UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2024

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________.

OR

☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report:

Commission file number: 001-40306

UTime Limited

(Exact name of Registrant as Specified in its Charter)

Cayman Islands

(Jurisdiction of Incorporation or Organization)

7th Floor, Building 5A

Shenzhen Software Industry Base, Nanshan District

Shenzhen, People’s Republic of China 518061

(Address of Principal Executive Offices)

Hengcong Qiu

Tel: (86) 755 86512266

7th Floor, Building 5A

Shenzhen Software Industry Base, Nanshan District

Shenzhen, People’s Republic of China 518061

(Name, Telephone, E-mail and/or Facsimile Number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of Each Class |  | Trading symbol |  | Name of Each Exchange On Which Registered
Ordinary shares, par value US$ $0.0001 per share |  | WTO |  | NASDAQ Capital Market

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

(Title of Class)

The number of outstanding shares of each of the issuer’s classes of capital or common stock as of March 31, 2024 was: 392,113,953 ordinary shares, par value $0.0001 per share.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☐ No ☒

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

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. ☐

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 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). ☐

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 ☒

UTIME LIMITED

FORM 20-F ANNUAL REPORT

TABLE OF CONTENTS

|  |  |  | Page
|  | PART I |  | 1
Item 1. |  | Identity of Directors, Senior Management and Advisers |  | 4
Item 2. |  | Offer Statistics and Expected Timetable |  | 4
Item 3. |  | Key Information |  | 4
Item 4. |  | Information On The Company |  | 64
Item 4A. |  | Unresolved Staff Comments |  | 98
Item 5. |  | Operating And Financial Review And Prospects |  | 99
Item 6. |  | Directors, Senior Management And Employees |  | 108
Item 7. |  | Major Shareholders And Related Party Transactions |  | 115
Item 8. |  | Financial Information |  | 116
Item 9. |  | The Offer And Listing |  | 118
Item 10. |  | Additional Information |  | 119
Item 11. |  | Quantitative And Qualitative Disclosures About Market Risk |  | 139
Item 12. |  | Description Of Securities Other Than Equity Securities |  | 139
|  | PART II |  | 140
Item 13. |  | Defaults, Dividend Arrearages And Delinquencies |  | 140
Item 14. |  | Material Modifications To The Rights Of Security Holders And Use Of Proceeds |  | 140
Item 15. |  | Controls And Procedures |  | 140
Item 16. |  | [Reserved] |  | 142
Item 16A. |  | Audit Committee Financial Expert |  | 142
Item 16B. |  | Code Of Ethics |  | 142
Item 16C. |  | Principal Accountant Fees and Services |  | 142
Item 16D. |  | Exemptions From The Listing Standards For Audit Committees |  | 142
Item 16E. |  | Purchases Of Equity Securities By The Issuer And Affiliated Purchasers |  | 142
Item 16F. |  | Change In Registrant’s Certifying Accountant |  | 142
Item 16G. |  | Corporate Governance |  | 142
Item 16H. |  | Mine Safety Disclosure |  | 143
Item 16I. |  | Disclosure Regarding Foreign Jurisdictions That Prevent Inspections. |  | 143
Item 16J. |  | Insider Trading Policies |  | 143
|  | PART III |  | 144
Item 17. |  | Financial Statements |  | 144
Item 18. |  | Financial Statements |  | 144
Item 19. |  | Exhibits |  | 144

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PART I

CERTAIN INFORMATION

In this annual report on Form 20-F, unless otherwise indicated, “we,” “us,” “our,” the “Company” or similar terms refer to UTime Limited, a Cayman Islands exempted company, and/or its wholly-owned subsidiaries, other than the variable interest entity, unless the context otherwise indicates; and “VIE” refers to the variable interest entity, United Time Technology Co., Ltd. UTime Limited’s operations in China are conducted primarily through the VIE and its subsidiaries in China, and UTime Limited does not conduct any business on its own. The financial results of the VIE and its subsidiaries are consolidated into our financial statements for accounting purposes, but we do not hold any equity interest in the VIE or any of its subsidiaries. Investors are purchasing an interest in UTime Limited, a Cayman Islands holding company.

Please see Item 3. Key Information - D. Risk Factors- Risks Related to Doing Business in China” beginning on page 16 for a detailed description of various risks related to doing business in China and other information that should be considered before making a decision to purchase any of our securities.

For details on the effects of HFCA Act on us, see “Item 3. Key Information - D. Risk Factors - Risks Related to Doing Business in China - Our ordinary shares may be delisted under the HFCA Act if the PCAOB is unable to adequately inspect audit documentation located in China. The delisting of our ordinary shares, or the threat of their being delisted, may materially and adversely affect the value of your investment. Additionally, the inability of the PCAOB to conduct adequate inspections deprives our investors with the benefits of such inspections. Furthermore, on June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, and on December 29, 2022, a legislation entitled “Consolidated Appropriations Act, 2023” (the “Consolidated Appropriations Act”) was signed into law by President Biden, which contained, among other things, an identical provision to Accelerating Holding Foreign Companies Accountable Act and amended the Holding Foreign Companies Accountable Act by reducing the period of time for foreign companies to comply with PCAOB audits to two consecutive years, instead of three, thus reducing the time period before our securities may be prohibited from trading or delisted.” on page 45.

GLOSSARY OF TERMS

The following is a glossary of the electronics industry and the PRC legal systems used in this annual report on Form 20-F. Other defined terms may be found in the body of this annual report.

AQSIQ |  | Administration of Quality Supervision, Inspection and Quarantine
BOM |  | bill of materials
CAB |  | Conformance Assessment Body
CAC |  | Cyberspace Administration of China
CCB |  | China Construction Bank
CNCA |  | Certification and Accreditation Administration of China
CPA |  | Consumer Protection Act, 1986
CRBZ |  | China Resources Bank of Zhuhai Co., Ltd.
CSRC |  | China Securities Regulatory Commission
DGFT |  | Directorate General of Foreign Trade
EMS |  | Electronics Manufacturing Services
EPF Act |  | Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
ESI Act |  | Employees’ State Insurance Act, 1948
FDI |  | Foreign Direct Investment
FEMA |  | Foreign Exchange and Management Act, 1999
FEMA Rules, 2019 |  | Foreign Exchange Management (Non-debt Instruments) Rules, 2019
FLA |  | Foreign Liabilities and Assets
Gratuity Act |  | Payment of Gratuity Act, 1972
HFCA Act |  | The Holding Foreign Companies Accountable Act
ID |  | Industrial Design
IE Code |  | Importer Exporter Code Number
IMF |  | International Monetary Fund
IoT |  | Internet of Things
IPR |  | Intellectual Property Right
JV |  | joint venture
mAh |  | Milliamp hour
MD |  | Mechanic Design

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MIIT |  | Ministry of Industry and Information Technology
MOFCOM |  | Ministry of Commerce of the PRC
MRP |  | Material Requirements Planning
NCLT |  | National Company Law Tribunal
NDRC |  | National Development and Reform Commission
ODM |  | Original Design Manufacturer
OEM |  | Original Equipment Manufacturer
OGL |  | Open General License
PCAOB |  | Public Company Accounting Oversight Board (United States)
PCBA |  | Printed circuit board and assembly
PFIC |  | passive foreign investment company
POSH Act |  | Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013
PRC |  | People’s Republic of China
SAFE |  | State Administration of Foreign Exchange
SCNPC |  | Standing Committee of the National People’s Congress
Shops Act |  | Shops and Commercial Establishments Act
SMF |  | Single Master Form
SMT |  | Surface Mounting Technology
TM Act |  | Trade Marks Act, 1999
TQM |  | Total Quality Management
VIE |  | Variable Interest Entity, which refers to United Time Technology Co., Ltd.
WOS |  | Wholly owned subsidiary

Unless the context indicates otherwise, all references to “China” and the “PRC” refer to the People’s Republic of China, all references to “Renminbi” or “RMB” are to the legal currency of the People’s Republic of China and all references to “U.S. dollars,” “dollars” and “$” are to the legal currency of the United States. This annual report contains translations of Renminbi amounts into U.S. dollars at specified rates solely for the convenience of the reader. We make no representation that the Renminbi or U.S. dollar amounts referred to in this report could have been or could be converted into U.S. dollars or Renminbi, as the case may be, at any particular rate or at all. On March 31, 2024, the cash buying rate announced by the People’s Bank of China was RMB7.0950 to $1.00.

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FORWARD-LOOKING STATEMENTS

This report contains “forward-looking statements” for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 that represent our beliefs, projections and predictions about future events. All statements other than statements of historical fact are “forward-looking statements,” including any projections of earnings, revenue or other financial items, any statements of the plans, strategies and objectives of management for future operations, any statements concerning proposed new projects or other developments, any statements regarding future economic conditions or performance, any statements of management’s beliefs, goals, strategies, intentions and objectives, and any statements of assumptions underlying any of the foregoing. Words such as “may”, “will”, “should”, “could”, “would”, “predicts”, “potential”, “continue”, “expects”, “anticipates”, “future”, “intends”, “plans”, “believes”, “estimates” and similar expressions, as well as statements in the future tense, identify forward-looking statements.

These statements are necessarily subjective and involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance or achievements, or industry results, to differ materially from any future results, performance or achievements described in or implied by such statements. Actual results may differ materially from expected results described in our forward-looking statements, including with respect to correct measurement and identification of factors affecting our business or the extent of their likely impact, and the accuracy and completeness of the publicly available information with respect to the factors upon which our business strategy is based or the success of our business.

Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of whether, or the times by which, our performance or results may be achieved. Forward-looking statements are based on information available at the time those statements are made and management’s belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to, those factors discussed under the headings “Risk Factors,” “Operating and Financial Review and Prospects,” and elsewhere in this report.

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ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not Applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not Applicable.

ITEM 3. KEY INFORMATION

Our Holding Company Structure and Contractual Arrangements with the VIE

UTime Limited is not a Chinese operating company, but rather a Cayman Islands holding company with no equity ownership in the VIE. Our Cayman Islands holding company does not conduct business operations directly. We conduct our operations in China through the VIE and its subsidiaries in China. Our WFOE in China has maintained a series of contractual arrangements with the VIE and its shareholders, which established the VIE structure. Investing in UTime Limited’s ordinary shares is highly speculative and involves a significant degree of risk. This variable interest entity structure involves unique risks to investors. There is no limitation or restriction on foreign investment in the industry where our VIE operates at present. We adopt the VIE structure, because Chinese laws prohibit foreign investors from holding more than 50% of equity interests in value-added telecommunication businesses, which we may explore and operate in the future, and our indirectly wholly-owned Chinese subsidiary, Shenzhen UTime Technology Consulting Co., Ltd., or UTime WFOE, as a foreign invested enterprise under Chinese laws, is not eligible to operate a value-added telecommunication business in China. Instead, our VIE and subsidiaries of VIE located inside the PRC are the Chinese operating companies. We do not have any equity ownership of the VIE, instead we receive the economic benefits of the VIE’s business operations through certain contractual arrangements. Accordingly, we operate the businesses in China through the VIE and its subsidiaries, and rely on contractual arrangements among UTime WFOE, the VIE and its shareholders to control the business operations of the VIE. The VIE is consolidated for accounting purposes, but are not entities in which our Cayman Islands holding company, or our investors, own equity. Investors in our ordinary shares are not purchasing equity interest in the VIE in China, but instead are purchasing equity interest in a holding company incorporated in the Cayman Islands. Investors in our ordinary shares may never directly hold equity in the VIE and its subsidiaries.

A series of contractual agreements, including business operation agreement, equity pledge agreement, exclusive technical consultation and service agreement, exclusive call option agreement, power of attorney and spousal consent letters, have been entered into by and among UTime WFOE, the VIE and its respective shareholders. These contractual agreements enable us to: (i) determine the most significant economic activities of the VIE; (ii) receive substantially all of the economic benefits of the VIE; and (iii) have an exclusive option to purchase all or part of the equity interest in and/or assets of the VIE when and to the extent permitted by PRC laws.

Despite the lack of legal majority ownership, our Cayman Island holding company is considered the primary beneficiary of the VIE and consolidates the VIE and its subsidiaries as required by Accounting Standards Codification topic 810, Consolidation. Accordingly, we treat the VIE as our consolidated entities under U.S. GAAP and we consolidate the financial results of the VIE in our consolidated financial statements in accordance with U.S. GAAP. For more details of these contractual arrangements, see “Item 4. Information on the Company-4A. History and Development of the Company-Contractual Arrangements with the VIE and its Respective Shareholders.”

However, the contractual agreements may not be as effective as the control provided by having a direct ownership in the VIE and we may incur substantial costs to enforce the terms of the arrangements. We have no direct or indirect equity interests in the VIE or any of its subsidiaries. Uncertainties in the PRC legal system may limit our ability, as a Cayman Islands holding company, to enforce these contractual agreements. The contractual agreements have not been tested in a court of law. Meanwhile, there are very few precedents as to whether contractual agreements would be judged to form effective control over the relevant VIE through the contractual arrangements, or how contractual arrangements in the context of a VIE should be interpreted or enforced by the PRC courts. Should legal actions become necessary, we cannot guarantee that the court will rule in favor of the enforceability of the VIE contractual arrangements. In the event we are unable to enforce these contractual arrangements, or if we suffer significant delay or other obstacles in the process of enforcing these contractual arrangements, we may not be able to determine the most significant economic activities of the VIE, and our ability to conduct our business may be materially adversely affected. In addition, the enforceability of the various contracts described above by our company against the VIE is dependent upon the shareholders of the VIE. If the shareholders of the VIE fail to perform their obligations under the contractual arrangements, we could be unable to enforce the contractual arrangements that enable us to consolidate the VIE’s operations and financial results in our financial statements in accordance with U.S. GAAP as the primary beneficiary. If this happens, we would need to deconsolidate the VIE. The majority of our assets, including the necessary licenses to conduct business in China are held by the VIE and its PRC subsidiaries and a significant part of our revenues are generated by the VIE and its subsidiaries. Any event that results in the deconsolidation of the VIE would have a material effect on our operations and result in the value of our ordinary shares diminishing substantially or even become worthless. See “Item 3. Key Information-D. Risk Factors-Risks Related to Our Corporate Structure-We do not hold direct equity interest in the VIE. We rely on contractual arrangements with our VIE and its shareholders for a large portion of our business operations, which may not be as effective as direct ownership in providing operational control.” and “-The shareholders of our VIE may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition.”

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We are subject to risks due to the uncertainty of the interpretation and application of the laws and regulations of the PRC, regarding the VIE and the VIE structure, including, but not limited to, regulatory review of overseas listing of PRC companies through a special purpose vehicle, and the validity and enforcement of the contractual arrangements with the VIE. It is uncertain whether any new PRC laws or regulations relating to the VIE structure will be adopted or if adopted, what they would provide. If we or the VIE is 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.

If the PRC government deems that our contractual arrangements with the VIE do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change or are interpreted differently in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations. Our Cayman Islands holding company, our PRC subsidiaries and the VIE, and investors of our company face uncertainty about potential future actions by the PRC government that could affect the enforceability of the contractual arrangements with the VIE and, consequently, significantly affect the financial performance of the VIE and our company as a whole. We are also subject to the risk that the Chinese regulatory authorities could disallow the VIE structure, which could result in a material change in our operations and the value of our ordinary shares, including that it could cause the value of our ordinary shares to significantly decline or become worthless. See “Item 3. Key Information-D. Risk Factors-Risks Related to Our Corporate Structure- UTime Limited is a holding company with no material operation. We conduct substantially all of our operations through the VIE and its subsidiaries, and we rely on contractual arrangements with the VIE and its shareholders to operate our business. If the PRC government deems that the agreements that establish the structure for operating some of our operations in China do not comply with PRC regulations relating to the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations.” and “-Substantial uncertainties exist with respect to the interpretation and implementation of the newly enacted PRC Foreign Investment Law and its Implementation Regulations and how they may impact the viability of our current corporate structure, corporate governance, business operations and financial results.”

We face various risks and uncertainties related to doing business in China. Our business operations are primarily conducted in China, and we are subject to complex and evolving PRC laws and regulations. For example, we face risks associated with regulatory approvals on overseas offerings conducted by and foreign investment in China-based issuers, the use of the VIE, anti-monopoly regulatory actions, and oversight on cybersecurity and data privacy. Recently, the PRC government has indicated an intent to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers, and initiated a series of regulatory actions and made a number of public statements to regulate business operations in China, some of which are published with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas using variable interest entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. These risks could result in a material adverse change in our operations and the value of our ordinary shares, significantly limit or completely hinder our ability to continue to offer ordinary shares to investors, or cause the value of such ordinary shares to significantly decline or become worthless. For a detailed description of risks related to doing business in China, “Item 3. Key Information-D. Risk Factors-Risks Related to Doing Business in China.”

Risks and uncertainties arising from the legal system in China, including risks and uncertainties regarding the enforcement of laws and quickly evolving rules and regulations in China, could result in a material adverse change in our operations and the value of our ordinary shares. For more details, see “Item 3. Key Information-D. Risk Factors-Risks Related to Doing Business in China-Uncertainties with respect to the PRC legal system and changes in laws and regulations in China could adversely affect us.”

Permissions Required from the PRC Authorities for Our Operations

Our operations in China are governed by PRC laws and regulations. As of the date of this annual report, each of UTime WFOE, the VIE and the VIE’s subsidiaries in China has obtained the requisite licenses and permits from the PRC government authorities that are material for the business operations in China. UTime WFOE, the VIE and the VIE’s subsidiaries in China are not operating in an industry that prohibits or limits foreign investment. As a result, UTime WFOE, the VIE and the VIE’s subsidiaries in China are not required to obtain any permission from Chinese authorities to operate other than those requisite for a domestic company in China will need to engage in the businesses similar to ours. Such licenses and permissions include, among others, the Business License, Certificate of the Customs of the People’s Republic of China on Registration of A Customs Declaration Entity, and other relevant permits required for operating our business. Neither have we nor our subsidiaries or the VIE or the VIE’s subsidiaries received any denial of permissions for their operation.

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Furthermore, the PRC government has recently indicated an intent to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers. Accordingly, there have been certain new or draft laws, regulations in relation to cybersecurity and data privacy, offerings conducted overseas by, and foreign investment in, China-based issuers (the “New Regulations”). For more detailed information, see “Item 4. Information on the Company-B. Business Overview-Regulations-Regulations on Overseas Listings.” And “Item 4. Information on the Company-B. Business Overview-Regulations-Regulation on Information Security and Censorship.” According to the New Regulations, we may be required to fulfill filing, reporting procedures and obtain approval from the China Securities Regulatory Commission, or the CSRC, in connection with follow-on offering and other equivalent overseas offing activities in an overseas market, and may be required to go through cybersecurity review by the Cyberspace Administration of China, or the CAC. If the New Regulations are enacted as currently proposed and we fail to obtain the relevant approval or complete other filing procedures thereof, for any future overseas offering or listing, we may face sanctions by the CSRC or other PRC regulatory authorities, which may include fines and penalties on our operations in China, limitations on our operating privileges in China, restrictions on or prohibition of the payments or remittance of dividends by our subsidiaries in China, restrictions on or delays to our future financing transactions offshore, or other actions that could have a material and adverse effect on our business. Any failure of us to fully comply with new regulatory requirements may significantly limit or completely hinder our ability to continue to offer our ordinary shares, cause significant disruption to our business operations, and severely damage our reputation, which could materially and adversely affect our financial condition and results of operations and cause our ordinary shares to significantly decline in value or become worthless. For more detailed information, see “Item 3. Key Information-D. Risk Factors-Risks Related to Doing Business in China-We may be required to obtain permission or approval or other compliance procedures from Chinese authorities to operate and issue ordinary shares to foreign investors in our offering and/or listing on the NASDAQ Capital Market, and if required and we or the VIE or the VIE’s subsidiaries are not able to obtain such permission or approval in a timely manner, our ordinary shares may substantially decline in value and become worthless.

On July 6, 2021, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the “Opinions on Severely Cracking Down on Illegal Securities Activities According to Law,” or the Opinions. The Opinions emphasized the need to strengthen the administration over illegal securities activities, and the need to strengthen the supervision over overseas listings by Chinese companies. Effective measures, such as promoting the construction of relevant regulatory systems will be taken to deal with the risks and incidents of China-concept overseas listed companies, and cybersecurity and data privacy protection requirements and similar matters. The Opinions and any related implementing rules to be enacted may subject us to compliance requirement in the future. Given the current regulatory environment in the PRC, we are still subject to the uncertainty of different interpretation and enforcement of the rules and regulations in the PRC adverse to us, which may take place quickly with little advance notice.

On December 28, 2021, thirteen PRC regulatory agencies, namely, the CAC, the NDRC, the Ministry of Industry and Information Technology, the Ministry of Public Security, the Ministry of State Security, the Ministry of Finance, MOFCOM, SAMR, CSRC, the People’s Bank of China, the National Radio and Television Administration, National Administration of State Secrets Protection and the National Cryptography Administration, jointly adopted and published the Measures for Cybersecurity Review, which further restates and expands the applicable scope of the cybersecurity review and took effect on February 15, 2022. Pursuant to Measures for Cybersecurity Review, if a network platform operator holding personal information of over one million users seeks for “foreign” listing, it must apply for the cybersecurity review. In addition, operators of critical information infrastructure purchasing network products and services are also obligated to apply for the cybersecurity review for such purchasing activities. Although the Measures for Cybersecurity Review provides no further explanation on the extent of “network platform operator” and “foreign” listing, we do not believe we are obligated to apply for a cybersecurity review pursuant to the Measures for Cybersecurity Review, considering that (i) we are not in possession of or otherwise holding personal information of over one million users and it is also very unlikely that we will reach such threshold in the near future; (ii) as of the date of this annual report, we have not received any notice or determination from applicable PRC governmental authorities identifying it as a critical information infrastructure operator.

