holder may make a written request to demand that we file
a registration statement on Form F-3, provided that the anticipated aggregate gross offering price pursuant to such registration shall
be no less than US$5.0 million. Upon such request, we shall use our best efforts to cause the registrable shares specified in the request
to be registered and/or qualified for sale and distribution by the registrable holder from time to time in accordance with the methods
of distribution elected by such registrable holder and set forth in the registration statement. We are obligated to consummate no more
than two registrations on Form F-3.
Piggyback registration rights
. If we propose
to file a registration statement for a public offering of our securities, we shall promptly, but in no event less than 20 days prior
to the proposed date of filing of such registration statement, give each registrable holder written notice of such registration. We shall
offer such registrable holders the opportunity to register under such registration statement or include in such offering such number
of registrable shares as the registrable holders may request in writing delivered to the us within 10 days after the date that our notice
has been delivered.
Expenses of registration
. We will generally
bear all registration expenses, other than underwriting discounts, selling commissions, expenses charged by the depositary bank, and
applicable transfer tax.
Termination of registration rights
. The
demand registration rights shall terminate with respect to a registrable holder upon the earlier of (1) the date on which such registrable
holder holds no registrable share, or (2) the date that is the fifth anniversary following the consummation of our initial public offering.
Employment Agreements and Indemnification Agreements
See "Item 6. Directors, Senior Management
and Employees—C. Board Practices—Employment Agreements and Indemnification Agreements."
Share Incentive Plans
See "Item 6. Directors, Senior Management
and Employees—B. Compensation—Share Incentive Plan."
C. Interests of Experts and Counsels
Not applicable.
ITEM 8. FINANCIAL INFORMATION
A. Consolidated Statements and Other Financial Information
We have appended consolidated financial statements
filed as part of this annual report.
Due to the effectiveness of the Implementation Rules, we have concluded
that we have lost control over the Affected Entities as from September 1, 2021, which primarily include the middle schools providing compulsory
education and the sponsor entities within China that are affected by the Implementation Rules. Consequently, we classified the operation
for the Affected Entities as discontinued operations. We have determined that, in substance, we had ceased to recognize revenues for all
activities related to the Affected Entities and had discontinued all business activities with such entities by September 1, 2021 except
for the continued provision of essential services to keep these schools in normal operations. In 2022, we had to discontinue some operations
due to regulatory changes and management decisions. Given such change, financial information for prior years was reclassified to conform
to the current year's presentation.
Legal and Other Proceedings
See "Item 4. Information on the Company—B. Business
Overview—Legal Proceedings."
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Dividend Policy
Our board of directors has complete discretion in
deciding the payment of any future dividends, subject to certain requirements of Cayman Islands law. In addition, our shareholders may
by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our board of directors. Under Cayman Islands
law, a Cayman Islands exempted company may pay a dividend out of either profit or share premium account, provided that in no circumstances
may a dividend be paid if this would result in the company being unable to pay its debts as they fall due in the ordinary course of business.
The declaration and payment of dividends will depend upon, among other things, our future operations and earnings, capital requirements
and surplus, our financial condition, contractual restrictions, general business conditions and other factors as our board of directors
may deem relevant. See "Item 10. Additional Information—B. Memorandum and Articles of Association."
We declared dividends of US$24.2 million and
paid such dividends, together with the previously declared but unpaid amount of RMB10.4 million, totaling US$25.7 million, to Longwater
Topco B.V. in the amount of US$7.5 million and to other shareholders in the amount of US$18.2 million in the first quarter of 2021.
We declared dividends of US$1.24 million, net of
10.0% withholding tax and paid such dividends to the holders of the our ordinary shares (including those represented by the ADSs) in October
2022.
We are a holding company incorporated in the Cayman
Islands. We may rely on dividends from our subsidiaries in China for our cash requirements, including any payment of dividends to our
shareholders. PRC regulations may restrict the ability of our PRC subsidiaries to pay dividends to us or of our subsidiaries in China
to pay cash dividend payments to us. See "Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—We
may rely on dividends paid by our PRC subsidiaries to fund cash and financing requirements. Any limitation on the ability of our PRC subsidiaries
to pay dividends to us could have a material adverse effect on our ability to conduct our business and to pay dividends to holders of
the ADSs and our ordinary shares."
If we pay any dividends on our ordinary shares,
we will pay those dividends which are payable in respect of the ordinary shares underlying the ADSs to the depositary, as the registered
holder of such ordinary shares, and the depositary then will pay such amounts to the ADS holders in proportion to the ordinary shares
underlying the ADSs held by such ADS holders, subject to the terms of the deposit agreement, including the fees and expenses payable thereunder.
See "Item 12. Description of Securities Other than Equity Securities—D. American Depositary Shares." Cash dividends
on our ordinary shares, if any, will be paid in U.S. dollars.
B. Significant Changes
Except as disclosed elsewhere in this annual
report, we have not experienced any significant changes since the date of our audited consolidated financial statements included in this
annual report.
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ITEM 9. THE OFFER AND LISTING
A. Offer and Listing Details
The ADSs (each representing three Class A ordinary shares) were listed
for trading on the NYSE under the symbol "FHS" from March 2021 to November 2022. On November 7, 2022, we were notified by
the NYSE that the staff of the NYSE Regulation has determined to commence proceedings to delist the ADSs. Trading in the ADSs was suspended
after the market close on the NYSE on November 7, 2022. On November 22, 2022, we were delisted from the NYSE when the staff of the New
York Stock Exchange LLC filed a Form 25 Notification of Delisting. The ADSs have since then been quoted on the OTC Pink Limited Information
under the symbol "FHSEY."
B. Plan of Distribution
Not applicable.
C. Markets
The ADSs are currently quoted on the OTC Pink Limited Information under
the symbol "FHSEY."
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 into this annual report our second
amended and restated memorandum and articles of association filed as Exhibit 1.1.
C. Material Contracts
Material contracts other than in the ordinary
course of business are described in "Item 4. Information on the Company" and "Item 7. Major Shareholders and Related
Party Transactions" or elsewhere in this annual report.
D. Exchange Controls
See "Item 4. Information on the Company—B.
Business Overview—Regulations—Regulations on Foreign Exchange in the PRC."
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E. Taxation
Cayman Islands Taxation
According to Maples and Calder (Hong Kong) LLP,
our Cayman Islands legal counsel, the Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income,
gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be
material to us levied by the government of the Cayman Islands except for stamp duties which may be applicable on instruments executed
in, or after execution brought within the jurisdiction of the Cayman Islands. The Cayman Islands is not party to any double tax treaties
applicable to payments to or by our company. There are no exchange control regulations or currency restrictions in the Cayman Islands.
Payments of dividends and capital in respect
of the shares will not be subject to taxation in the Cayman Islands and no withholding will be required on the payment of a dividend
or capital to any holder of the Shares, nor will gains derived from the disposal of the shares be subject to Cayman Islands income or
corporate tax.
No stamp duty is payable in respect of the issue
of the shares or on an instrument of transfer in respect of a share.
PRC Taxation
Under the PRC Enterprise Income Tax Law and its
implementation rules, an enterprise established under the laws of jurisdictions outside of the PRC with a "de facto management
body" within the PRC is considered a resident enterprise and will be subject to the enterprise income tax at the rate of 25% on
its global income. The implementation rules define the term "de facto management body" as the body that exercises full and
substantial control over and overall management of the business, productions, personnel, accounts and properties of an enterprise. In
April 2009, the SAT issued a circular, known as Circular 82, which provides certain specific criteria for determining whether the "de
facto management body" of a PRC-controlled enterprise that is incorporated offshore is located in China. Although this circular
only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals
or foreigners, the criteria set forth in the circular may reflect the SAT's general position on how the "de facto management
body" test should be applied in determining the tax resident status of all offshore enterprises. According to Circular 82, an offshore
incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of
having its "de facto management body" in China only if all of the following conditions are met: (1) the senior management
and core management departments in charge of daily operations are located mainly within China; (2) decisions relating to the enterprise's
financial and human resource matters are made or are subject to approval by organizations or personnel in China; (3) the enterprise's
primary assets, accounting books, company seals, and board and shareholder resolutions, are located or maintained in China; and (4) at
least 50% of voting board members or senior executives habitually reside in China.
We do not believe that our Cayman Islands holding
company meets all of the conditions above. Our Cayman Islands holding company is not a PRC resident enterprise for PRC tax purpose. As
a holding company, its key assets are its ownership interests in its subsidiaries, and its key assets are located, and its records (including
the resolutions of its board of directors and the resolutions of its shareholders) are maintained, outside the PRC. For the same reasons,
we believe our other entities outside of China are not PRC resident enterprises either. However, the tax resident status of an enterprise
is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term "de
facto management body." However, there can be no assurance that the PRC government will ultimately take a view that is consistent
with us.
Beijing Zhongwen Law Firm, our legal counsel
as to PRC law, has advised us that however, if the PRC tax authorities determine that our Cayman Islands holding company is a PRC resident
enterprise for enterprise income tax purposes, we may be required to withhold a 10% withholding tax from dividends we pay to our shareholders
that are non-resident enterprises, including the holders of the ADSs. In addition, non-resident enterprise shareholders (including the
ADS holders) may be subject to a 10% PRC tax on gains realized on the sale or other disposition of ADSs or ordinary shares, if such income
is treated as sourced from within the PRC. It is unclear whether our non-PRC individual shareholders (including the ADS holders) would
be subject to any PRC tax on dividends or gains obtained by such non-PRC individual shareholders in the event we are determined to be
a PRC resident enterprise. If any PRC tax were to apply to such dividends or gains, it would generally apply at a rate of 20% unless
a reduced rate is available under an applicable tax treaty. However, it is also unclear whether non-PRC shareholders of our Cayman Islands
holding company would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event
that our Cayman Islands holding company is treated as a PRC resident enterprise.
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Provided that our Cayman Islands holding company
is not deemed to be a PRC resident enterprise, holders of the ADSs and ordinary shares who are not PRC residents will not be subject
to PRC income tax on dividends distributed by us or gains realized from the sale or other disposition of our shares or ADSs. However,
under SAT Circular 7, where a non-resident enterprise conducts an "indirect transfer" by transferring taxable assets, including,
in particular, equity interests in a PRC resident enterprise, indirectly by disposing of the equity interests of an overseas holding
company, the non-resident enterprise, being the transferor, or the transferee or the PRC entity which directly owned such taxable assets
may report to the relevant tax authority such indirect transfer. Using a "substance over form" principle, the PRC tax authority
may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose
of reducing, avoiding or deferring PRC tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income
tax, and the transferor obligated to withhold the applicable taxes, currently at a rate of 10% for the transfer of equity interests in
a PRC resident enterprise. We and our non-PRC resident investors may be at risk of being required to file a return and being taxed under
SAT Circular 7, and we may be required to expend valuable resources to comply with SAT Circular 7, or to establish that we should not
be taxed under this circular. See "Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—If
we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences
to us and our non-PRC shareholders or the ADS holders."
U.S. Federal Income Taxation Considerations
The following discussion is a summary of U.S.
federal income tax considerations relating to the ownership and disposition of the ADSs or ordinary shares by a U.S. Holder, as defined
below, that holds the ADSs or ordinary shares as "capital assets" (generally, as property held for investment) under the U.S.
Internal Revenue Code of 1986, as amended (the Code").
This discussion is based upon existing U.S. federal
income tax law, which is subject to differing interpretations or change, possibly with retroactive effect. No ruling has been sought
from the Internal Revenue Service (the "IRS"), with respect to any U.S. federal income tax consequences described below,
and there can be no assurance that the IRS or a court will not take a contrary position.
This discussion does not address all aspects
of U.S. federal income taxation that may be important to particular investors in light of their individual circumstances, including investors
subject to special tax rules, including:
●
banks and other financial institutions;
●
insurance companies;
●
regulated investment companies;
●
real estate investment trusts;
●
dealers
or traders in securities;
●
U.S. expatriates and certain former citizens or residents of the United States;
●
traders in securities or other persons that elect mark-to-market treatment;
●
partnerships or other pass-through entities and their partners or investors;
●
tax-exempt organizations (including private foundations and pension funds);
●
investors that own (directly, indirectly, or constructively) 10% or more of our stock by vote or
    value;
investors that hold their ADSs or ordinary shares as part of a
straddle, hedge, conversion, constructive sale or other integrated transaction;
●
investors who own stock in an individual retirement or other tax-deferred account;
●
investors that have a functional currency other than the U.S. dollar; or
●
investors required to accelerate the recognition of any item of gross income with respect to the ADSs or Class A ordinary shares as a result of such income being recognized in an "applicable financial statement" (as defined in the Code).
In addition, this discussion does not address
any U.S. state, local, alternative minimum tax, or non-U.S. tax considerations, or the additional Medicare tax on net investment income.
Each potential investor is urged to consult its tax advisor regarding the U.S. federal, state, local and non-U.S. income and other tax
considerations associated with an investment in our ADSs or ordinary shares.
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General
For purposes of this discussion, a "U.S.
Holder" is a beneficial owner of the ADSs or ordinary shares that is, for U.S. federal income tax purposes, (1) an individual who
is a citizen or resident of the United States, (2) a corporation (or other entity treated as a corporation for U.S. federal income tax
purposes) created in, or organized under the laws of, the United States or any state thereof or the District of Columbia, (3) an estate
the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source, or (4) a trust (a) the
administration of which is subject to the primary supervision of a U.S. court and which has one or more U.S. persons who have the authority
to control all substantial decisions of the trust or (b) that has otherwise elected to be treated as a United States person under the
Code.
If a partnership (or other entity or arrangement
treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of the ADSs or ordinary shares, the tax treatment
of a partner in the partnership will depend upon the status of the partner and the activities of the partnership. Partnerships and partners
of a partnership holding the ADSs or ordinary shares are urged to consult their tax advisors regarding an investment in the ADSs or ordinary
shares.
For U.S. federal income tax purposes, a U.S. Holder
of ADSs will generally be treated as the beneficial owner of the underlying shares represented by the ADSs.
Passive Foreign Investment Company Considerations
A non-U.S. corporation, such as our company, will
be classified as a "passive foreign investment company," or PFIC, for U.S. federal income tax purposes, if, in the case of
any particular taxable year, either (1) 75% or more of its gross income for such taxable year consists of certain types of "passive"
income or (2) 50% or more of the value of its assets (generally based on an average of the quarterly values of the assets) during such
taxable year is attributable to assets that produce or are held for the production of passive income. For this purpose, cash and cash
equivalents are categorized as a passive asset and the company's unbooked intangibles associated with active business activities
may generally be classified as non-passive assets. Passive income generally includes, among other things, dividends, interest, rents,
royalties, and gains from the disposition of passive assets. We will be treated as owning our proportionate share of the assets and earning
our proportionate share of the income of any other non-U.S. corporation in which we own, directly or indirectly, 25% or more (by value)
of the stock. Although the law in this regard is unclear, we treat our affiliated entities as being beneficially owned by us for U.S.
federal income tax purposes because we control their management decisions, we are entitled to substantially all of the economic benefits
associated with these entities, and, as a result, we consolidate their results of operations in our U.S. GAAP financial statements.
Assuming that we are the owner of our affiliated
entities for U.S. federal income tax purposes, and based upon the asset and income composition for our fiscal year 2022, we do not believe
that we were a PFIC for our taxable year ended December 31, 2022. However, even if we were not a PFIC for our 2022 taxable year, changes
in the nature of our income or assets, or fluctuations in the market price of our ADSs, may cause us to become a PFIC for the current
or future taxable years. If the market price of our ADSs continues to decline or does not increase, we may be classified as a PFIC for
the current or future taxable years because the value of our assets for purposes of the asset test, including the value of our goodwill
and other unbooked intangibles, may be determined by reference to the market price of our ADSs, which is volatile and likely will continue
to be volatile. In addition, if it were determined that we are not the beneficial owner of our affiliated entities for U.S. federal income
tax purposes, we would be treated as a PFIC for our current taxable year ending December 31, 2023 and in future taxable years.
Because there are uncertainties in the application of the relevant
rules and PFIC status is a factual determination made annually after the close of each fiscal year, there can be no assurance that we
will not be a PFIC for the current fiscal year ending December 31, 2023 or any future fiscal year or that the IRS will not take a contrary
position. If we were classified as a PFIC for any year during which a U.S. Holder held the ADSs or ordinary shares, we generally would
continue to be treated as a PFIC for all succeeding years during which such U.S. Holder held the ADSs or ordinary shares.
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The discussion below under "—Dividends"
and "—Sale or other disposition of ADSs or ordinary shares" is written on the basis that we will not be classified
as a PFIC for U.S. federal income tax purposes. The U.S. federal income tax rules that apply if we are classified as a PFIC for the current
taxable year or any subsequent taxable year are discussed below under "—Passive foreign investment company rules."
Dividends
Subject to the PFIC rules described below, any
cash distributions (including constructive distributions and the amount of any PRC tax withheld) paid on the ADSs or ordinary shares
out of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles, will generally be includible
in the gross income of a U.S. Holder as dividend income on the day actually or constructively received by the U.S. Holder, in the case
of ordinary shares, or by the depositary bank, in the case of ADSs. Because we do not intend to determine our earnings and profits on
the basis of U.S. federal income tax principles, any distribution will generally be treated as a "dividend" for U.S. federal
income tax purposes. Under current law, a non-corporate recipient of a dividend from a "qualified foreign corporation" will
generally be subject to tax on the dividend income at the lower applicable net capital gains rate rather than the marginal tax rates
generally applicable to ordinary income provided that certain holding period and other requirements are met.
A non-U.S. corporation (other than a corporation
that is classified as a PFIC for the taxable year in which the dividend is paid or the preceding taxable year) will generally be considered
to be a qualified foreign corporation (1) if it is eligible for the benefits of a comprehensive tax treaty with the United States which
the Secretary of Treasury of the United States determines is satisfactory for purposes of this provision and which includes an exchange
of information program, or (2) with respect to any dividend it pays on stock (or ADSs in respect of such stock) which is tradable on an
established securities market in the United States. The ADSs are currently quoted and tradeable on the OTC market, which we do not believe
is considered to be an established securities market. Since we do not expect that our ADSs or ordinary shares will be listed on established
securities markets, we do not expect either our ADSs or our ordinary shares to meet the conditions required for the reduced tax rate.
In the event we are deemed to be a PRC resident enterprise under the EIT Law, we may be eligible for the benefits of the Agreement Between
the Government of the United States of America and the Government of the People's Republic of China for the Avoidance of Double
Taxation and the Prevention of Tax Evasion with Respect to Taxes on Income, or the U.S.-PRC income tax treaty (which the Secretary of
the Treasury of the United States has determined is satisfactory for this purpose and includes an exchange of information program), in
which case we would be treated as a qualified foreign corporation with respect to dividends paid on our ordinary shares or ADSs. U.S.
Holders are urged to consult their tax advisors regarding the availability of any potential reduced tax rate on dividends in their particular
circumstances. Dividends received on the ADSs or ordinary shares will not be eligible for the dividends received deduction allowed to
corporations.
For U.S. foreign tax credit purposes, dividends
paid on the ADSs or ordinary shares will generally be treated as income from foreign sources and will generally constitute passive category
income. In the event that we are deemed to be a PRC resident enterprise under the EIT Law, a U.S. Holder may be subject to PRC withholding
taxes on dividends paid, if any, on the ADSs or ordinary shares. A U.S. Holder may be eligible, subject to a number of complex limitations,
to claim a foreign tax credit in respect of any foreign withholding taxes imposed on dividends received on the ADSs or ordinary shares.
A U.S. Holder who does not elect to claim a foreign tax credit for foreign tax withheld may instead claim a deduction for U.S. federal
income tax purposes in respect of such withholding, but only for a taxable year in which such U.S. Holder elects to do so for all creditable
foreign income taxes. The rules governing the foreign tax credit are complex. U.S. Holders are urged to consult their tax advisors regarding
the availability of the foreign tax credit under their particular circumstances.
Sale or Other Taxable Disposition of ADSs or ordinary shares
Subject to the PFIC rules discussed below, a
U.S. Holder will generally recognize capital gain or loss, if any, upon the sale or other disposition of ADSs or ordinary shares in an
amount equal to the difference between the amount realized upon the disposition and the U.S. Holder's adjusted tax basis in such
ADSs or ordinary shares. Any capital gain or loss will be long-term gain or loss if the ADSs or ordinary shares have been held for more
than one year and will generally be U.S. source gain or loss for U.S. foreign tax credit purposes. Long-term capital gains of non-corporate
taxpayers are currently eligible for reduced rates of taxation. In the event that we are treated as a PRC resident enterprise under the
EIT Law, and gain from the disposition of the ADSs or ordinary shares is subject to tax in the PRC, such gain may be treated as PRC source
gain for foreign tax credit purposes under the U.S.-PRC income tax treaty. The deductibility of a capital loss may be subject to limitations.