6

On February 17, 2023, the CSRC promulgated the Trial Administrative Measures of the Overseas Securities Offering and Listing by Domestic Companies (the “Trial Measures”) and five supporting guidelines, which became effective on March 31, 2023. According to the Trial Measures, among other requirements, any domestic companies that seek to offer or list securities overseas, both directly and indirectly, should fulfil the filing procedures with the CSRC within three business days after the submission of the overseas offering and listing application. The Trial Measures provide that if an issuer meets both of the following criteria, the overseas offering and listing of securities conducted by such issuer shall be determined as an indirect overseas offering and listing by a PRC domestic enterprise and is therefore subject to the filing and reporting requirements as required thereunder: (i) any of the operating revenue, total profits, total assets or net assets of the PRC domestic enterprise(s) of the issuer in the most recent fiscal year accounts for more than 50% of the corresponding item in the issuer’s audited consolidated financial statements for the same period; and (ii) the main parts of the issuer’s operation activities are conducted in mainland China, or the principal operation premises are located in mainland China, or the majority of senior management personnel in charge of its business operations and management are PRC citizens or have habitual residences located in mainland China. The Trial Measures further stipulate that the determination as to whether a PRC domestic company is indirectly offering and listing securities in an overseas market shall be made on a substance-over-form basis. According to one of the Guidelines for Overseas Listing, where an issuer does not fall within the circumstances as stipulated aforementioned, but the risk factors disclosed in the submitted listing application documents pursuant to the relevant overseas market regulations are mainly related to mainland China, the securities companies and the PRC counsels of the issuer shall, act in accordance with the Trial Measures for Overseas Listing and follow the principle of substance-over-form, conduct comprehensive demonstration and identification with regard to whether the issuer falls within the scope which is subject to the filing requirements under the Trial Measures for Overseas Listing. If a PRC company fails to complete required filing procedures or conceals any material fact or falsifies any major content in its filing documents, such PRC company may be subject to administrative penalties, such as order to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties, such as warnings and fines. On the same day, the CSRC also held a press conference for the release of the Trial Measures and issued the Notice on Administration for the Filing of Overseas Offering and Listing by Domestic Companies, which, among others, clarifies that PRC domestic companies that have already been listed overseas on or before the effective date of the Trial Measures for Overseas Listing (i.e., March 31, 2023) can be deemed as existing issuers, or the Existing Issuers. Existing Issuers are not required to complete the filling procedures immediately for their historical offerings and listing, and they are required to file with the CSRC when they conduct subsequent financing activities. We do not believe that we are required to obtain the approval from or complete the filing with the CSRC because we became a public company before the Trial Measures went into effect. If in the future we are going to conduct any offering or financing in the U.S., we will complete filing procedures with the CSRC pursuant to the requirements of the Trial Measures. In addition, we have not received any formal inquiry, notice, warning, sanction, or objection from the CSRC with respect our listing on the Nasdaq Capital Market.

In addition, on February 24, 2023, the CSRC, together with Ministry of Finance of the PRC, National Administration of State Secrets Protection and National Archives Administration of China, revised the Provisions on Strengthening Confidentiality and Archives Administration for Overseas Securities Offering and Listing which was issued by the CSRC, National Administration of State Secrets Protection and National Archives Administration of China in 2009, or the Provisions. The revised Provisions is issued under the title the Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies, and came into effect on March 31, 2023 together with the Trial Measures. One of the major revisions to the revised Provisions is expanding its application to cover indirect overseas offering and listing, as is consistent with the Trial Measures. The revised Provisions require that, including but not limited to (a) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals or entities including securities companies, securities service providers and overseas regulators, any documents and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level; and (b) domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals and entities including securities companies, securities service providers and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations. Where a PRC domestic company, after completing the relevant procedures, provides to securities companies, securities service providers or other entities with any documents and materials that contain state secrets or working secrets of government agencies, or any other documents and materials that would be detrimental to national security or public interest if leaked, a non-disclosure agreement must be signed between the provider and receiver of such information according to the relevant PRC laws and regulations, which must specify, among others, the obligations and liabilities on confidentiality held by such securities companies and securities service providers. Specifically, when a PRC domestic company provides accounting archives or copies of accounting archives to any entities including securities companies, securities service providers or overseas regulators and individuals, it must complete the due procedures in compliance with applicable national regulations.

7

As of the date of this annual report, no relevant laws or regulations in the PRC explicitly require us to seek approval from the CSRC or the CAC or any other PRC governmental authorities for our offering and/or list on the NASDAQ Capital Market. Furthermore, we have not received any penalty, investigation or warning in connection with the operations of UTime WFOE, the VIE and VIE’s subsidiaries from the CSRC or the CAC or any other PRC governmental authorities, nor have we or the VIE or the VIE’s subsidiaries received any inquiry, notice, warning or sanctions regarding our offering from the CSRC or any other PRC governmental authorities. We believe that we, the VIE and the VIE’s subsidiaries have received has obtained all permissions and approvals to operate their respective business and are not required to obtain additional permission or approval from Chinese authorities to issue our ordinary shares to foreign investors or list on the NASDAQ Capital Market based on the PRC laws, regulations and rules currently in effect. However, since these statements and regulatory actions are newly published, however, official guidance and related implementation rules have not been issued, we are subject to the risks of uncertainty of any future actions of the PRC government in this regard including the risk that we inadvertently conclude that the permissions or approvals discussed here are not required, that applicable laws, regulations or interpretations change such that we or the VIE or the VIE’s subsidiaries are required to obtain approvals in the future, or that the PRC government could disallow our structure, which would likely result in a material change in our operations, including our ability to continue our existing structure, carry on the daily business operations of the VIE and the VIE’s subsidiaries, our ability to accept foreign investments, and our listing on an U.S. exchange. These adverse actions could cause the value of our ordinary shares to significantly decline or become worthless. We or the VIE or the VIE’s subsidiaries may also be subject to penalties and sanctions imposed by the PRC regulatory authorities, including the CSRC, if we or the VIE or the VIE’s subsidiaries fail to comply with such rules and regulations, which would likely adversely affect the ability of our securities to be listed on a U.S. exchange, which would likely cause the value of our ordinary shares to significantly decline or become worthless. See “-D. Risk Factors-Risks Relating to Our Corporate Structure” and “-D. Risk Factors-Risks Relating to Doing Business in the PRC” for more information.

Cash and Asset Flows through Our Organization

Our Hong Kong subsidiary, or UTime HK, may transfer funds to UTime WFOE through an increase in the registered capital or loans to UTime WFOE. However, the receipt of funds by UTime WFOE through an increase in registered capital or loans requires UTime WFOE to apply for, seek approval from or register with the relevant PRC authorities or the local bank and this process may be time consuming. Because UTime Limited and its subsidiaries do not have equity ownership in the VIE, they are not able to make direct capital contributions to the VIE and its subsidiaries. However, they may transfer cash to the VIE by loans or by making payment to the VIE for inter-group transactions.

UTime WFOE has the exclusive right to provide or designate any entity to provide the VIE with business support, technical and consulting services in exchange for service fees from the VIE, pursuant to the Exclusive Technical Consultation and Service Agreement, which is part of the contractual arrangements. These service fees shall be recognized as expenses of VIE, with a corresponding amount as revenue by UTime WFOE and then completely eliminate in consolidation level. For income tax purposes, UTime WFOE and the VIE will file income tax returns on a separate company basis. The service fees paid are recognized as a tax deduction by the VIE and as revenue by UTime WFOE. The PRC’s statutory Enterprise Income Tax (“EIT”) rates is 25%. Any limitation on the ability of the VIE to pay service fees to UTime WFOE, or any tax implications of making service fees payments to UTime WFOE, could have a material adverse effect on UTime WFOE’s financial condition. In addition, UTime WFOE may provide loans to the VIE, subject to statutory limits and restrictions.

Our business is conducted by the VIE, including its subsidiaries. In addition to funds generated from sales of mobile handsets and other products, the VIE’s operations may be financed by loans from UTime WFOE, which may receive funds from UTime Limited, through either capital contributions or loans, directly or indirectly. Funds from the VIE to UTime Limited are remitted as service fees to UTime WFOE, which, in turn, makes distributions or pays dividends to UTime HK, then to UTime Limited. Both investment in Chinese companies, which are governed by the Foreign Investment Law, and the dividends and distributions from UTime WFOE to UTime HK, then to UTime Limited are subject to regulations and restrictions on dividends and other payment to parties outside of China. Applicable PRC law permits payment of dividends to UTime Limited by our PRC subsidiaries only out of their net income, if any, which are determined in accordance with PRC accounting standards and regulations. Our PRC subsidiary and the VIE and its subsidiaries in China are required to set aside a portion of their net income, if any, each year to fund general reserves for appropriations until such reserves have reached 50% of such company’s registered capital. These reserves are not distributable as cash dividends. In addition, registered share capital and capital reserve accounts are also restricted from withdrawal in the PRC, up to the amount of net assets held in each PRC company.

8

As a Cayman Islands holding company, UTime Limited may receive dividends from UTime WFOE through UTime HK, our intermediary holding companies in Hong Kong. The PRC EIT Law and its implementing rules provide that dividends paid by a PRC entity to a non-resident enterprise for income tax purposes are subject to PRC withholding tax at a rate of 10%, subject to reduction by an applicable tax treaty with China. According to the Arrangement Between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income and relevant implanting notice, if UTime HK satisfies all the requirements under the tax arrangement and receives approval from the relevant tax authority, the dividends paid to UTime HK would be subject to withholding tax at a reduced rate of 5%. See “Item 3. Key Information-D. Risk Factors-Risks Related to Doing Business in China-There are significant uncertainties under the PRC Enterprise Income Tax Law relating to the withholding tax liabilities of our PRC Subsidiary, and dividends payable by our PRC Subsidiary to us through our Hong Kong subsidiary s may not qualify to enjoy certain treaty benefits”.

In addition, to the extent our cash is in the PRC or a PRC entity, the funds may not be available to distribute dividends to our investors, or for other use outside of the PRC, due to interventions in or the imposition of restrictions and limitations on the ability of us, our subsidiaries, or the VIE and the VIE’s subsidiaries by the PRC government to transfer cash. The PRC government imposes controls on the convertibility of Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. All of the VIE and VIE’s PRC subsidiaries’ income are received in Renminbi and shortages in foreign currencies may restrict our ability to pay dividends or other payments, or otherwise satisfy our foreign currency denominated obligations, if any. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from trade-related transactions, can be made in foreign currencies without prior approval from SAFE as long as certain procedural requirements are met. Approval from appropriate government authorities is required if Renminbi is converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. Our cash dividends, if any, will be paid in U.S. dollars. The PRC government may, at its discretion, impose restrictions on access to foreign currencies for current account transactions and if this occurs in the future, we may not be able to pay dividends in foreign currencies to our shareholders. See “D. Risk Factors - Risks Related to Doing Business in China- Governmental control of currency conversion may limit our ability to utilize our net revenues effectively and affect the value of your investment.” In contrast, presently, there is no foreign exchange control or restrictions on capital flows into and out of Hong Kong. Hence, our Hong Kong subsidiary is able to transfer cash without any limitation to its direct parent company, UTime Limited, under normal circumstances.

As of the date of this annual report, there have not been any dividends or distributions by and among UTime Limited, its subsidiaries, the VIE and subsidiaries of VIE, to investors. UTime Limited has not declared or paid any cash dividends, nor does it have any present plan to pay any cash dividends on its ordinary shares in the foreseeable future. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business.

In addition, as of the date of this annual report, no amounts owed under the contractual arrangements has been settled by or between the VIE and its subsidiaries, and UTime WFOE. The VIE intends to distribute earnings or settle amounts owed under the contractual arrangements. We anticipate that, to the extent that the VIE requires funds from us for its operations, UTime Limited will provide funds in the manner described above, and to the extent that VIE generates positive cash flow from its operations in excess of its requirements for its operations, it will transfer such excess funds to UTime Limited, through service payments to UTime WFOE.

9

Our subsidiaries and the VIE conduct business transactions that include trading activities, provision of services and intercompany advances. The transactions and cash flows that have occurred between UTime Limited (“Parent”), VIE and its consolidated subsidiaries (“VIE”), UTime WFOE that are the primary beneficiary of the VIE (“WFOE”), an aggregation of other entities that are consolidated (“other entities”) are summarized as the following:

|  | 31-Mar-22 |  |  | 31-Mar-23 |  |  | 31-Mar-24 |
|  | RMB |  |  | RMB |  |  | RMB |
|  | Parent |  |  | VIE |  |  | WFOE |  |  | Other entities |  |  | Elimination |  |  | Consolidated |  |  | Parent |  |  | VIE |  |  | WFOE |  |  | Other entities |  |  | Elimination |  |  | Consolidated |  |  | Parent |  |  | VIE |  |  | WFOE |  |  | Other entities |  |  | Elimination |  |  | Consolidated |
Intercompany receivables |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Opening |  |  | 6,466 |  |  |  | 45,985 |  |  |  | - |  |  |  | 392 |  |  |  | (52,843 | ) |  |  | - |  |  |  | 73,346 |  |  |  | 48,619 |  |  |  | - |  |  |  | 921 |  |  |  | (122,886 | ) |  |  | - |  |  |  | 73,346 |  |  |  | 48,619 |  |  |  | - |  |  |  | 921 |  |  |  | (122,886 | ) |  |  | - |
Sales |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Receipts |  |  | - |  |  |  | (1,283 | ) |  |  | - |  |  |  | - |  |  |  | 1,283 |  |  |  | - |  |  |  | - |  |  |  | (149 | ) |  |  | - |  |  |  | - |  |  |  | 149 |  |  |  | - |  |  |  | - |  |  |  | (149 | ) |  |  | - |  |  |  | - |  |  |  | 149 |  |  |  | - |
Payments on behalf of Parent/WFOE/Other entities by VIE |  |  | - |  |  |  | 5,430 |  |  |  | - |  |  |  | 542 |  |  |  | (5,972 | ) |  |  | - |  |  |  | - |  |  |  | 1,772 |  |  |  | - |  |  |  | (7 | ) |  |  | (1,765 | ) |  |  | - |  |  |  | - |  |  |  | 1,772 |  |  |  | - |  |  |  | (7 | ) |  |  | (1,765 | ) |  |  | - |
IPO Proceeds received by other entities on behalf of Parent |  |  | 88,263 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (88,263 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Down payment for financing services on behalf of Parent |  |  | (19,003 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 19,003 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Expenses charged by other entities |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Exchange difference |  |  | (2,381 | ) |  |  | (1,513 | ) |  |  | - |  |  |  | (13 | ) |  |  | 3,907 |  |  |  | - |  |  |  | 6,047 |  |  |  | 3,794 |  |  |  | - |  |  |  | 74 |  |  |  | (9,915 | ) |  |  | - |  |  |  | 6,047 |  |  |  | 3,794 |  |  |  | - |  |  |  | 74 |  |  |  | (9,915 | ) |  |  | - |
Closing |  |  | 73,345 |  |  |  | 48,619 |  |  |  | - |  |  |  | 921 |  |  |  | (122,885 | ) |  |  | - |  |  |  | 79,393 |  |  |  | 54,036 |  |  |  | - |  |  |  | 988 |  |  |  | (134,417 | ) |  |  | - |  |  |  | 79,393 |  |  |  | 54,036 |  |  |  | - |  |  |  | 988 |  |  |  | (134,417 | ) |  |  | - |
Intercompany payables |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Opening |  |  | 26,846 |  |  |  | 237 |  |  |  | 8 |  |  |  | 25,604 |  |  |  | (52,695 | ) |  |  | - |  |  |  | 31,493 |  |  |  | 927 |  |  |  | 11 |  |  |  | 90,208 |  |  |  | (122,639 | ) |  |  | - |  |  |  | 31,493 |  |  |  | 927 |  |  |  | 11 |  |  |  | 90,208 |  |  |  | (122,639 | ) |  |  | - |
Purchase |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Payments |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (1,283 | ) |  |  | 1,283 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (57 | ) |  |  | 57 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (57 | ) |  |  | 57 |  |  |  | - |
Payments on behalf of Parent/WFOE/Other entities by VIE |  |  | 5,619 |  |  |  | 700 |  |  |  | 3 |  |  |  | (350 | ) |  |  | (5,972 | ) |  |  | - |  |  |  | 1,539 |  |  |  | - |  |  |  | 5 |  |  |  | - |  |  |  | (1,544 | ) |  |  | - |  |  |  | 1,539 |  |  |  | - |  |  |  | 5 |  |  |  | - |  |  |  | (1,544 | ) |  |  | - |
IPO Proceeds received by other entities on behalf of Parent |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 88,263 |  |  |  | (88,263 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Down payment for financing services on behalf of Parent |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (19,003 | ) |  |  | 19,003 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Exchange difference |  |  | (973 | ) |  |  | (10 | ) |  |  | - |  |  |  | (3,024 | ) |  |  | 4,007 |  |  |  | - |  |  |  | 2,602 |  |  |  | 73 |  |  |  | - |  |  |  | 7,675 |  |  |  | (10,350 | ) |  |  | - |  |  |  | 2,602 |  |  |  | 73 |  |  |  | - |  |  |  | 7,675 |  |  |  | (10,350 | ) |  |  | - |
Closing |  |  | 31,492 |  |  |  | 927 |  |  |  | 11 |  |  |  | 90,207 |  |  |  | (122,637 | ) |  |  | - |  |  |  | 35,634 |  |  |  | 1,000 |  |  |  | 16 |  |  |  | 97,826 |  |  |  | (134,476 | ) |  |  | - |  |  |  | 35,634 |  |  |  | 1,000 |  |  |  | 16 |  |  |  | 97,826 |  |  |  | (134,476 | ) |  |  | - |

10

Financial Information Related to the Condensed Consolidated VIE

Set forth below are the condensed consolidating schedule showing the financial position, results of operations and cash flows for the Parent, the VIE, the WFOE and the other entities, elimination and consolidated total (in thousands of RMB or US$) as of and for the years ended March 31, 2022, 2023 and 2024.

Selected Condensed Consolidated Statements of Comprehensive Loss Data

|  | Year Ended March 31, 2022 |  |  | Year Ended March 31, 2023 |  |  | Year ended March 31, 2024 |
|  | RMB |  |  | RMB |  |  | RMB |  |  | US$ |
|  | Parent |  |  | VIE |  |  | WFOE |  |  | Other entities |  |  | Elimination |  |  | Consolidated |  |  | Parent |  |  | VIE |  |  | WFOE |  |  | Other entities |  |  | Elimination |  |  | Consolidated |  |  | Parent |  |  | VIE |  |  | WFOE |  |  | Other entities |  |  | Elimination |  |  | Consolidated |  |  | Consolidated |
Net sales (1) |  |  | - |  |  |  | 273,922 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 273,922 |  |  |  | - |  |  |  | 197,564 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 197,564 |  |  |  | - |  |  |  | 172,156 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 172,156 |  |  |  | 24,264 |
Cost of sales (1) |  |  | - |  |  |  | 259,904 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 259,904 |  |  |  | - |  |  |  | 167,143 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 167,143 |  |  |  | - |  |  |  | 163,286 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 163,286 |  |  |  | 23,014 |
Gross profit (loss) |  |  | - |  |  |  | 14,018 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 14,018 |  |  |  | - |  |  |  | 30,421 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 30,421 |  |  |  | - |  |  |  | 8,870 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 8,870 |  |  |  | 1,250 |
Operating expenses |  |  | 6,483 |  |  |  | 38,002 |  |  |  | 3 |  |  |  | 20 |  |  |  | 111 |  |  |  | 44,619 |  |  |  | 69,220 |  |  |  | 39,013 |  |  |  | 1 |  |  |  | 101 |  |  |  | (309 | ) |  |  | 108,026 |  |  |  | 10,802 |  |  |  | 28,400 |  |  |  | 2 |  |  |  | 2 |  |  |  | (196 | ) |  |  | 39,010 |  |  |  | 5,498 |
Loss from operations |  |  | (6,483 | ) |  |  | (23,984 | ) |  |  | (3 | ) |  |  | (20 | ) |  |  | (111 | ) |  |  | (30,601 | ) |  |  | (69,220 | ) |  |  | (8,592 | ) |  |  | (1 | ) |  |  | (101 | ) |  |  | 309 |  |  |  | (77,605 | ) |  |  | (10,802 | ) |  |  | (19,530 | ) |  |  | (2 | ) |  |  | (2 | ) |  |  | 196 |  |  |  | (30,140 | ) |  |  | (4,248 | )
Investment loss from VIE/subsidiaries |  |  | 32,350 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | -32,350 |  |  |  | - |  |  |  | 18,396 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (18,396 | ) |  |  | - |  |  |  | 50,082 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (50,082 | ) |  |  | - |  |  |  | - |
Interest expenses |  |  | - |  |  |  | 4,875 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 4,875 |  |  |  | - |  |  |  | 6,149 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 6,149 |  |  |  | - |  |  |  | 3,617 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 3,617 |  |  |  | 510 |
Loss before income taxes |  |  | (38,833 | ) |  |  | (28,859 | ) |  |  | (3 | ) |  |  | (20 | ) |  |  | 32,239 |  |  |  | (35,476 | ) |  |  | (87,616 | ) |  |  | (14,741 | ) |  |  | (1 | ) |  |  | (101 | ) |  |  | 18,705 |  |  |  | (83,754 | ) |  |  | (60,884 | ) |  |  | (23,147 | ) |  |  | (2 | ) |  |  | (2 | ) |  |  | 50,278 |  |  |  | (33,757 | ) |  |  | (4,758 | )
Income tax benefit |  |  | - |  |  |  | (46 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (46 | ) |  |  | - |  |  |  | (171 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (171 | ) |  |  | - |  |  |  | (171 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (171 | ) |  |  | (24 | )
Net loss from continuing operations |  |  | (38,833 | ) |  |  | (28,813 | ) |  |  | (3 | ) |  |  | (20 | ) |  |  | 32,239 |  |  |  | (35,430 | ) |  |  | (87,616 | ) |  |  | (14,570 | ) |  |  | (1 | ) |  |  | (101 | ) |  |  | 18,705 |  |  |  | (83,583 | ) |  |  | (60,884 | ) |  |  | (22,976 | ) |  |  | (2 | ) |  |  | (2 | ) |  |  | 50,278 |  |  |  | (33,586 | ) |  |  | (4,734 | )
Discontinued operations |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loss on disposal of discontinued operation |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (19,199 | ) |  |  | - |  |  |  | (7,520 | ) |  |  | - |  |  |  | (26,719 | ) |  |  | (3,766 | )
Loss from discontinued operations |  |  | - |  |  |  | (830 | ) |  |  | - |  |  |  | (3,070 | ) |  |  | - |  |  |  | (3,900 | ) |  |  | - |  |  |  | (4,652 | ) |  |  | - |  |  |  | (1,787 | ) |  |  |  |  |  |  | (6,439 | ) |  |  | - |  |  |  | (1,903 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (1,903 | ) |  |  | (268 | )
Net loss from discontinued operations |  |  | - |  |  |  | (830 | ) |  |  | - |  |  |  | (3,070 | ) |  |  | - |  |  |  | (3,900 | ) |  |  | - |  |  |  | (4,652 | ) |  |  | - |  |  |  | (1,787 | ) |  |  | - |  |  |  | (6,439 | ) |  |  | - |  |  |  | (21,102 | ) |  |  | - |  |  |  | (7,520 | ) |  |  | - |  |  |  | (28,622 | ) |  |  | (4,034 | )
Net loss |  |  | (38,833 | ) |  |  | (29,643 | ) |  |  | (3 | ) |  |  | (3,090 | ) |  |  | 32,239 |  |  |  | (39,330 | ) |  |  | (87,616 | ) |  |  | (19,222 | ) |  |  | (1 | ) |  |  | (1,888 | ) |  |  | 18,705 |  |  |  | (90,022 | ) |  |  | (60,884 | ) |  |  | (44,078 | ) |  |  | (2 | ) |  |  | (7,522 | ) |  |  | 50,278 |  |  |  | (62,208 | ) |  |  | (8,768 | )

11

Selected Condensed Consolidated Balance Sheets Data

|  | 31-Mar-23 |  |  | 31-Mar-24 |
|  | RMB |  |  | RMB |  |  | US$ |
|  | Parent |  |  | VIE |  |  | WFOE |  |  | Other entities |  |  | Elimination |  |  | Consolidated |  |  | Parent |  |  | VIE |  |  | WFOE |  |  | Other entities |  |  | Elimination |  |  | Consolidated |  |  | Consolidated |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  |  | 2 |  |  |  | 272 |  |  |  | 5 |  |  |  | 71,641 |  |  |  | - |  |  |  | 71,920 |  |  |  | 1 |  |  |  | 2,704 |  |  |  | 3 |  |  |  | 73,967 |  |  |  | - |  |  |  | 76,675 |  |  |  | 10,807 |
Restricted cash |  |  | - |  |  |  | 500 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 500 |  |  |  | - |  |  |  | 500 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 500 |  |  |  | 70 |
Accounts receivable, net |  |  | - |  |  |  | 52,172 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 52,172 |  |  |  | - |  |  |  | 30,240 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 30,240 |  |  |  | 4,262 |
Prepaid expenses and other current assets, net |  |  | 25,109 |  |  |  | 66,331 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 91,440 |  |  |  | 25,924 |  |  |  | 81,576 |  |  |  | 350,001 |  |  |  | - |  |  |  | - |  |  |  | 457,501 |  |  |  | 64,482 |
Intercompmany receivables (1) |  |  | 79,393 |  |  |  | 54,036 |  |  |  | - |  |  |  | 988 |  |  |  | (134,417 | ) |  |  | - |  |  |  | 444,934 |  |  |  | 2,710 |  |  |  | - |  |  |  | 995 |  |  |  | (448,639 | ) |  |  | - |  |  |  | - |
Due from related parties |  |  | - |  |  |  | 584 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 584 |  |  |  | - |  |  |  | 553 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 553 |  |  |  | 78 |
Inventories |  |  | - |  |  |  | 16,169 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 16,169 |  |  |  | - |  |  |  | 11,026 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 11,026 |  |  |  | 1,554 |
Assets related to discontinued operations |  |  | - |  |  |  | 3,948 |  |  |  | - |  |  |  | 292 |  |  |  | - |  |  |  | 4,240 |  |  |  | - |  |  |  | 1,441 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,441 |  |  |  | 203 |
Total current assets |  |  | 104,504 |  |  |  | 194,012 |  |  |  | 5 |  |  |  | 72,921 |  |  |  | (134,417 | ) |  |  | 237,025 |  |  |  | 470,859 |  |  |  | 130,750 |  |  |  | 350,004 |  |  |  | 74,962 |  |  |  | (448,639 | ) |  |  | 577,936 |  |  |  | 81,456 |
Non-Current assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Property and equipment, net |  |  | - |  |  |  | 61,407 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 61,407 |  |  |  | - |  |  |  | 54,188 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 54,188 |  |  |  | 7,637 |
Operating lease right-of-use assets, net |  |  | - |  |  |  | 13,030 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 13,030 |  |  |  | - |  |  |  | 9,781 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 9,781 |  |  |  | 1,379 |
Finance lease right-of-use assets, net |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | - |  |  |  |  |  |  |  | 6,460 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 6,460 |  |  |  | 911 |
Intangible assets, net |  |  | - |  |  |  | 1,677 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,677 |  |  |  | - |  |  |  | 662 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 662 |  |  |  | 93 |
Long-term investments |  |  | (18,929 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 18,929 |  |  |  | - |  |  |  | (43,653 | ) |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 43,653 |  |  |  | - |  |  |  | - |
Equity method investment |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Deferred loss on sale-leaseback |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | - |  |  |  |  |  |  |  | 767 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 767 |  |  |  | 108 |
Other non-current assets |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 153 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 153 |  |  |  | 22 |
Total non-current assets |  |  | (18,929 | ) |  |  | 76,118 |  |  |  | - |  |  |  | 18 |  |  |  | 18,929 |  |  |  | 76,114 |  |  |  | (43,653 | ) |  |  | 72,011 |  |  |  | - |  |  |  | - |  |  |  | 43,653 |  |  |  | 72,011 |  |  |  | 10,150 |
Total Assets |  |  | 85,575 |  |  |  | 270,128 |  |  |  | 5 |  |  |  | 72,919 |  |  |  | (115,488 | ) |  |  | 313,139 |  |  |  | 427,206 |  |  |  | 202,761 |  |  |  | 350,004 |  |  |  | 74,962 |  |  |  | (404,986 | ) |  |  | 649,947 |  |  |  | 91,606 |
Liabilities and Stockholder’s equity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Accounts payable |  |  | - |  |  |  | 125,374 |  |  |  | - |  |  |  | 0 |  |  |  | - |  |  |  | 125,374 |  |  |  | - |  |  |  | 106,092 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 106,092 |  |  |  | 14,953 |
Short-term borrowings |  |  | - |  |  |  | 53,935 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 53,935 |  |  |  | - |  |  |  | 56,949 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 56,949 |  |  |  | 8,027 |
Current portion of long-term borrowings |  |  | - |  |  |  | 1080 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,080 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Due to related parties |  |  | 313 |  |  |  | 4466 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 4,779 |  |  |  | 23,728 |  |  |  | 11,516 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 35,244 |  |  |  | 4,967 |
Lease liability |  |  | - |  |  |  | 3,673 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 3,673 |  |  |  | - |  |  |  | 6,824 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 6,824 |  |  |  | 962 |
Other payables and accrued liabilities |  |  | 5,539 |  |  |  | 48,100 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 53,639 |  |  |  | 32,794 |  |  |  | 31,157 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 63,951 |  |  |  | 9,014 |
Intercompmany payables (1) |  |  | 35,634 |  |  |  | 1000 |  |  |  | 16 |  |  |  | 97,826 |  |  |  | (134,476 | ) |  |  | - |  |  |  | 2,886 |  |  |  | 14,071 |  |  |  | 350,017 |  |  |  | 81,995 |  |  |  | (448,969 | ) |  |  | - |  |  |  | - |
Income tax payables |  |  | - |  |  |  | 18 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 18 |  |  |  | - |  |  |  | 18 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 18 |  |  |  | 3 |
Current liabilities related to discontinued operations |  |  |  |  |  |  | 2,390 |  |  |  |  |  |  |  | 781 |  |  |  |  |  |  |  | 3,171 |  |  |  | - |  |  |  | 1,929 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 1,929 |  |  |  | 272 |
Total current liabilities |  |  | 41,486 |  |  |  | 240,036 |  |  |  | 16 |  |  |  | 98,607 |  |  |  | (134,476 | ) |  |  | 245,669 |  |  |  | 59,408 |  |  |  | 228,556 |  |  |  | 350,017 |  |  |  | 81,995 |  |  |  | (448,969 | ) |  |  | 271,007 |  |  |  | 38,198 |
Non-current liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Long-term borrowings |  |  | - |  |  |  | 6,870 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 6,870 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Government grants |  |  | - |  |  |  | 8,697 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 8,697 |  |  |  | - |  |  |  | 6,154 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 6,154 |  |  |  | 867 |
Deferred tax liability |  |  | - |  |  |  | 295 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 295 |  |  |  | - |  |  |  | 125 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 125 |  |  |  | 18 |
Lease liability - non-current |  |  | - |  |  |  | 10,876 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 10,876 |  |  |  | - |  |  |  | 10,054 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 10,054 |  |  |  | 1,417 |
Total non-current liabilities |  |  | - |  |  |  | 26,738 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 26,738 |  |  |  | - |  |  |  | 16,333 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 16,333 |  |  |  | 2,302 |
Total liabilities |  |  | 41,486 |  |  |  | 266,773 |  |  |  | 16 |  |  |  | 98,608 |  |  |  | (134,476 | ) |  |  | 272,407 |  |  |  | 59,408 |  |  |  | 244,889 |  |  |  | 350,017 |  |  |  | 81,995 |  |  |  | (448,969 | ) |  |  | 287,340 |  |  |  | 40,500 |
Ordinary shares |  |  | 9 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 9 |  |  |  | 278 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 278 |  |  |  | 39 |
Additional paid-in capital |  |  | 216,504 |  |  |  | 72,413 |  |  |  | - |  |  |  | 807 |  |  |  | (73,220 | ) |  |  | 216,504 |  |  |  | 573,615 |  |  |  | 72,413 |  |  |  | - |  |  |  | 807 |  |  |  | (73,220 | ) |  |  | 573,615 |  |  |  | 80,848 |
Accumulated deficit |  |  | (175,893 | ) |  |  | (66,738 | ) |  |  | (11 | ) |  |  | (27,813 | ) |  |  | 94,562 |  |  |  | (175,893 | ) |  |  | (208,828 | ) |  |  | (111,899 | ) |  |  | (13 | ) |  |  | (5,072 | ) |  |  | 116,984 |  |  |  | (208,828 | ) |  |  | (29,433 | )
Accumulated other comprehensive income |  |  | 3,469 |  |  |  | 507 |  |  |  | - |  |  |  | 1,847 |  |  |  | (2,354 | ) |  |  | 3,469 |  |  |  | 2,733 |  |  |  | (818 | ) |  |  | - |  |  |  | 599 |  |  |  | 219 |  |  |  | 2,733 |  |  |  | 384 |
Total UTime Limited shareholder’s equity |  |  | 44,089 |  |  |  | 6,182 |  |  |  | (11 | ) |  |  | (25,159 | ) |  |  | 18,988 |  |  |  | 44,089 |  |  |  | 367,798 |  |  |  | (40,304 | ) |  |  | (13 | ) |  |  | (3,666 | ) |  |  | 43,983 |  |  |  | 367,798 |  |  |  | 51,838 |
Non-controlling interests |  |  | - |  |  |  | (2,827 | ) |  |  | - |  |  |  | (530 | ) |  |  | - |  |  |  | (3,357 | ) |  |  | - |  |  |  | (1,824 | ) |  |  | - |  |  |  | (3,367 | ) |  |  | - |  |  |  | (5,191 | ) |  |  | (732 | )
Total shareholders’ equity |  |  | 44,089 |  |  |  | 3,355 |  |  |  | (11 | ) |  |  | (25,689 | ) |  |  | 18,988 |  |  |  | 40,732 |  |  |  | 367,798 |  |  |  | (42,128 | ) |  |  | (13 | ) |  |  | (7,033 | ) |  |  | 43,983 |  |  |  | 362,607 |  |  |  | 51,106 |
Total liabilities and shareholders’ equity |  |  | 85,575 |  |  |  | 270,128 |  |  |  | 5 |  |  |  | 72,919 |  |  |  | (115,488 | ) |  |  | 313,139 |  |  |  | 427,206 |  |  |  | 202,761 |  |  |  | 350,004 |  |  |  | 74,962 |  |  |  | (404,986 | ) |  |  | 649,947 |  |  |  | 91,606 |

12

Selected Condensed Consolidated Cash Flows Data

|  | Year Ended March 31, 2022 |  |  | Year Ended March 31, 2023 |  |  | Year Ended March 31, 2024 |
|  | RMB |  |  | RMB |  |  | RMB |  |  | US$ |
|  | Parent |  |  | VIE |  |  | WFOE |  |  | Other entities |  |  | Elimination |  |  | Consolidated |  |  | Parent |  |  | VIE |  |  | WFOE |  |  | Other entities |  |  | Elimination |  |  | Consolidated |  |  | Parent |  |  | VIE |  |  | WFOE |  |  | Other entities |  |  | Elimination |  |  | Consolidated |  |  |  |
Cash flows from operating activities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  |  | (38,833 | ) |  |  | (29,643 | ) |  |  | (3 | ) |  |  | (3,090 | ) |  |  | 32,239 |  |  |  | (39,330 | ) |  |  | (87,616 | ) |  |  | (19,222 | ) |  |  | (1 | ) |  |  | (1,888 | ) |  |  | 18,705 |  |  |  | (90,022 | ) |  |  | (60,884 | ) |  |  | (44,078 | ) |  |  | (2 | ) |  |  | (7,522 | ) |  |  | 50,278 |  |  |  | (62,208 | ) |  |  | (8,768 | )
Net loss from discontinued operations |  |  | - |  |  |  | (830 | ) |  |  | - |  |  |  | (3,070 | ) |  |  | - |  |  |  | (3,900 | ) |  |  | - |  |  |  | (4,651 | ) |  |  | - |  |  |  | (1,788 | ) |  |  | - |  |  |  | (6,439 | ) |  |  | - |  |  |  | (21,102 | ) |  |  | - |  |  |  | (7,520 | ) |  |  | - |  |  |  | (28,622 | ) |  |  | (4,034 | )
Net loss from continuing operations |  |  | (38,833 | ) |  |  | (28,813 | ) |  |  | (3 | ) |  |  | (20 | ) |  |  | 32,239 |  |  |  | (35,430 | ) |  |  | (87,616 | ) |  |  | (14,571 | ) |  |  | (1 | ) |  |  | (100 | ) |  |  | 18,705 |  |  |  | (83,583 | ) |  |  | (60,884 | ) |  |  | (22,976 | ) |  |  | (2 | ) |  |  | (2 | ) |  |  | 50,278 |  |  |  | (33,586 | ) |  |  | (4,734 | )
Adjustments to reconcile net loss from operations to net cash provided by (used in) operating activities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | - |  |  |  |  |  |  |  |  |
Depreciation and amortization |  |  | - |  |  |  | 4,277 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 4,277 |  |  |  | - |  |  |  | 5,769 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 5,769 |  |  |  | - |  |  |  | 6,736 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 6,736 |  |  |  | 949 |
Allowances for obsolete inventories, net |  |  | - |  |  |  | 1,664 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,664 |  |  |  | - |  |  |  | (356 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (356 | ) |  |  | - |  |  |  | 688 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 688 |  |  |  | 97 |
Provision for doubtful account, net |  |  | - |  |  |  | 1,379 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,379 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 152 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 152 |  |  |  | 21 |
Share-based compensation and expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | - |  |  |  | 63,656 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 63,656 |  |  |  | 8,892 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 8,892 |  |  |  | 1,253 |
Loss on disposal of property and equipment |  |  | - |  |  |  | 10 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 10 |  |  |  | - |  |  |  | 184 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 184 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Loss on disposal of discontinued operation |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Deferred tax |  |  | - |  |  |  | 348 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 348 |  |  |  | - |  |  |  | (171 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (171 | ) |  |  | - |  |  |  | (171 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (171 | ) |  |  | (24 | )
Equity loss of subsidiaries |  |  | 32,350 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (32,350 | ) |  |  | - |  |  |  | 18,396 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (18,396 | ) |  |  | - |  |  |  | 50,082 |  |  |  | - |  |  |  | - |  |  |  |  |  |  |  | (50,082 | ) |  |  | - |  |  |  | - |
Net changes in operating assets and liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | - |  |  |  | - |  |  |  |  |
Accounts receivable |  |  | - |  |  |  | (5,720 | ) |  |  | - |  |  |  | (1 | ) |  |  | - |  |  |  | (5,721 | ) |  |  | - |  |  |  | (27,463 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (27,463 | ) |  |  | - |  |  |  | 22,429 |  |  |  | - |  |  |  | - |  |  |  | (18,311 | ) |  |  | 4,118 |  |  |  | 580 |
Prepaid expenses and other current assets |  |  | (1,173 | ) |  |  | 8,342 |  |  |  | - |  |  |  | (11 | ) |  |  | - |  |  |  | 7,158 |  |  |  | - |  |  |  | (22,908 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (22,908 | ) |  |  | (500 | ) |  |  | (27,456 | ) |  |  | (350,001 | ) |  |  | - |  |  |  | 16,386 |  |  |  | (361,571 | ) |  |  | (50,961 | )
Intercompany receivables (1) |  |  | 2,381 |  |  |  | (2,634 | ) |  |  | - |  |  |  | (529 | ) |  |  | 782 |  |  |  | - |  |  |  | - |  |  |  | (1,623 | ) |  |  | - |  |  |  | 7 |  |  |  | 1,616 |  |  |  | - |  |  |  | (13,078 | ) |  |  | 33,901 |  |  |  | - |  |  |  | - |  |  |  | (20,823 | ) |  |  | - |  |  |  | - |
Inventories |  |  | - |  |  |  | (5,249 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (5,249 | ) |  |  | - |  |  |  | 17,265 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 17,265 |  |  |  | - |  |  |  | 4,459 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 4,459 |  |  |  | 628 |
Accounts payable |  |  | - |  |  |  | 21,577 |  |  |  | - |  |  |  | 1,923 |  |  |  | - |  |  |  | 23,500 |  |  |  | - |  |  |  | 18,161 |  |  |  | - |  |  |  | 56 |  |  |  | - |  |  |  | 18,217 |  |  |  | - |  |  |  | (29,017 | ) |  |  | - |  |  |  | - |  |  |  | 18,411 |  |  |  | (10,606 | ) |  |  | (1,495 | )
Other payables and accrued liabilities, and lease liabilities |  |  | 1,269 |  |  |  | (14,676 | ) |  |  | - |  |  |  | 1,907 |  |  |  | - |  |  |  | (11,500 | ) |  |  | 4,026 |  |  |  | 4,226 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 8,252 |  |  |  | 25,531 |  |  |  | (4,448 | ) |  |  | - |  |  |  | - |  |  |  | (16,870 | ) |  |  | 4,213 |  |  |  | 594 |
Intercompany payables (1) |  |  | 5,619 |  |  |  | 498 |  |  |  | 3 |  |  |  | (5,629 | ) |  |  | (682 | ) |  |  | (191 | ) |  |  | 1,539 |  |  |  | - |  |  |  | 5 |  |  |  | (54 | ) |  |  | (1,490 | ) |  |  | - |  |  |  | (33,989 | ) |  |  | 13,078 |  |  |  | - |  |  |  | 3 |  |  |  | 20,909 |  |  |  | - |  |  |  | - |
Related parties |  |  | - |  |  |  | (699 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (699 | ) |  |  | - |  |  |  | 877 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 877 |  |  |  | 2,901 |  |  |  | 48 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 2,949 |  |  |  | 416 |
Government grants |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 8,697 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 8,697 |  |  |  | - |  |  |  | (2,542 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (2,542 | ) |  |  | (358 | )
Other non-current assets |  |  | - |  |  |  | (208 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (208 | ) |  |  | - |  |  |  | 541 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 541 |  |  |  | - |  |  |  | (153 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (153 | ) |  |  | (22 | )
Net cash provided by (used in) operating activities |  |  | 1,613 |  |  |  | (19,904 | ) |  |  | - |  |  |  | (2,360 | ) |  |  | (11 | ) |  |  | (20,662 | ) |  |  | 1 |  |  |  | (11,372 | ) |  |  | 4 |  |  |  | (91 | ) |  |  | 435 |  |  |  | (11,023 | ) |  |  | (21,045 | ) |  |  | (5,272 | ) |  |  | (350,003 | ) |  |  | 1 |  |  |  | (103 | ) |  |  | (376,422 | ) |  |  | (53,056 | )
Net cash (used in) provided by operating activities - Discontinued operations |  |  |  |  |  |  | 98 |  |  |  |  |  |  |  | (301 | ) |  |  |  |  |  |  | (203 | ) |  |  | - |  |  |  | (3,898 | ) |  |  | - |  |  |  | (217 | ) |  |  | - |  |  |  | (4,115 | ) |  |  | - |  |  |  | 246 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 246 |  |  |  | 35 |
Net cash provided by(used in) provided by operating activities |  |  | 1,613 |  |  |  | (19,806 | ) |  |  | - |  |  |  | (2,661 | ) |  |  | (11 | ) |  |  | (20,865 | ) |  |  | 1 |  |  |  | (15,270 | ) |  |  | 4 |  |  |  | (308 | ) |  |  | 435 |  |  |  | (15,138 | ) |  |  | (21,045 | ) |  |  | (5,026 | ) |  |  | (350,003 | ) |  |  | 1 |  |  |  | (103 | ) |  |  | (376,176 | ) |  |  | (53,021 | )
Investing activities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Payment for property and equipment |  |  | - |  |  |  | (5,860 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (5,860 | ) |  |  | - |  |  |  | (2,593 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (2,593 | ) |  |  |  |  |  |  | (971 | ) |  |  |  |  |  |  |  |  |  |  | (971 | ) |  |  | (137 | ) |  |  |  |
Payment for intangible assets |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (307 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (307 | ) |  |  |  |  |  |  | - |  |  |  |  |  |  |  |  |  |  |  | - |  |  |  | - |  |  |  |  |
Cash received from consolidation, net of cash acquired |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  |  |  |  |  | - |  |  |  |  |  |  |  |  |  |  |  | - |  |  |  | - |  |  |  |  |
Proceeds from sale of property, plant and equipment |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | - |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | - |  |  |  |  |  |  |  | 6,500 |  |  |  |  |  |  |  |  |  |  |  | 6,500 |  |  |  | 916 |  |  |  |  |
Disposal of discontinued operation |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | - |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | - |  |  |  |  |  |  |  | - |  |  |  |  |  |  |  |  |  |  |  | - |  |  |  | - |  |  |  |  |
Net cash (used in) provided by investing activities - Continuing operations |  |  | - |  |  |  | (5,860 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (5,860 | ) |  |  | - |  |  |  | (2,900 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (2,900 | ) |  |  | - |  |  |  | 5,529 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 5,529 |  |  |  | 779 |
Net cash used in provided by investing activities - Discontinued operations |  |  |  |  |  |  | 28 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 28 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (9 | ) |  |  | - |  |  |  | (9 | ) |  |  | (1 | )
Net cash (used in) provided by investing activities |  |  | - |  |  |  | (5,832 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (5,832 | ) |  |  | - |  |  |  | (2,900 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (2,900 | ) |  |  | - |  |  |  | 5,529 |  |  |  | - |  |  |  | (9 | ) |  |  | - |  |  |  | 5,520 |  |  |  | 778 |
Financing activities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Proceeds from short-term borrowings |  |  | - |  |  |  | 46,500 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 46,500 |  |  |  | - |  |  |  | 66,300 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 66,300 |  |  |  | - |  |  |  | 60,571 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 60,571 |  |  |  | 8,537 |
Loan received from a shareholder |  |  | - |  |  |  | 5,980 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 5,980 |  |  |  | - |  |  |  | 4,010 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 4,010 |  |  |  | 20,546 |  |  |  | 21,250 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 41,796 |  |  |  | 5,891 |
Proceeds from long-term borrowings |  |  | - |  |  |  | 9,000 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 9,000 |  |  |  | - |  |  |  |  |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Repayment of loan from a shareholder |  |  | - |  |  |  | (3,000 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (3,000 | ) |  |  | - |  |  |  | (3,000 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (3,000 | ) |  |  | - |  |  |  | (14,200 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (14,200 | ) |  |  | (2,001 | )
Repayment of short-term borrowings |  |  | - |  |  |  | (41,520 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (41,520 | ) |  |  | - |  |  |  | (48,145 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (48,145 | ) |  |  | - |  |  |  | (57,557 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (57,557 | ) |  |  | (8,112 | )
Repayments of long-term borrowings |  |  | - |  |  |  | (5,760 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (5,760 | ) |  |  | - |  |  |  | (870 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (870 | ) |  |  | - |  |  |  | (7,950 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (7,950 | ) |  |  | (1,121 | )
Down payment for financing services |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (19,003 | ) |  |  | - |  |  |  | (19,003 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Contribution in a subsidiary by a shareholder |  |  | - |  |  |  | 6,429 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 6,429 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  |  |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Payment of capital lease obligation |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | - |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | - |  |  |  | - |  |  |  | (498 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (498 | ) |  |  | (70 | )
Proceeds from issuance of ordinary shares |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 88,262 |  |  |  | - |  |  |  | 88,262 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 350,001 |  |  |  | - |  |  |  | - |  |  |  | 350,001 |  |  |  | 49,331 |
Net cash provided by financing activities |  |  | - |  |  |  | 17,629 |  |  |  | - |  |  |  | 69,259 |  |  |  | - |  |  |  | 86,888 |  |  |  | - |  |  |  | 18,295 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 18,295 |  |  |  | 20,546 |  |  |  | 1,616 |  |  |  | 350,001 |  |  |  | - |  |  |  | - |  |  |  | 372,163 |  |  |  | 52,455 |
Effect of exchange rate changes on cash and cash equivalent and restricted cash |  |  | (1,618 | ) |  |  | (104 | ) |  |  | - |  |  |  | (765 | ) |  |  | 11 |  |  |  | (2,476 | ) |  |  | - |  |  |  | (42 | ) |  |  | - |  |  |  | 5,464 |  |  |  | (437 | ) |  |  | 4,985 |  |  |  | 498 |  |  |  | 330 |  |  |  | - |  |  |  | 2,329 |  |  |  | 77 |  |  |  | 3,234 |  |  |  | 456 |
Net increase (decrease) in cash and cash equivalent and restricted cash |  |  | (5 | ) |  |  | (8,113 | ) |  |  | - |  |  |  | 65,833 |  |  |  | - |  |  |  | 57,715 |  |  |  | 1 |  |  |  | 83 |  |  |  | 4 |  |  |  | 5,156 |  |  |  | (2 | ) |  |  | 5,242 |  |  |  | (1 | ) |  |  | 2,449 |  |  |  | (2 | ) |  |  | 2,321 |  |  |  | (26 | ) |  |  | 4,741 |  |  |  | 668 |
Cash and cash equivalents and restricted cash at beginning of year |  |  | 6 |  |  |  | 8,805 |  |  |  | 3 |  |  |  | 663 |  |  |  | - |  |  |  | 9,477 |  |  |  | 1 |  |  |  | 692 |  |  |  | 3 |  |  |  | 66,496 |  |  |  | - |  |  |  | 67,192 |  |  |  | 2 |  |  |  | 777 |  |  |  | 5 |  |  |  | 71,650 |  |  |  | - |  |  |  | 72,434 |  |  |  | 10,209 |
Cash and cash equivalents and restricted cash at end of year |  |  | 1 |  |  |  | 692 |  |  |  | 3 |  |  |  | 66,496 |  |  |  | - |  |  |  | 67,192 |  |  |  | 2 |  |  |  | 776 |  |  |  | 6 |  |  |  | 71,652 |  |  |  | (2 | ) |  |  | 72,434 |  |  |  | 1 |  |  |  | 3,226 |  |  |  | 3 |  |  |  | 73,971 |  |  |  | (26 | ) |  |  | 77,175 |  |  |  | 10,877 |
Less: Cash and cash equivalent and restricted cash - Discontinued operations |  |  | - |  |  |  | (25 | ) |  |  | - |  |  |  | (316 | ) |  |  | - |  |  |  | (341 | ) |  |  | - |  |  |  | (6 | ) |  |  | - |  |  |  | (8 | ) |  |  | - |  |  |  | (14 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Cash and cash equivalents and restricted cash at end of year - Continuing operations |  |  | 1 |  |  |  | 667 |  |  |  | 3 |  |  |  | 66,180 |  |  |  | - |  |  |  | 66,851 |  |  |  | 2 |  |  |  | 770 |  |  |  | 6 |  |  |  | 71,644 |  |  |  | (2 | ) |  |  | 72,420 |  |  |  | 1 |  |  |  | 3,226 |  |  |  | 3 |  |  |  | 73,971 |  |  |  | (26 | ) |  |  | 77,175 |  |  |  | 10,877 |