U.S. Holders are urged to consult their tax advisors regarding the tax consequences if a foreign tax is imposed on a disposition of the
ADSs or ordinary shares, including the availability of the foreign tax credit under their particular circumstances.
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Passive Foreign Investment Company Rules
If we are classified as a PFIC for any taxable
year during which a U.S. Holder holds the ADSs or ordinary shares, unless the U.S. Holder is able to make a "mark-to-market"
election (as described below), the U.S. Holder will, except as discussed below, be subject to special tax rules that have a penalizing
effect, regardless of whether we remain a PFIC, on (1) any excess distribution that we make to the U.S. Holder (which generally means
any distribution paid during a taxable year to a U.S. Holder that is greater than 125% of the average annual distributions paid in the
three preceding taxable years or, if shorter, the U.S. Holder's holding period for the ADSs or ordinary shares) and (2) any gain
realized on the sale or other disposition, including, under certain circumstances, a pledge, of ADSs or ordinary shares. Under the PFIC
rules:
●
the excess distribution and/or gain will be allocated ratably over the U.S. Holder's holding
    period for the ADSs or ordinary shares;
●
the amount of the excess distribution or gain allocated to the taxable year of the distribution
    or disposition and any taxable years in the U.S. Holder's holding period prior to the first taxable year in which we are classified
    as a PFIC, or a pre-PFIC year, will be taxable as ordinary income; and
●
the amount of the excess distribution or gain allocated to each taxable year other than the taxable
    year of the distribution or disposition or a pre-PFIC year, will be subject to tax at the highest tax rate in effect applicable to
    the individuals or corporations, and the interest charge generally applicable to underpayments of tax will be imposed on the resulting
    tax attributable to each such year.
If we are a PFIC for any taxable year during
which a U.S. Holder holds the ADSs or ordinary shares and any of our non-U.S. subsidiaries is also a PFIC, such U.S. Holder would be
treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC for purposes of the application of these rules.
Each U.S. Holder is advised to consult its tax advisors regarding the application of the PFIC rules to any of our subsidiaries.
If we are a PFIC for any fiscal year during which
a U.S. Holder holds the ADSs or ordinary shares, we will continue to be treated as a PFIC with respect to such U.S. Holder for all succeeding
years during which the U.S. Holder holds the ADSs or ordinary shares, unless we were to cease to be a PFIC and the U.S. Holder makes
a "deemed sale" election with respect to the ADSs or ordinary shares. If such election is made, the U.S. Holder will be deemed
to have sold the ADSs or ordinary shares it holds at their fair market value and any gain from such deemed sale would be subject to the
rules described in the preceding two paragraphs. After the deemed sale election, so long as we do not become a PFIC in a subsequent fiscal
year, the ADSs or ordinary shares with respect to which such election was made will not be treated as shares in a PFIC and, as a result,
the U.S. Holder will not be subject to the rules described above with respect to any "excess distribution" the U.S. Holder
receives from us or any gain from an actual sale or other disposition of the ADSs or ordinary shares. Each U.S. Holder is strongly urged
to consult its tax advisors as to the possibility and consequences of making a deemed sale election if we are and then cease to be a
PFIC and such an election becomes available to the U.S. Holder.
As an alternative to the foregoing rules, if the
ADSs were "regularly traded" on a "qualified exchange," as defined in applicable Treasury Regulations, a U.S.
Holder could make a mark-to-market election that would result in tax treatment different from the general tax treatment for PFICs described
in the preceding paragraph. However, because the prices of our ADSs are currently quoted on the OTC Pink Limited Information system, we
do not believe mark-to-market treatment of the ADSs is available for as long as the ADSs continue to be delisted from, or not regularly
traded on, the NYSE or any other qualified stock exchange. U.S. Holders that made (or wish to make) a mark-to-market election with respect
to a taxable year for which the election may be available should consult their tax advisers regarding the availability and advisability
of making the election in their particular circumstances and the effect the election would have on their income inclusion with respect
to, and the tax basis in, their ADSs.
If a mark-to-market election is able to be made
and is made, the U.S. Holder will generally (1) include as ordinary income for each taxable year that we are a PFIC the excess, if any,
of the fair market value of ADSs held at the end of the taxable year over the adjusted tax basis of such ADSs and (2) deduct as an ordinary
loss the excess, if any, of the adjusted tax basis of the ADSs over the fair market value of such ADSs held at the end of the taxable
year, but only to the extent of the net amount previously included in income as a result of the mark-to-market election. The U.S. Holder's
adjusted tax basis in the ADSs would be adjusted to reflect any income or loss resulting from the mark-to-market election. If a U.S. Holder
makes an effective mark-to-market election, in each year that we are a PFIC any gain recognized upon the sale or other disposition of
the ADSs will be treated as ordinary income and loss will be treated as ordinary loss, but only to the extent of the net amount previously
included in income as a result of the mark-to-market election. Because our ordinary shares are not listed on a stock exchange, U.S. Holders
will not be able to make a mark-to-market election with respect to our ordinary shares.
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If a U.S. Holder makes a mark-to-market election
in respect of a corporation classified as a PFIC and such corporation ceases to be classified as a PFIC, the U.S. Holder will not be
required to take into account the mark-to-market gain or loss described above during any period that such corporation is not classified
as a PFIC.
Because a mark-to-market election cannot be made
for any lower-tier PFICs that we may own, a U.S. Holder who makes a mark-to-market election with respect to the ADSs may continue to be
subject to the general PFIC rules with respect to such U.S. Holder's indirect interest in any of our non-U.S. subsidiaries or other
corporate entities in which we own equity interests that is classified as a PFIC for U.S. federal income tax purposes.
We do not intend to provide information necessary
for U.S. Holders to make qualified electing fund elections, which, if available, would result in tax treatment different from the general
tax treatment for PFICs described above.
As discussed above under "—Dividends,"
dividends that we pay on the ADSs or ordinary shares will not be eligible for the reduced tax rate that applies to qualified dividend
income if we are classified as a PFIC for the taxable year in which the dividend is paid or the preceding taxable year. In addition,
if a U.S. Holder owns the ADSs or ordinary shares during any taxable year that we are a PFIC, the U.S. Holder must file an annual information
return with the IRS. Each U.S. Holder is urged to consult its tax advisor concerning the U.S. federal income tax consequences of holding,
and disposing ADSs or ordinary shares if we are or become a PFIC, including the possibility of making a mark-to-market election and the
unavailability of the qualified electing fund election.
Information reporting
Certain U.S. Holders may be required to report
information to the IRS relating to an interest held by such holder in "specified foreign financial assets" (as defined in
the Code), including shares issued by a non-U.S. corporation, for any year in which the aggregate value of all specified foreign financial
assets exceeds US$50,000 (or a higher dollar amount prescribed by the IRS), subject to certain exceptions (including an exception for
shares held in custodial accounts maintained with a U.S. financial institution). These rules also impose penalties if a U.S. Holder is
required to submit such information to the IRS and fails to do so. U.S. Holders are urged to consult their own tax advisors regarding
foreign financial asset reporting obligations and their possible application to the holding of our ordinary shares or ADSs.
In addition, U.S. Holders may be subject to information
reporting to the IRS and backup withholding with respect to dividends on and proceeds from the sale or other disposition of the ADSs
or ordinary shares. Information reporting will apply to payments of dividends on, and to proceeds from the sale or other disposition
of, ordinary shares or ADSs by a paying agent within the United States to a U.S. Holder, other than U.S. Holders that are exempt from
information reporting and properly certify their exemption. A paying agent within the United States will be required to withhold at the
applicable statutory rate, currently 24%, in respect of any payments of dividends on, and the proceeds from the disposition of, ordinary
shares or ADSs within the United States to a U.S. Holder (other than U.S. Holders that are exempt from backup withholding and properly
certify their exemption) if the U.S. Holder fails to furnish its correct taxpayer identification number or otherwise fails to comply
with applicable backup withholding requirements. U.S. Holders who are required to establish their exempt status generally must provide
a properly completed IRS Form W-9.
Backup withholding is not an additional tax.
Amounts withheld as backup withholding may be credited against a U.S. Holder's U.S. federal income tax liability. A U.S. Holder
generally may obtain a refund of any amounts withheld under the backup withholding rules by filing the appropriate claim for refund with
the IRS in a timely manner and furnishing any required information. Each U.S. Holder is advised to consult with its tax advisor regarding
the application of the U.S. information reporting rules to its particular circumstances.
F. Dividends and Paying Agents
Not applicable.
G. Statement by Experts
Not applicable.
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H. Documents on display
We have previously filed with the SEC our registration
statement on Form F-1 (File No. 333-252076), as amended, and a prospectus under the Securities Act with respect to our ordinary shares
represented by the ADSs.
We are subject to the periodic reporting and
other informational requirements of the Exchange Act. Under the Exchange Act, we are required to file reports and other information with
the SEC. Specifically, we are required to file annually a Form 20-F within four months after the end of each fiscal year. Copies of reports
and other information, when so filed, may be inspected without charge and may be obtained at prescribed rates at the public reference
facilities maintained by the SEC at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. The public may obtain information regarding
the Washington, D.C. Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a web site at
www.sec.gov
that contains reports, proxy and information statements, and other information regarding registrants that make electronic filings
with the SEC using its EDGAR system.
As a foreign private issuer, we are exempt from
the rules of the Exchange Act prescribing the furnishing and content of quarterly reports and proxy statements, and our executive officers,
directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16
of the Exchange Act. In addition, we are not required under the Exchange Act to file periodic reports and financial statements with the
SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act.
We will furnish The Bank of New York Mellon,
the depositary, with our annual reports, which include a review of operations and annual audited consolidated financial statements prepared
in conformity with U.S. GAAP, and all notices of shareholders' meeting and other reports and communications that are made generally
available to our shareholders. The depositary makes such notices, reports and communications available to holders of ADSs and, upon our
request, mails to all record holders of ADSs the information contained in any notice of a shareholders' meeting received by the
depositary from us.
I. Subsidiary Information
Not applicable.
J. Annual Report to Security Holders
Not applicable.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
Foreign Exchange Risk
All of our net revenues and expenses are denominated
in Renminbi. We do not believe that we currently have any significant direct foreign exchange risk and have not used any derivative financial
instruments to hedge exposure to such risk. Although our exposure to foreign exchange risks should be limited in general, the value of
your investment in the ADSs will be affected by the exchange rate between U.S. dollar and Renminbi because the value of our business
is effectively denominated in Renminbi, while the ADSs will be traded in U.S. dollars.
The value of the Renminbi against the U.S. dollar
and other currencies is affected by changes in China's political and economic conditions and by China's foreign exchange
policies, among other things. In July 2005, the PRC government changed its decades-old policy of pegging the value of the Renminbi to
the U.S. dollar, and the Renminbi appreciated more than 20% against the U.S. dollar over the following three years. Between July 2008
and June 2010, this appreciation subsided and the exchange rate between the Renminbi and the U.S. dollar remained within a narrow band.
Since June 2010, the Renminbi has fluctuated against the U.S. dollar, at times significantly and unpredictably. While appreciating approximately
by 7% against the U.S. dollar in 2017, the Renminbi in 2018 depreciated approximately by 5% against the U.S. dollar. Since October 1,
2016, the Renminbi has joined the International Monetary Fund (IMF)'s basket of currencies that make up the Special Drawing Right
(SDR), along with the U.S. dollar, the Euro, the Japanese yen and the British pound. With the development of the foreign exchange market
and progress towards interest rate liberalization and Renminbi internationalization, the PRC government may in the future announce further
changes to the exchange rate system and there is no guarantee that the Renminbi will not appreciate or depreciate significantly in value
against the U.S. dollar in the future. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange
rate between the Renminbi and the U.S. dollar in the future.
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To the extent that we need to convert U.S. dollars
into Renminbi for our operations, appreciation of Renminbi against the U.S. dollar would reduce the Renminbi amount we receive from the
conversion. Conversely, if we decide to convert Renminbi into U.S. dollars for the purpose of making payments for dividends on our ordinary
shares or ADSs, servicing our outstanding debt, or for other business purposes, appreciation of the U.S. dollar against the Renminbi
would reduce the U.S. dollar amounts available to us.
In addition, very limited hedging options are
available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions in
an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future,
the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure or at all.
In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert Renminbi
into foreign currency.
Credit Risk
Our credit risk is primarily attributable to
cash in banks, cash and term deposits held at a related party finance entity, receivables due from related parties.
We had cash held by third-party financial institutions
located in the PRC, and Hong Kong SAR. The bank deposits with financial institutions in the PRC are insured by the government authority
for up to RMB500,000. The bank deposits with financial institutions in the Hong Kong SAR are insured by the government authority for up
to HK$500,000. We have not experienced any losses in uninsured bank deposits and do not believe that it is exposed to any significant
risks on cash held in bank accounts. To limit exposure to credit risk, we primarily place bank deposits with large financial institutions
in the PRC, and Hong Kong SAR with high-credit rating and quality.
Liquidity Risk
Liquidity risk is the risk that we will encounter
difficulty in meeting the obligations associated with our financial liabilities that are settled by delivering cash or other financial
assets. Our approach to managing liquidity is to ensure, as far as possible, that we will always have sufficient liquidity to meet our
liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to our reputation.
Concentration of Credit Risk
Our credit risk arises from cash, other current
assets, other non-current assets and accounts receivable. The carrying amounts of these financial instruments represent the maximum amount
of loss due to credit risk. We expect that there is no significant credit risk associated with the cash which are held by reputable financial
institutions in the jurisdictions where our company, subsidiaries and affiliated entities are located. We believe that we are not exposed
to unusual risks as these financial institutions have high credit quality. We have no significant concentration of credit risk with respect
to other receivables. We conduct credit evaluations on our customers prior to delivery of goods or services. The assessment of customer
creditworthiness is primarily based on historical collection records, research of publicly available information and customer on-site
visits. Based on this analysis, we determine what credit terms, if any, to offer to each customer individually. If the assessment indicates
a likelihood of collection risk, we will not deliver the services or sell the products to the customer or require the customer to pay
cash or to make significant down payments. Historically, credit losses on accounts receivable have been insignificant.
As of December 31, 2022, substantially all of
our cash and cash equivalents and term deposits were deposited with financial institutions with high-credit ratings and quality.
Interest Rate Risk
Our exposure to interest rate risk primarily
relates to the interest income generated by excess cash, which is mostly held in interest-bearing bank deposits and wealth management
products. Interest-earning instruments carry a degree of interest rate risk. We have not been exposed to material risks due to changes
in interest rates, and we have not used any derivative financial instruments to manage our interest risk exposure.
Investments in both fixed rate and floating rate
interest earning instruments carry a degree of interest rate risk. Fixed rate securities may have their fair market value adversely impacted
due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall.
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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
Fees and Expenses the ADS Holders May Have to Pay
The Bank of New York Mellon, as depositary, will
register and deliver American Depositary Shares, also referred to as ADSs. Each ADS will represent three Class A ordinary shares (or
a right to receive Class A ordinary shares) deposited with The Hongkong and Shanghai Banking Corporation Limited, as custodian for the
depositary in Hong Kong. Each ADS will also represent any other securities, cash or other property that may be held by the depositary.
The deposited shares together with any other securities, cash or other property held by the depositary are referred to as the deposited
securities. The depositary's office at which the ADSs will be administered and its principal executive office are located at 240
Greenwich Street, New York, New York 10286.
Persons depositing or withdrawing shares
    or ADS holders must pay:
For:
US$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)
Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other
    property
Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates
US$0.05 (or less) per ADS
Any cash distribution to ADS holders
A fee equivalent to the fee that would be payable if securities distributed to you had been shares
    and the shares had been deposited for issuance of ADSs
Distribution of securities distributed to holders of deposited securities (including rights) that
    are distributed by the depositary to ADS holders
US$0.05 (or less) per ADS per calendar year
Depositary services
Registration or transfer fees
Transfer and registration of shares on our share register to or from the name of the depositary
    or its agent when you deposit or withdraw shares
Expenses of the depositary
Cable (including SWIFT) and facsimile transmissions (when expressly provided in the deposit agreement)
Converting foreign currency to U.S. dollars
Taxes and other governmental charges the depositary or the custodian has to pay on any ADSs or
    shares underlying ADSs, such as stock transfer taxes, stamp duty or withholding taxes
As necessary
Any charges incurred by the depositary or its agents for servicing the deposited securities
As necessary
Fees and Other Payments Made by the Depositary to Us
From time to time, the depositary may make payments
to us to reimburse us for costs and expenses generally arising out of establishment and maintenance of the ADS program, waive fees and
expenses for services provided to us by the depositary or share revenue from the fees collected from ADS holders. As of the date of this
annual report, we have not received any cash payment from The Bank of New York Mellon, the depositary for our ADS program.
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PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
Not applicable.
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"
for a description of the rights of shareholders, which remain unchanged.
Use of Proceeds
The following "Use of Proceeds" information
relates to the registration statement on Form F-1 (File No. 333-252076), as amended, in relation to our initial public offering of 7,500,000
ADSs representing 22,500,000 Class A ordinary shares, at an initial offering price of US$10.00 per ADS. The registration statement was
declared effective by the SEC on March 10, 2021. Our initial public offering was closed on March 15, 2021. The Benchmark Company LLC,
Valuable Capital Limited and TFI Securities and Futures Limited were the representatives of the underwriters for our initial public offering.
We received net proceeds of approximately US$42.4
million from our initial public offering, after deducting underwriting discounts and commissions and offering expenses paid by us. Our
expenses incurred and paid to others in connection with the issuance and distribution of the ADSs in our offering totaled US$4.4 million,
which included US$4.2 million for underwriting discounts and commissions and US$0.2 million for other expenses. None of the transaction
expenses included payments to directors or officers of our company or their associates, persons owning more than 10% or more of our equity
securities or our affiliates. None of the net proceeds we received from the initial public offering were paid, directly or indirectly,
to any of our directors or officers or their associates, persons owning 10% or more of our equity securities or our affiliates.
As of the date of this annual report, we have used all of
the net proceeds from our initial public offering for purposes disclosed in our registration statement on Form F-1.
ITEM 15. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our management, with the participation of our
chief executive officer and our chief financial officer, has performed an evaluation of the effectiveness of our disclosure controls and
procedures, as defined in Rule 13a-15(e) under the Exchange Act, as of the end of the period covered by this annual report, as required
by Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our management has concluded that, as of December 31, 2022, our
disclosure controls and procedures were not effective as our management has identified a material weakness which is detailed under the
section entitled "—Internal Control Over Financial Reporting."
Management's Annual Report on Internal Control over Financial
Reporting
Our management is responsible for establishing
and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. Our management
evaluated the effectiveness of our internal control over financial reporting, as required by Rule 13a-15(c) of the Exchange Act, based
on criteria established in the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework). Based on this evaluation, our management has concluded that our internal control over financial reporting
was not effective as of December 31, 2022 due to the existence of a material weakness, as described below.
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Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness
of our internal control over financial reporting to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.
A material weakness is a deficiency, or a combination
of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement
of the Company's financial statements will not be prevented or detected on a timely basis. Our material weakness is that we did
not have sufficient financial reporting personnel with appropriate knowledge, experience and training of U.S. GAAP and SEC financial reporting
requirements to properly address complex U.S. GAAP accounting issues and prepare and review financial statements and related disclosures
in accordance with U.S. GAAP and reporting requirements set forth by the SEC.
Notwithstanding the identified material weakness,
management, including our chief executive officer and acting chief financial officer, believes the consolidated financial statements
included in this annual report on Form 20-F present fairly, in all material respects, our financial condition, results of operations
and cash flows in conformity with U.S. GAAP.
Attestation Report of the Registered Public Accounting Firm
This annual report on Form 20-F does not include
an attestation report of our registered public accounting firm due to rules of the SEC where domestic and foreign registrants that are
"emerging growth companies" which we are, are not required to provide the auditor attestation report.
Changes in Internal Control Over Financial Reporting
In the course of auditing our consolidated financial
statements as of and for the years ended December 31, 2020, 2021 and 2022, we and our independent registered public accounting firm identified
one material weakness in our internal control over financial reporting as of December 31, 2022. As defined in the standards established
by the PCAOB, a "material weakness" is a deficiency, or a combination of deficiencies, in internal control, such that there
is a reasonable possibility that a material misstatement of our company's annual or interim financial statements will not be prevented
or detected on a timely basis.
The material weakness that has been identified
relates to our lack of sufficient number of financial reporting personnel with appropriate knowledge, experience and training of U.S.