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3.A. [Reserved]

3.B. Capitalization and Indebtedness

Not Applicable.

3.C. Reasons For The Offer And Use Of Proceeds

Not Applicable.

3.D. Risk Factors

An investment in our ordinary shares involves a high degree of risk. You should carefully consider the risks and uncertainties described below together with all other information contained in this annual report, including the matters discussed under the headings “Forward-Looking Statements” and “Operating and Financial Review and Prospects” before you decide to invest in our ordinary shares. We are a holding company with substantial operations in China and are subject to a legal and regulatory environment that in many respects differs from the United States. If any of the following risks, or any other risks and uncertainties that are not presently foreseeable to us, actually occur, our business, financial condition, results of operations, liquidity and our future growth prospects could be materially and adversely affected.

Risk Factors Summary

Risks Related to Our Business and Industry

| ● | We have incurred significant losses and we may continue to experience losses in the future.

| ● | Because material amounts of our funds are held in banks where only limited protection on deposit accounts is required, the failure of any bank in which we deposit our funds could result in a loss of those funds to the extent exceeding the amounts protected and could, depending on the amount involved, affect our ability to continue in business.

| ● | We may need to raise additional capital or obtain loans from financial institutions from time to time and our operations could be curtailed if we are unable to obtain the required additional funding when needed. We may not be able to do so when necessary, and/or the terms of any financings may not be advantageous to us.

| ● | We generate a significant portion of our net revenues from a small number of major customers and key projects and any loss of business from these customers or key projects could reduce our net revenues and significantly harm our business.

| ● | The outbreak of the coronavirus in China and across the world may have a material adverse effect on our business.

| ● | We depend on third party service providers for logistics and aftersales services, and any failure of our third party service providers to perform may have a material negative impact on our business.

| ● | We rely on outsourcing manufacturers to produce a majority of our products. If we encounter issues with them, our business and results of operations could be materially and adversely affected.

| ● | Our expansion into new product categories and scenarios, and substantial increases in product lines may expose us to new challenges and more risks.

| ● | Our international expansion is subject to a variety of costs and risks and we may not be successful, which could adversely affect our profitability and operating results.

| ● | Our use of open source software could materially adversely affect our business, financial condition, operating results and cash flow.

| ● | We operate in a rapidly evolving industry. If we fail to keep up with technological developments and changing requirements of our customers, business, financial condition and results of operations may be materially and adversely affected.

| ● | We face intense competition from onshore and offshore third party software providers in the mobile phone market, and, if we are unable to compete effectively, we may lose customers and our revenues may decline. The lack of technological development and increase in competition may lead to a decline in our sustainable growth.

| ● | We may undertake acquisitions, investments, joint ventures or other strategic alliances in the future, which could expose us to new operational, regulatory and market risks. In addition, such future undertakings may not be successful, which may adversely affect our business, results of operations, financial condition and prospects.

| ● | The international nature of our business exposes us to risks that could adversely affect our financial condition and results of operations.

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| ● | Inadequacy of skilled personnel may lead to decline in sales of mobile phones by us.

| ● | Our success depends substantially on the continuing efforts of our senior executives and other key personnel, and our business may be severely disrupted if we lose their services.

| ● | We could be impacted by unfavorable results of legal proceedings, including the pending proceeding against Do Mobile, and may, from time to time, be involved in future litigation in which substantial monetary damages are sought.

| ● | Compromised product quality of our mobile products may damage our brand and reputation of and customers could stop using our mobile handsets

| ● | We may not be able to successfully sustain our growth strategy into new geographic markets and innovative consumer electronic products. Inability to effectively manage growth, our current and planned resources and related issues could materially and adversely affect our business of and impact future financial performance.

| ● | We are dependent on raw materials and mobile device components from off shore entities and from local markets, and an increase in their cost could have an adverse effect on our business.

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

| ● | We may be adversely affected by product liability exposure claims.

| ● | Our management and auditors identified material weaknesses in our internal control over financial reporting that, if not properly remediated, could result in material misstatements in our consolidated financial statements that could cause investors to lose confidence in our reported financial information and have a negative effect on the trading price of our ordinary shares.

| ● | Our internal controls over financial reporting may not be effective and our independent registered public accounting firm may not be able to certify as to their effectiveness, which could have a significant and adverse effect on our business and reputation.

| ● | We are subject to various anti-corruption and anti-bribery laws, including the U.S. Foreign Corrupt Practices Act, and U.K. and PRC anti-corruption and anti-bribery laws; any determination that we have violated such laws could damage our business and reputation, limit our ability to bid for certain business opportunities, and subject us to significant criminal and civil penalties, civil litigation (such as shareholder derivative suits), and commercial liabilities.

| ● | The agreements governing the loan facilities we currently have contain restrictions and limitations that could significantly affect our ability to operate our business, raise capital, as well as significantly affect our liquidity, and therefore could adversely affect our results of operations.

| ● | Defaults under either of our loan agreements with each of SRCB and CRBZ could result in a substantial loss of our assets.

Risks Related to Our Corporate Structure

| ● | We are a holding company, and will rely on dividends paid by our subsidiaries for our cash needs. Any limitation on the ability of our subsidiaries to make dividend payments to us, or any tax implications of making dividend payments to us, could limit our ability to pay our parent company expenses or pay dividends to holders of our ordinary shares.

| ● | Minfei Bao, our founder, and director, and Min He, will continue to have significant influence over us after our initial public offering, including control over decisions that require the approval of shareholders, which could limit your ability to influence the outcome of matters submitted to shareholders for a vote.

| ● | We are a “controlled company” within the meaning of Nasdaq’s Rules and, as a result, may rely on exemptions from certain corporate governance requirements that provide protection to shareholders of other companies.

| ● | We may become subject to taxation in the Cayman Islands, which would negatively affect our results.

| ● | We are subject to various changing laws and regulations regarding regulatory matters, corporate governance and public disclosure that have increased both our costs and the risk of non-compliance.

| ● | Because we are incorporated under the laws of the Cayman Islands, you may face difficulties in protecting your interests, and your ability to protect your rights through the U.S. Federal courts may be limited.

15

Risks Related to Doing Business in China

| ● | Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and operations.
| ● | Uncertainties with respect to the PRC legal system and changes in laws and regulations in China could adversely affect us.
| ● | The approval of or filing and reporting with the CSRC or other PRC government authorities may be required in connection with our overseas offerings under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing or reporting procedures.
| ● | The PRC government exerts substantial influence over the manner in which we conduct our business activities. The PRC government may also intervene or influence our operations at any time, which could result in a material change in our operations and our ordinary shares could decline in value or become worthless. Any actions by the PRC government to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer ordinary shares to investors and cause the value of our ordinary shares to significantly decline or become worthless
| ● | Our ordinary shares may be delisted under the HFCA Act if the PCAOB is unable to adequately inspect audit documentation located in China. The delisting of our ordinary shares, or the threat of their being delisted, may materially and adversely affect the value of your investment. Additionally, the inability of the PCAOB to conduct adequate inspections deprives our investors with the benefits of such inspections. Furthermore, on June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, and on December 29, 2022, a legislation entitled “Consolidated Appropriations Act, 2023” (the “Consolidated Appropriations Act”) was signed into law by President Biden, which contained, among other things, an identical provision to Accelerating Holding Foreign Companies Accountable Act and amended the Holding Foreign Companies Accountable Act by reducing the period of time for foreign companies to comply with PCAOB audits to two consecutive years, instead of three, thus reducing the time period before our securities may be prohibited from trading or delisted.
| ● | Governmental control of currency conversion may limit our ability to utilize our net revenues effectively and affect the value of your investment.
| ● | The M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of PRC companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China.
| ● | PRC regulations relating to foreign exchange registration of overseas investment by PRC residents may subject our PRC resident beneficial owners or our PRC Subsidiary to liability or penalties, limit our ability to inject capital into our PRC Subsidiary, limit our PRC Subsidiary’s ability to increase their registered capital or distribute profits to us, or may otherwise adversely affect us.
| ● | Any failure to comply with PRC regulations regarding the registration requirements for employee stock incentive plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions.
| ● | We face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.

16

Risks Related to Our Ordinary Shares

| ● | The trading prices of our ordinary shares are likely to be volatile, which could result in substantial losses to investors.

| ● | Sales of a substantial number of our ordinary shares in the public market by our existing shareholders could cause our share price to fall.

| ● | There are no assurance that our securities, including our ordinary shares, will continue to be listed or, if listed, that we will be able to comply with the continued listing standards of Nasdaq, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.

| ● | Future issuance of our ordinary shares could cause dilution of ownership interests and adversely affect our stock price.

| ● | Shares eligible for future sale may depress our stock price.

| ● | We may issue preference shares to investor that grant them superior rights than holders of our ordinary shares without obtaining shareholder approval.

| ● | If securities or industry analysts do not publish or cease publishing research reports about us, if they adversely change their recommendations regarding our ordinary shares or if our operating results do not meet their expectations, the price of our ordinary shares could decline.

| ● | As a foreign private issuer, we are subject to different U.S. securities laws and NASDAQ governance standards than domestic U.S. issuers. This may afford less protection to holders of our ordinary shares, and you may not receive corporate and company information and disclosure that you are accustomed to receiving or in a manner in which you are accustomed to receiving it.

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

| ● | As an “emerging growth company” under the JOBS Act, we are allowed to postpone the date by which we must comply with some of the laws and regulations intended to protect investors and to reduce the amount of information we provide in our reports filed with the SEC, which could undermine investor confidence in our company and adversely affect the market price of our ordinary shares.

| ● | If we are classified as a passive foreign investment company, United States taxpayers who own our ordinary shares may have adverse United States federal income tax consequences.

Risks Related to Our Business and Industry

We have incurred significant losses and we may continue to experience losses in the future.

We have incurred significant losses in the past. In fiscal year 2023 and 2024, respectively, we had losses from operations of RMB84.0 million and RMB 33.6 (US$4.7 million), and net losses of RMB90.0 million and RMB 62.2 (US$8.8 million). We also had net cash used by operating activities of RMB 15.1 million in fiscal year 2023, and cash used in operations of RMB 376.2 (US$53.0) in fiscal year 2024. We may continue to have an adverse effect on our shareholders’ equity and working capital in the future.

We cannot assure you that we will be able to generate profits or positive cash flow from operating activities in the future. Our ability to achieve profitability depends in large part on our ability to manage our costs and expenses. We intend to manage and control our costs and expenses as a proportion of our total revenues, but there can be no assurance that we will achieve this goal. We may experience losses in the future due to our continued investments in technology, talent, content and other initiatives. In addition, our ability to achieve and sustain profitability is affected by various factors, some of which are beyond our control, such as changes in macroeconomic and regulatory environment or competitive dynamics in the industry. Accordingly, you should not rely on our financial results of any prior period as an indication of our future performance.

Because material amounts of our funds are held in banks where only limited protection on deposit accounts is required, the failure of any bank in which we deposit our funds could result in a loss of those funds to the extent exceeding the amounts protected and could, depending on the amount involved, affect our ability to continue in business.

At March 31, 2024, we had cash on hand of $ 10.8 million. Of that amount, approximately $ 10.4 million was held in banks and other financial institutions in Hong Kong, and $ 0.4 million in the PRC. The Hong Kong government provides deposit protection up to a maximum amount of HK$500,000 (approximately US$ 63,903 based on the midpoint exchange rate for March 31, 2024 reported by “Historical Exchange Rates” at http://www.oanda.com/fx-for-business/historical-rates) for each depositor in any individual bank in Hong Kong. We understand that in the event of a bank failure of a bank in the PRC, a PRC-government agency is to provide some, unspecified, protections of deposit accounts to individual depositors. After three interest rate hikes in 2011, there were recommendations in early 2012 from China’s economists that a formal insurance system from China’s central bank is necessary to protect depositors’ assets. On May 1, 2015, the new “Deposit Insurance Regulations” became effective in the PRC and provide that the maximum protection would be up to RMB500,000 (including principal and interest) per depositor per insured financial institution. Depending upon the amounts of funds we have on deposit in a Hong Kong or mainland China financial institution that fails, our inability to have immediate access to our cash, and the lack of deposit protection in excess of applicable protection limits, could impair our operations, and, if we are not able to access needed funds to pay our suppliers, employees and other creditors, we may be unable to continue in business.

17

We may need to raise additional capital or obtain loans from financial institutions from time to time and our operations could be curtailed if we are unable to obtain the required additional funding when needed. We may not be able to do so when necessary, and/or the terms of any financings may not be advantageous to us.

As of the fiscal year ended March 31, 2023 and 2024, respectively, we had accumulated deficit of RMB175.9 million and RMB 208.8 (US$29.3 million). Due to our accumulated deficit, we may need to obtain additional funding from outside sources, including from the sales of our securities, grants or other forms of financing. Our accumulated deficit increases the difficulty in completing such sales or securing alternative sources of funding, and there can be no assurances that we will be able to obtain such funding on favorable terms or at all. If we are unable to obtain sufficient financing from the sale of our securities or from alternative sources, we may be required to reduce, defer or discontinue certain of our research and development and operating activities or we may not be able to continue as a going concern. If we cannot continue as a going concern, our shareholders may lose their entire investment in our ordinary shares. Future reports from our independent registered public accounting firm may contain statements expressing doubt about our ability to continue as a going concern.

We generate a significant portion of our net revenues from a small number of major customers and key projects and any loss of business from these customers or key projects could reduce our net revenues and significantly harm our business.

We have derived, and believe that in the foreseeable future we will continue to derive, a significant portion of our net revenues from a small number of major customers and key projects. For the year ended March 31, 2023, our top three customers accounted for approximately 22.2%, 12.9% and 12.9% of our net revenues. For the year ended March 31, 2024, our top three customers accounted for approximately 22.0%, 14.1%, and 11.6% of our net revenue.

Our ability to maintain close relationships with our major customers is essential to the growth and profitability of our business. However, the volume of work performed for a specific customer is likely to vary from year-to-year and project-to-project, especially since we are generally not the exclusive service solutions provider for our customers, some of our customers have in-house research and development capabilities, and we do not have long-term purchase commitments from any of our customers. A major customer in one year may not provide the same level of net revenues for us in any subsequent year. The products we provide to our customers, and the net revenues and income from those products, may decline or vary as the type and quantity of products changes over time. In addition, reliance on any individual customer for a significant portion of our net revenues may give that customer a degree of pricing leverage when negotiating contracts and terms of service with us.

In addition, a number of factors not within our control could cause the loss of, or reduction in, business or revenues from any customer, and these factors are not predictable. These factors include, among others, a customer’s decision to re-negotiate the royalty payment of a contract if the volume of unit sales exceeds original expectations, pricing pressure from competitors, a change in a customer’s business strategy, or failure of a mobile chipset manufacturer or mobile device OEM to develop competitive products. Our customers may also choose to pursue alternative technologies and develop alternative products in addition to, or in lieu of, our products, either on their own or in collaboration with others, including our competitors. The loss of any major customer or key project, or a significant decrease in the volume of customer demand or the price at which we sell our products to customers, could materially adversely affect our financial condition and results of operations.

18

The outbreak of the coronavirus in China and across the world may have a material adverse effect on our business.

Our business could be materially and adversely affected by the outbreak of the Coronavirus Disease 2019 (“COVID-19” or the “coronavirus”), or the coronavirus, in China. On January 30, 2020, the World Health Organization declared the coronavirus outbreak a “Public Health Emergency of International Concern” and on March 10, 2020, declared it to be a pandemic. Actions taken around the world to help mitigate the spread of the coronavirus include restrictions on travel, and quarantines in certain areas, and forced closures for certain types of public places and businesses. The coronavirus and actions taken to mitigate it have had and are expected to continue to have an adverse impact on the economies and financial markets of many countries, including the geographical area in which the Company operates.

Our headquarters (Shenzhen) and our factory (Guizhou) are located in China. As this virus is transmitted between humans, the Chinese government has imposed travel restrictions in certain parts of the country and several businesses operating in China have scaled back operations. Although COVID-19 has gradually eased around the world, the lasting effect of the coronavirus outbreak could materially disrupt our business and operations, slow down the overall economy, curtail consumer spending, interrupt our sources of supply, and make it difficult to adequately staff our operations. As a result, our operating results, financial condition and cash flows could be materially adversely impacted.

In China, the government has been implementing a “Zero-Covid” policy since the coronavirus started, which policy entails very strict quarantine or unexpected lockdown measures with little advance notice. Since its implementation, and in particular with respect to the Omicron outbreak, the impact of the “Zero-Covid” policy on the Company’s business, financial condition, and results of operations include, but are not limited to, the following:

Our headquarters (Shenzhen) and our factory (Guizhou), located in China, have suffered strict quarantine measures and lockdown. In particular, from March 2022 to November 2022, our headquarters (Shenzhen) and our factory (Guizhou) have experienced quarantine-related shutdowns for about 15 business days and 10 business days, respectively. Additionally, about one-third of the Company’s employees from each department have experienced quarantine periods ranging from 3 days to 17 days. The key operating activities of the Company’s business, including design, testing and manufacturing, have been heavily disrupted by the unexpected quarantine. Even though the Company has implemented certain procedures to mitigate the negative impact of quarantine, such as remote work options, online meetings, etc., these procedures have also limited employees’ contributions. Accordingly, the Company’s operational efficiency has diminished significantly.

Due to the domestic and global travel restrictions, the Company has been forced to significantly reduce both domestic and international business travel. From March 2022 until January 2023, the Company’s business travel activities dropped approximately 60%, and only one international business trip occurred. Travel restrictions have been negatively impacting the Company’s business expansion activities in Mexico and Japan, since the Company has been struggling to deploy its own team to Mexico to commence its operational expansion and has to maintain a minimum level of business activities there, and to visit or invite Japan client on site.

The coronavirus is impacting several areas of the world, including Asia and the United States. Many factories in China closed during February 2020 at the mandate of the Chinese government and did not reopen until March 2020. This has impacted the manufacturing productivity of our factories as well as those of our suppliers, and therefore the amount of inventory we receive and can ship to customers. The Chinese government stopped enforcing the Zero Covid policy in January 2023, and we have resumed normal operations since March 2023. We are doing everything we can to keep customer production running and to keep things as smooth and stable as possible. However, the coronavirus could negatively impact our sales performance, our vendors and suppliers.

19

The impact of COVID-19 on our business, financial condition, and results of operations include, but are not limited to, the following:

| ● | The outbreak of Omicron (a variant of Covid) since January 2022 also adversely affected our business. Our headquarters (Shenzhen) and our factory (Guizhou), located in China, have suffered strict quarantine measures and lockdown. In particular, from March 2022 until now, its headquarters (Shenzhen) and its factory (Guizhou) have experienced quarantine-related shutdowns for about 15 business days and 10 business days, respectively. About one-third of the Company’s employees from each department experienced quarantine periods ranging from 3 days to 17 days. Our logistics channels were also negatively impacted by the outbreak of Omicron and the quarantine and travel restrictions due to the strict policy. Total revenue for fiscal year ended March 31, 2023 is approximately US$1.9 million less than previously expected. The Company continued suffering delayed orders of about US$2.2 million until since April 2022, which were restarted in February 2023 and has fully delivered by the Company to the customers by June 2023.

| ● | Our logistics channels have been negatively impacted by the outbreak, which may delay our products delivery. As a result, our revenue and account receivables outside of India has been negatively impacted in fiscal year 2021, 2022 and 2023. Some of our orders have been delayed due to nationwide lockdowns in Mainland China, Europe, the United States, South America and Africa. However, to date, none of these orders have been returned or cancelled. We had no delayed orders excluding India before October 2020. However, from October 2020 to April 2021, delayed orders started to increase again due to the worsened situation relating to COVID-19 outside China. Although we had approximately US$1.2 million orders delayed by COVID-19 as of early April 2021, we have managed to complete all of them and we have no additional orders delayed by COVID-19 as of the date of this annual report.

| ● | Some of our customers have been and could continue to be negatively impacted by the outbreak, which may reduce their orders. Our customers may reduce their future purchases from us if they are not able to complete the manufacture of their products due to the shortage of components from other suppliers. Although to date, none of our customers have terminated contracts with us, our revenue and income has been and may continue to be negatively impacted.

| ● | The situation may worsen if the COVID-19 outbreak continues. Certain of our customers have requested, and additional customers may request, additional time to pay us or fail to pay us on time, or at all, which may require us to record additional allowances. We are currently working with customers on finalizing payment schedules and have not experienced significant collection issues so far. We will continue to closely monitor our collections.

| ● | The global stock markets have experienced, and may continue to experience, significant decline from the COVID-19 outbreak. It is possible that the price of our ordinary shares will decline significantly after the date of this report, in which case you may lose your investment.

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We depend on third party service providers for logistics and aftersales services, and any failure of our third party service providers to perform may have a material negative impact on our business.

We outsource all of our transportation and logistics services, as well as after-sale services, for our products to third-party service providers. We rely on these outsourcing partners to bring our products to our customers and provide after sale services. While these arrangements allow us to focus on our main business, they also reduce our direct control over the logistics and aftersales services provided to our customers. Any failure of our logistics partners to perform may have a material negative impact on the timely delivery of our products and customer satisfaction. In addition, logistics in our primary locations or transit to final destinations may be disrupted for a variety of reasons including, natural and man-made disasters, information technology system failures, commercial disputes, military actions or economic, business, labor, environmental, public health, or political issues. We may also be unable to pass any increase in logistics costs to our customers. Errors that occur in product maintenance processes can compromise our products and services, adversely affect customer experience, and harm our business.

We rely on outsourcing manufacturers to produce a majority of our products. If we encounter issues with them, our business and results of operations could be materially and adversely affected.

We rely on outsourcing manufacturers to produce a majority of our products. However, the volume of orders designated to a specific manufacturer is likely to vary from year-to-year and project-to-project, especially since we generally do not enter into exclusive relationship with the manufacturers and we do not have long-term or fixed-term purchase commitments with any of our outsourcing manufacturers. A major manufacturer in one year may not provide the same amount of products to us in any subsequent year. The products each manufacturer supplies us may decline or vary our customer orders change over time. Additionally, our contracts with these manufacturers can be terminated at any time. Therefore, we may not be able to maintain a long-term cooperative relationship with our outsourcing manufacturers for our existing products. We may also experience operational difficulties with our outsourcing manufacturers, including reductions in the availability of production capacity, failure to comply with product specifications, insufficient quality control, failure to meet production deadlines, increases in manufacturing costs and longer lead time. Our outsourcing manufacturers may experience disruptions in their manufacturing operations due to equipment breakdowns, labor strikes or shortages, natural disasters, component or material shortages, cost increases, violation of environmental, health or safety laws and regulations, or other problems. We may be unable to pass the cost increases to our customers. We may have disputes with our outsourcing manufacturers, which may result in litigation expenses, divert our management’s attention and cause supply shortages to us. In addition, we may not be able to identify outsourcing manufacturers who are capable of producing new products we target to launch in the future.

Our expansion into new product categories and scenarios, and substantial increases in product lines may expose us to new challenges and more risks.

We strive to continue to expand and diversify our product offerings to cover additional scenarios in the mobile or IoT era. Expanding into new product categories and scenarios outside of the mobile phone and accessories category, such as to wearable devices, speakers and related consumer electronics and substantially increasing our product lines involve new risks and challenges. Our potential lack of familiarity with new products and scenarios and the lack of relevant customer data relating to these products may make it more difficult for us to anticipate user demand and preferences. We may misjudge market demand, resulting in inventory buildup and possible inventory write-downs. We may not be able to effectively control our costs and expenses in rolling out these new product categories and scenarios. We may have certain quality issues and experience higher return rates on new products, receive more customer complaints and face costly product liability claims, such as injury allegedly or actually caused by our products, which would harm our brand and reputation as well as our financial performance.

Furthermore, we may need to price our new products more aggressively to penetrate new markets, and gain market share or remain competitive. It may be difficult for us to achieve profitability in the new product categories and our profit margin, if any, may be lower than we anticipate, which would adversely affect our overall profitability and results of operations.

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Our international expansion is subject to a variety of costs and risks and we may not be successful, which could adversely affect our profitability and operating results.

We intend to expand or enter into new geographic markets, such as the United States and Canada, where we have limited or no experience in marketing, selling our products and deploying our services. International expansion has required and will continue to require us to invest significant capital and other resources and our efforts may not be successful. Our expansion may be subject to risks such as: brand awareness, sales and distribution network, differences in customer preference, political and economic instability, trade restrictions, difficulties in forming and managing local staff and teams, lesser degrees of intellectual property protection.

The occurrence of any of these risks could negatively affect our international business and consequently our business and operating results. In addition, the concern over these risks may also prevent us from entering into or releasing certain of our products in certain markets.

Our use of open source software could materially adversely affect our business, financial condition, operating results and cash flow.

Certain of our technology and our suppliers’ technology may contain or may be derived from “open source” software, which, under certain open source licenses, may offer accessibility to a portion of a product’s source code and may expose related intellectual property to adverse licensing conditions. Licensing of such technology may impose certain obligations on us if we were to distribute derivative works of the open source software. For example, these obligations may require us to make source code for derivative works available or license such derivative works under a particular type of license that is different from what we customarily use to license our technology. While we believe we have taken appropriate steps and employ adequate controls to protect our intellectual property rights, our use of open source software presents risks that, if we inappropriately use open source software, we may be required to reengineer our technology, discontinue the sale of our technology, release the source code of our proprietary technology to the public at no cost or take other remedial actions, which could adversely affect our business, operating results and financial condition. There is a risk that open source licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to commercialize our products or solutions, which could adversely affect our business, operating results and financial condition.

We operate in a rapidly evolving industry. If we fail to keep up with technological developments and changing requirements of our customers, business, financial condition and results of operations may be materially and adversely affected.

The mobile industry is rapidly evolving and subject to continuous technological developments. Our success depends on our ability to keep up with these technological developments and the resulting changes in customers’ demands. There may also be changes in the industry landscape as different types of platforms compete with one another for market share. If we do not adapt our software and service platform solutions to such changes in an effective and timely manner as more mobile operating system platforms become available in the future, we may suffer a loss in market share. Given that we operate in a rapidly evolving industry, we also need to continuously invest significant resources in research and development in order to enhance our existing products and to respond to changes in customer preference, new challenges and industry changes in a timely and effective manner. If we fail to keep up with technological developments and continue to innovate to meet the needs of our customers, our software and service platform solutions may become less attractive to customers, which in turn may adversely affect our reputation, competitiveness, results of operations and prospects.

We face intense competition from onshore and offshore third party software providers in the mobile phone market, and, if we are unable to compete effectively, we may lose customers and our revenues may decline. The lack of technological development and increase in competition may lead to a decline in our sustainable growth.

The mobile phone market is highly fragmented and competitive, and we expect competition to persist and intensify from both existing competitors and new market entrants. We believe that the principal competitive factors in our industry are reliability and efficiency, performance, product features and functionality, development complexity and time-to-market, price, support for multiple architectures and processors, interoperability with other systems, support for emerging industry and customer standards and protocols and levels of training, technical services and customer support.

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The market in which we operate is highly competitive and is subject to frequent changes due to technological improvements and advancements, availability of new and alternative services and frequently changing client preferences and demands. Our ability to anticipate changes in technology and regulatory standards and to develop and introduce new and enhanced products successfully on a timely basis will be a significant factor in our ability to grow and to remain competitive. The development and acquisition of technology requires substantial investments, and we cannot guarantee that we will be able to achieve the technological advances that may be necessary for us to remain competitive. If we fail to update the technology used in their handsets, it will be challenging for us to experience sustained growth in both existing and new markets and consequently, we may lose our market share and revenue.

We may undertake acquisitions, investments, joint ventures or other strategic alliances in the future, which could expose us to new operational, regulatory and market risks. In addition, such future undertakings may not be successful, which may adversely affect our business, results of operations, financial condition and prospects.

We intend to grow both organically by expanding our current business lines and geographic coverage and through acquisitions, investments, joint ventures or other strategic alliances if the appropriate opportunities arise. These potential business plans, acquisitions, investments, joint ventures and strategic alliances may expose us to new operational, regulatory and market risks, as well as risks associated with additional capital requirements. In addition, we may not be able to identify suitable future acquisition or investment candidates or joint venture or alliance partners. Even if we identify suitable candidates or partners, we may be unable to complete an acquisition, investment or alliance on terms commercially acceptable to us. If we fail to identify appropriate candidates or partners, or complete desired acquisitions, investments or alliances, we may not be able to implement our strategies effectively or efficiently.

In addition, our ability to successfully integrate acquired companies and their operations may be adversely affected by a number of factors, including, among others, the ability to capitalize on anticipated synergies, diversion of resources and management’s attention, difficulties in retaining personnel of the acquired companies, unanticipated problems or legal liabilities and tax and accounting issues. If we fail to integrate any acquired company efficiently, our earnings, revenues, gross margins, operating margins and business operations could be adversely affected. The integration of acquired companies is a complex, time-consuming and expensive process.

Security and privacy breaches may expose us to liability and harm our reputation and business.

As part of our business, we may receive and process information about our employees, customers and partners, and we may store (or contract with third parties to store) our customers’ data. There are numerous laws governing privacy and the storage, sharing, use, disclosure and protection of personally identifiable information and user data. Specifically, personally identifiable and other confidential information is increasingly subject to legislation and regulations in numerous domestic and international jurisdictions. The regulatory framework for privacy protection in China and worldwide, including the United States, is currently evolving and is likely to remain uncertain for the foreseeable future. We could be adversely affected if legislation or regulations in China and elsewhere on the world where we have business operations are expanded to require changes in business practices or privacy policies, or if the relevant governmental authorities in China and elsewhere on the world where we have business operations interpret or implement their legislation or regulations in ways that negatively affect our business, financial condition and results of operations.

For example, in the PRC, governmental authorities have enacted a series of laws and regulations to enhance the protection of privacy and data. The Civil Code of the PRC (issued by the PRC National People’s Congress on May 28, 2020 and effective from January 1, 2021) provides legal basis for privacy and personal information infringement claims under the Chinese civil laws. PRC regulators, including the CAC, the Ministry of Industry and Information Technology, and the Ministry of Public Security, have been increasingly focused on regulation in data security and data protection. The PRC regulatory requirements regarding cybersecurity are evolving. For instance, various regulatory bodies in China, including the CAC the Ministry of Public Security and the State Administration for Market Regulation, have enforced data privacy and protection laws and regulations with varying and evolving standards and interpretations. On November 7, 2016, the Standing Committee of the PRC National People’s Congress issued the Cybersecurity Law of the PRC, or Cybersecurity Law, which became effective on June 1, 2017.The Cybersecurity Law is the first PRC law that systematically lays out the regulatory requirements on cybersecurity and data protection, subjecting many previously under-regulated or unregulated activities in cyberspace to government scrutiny. The Cybersecurity Law requires network operators to perform certain functions related to cybersecurity protection and the strengthening of network information management. For instance, under the Cybersecurity Law, network operators of key information infrastructure, including network operators of key information infrastructures in public communications and information industry, generally shall, during their operations in the PRC, store the personal information and important data collected and produced within the territory of the PRC and their purchase of network products and services that may affect national securities shall be subject to national cybersecurity review. Pursuant to the Cybersecurity Law, network operators must not, without users’ consent, collect their personal information, and may only collect users’ personal information necessary to provide their services. Providers are also obliged to provide security maintenance for their products and services and shall comply with provisions regarding the protection of personal information as stipulated under the relevant laws and regulations. The legal consequences of violation of the Cybersecurity Law include penalties of warning, confiscation of illegal income, suspension of related business, winding up for rectification, shutting down the websites, and revocation of business license or relevant permits.

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Further, the Standing Committee of the National People’s Congress of the PRC promulgated the PRC Data Security Law on June 10, 2021, which became effective from September 1, 2021. Also, the PRC Personal Information Protection Law was enacted on August 20, 2021, which became effective on November 1, 2021.These two laws, together with the Cybersecurity Law, form the over-arching framework that governs data protection and cybersecurity in China. The Cybersecurity Law has a focus on cybersecurity and the protection of the critical information infrastructure, while the PRC Data Security Law focuses on regulating “important data” and data processing activities that would have an impact on national security. The PRC Personal Information Protection Law focuses on protecting personal information. See “Item 4. Information on the Company-B. Business Overview-Regulations-Regulation on Information Security and Censorship.”

Following the promulgation of the above laws, the PRC governmental authorities have enacted or are in the process of formulating a series of regulations and policies to enhance the protection of cybersecurity, data security and personal information. On October 29, 2021, the CAC published the Safety Assessment Measures for Data Outbound Transfer (Draft for Comments). On November 14, 2021, the CAC published the Regulations of Cyber Data Security Management (Draft for Comments), requiring that, among others, data processors handling important data or the data processors to be listed overseas to complete an annual data security assessment and file a data security assessment report to applicable regulators. On December 28, 2021, the CAC and other PRC governmental authorities jointly released the Measures for Cybersecurity Review, which took effect on February 15, 2022, requiring that, among others, operators of “critical information infrastructure” or data processors holding over one million users’ personal information which intends to be listed in a foreign country are subject to a cybersecurity review. On November 14, 2021, the CAC released the Regulations on Network Data Security (draft for public comments), or the draft Regulations on Network Data Security, which reiterates that data processors that process the personal information of more than one million users listing in a foreign country should apply for a cybersecurity review. Currently, the draft Regulations on Network Data Security has been released for public comment only, and its implementation provisions and anticipated adoption or effective date remains substantially uncertain and may be subject to change. On July 7 2022, the CAC published the Safety Assessment Measures for Data Outbound Transfer, which took effect on September 1, 2022. See “Item 4. Information on the Company-B. Business Overview-Regulations-Regulation on Information Security and Censorship.”

Compliance with the Cybersecurity Law, the PRC National Security Law, the Data Security Law, the Cybersecurity Review Measures, the Personal Information Protection Law, as well as additional laws and regulations that PRC regulatory bodies may enact in the future, may result in additional expenses to us and subject us to negative publicity, which could harm our reputation among customers and negatively affect the trading price of our ordinary shares in the future. As of the date of this annual report, we do not expect that the current PRC laws on cybersecurity or data security would have a material adverse impact on our business operations and our offering. We do not believe the VIE or the VIE’s subsidiaries are among the “operator of critical information infrastructure,” “data processor” carrying out data processing activities that affect or may affect national security, or “operator of network platform” holding personal information of more than one million users as mentioned above, and we have not been involved in any investigations on cybersecurity or data security initiated by related governmental regulatory authorities, and we have not received any inquiry, notice, warning, or sanction in such respect.

However, there remains uncertainty as to how these laws and regulations will be interpreted or implemented and whether the PRC regulatory agencies, including the CAC, may adopt new laws, regulations, rules, or detailed implementation and interpretation related to the PRC laws on cybersecurity or data security. We cannot assure you that PRC regulatory agencies, including the CAC, would take the same view as we do, and we cannot assure you that we will comply with such regulations in all respects and we may be ordered to rectify or terminate any actions that are deemed illegal by regulatory authorities or face other penalties, which could materially and adversely affect our business, financial condition, and results of operation. If any such new laws, regulations, rules, or implementation and interpretation comes into effect, we will take all reasonable measures and actions to comply with and to minimize the adverse effect of such laws on us.