GAAP and SEC financial reporting requirements to properly address complex U.S. GAAP accounting issues and prepare and review financial
statements and related disclosures in accordance with U.S. GAAP and reporting requirements set forth by the SEC. Neither we nor our independent
registered public accounting firm undertook a comprehensive assessment of our internal control for purposes of identifying and reporting
material weaknesses and other control deficiencies in our internal control over financial reporting. Had we performed a formal assessment
of our internal control over financial reporting or had our independent registered public accounting firm performed an audit of our internal
control over financial reporting, additional deficiencies may have been identified. Following the identification of the material weakness,
we have taken measures and plan to continue to take remedial measures.
To remedy our identified material weakness, we
have adopted and plan to continue to adopt certain measures to improve our internal control over financial reporting, including (1) hiring
more qualified accounting personnel with extensive experience and knowledge in handling U.S. GAAP and SEC financial reporting requirements;
(2) providing regular and appropriate trainings for our accounting staff, especially trainings related to U.S. GAAP and SEC reporting
requirements; and (3) setting up performance measurement and reward plan for our accounting staff aligning with our objective of internal
control over financial reporting and our ethical value.
However, we cannot assure you that we will remediate our material weakness
in a timely manner. See "Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—If
we fail to maintain an effective system of internal control over financial reporting, we may be unable to accurately report our financial
results or prevent fraud."
As a company with less than US$1.235 billion in
revenue for our last fiscal year, we qualify as an "emerging growth company" pursuant to the JOBS Act. An emerging growth
company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies.
These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002 in the
assessment of the emerging growth company's internal control over financial reporting.
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Except for the measures to be adopted to improve
our internal control over financial reporting as described in this annual report, there were no changes in our internal control over
financial reporting during 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.
It should be noted that while our management
believes that our disclosure controls and procedures provide a reasonable level of assurance, our management does not expect that our
disclosure controls and procedures or internal financial controls will prevent all errors or fraud. A control system, no matter how well
conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
Our board of directors has determined that Mr.
Yuanlin Hu, an independent director and the chairman of our audit committee, qualifies as an "audit committee financial expert"
within the meaning of the SEC rules, and that he meets the independence standards under Rule 10A-3 under the Exchange Act.
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, officers and employees. We have filed our code of business conduct
and ethics as an exhibit to our registration statement on Form F-1 (File No. 333-252076) initially filed with the SEC on January 13,
2021, as amended, which was incorporated by reference thereto in this annual report.
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth the aggregate fees
by categories specified below in connection with certain professional services rendered by KPMG Huazhen LLP and Audit Alliance LLP, our
independent registered public accounting firm, for the years ended December 31, 2021 and 2022, respectively. Save as disclosed below,
we did not pay any other fees to KPMG Huazhen LLP and Audit Alliance LLP during the periods indicated below.
2021
2022
RMB
RMB
US$
(in thousands)
Audit fees
(1)
KPMG Huazhen LLP
3,623
—
—
Audit Alliance LLP
2,549
2,125
308
Total
6,172
2,125
308
(1)
Audit fees represent the aggregate fees billed for each of the fiscal
years listed for professional services rendered for the audit of our annual consolidated financial statements, review of our interim condensed
consolidated financial statements, and assistance with and review of documents filed with the SEC. On December 15, 2021, we dismissed
KPMG Huazhen LLP and engaged Audit Alliance LLP as our independent registered public accounting firm. See "Item 16F. Change in Registrant's
Certifying Accountant.
Our audit committee is responsible for pre-approving all
audit and non-audit services provided by our independent registered public accounting firm.
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
PURCHASERS
Not applicable.
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ITEM 16F. CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT
On December 15, 2021, we dismissed KPMG Huazhen
LLP, as our independent registered public accounting firm. On the same date, we appointed Audit Alliance LLP as our independent registered
public accounting firm in connection with the audit of our consolidated financial statements for the fiscal year ending December 31,
2021. The change of our independent registered public accounting firm had been approved by our audit committee and board of directors.
During the two fiscal years ended December 31,
2020, and the subsequent interim period through December 15, 2021, there were no: (1) disagreements with KPMG Huazhen LLP on any matter
of accounting principles or practices, financial statement disclosure, or auditing scope or procedures that, which disagreements if not
resolved to their satisfaction would have caused them to make reference in connection with their opinion to the subject matter of the
disagreement; or (2) reportable events, except that KPMG Huazhen LLP advised us of the material weakness in internal control over financial
reporting with respect to the lack of sufficient number of financial reporting personnel with appropriate knowledge, experience and training
of U.S. GAAP and SEC financial reporting requirements. The audit reports of KPMG Huazhen LLP on the consolidated financial statements
of our company as of and for the years ended December 31, 2019 and 2020 did not contain any adverse opinion or disclaimer of opinion,
nor were they qualified or modified as to uncertainty, audit scope, or accounting principles.
We provided KPMG Huazhen LLP with a copy of the
foregoing disclosure, and requested that KPMG Huazhen LLP furnish us with a letter addressed to the SEC stating whether it agrees with
the above statements, and if not, stating the respects in which it does not agree. A copy of the requested letter from KPMG Huazhen LLP
is attached as Exhibit 16.1 of the annual report on Form 20-F.
During the two fiscal years ended December 31,
2020 and the subsequent interim period through December 15, 2021, neither we nor anyone on behalf of us has consulted with Audit Alliance
LLP regarding (1) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit
opinion that might be rendered on our consolidated financial statements, and neither a written report nor oral advice was provided to
us that Audit Alliance LLP concluded was an important factor considered by us in reaching a decision as to any accounting, auditing,
or financial reporting issue, (2) any matter that was the subject of a disagreement pursuant to Item 16F(a)(1)(iv) of the instructions
to Form 20-F, or (3) any reportable event pursuant to Item 16F(a)(1)(v) of the instructions to Form 20-F.
ITEM 16G. CORPORATE GOVERNANCE
As a Cayman Islands company previously listed on the NYSE, we were
subject to the NYSE corporate governance listing standards. However, NYSE rules permit a foreign private issuer like us to follow the
corporate governance practices of its home country. Certain corporate governance practices in the Cayman Islands, which is our home country,
may differ significantly from the NYSE corporate governance listing standards. To the extent that we choose to follow home country practice
in the future, our shareholders may be afforded less protection than they otherwise would enjoy under the NYSE corporate governance listing
standards applicable to U.S. domestic issuers.
On November 22, 2022, we were delisted from the NYSE when the staff
of the New York Stock Exchange LLC filed a Form 25 Notification of Delisting. The ADSs are currently quoted on the OTC Pink Limited
Information under the symbol "FHSEY."
ITEM 16H. MINE SAFETY DISCLOSURE
Not applicable.
ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT
PREVENT INSPECTIONS
Not applicable.
ITEM 16J. INSIDER TRADING POLICIES
Not applicable.
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PART III
ITEM 17. FINANCIAL STATEMENTS
We have elected to provide financial statements
pursuant to Item 18.
ITEM 18. FINANCIAL STATEMENTS
Our consolidated financial statements are included
at the end of this annual report.
ITEM 19. EXHIBITS
Exhibit No.
Description of Exhibit
1.1
Second Amended and Restated Memorandum and Articles of Association of the Registrant, as currently in effect (incorporated by reference to Exhibit 1.1 of our annual report on Form 20-F (File No. 001-40150) filed with the SEC on April 22, 2021)
2.1
Registrant's Specimen American Depositary Receipt (incorporated by reference to Exhibit 2.1 of our annual report on Form 20-F (File No. 001-40150) filed with the SEC on April 22, 2021)
2.2
Registrant's Specimen Certificate for Class A Ordinary Shares (incorporated by reference to Exhibit 4.2 of our registration statement on Form F-1 (File No. 333-252076) initially filed with the SEC on January 13, 2021, as amended)
2.3
Deposit Agreement (incorporated by reference to Exhibit 2.3 of our annual report on Form 20-F (File No. 001-40150) filed with the SEC on April 22, 2021)
2.4
Description of Securities (incorporated by reference to Exhibit 2.4 of our annual report on Form 20-F (File No. 001-40150) filed with the SEC on April 22, 2021)
4.1
Form of Employment Agreement between the Registrant and each of its executive officers (incorporated by reference to Exhibit 10.1 of our registration statement on Form F-1 (File No. 333-252076) initially filed with the SEC on January 13, 2021, as amended)
4.2
Form of Indemnification Agreement between the Registrant and each of its directors and executive officers (incorporated by reference to Exhibit 10.2 of our registration statement on Form F-1 (File No. 333-252076) initially filed with the SEC on January 13, 2021, as amended)
4.3
English translation of exclusive technical service and management consultancy agreement among Yunnan WFOE and our affiliated entities, dated December 13, 2018 (incorporated by reference to Exhibit 10.3 of our registration statement on Form F-1 (File No. 333-252076) initially filed with the SEC on January 13, 2021, as amended)
4.3.1
Schedule of exclusive technical service and management consultancy agreement among Yunnan WFOE and our affiliated entities
4.4
English translation of business cooperation agreement among Yunnan WFOE, our affiliated entities, and the shareholders of Long-Spring Education, dated December 13, 2018 (incorporated by reference to Exhibit 10.4 of our registration statement on Form F-1 (File No. 333-252076) initially filed with the SEC on January 13, 2021, as amended)
4.5
English translation of exclusive call option agreement among Yunnan WFOE, our affiliated entities, and the shareholders of Long-Spring Education, dated December 13, 2018 (incorporated by reference to Exhibit 10.5 of our registration statement on Form F-1 (File No. 333-252076) initially filed with the SEC on January 13, 2021, as amended)
4.5.1
Schedule of exclusive call option agreement among Yunnan WFOE, our affiliated entities, and the shareholders of Long-Spring Education
4.6
English translation of equity pledge agreement among Yunnan WFOE, Long-Spring Education, and the shareholders of Long-Spring Education, dated December 13, 2018 (incorporated by reference to Exhibit 10.6 of our registration statement on Form F-1 (File No. 333-252076) initially filed with the SEC on January 13, 2021, as amended)
4.7
English translation of school sponsors' and directors' rights entrustment agreement among Yunnan WFOE, our schools, the sponsors of our schools, and the directors appointed by the sponsors of our schools, dated December 13, 2018 (incorporated by reference to Exhibit 10.7 of our registration statement on Form F-1 (File No. 333-252076) initially filed with the SEC on January 13, 2021, as amended)
4.7.1
Schedule of school sponsors' and directors' rights entrustment agreement among Yunnan WFOE, our schools, the sponsors of our schools, and the directors appointed by the sponsors of our schools
4.8
English translation of the executed form of power of attorney granted by the sponsors of our schools and a schedule of all executed power of attorney adopting the same form (incorporated by reference to Exhibit 10.8 of our registration statement on Form F-1 (File No. 333-252076) initially filed with the SEC on January 13, 2021, as amended)
4.8.1
Schedule of power of attorney granted by the sponsors of our schools
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4.9
English translation of the executed form of power of attorney granted by directors appointed by the sponsors of our schools and a schedule of all executed power of attorney adopting the same form (incorporated by reference to Exhibit 10.9 of our registration statement on Form F-1 (File No. 333-252076) initially filed with the SEC on January 13, 2021, as amended)
4.9.1
Schedule of power of attorney granted by directors appointed by the sponsors of our schools
4.10
English translation of shareholders' rights entrustment agreement among Yunnan WFOE, Long-Spring Education, and shareholders of Long-Spring Education, dated December 13, 2018 (incorporated by reference to Exhibit 10.10 of our registration statement on Form F-1 (File No. 333-252076) initially filed with the SEC on January 13, 2021, as amended)
4.11
English translation of the executed form of power of attorney granted by shareholders of Long-Spring Education and a schedule of all executed power of attorney adopting the same form (incorporated by reference to Exhibit 10.11 of our registration statement on Form F-1 (File No. 333-252076) initially filed with the SEC on January 13, 2021, as amended)
4.12
English translation of the executed form spousal undertaking granted by the spouse of each individual shareholder of Long-Spring Education and a schedule of all executed spousal undertaking adopting the same form (incorporated by reference to Exhibit 10.12 of our registration statement on Form F-1 (File No. 333-252076) initially filed with the SEC on January 13, 2021, as amended)
4.13
English translation of loan agreement among Yunnan WFOE, our schools, and Long-Spring Education, dated December 13, 2018 (incorporated by reference to Exhibit 10.13 of our registration statement on Form F-1 (File No. 333-252076) initially filed with the SEC on January 13, 2021, as amended)
4.14
2021 Share Incentive Plan (incorporated by reference to Exhibit 10.14 of our registration statement on Form F-1 (File No. 333-252076) initially filed with the SEC on January 13, 2021, as amended)
4.15
Subscription agreement, dated as of January 10, 2021, by and between the Registrant and Shanghai Ruihai Chuangfeng Industrial Development Co., Ltd. (incorporated by reference to Exhibit 10.15 of our registration statement on Form F-1 (File No. 333-252076) initially filed with the SEC on January 13, 2021, as amended)
8.1*
List of Principal Subsidiaries and Affiliated Entities of the Registrant
11.1
Code of Business Conduct and Ethics of the Registrant (incorporated by reference to Exhibit 99.1 of our registration statement on Form F-1 (File No. 333-252076) initially filed with the SEC on January 13, 2021, as amended)
12.1*
CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
12.2*
CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
13.1**
CEO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
13.2**
CFO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
15.1*
Consent of Beijing Zhongwen Law Firm
15.2*
Consent of Audit Alliance LLP
15.3*
Consent of Maples and Calder (Hong Kong) LLP
16.1
Letter from KPMG Huazhen LLP to the Securities and Exchange Commission (incorporated by reference to Exhibit 16.1 of our Annual Report on Form 20-F filed with the SEC on May 9, 2022).
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 Definition Linkbase Document.
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
Inline XBRL for the cover page of this Annual Report on Form 20-F(embedded within the Inline XBRL document)
*
Filed with this annual report on Form 20-F
**
Furnished with this annual report on Form 20-F
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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.
First High-School Education Group Co., Ltd.
By:
/s/ Shaowei Zhang
Name:
Shaowei Zhang
Title:
Chairman and Chief Executive Officer
Date: May 1, 2023
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FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD. AND SUBSIDIARIES
Index to Consolidated Financial Statements
Page
Report of Independent Registered Public Accounting Firm
F-2
Consolidated Balance Sheets as of December 31, 2021 and 2022
F-3
Consolidated Statements of Comprehensive Income/(Loss) for the years ended December 31, 2020, 2021 and 2022
F-6
Consolidated Statements of Changes in Equity/(Deficit) for the years ended December 31, 2020, 2021 and 2022
F-7
Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2021 and 2022
F-8
Notes to the Consolidated Financial Statements
F-10
F-
1
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of First High-school Education
Group Co., Ltd.:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of First
High-school Education Group Co., Ltd. (collectively, the "Company") as of December 31, 2022 and 2021, the related consolidated
statements of income (loss), comprehensive income (loss), shareholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 2022, and the related notes to the consolidated financial statements and schedule (collectively, the financial
statements). In our opinion, the financial statements present fairly, in all material respects, the financial positions of the Company
as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period
ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public
accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of
the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform,
an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal
control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal
control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks
of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/
Audit Alliance LLP
We have served as the Company's auditor since 2021.
Singapore
May 1, 2023
PCAOB ID Number
3487
F-
2
Table of Contents
FIRST
HIGH-SCHOOL EDUCATION GROUP CO., LTD.
CONSOLIDATED BALANCE SHEETS
(In
thousands of RMB, except share data and per share data, or otherwise noted)
As of December 31,
2021
2022
Assets
Current assets
Cash
114,197
105,258
Accounts receivable, net of allowance for doubtful accounts
28,346
87,247
Amounts due from related parties
11,707
73,450
Prepaid expenses and other current assets
92,300
144,708
Assets related to discontinued operation
134,764
65,815
Total current assets
381,314
476,478
Non-current assets
Property and equipment, net
133,874
128,163
Intangible assets, net
5,920
5,995
Goodwill
30,347
30,347
Deferred tax assets
14,744
13,309
Other non-current assets
56,488
47,177
Assets related to discontinued operation
197,982
11,010
Total non-current assets
439,355
236,001
Total assets
820,669
712,479
820,669
712,479
See accompanying notes to consolidated financial
statements.
F-
3
Table of Contents
FIRST HIGH-SCHOOL EDUCATION
GROUP CO., LTD.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(In thousands of RMB, except share data and per
share data, or otherwise noted)
As of December 31,
2021
2022
Liabilities and Equity
Current liabilities
Contract liabilities
141,912
141,574
Borrowings under financing arrangements
40,078
20,540
Bank loan
43,219
33,572
Accounts payable
3,138
13,809
Accrued expenses and other payables
26,771
52,463
Income tax payables
20,730
29,622
Amounts due to related parties
17,909
51,675
Dividend payables
-
2,132
Liability related to discontinued operation
218,289
104,641
Total current liabilities
512,046
450,028
Non-current liabilities
Borrowings under financing arrangements
44,178
24,987
Other payables
7,989
1,645
Deferred tax liabilities
2,185
5,155
Liability related to discontinued operation
23,907
-
Total non-current liabilities
78,259
31,787
Total liabilities
590,305
481,815
See accompanying notes to consolidated financial
statements.
F-
4
Table of Contents
FIRST
HIGH-SCHOOL EDUCATION GROUP CO., LTD.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(In
thousands of RMB, except share data and per share data, or otherwise noted)
As of December 31,
2021
2022
Liabilities and Equity
Commitments and contingencies
Equity
Ordinary shares (US$
0.00001
par value;
5,000,000,000
shares authorized; and
86,838,700
shares issued and outstanding as of December 31, 2021, and
86,838,700
shares issued and outstanding as of December 31, 2022, respectively)
6
6
Additional paid-in capital
389,199
357,689
Statutory reserves
49,060
54,366
Accumulated other comprehensive income
462
2,430
Accumulated deficit
(
207,713
)
(
184,258
)
Total equity attributable to the shareholders of the Company
231,014
230,233
Non-controlling interests
(
650
)
431
Total equity
230,364
230,664
Total liabilities and equity
820,669
712,479
See accompanying notes to consolidated financial
statements.
F-
5
Table of Contents
FIRST HIGH-SCHOOL EDUCATION
GROUP CO., LTD.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/ (LOSS)
(In thousands of RMB, except share data and per share data,
or otherwise noted)
Years Ended December 31,
2020
2021
2022
Revenue
306,245
337,314
342,506
Cost of revenues
(
164,354
)
(
206,769
)
(
213,622
)
Gross profit
141,891
130,545
128,884
Operating expenses and income
Selling and marketing expenses
(
6,398
)
(
6,440
)
(
3,101
)
General and administrative expenses
(
43,485
)
(
47,667
)
(
54,586
)
Government grants
4,277
2,097
2,036
Bad debt provision
-
(
14
)
(
9
)
Net operating expenses
(
45,606
)
(
52,024
)
(
55,660
)
Income from operations
96,285
78,521
73,224
Other income (expenses):
Interest income
1,124
1,128
1,422
Interest expense
(
5,747
)
(
9,545
)
(
9,546
)
Foreign currency exchange loss, net
(
469
)
(
922
)
(
55
)
Others, net
1,741
3,641
1,069
Income before income taxes
92,934
72,823
66,114
Income tax expenses
(
14,034
)
(
15,042
)
(
20,017
)
Net income from continuing operations
78,900
57,781
46,097
Discontinued Operations
Loss from discontinued operations
2,019
(
5,088
)
(
14,976
)
Gain on disposal of discontinued operations
-
-
7,285
Net income
80,919
52,693
38,406
Less: Net income attributable to non-controlling interests
101
—
1,081
Net income attributable to First High-school Education Group Co., Ltd.
80,818
52,693
37,325
Comprehensive Income
Income from continuing operations
78,900
57,781
46,097
Other comprehensive income: foreign currency translation
144
318
1,968
Comprehensive income - continued operations
79,044
58,099
48,065
Comprehensive income/( loss) - discontinued operations
2,019
(
5,088
)
(
7,691
)
Comprehensive Income
81,063
53,011
40,374
Comprehensive income attributable to non-controlling interests
101
—
1,081
Comprehensive income attribute to First High-school Education Group Co., Ltd.
80,962
53,011
39,293
Earnings per share:
Basic earnings per share from continued operation
1.12
0.69
0.52
Basic loss per share from discontinued operation
0.03
(
0.60
)
(
0.09
)
Diluted Earnings per share:
Diluted earnings per share from continued operation
1.12
0.67
0.51
Diluted earnings (loss) per share from discontinued operation
0.03
(
0.06
)
(
0.09
)
Weighted average number of ordinary share outstanding
Basic
70,488,700
83,925,002
86,838,700
Diluted
70,488,700
85,775,002
88,688,700
See accompanying notes to consolidated financial statements.
F-
6
Table of Contents
FIRST HIGH-SCHOOL EDUCATION
GROUP CO., LTD.