While we take security measures relating to service platform solutions, specifically, and our operations, generally, those measures may not prevent security breaches that could harm our business and we cannot assure you that the measures we have taken or will take are adequate under the Cybersecurity Law and other relevant laws and regulations. Advances in computer capabilities, inadequate technology or facility security measures or other factors may result in a compromise or breach of our systems and the data we store and process. Our security measures may be breached as a result of actions by third parties or employee error or malfeasance. A party who is able to circumvent our security measures or exploit inadequacies in our security measures, could, among other things, misappropriate proprietary information (including information about our employees, customers and partners and our customers’ information), cause the loss or disclosure of some or all of this information, cause interruptions in our operations or our customers’ or expose our customers to computer viruses or other disruptions or vulnerabilities. Any compromise of our systems or the data it stores or processes could result in a loss of confidence in the security of our service platform solutions, damage our reputation, disrupt our business, lead to legal liability and adversely affect our financial condition and results of operations. Moreover, a compromise of our systems could remain undetected for an extended period of time, exacerbating the impact of that compromise. Actual or perceived vulnerabilities may lead to claims against us by our customers, partners or other third parties, which could be material. While our customer agreements typically contain provisions that seek to limit our liability, there is no assurance these provisions will be enforceable and effective under applicable law. In addition, the cost and operational consequences of implementing further data protection measures could be significant.

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We are vulnerable to technology infrastructure failures, which could harm our reputation and business.

We rely on our technology infrastructure for many functions, including selling our service platform solutions, supporting our customers and billing, collecting and making payments. We also rely on our own technology infrastructure, which is located on a third-party site, as well as the technology infrastructure of third parties, to provide some of our back-end services. This technology infrastructure may be vulnerable to damage or interruption from natural disasters, power loss, telecommunication failures, terrorist attacks, computer intrusions and viruses, software errors, computer denial-of-service attacks and other events. A significant number of the systems making up this infrastructure are not redundant, and our disaster recovery planning is not sufficient for every eventuality. This technology infrastructure is also subject to break-ins, sabotage and intentional acts of vandalism by internal employees, contractors and third parties. Despite any precautions we or our third-party partners may take, such problems could result in, among other consequences, interruptions in our services and loss of data, which could harm our reputation, business and financial condition. We do not carry business interruption insurance sufficient to protect us from all losses that may result from interruptions in our services as a result of technology infrastructure failures or to cover all contingencies. Any interruption in the availability of our websites and on-line interactions with customers and partners would create a large volume of questions and complaints that would need to be addressed by our support personnel. If our support personnel cannot meet this demand, customer and partner satisfaction levels may fall, which in turn could cause additional claims, reduced revenue, reputation damage or loss of customers.

We may not be able to continue to use or adequately protect our intellectual property rights, which could harm our business reputation and competitive position.

We believe that patents, trademarks, trade secrets, copyright, software registration and other intellectual property we use are important to our business. We rely on a combination of patent, trademark, copyright, software registration and trade secret protection laws in China, the United States, the Philippines, Kenya and other jurisdictions, as well as confidentiality procedures and contractual provisions to protect our intellectual property and brand name. Risks related to mis-branded counterfeit, unlawful copying can lead to security problems, loss of consumer confidence, losing out on the brand image, reputation and goodwill Any failure by us to maintain or protect our intellectual property rights, including any unauthorized use of our intellectual property by third parties or use of “UTime” as a company name to conduct software or services business, may adversely affect our current and future revenues and our reputation.

In addition, the validity, enforceability and scope of protection available under intellectual property laws with respect to the mobile and Internet industries in China, where a significant part of our business and operations are located, are uncertain and still evolving. Implementation and enforcement of PRC intellectual property-related laws have historically been deficient, ineffective and hampered by corruption and local protectionism. Accordingly, protection of intellectual property rights in China may not be as effective as in the United States or other countries. Furthermore, policing unauthorized use of proprietary technology is difficult and expensive, and we may need to resort to litigation to enforce or defend patents issued to us or to determine the enforceability, scope and validity of our proprietary rights or those of others. Such litigation and an adverse determination in any such litigation, if any, could result in substantial costs and diversion of resources and management attention, which could harm our business and competitive position.

We also may be required to enter into license agreements with certain third parties to use their intellectual property for our business operations. If such third parties fail to perform under these license agreements or if the agreements are terminated for any reason, our business and results of operations may be negatively impacted. Furthermore, if we are deemed to be using third parties’ intellectual property without due authorization, we may become subject to legal proceedings or sanctions, which may be time-consuming and costly to defend, divert management attention and resources or require us to enter into licensing agreements, which may not be available on commercial terms, or at all.

The international nature of our business exposes us to risks that could adversely affect our financial condition and results of operations.

We conduct our business throughout the world in multiple locations. Our corporate structure also spans multiple jurisdictions, with our parent company incorporated in the Cayman Islands and structured as a holding company and intermediate and operating subsidiaries incorporated in mainland China, and Hong Kong. As a result, we are exposed to risks typically associated with conducting business internationally, many of which are beyond our control. These risks include, among others:

| ● | significant currency fluctuations between the U.S. dollar and other currencies in which we transact business;

| ● | difficulty in identifying appropriate mobile chipset manufacturers, mobile device OEMs, mobile operators and/or joint venture partners, and establishing and maintaining good relationships with them;

| ● | legal uncertainty owing to the overlap and inconsistencies of different legal regimes, problems in asserting contractual or other rights across international borders and the burden and expense of complying with the laws and regulations of various jurisdictions;

| ● | potentially adverse tax consequences, such as scrutiny of transfer pricing arrangements by authorities in the countries in which we operate;

| ● | adverse effect of inflation and increase in labor costs;

| ● | current and future tariffs and other trade barriers, including restrictions on technology and data transfers;

| ● | general global economic downturn;

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| ● | unexpected changes in political environment and regulatory requirements; and

| ● | terrorist attacks and other acts of violence or war.

The potential for war or terrorist attacks may also cause uncertainty and cause our business to suffer in ways that we cannot predict. Our business could also be adversely affected by the outbreaks of epidemics in China and globally, such as the coronavirus which originated in Wuhan, China at the end of 2019, Ebola virus disease, H1N1 flu, H7N9 flu, avian flu, Severe Acute Respiratory Syndrome, or SARS, or other epidemics. A recurrence of an outbreak of any kind of epidemic could cause a slowdown in the levels of economic activity generally, which may adversely affect our business, financial condition and results of operations. Should major public health issues, including pandemics, arise, we could be adversely affected by more stringent employee travel restrictions, additional limitations in freight services, governmental actions limiting the movement of products between regions, delays in production ramps of new products and disruptions in the operations of our component suppliers.

The occurrence of any of these events could have a material adverse effect on our results of operations and financial condition.

Furthermore, we are in the process of implementing policies and procedures designed to facilitate compliance with laws and regulations in various jurisdictions applicable to us, but there can be no assurance that our employees, contractors or agents will not violate such laws and regulations or our policies. Any such violations could, individually or in the aggregate, materially and adversely affect our financial condition and operating results.

Inadequacy of skilled personnel may lead to decline in sales of mobile phones by us.

Competition in our industry for qualified employees, especially technical employees, is intense, and our competitors directly target our employees from time to time. We have also experienced employees leaving us to start competing businesses or to join the in-house research and development teams of our customers. The loss of the technical knowledge and industry expertise of any of these individuals could seriously impede our success. Moreover, the loss of these individuals, particularly to a competitor, some of which are in a position to offer greater compensation, and any resulting loss of customers or trade secrets and technological expertise could further lead to a reduction in our market share and adversely affect our business. If we are required to increase the compensation payable to our qualified employees to compete with certain competitors with greater resources than we have or to discourage employees from leaving us to start competing businesses, our operating expenses will increase which, in turn, will adversely affect our results or operations.

Moreover, our sales team plays a pivotal role in the success of the business of every organization. The unique and important role of sales is to bridge the gap between the potential customer’s needs and the products/services that the organization offers that can fulfil their needs. Every organization strives to have best sales team who possess skill set for understanding consumer behavior and consumer needs and excellent communication skill. Our growth strategy places significant dependence on the experience and the continued efforts of our sales executives. There has always been dearth of such skilled sales personnel, and we may need to incur significant expenditure for attracting skilled sales personnel and for retaining its existing sales team. We may not be able to retain our existing sales team or attract and recruit new sales executives in the future. This may result in drop in sale of mobile handsets and will consequently have an adverse effect on our revenue and sustained growth.

Our success depends substantially on the continuing efforts of our senior executives and other key personnel, and our business may be severely disrupted if we lose their services.

Our future success heavily depends upon the continued services of our senior executives and other key employees. In particular, we rely on the expertise, experience, customer relationships and reputation of Minfei Bao, our founder and a director serving on the Board of Directors. We currently do not maintain key man life insurance for any of the senior members of our management team or other key employees. If one or more of our senior executives or key employees are unable or unwilling to continue in their present positions, it could disrupt our business operations, and we may not be able to replace them easily or at all. In addition, competition for senior executives and key employees in our industry is intense, and we may be unable to retain our senior executives and key employees or attract and retain new senior executive and key employees in the future, in which case our business may be severely disrupted, and our financial condition and results of operations may be materially and adversely affected.

If any of our senior executives or key employees joins a competitor or forms a competing company, it may lose customers, know-how and other key employees and staff members to them. Also, if any of our business development managers, who generally keep a close relationship with our customers, joins a competitor or forms a competing company, we may lose customers, and our net revenues may be materially and adversely affected. Additionally, there could be unauthorized disclosure or use of our technical knowledge, practices or procedures by such employees. All of our executives and key employees have entered into employment agreements with us that contain non-competition provisions, non-solicitation and nondisclosure covenants. However, if any dispute arises between our executive officers or key employees and us, such non-competition, non-solicitation and nondisclosure provisions might not provide effective protection to us, especially in China, where most of these executive officers and key employees reside, in light of the uncertainties with China’s legal system.

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We could be impacted by unfavorable results of legal proceedings and may, from time to time, be involved in future litigation in which substantial monetary damages are sought.

Regarding the construction contract dispute between UTime GZ and Guizhou Branch of Guangdong Jian ‘an Fire Electromechanical Engineering Co., Ltd (“Guangdong Jian’an”), on December 1, 2021, the People’s Court of Honghuagang District of Zunyi City, Guizhou Province (“Honghuagang Court”) issued the civil judgment (No. (2021) Qian 0302 Min Chu 20364 ), ruling that the defendant UTime GZ shall pay the amount of RMB 2,230,293.46 to the plaintiff Guangdong Jian’an within 10 days from the effective date of the judgment. On December 24, 2021, Utime GZ has appealed to the Intermediate People’s Court of Zunyi City, Guizhou Province (“Zunyi Intermediate Court”). On April 25, 2022, the Intermediate People’s Court of Zunyi City issued a civil ruling (No. (2022) Qian 03 Min Zhong 642). The Zunyi Intermediate Court held that the facts determined in the first instance were basically unclear and ruled to revoke the civil judgment of No. (2021) Qian 0302 Min Chu 20364. The case was remanded to the Honghuagang Court for retrial. On December 22, 2022, Honghuagang Court issued the civil judgment (No. (2022) Qian 0302 Min Chu 9108) after retrial, ruling that UTime GZ shall pay the amount of RMB 2,230,293.46 to the plaintiff Guangdong Jian’an within 10 days from the effective date of the judgment. Utime GZ has appealed to Zunyi Intermediate Court. On April 26, 2023, the Zunyi Intermediate Court issued a civil ruling (No. (2023) Qian 03 Min Zhong No. 671). The Zunyi Intermediate Court rejected the appeal and upheld the original judgment. On May 29, 2023, Guangdong Jian’an, Utime GZ, Jietongda and Utime SZ entered into the Implementation of Settlement Agreement based on the civil judgment (No. (2022) Qian 0302 Minchu 9108), with Utime SZ as the guarantor. According to the Implementation of Settlement Agreement, with regard to the payment of RMB 223,0293.46 and the first instance case acceptance fee of RMB 25,440, starting from June 2023, Utime GZ and Jietongda promise to pay RMB 300,000 Guangdong Jian’an before the end of each month (“Settlement Payment”), and complete the above payment before the end of January 2024. If either Utime SZ and Jietongda fails to make payment in accordance with this agreement, Guangdong Jian’an has the right to resume enforcement of all outstanding payments. As of the date of this annual report, the Settlement Payment has been paid by Jietongda.

Utime SZ and Dongguan Qinling Electronic Technology Co., Ltd (“Dongguan Qinling”) had a sales contract dispute case. On September 29, 2020, People’s Court of Futian District of Shenzhen, Guangdong Province (“Futian Court”) issued the civil judgment (No.（2019）Yue 0304 Min Chu 51640), ruling that the defendant Dongguan Qinling should return the loan amount of RMB 300,000 and pay relevant interest to the plaintiff Utime SZ within 10 days from the effective date of the judgment. As of the date of this annual report, Dongguan Qinling has not actually performed the judgment, and has not paid any payment and interest to Utime SZ. Furthermore, the business license of Dongguan Qinling has been revoked, and it is unable for Dongguan Qinling to perform this judgment for now.

Utime SZ and Shenzhen Wanhua Supply Chain Co., Ltd (“Shenzhen Wanhua”) had a entrustment agreement contract dispute case. On March 31, 2023, People’s Court of Shenzhen Qianhai Cooperation Zone, Guangdong Province issued the civil judgment ((No. (2023) Yue 0391 Min Chu 762), ruling that 1) the defendant Shenzhen Wanhua shall pay the plaintiff UTime SZ USD 76,639.91 within seven days from the effective date of the judgment; 2) the defendant Shenzhen Wanhua shall compensate the plaintiff UTime SZ for the overdue payment loss within seven days from the effective date of the judgment (the calculation method for the overdue payment loss is based on USD 76,639.91 , and from December 14, 2022, it shall be paid according to the same period US dollar loan interest rate standard of Bank of China until the actual settlement date). As of the date of this annual report, Shenzhen Wanhua has not actually performed the judgment, and has not paid any payment and interest to Utime SZ.

UTime SZ and Shenzhen Zhonghang Jiayikang Electronics Co., Ltd. (“Jiayikang”) had a sales contract dispute. Jiayikang requests the judgment to 1) order the defendant UTime SZ to repay the outstanding payment to the plaintiff Jiayikang, totaling RMB 2,224,638.78; 2) order to calculate the loss of overdue payment from March 1, 2020 to the date when the principal of the loan has been fully repaid, with RMB 2,224,638.78 as the base number and 50% higher than the standard of one-year loan market quotation rate published by the National Interbank lending market Center authorized by the People’s Bank of China: the current loss of overdue payment is temporarily calculated to be RMB 354,736.94 by December 15, 2022. As of the date of this annual report, the Company is currently subject to ongoing appellate proceedings following a first-instance judgment (No. (2023) Yue 0304 Min Chu 13831) rendered by Futian Court on February 27, 2024.

Regardless of the merit of particular claims, litigation may be expensive, time consuming, disruptive to our operations and distracting to management. For instance, if such litigation against Do Mobile stays pending, there will be no effective board of Do Mobile, which may lead to serious complications for Do Mobile. Continued non-compliance may impact Do Mobile’s operations negatively, which could result in the imposition of substantial penalties by the government and lead to prosecution of our management. Therefore, our business operations could be negatively impacted by unfavorable results of legal proceedings.

In addition, we may from time to time be involved in future litigation in which substantial monetary damages are sought. Litigation claims may relate to intellectual property, contracts, employment, securities and other matters arising out of the conduct of our current and past business activities. Any claims, whether with or without merit, could be time consuming, expensive to defend and could divert management’s attention and resources. We may maintain insurance against some, but not all, of these potential claims, and the levels of insurance we do maintain may not be adequate to fully cover any and all losses. Nonetheless, the results of any future litigation or claims are inherently unpredictable, and such outcomes could have a material adverse effect on our results of operations, cash from operating activities or financial condition.

Compromised product quality of our mobile products may damage our brand and reputation of and customers could stop using our mobile handsets

Quality of any product plays a vital role towards its demand and any failure to maintain quality standards may impact sales and revenues. Much of the mobile products we sell, for instance, the mobile handsets sold by Do Mobile, are being manufactured by third party vendors. Though we conduct frequent vendor inspections in an effort to ensure that these vendors adhere to our prescribed quality standards; however, there remains an element of risk about the quality of mobile handsets as we cannot guarantee that our inspections will capture all existing or latent defects. Our inability to maintain the quality of our products, may materially impact our reputation and business.

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We may not be able to successfully sustain our growth strategy into new geographic markets and innovative consumer electronic products. Inability to effectively manage growth, our current and planned resources and related issues could materially and adversely affect our business of and impact future financial performance.

We have experienced rapid growth since we commenced operations. Our rapid expansion may expose us to new challenges and risks. Currently we are not involved in any other business vertical and are solely dependent upon revenue from its mobile handset business. In the event, our mobile handset vertical becomes vulnerable due to any unforeseen circumstance or we become unable to successfully augment our existing business of sale of mobile handsets, then our business and financial condition could material adverse effect. Even if we introduce any new service or product as a part of its business operations, it may take time to establish in a highly competitive Asian market, hence, there can be no assurance that we will be able to achieve its intended return on investments.

A further principal component of our growth strategy is to expand the geographical scope of our business. This growth strategy will require deployment of additional funds and resources, continued expansion and enhancement of our infrastructure and technology, improvement of our operational and financial systems and controls, and will also entail procuring additional approvals, permissions and licenses from regulatory authorities. This will put strain on our funds position and there will always be a requirement of infusion of additional capital. For example, we currently manage all of our human resources functions with a traditional and basic system and expect that we will need to upgrade our current system as we continue to increase our headcount. We also need to expand, train and manage our growing employee base. In addition, our management will be required to obtain, maintain or expand relationships with mobile chipset manufacturers, mobile device OEMs and mobile operators, as well as other third-party business partners. We cannot assure you that our current and planned personnel, infrastructure, systems, procedures and controls will be adequate to support our expanding operations. As we enter new markets, such expansion may subject us to various challenges, including those relating to our lack of familiarity with the culture, legal regulations and economic conditions of the new regions, difficulties in selection and appointment of distributors, display centers, staffing and managing such operations. The risks involved in entering new geographical markets may be higher than expected, and we may face significant competition in such markets. By expanding into new markets, we may be exposed to significant liabilities and could lose some or all of our investment in such regions. If we fail to manage our expansion effectively, our business, results of operations and prospects may be materially and adversely affected. Any delay or non-availability of additional capital will also impact our growth curve and may lead to stagnation and loss of business.

Continuous expansion also involves challenges relating to recruitment, training and retention of human resources of caliber. Failure to train and retain employees may result in attrition, which will put pressure on us for recruitment, which may also lead to increased human resource costs, which may also impact our financial position.

We are dependent on raw materials and mobile device components from off shore entities and from local markets, and an increase in their cost could have an adverse effect on our business.

The stability or variability in the prices of materials or components depends on various factors which could have an adverse effect on our business and accordingly, a major fluctuation should not be ruled out in the future. Several components used in handsets sold by us are sourced from offshore companies, primarily from China. The price and availability of the materials or components depends on several factors beyond our control, including supplier’s preferability, overall economic conditions, production levels, market demand for such material, production and transportation cost, duties, taxes and trade restrictions. Any impact on supply of components for any reason whatsoever will have direct impact on our business.

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

We have entered into a number of transactions with related parties, including our significant shareholders and directors. For example, we have entered into several transactions with persons or our founder and a director of us, Minfei Bao, where we borrowed funds from him for additional working capital demand. See “Item 7. Major Shareholders And Related Party Transactions - B. Related Party Transactions - Loans from Mr. Bao”. We may in the future enter into additional transactions with entities in which members of our board of directors and other related parties hold ownership interests.

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

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We may be adversely affected by product liability exposure claims.

We face an inherent business risk of exposure to product liability claims in the event that our products fail to perform to their specifications. In case of any product liability claim, we may need to incur significant expenditure in defending any such claims. We may incur losses relating to these claims or the defense of these claims.

We may also be required to participate in recalls involving our mobile products, if any prove to be defective, or we may voluntarily initiate a recall or make payments related to such claims as a result of various industry or business practices or the need to maintain good customer relationships. Such a recall would result in a diversion of resources. Where defective designs or defective components parts cause significant bodily damage or injury, our liability risks will increase.

We do not maintain product liability insurance, and to the extent we do obtain such insurance in the future, we cannot assure investors that it will be sufficient to cover all product liability claims, that such claims will not exceed our insurance coverage limits or that such insurance will continue to be available on commercially reasonable terms, if at all. Any product liability claim brought against us could have a material adverse effect on the results of our operations.

Our management and auditors identified material weaknesses in our internal control over financial reporting that, if not properly remediated, could result in material misstatements in our consolidated financial statements that could cause investors to lose confidence in our reported financial information and have a negative effect on the trading price of our ordinary shares.

Prior to our initial public offering, we were a private company with limited accounting personnel and other resources with which we address our internal control over financial reporting. In connection with the audits of our consolidated financial statements included in this annual report, we and our independent registered public accounting firm identified two material weaknesses in our internal control over financial reporting. A “material weakness” is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

We did not maintain appropriately designed entity-level controls impacting the control environment, risk assessment procedures, and effective monitoring controls to prevent or detect material misstatements to the consolidated financial statements. These deficiencies were attributed to: (i) our lack of sufficient qualified financial reporting and accounting personnel with an appropriate knowledge under accounting principles generally accepted in the United States (“U.S. GAAP”), and (ii) our lack of comprehensive accounting policies and procedures manual in accordance with U.S. GAAP. We are taking remedial measures to improve the effectiveness of our controls, including by hiring additional accounting and finance personnel and by seeking to engage an outside consultant. The existence of material weaknesses is an indication that there is a more than remote likelihood that a material misstatement of our financial statements will not be prevented or detected in a future period, and the process of designing and implementing effective internal controls and procedures will be a continual effort that may require us to expend significant resources to establish and maintain a system of controls that is adequate to satisfy our reporting obligations as a public company. We cannot assure you that the measures we take will be sufficient to remediate the material weaknesses identified by our management and Audit Alliance LLP or that we will implement and maintain adequate controls over our financial processes and reporting in the future in order to avoid additional material weaknesses or controlled deficiencies in our internal control over financing reporting. If our remediation efforts are not successful or other material weaknesses or control deficiencies occur in the future, we may be unable to report our financial results accurately or on a timely basis, which could cause our reported financial results to be materially misstated and result in the loss of investor confidence and cause the trading price of our ordinary shares to decline. Moreover, ineffective controls could significantly hinder our ability to prevent fraud.

Our internal controls over financial reporting may not be effective and our independent registered public accounting firm may not be able to certify as to their effectiveness, which could have a significant and adverse effect on our business and reputation.

We will be in a continuing process of developing, establishing, and maintaining internal controls and procedures that will allow our independent registered public accounting firm to attest to, our internal controls over financial reporting if and when required to do so under Section 404 of the Sarbanes-Oxley Act. Although our independent registered public accounting firm is not required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act until the date we are no longer an emerging growth company and neither a large accelerated filer nor an accelerated filer, our management will be required to report on our internal controls over financial reporting under Section 404 of the Sarbanes-Oxley Act. If we fail to achieve and maintain the adequacy of our internal controls, we would not be able to conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed or operating. Moreover, our testing, or the subsequent testing by our independent registered public accounting firm, may reveal other material weaknesses or that the material weaknesses described above have not been fully remediated. If we do not remediate the material weaknesses described above, or if other material weaknesses are identified or we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, our reported financial results could be materially misstated or could subsequently require restatement, we could receive an adverse opinion regarding our internal controls over financial reporting from our independent registered public accounting firm and we could be subject to investigations or sanctions by regulatory authorities, which would require additional financial and management resources, and the market price of our ordinary shares could decline.

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We are subject to various anti-corruption and anti-bribery laws, including the U.S. Foreign Corrupt Practices Act, and U.K. and PRC anti-corruption and anti-bribery laws; any determination that we have violated such laws could damage our business and reputation, limit our ability to bid for certain business opportunities, and subject us to significant criminal and civil penalties, civil litigation (such as shareholder derivative suits), and commercial liabilities.

We are subject to anti-corruption and anti-bribery laws in the United States, United Kingdom, and China that prohibit certain improper payments made directly or indirectly to government departments, agencies, and instrumentalities; officials of those government departments, agencies, and instrumentalities; political parties and their officials; candidates for political office; officials of public international organizations; persons acting on behalf of the foregoing; and commercial counterparties. These laws include the U.S. Foreign Corrupt Practices Act, the PRC Criminal Law, the PRC Anti-Unfair Competition Law.

We are engaged in business in a number of countries that are regarded as posing significant risks of corruption. Of particular note, we conduct operations, have agreements with state-controlled enterprises and other third parties and make sales in the PRC, which may be exposed to corruption risk. It is our policy to implement safeguards and procedures to prohibit these practices by our employees, officers, directors, or by third parties acting on our behalf. However, we cannot rule out the risk that any of our employees, officers, directors, or third parties acting on our behalf may engage in breaches of our policies or anti-corruption laws, for which we might be held responsible.

Allegations of violations of these anti-corruption and anti-bribery laws, and investigation into such allegations, could negatively affect our reputation, business, operating results, and financial condition. The violation of these laws may result in substantial monetary and even criminal sanctions, follow-on civil litigation (such as shareholder derivative suits), and monitoring of our compliance program by the United States or other governments, each of which could negatively affect our reputation, business, operating results, and financial condition. In addition, the United States or other governments may seek to hold us liable for violations of these laws committed by companies in which we invest or acquire.

The agreements governing the loan facilities we currently have contain restrictions and limitations that could significantly affect our ability to operate our business, raise capital, as well as significantly affect our liquidity, and therefore could adversely affect our results of operations.

We have incurred certain indebtedness under loan facilities with various lenders including Shenzhen Rural Commercial Bank (“SRCB”) and China Resources Bank of Zhuhai Co., Ltd (“CRBZ”).

Covenants governing our loan facilities with SRCB and CRBZ restrict, among other things, our ability to:

| ● | incur or permit to exist any additional indebtedness;

| ● | guarantee or otherwise become liable with respect to the obligations of another party or entity;

| ● | acquire any assets, except in the ordinary course of business, or make any investments;

| ● | use the loan hereunder for investment in fixed assets or equity, or for investment in securities or futures market; and

| ● | complete a merger, division, transfer of equity and creditor’s rights, external investment, material increase of debt financing, or a sale of all or substantially all of our assets.

We have been subject to certain financial covenants from our lenders. Our credit agreements with SRCB require us to meet certain monthly revenue targets, each for a term of three years. These credit agreements require us to maintain monthly revenue at least RMB3.0 million (US$0.5 million). Such monthly revenue amounts shall be deposited into an account established by UTime SZ and under the supervision of SRCB. UTime SZ may withdraw funds from such account only after ensuring that the applicable principal and interest of the SRCB loans are paid off as they become due on a monthly basis. Apart from the aforementioned restriction, UTime SZ is able to fully control the funds in the supervision account. However, if UTime SZ fails to meet the minimum monthly revenue covenant in the credit agreement, SRCB shall have the right to raise the interest rate by 50% from the date of funding (i.e. July 16, 2021) or to accelerate the loan.

In addition to the above-mentioned financial covenants, the SRCB and CRBZ loan documents contain customary events of default, including but not limited to: non-payment of principal, interest and fees or other amounts; violation of covenants; inaccuracy of representations and warranties; and certain bankruptcy and other insolvency events. If UTime SZ is in breach of any of these credit agreements, the applicable lender shall have the right to dispose of the collateral in accordance with the law.

Our ability to comply with these and other provisions under our outstanding loans may be affected by events beyond our control. Although as of the date of this annual report, we believe we are in compliance with all of our loan covenants, such covenants and obligations are ongoing, and the breach of any such covenants or obligations not otherwise waived or cured could result in a default under the applicable debt obligations and could trigger acceleration of those obligations.

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Any defaults under our loan arrangements could adversely affect our growth, our financial condition, our results of operations and our ability to make payments on our debt. The ability to make payments of principal and interest on indebtedness will depend on our financial condition, which is subject to general economic conditions, industry cycles and financial, business and other factors affecting our operations, many of which are beyond our control. If sufficient cash flow is not generated from operations to service such debt, we may be required, among other things, to:

| ● | seek additional financing in the debt or equity markets;

| ● | delay, curtail or abandon altogether our research & development or investment plans;

| ● | refinance or restructure all or a portion of our indebtedness; or

| ● | sell selected assets.

Such measures might be insufficient to service the indebtedness. In addition, any such financing, refinancing or sale of assets may not be available on commercially reasonable terms, or at all. In addition, we may not be able to grow market share, take advantage of future opportunities or respond to competitive pressures or unanticipated requirements, which could negatively impact our business, operating results and financial condition.

Defaults under either of our loan agreements with each of SRCB and CRBZ could result in a substantial loss of our assets.

Historically, we have mortgaged our assets to obtain loans with various banking institutions. We have mortgaged our office owned by UTime SZ and pledged accounts receivables equal to RMB22,500,000 (US$3.5 million) owned by UTime SZ under our credit agreement with CCB, which was terminated in November 2020. Additionally, we have mortgaged our office owned by UTime SZ under our credit agreement with CRBZ. See “Item 5. Operating And Financial Review And Prospects- Liquidity and Capital Resources - Financing Activities.”

A failure to repay any of the indebtedness under either of our loan agreements with SRCB or CRBZ as they become due or to otherwise comply with the covenants contained in any of such agreements could result in an event of default thereunder. If not cured or waived, an event of default under any of such agreements could enable the lender thereunder to declare all borrowings outstanding on such debt, together with accrued and unpaid interest and fees, to be due and payable and terminate all commitments to extend further credit. Such lenders could also elect to foreclose on our assets securing such debt. In such an event, the Company may not be able to refinance or repay all of its indebtedness, pay dividends or have sufficient liquidity to meet operating and capital expenditure requirements. Any such acceleration could cause us to lose a substantial portion of our assets and will substantially adversely affect our ability to continue our operations.

Controversies affecting China’s trade with the United States could harm our operations.

In July 2018 and again in September 2018, the United States imposed tariffs on a wide range of products and other goods from China. In May 2019, negotiations on tariffs and other trade matters between the United States and China came to a halt, and both sides escalated the trade dispute. In June 2019, trade talks resumed between the United States and China, and the United States indicated it would not impose additional tariffs at this time. Although negotiation resumed in the second half of 2019 between the United States and China and the two countries reached a trade deal in January 2020, it is possible the United States will impose additional tariffs. Given our major manufacturing in China, the imposition of tariffs by the United States presents negative effect for us. Tariffs that have already been announced and implemented have covered certain of our products. The trade controversy between the United States and China is still evolving, and we cannot predict future trade policy. However, future tariffs could cover more or all of our products, resulting in an adverse effect on our operations, including customer demand from the United States.

Risks Related to Our Corporate Structure

We are a holding company, and will rely on dividends paid by our subsidiaries for our cash needs. Any limitation on the ability of our subsidiaries to make dividend payments to us, or any tax implications of making dividend payments to us, could limit our ability to pay our parent company expenses or pay dividends to holders of our ordinary shares.

We are a holding company and conduct substantially all of our business through our operating subsidiaries, including limited liability companies established in China. We will rely on dividends paid by our subsidiaries for our cash needs, including the funds necessary to pay dividends and other cash distributions to our shareholders, to service any debt we may incur and to pay our operating expenses.

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We rely on dividends and other distributions on equity paid by our PRC Subsidiary to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC Subsidiary to make payments to us could have a material adverse effect on our ability to conduct our business. If our PRC Subsidiary incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us. Under PRC laws and regulations, our PRC Subsidiary, which is a wholly foreign-owned enterprise, may pay dividends only out of its accumulated profits as determined in accordance with PRC accounting standards and regulations. In addition, a wholly foreign-owned enterprise is required to set aside at least 10% of its accumulated after-tax profits each year, if any, to fund a certain statutory reserve fund, until the aggregate amount of such fund reaches 50% of its registered capital. Such reserve funds cannot be distributed to us as dividends. At its discretion, a wholly foreign-owned enterprise may allocate a portion of its after-tax profits based on PRC accounting standards to an enterprise expansion fund, or a staff welfare and bonus fund.

Our PRC Subsidiary generates primarily all of its revenue in Renminbi, which is not freely convertible into other currencies. As result, any restriction on currency exchange may limit the ability of our PRC Subsidiary to use its Renminbi revenues to pay dividends to us. The PRC government may continue to strengthen its capital controls, and more restrictions and substantial vetting process may be put forward by State Administration of Foreign Exchange (the “SAFE”) for cross-border transactions falling under both the current account and the capital account. Any limitation on the ability of our PRC Subsidiary to pay dividends or make other kinds of payments to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.

In addition, the Enterprise Income Tax Law and its implementation rules provide that a withholding tax rate of up to 10% will be applicable to dividends payable by Chinese companies to non-PRC-resident enterprises unless otherwise exempted or reduced according to treaties or arrangements between the PRC central government and governments of other countries or regions where the non-PRC resident enterprises are incorporated. Any limitation on the ability of our PRC subsidiary to pay dividends or make other distributions to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.

Minfei Bao, our founder and director, and Min He will continue to have significant influence over us after our initial public offering, including control over decisions that require the approval of shareholders, which could limit your ability to influence the outcome of matters submitted to shareholders for a vote.

As of the date of this annual report, Minfei Bao beneficially owns 4,380,000 of our ordinary shares, or 1.12% of our issued and outstanding ordinary shares, through Grandsky Phoenix Limited, a British Virgin Islands company, of which Mr. Bao controls 100% of the equity interest. As of the date of this annual report, Min He, one of our directors, beneficially owns 137,793 of our ordinary shares, or 0.04% of our issued and outstanding ordinary shares through HMercury Capital Limited, a British Virgin Islands company, of which Mr. He is the controlling shareholder. As long as Mr. Bao owns or controls a significant amount of our outstanding voting power of our ordinary shares, Mr. Bao, or Mr. Bao and Mr. He, if they act together, has or have the ability to exercise substantial control over all corporate actions requiring shareholder approval, irrespective of how our other shareholders may vote, including:

| ● | the election and removal of directors and the size of our board of directors;

| ● | any amendment of our memorandum or articles of association; or

| ● | the approval of mergers, consolidations and other significant corporate transactions, including a sale of substantially all of our assets.

Moreover, beneficial ownership of our ordinary shares by Mr. Bao may also adversely affect the trading price of our ordinary shares on Nasdaq to the extent investors perceive disadvantages in owning shares of a company with a controlling shareholder. As a result, this concentration of ownership may not be in the best interests of our other shareholders.

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We are a “controlled company” within the meaning of Nasdaq’s Rules and, as a result, may rely on exemptions from certain corporate governance requirements that provide protection to shareholders of other companies.

We are a “controlled company” as defined under Nasdaq’s Rules because Mr. Bao holds more than 50% of our voting power, and we continue to be a controlled company upon completion of our initial public offering. For so long as we remain a controlled company under that definition, we are permitted to elect to rely, and may rely, on certain exemptions from the obligation to comply with certain corporate governance requirements, including:

| ● | the requirement that our directors must be selected or recommended solely by independent directors; and

| ● | the requirement that we have a corporate governance and nominating committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.

As a result, you will not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of the NASDAQ Stock Market Rules, if we utilize such exemptions. We currently do not intend to utilize the controlled company exemptions. To the extent we cease to qualify as a controlled company, we will no longer be able to rely on any of these exemptions.

We may become subject to taxation in the Cayman Islands, which would negatively affect our results.

We have received an undertaking from the Financial Secretary of the Cayman Islands that, in accordance with section 6 of the Tax Concessions Act (As Revised) of the Cayman Islands, until the date falling 20 years after October 15, 2018, being the date of such undertaking, no law which is enacted in the Cayman Islands imposing any tax to be levied on profits, income, gains or appreciations shall apply to us or our operations and, in addition, that no tax to be levied on profits, income, gains or appreciations or which is in the nature of estate duty or inheritance tax shall be payable (i) on or in respect of the shares, debentures or other obligations of our company or (ii) by way of the withholding in whole or in part of a payment of dividend or other distribution of income or capital by our company to its members or a payment of principal or interest or other sums due under a debenture or other obligation of our company. If we otherwise were to become subject to taxation in the Cayman Islands, our financial condition and results of operations could be materially and adversely affected. See “Item 10.E. Taxation - Cayman Islands Taxation”.

We are subject to various changing laws and regulations regarding regulatory matters, corporate governance and public disclosure that have increased both our costs and the risk of non-compliance.

We are subject to rules and regulations by various governing bodies, including, for example, the SEC, which is charged with the protection of investors and the oversight of companies whose securities are publicly traded, and to new and evolving regulatory measures under applicable law. Our efforts to comply with new and changing laws and regulations have resulted in and are likely to continue to result in, increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities.

Moreover, because these laws, regulations and standards are subject to varying interpretations, their application in practice may evolve over time as new guidance becomes available. This evolution may result in continuing uncertainty regarding compliance matters and additional costs necessitated by ongoing revisions to our disclosure and governance practices. If we fail to address and comply with these regulations and any subsequent changes, we may be subject to penalty and our business may be harmed.

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Because we are incorporated under the laws of the Cayman Islands, you may face difficulties in protecting your interests, and your ability to protect your rights through the U.S. Federal courts may be limited.

We are a Cayman Islands exempted company with limited liability and substantially all of our assets will be located outside the United States. In addition, most of our directors and officers are nationals or residents of jurisdictions other than the United States and all or a substantial portion of their assets are located outside the United States. As a result, it may be difficult for investors to effect service of process within the United States upon us or our directors or executive officers, or enforce judgments obtained in the United States courts against us or our directors or officers.

Further, mail addressed to us and received at our registered office will be forwarded unopened to the forwarding address supplied by our directors. Our directors will only receive, open or deal directly with mail which is addressed to them personally (as opposed to mail which is only addressed to us). We, our directors, officers, advisors or service providers (including the organization which provides registered office services in the Cayman Islands) will not bear any responsibility for any delay, howsoever caused, in mail reaching this forwarding address.

Our corporate affairs are governed by our amended and restated memorandum and articles of association, the Companies Act (As Revised) (as the same may be supplemented or amended from time to time) 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 judicial precedent in the Cayman Islands as well as from English common law, the decisions of whose courts are of persuasive authority, but are not technically 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 exhaustive body of securities laws as compared to the United States, and certain states, such as Delaware, have more fulsome and judicially interpreted bodies of corporate law. As a result, there may be significantly less protection for investors than is available to investors in companies organized in the United States, particularly Delaware. In addition, Cayman Islands companies may not have standing to initiate a shareholders’ derivative action in a Federal court of the United States.

The Cayman Islands courts are also unlikely:

| ● | to recognize or enforce against us judgments of courts of the United States based on the civil liability provisions of United States securities laws; and

| ● | to impose liabilities against us, in original actions brought in the Cayman Islands, based on the civil liability provisions of United States securities laws that impose liabilities that are penal in nature.

In those circumstances, although there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, the courts of the Cayman Islands will recognize and enforce a foreign money judgment of a foreign court of competent jurisdiction without retrial on the merits based on the principle that a judgment of a competent foreign court imposes upon the judgment debtor an obligation to pay the sum for which judgment has been given provided certain conditions are met. For a foreign judgment to be enforced in the Cayman Islands, such judgment must be final and conclusive and for a liquidated sum, and must not be in respect of taxes or a fine or penalty, inconsistent with a Cayman Islands judgment in respect of the same matter, impeachable on the grounds of fraud or obtained in a manner, and or be of a kind the enforcement of which is, contrary to natural justice or the public policy of the Cayman Islands (awards of punitive or multiple damages may well be held to be contrary to public policy). A Cayman Islands Court may stay enforcement proceedings if concurrent proceedings are being brought elsewhere.

Like many jurisdictions in the United States, in certain circumstances Cayman Islands law permits mergers and consolidations between Cayman Islands companies and between Cayman Islands companies and non-Cayman Islands companies (provided that is facilitated by the laws of that other jurisdiction) and any such company may be the surviving entity for the purposes of mergers or the consolidated company for the purposes of consolidations. For these purposes, (a) “merger” means the merging of two or more constituent companies and the vesting of their undertaking, property and liabilities in one of such companies as the surviving company and (b) a “consolidation” means the combination of two or more constituent companies into a consolidated company and the vesting of the undertaking, property and liabilities of such companies to the consolidated company. In order to effect such a merger or consolidation, the directors of each constituent company must approve a written plan of merger or consolidation, which must, in most instances, then be authorized by a special resolution (usually a majority of 66 2/3% in value) of the shareholders of each constituent company and such other authorization, if any, as may be specified in such constituent company’s articles of association. A merger between a Cayman parent company and its Cayman subsidiary or subsidiaries does not require authorization by a resolution of shareholders provided a copy of the plan of merger is given to every member of each subsidiary company to be merged (unless waived by such member). For this purpose a subsidiary is a company of which at least 90% of the votes cast at its general meeting are held by the parent company. The consent of each holder of a fixed or floating security interest over a constituent company is required unless this requirement is waived by a court in the Cayman Islands. The plan of merger or consolidation must be filed with the Registrar of Companies who, if satisfied that the requirements of the Companies Act (As Revised) which includes certain other formalities, have been complied with, will register it. The filing must include a declaration as to the solvency of the consolidated or surviving company, a list of the assets and liabilities of each constituent company and an undertaking that a copy of the certificate of merger or consolidation will be given to the members and creditors of each constituent company and published in the Cayman Islands Gazette. Dissenting shareholders have the right to be paid the fair value of their shares (which, if not agreed between the parties, will be determined by the Cayman Islands court) if they follow the required procedures, subject to certain exceptions. Court approval is not required for a merger or consolidation which is effected in compliance with these statutory procedures.

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In addition, there are statutory provisions that facilitate the reconstruction and amalgamation of companies in certain circumstances, provided that the arrangement is approved by a majority in number of each class of shareholders and creditors with whom the arrangement is to be made, and who must in addition represent two-thirds in value of each such class of shareholders or creditors, as the case may be, that are present and voting either in person or by proxy at a meeting, or meetings, convened for that purpose. The convening of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of the Cayman Islands. While a dissenting shareholder has the right to express to the court the view that the transaction ought not be approved, the court can be expected to approve the arrangement if it determines that:

| ● | the company is not proposing to act illegally or beyond the scope of its corporate authority and the statutory provisions as to the required majority vote have been met;

| ● | the shareholders have been fairly represented at the meeting in question, the statutory majority are acting bona fide without coercion of the minority to promote interests adverse to those of the class and that the meeting was properly constituted;

| ● | the arrangement is such that it may reasonably be approved by an intelligent and honest man of that share class acting in respect of his interest; and

| ● | the arrangement is not one which would be more properly sanctioned under some other provision of the Companies Act, or that would amount to “fraud on the minority.”

If the arrangement and reconstruction is approved, the dissenting shareholder would have no rights comparable to appraisal rights, which would otherwise ordinarily be available to dissenting shareholders of U.S. corporations, providing rights to receive payment in cash for the judicially determined value of the shares.

In addition, there are further statutory provisions to the effect that, when a take-over offer is made and approved by holders of 90.0% in value of the shares affected (within four months after the making of the offer), the offeror may, within two months following the expiry of such period, require the holders of the remaining shares to transfer such shares on the terms of the offer. An objection can be made to the Grand Court of the Cayman Islands, but this is unlikely to succeed unless there is evidence of fraud, bad faith, collusion or inequitable treatment of shareholders.

Further, transactions similar to a merger, reconstruction and/or an amalgamation may in some circumstances be achieved through other means to these statutory provisions, such as a share capital exchange, asset acquisition or control, through contractual arrangements, of an operating business.

As a result of all of the above, public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as public shareholders of a U.S. company.

Provisions of our amended and restated memorandum and articles of association or Cayman Islands law could delay or prevent an acquisition of our company, even if the acquisition may be beneficial to our shareholders, could make it more difficult for you to change management, and could have an adverse effect on the market price of our ordinary shares.