CONSOLIDATED STATEMENTS OF CHANGES
IN EQUITY/ (DEFICIT)
(In thousands of RMB, except share data
and per share data, or otherwise noted)
Total
equity/(deficit)
attributable
Accumulated
Retained
to the
Ordinary
    shares*
Additional
other
earnings/
shareholders
Non-
Total
Number
Treasury
paid-in
comprehensive
Statutory
(accumulated
of the
controlling
equity/
of
    shares*
stock
Amount
capital
income
reserves
deficit)
Company
interests
(deficit)
Balance
    as of January 1, 2020
70,488,700
—
—
221,791
—
29,101
(
180,769
)
70,123
86
70,209
Net income from continuing
    operations
—
—
—
—
—
—
78,799
78,799
101
78,900
Net income from discontinued
    operations
—
—
—
—
—
—
2,019
2,019
—
2,019
Other comprehensive  income
—
—
—
—
144
—
—
144
—
144
Transfer to statutory reserve
—
—
—
—
—
12,490
(
12,490
)
—
—
—
Distribution to the Parent
—
—
—
—
—
—
(
89,083
)
(
89,083
)
—
(
89,083
)
Dividend declared
—
—
—
(
157,663
)
—
—
—
(
157,663
)
—
(
157,663
)
Balance
    as of December 31, 2020 and January 1, 2021
70,488,700
—
—
64,128
144
41,591
(
201,524
)
(
95,661
)
187
(
95,474
)
Net income from continuing
    operations
—
—
—
—
—
—
57,781
57,781
—
57,781
Net loss from discontinued
    operations
—
—
—
—
—
—
(
5,088
)
(
5,088
)
—
(
5,088
)
Other comprehensive income
—
—
—
—
318
—
—
318
—
318
Transfer to statutory reserve
—
—
—
—
—
7,469
(
7,469
)
—
—
—
Issuance of common stocks-cash
23,532,390
(
7,182,390
)
6
325,071
—
—
—
325,077
—
325,077
Distribution to the Parent
—
—
—
—
—
—
(
18,424
)
(
18,424
)
—
(
18,424
)
Shareholder interest on acquisition
    of subsidiary - discontinued operations
—
—
—
—
—
(
32,989
)
(
32,989
)
—
(
32,989
)
Non-controlling interests
    on acquisition of subsidiary - discontinued operations
—
—
—
—
—
—
—
—
(
837
)
(
837
)
Balance
    as of December 31, 2021 and January 1, 2022
94,021,090
(
7,182,390
)
6
389,199
462
49,060
(
207,713
)
231,014
(
650
)
230,364
Net
    income from continuing operations
-
-
-
-
-
-
45,016
45,016
1,081
46,097
Net
    loss from discontinued operations
-
-
-
-
-
-
(
14,976
)
(
14,976
)
-
(
14,976
)
Other
    comprehensive income
-
-
-
-
1,968
-
-
1,968
-
1,968
Transfer
    to statutory reserve
-
-
-
-
-
5,306
(
5,306
)
-
-
-
Issuance
    of common stocks- cash
108,209
(
108,209
)
-
(
533
)
-
-
-
(
533
)
-
(
533
)
Dividend
    declared
-
-
-
-
-
-
(
8,564
)
(
8,564
)
-
(
8,564
)
Disposition of discontinued
    operation
-
-
-
(
30,977
)
-
-
7,285
(
23,692
)
-
(
23,692
)
Balance
    as of December 31, 2022
94,129,299
(
7,290,599
)
6
357,689
2,430
54,366
(
184,258
)
230,233
431
230,664
*
Number of ordinary shares reflect on a retrospective basis the
effect of shares issued in connection with the Corporate Restructuring in January 2021.
See accompanying notes to consolidated financial
statements.
Reclassification- certain reclassifications have been
made to the financial statements for the year ended December 31, 2021 to conform to the presentation for the year ended December 31, 2022,
with no effect on previously reported net income (loss).
F-
7
Table of Contents
FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.
CONSOLIDATED STATEMENTS
OF CASH FLOWS
(In thousands of RMB, except share data and per
share data, or otherwise noted)
Years Ended December 31,
2020
2021
2022
Cash flows from operating activities:
Net income
80,919
52,693
38,406
Net income (loss) from discontinued operation
2,019
(
5,088
)
(
7,691
)
Net income from continuing operation
78,900
57,781
46,097
Adjustments to reconcile net (loss) / income to net cash generated from operating activities:
Depreciation
11,329
13,650
12,068
Amortization
296
718
719
Bad debt provision
-
(
14
)
(
9
)
Deferred income taxes
(
5,336
)
(
1,612
)
4,405
Changes in operating assets and liabilities:
Accounts receivable
(
27,994
)
3,939
(
58,892
)
Advances to suppliers and other current assets
(
27,310
)
(
66,075
)
(
127,647
)
Accounts payable
125
(
5,118
)
10,671
Deferred revenue
(
3,894
)
121
(
8
)
Accrued expenses & other payables
(
39,262
)
(
54,432
)
19,356
Taxes payable
6,141
9,618
8,892
Advances from customers
(
22,907
)
20,249
(
338
)
Net Cash used in Operating Activities - Continuing Operations
(
29,912
)
(
21,175
)
(
84,686
)
Net Cash generated from Operating Activities - Discontinued Operations
134,735
109,545
85,275
See accompanying notes to consolidated financial
statements.
F-
8
Table of Contents
FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(In thousands of RMB, except share data and per
share data, or otherwise noted)
Years Ended December 31,
2020
2021
2022
Cash flows from investing activities
Purchase of property and equipment
(
33,491
)
(
24,211
)
(
17,847
)
Purchase of intangible assets
(
1,635
)
(
1,662
)
(
794
)
Disposal of property and equipment
-
-
39
Disposal of a subsidiaries, net of cash
-
-
44,689
Acquisition of a subsidiaries, net of cash
-
(
41,984
)
-
Net cash generated from/(used in) investing activities - Continuing Operations
(
35,126
)
(
67,857
)
26,087
Net cash generated from/(used in) investing activities - Discontinued Operations
16,089
(
65,755
)
107,586
Cash flows from financing activities:
Prepayment for the issuance of common stock
-
296,386
-
Dividend to shareholders
(
42,300
)
(
166,688
)
(
6,432
)
Treasury stock
-
-
(
533
)
Proceeds from amounts due from related parties, net
45,430
62,243
122,094
Repayment of amounts due to related parties, net
(
151,000
)
(
45,810
)
(
150,071
)
Proceeds from loan
139,421
286,042
101,775
Repayment of loans
-
(
297,988
)
(
150,151
)
Net cash generated from/(used in) financing activities - Continuing Operations
(
8,449
)
134,185
(
83,318
)
Net cash generated from/(used in) financing activities - Discontinued Operations
13,542
(
10,614
)
-
Effect of exchange rate changes on cash
144
318
1,968
Net increase in cash
91,023
78,647
52,912
Cash at beginning of year
117,333
136,953
114,197
Cash at end of year
208,356
215,600
167,109
Less: Cash and cash equivalents, from the discontinued operations, end of period
(
71,403
)
(
101,403
)
(
61,851
)
Cash and cash equivalents, from the continuing operations end of period
136,953
114,197
105,258
Supplemental disclosures of cash flow information
Income tax paid
14,034
15,042
20,017
Interests paid
5,747
9,545
9,546
Supplemental disclosures of non-cash investing and financing activities
Payable for declared dividends
157,663
-
6,432
Consideration payable for the acquisition of subsidiaries
-
104,606
-
See accompanying notes to consolidated financial
statements.
F-
9
Table of Contents
FIRST HIGH-SCHOOL EDUCATION
GROUP CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of RMB, except share data and per
share data, or otherwise noted)
1
ORGANIZATION AND PRINCIPAL ACTIVITIES
First High-School Education Group Co., Ltd. (the "Company")
was incorporated as an exempted company with limited liability in the Cayman Islands on September 19, 2018. The Company, its subsidiaries
and its consolidated variable interest entity and its subsidiaries ("VIEs") (collectively as the "Group") are
principally engaged in the provision of full spectrum private fundamental education and complementary education services, including middle
and high school and tutorial school in the People's Republic of China (the "PRC"). The Company completed its initial
public offering ("IPO") on the New York Stock Exchange on March 11, 2021. Prior to January 12, 2021, the Company was wholly-owned
by Long-Spring Education Group (the "Parent"). Upon completion of the corporate restructuring on January 12, 2021, Long-Spring
Education Group ceased to be the parent company of the Group.
On November 22, 2022, the Company was delisted from the NYSE when the
staff of the New York Stock Exchange LLC filed a Form 25 Notification of Delisting. The ADSs have been quoted on the OTC Pink Limited
Information initially under the symbol "FHSEY."
As of December 31, 2022, the Company's subsidiaries
and consolidated VIEs are as follows.
Equity interest
Name
Place of
establishment
Date of
establishment
attributable
to the
Group
Principal
activities
Wholly owned subsidiaries
First High-School Education Group (BVI) Limited
("First High-School BVI")
BVI
September 20, 2018
100
%
Investment holding
First High-School Group Hong Kong Limited
("First High-School HK")
Hong Kong
September 28, 2016
100
%
Investment
holding
Yunnan Century Long-Spring Education Technology Co., Ltd.
("Yunnan WFOE")
The PRC
October 31, 2016
100
%
Management consulting service
Yunnan Long-Spring Logistics Service Co., Ltd
The PRC
September 16, 2015
100
%
Education and management service
Percentage of
direct and
indirect
Place of
Date of
economic
Principal
Name
establishment
establishment
interest
activities
VIE:
Long-Spring Education Holding Group Limited
The PRC
September 20, 2011
100
%
Investment holding
Subsidiaries/schools held by the VIE:
Beijing Hualing International Human Resources Co., Ltd
The PRC
December 5, 2016
100
%
Management service
Yunnan Zhongchuang Education Tutorial School
The PRC
August 28, 2012
100
%
Tutorial services
Kunming Xishan Long-Spring Experimental Secondary School
The PRC
April 4, 2014
100
%
Formal education services*
Kunming Chenggong Long-Spring Experimental Secondary School
The PRC
July 23, 2015
100
%
Formal education services*
Yunnan Hengshui Experimental Secondary School— Xishan School
The PRC
July 1, 2016
100
%
Formal education services*
Yiliang Long-Spring Experimental Secondary SchoolYunnan
The PRC
July 11, 2016
100
%
Formal education services*
Yunnan Long-Spring Foreign Language Secondary School Dianchi Resort District School
The PRC
April 18, 2017
100
%
Formal education services*
F-
10
Table of Contents
FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of RMB, except share data and per
share data, or otherwise noted)
Percentage of
direct and
indirect
Place of
Date of
economic
Principal
Name
establishment
establishment
interest
activities
VIEs:
Qujing Hengshui Experimental Secondary School
The PRC
July 18, 2017
100
%
Formal education services*
Yunnan Yuxi Hengshui Experimental High School
The PRC
August 3, 2017
100
%
Formal education services*
Kunming Guandu Hengshizhong Education Tutorial School Co., Ltd.
The PRC
January 10, 2019
100
%
Tutorial services
Xinping Long-Spring Advanced Secondary School Co., Ltd.
The PRC
July 5, 2019
100
%
Formal education services*
Shanxi Long-Spring Enterprise Management Co., Ltd.
The PRC
June 20, 2019
56
%
Investment holding
Datong Hengshi Gaokao Tutorial School
The PRC
June 20, 2019
56
%
Tutorial services
Xishuangbanna Long-Spring Experimental Secondary School Co., Ltd.
The PRC
July 20, 2020
100
%
Formal education services*
Guizhou Long-Spring Century Technology Co., Ltd.
The PRC
June 17, 2020
100
%
Management consulting service
Guizhou Hengshizhong Technology Co., Ltd.
The PRC
July 1, 2020
56
%
Management consulting service
Yunnan Lihua Education Technology Co., Ltd.
The PRC
May 11, 2020
56
%
Investment holding
Zhenxiong Bainian Long-Spring Technology Co., Ltd.
The PRC
July 2, 2020
56
%
Management consulting service
Zhenxiong Long-Spring Advanced Secondary School
The PRC
September 1, 2020
56
%
Formal education services*
Qiubei Long-Spring Experimental Secondary School
The PRC
July 21, 2020
100
%
Formal education services*
Wenshan Long-Spring Experimental Secondary School
The PRC
August 3, 2020
56
%
Formal education services*
Mengla Long-Spring Experimental Secondary School
The PRC
September 4, 2020
100
%
Formal education services*
Kunming Chenggong Times Giant Tutorial School Co., Ltd.
The PRC
August 24, 2018
100
%
Tutorial services
Beijing First High-Education Technology Co., Ltd.
The PRC
March 18, 2021
100
%
Management consulting service
Zhengzhou Hengshi Hengzhong Education Technology Co., Ltd.
The PRC
June 10, 2021
70
%
Investment holding
Shenyang Century Long-Spring Technology Co., Ltd.
The PRC
May 12, 2021
70
%
Investment holding
Xiamen Hengshi Education Technology Co., Ltd.
The PRC
June 07, 2021
60
%
Investment holding
Shenzhen Hengshi Education Technology Co., Ltd.
The PRC
May 27, 2021
60
%
Investment holding
Chongqing Hengshi Education Technology Co., Ltd.
The PRC
February 26, 2021
100
%
Investment holding
Mengzi Bainian Long-Spring Education Technology Co., Ltd.
The PRC
February 8, 2022
100
%
Investment holding
Panzhihua Bainian Long-Spring Education Technology Co., Ltd.
The PRC
January 11, 2022
100
%
Investment holding
Yunnan Hengshun Property Service Co., Ltd.
The PRC
October 18, 2018
100
%
Management consulting service
Zunyi Hengshi Education Technology Co., Ltd.
The PRC
May 19, 2021
100
%
Management consulting service
Yunnan Long-Spring Education Holding Group Hengshui Experimental Middle School Management Co., Ltd
The PRC
December 24, 2020
100
%
Management consulting service
Shaanxi Century Long-Spring Education Technology Co., Ltd.
The PRC
January 11, 2021
100
%
Investment holding
Shaanxi Hengshi Hengzhong Education Technology Co., Ltd.
The PRC
March 08, 2021
51
%
Management consulting service
Guizhou New Vocational Education Technology Co., Ltd.
The PRC
September 17, 2022
100
%
Management consulting service
New Vocational Education (Hebei) Education Technology Co., Ltd.
The PRC
September 9, 2022
100
%
Management consulting service
New Vocational Education (Henan) Education Technology Co., Ltd.
The PRC
September 13, 2022
100
%
Management consulting service
New Vocational Education (Chengdu) Cultural Development Co., Ltd.
The PRC
December 20, 2022
100
%
Management consulting service
New Vocational Education (Shandong) Cultural Development Co., Ltd.
The PRC
November 1, 2022
100
%
Management consulting service
*
Formal education services include middle, high and international
school services.
F-1
F-
11
Table of Contents
FIRST HIGH-SCHOOL EDUCATION
GROUP CO., LTD.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(In thousands of RMB, except share data and per share
data, or otherwise noted)
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a)
Basis of presentation
The accompanying consolidated financial statements have
been prepared in accordance with U.S. generally accepted accounting principles ("US GAAP"). The consolidated financial statements
are presented in Renminbi ("RMB"), rounded to the nearest thousand.
The accompanying consolidated financial statements have
been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal
course of business. The realization of assets and the satisfaction of liabilities in the normal course of business are dependent on, among
other things, the Company's ability to operate profitably, to generate cash flows from operations, and the Company's ability
to pursue financing arrangements to support its working capital requirements.
Principles of consolidation of VIEs
In order to comply with the PRC laws and regulations which prohibit
foreign ownership of companies and institutions in compulsory educational services at middle school levels and restrict foreign investment
in educational services businesses at the high school level, the Group operates its restricted business in the PRC through its VIEs, whose
equity interest are held by the founders of the Group. The Group obtained the control over these VIEs by entering into a series of contractual
agreements as detailed below:
Exclusive Call Option Agreement
Pursuant to the exclusive call option agreement, the
shareholders of Long-Spring Education Holding Group Limited ("Long-Spring Education") unconditionally and irrevocably granted
Yunnan WFOE or its designated entity the right to purchase at any time all or part of their equity interests in Long-Spring Education
at the lowest price applicable under PRC laws and regulations. Without Yunnan WFOE's prior written consent, the shareholders of
Long-Spring Education also refrain from (1) selling, assigning, transferring, or otherwise disposing of the equity or sponsorship interest,
(2) increasing or reducing the capital investment, (3) dividing the affiliated entities into or merging it with other entities, (4) disposing
of any of the assets of the affiliated entities, (5) terminating or contradicting any material contract entered into by the affiliated
entities, (6) procuring the affiliated entities to enter into transactions that may have material impact on their assets, liabilities,
operations, equity structure, or other legal rights, (7) procuring the affiliated entities to declare or distribute profits and/or returns,
(8) amending the article of association of the affiliated entities, and (9) allowing the affiliated entities to undertake any material
obligation beyond normal business activities.
F-
12
Table of Contents
FIRST HIGH-SCHOOL EDUCATION GROUP CO.,
LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of RMB, except share data and per share data, or otherwise noted)
School Sponsor's and Directors' Rights Entrustment Agreement
Pursuant to the school sponsor's and directors'
rights entrustment agreement, the school sponsors irrevocably authorized and entrusted Yunnan WFOE or its designated personnel to exercise
all their rights as the school sponsor of each school, including but not limited to the right to appoint and/or elect directors, council
members, and supervisors of the school, right to review the resolutions of the board of directors and the financial statement of the school,
right to transfer school sponsor's interest, and right to decide whether the school would be for-profit or non-profit. Each director
appointed by the sponsor of each school unconditionally and irrevocably authorized and entrusted Yunnan WFOE to exercise all the rights
as a director of the school, including but not limited to the right to attend meetings of the board of directors and vote, right to sign
board resolutions and other legal documents and other rights of directors under the school's articles of association and the applicable
PRC laws.
Shareholders' Rights Entrustment Agreement
Pursuant to the shareholders' rights
entrustment agreement, each shareholder of Long-Spring Education irrevocably authorized and entrusted Yunnan WFOE to exercise all the
respective rights as shareholders of Long-Spring Education, including but not limited to the right to attend shareholder's meeting
and vote, right to sign shareholders' resolutions and other legal documents, right to instruct the directors and other rights of
shareholders under the school's articles of association and the applicable PRC laws.
Power of Attorney
Pursuant to the school sponsors' power of attorney, each school
sponsor authorized and appointed Yunnan WFOE as its agent to exercise on its behalf a school sponsor's rights. Pursuant to the directors'
power of attorney, each director of Long-Spring Education authorized and appointed Yunnan WFOE as his/her agent to exercise on his/her
behalf a director's rights. Pursuant to the shareholders' power of attorney, each shareholder of Long-Spring Education authorized
and appointed Yunnan WFOE as his/her/its agent to exercise on his/her/its behalf a shareholder's rights.
Equity Pledge Agreement
Pursuant to the equity pledge agreement, the shareholders of
Long-Spring Education unconditionally and irrevocably pledged and granted first priority security interests over all of his/her/its equity
interest in Long-Spring Education, as well as all related rights, to Yunnan WFOE as security for performance of all the contractual arrangements.
Without Yunnan WFOE's prior written consent, the shareholders of Long-Spring Education must not transfer the equity interest or
create further pledge or encumbrance over the pledged equity interest. They also waived any pre-emptive rights upon enforcement, and Yunnan
WFOE can enforce upon default by transferring all or part of the equity interest, selling the pledged equity interest, or disposing of
the pledged equity interest in any other way to the extent permitted by PRC laws and regulations.
F-
13
Table of Contents
FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of RMB, except share data and per share data,
or otherwise noted)
Spousal Undertaking
Pursuant to the spousal undertaking executed by the spouses of the
shareholders of Long-Spring Education, the signing spouses consented to the contractual arrangements with respect to the equity interest
in Long-Spring Education, including its pledge, transfer, and disposal in any other forms. The spouses will not participate in the operation,
management, liquidation, or any other matters in relation to Long-Spring Education's subsidiaries and affiliated schools. They authorized
the shareholders of Long-Spring Education to exercise their shareholding rights on behalf of them to ensure the interest of Yunnan WFOE.
This undertaking will not terminate until Yunnan WFOE and the spouses terminate it in writing.
Loan Agreement
Pursuant to the loan agreement, Yunnan WFOE agreed to provide
interest-free loans to Long-Spring Education. Each loan will be for an infinite term until termination at the sole discretion of Yunnan
WFOE. This agreement will terminate when all equity interests of the Long-Spring Education are transferred to Yunnan WFOE.
The agreements that transfer economic benefits of Long-Spring Education
to the Group include:
Exclusive Technical Service and Management Consultancy Agreement
and Business Cooperation Agreement
Pursuant to the exclusive technical service and management
consultancy agreement and business cooperation agreement, Yunnan WFOE provides exclusive technical services to Long-Spring Education VIEs,
including software, website, and on-site technical support and training. It also provides exclusive management consultancy services such
as staff training, student recruitment support, internal management advisory, and market research and public relations. Each of the Long-Spring
Education VIEs pays Yunnan WFOE a service fee equal to the total amount of surplus of its operation. Yunnan WFOE also reserves the exclusive
proprietary rights to any technology or intellectual property developed in the course of the provision of services under the agreements.
Without the prior written consent of Yunnan WFOE, Long-Spring Education VIEs cannot accept services provided by or establish similar cooperation
relationship with any third-party. The agreements will remain effective unless Yunnan WFOE and/or the designated entity fully exercised
its purchase rights pursuant to the exclusive call option agreement or unilaterally terminated by Yunnan WFOE with a 30-day advance notice.
Unless otherwise required by applicable PRC laws, Long-Spring Education VIEs do not have any right to terminate the agreements.
Under the above agreements, the shareholders of Long-Spring
Education irrevocably granted Yunnan WFOE the power to exercise all voting rights to which they were entitled. In addition, Yunnan WFOE
has the option to acquire all of the equity interests in Long-Spring Education, to the extent permitted by the PRC laws and regulations,
for nominal consideration. Finally, Yunnan WFOE is entitled to receive service fees for certain services to be provided to Long-Spring
Education.
The Exclusive Call Option Agreement and Power of Attorney
provide the Group with effective control over the Long-Spring Education, while the Equity Pledge Agreements secure the obligations of
the shareholders of Long-Spring Education under the relevant agreements.
Because the Group has (i) the power to direct the activities
of Long-Spring Education, that most significantly affect its economic performance and (ii) the right to receive substantially all of the
benefits from Long-Spring Education, the Group is deemed the primary beneficiary of Long-Spring Education. Accordingly, the Company consolidates
VIEs' financial results of operations, assets and liabilities in the Group's consolidated financial statements.
F-
14
Table of Contents
FIRST HIGH-SCHOOL EDUCATION GROUP
CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of RMB, except share data and per share data, or otherwise noted)
In December 2018, in connection with 2018 Share Incentive
Plan, certain management personnel and employees of the Group through establishment of limited partnership entities ("PRC Partnership
entities") became legal shareholders of Long-Spring Education. The above VIE agreements ("2016 VIE Agreements") were
terminated and concurrently, new contractual VIE Agreements were entered into among Long-Spring Education, Long-Spring Education's
shareholders (including PRC Partnership entities) and Yunnan WFOE. The terms of the new contractual arrangements among Long-Spring Education,
PRC Partnership entities and Yunnan WFOE are identical to the terms of the 2016 VIE Agreements.
Risks in relation to VIE structure
As Long-Spring Education VIEs were established as limited
liability companies or organizations under the PRC law, their creditors do not have recourse to the general credit of Yunnan WFOE for
the liabilities of Long-Spring Education VIEs, and Yunnan WFOE does not have the obligation to assume the liabilities of Long-Spring Education
VIEs.
The Group believes that the contractual arrangements with
Long-Spring Education VIEs are in compliance with the PRC law and are legally enforceable.
However, the contractual arrangements are subject to risks
and uncertainties, including:
●
Long-Spring Education and their shareholders may have or develop interests that conflict with the Group's
interests, which may lead them to pursue opportunities in violation of the aforementioned contractual arrangements. If the Group cannot
resolve any conflicts of interest or disputes between the Group and the shareholders of Long-Spring Education, the Group would have to
rely on legal proceedings, which could result in disruption of its business, and there may be substantial uncertainty as to the outcome
of any such legal proceedings.
●
Long-Spring Education and their shareholders could fail to obtain the proper operating licenses or fail
to comply with other regulatory requirements. As a result, the PRC government could impose fines, new requirements or other penalties
on the VIEs or the Group, mandate a change in ownership structure or operations for the VIEs or the Group, restrict the VIEs or the Group's
use of financing sources or otherwise restrict the VIEs or the Group's ability to conduct business.
●
The PRC government may declare the aforementioned contractual arrangements invalid. They may modify the
relevant regulations, have a different interpretation of such regulations, or otherwise determine that the Group or the VIEs have failed
to comply with the legal obligations required to effectuate such contractual arrangements.
●
If the legal structure and contractual arrangements were found to be in violation of PRC laws and regulations,
the PRC government may restrict or prohibit the Group's use of the proceeds of the additional public offering to finance the Group's
business and operations in China.
F-
15
Table of Contents
FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(In thousands of RMB, except
share data and per share data, or otherwise noted)
The Group's ability to conduct its business may be negatively
affected if the PRC government were to carry out of any of the aforementioned actions.
There is no VIE in which the Group has a variable interest but is not the primary beneficiary.
The table sets forth the assets and liabilities of the VIEs included in the Company's consolidated balance sheets:
As of December 31,
2021
2022
Current assets
Cash
102,179
96,558
Accounts receivable, net of allowance for doubtful accounts
17,296
41,441
Amounts due from related parties
10,873
41,123
Prepaid expenses and other current assets
49,939
135,121
Total current assets
180,287
314,243
Property and equipment, net
56,967
67,405
Intangible assets, net
160
141
Goodwill
30,347
30,347
Deferred tax assets
8,498
6,290
Other non-current assets
54,489
47,177
Total assets
330,748
465,603
Current liabilities
Contract liabilities
131,840
135,703
Bank loan
43,219
33,572
Borrowings under financing arrangements
40,078
20,540
Accounts payable
8,555
10,615
Accrued expenses and other payables
24,354
48,211
Income tax payables
10,086
9,409
Amounts due to related parties
3,027
45,781
Total current liabilities
261,159
303,831
Borrowings under financing arrangements
44,178
24,987
Other payables
7,989
1,270
Deferred tax liabilities
1,315
4,285
Total liabilities
314,641
334,373
Notes:
(i):
Amounts due from related parties consisted of (a) amounts due from related parties as disclosed in Note
21
.
(ii):
Amounts due to related parties consisted of (a) amounts due
to related parties as disclosed in Note 21.
F-
16
Table of Contents
FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(In thousands of RMB, except
share data and per share data, or otherwise noted)
The table sets forth the results of operations of the VIEs
included in the Company's consolidated statements of comprehensive income:
Years Ended December 31,
2020
2021
2022
Net revenues
253,271
307,348
230,238
Net income
27,396
11,442
8,514
(c)
Use of estimates
The preparation of consolidated financial statements in conformity
with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions
include, but are not limited to, estimate of standalone selling prices of each unit of accounting in multiple performance obligations,
estimate of the contract period of the government cooperative agreements, the useful lives of long-lived assets, the fair values of assets
acquired and liabilities assumed and the consideration transferred in a business combination, the fair value of the reporting unit for
the goodwill impairment test, the allowance for doubtful accounts receivable and other current assets, the realization of deferred income
tax assets, the fair value of share-based compensation awards and the recoverability of long-lived assets. Changes in facts and circumstances
may result in revised estimates. Actual results could differ from those estimates, and as such, differences may be material to the consolidated
financial statements.
(d)
Cash, cash equivalents
Cash and cash equivalents comprise cash at banks and on
hand, which have original maturities of three months or less when purchased and are subject to an insignificant risk of changes in value.
As of December 31, 2021 and 2022, cash equivalents were RMB
114,197
and RMB
105,258
.
F-
17
Table of Contents
FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of RMB, except share data and per
share data, or otherwise noted)
(e)
Fair value of financial instruments
The Group utilizes valuation techniques that maximize the
use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Group determines fair value based on
assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering
market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable
inputs, which are categorized in one of the following levels:
●
Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity
at the measurement date.
●
Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset
or liability, either directly or indirectly, for substantially the full term of the asset or liability.
●
Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent
that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset
or liability at the measurement date.
The carrying values of financial instruments,
which consist of cash, restricted cash, accounts receivable, net of allowance for doubtful accounts, amounts due from related parties,
prepaid expenses and other current assets, accounts payable, accrued expenses and other payables, bank loan and amounts due to related
parties are measured at amortized cost which approximates their fair value due to the short-term nature of these instruments.
The borrowings under financing arrangements is measured
at amortized cost. The fair value of these long-term debt obligations approximates their carrying value as the borrowing rates are similar
to the market rates that are currently available to the Group for financing obligations with similar terms and credit risks and represent
a level 2 measurement.
(f)
Contract balances
The timing of revenue recognition, billings and cash collections
result in accounts receivable, contract assets and contract liabilities. Accounts receivable are recorded at the billing amount, net of
an allowance for doubtful account and is recognized in the period when the Company's right to consideration is unconditional. Amounts
collected on accounts receivable are included in net cash provided by operating activities in the consolidated statements of cash flows.
The Group maintains an allowance for doubtful accounts for estimated losses inherent in its accounts receivable portfolio. In establishing
the required allowance, management considers historical losses adjusted to take into account current market conditions and customers'
financial condition, the amount of receivables in dispute, the accounts receivable aging, and the customers' repayment patterns.
The Group reviews its allowance for doubtful accounts on a customer-by-customer basis. Account balances are charged off against the allowance
after all means of collection have been exhausted and the potential for recovery is considered remote. The Group does not have any off-balance-sheet
credit exposure related to its customers.
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18
Table of Contents
FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of RMB, except share data and per
share data, or otherwise noted)
A contract liability is the obligation to provide services
or goods to a customer for which the Group has received consideration from the customer. If a customer pays the consideration before the
Group provides services or goods to the customer, a contract liability is recognized when the payment is made or the payment is due.
A contract asset is the right to consideration in exchange
for goods or services that the entity has transferred to a customer when that right is conditioned on something other than the passage
of time (for example, the entity's future performance).
(g)
Property and equipment
Property and equipment are carried at cost less accumulated
depreciation and any recorded impairment.
Gains or losses arising from the disposal of an item of
property and equipment are determined based on the difference between the net disposal proceeds and the carrying amount of the item and
are recognized in profit or loss on the date of disposal.
The estimated useful lives are presented below.
Category
Estimated useful life
Buildings
18
-
20
years
Leasehold improvement
Shorter of the lease term and the estimated useful lives of the assets
Furniture and office equipment
6
-
10
years
Electronic equipment
4
-
5
years
Vehicles
5
years
Depreciation on property and equipment is calculated on the
straight-line method over the estimated useful lives of the assets.
(h)
Leases
Leases are classified at the lease inception date as either
a capital lease or an operating lease. A lease is a capital lease if any of the following conditions exists: a) ownership is transferred
to the lessee by the end of the lease term, b) there is a bargain purchase option, c) the lease term is at least
75
% of the property's
estimated remaining economic life, or d) the present value of the minimum lease payments at the beginning of the lease term is
90
% or
more of the fair value of the leased property to the lessor at the inception date. The Group records a capital lease as an asset and an
obligation at an amount equal to the present value at the beginning of the lease term of minimum lease payments during the lease term.
Rental costs on operating leases are charged to expense
on a straight-line basis over the lease term. Certain operating leases contain rent holidays and escalating rent. Rent holidays and escalating
rent are considered in determining the straight-line rent expense to be recorded over the lease term. Rental costs associated with building
operating leases that are incurred during the construction of leasehold improvements and to otherwise ready the property for the Group's
intended use are recognized as rental expenses and are not capitalized.
F-
19
Table of Contents
FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of RMB, except share data and per
share data, or otherwise noted)
(i)
Business combinations
Business combinations are recorded using the acquisition
method of accounting. The assets acquired, the liabilities assumed, and any non-controlling interests of the acquiree at the acquisition
date, if any, are measured at their fair values as of the acquisition date. Goodwill is recognized and measured as the excess of the total
consideration transferred plus the fair value of any non-controlling interest of the acquiree and fair value of previously held equity
interest in the acquiree, if any, at the acquisition date over the fair values of the identifiable net assets acquired. Liability-classified
contingent consideration is measured at fair value at the acquisition date, and is remeasured at fair value at each subsequent reporting
date (with changes in fair value recognized in the consolidated statement of comprehensive income/ (loss)) until the contingency is resolved.
(j)
Intangible assets
Acquired intangible assets comprised of government cooperative
agreements and software. The government cooperative agreements acquired from business combination is recognized and measured at fair value
and the acquired software are measured at cost, less accumulated amortization and impairment. Amortization of finite-lived intangible
assets is computed using the straight-line method over the estimated useful lives. The amortization periods by intangible asset classes
are as follows:
Category
Estimated useful life
Systems software
2
-
10
years
(k)
Goodwill
Goodwill is an asset representing the future economic
benefits arising from other assets acquired in the acquisition that are not individually identified and separately recognized.
Goodwill is not amortized but is tested for impairment annually
or more frequently if events or changes in circumstances indicate that it might be impaired. Goodwill is tested for impairment at the
reporting unit level on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than
not reduce the fair value of a reporting unit below its carrying value. These events or circumstances could include a significant change
in the business climate, legal factors, operating performance indicators, competition, or sale or disposition of a significant portion
of a reporting unit. Application of the goodwill impairment test requires judgment, including the identification of the reporting unit,
assignment of assets and liabilities to the reporting unit, assignment of goodwill to the reporting unit, and determination of the fair
value of each reporting unit.
The Group has the option to perform a qualitative assessment
to determine whether it is more-likely-than not that the fair value of a reporting unit is less than its carrying value prior to performing
the two-step goodwill impairment test. If it is more-likely-than-not that the fair value of a reporting unit is greater than its carrying
amount, the two-step goodwill impairment test is not required. If the two-step goodwill impairment test is required, first, the fair value
of the reporting unit is compared with its carrying amount (including goodwill). If the fair value of the reporting unit is less than
its carrying amount, an indication of goodwill impairment exists for the reporting unit and the Group performs step two of the impairment
test (measurement). Under step two, an impairment loss is recognized for any excess of the carrying amount of the reporting unit's
goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of
the reporting unit in a manner similar to a purchase price allocation and the residual fair value after this allocation is the implied
fair value of the reporting unit goodwill. No impairment losses were recorded for goodwill for the years ended December 31, 2020, 2021
and 2022.
F-
20
Table of Contents
FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of RMB, except share data and per
share data, or otherwise noted)
(l)
Impairment of long-lived assets
Long-lived assets, such as property and equipment, intangible
assets subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the
Group first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying amount. If the carrying
amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the
extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques including discounted
cash flow models, quoted market values and third-party independent appraisals, as considered necessary. No impairment losses were recorded
for long-lived assets for the years ended December 31, 2020, 2021 and 2022.
(m)
Commitment and contingencies
Liabilities for loss contingencies arising from claims,
assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and
the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.
(n)
Revenue recognition
Revenue is recognized when control of promised goods or
services is transferred to the Group's students in an amount of consideration to which the Group expects to be entitled to in exchange
for those goods or services. The Group follows the five steps approach for revenue recognition under Accounting Standards Update ("ASU")
No. 2104-09,
Revenue from Contracts with Customers (Topic 606)
("Topic 606"): (i) identify the contract(s) with a customer,
(ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price
to the performance obligations in the contract, and (v) recognize revenue when (or as) the Group satisfies a performance obligation.
For contracts with customers that contain multiple performance
obligations, determining whether products and services are considered distinct performance obligations that should be accounted for separately
versus together may require significant judgment. The transaction price is allocated to the separate performance obligation on a relative
standalone selling price basis. The standalone selling price is determined based on overall pricing objectives, taking into consideration
market conditions, geographic locations and other factors.
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21
Table of Contents
FIRST HIGH-SCHOOL EDUCATION GROUP CO.,
LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of RMB, except share data and per share data, or otherwise noted)
The primary sources of the Group's revenues are as follows:
Formal education services
The Group's revenue is principally derived from the
provision of boarding school educational services to students. The Group offers formal education program at the middle school and high
school.
Tuition and accommodation fees received from formal education
services are generally paid in advance prior to the beginning of each semester. In very limited circumstances students may, with special
approval of the management, receive education first and pay their tuition in arrears.
Each contract with a student in respect of the formal education services
contains multiple performance obligations consisting of the provision of the curriculum education services, after-school enrichment services,
registration and transportation services (collectively as "educational services"), delivery of educational books and related
materials (collectively as "educational materials"), boarding services and meal catering services. These performance obligations
are distinct in the context of the contract. The consideration expected to be received is allocated at contract inception among the performance
obligations based on their stand-alone selling prices.
Revenue attributable to educational services and boarding
services is recognized over time, based on a straight-line basis over the school year, as students simultaneously receive and consume
the benefits of these services throughout the service period. The portion of tuition and boarding payments received from students but
not earned is recorded as contract liability and is reflected as a current liability as such amounts represent revenue that the Group
expects to earn within one year. The academic year of the Group's school is generally from September to January of the following
year and from March to June. The Group determines that there is not a significant financing component based on the nature of the service
being offered and the purpose of the payment terms.
Revenue attributable to educational materials and meal catering
services is recognized at point in time, when the control of the educational materials or underlying goods is passed to customers. The
Group considers that it is acting as the principal in the transaction and recognizes revenue from sales of the educational materials and
meal catering services on a gross basis.
Revenue from government cooperative arrangements
The Group has entered into certain long-term cooperative arrangements
with local governments in areas where some of the schools are located. Pursuant to such arrangements, the Group is committed to admit
certain number of local students as "publicly-sponsored students" who pay the tuition fees based on the amounts charged by
a comparable public school. The difference between the fees charged by the Group to other students and the fees charged to publicly-sponsored
students are subsidized by the local governments in the form of lump sum funding payments in the first few years of the cooperative arrangements.
The government subsidies are recognized as "revenue from government cooperative arrangements" on a systematic basis when there
is reasonable assurance that they will be received and the Group will comply with the conditions attaching to the agreements. In particular,
revenue under these arrangements are recognized on a straight-line basis during the relevant school year, and over the estimated period
to which the subsidies relate, based on the difference in average tuition fee for private students and for publicly-sponsored students
and the number of publicly-sponsored students of each academic year. When the Group has received payments from the governments before
educational services are provided to these publicly-sponsored students, a deferred revenue from governments is recognized when the payments
are received.
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22
Table of Contents
FIRST HIGH-SCHOOL EDUCATION
GROUP CO., LTD.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(In thousands of RMB, except share data and per share data,
or otherwise noted)
Throughout the whole period of cooperative arrangements,
the governments also provide free access to certain buildings and dormitories and assign certain number of teachers who originally work
in other public schools to the Group. These subsidies are determined as non-monetary government grants in a nonreciprocal transfer for
which the fair value is not reliably estimable. Accordingly, the Group recognizes the asset or services and the relevant grants at their
nominal amounts paid.
Tuition income from training programs
Revenue derived from providing Gaokao (the university entrance
examination in China) repeaters' education programs and other after-school is recognized over time, based on a straight-line basis
over the program service period, as customers simultaneously receive and consume the benefits of these services throughout the service
period.
Education and management service fees
Revenue derived from 1) the education and management service
provided to the third-party schools included logistic management services, school operation and management services and other services.
The promised services in each education and management service contract are combined and accounted as a single performance obligation,
as the promised services in a contract are not distinct and are considered as a significant integrated service, and 2) the meal catering
services are outsourced to certain vendors and the Group charges management service fee to these vendors. The revenue is recognized on
a straight-line basis over the period of the education and management service, as customers simultaneously receive and consume the benefits
of these services throughout the service period.
The Group has assessed all variable considerations identified
when determining the transaction price. In making such assessment, the Group may provide price concessions to the customers under education
and management services contracts in order to enter into new contracts or collect payments. The Group includes the estimate of the concession
in the amount of consideration to which it ultimately expects to be entitled.
VAT collected from customers is excluded from revenue. The
Company's PRC subsidiaries and VIEs are subject to VAT. The deductible input VAT balance is recorded in prepaid expenses and other
current assets, and VAT payable balance is recorded in the accrued expenses and other payables.
(o)
Cost of revenues
Cost of revenues consists primarily of salaries to instructors
and tutors, rental expenses for office and school space, depreciation and amortization of properties and equipment, teaching materials
and other costs directly attributable to the provision of the service revenue.
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FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of RMB, except share data and per
share data, or otherwise noted)
(p)
Selling and marketing expenses
Selling and marketing expense mainly consists of advertising
costs which are expensed as incurred. Advertising costs amounted to approximately RMB
3,737
, RMB
2,986
and RMB
1,299
for the years ended
December 31, 2020, 2021 and 2022, respectively.
(q)
Government grants
Except for the subsidies received under the government
cooperative arrangements described in Note 2(n), government grants are recognized when received and when all the conditions for their
receipt have been met. Subsidies that compensate the Group for expenses incurred are recognized as a reduction of expenses in the consolidated
statements of comprehensive income/ (loss). Subsidies that are not associated with expenses are recognized as income from government grants.
(r)
Income tax
Income taxes are accounted for under the liability method.
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. 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 that includes the enactment date.
The Group reduces the carrying amounts of deferred tax assets
by a valuation allowance, if based on the available evidence, it is "more-likely-than-not" that such assets will not be realized.
Accordingly, the need to establish valuation allowances for deferred tax assets is assessed at each reporting period based on a "more-likely-than-not"
realization threshold. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses,
forecasts of futures profitability, the duration of statutory carry forward periods, the Group's experience with operating loss
and tax credit carry forwards, if any, not expiring.
The Group recognizes the effect of income tax positions
only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount
that is greater than
50
% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change
in judgment occurs. The Group records interest related to unrecognized tax benefits in income tax expense and penalties in general and
administrative expenses.
(s)
Share-based compensation
The Group accounts for the compensation cost from share-based
payment transactions with employees based on the grant-date fair value of the equity instrument issued. The grant-date fair value of the
award is recognized as compensation expense, net of forfeitures, over the period during which an employee is required to provide service
in exchange for the award, which is generally the vesting period. When no future services are required to be performed by the employee
in exchange for an award of equity instruments, and if such award does not contain a performance or market condition, the cost of the
award is expensed on the grant date. The Group elects to recognize forfeitures when they occur.
F-
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FIRST HIGH-SCHOOL EDUCATION
GROUP CO., LTD.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(In thousands of RMB, except share data and per share data,
or otherwise noted)
Share-based payment transactions with non-employees in which
goods or services are received in exchange for equity instruments are accounted for based on the fair value of the consideration received
or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date of the fair value of the
equity instrument issued is the earlier of either the date on which the counterparty's performance is complete or the date at which
a commitment for performance by the counterparty to earn the equity instrument is reached.
The award in the shares of the Parent
of the Group granted to employees and non-employees of the Group would be accounted for as employee and non-employee awards in the Group's
consolidated financial statements. Compensation cost related to the grant of these share awards would be recorded at the Group level with
a corresponding credit to equity, representing Parent's equity contribution.
For further information on share-based compensation.
(t)
Employee benefits
Pursuant to relevant PRC regulations, the Group is required
to make contributions to various defined contribution plans organized by municipal and provincial PRC governments. The contributions are
made for each PRC employee at rates ranging from
31
% to
37
% on employees' salaries, up to a maximum amount specified by local social
security bureau. Contributions to the defined contribution plans are charged to the consolidated statements of comprehensive income/ (loss)
when the related service is provided.
(u)
Foreign currency translation and foreign currency risks
The Group use RMB as its reporting currency. The functional
currency of the Company, First High-School BVI and First High-School HK is the USD, whereas the functional currency of its PRC subsidiaries
and consolidated VIEs is the RMB.
Foreign currency transactions during the period are translated
at the foreign exchange rates ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated
at the foreign exchange rates ruling at the end of the reporting period. Exchange gains and losses are recognized in profit or loss and
are reported in foreign currency exchange gain (loss) on a net basis.
The results of foreign operations are translated into RMB
at the exchange rates approximating the foreign exchange rates ruling at the dates of the transactions. Assets and liabilities are translated
at the exchange rates at the balance sheet date, equity accounts are translated at historical exchange rates and revenues, expenses, gains
and losses are translated using the average rate for the year.
Translation adjustments are reported in other comprehensive
income and accumulated in the translation adjustment component of equity until the sale or liquidation of the foreign entity.
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FIRST HIGH-SCHOOL EDUCATION GROUP CO.,
LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of RMB, except share data and per
share data, or otherwise noted)
The RMB is not a freely convertible currency. The PRC
State Administration for Foreign Exchange, under the authority of the PRC government, controls the conversion of RMB to foreign currencies.
The value of the RMB is subject to changes of central government policies and international economic and political developments affecting
supply and demand in the China foreign exchange trading system market. The Group's cash denominated in RMB amounted to approximately
RMB
114,197
and RMB
105,258
as of December 31, 2021 and 2022, respectively.
(v)
Concentration of credit risk
The Group's credit risk arises from cash, other
current assets and other non-current assets and accounts receivable. The carrying amounts of these financial instruments represent the
maximum amount of loss due to credit risk.
The Group expects that there is
no significant credit risk associated with the cash which are held by reputable financial institutions in the jurisdictions where the
Company, its subsidiaries and VIEs are located. The Group believes that it is not exposed to unusual risks as these financial institutions
have high credit quality.
The Group has no significant concentration of credit risk
with respect to its other receivables and prepayments.
The Group conducts credit evaluations on its customers
prior to delivery of goods or services. The assessment of customer creditworthiness is primarily based on historical collection records,
research of publicly available information and customer on-site visits. Based on this analysis, the Group determines what credit terms,
if any, to offer to each customer individually. If the assessment indicates a likelihood of collection risk, the Group will not deliver
the services or sell the products to the customer or require the customer to pay cash or to make significant down payments. Historically,
credit losses on accounts receivable have been insignificant.
(w)
Recently adopted accounting pronouncements
In October 2018, the FASB issued ASU 2018-17,
Consolidation
(Topic 810): Targeted Improvements to the Related Party Guidance for Variable Interest Entities
. ASU 2018-17 changes how entities
evaluate decision-making fees under the variable interest entity guidance. To determine whether decision-making fees represent a variable
interest, an entity considers indirect interests held through related parties under common control on a proportional basis, rather than
in their entirety. The guidance is effective for the Group for periods beginning after December 15, 2020. Early adoption is allowed. The
Group adopted the standard on January 1, 2021 and the adoption of this standard did not have a material impact on the consolidated financial
statements.
(x)
Recently issued accounting pronouncements
Under the Jumpstart Our Business Startups Act of 2012,
as amended ("the JOBS Act"), the Company meets the definition of an emerging growth company, or EGC, and has elected the extended
transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards until
they would apply to private companies.
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FIRST HIGH-SCHOOL EDUCATION
GROUP CO., LTD.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(In thousands of RMB, except share data and per share data,
or otherwise noted)
In December 2019, the FASB issued ASU 2019-12,
Income Taxes
(Topic 740): Simplifying the Accounting for Income Taxes.
ASU 2019-12 key changes include hybrid tax regimes, intra-period tax allocation
exception, and interim-period accounting for enacted changes in tax law. Early adoption is permitted, including adoption in any interim
period or annual reports for which financial statements have not yet been made available for issuance. The guidance is effective for the
Group for annual periods beginning after December 15, 2021. The Group does not plan to early adopt this guidance and is evaluating the
impact of the new standard.
In January 2017, FASB issued ASU No. 2017-04,
Intangibles—Goodwill
and Other (Topic 350): Simplifying the Test for Goodwill Impairment
. This ASU is to simplify the subsequent measurement of goodwill.
The ASU eliminates step 2 from the goodwill impairment test and the requirements for any reporting unit with a zero or negative carrying
amount to perform a qualitative assessment and, if it fails that qualitative test, to perform step 2 of the goodwill impairment test.
An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment
test is necessary. This ASU should be applied on a prospective basis. The amendments in this ASU are effective for the Group for its annual
or any interim goodwill impairment tests in fiscal years beginning after December 15, 2021. Early adoption is permitted. The Group does
not plan to early adopt this guidance and is evaluating the impact of the new standard.
In June 2016, the FASB issued ASU 2016-13,
Financial Instruments-Credit
Losses (Topic 326), Measurement of Credit Losses on Financial Instruments
and issued a series of subsequent amendments to the initial
guidance. These ASUs require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the
net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis
of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. The measurement
of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and
reasonable and supportable forecasts that affect the collectability of the reported amount. These ASUs eliminates the probable initial
recognition threshold in current GAAP and, instead, reflects an entity's current estimate of all expected credit losses. The amendments
in these ASUs are effective for the Group for its fiscal years beginning after December 15, 2022, with early adoption permitted. The Group
does not plan to early adopt this guidance and is evaluating the impact of the new standard.
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FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of RMB, except share data and per
share data, or otherwise noted)
In February 2016, the FASB issued ASU No. 2016-02,
Leases
(Topic 842)
, which supersedes the guidance in ASC Topic 840,
Leases
. ASU 2016-02 requires, among other changes to the
lease accounting guidance, lessees to recognize most leases on-balance sheet via a right-of-use asset and lease liability, and
additional qualitative and quantitative disclosures. In July 2018, ASU No. 2018-10,
Codification Improvements to Topic 842,
Leases,
was issued to provide more detailed guidance and additional clarification for implementing ASU No. 2016-02. In July
2018, the FASB issued ASU No. 2018-11,
Leases (Topic 842): Targeted Improvements, which provides an optional transition method in
addition to the existing modified retrospective transition method by allowing a cumulative effect adjustment to the opening balance
of retained earnings in the period of adoption. Furthermore, in June 2020, the FASB issued ASU No. 2020-05, Revenue from Contracts
with Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities, which defers the effective date of ASU No.
2016-02 for certain entities. This update is effective for the Group for annual reporting periods beginning after December 15, 2021
and interim periods within annual periods beginning after December 15, 2022.
Early adoption is permitted. The Group does not plan to
early adopt this guidance and is evaluating the impact of the new standard.
3
CONTRACT BALANCES
(a)
Accounts receivable, net
Accounts receivable, net consisted of the following:
As of December 31,
Note
2021
2022
Accounts receivable derived from governments cooperative arrangements
(i)
26,862
73,106
Accounts receivable from other customers
(ii)
1,484
14,150
Accounts receivable
28,346
87,256
Less: allowance for doubtful accounts
—
(
9
)
Accounts receivable, net
28,346
87,247
Note (i):
Accounts receivable derived from government cooperative arrangements were recorded when the educational services have been provided to
publicly-sponsored students and the receivables are due in accordance with the payment schedule in the relevant agreements with the governments.
Note (ii):
When rendering education and management services and other services, the Group generally bills its customers in the period when the Group's right
to consideration is unconditional and transfer control over services in accordance with the contract terms.
Nil
and RMB
9
allowance for doubtful accounts was provided to accounts
receivable as of December 31, 2021 and 2022 respectively.
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FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of RMB, except share data and per
share data, or otherwise noted)
(b)
Contract liabilities
The balances of the Group's contract liabilities are
as following:
As of December 31,
2021
2022
Tuition fee
120,653
116,407
Accommodation fee
12,339
9,581
Deposit
32
1,389
Teaching and Miscellaneous Fees
3,112
1,060
Training fee
5,113
5,512
Service charge
663
7,625
Contract liabilities
141,912
141,574
The contract liabilities primarily relate to up-front payments
from the Group's customers for the formal educational services and training programs.
4
PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consisted of the following:
As of December 31,
2021
2022
Advances to third parties
55,913
58,552
Advances to employees
13,089
8,577
Receivables from selling subsidiaries
-
45,450
Prepaid rental fees
3,762
1,103
School deposits
13,276
21,038
Deposits for financing arrangements
3,250
6,700
Low-value consumables
1,625
1,730
Others
1,385
1,558
Prepaid expenses and other current assets
92,300
144,708
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FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of RMB, except share data and per
share data, or otherwise noted)
5
PROPERTY AND EQUIPMENT, NET
Property and equipment consisted of the
following:
As of December 31,
2021
2022
At cost:
Buildings
91,390
96,819
Leasehold improvement
40,802
38,194
Furniture and office equipment
16,452
17,945
Electronic equipment
27,932
25,458
Vehicles
2,205
3,937
Construction in progress
3,211
-
181,992
182,353
Less: accumulated depreciation
(
48,118
)
(
54,190
)
Property and equipment, net
133,874
128,163
As of December 31, 2021 and 2022, certain furniture and
office equipment and electronic equipment of the Group with net book value of RMB
22,383
and RMB
19,604
, respectively, were pledged pursuant
to borrowings under financial arrangement as disclosed in Note 9.
Depreciation of property and equipment were approximately
RMB
11,329
, RMB
13,650
and RMB
12,068
for the years ended December 31, 2020, 2021 and 2022, respectively, and included in the following captions:
Years Ended December 31,
2020
2021
2022
Cost of revenues
7,936
9,600
8,072
General and administrative expenses
3,393
4,050
3,996
Total
11,329
13,650
12,068
6
INTANGIBLE ASSETS, NET
Intangible assets
consisted of the following:
As of December 31,
2021
2022
Systems  software
7,079
7,873
Less: accumulated amortization
(
1,159
)
(
1,878
)
Intangible assets, net
5,920
5,995
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FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of RMB, except share data and per
share data, or otherwise noted)
Amortization of intangible assets were
approximately RMB
296
, RMB
718
and RMB
719
for the years ended December 31, 2020, 2021 and 2022, respectively.
Estimated future amortization expense
related to these intangible assets is as follows:
Fiscal year ending December 31, 2021
2022
589
2023
589
2024
589
2025
589
2026
589
Thereafter
2,975
Total
5,920
Fiscal year ending December 31, 2022
2023
755
2024
754
2025
749
2026
747
2027
740
Thereafter
2,250
Total
5,995
7
BUSINESS
COMBINATION AND GOODWILL
The movement of goodwill is set out as below:
2021
2022
Balance as of January 1,
-
30,347
Addition during the year
30,347
-
Balance as of December 31,
30,347
30,347
The Group did not incur impairment loss on goodwill
for the years ended December 31, 2020, 2021 and 2022.
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31
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FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(In thousands of RMB, except
share data and per share data, or otherwise noted)
Yunnan Times Giant Acquisition
On June 8, 2021, the Group acquired all
of the equity interests in Kunming Chenggong Times Giant Tutorial School Co., Ltd., Wenshan Times Giant Tutorial School Co., Ltd., and
Kunming Wuhua District Zhuorui Cultural Training School Co., Ltd. (collectively known as "Yunnan Times Giant") for consideration
of RMB
2,500
, RMB
12,500
, and RMB
5,000
, respectively, from an original shareholder that was controlled by a related party of the Company.
Yunnan Times Giant is franchise of Giant Education Group in
Yunnan Province. Yunnan Times Giant mainly engaged in the services of middle school entrance examination, high school entrance examination,
and college entrance examination training and consulting services. The offered curriculum includes English, sports and arts, computer,
vocational skills training, and STEM education subjects. It is a leader in private training and education in China with strong team of
teachers, top elite management teams and high-quality educational resources.
The identifiable assets acquired and
liabilities assumed in the business combination were recorded at their fair values on the acquisition date and consisted of the following
major items.
Fair value of consideration
20,000
Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash
1,344
Property and equipment
581
Accounts receivable
39
Other assets
2,744
Accounts payable
(
193
)
Other liabilities
(
17,504
)
Total identifiable net liabilities at fair values
(
12,989
)
Total shareholder interest on acquisition of subsidiary
32,989
The Company has included the operating
results of Yunnan Times Giant in its consolidated financial statements since the Acquisition Date. RMB
5,356
in net sales and RMB
228
in
net loss of Yunnan Times Giant were included in the consolidated financial statements for the years ended December 31, 2021. Yunnan Times
Giant was under the same control with the Company before Acquisition.
Yunnan Hengshun Acquisition
On April 30, 2021, the Group acquired
all of the equity interests in Yunnan Hengshun Property Services Co., Ltd. ("Yunnan Hengshun"), a campus focused general service
company for a consideration of RMB
24,500
from an original shareholder that was controlled by a third party. The transaction was closed
on April 30, 2021.
Yunnan Hengshun is a full general servicing company targeted
at campus management. The company offers campus specialized services of security, sanitation, landscaping, repairs and maintenance, food
and retail marketing, and lodging services.
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FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(In thousands of RMB,
except share data and per share data, or otherwise noted)
The identifiable assets acquired and liabilities assumed
in the business combination were recorded at their fair values on the acquisition date and consisted of the following major items.
Fair value of consideration
24,500
Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash
1,172
Property and equipment
2
Accounts receivable
1,467
Other assets
19,978
Other liabilities
(
28,466
)
Total identifiable net liabilities at fair value
(
5,847
)
Goodwill
30,347
The Company has included the operating results of Yunnan
Hengshun in its consolidated financial statements since the Acquisition Date. RMB
14,582
in net sales and RMB
6,666
in net gain of Yunnan
Hengshun were included in the consolidated financial statements for the years ended December 31, 2021.
8
OTHER NON-CURRENT ASSETS
Other non-current assets consisted of the following:
As of December 31,
2021
2022
Loans to employees
2,867
-
Deposits for financing arrangements
6,700
6,700
School deposits
22,173
32,350
Rental deposits
22,901
8,127
Others
1,847
-
Other non-current assets
56,488
47,177
9
BORROWINGS UNDER FINANCING ARRANGEMENTS
The balances of the Group's borrowings under financing
arrangements are as following:
As of December 31,
2021
2022
Current portion
40,078
20,540
Non-current portion
44,178
24,987
84,256
45,527
The Group entered into sale and leaseback contracts with
certain third-party financial institutions during 2020 and 2021. The lease items were mainly multi-media computers, video conference equipment,
computers and other teaching equipment. The Group considers the substance of these transactions to be debt financing in nature and no
gain or loss is recognized upon the sale. Thus, the Group recorded the cash receipt from these transactions as liabilities and accrued
the interest using the effective interest method.
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FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(In thousands of RMB, except
share data and per share data, or otherwise noted)
The detailed terms of these sale and leaseback contracts are summarized below:
(i)
On August 14, 2020, the Group entered into sale and leaseback contracts with Haier Financial Leasing Co.,
Ltd. for a consideration of RMB
60,000
repayable in thirteen instalments until August 31, 2023 with an effective interest rate of
7.4
%
per annum. The Group recorded the cash receipts of RMB
57,800
as a liability and accrued the interest using the effective interest method.
As of December 31, 2021 and 2022, the balance was RMB
29,256
and RMB
3,366
respectively.
The Group paid an aggregate amount of RMB
1,700
as deposits.
These amounts are recorded in prepaid expenses and other current assets and other non-current assets as of December 31, 2021 and 2022
respectively.
(ii)
On November 1, 2021, the Group entered into sale and leaseback contracts with Chengtai Finance Leasing (Shanghai) Co., Ltd for an aggregated consideration of RMB
55,000
repayable in twelve instalments until November 1, 2024 with an effective interest rate of
10.8
% per annum. The Group recorded the cash receipt of RMB
51,750
as a liability and accrued the interest using the effective interest method. As of December 31, 2021 and 2022, the balance was RMB
55,000
and RMB
42,161
respectively.
The Group paid an aggregate amount of RMB
5,000
as deposits.
These amounts are recorded in prepaid expenses and other current assets and other non-current assets as of December 31,2021 and 2022 respectively.
10
BANK LOAN
On April 16, 2021, the Company entered into a term loan credit limit
RMB
60,000
with Guangdong Development Bank until
April 15, 2022
with an interest rate of
5.25
% per annum. During fiscal year 2021, the
borrowing amount was RMB
89,534
, and the amount of RMB
47,139
has been repaid. During fiscal year 2022, the borrowing amount was RMB
10,680
,
and amount of RMB
53,075
has been repaid. The short-term loan agreement was based on the Company's credit standing and no securities
or guarantees were involved.
On April 12, 2021, the Company entered into a short-term
loan agreement credit limit RMB
60,000
with China CITIC Bank until
April 8, 2022
with an interest rate of
4.65
% per annum. During fiscal
year 2021, the borrowing amount was RMB
64,228
, and the amount of RMB
63,403
has been repaid. During fiscal year 2022, the borrowing amount
was RMB
59,065
, and the amount of RMB
58,348
has been repaid, and a balance of RMB
1,542
remains. The short-term loan agreement was based
on the Company's credit standing and no securities or guarantees were involved.
On July 4, 2022, the Company entered into a short-term loan agreement
credit limit RMB
60,000
with Guangdong Development Bank until
July 3, 2023
with an interest rate of
4.65
% per annum. During fiscal year
2022, borrowing amount was RMB
32,030
, and the balance remains. The short-term loan agreement was based on the Company's credit standing
and no securities or guarantees were involved.
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FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(In thousands of RMB, except
share data and per share data, or otherwise noted)
11
ACCRUED EXPENSES AND OTHER PAYABLES
Accrued expenses and other payables, current and non-current, consisted of the following:
As of December 31,
2021
2022
Accrued payroll and welfare benefits
12,581
24,465
Government subsidies received on behalf of certain teachers and students
824
11,413
Other tax payables
612
165
Deposits received
75
212
Accrued service fees
48
147
Accrued utilities fees
37
71
Collection of teaching and auxiliary materials fee
12,464
15,879
Accrued expenses
7,868
1,532
Others
251
224
Accrued expenses and other payables
34,760
54,108
Including:
Current portion
26,771
52,463
Non-current portion
7,989
1,645
12
LEASES
Operating leases
The Group leases properties and other equipment that are
classified as operating leases. The majority of the Group's operating leases expire at various dates though 2036.
Future minimum operating lease payments as of December
31, 2022 and 2021 are summarized as follow:
December 31, 2021
2022
8,300
2023
8,300
2024
11,578
2025
11,677
2026
11,778
Thereafter
42,472
Total
94,105
December 31, 2022
2023
9,630
2024
4,350
2025
4,350
2026
4,350
2027
4,350
Thereafter
38,100
Total
65,130
Rental expenses were approximately RMB
243
, RMB
2,148
, and
RMB
5,243
for the years ended December 31, 2020, 2021 and 2022, respectively. The Group did not sublease any of its operating leases for
the years presented.
F-
35
Table of Contents
FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of RMB, except share data and
per share data, or otherwise noted)
13
SHARE CAPITAL
On January 12, 2021, the Company issued
70,488,700
ordinary
shares to the respective shareholders of the Parent to mirror the shareholding structure of the Parent. At the same time, the Parent surrendered
100,000
issued shares in the Company pursuant to a form of surrender letter. Accordingly, all share and per share data shown in the consolidated
financial statements have been retrospectively revised to give effects to the nominal issuance of the
70,488,700
new shares and the surrender
of the
100,000
old shares.
On March 11, 2021, the Company issued
7,500,000
American
Depositary Shares ("ADS"), price per ADS of US$
10.00
in an Initial Public Offering, representing
22,500,000
Class A Ordinary
Shares, and received in consideration of USD
45,577
, net of
2,500,000
ADS proceed sold directly to Longwater Topco B.V., underwriting
commission and other related fees.
The amount received of USD
45,577
or RMB
296,386
, subtract
ordinary shares of 6, was recorded as Paid-in Capital of RMB
296,381
.
Pursuant to subscription agreement dated January 10, 2021
with Shanghai Ruihai Chuangfeng Industrial Development Co., Ltd. ("CPP Investor"), a wholly-owned subsidiary of Harier Financial
Leasing Co., Ltd., CPP Investor agreed to purchase
1,350,000
Class A Ordinary Shares, equivalent to
450,000
American Depositary Shares
("ADS"), price per ADS of US$
10
in an Initial Public Offering. The purchase totaled for aggregate net proceeds to the Company
of RMB
28,691
, after deducting fees to the placement agent and other offering expenses payable by the Company.
14
Discontinued
                                            Operations
On May 14, 2021, the PRC State Council announced the Implementation
Rules for Private Education Laws (the "Implementation Rules"), which became effective on September 1, 2021. Pursuant to the
Implementation Rules, (1) foreign-invested enterprises established in China and social organizations whose actual controllers are foreign
parties shall not sponsor, participate in or actually control private schools that provide compulsory education, (2) social organizations
or individuals shall not control any private school that provides compulsory education or any non-profit private school that provides
pre-school education by means of, among others, merger, acquisition and contractual arrangements, and (3) private schools providing compulsory
education shall not conduct any transaction with any related party. In addition, private school providing compulsory education shall not
conduct any transaction with any related party, and any other private school conducting any transaction with any related party shall follow
the principles of openness, fairness and impartiality, fix the price reasonably and regulate the decision-making, and shall not damage
the interests of the state and the school or the rights and interests of the teachers and students, which may impose restrictions on the
above-mentioned related party transactions. Such prohibition has significantly affected the enforceability of the exclusive management
services and business cooperation agreements with affiliated entities providing compulsory education.
The Implementation Rules have had significant impacts on our
business operations and our results of operations. After consultation with our PRC legal counsel, we reached the conclusion that, as a
result of the effectiveness of the Implementation Rules, we have lost control over the middle schools that are affected by the Implementation
Rules, and entities holding such middle school institutions or middle school programs ("Affected Entities") as from September
1, 2021. Consequently, the contractual arrangements with the Affected Entities have become invalid since September 1, 2021, and we classified
the operation for the Affected Entities as discontinued operations. We have determined that, in substance, we had ceased to recognize
revenues for all activities related to the Affected Entities and had discontinued all business activities with such entities by September
1, 2021 while continuing to provide essential services to keep these schools open. Such discontinuation has had a material and adverse
impact on our business, financial condition and results of operations. Our ability to engage in the compulsory education in China has
been materially and adversely affected, and we cannot assure you that we will be able to restore such ability, which could materially
and adversely affect our business, prospects, results of operations and financial condition.
F-
36
Table of Contents
FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of RMB, except share data and per share data, or otherwise
noted)
The Affected Entities are as follow: Kunming Xishan Long-Spring
Experimental Secondary School Middle School Program, Kunming Chenggong Long-Spring Experimental Secondary School Middle School Program,
Yiliang Long-Spring Experimental Secondary School Middle School Program, Yunnan Hengshui Experimental Secondary School—Xishan School
Middle School Program, Qujing Hengshui Experimental Secondary School Middle School Program, Yunnan Long-Spring Foreign Language Secondary
School Middle School Program, Xinping Hengshui Experimental Middle School, Zhenxiong Long-Spring Advanced Secondary School Middle School
Program, and Shaanxi Hengshi Middle School.
On July 25, 2022, Shenyang Century Long-Spring Technology Co., Ltd.
was deregistered.
On April 17, 2022, Long-Spring Education Holding Group Co.,
Ltd., entered into a Share Transfer Agreement (the "Agreement") with Inner Mongolia Qingyi Consulting Service Co., Ltd., (the
"Buyer"). Pursuant to the terms of the Agreement, the Buyer purchased
100
% ownership of Beijing Hengyue Education Technology
Co., Ltd. from Long-Spring Education Holding Group Co., Ltd., which value is primarily derived from Beijing Hengyue's and wholly-owned
subsidiary Ordos Hengshui Experimental High School for a total price of RMB
50,500
(the "Sale Transaction"). The Sale Transaction
was closed on July 27, 2022. In accordance with ASC Topic 205, Presentation of Financial Statement Discontinued Operations ("ASC
Topic 205"), the Company presented the operation results of Beijing Hengyue and its subsidiaries as a discontinued operation, as
the Company believed that no continued cash flow would be generated by the discontinued component and that the Company would have no significant
continuing involvement in the operations of the discontinued component. The total assets of Beijing Hengyue were RMB
120,481
as of July
27, 2022 and the total liabilities of Beijing Hengyue were RMB
68,657
as of July 27, 2022, resulting in a loss on disposal of RMB
2,597
.
On September 2, 2022, Long-Spring Education Holding Group
Co., Ltd., entered into a Share Transfer Agreement (the "Agreement") with Yunnan Long-Spring Education Technology Co., Ltd.,
(the "Buyer"). Pursuant to the terms of the Agreement, the Buyer purchased
82.44
% ownership of Beijing Tomorrow Future Plus
Education Technology Co., Ltd. from Long-Spring Education Holding Group Co., Ltd., for a total price of RMB
76,500
(the "Sale Transaction").
The Sale Transaction was closed on September 2, 2022. In accordance with ASC Topic 205, Presentation of Financial Statement Discontinued
Operations ("ASC Topic 205"), the Company presented the operation results of Beijing Tomorrow Future Plus Education Technology
Co., Ltd. as a discontinued operation, as the Company believed that no continued cash flow would be generated by the discontinued component
and that the Company would have no significant continuing involvement in the operations of the discontinued component. The total assets
of Beijing Tomorrow Future Plus Education Technology Co., Ltd. were RMB
70,995
as of September 2, 2022 and the total liabilities of Beijing
Tomorrow Future Plus Education Technology Co., Ltd. were RMB
2,246
as of September 2, 2022, resulting in a gain on disposal of RMB
7,696
.
On July 25, 2022, Long-Spring Education Holding Group Co.,
Ltd., entered into a Share Transfer Agreement (the "Agreement") with Shenzhen Xiaoling Human Resources Co., Ltd., (the "Buyer").
Pursuant to the terms of the Agreement, the Buyer purchased
100
% ownership of Sichuang Century Changshui Technology Co., Ltd. from Long-Spring
Education Holding Group Co., Ltd., for a total price of RMB
3,000
(the "Sale Transaction"). The Sale Transaction was closed
on July 25, 2022. In accordance with ASC Topic 205, Presentation of Financial Statement Discontinued Operations ("ASC Topic 205"),
the Company presented the operation results of Sichuang Century Changshui Technology Co., Ltd. as a discontinued operation, as the Company
believed that no continued cash flow would be generated by the discontinued component and that the Company would have no significant continuing
involvement in the operations of the discontinued component. The total assets of Sichuang Century Changshui Technology Co., Ltd. were
RMB
5,569
as of July 25, 2022 and the total liabilities of Sichuang Century Changshui Technology Co., Ltd. were RMB
5,748
as of July 25,
2022, resulting in a gain on disposal of RMB
2,186
.
Loss from discontinued operations
for fiscal years 2021 and 2022 was as follows:
F-
37
Table of Contents
FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of RMB, except share data and per share data, or otherwise
noted)
As of December 31,
2021
2022
Assets
Current assets
Cash
101,403
61,851
Accounts receivable, net of allowance for doubtful accounts
14,851
-
Amounts due from related parties
12,464
-
Prepaid expenses and other current assets
6,046
3,964
Total current assets
134,764
65,815
Non-current assets
Property and equipment, net
20,467
10,184
Intangible assets, net
41,605
1
Goodwill
120,648
-
Deferred tax assets
14,809
825
Other non-current assets
451
-
Total non-current assets
197,980
11,010
Total assets
332,744
76,825
As of December 31,
2021
2022
Liabilities
Current liabilities
Contract liabilities
88,393
49,862
Accounts payable
17,584
12,898
Income tax payables
4,318
269
Deferred revenue
7,833
-
Amounts due to related parties  respectively
1,850
-
Accrued expenses and other payables
98,311
41,612
Total current liabilities
218,289
104,641
Non-current liability
Deferred tax liabilities
13,510
-
Deferred revenue
10,393
-
Total liabilities
242,192
104,641
Years Ended December 31,
2020
2021
2022
Revenues
139,589
169,541
91,457
Cost of revenues
(
122,879
)
(
152,656
)
(
95,335
)
Gross profit/(loss)
16,710
16,885
(
3,878
)
Operating expenses and income
Selling and marketing expenses
(
1,226
)
(
1,371
)
(
135
)
General and administrative expenses
(
16,991
)
(
39,504
)
(
11,899
)
Government grants
4,908
4,468
1,000
Income (loss) from operations
3,401
(
19,522
)
(
14,912
)
Other income (expenses):
Interest income
31
-
-
Others, net
(
43
)
(
20
)
(
64
)
Income (loss) from discontinued operations before income tax
3,389
(
19,542
)
(
14,976
)
Income tax expenses
(
1,370
)
14,454
-
Income (loss) from discontinued operation before non-controlling interest
2,019
(
5,088
)
(
14,976
)
Gain on disposal of discontinued - operations
-
-
7,285
Less: Net loss attributable to non-controlling interests
-
-
-
Income (loss) from discontinued operations
2,019
(
5,088
)
(
7,691
)
F-
38
Table of Contents
FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(In thousands of RMB, except
share data and per share data, or otherwise noted)
15
REVENUES
Revenues consisted of the following:
Years Ended December 31,
2020
2021
2022
Formal education services
-Educational services
207,424
192,383
211,197
-Boarding
15,768
19,248
7,609
-Sale of educational materials
37,865
40,468
21,205
Subtotal
261,057
252,099
240,011
Tuition income from training programs
12,043
17,765
28,521
Education and management service fees
1,849
15,104
30,868
Others
5,238
1,399
995
280,187
286,367
300,395
Revenue from governments cooperative agreements
26,058
50,947
42,111
306,245
337,314
342,506
16
INCOME TAX
Cayman Islands
Under the current laws of the Cayman Islands, the Company
is not subject to tax on income or capital gain. Additionally, upon payments of dividends to the shareholders, no Cayman Islands withholding
tax will be imposed.
British Virgin Islands
Under the current laws of the British Virgin Islands, First
High-School BVI is not subject to tax on their income or capital gains.
Additionally, upon payments of dividends to the shareholders,
no British Virgin Islands withholding tax will be imposed.
F-
39
Table of Contents
FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of RMB, except share data and per share data, or otherwise noted)
Hong Kong
Under the current Hong Kong Inland Revenue Ordinance, First
High-School HK is subject to Hong Kong profits tax at a rate of
16.5
%. A Two-tiered Profits Tax rates regime was introduced since year
2018 where the first HK$
2,000
of assessable profits earned by a company will be taxed at half the current tax rate (
8.25
%) whilst the
remaining profits will continue to be taxed at
16.5
%. There is an anti-fragmentation measure where each group will have to nominate only
one company in the group to benefit from the progressive rates. No provision for Hong Kong profits tax has been made as the Group had
no assessable profits derived from or earned in Hong Kong during the years ended December 31, 2020, 2021 and 2022. Additionally, upon
payments of dividends to the shareholders, no Hong Kong withholding tax will be imposed.
PRC
Under the PRC Enterprise Income Tax Law ("EIT Law"),
the Group's PRC subsidiaries and affiliated schools are subject to the statutory income tax rate at
25
% unless otherwise specified.
In accordance with the prevailing tax regulations, Yunnan
WFOE and Yunnan Zhongchuang Education Tutorial School were qualified to enjoy
15
% preferential income tax rate under "Development
Plan for Western China" from 2017 to 2020 which is further extended by another 10 years to 2030 if they continue to satisfy all
the requirements pursuant to the relevant tax regulations in each of those years.
According to the Implementation Rules for the Law for Promoting
Private Education in 2004 (the "2004 Implementing Rules"), private schools, whether requiring reasonable returns or not, may
enjoy preferential tax treatment. The 2004 Implementing Rules provide that the relevant authorities under the State Council may introduce
preferential tax treatments and related policies applicable to private schools requiring reasonable returns.
According to the Law of People's Republic of China on the Promotion
of Private Education as revised in 2016 ("2016 Revised Private Education Law"), non-profit private schools will be entitled
to similar tax benefits as public schools. However, taxation policies of for-profit private schools are still unclear as more specific
provisions are to be introduced. As of the date of this consolidated financial statements, most of our schools are in transition period
for for-profit and non-profit election. As such, the Group is unable to determine the income tax impact as a result of the 2016 Revised
Private Education Law on the profitability of its affiliated schools in future fiscal years.
F-
40
Table of Contents
FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of RMB, except share data and per
share data, or otherwise noted)
The applicable income tax rate of the Group's affiliated
schools for the years ended December 31, 2020, 2021 and 2022 are summarized as below:
School name
Note
Applicable income tax rate
Yunnan Hengshui Chenggong Experimental Secondary School
(i)
Income tax exemption
Yunnan Hengshui Experimental Secondary School—Xishan School
(i)
Income tax exemption
Yunnan Hengshui Yiliang Experimental Secondary School
(i)
Income tax exemption
Kunming Xishan Long-Spring Experimental Secondary School
(i)
Income tax exemption
Kunming Chenggong Long-Spring Experimental Secondary School
(i)
Income tax exemption
Yiliang Long-Spring Experimental Secondary School
(i)
Income tax exemption
Qujing Hengshui Experimental Secondary School
(i)(iv)
Income tax exemption
Yunnan Yuxi Hengshui Experimental High School
(i)
Income tax exemption
Wenshan Long-Spring Experimental Secondary School
(i)
Income tax exemption
Yunnan Yuxi Hengshui Experimental High School
(i)
Income tax exemption
Mengla Long-Spring Experimental Secondary School
(i)
Income tax exemption
Qiubei Long-Spring Experimental Secondary School
(i)
Income tax exemption
Resorts District Hengshui Experimental Secondary School
(ii)
Income tax exemption on certain income
Yunnan Long-Spring Foreign Language Secondary School
(ii)
Income tax exemption on certain income
Xinping Hengshui Experimental High School Co., Ltd.
(iii)(iv)
Preferential tax rate of small and micro enterprise
Guizhou Mingde Tutorial School
(iii)
Preferential tax rate of small and micro enterprise
Yunnan Hengshui Zhenxiong High School
(iii)
Preferential tax rate of small and micro enterprise
Yunnan Hengshui Wenshan Experimental High School
(iii)
Preferential tax rate of small and micro enterprise
Xishuangbanna Hengshui Experimental High School
(iii)
Preferential tax rate of small and micro enterprise
Yunnan Hengshui Qiubei Experimental High School
(iii)
Preferential tax rate of small and micro enterprise
Mengla Hengshui Experimental High School
(iii)
Preferential tax rate of small and micro enterprise
Yunnan Long-Spring Logistics Service Co., Ltd.
(iii)
25
%
Long-Spring Education Holding Group Limited
(iii)
25
%
Kunming Guandu Hengshizhong Education Training School Co., Ltd.
(iii)
Preferential tax rate of small and micro enterprise
Chongqing Hengshi Education Technology Co., Ltd.
(iii)
Preferential tax rate of small and micro enterprise
Yunnan Hengshun Property Service Co., Ltd.
(iii)
Preferential tax rate of small and micro enterprise
Kunming Chenggong Times Giant Tutorial School Co., Ltd.
(iii)
Preferential tax rate of small and micro enterprise
Kunming Wuhua District Zhuorei Culture Training School Co., Ltd.
(iii)
Preferential tax rate of small and micro enterprise
Wenshan Century Times Giant Training School Co., Ltd.
(iii)
Preferential tax rate of small and micro enterprise
Zhengzhou Hengshi Hengzhong Education Technology Co., Ltd.
(iii)
Preferential tax rate of small and micro enterprise
Shenzhen Hengshi Education Technology Co., Ltd.
(iii)
Preferential tax rate of small and micro enterprise
Xiamen Hengshi Education Technology Co., Ltd.
(iii)
Preferential tax rate of small and micro enterprise
Shanxi Long-Spring Enterprise Management Co., Ltd.
(iii)
Preferential tax rate of small and micro enterprise
Mengzi Bainian Long-Spring Education Technology Co., Ltd.
(iii)
Preferential tax rate of small and micro enterprise
Yunnan Long-Spring Education Holding Group Hengshui Experimental Middle School Management Co., Ltd
(iii)
Preferential tax rate of small and micro enterprise
Beijing New Vocational Education Cultural Development Co., Ltd.
(iii)
Preferential tax rate of small and micro enterprise
F-
41
Table of Contents
FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(In thousands of RMB, except
share data and per share data, or otherwise noted)
School name
Note
Applicable income tax rate
New Vocational Education (Yunnan) Cultural Development Co., Ltd.
(iii)
Preferential tax rate of small and micro enterprise
Beijing First High-Education Technology Co., Ltd.
(iii)
Preferential tax rate of small and micro enterprise
Zunyi Hengshi Education Technology Co., Ltd.
(iii)
Preferential tax rate of small and micro enterprise
Guizhou Long-Spring Century Technology Co., Ltd.
(iii)
Preferential tax rate of small and micro enterprise
Guizhou Hengshizhong Technology Co., Ltd.
(iii)
Preferential tax rate of small and micro enterprise
Yunnan Lihua Education Technology Co., Ltd.
(iii)
Preferential tax rate of small and micro enterprise
Zhenxiong Bainian Long-Spring Technology Co., Ltd.
(iii)
Preferential tax rate of small and micro enterprise
Xishuangbanna Long-Spring Experimental Secondary School Co., Ltd.
(iii)
25
%
Shaanxi Century Long-Spring Education Technology Co., Ltd.
(iii)
Preferential tax rate of small and micro enterprise
Shaanxi Hengshi Hengzhong Education Technology Co., Ltd.
(iii)
Preferential tax rate of small and micro enterprise
Zhenxiong Long-Spring Advanced Secondary School
(iii)
25
%
Beijing Hualing International Human Resources Co., Ltd.
(iii)
Preferential tax rate of small and micro enterprise
Datong Hengshi Gaokao Tutorial School
(iii)
Preferential tax rate of small and micro enterprise
Xinping Long-Spring Advanced Secondary School Co., Ltd.
(iii)
25
%
Yunnan Century Long-Spring Technology Co., Ltd.
(iii)
15
%
Yunnan Zhongchuang Education Tutorial School
(iii)
15
%
Notes:
(i)
As confirmed by the local tax authorities, these school are
exempt from income taxes for the years ended December 31, 2020, 2021 and 2022, respectively.
(ii)
Resorts District Hengshui Experimental Secondary School and
Yunnan Long-Spring Foreign Language Secondary School are entitled to a five-year enterprise income tax exemptions for certain revenue
that meets relevant legal requirements from January 1, 2018 through December 31, 2022 and from January 1, 2019 through December 31, 2023
respectively, as determined by the local government authorities as non-profit organizations.
(iii)
As these schools have not received confirmations from the local
tax authorities on income tax exemption, they are subject to the statutory income tax rate of
25
% for the years ended December 31, 2020,
2021 and 2022, respectively. High tech enterprises are subject to corporate income tax at a reduced rate of
15
%. For the year ended December
31, 2022, the newly established schools are qualified as small and micro enterprises, the preferential tax rates of
5
% or
10
% are applied.
(iv)
Under 2016 Revised Private Education Law, Qujing Hengshui Experimental
Secondary School have registered as non-profit schools in 2019 and are qualified for similar tax benefits as public schools, which entitle
them to income tax exemptions.
F-
42
Table of Contents
FIRST HIGH-SCHOOL EDUCATION
GROUP CO., LTD.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(In thousands of RMB, except share data and per share data,
or otherwise noted)
Under the EIT Law and its implementation rules, an enterprise
established outside China with a "place of effective management" within China is considered a China resident enterprise for
Chinese enterprise income tax purposes. A China resident enterprise is generally subject to certain Chinese tax reporting obligations
and a uniform
25
% enterprise income tax rate on its worldwide income. The implementation rules to the New EIT Law provide that non-resident
legal entities are considered PRC residents if substantial and overall management and control over the manufacturing and business operations,
personnel, accounting, properties, etc., occurs within the PRC. Despite the present uncertainties resulting from the limited PRC tax guidance
on the issue, the Company does not believe that the legal entities organized outside the PRC should be treated as China resident enterprises
for 2008 EIT law purposes.
If the PRC tax authorities subsequently determine that
the Company is deemed China resident enterprise, the Company will be subject to the PRC income tax at the rate of
25
%. Dividends paid
to non-PRC-resident corporate investor from profits earned by the PRC subsidiaries and VIEs on or after January 1, 2008 would be subject
to a withholding tax. The EIT law and its relevant regulations impose a withholding tax at
10
%, unless reduced by a tax treaty or agreement,
for dividends distributed by a PRC-resident enterprise to its non-PRC-resident corporate investor for earnings generated beginning on
January 1, 2008.
The Group does not file combined or consolidated tax returns,
therefore, losses from individual subsidiaries or the VIEs may not be used to offset other subsidiaries' or the VIEs' earnings
within the Group.
Income taxes
The income before income taxes and the provision for
PRC income taxes for the years ended December 31, 2020, 2021 and 2022 are as follows:
Years Ended December 31,
2020
2021
2022
Income before income taxes
92,934
72,823
66,114
Current income tax expense
19,366
27,261
24,424
Deferred tax benefits
(
5,332
)
(
12,219
)
(
4,407
)
Total income taxes expenses
14,034
15,042
20,017
F-
43
Table of Contents
FIRST HIGH-SCHOOL EDUCATION
GROUP CO., LTD.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(In thousands of RMB, except share data and per
share data, or otherwise noted)
Tax rate reconciliation
The actual income tax expenses reported in the consolidated
statements of comprehensive income differs from the amount computed by applying the PRC statutory income tax rate of
25
% to income
before income taxes due to the following:
Years Ended December 31,
2020
2021
2022
Income before income taxes
92,934
72,823
66,114
Income tax computed at PRC statutory tax rate
23,234
18,206
16,529
Effect of non-taxable income
(
3,516
)
(
3,369
)
(
2,917
)
Effect of non-deductible expenses
2,085
2,983
3,521
Effect of preferential tax rate
(
10,690
)
(
11,571
)
(
7,041
)
Deferred tax assets losses not recognized
3,408
8,470
9,516
Others
(
487
)
323
409
Total
14,034
15,042
20,017
Deferred
taxes
The
components of deferred tax assets and liabilities are as follows:
As of December 31,
2021
2022
Deferred tax assets:
Allowance for doubtful accounts
408
408
Deductible donation expenses carried forwards
2,646
2,901
Accrued expenses
4,126
2,692
Registration fees
3,537
3,537
Property and equipment
137
137
Net operating loss carry forwards
4,692
4,818
Total gross deferred tax assets
15,546
14,493
Valuation allowance on deferred tax assets
(
802
)
(
1,184
)
Deferred tax assets, net of valuation allowance
14,744
13,309
Deferred tax liabilities:
Property and equipment
(
969
)
(
969
)
Government grants
(
1,216
)
(
4,186
)
Total deferred tax liabilities
(
2,185
)
(
5,155
)
Net deferred tax
12,559
8,154
Analysis as:
Deferred tax assets
14,744
13,309
Deferred tax liabilities
(
2,185
)
(
5,155
)
Net deferred tax assets
12,559
8,154
F-
44
Table of Contents
FIRST HIGH-SCHOOL EDUCATION
GROUP CO., LTD.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(In thousands of RMB, except share data and per share data,
or otherwise noted)
17
DISTRIBUTION OF PROFIT
(a)
Distribution of profits
According to the resolutions of the board of director of
First High-School HK on November 27, 2018, the dividends declared to the then shareholder were RMB
80,614
. Dividends of RMB
27,880
were
paid in November 2018 and unpaid dividends of RMB
52,734
were recorded in amounts due to related parties as of December 31, 2018 and 2019,
respectively. The Group further paid out RMB
42,300
in December 2020 with a remaining balance of RMB
10,434
unpaid ("Unpaid 2018 Dividend")
which was subsequently paid in March 2021.
According to the resolutions of the board of director of First High-School
HK on December 25, 2020, the dividends declared to the then shareholder were US$
24,163
(approximately RMB
157,663
). Dividends of US$
24,163
were paid in March 2021.
(b)
Distribution to the Parent
On December 9, 2020, the Parent entered into a Share Repurchase
Agreement with its shareholder, Longwater Topco B.V. ("Longwater"), pursuant to which the Parent agreed to repurchase
718,239
of its shares from Longwater at a cash consideration of US$
15,300
, of which RMB
89,083
(approximate US$
13,713
) was paid by the Group on
the Parent's behalf. The Group made the payment in December 2020 and has accounted for such payment as a distribution to the Parent
within equity.
On January, 2021, the Parent entered into
several agreements with the Group, pursuant to which the Group agreed to make distribution to the Parent of RMB
18,424
, to offset historical
aggregated amounts due from the Parent. The distribution was made not in cash, but as offsets in January 2021 and was accounted for a
distribution to the Parent within equity.
On June, 2021, the Group acquired all of the equity interests
in Kunming Chenggong Times Giant Tutorial School Co., Ltd., Wenshan Century Times Giant Training School Co., Ltd., and Kunming Wuhua District
Zhuorui Cultural Training School Co., Ltd. (collectively known as "Yunnan Times Giant"), the acquisition was made to a related
party of the Company (same control in nature), therefore the amount of RMB
32,989
is recorded as net income of the same controlled entity.
(c)
Reserves
As stipulated by relevant PRC laws and regulations, the
Company's subsidiaries and consolidated VIEs in the PRC must take appropriations from after-tax profit to non-distributive funds.
These reserves include general reserve and the development
reserve.
The general reserve requires annual appropriation
10
% of
after-tax profits as determined under PRC GAAP at each year-end until the balance reaches
50
% of the PRC Company's registered capital.
The other reserve is set aside at the company's discretion. These reserves can only be used for general enterprise expansion and
are not distributable as cash dividends. The general reserve as of December 31, 2021 and 2022 were RMB
5,095
and RMB
5,491
respectively.
Each of the schools is required to appropriate
25
%, if
any, of its after-tax profits as determined under PRC GAAP to a non-distributable education development reserve for the construction or
maintenance of the school or procurement or upgrading of educational equipment. In accordance with the 2004 Implementing Rules, this reserve
can only be used for school construction, maintenance and upgrade of education equipment. The development reserve is restricted net assets
of the schools which are un-distributable to the Company in the form of dividends or loans. The education development reserve as of December
31, 2021 and 2022 were RMB
43,965
and RMB
48,875
, respectively.
(d)
Declared dividends
Pursuant to a board meeting dated December 25, 2020,
the Company declared a dividend of US$
24,163
(approximately RMB
157,663
) to the shareholders of the Company upon the consummation of the
Corporate Restructuring described in Note 22. Such dividend was paid in full in March 2021.
Pursuant to a board meeting dated September 30, 2022,
the Company declared a dividend of US$
1,240
(approximately RMB
8,564
) to the shareholders in Note 22. As December 31, 2022, RMB
6,432
has
been paid. The remaining dividend will be paid in October 2023.
F-
45
Table of Contents
FIRST HIGH-SCHOOL EDUCATION
GROUP CO., LTD.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(In thousands of RMB, except share data and per
share data, or otherwise noted)
18
EARNINGS PER ORDINARY SHARE
Years Ended December 31,
2020
2021
2022
Numerator
Net income from continuing operations attributable to First High-school Education Group Co., Ltd.
78,799
57,781
45,016
Net income (loss) from discontinued operations attributable to First High-school Education Group Co., Ltd.
2,019
(
5,088
)
(
7,691
)
Denominator
Weighted average number of ordinary shares – basic and diluted
Basic
70,488,700
83,925,002
86,838,700
Diluted
70,488,700
85,775,002
88,688,700
Basic earnings per share from continued operation
RMB
1.12
RMB
0.69
RMB
0.52
Basic earnings (loss) per share from discontinued operation
RMB
0.03
RMB
(
0.06
)
RMB
(
0.09
)
Diluted earnings per share from continued operation
RMB
1.12
RMB
0.67
RMB
0.51
Diluted earnings (loss) per share from discontinued operation
RMB
0.03
RMB
(
0.06
)
RMB
(
0.09
)
19
SEGMENT INFORMATION
The Group has one operating segment, which is engaged in
provision of full spectrum private fundamental education and complementary education services. The Group's chief operating decision
maker is the chief executive officer of the Group who reviews consolidated results when making decisions about allocating resources and
assessing performance of the Group. Accordingly, no reportable segment information is presented.
During the years ended December 31, 2020, 2021 and 2022, substantially
all of the Group's operations and long-lived assets were in the PRC.
20
COMMITMENTS AND CONTINGENCIES
(a)
Capital commitments
Capital commitments outstanding as of December 31, 2021 and
2022 not provided for in the consolidated financial statements were as follows:
As of December 31,
2021
2022
Contracted for payable of student related uniform, luggage, and teaching
materials
21,044
26,707
(b)
Lease commitments
The Group's lease commitments are disclosed in Note
12.
F-
46
Table of Contents
FIRST HIGH-SCHOOL EDUCATION
GROUP CO., LTD.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(In thousands of RMB, except share data and per
share data, or otherwise noted)
21
RELATED PARTY TRANSACTIONS
As of December 31, 2022, the amounts due to the related parties
were consisted of the followings:
Name
Amount
Relationship
Note
Yunnan Long-Spring Education Technology Co., Ltd.
1,432
Entity significantly influenced by Mr. Zhang
Other payables, interest free and payment on demand.
Yunnan Preparatory School for Studying Abroad
2,000
Cooperative education projects
Other payables, interest free and payment on demand.
Campus Reserve Fund
3,019
Management
Other payables, interest free and payment on demand.
Beijing Long-Spring International Education Technology Research Institute
900
Entity significantly influenced by Mr. Zhang
Other payables, interest free and payment on demand.
Beijing Tomorrow Future Plus Education Technology Co., Ltd.
6
Controlled by the same shareholder
Other payables, interest free and payment on demand.
Lihua Family Education Technology (Beijing) Co., Ltd.
7,446
Controlled by the same shareholder
Other payables, interest free and payment on demand.
Chengdu First Carbon New Technology Co., Ltd.
3
Controlled by the same shareholder
Other payables, interest free and payment on demand.
Yunnan Three Three One Education Technology Co., Ltd.
36,869
Controlled by the same shareholder
Other payables, interest free and payment on demand.
51,675
As of December 31, 2022, the amounts due from the related
parties were consisted of the followings:
Name
Amount
Relationship
Note
Beijing Long-Spring Education Technology Group Co., Ltd.
29,969
Entity controlled by Mr. Zhang*
Loan receivables*, interest free and payment on demand.
Lihua Family Education Technology (Beijing) Co., Ltd.
3,333
Controlled by the same shareholder
Loan receivables*, interest free and payment on demand.
Chengdu First Carbon New
    Technology Co., Ltd.
5,192
Controlled by the same shareholder
Loan receivables*, interest free and payment on demand.
Yunnan Three Three One Education Technology Co., Ltd.
339
Controlled by the same shareholder
Loan receivables*, interest free and payment on demand.
Zunyi Huichuan Hengshi Education and Training School
139
Cooperative education projects
Loan receivables*, interest free and payment on demand.
Yunnan Long-Spring Education Technology Co., Ltd.
3,173
Controlled by the same shareholder Entity significantly influenced by Mr. Zhang
Loan receivables*, interest free and payment on demand.
Yunnan Huayiweiming Technology Co., Ltd.
15,503
Entity significantly influenced by Mr. Zhang
Loan receivables*, interest free and payment on demand.
Beijing Long-Spring International Education Technology Research Institute
25
Entity significantly influenced by Mr. Zhang
Loan receivables*, interest free and payment on demand.
Beijing Tomorrow Future Plus Education Technology Co., Ltd.
1
Controlled by the same shareholder
Loan receivables*, interest free and payment on demand.
Kunming Xinxiaoling Human Resources Co., Ltd.
277
Controlled by the same shareholder
Loan receivables*, interest free and payment on demand.
Mengzi Long-Spring Experimental Secondary School
331
Cooperative education projects
Loan receivables*, interest free and payment on demand.
Shaanxi Long-Spring Enterprise Management Consulting Partnership (Limited Partnership)
10
Controlled by the same shareholder
Loan receivables*, interest free and payment on demand.
Campus Reserve Fund
12,123
Management
Loan receivables*, interest free and payment on demand.
Zunyi Huichuan Long-Spring Jincheng Education Consulting Co., Ltd.
1,976
Controlled by the same shareholder
Loan receivables*, interest free and payment on demand.
Zhang, Shaodong
1,059
Mr. Zhang's immediate family member
Loan receivables*, interest free and payment on demand.
73,450
F-
47
Table of Contents
FIRST HIGH-SCHOOL EDUCATION
GROUP CO., LTD.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(In thousands of RMB, except share data and per
share data, or otherwise noted)
As of December 31, 2021, the amounts due to the related parties
were consisted of the followings:
Name
Amount
Relationship
Note
Yunnan Three Three One Education Technology Co., Ltd.
14,885
Entity significantly influenced by Mr. Zhang
Other payables, interest free and payment on demand.
Zhang, Shaodong
1,374
Mr. Zhang's immediate family member
Other payables, interest free and payment on demand.
Campus Reserve Fund
1,487
Management
Other payables, interest free and
Chengdu Longquanyi District Hengshi Education Training School Co., Ltd.
163
Controlled by the same shareholder
Other payables, interest free and payment on demand.
17,909
As of December 31, 2021, the amounts due from the related
parties were consisted of the followings:
Name
Amount
Relationship
Note
Beijing Long-Spring Education Technology Group Co., Ltd.
11,062
Entity controlled by Mr. Zhang*
payment on demand. Loan receivables*, interest free and
Yunnan Shaowei Education Information Consulting Co., Ltd.
260
Controlled by the same shareholder
Loan receivables*, interest free and payment on demand.
Zunyi Huichuan District Long-Spring Jincheng Education
Consulting Co., Ltd.
160
Controlled by the same shareholder
Loan receivables*, interest free and payment on demand.
Campus Reserve Fund
225
Management
payment on demand. Loan receivables*, interest free and
11,707
22
DIVIDEND
PAYABLES
According to the resolutions of the board of director
of First High-School HK on November 27, 2018, the dividends declared to the then shareholder were RMB
80,614
. Dividends of RMB
27,880
and
RMB
42,300
was paid in November 2018, and December 2020 respectively. A remaining balance of RMB
10,434
, was paid in March 18, 2021. Pursuant
to a board meeting dated December 25, 2020, the Company declared a dividend of US$
24,163
(approximately RMB
156,254
) to the shareholders
of the Company upon the consummation of the Corporate Restructuring. Such dividend was paid in full on March 18, 2021. The sum of the
two dividends paid on March 18, 2021 totaled RMB
166,688
.
Pursuant to a board meeting dated September 30, 2022,
the Company declared a dividend of US$
1,240
(approximately RMB
8,564
) to the shareholders. As December 31, 2022, RMB
6,432
has been paid.
The remaining dividend will be paid in October 2023.
F-
48
Table of Contents
FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of RMB, except share data and per share data, or otherwise noted)
23
SUBSEQUENT EVENTS
The Company has evaluated subsequent events through the
date of the issuance of the consolidated financial statements and no subsequent event is identified.
24
RESTRICTED NET ASSETS
The Group's ability to pay dividends is primarily
dependent on the Group receiving distributions of funds from its subsidiaries and VIEs. Relevant PRC statutory laws and regulations permit
payments of dividends by the Group's subsidiaries and VIEs incorporated in the PRC only out of their retained earnings, if any,
as determined in accordance with PRC accounting standards and regulations. The results of operations reflected in the financial statements
prepared in accordance with US GAAP differ from those reflected in the statutory financial statements of the Group's subsidiaries
and VIEs.
In accordance with the PRC laws and regulations, statutory
reserve funds shall be made and can only be used for specific purposes and are not distributable as cash dividends. As a result of these
PRC laws and regulations that require annual appropriations of
10
% of net after tax profits to be set aside prior to payments of dividends
as general reserve fund or statutory surplus fund; and in private school sector, annual appropriations of
25
% of net after tax profits
to be set aside prior to payments of dividends as development fund. The Group's PRC subsidiaries and VIEs are restricted in their
ability to transfer a portion of their net assets to the Company.
As of December 31, 2022, the total restricted net assets
of the Company's subsidiaries and VIEs incorporated in PRC and subjected to restriction amounted to RMB
118
,
970.
25
CONDENSED
FINANCIAL STATEMENTS OF THE COMPANY
The Company performed a test on the restricted net assets
of its consolidated subsidiaries and VIEs (the "restricted net assets") in accordance with Securities and Exchange Commission
Regulation S-X Rule 4-08 (e) (3), "General Notes to Financial Statements" and concluded that it was applicable to disclose
the condensed financial information of the Company.
F-
49
Table of Contents
FIRST HIGH-SCHOOL EDUCATION GROUP CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of RMB, except share data and per
share data, or otherwise noted)
The following condensed financial statements of the Company
have been prepared using the same accounting policies as set out in the Company's consolidated financial statements except that
the Company used the equity method to account for its investment in its subsidiaries and VIEs. Such investment is presented on the separate
condensed balance sheets of the Company as "Investments in subsidiaries and VIEs". The Company, its subsidiaries and VIEs
were included in the consolidated financial statements whereby the inter-company balances and transactions were eliminated upon consolidation.
The Company's share of income/ (loss) from its subsidiaries and VIEs is reported as share of income/ (loss) from subsidiaries and
VIEs in the condensed financial statements. Certain information and footnote disclosures generally included in financial statements prepared
in accordance with US GAAP have been condensed and omitted.
As of December 31, 2022, there were no material commitments
or contingencies, significant provisions for long-term obligations or guarantees of the Company, except for those which have been separately
disclosed in the consolidated financial statements, if any.
Condensed Balance Sheets
As of December 31,
2021
2022
Assets
Current assets:
Cash
10,812
7,842
Amounts due from related parties
-
74,505
Prepaid expenses and other current assets
7,767
-
Total assets
18,579
82,347
Non-current assets
Investments in subsidiaries and VIEs
222,869
148,931
Total non-current assets and total assets
241,448
231,278
Liabilities and Shareholders' Equity
Current liabilities
Amounts due to a related party
10,434
-
Accrued expenses and other current liabilities
-
1,045
Total current liabilities and total liabilities
10,434
1,045
Shareholders' equity
Ordinary shares (US$
0.00001
par value;
5,000,000,000
shares authorized; and
86,838,700
shares issued and outstanding as of December 31, 2021, and
86,838,700
shares issued and outstanding as of December 31, 2022, respectively)
6
6
Additional paid-in capital
389,199
349,125
Statutory reserves
49,060
54,366
Accumulated other comprehensive loss
462
2,430
Accumulated deficits
(
207,713
)
(
175,694
)
Total shareholders' equity
231,014
230,233
Total liabilities and shareholders' equity
241,448
231,278
Condensed Statements
of Comprehensive Income
Years Ended December 31,
2020
2021
2022
Share of income from subsidiaries and VIEs
80,818
52,693
38,406
Net income before income taxes
80,818
52,693
38,406
Income tax expense
—
—
—
Net income of the Company
80,818
52,693
38,406
Other comprehensive (expense)/income
(
8,019
)
3,635
6,127
Comprehensive income
72,799
56,328
44,533
F-50