Provisions in our amended and restated memorandum and articles of association may discourage, delay or prevent a merger, acquisition or other change in control that shareholders may consider favorable, including transactions in which shareholders might otherwise receive a premium for their shares. In addition, these provisions may frustrate or prevent any attempt by our shareholders to replace or remove our current management by making it more difficult to replace or remove our board of directors. Such provisions may reduce the price that investors may be willing to pay for our ordinary shares in the future, which could reduce the market price of our ordinary shares. These provisions include:

| ● | a prohibition on shareholder action through written consent;

| ● | a requirement that extraordinary general meetings of shareholders be called only by a majority of the board of directors or, in limited circumstances, by the board upon shareholder requisition;

| ● | an advance notice requirement for shareholder proposals and nominations to be brought before an annual general meeting;

| ● | the authority of our board of directors to issue preference shares with such terms as our board of directors may determine; and

| ● | a requirement of approval of not less than two-thirds of the votes cast by shareholders entitled to vote thereon in order to amend any provisions of our amended and restated memorandum and articles of association.

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UTime Limited is a holding company with no material operation. We conduct substantially all of our operations through the VIE and its subsidiaries, and we rely on contractual arrangements with the VIE and its shareholders to operate our business. If the PRC government deems that the agreements that establish the structure for operating some of our operations in China do not comply with PRC regulations relating to the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations.

We are a holding company incorporated in the Cayman Islands and our PRC Subsidiary is considered foreign-invested enterprise. As a holding company with no material operations of our own, we conduct a substantial majority of our operations through the VIE and its subsidiaries. In December 2018, UTime HK established a wholly owned subsidiary in China, UTime WFOE, our wholly-owned foreign enterprise (“WFOE”). In March 2019, we obtained control over UTime SZ via UTime WFOE by entering into a series of contractual arrangements with UTime SZ, our VIE, and its shareholder. In August 2019, the amended and restated contractual agreements were entered into among UTime SZ, our VIE, and its shareholders, which were further amended and restated in September 2019.

UTime WFOE has entered into a series of contractual arrangements with our VIE and its shareholders, respectively, which enable us to (i) determine the most significant economic activities of the VIE, (ii) receive substantially all of the economic benefits of our VIE, and (iii) have an exclusive option to purchase all or part of the equity interests and assets in our VIE when and to the extent permitted by PRC laws. As a result of these contractual arrangements, we have control over and are considered the primary beneficiary of our VIE for accounting purposes and hence consolidate its financial results into our consolidated financial statements under U.S. GAAP. See “Item 4A. - History and Corporate Structure - Contractual Arrangements with the VIE and its Respective Shareholders” for further details.

In the opinion of Zhejiang Taihang Law Firm, our PRC legal counsel, (i) the ownership structures of the VIE in China and UTime WFOE, both currently and immediately after giving effect to our initial public offering, comply with all existing PRC laws and regulations; and (ii) the contractual arrangements between UTime WFOE, our VIE and its shareholders governed by PRC law are valid, binding and enforceable, and will not result in any violation of PRC laws or regulations currently in effect. However, 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. The contractual arrangements have not been tested in a court of law. Accordingly, the PRC regulatory authorities may ultimately 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 the VIE structure will be adopted or if adopted, what they would provide. If we or our VIE is 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, including:

| ● | revoking the business license and/or operating licenses of our WFOE or our VIE;

| ● | discontinuing or placing restrictions or onerous conditions on our operations through any transactions between our WFOE and our VIE;

| ● | imposing fines, confiscating the income from our WFOE or our VIE, or imposing other requirements with which we or our VIE may not be able to comply;

| ● | requiring us to restructure our ownership structure or operations, including terminating the contractual arrangements with our VIE and deregistering the equity pledges of our VIE, which in turn would affect our ability to consolidate, derive economic interests from, or determine the most significant economic activities of the VIE; or

| ● | restricting or prohibiting our use of the proceeds of our initial public offering to finance our business and operations in China.

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Furthermore, new PRC laws, rules and regulations may be introduced to impose additional requirements that may be applicable to our corporate structure and contractual arrangements. See “Risks Related to Our Corporate Structure-Substantial uncertainties exist with respect to the interpretation and implementation of the newly enacted PRC Foreign Investment Law and its Implementation Regulations and how they may impact the viability of our current corporate structure, corporate governance, business operations and financial results.” Occurrence of any of these events could materially and adversely affect our business and financial condition and results of operations.

The imposition of any of these penalties would result in a material and adverse effect on our ability to conduct our business and the market price of our ordinary shares. In addition, it is unclear what impact the PRC government actions would have on us and on our ability to consolidate the financial results of our VIE in our consolidated financial statements, if the PRC government authorities were to find our legal structure and contractual arrangements to be in violation of PRC laws and regulations, or if these regulations change or are interpreted differently in the future. If the imposition of any of these government actions causes us to lose our right to direct the activities of our VIE or our right to receive substantially all the economic benefits and residual returns from our VIE 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 VIE in our consolidated financial statements, which may cause the value of our ordinary shares to significantly decline or even become worthless. Either of these results, or any other significant penalties that might be imposed on us in this event, would have a material change in our operation and a material adverse effect on our financial condition and results of operations, could significantly limit or completely hinder our ability to offer ordinary shares to investors and could cause the value of our ordinary shares to significantly decline or be worthless.

We do not hold direct equity interest in the VIE. We rely on contractual arrangements with our VIE and its shareholders for a large portion of our business operations, which may not be as effective as direct ownership in providing operational control.

UTime Limited is a Cayman Islands holding company and does not hold direct equity interest in the VIE. We have relied and expect to continue to rely on contractual arrangements with our VIE and its shareholders to conduct certain of our key businesses. These contractual arrangements may not be as effective as the control provided by having a direct ownership in our VIE. For example, our VIE and its shareholders could breach their contractual arrangements with us by, among other things, failing to conduct their operations in an acceptable manner or taking other actions that are detrimental to our interests. We have no direct or indirect equity interests in the VIE or any of its subsidiaries.

If we had direct ownership of our VIE, we would be able to exercise our rights as a shareholder to effect changes in the board of directors of our VIE, which in turn could implement changes, subject to any applicable fiduciary obligations, at the management and operational level. However, under the current contractual arrangements, we rely on the performance by our VIE and its shareholders of their obligations under the contracts to exercise control over our VIE. The shareholders of our consolidated VIE may not act in the best interests of our Company or may not perform their obligations under these contracts. Such risks exist throughout the period in which we intend to operate certain portions of our business through the contractual arrangements with our VIE. All of these contractual arrangements are governed by PRC law and provide for the resolution of disputes through arbitration in the PRC. The legal environment in the PRC is not as developed as in some other jurisdictions, such as the United States. If any disputes relating to these contracts remains unresolved, we will have to enforce our rights under these contracts through the operations of PRC laws and arbitration, litigation and other legal proceedings and therefore will be subject to uncertainties in the PRC legal system. In the event we are unable to enforce these contractual arrangements, we may not be able to determine the most significant economic activities of the VIE and we may be precluded from operating our business, which would have a material adverse effect on our financial condition and results of operations. Therefore, our contractual arrangements with our VIE may not be as effective in ensuring our control over the relevant portion of our business operations as direct ownership would be. If we are unable to assert our contractual control rights over the assets of the VIE that conduct all or substantially all of our operations, our ordinary shares may decline in value or become worthless.

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

A substantial majority of our business is conducted through UTime SZ, which currently is considered for accounting purposes as a VIE, and we are considered as the primary beneficiary, enabling us to consolidate our financial results in our consolidated financial statements. In the event that in the future the VIE would no longer meet the definition of a VIE, or we are deemed not to be the primary beneficiary, we would not be able to consolidate line by line the VIE’s financial results in our consolidated financial statements for PRC purposes. Also, if in the future an affiliate company becomes a VIE and we become the primary beneficiary, we would be required to consolidate that entity’s financial results in our consolidated financial statements for PRC purposes. If such entity’s financial results were negative, this could have a corresponding negative impact on our operating results for PRC purposes. However, any material variations in the accounting principles, practices, and methods used in preparing financial statements for PRC purposes from the principles, practices, and methods generally accepted in the United States and in the SEC accounting regulations must be discussed, quantified, and reconciled in financial statements for the United States and SEC purposes.

Any failure by our VIE or its shareholders to perform their obligations under our contractual arrangements with them would have a material and adverse effect on our business.

We refer to the shareholders of our VIE as its nominee shareholders because although they remain the holders of equity interests on record in our VIE, pursuant to the terms of the relevant power of attorney, such shareholders have irrevocably authorized our WFOE or any individual duly appointed by WFOE to exercise their rights as a shareholder of the relevant VIE. However, if our VIE or its shareholders fail to perform their respective obligations under the contractual arrangements, we may have to incur substantial costs and expend additional resources to enforce such arrangements. We may also have to rely on legal remedies under PRC laws, including seeking specific performance or injunctive relief, and claiming damages, which we cannot assure, will be effective under PRC law. For example, if the shareholders of our VIE refuse to transfer their equity interest in our VIE to us or our designee if we exercise the purchase option pursuant to these contractual arrangements, or if they otherwise act in bad faith toward us, then we may have to take legal actions to compel them to perform their contractual obligations.

Our contractual arrangements are governed by PRC laws. Accordingly, these contracts would be interpreted in accordance with PRC laws, and any disputes would be resolved in accordance with PRC legal procedures, which may not protect you as much as those of other jurisdictions, such as the United States.

All of the agreements under our contractual arrangements are governed by PRC laws and provide for the resolution of disputes through arbitration in China. Accordingly, these contracts would be interpreted in accordance with PRC laws and any disputes would be resolved in accordance with PRC legal procedures. The legal system in the PRC is not as developed as in some other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements. See “Risks Related to Doing Business in China -Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and operations.” Meanwhile, there is very little precedent and formal guidance as to how contractual arrangements in the context of a VIE should be interpreted or enforced under PRC laws. There remain significant uncertainties regarding the ultimate outcome of such arbitration should legal action become necessary. In addition, under PRC laws, rulings by arbitrators are final, parties cannot appeal the arbitration results in courts, and if the losing parties fail to carry out the arbitration awards within a prescribed time limit, the prevailing parties may only enforce the arbitration awards in PRC courts through arbitration award recognition proceedings, which would require additional expenses and delay. In the event we are unable to enforce these contractual arrangements, or if we suffer significant delays or other obstacles in the process of enforcing these contractual arrangements, we may not be able to determine the most significant economic activities of the VIE, and our ability to conduct our business may be negatively affected.

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PRC regulation of loans to and direct investment in PRC entities by offshore holding companies to PRC entities may delay or prevent us from making loans or additional capital contributions to our PRC operating subsidiaries.

As an offshore holding company of our PRC Subsidiary, we may make loans to our PRC Subsidiary, our VIE and the VIE’s subsidiaries, or may make additional capital contributions to our PRC Subsidiary, subject to satisfaction of applicable governmental registration and approval requirements.

Any loans we extend to our PRC Subsidiary, which are treated as foreign-invested enterprises under PRC law, cannot exceed the statutory limit and must be registered with the local counterpart of the SAFE.

We may also decide to finance our PRC Subsidiary by means of capital contributions. According to the relevant PRC regulations on foreign-invested enterprises in China, these capital contributions are subject to registration with or approval by local Administration for Market Regulation (“AMR”). In addition, the PRC government also restricts the convertibility of foreign currencies into Renminbi and use of the proceeds. On March 30, 2015, SAFE promulgated the Notice of the State Administration of Foreign Exchange on Reforming the Administration of Foreign Exchange Settlement of Capital of Foreign-invested Enterprises, or SAFE Circular 19, which took effect and replaced certain previous SAFE regulations from June 1, 2015. SAFE further promulgated the Notice of the State Administration of Foreign Exchange on Reforming and Standardizing the Foreign Exchange Settlement Management Policy of Capital Account, or SAFE Circular 16, effective on June 9, 2016, which, among other things, amend certain provisions of SAFE Circular 19. According to SAFE Circular 19 and SAFE Circular 16, the flow and use of the Renminbi capital converted from foreign currency denominated registered capital of a foreign-invested company is regulated such that Renminbi capital may not be used for business beyond its business scope or to provide loans to persons other than affiliates unless otherwise permitted under its business scope. Violations of the applicable circulars and rules may result in severe penalties, including substantial fines as set forth in the Foreign Exchange Administration Regulations. If our VIE requires financial support from us or our WOS in the future and we find it necessary to use foreign currency-denominated capital to provide such financial support, our ability to fund our VIE’s operations will be subject to statutory limits and restrictions, including those described above. These circulars may limit our ability to transfer any foreign currency we hold, including the net proceeds from our initial public offering, to our VIE and our PRC subsidiary, which may adversely affect our liquidity and our ability to fund and expand our business in China. Despite the restrictions under these SAFE circulars, our PRC Subsidiary may use its income in Renminbi generated from their operations to finance the VIE through entrustment loans to the VIE or loans to the VIE’s shareholders for the purpose of making capital contributions to the VIE. In addition, our PRC Subsidiary can use Renminbi funds converted from foreign currency registered capital to carry out any activities within their normal course of business and business scope. On October 23, 2019, the SAFE promulgated the Notice of the State Administration of Foreign Exchange on Further Promoting the Convenience of Cross-border Trade and Investment, or the SAFE Circular 28, which, among other things, allows all foreign-invested companies to use Renminbi converted from foreign currency-denominated capital for equity investments in China, as long as the equity investment is genuine, does not violate applicable laws, and complies with the negative list on foreign investment.

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

If the chops of our PRC subsidiary and the VIE are not kept safely, are stolen or are used by unauthorized persons or for unauthorized purposes, the corporate governance of these entities could be severely and adversely compromised.

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

The shareholders of our VIE may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition.

As of the date of this annual report, Mr. Bao and Mr. He hold 96.95% and 3.05% equity interest in UTime SZ, respectively. The shareholders of our VIE may have potential conflicts of interest with us. The shareholders may breach, or cause our VIE to breach, or refuse to renew, the existing contractual arrangements we have with them and our VIE, which would have a material and adverse effect on our ability to determine the most significant economic activities of the VIE and receive economic benefits from it. For example, the shareholders may be able to cause our agreements with our VIE to be performed in a manner adverse to us by, among other things, failing to remit payments due under the contractual arrangements to us on a timely basis. We cannot assure you that when conflicts of interest arise the 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 the shareholders and our Company. If we cannot resolve any conflict of interest or dispute between us and the 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.

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Currently, we do not have any arrangements to address potential conflicts of interest between these shareholders and our company, except that we could exercise our purchase option under the exclusive call option agreements with these shareholders to request them to transfer all of their equity interests in the VIE to a PRC entity or individual designated by us, to the extent permitted by PRC law. For Mr. Bao, who is our director and also a major shareholder of the VIE, we rely on him to abide by the laws of the Cayman Islands, which provide that directors and officers owe a fiduciary duty to the company that requires them to act in good faith and in what they believe to be the best interests of the company and not to use their position for personal gains. The shareholders of the VIE have executed powers of attorney to appoint our WFOE to vote on their behalf and exercise voting rights as shareholders of the VIE. If we cannot resolve any conflict of interest or dispute between us and the shareholders of the VIE, 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.

The shareholders of our VIE may be involved in personal disputes with third parties or other incidents that may have an adverse effect on their equity interests in our VIE and the validity or enforceability of our contractual arrangements with our VIE and its shareholder. For example, in the event that one of the shareholders of our VIE divorces his spouse, the spouse may claim that the equity interest of our VIE held by such shareholder is part of their community property and should be divided between such shareholder and his spouse. If such claim is supported by the court, the relevant equity interest may be obtained by the shareholder’s spouse or any third party who is not subject to obligations under our contractual arrangements, which could result in a loss of our major influence on the VIE. Similarly, if any of the equity interests of our VIE is inherited by a third party on whom the current contractual arrangements are not binding, we could lose our economic benefits over the VIE or have to incur unpredictable costs to maintain such economic benefits, which could cause significant disruption to our business and operations and harm our financial condition and results of operations.

Although under our current contractual arrangements, each of the spouses of Mr. Bao and Mr. He have executed spousal consent letters, under which each of them agreed that she will not take any actions or raise any claims to interfere with the performance by her spouse of the obligations under these contractual arrangements, including claiming community property ownership on the equity interest, and renounce any and all right and interest related to the equity interest that she may be entitled to under applicable laws. We cannot assure you that these undertakings and arrangements will be complied with or effectively enforced. In the event that any of them is breached or becomes unenforceable and leads to legal proceedings, it could disrupt our business, distract our management’s attention and subject us to substantial uncertainties as to the outcome of any such legal proceedings.

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

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

We may lose the ability to use and enjoy assets held by our VIE that are material to the operation of certain portion of our business if our VIE goes bankrupt or becomes subject to a dissolution or liquidation proceeding.

As part of our contractual arrangements with our VIE, our VIE and its subsidiaries hold certain assets that are material to the operation of certain portion of our business, including intellectual property and premise. If our VIE goes bankrupt and all or part of its assets become subject to liens or rights of third-party creditors, we may be unable to continue some or all of our business activities, which could materially and adversely affect our business, financial condition and results of operations. Under the contractual arrangements, our VIE may not, in any manner, sell, transfer, mortgage or dispose of its assets or legal or beneficial interests in the business without our prior consent. However, in the event that the shareholders breach this obligation and voluntarily liquidate our VIE, or our VIE declares bankruptcy, or all or part of its assets become subject to liens or rights of third-party creditors, we may be unable to continue some or all of our operations, which could materially and adversely affect our business, financial condition and results of operations. Furthermore, if our VIE or its subsidiaries undergo a voluntary or involuntary liquidation proceeding, its shareholders or unrelated third-party creditors may claim rights to some or all of its assets, hindering our ability to operate our business, which could materially and adversely affect our business, financial condition and results of operations.

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Substantial uncertainties exist with respect to the interpretation and implementation of the newly enacted PRC Foreign Investment Law and its Implementation Regulations and how they may impact the viability of our current corporate structure, corporate governance, business operations and financial results.

On March 15, 2019, the National People’s Congress approved the Foreign Investment Law, which took effect on January 1, 2020. On December 26, 2019, the Regulation on the Implementation of the Foreign Investment Law of the People’s Republic of China, was issued by the State Council and came into force on January 1, 2020. The Foreign Investment Law defines the “foreign investment” as the investment activities in China conducted directly or indirectly by foreign investors in the following manners: (i) a foreign investor, individually or collectively with other investors establishes a foreign-invested enterprise within China; (ii) a foreign investor acquires stock shares, equity shares, shares in assets, or other like rights and interests of an enterprise within China; (iii) a foreign investor, individually or collectively with other investors, invests and establishes new projects within China; and (iv) a foreign investor invests through other approaches as stipulated by laws, administrative regulations, or otherwise regulated by the State Council. Since the Foreign Investment Law is relatively new, uncertainties exist in relation to its interpretation and implementation. The Foreign Investment Law does not explicitly classify whether variable interest entities that are controlled through contractual arrangements would be deemed as foreign invested enterprises if they are ultimately “controlled” by foreign investors. The VIE structure, has been adopted by many PRC-based companies, including us. Though these regulations do not explicitly classify contractual arrangements as a form of foreign investment, there is no assurance that foreign investment via contractual arrangements would not be interpreted as a type of indirect foreign investment activities under the definition in the future. In addition, it has a catch-all provision under definition of “foreign investment” that includes investments made by foreign investors in China through other means as provided by laws, administrative regulations or the State Council. The Foreign Investment Law still leaves leeway for future laws, administrative regulations or provisions of the State Council to provide for contractual arrangements as a form of foreign investment. Therefore, there can be no assurance that our control over our VIE through contractual arrangements will not be deemed as foreign investment in the future under the PRC laws and regulations.

The Foreign Investment Law grants national treatment to foreign-invested entities, except for those foreign-invested entities that operate in industries specified as either “restricted” or “prohibited” from foreign investment in a “negative list”. The Foreign Investment Law provides that foreign-invested entities operating in “restricted” or “prohibited” industries will require market entry clearance and other approvals from relevant PRC government authorities. On December 27, 2021, the Ministry of Commerce of the PRC (the “MOFCOM”) and the National Development and Reform Commission (the “NDRC”) jointly issued the latest version of Negative List (Edition 2021), which became effective on January 1, 2022. See “Regulations - Regulations relating to Foreign Investment - The Guidance Catalogue of Industries for Foreign Investment”. Currently, our business related to the operation of designing, manufacturing and marketing mobile communication devices, and selling a variety of related accessories falls within the permitted category. However, we cannot assure you that our current operations or any newly-developed business in the future will still deemed to be “permitted” in the “negative list”, which may be promulgated or be amended from time to time by the MOFCOM and the NDRC. If our control over our VIE through contractual arrangements are deemed as foreign investment in the future, and any business of our VIE is “restricted” or “prohibited” from foreign investment under the “negative list” promulgated or amended in the future, we may be deemed to be in violation of the Foreign Investment Law, the contractual arrangements that allow us to have control over our VIE may be deemed as invalid and illegal, and we may be required to unwind such contractual arrangements and/or restructure our business operations, any of which may have a material adverse effect on our business operation.

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

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Risks Related to Doing Business in China

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

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

While the Chinese economy has experienced significant growth over the past decades, growth has been uneven, both geographically and among various sectors of the economy, and the rate of growth has been slowing since 2012. Any adverse changes in economic conditions in China, in the policies of the Chinese government or in the laws and regulations in China could have a material adverse effect on the overall economic growth of China. Such developments could adversely affect our business and operating results, lead to reduction in demand for our services and adversely affect our competitive position. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall Chinese economy, but may have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations. In addition, in the past the Chinese government has implemented certain measures, including interest rate adjustment, to control the pace of economic growth. These measures may cause decreased economic activity in China, which may adversely affect our business and operating results.

Uncertainties with respect to the PRC legal system and changes in laws and regulations in China could adversely affect us.

We conduct our business primarily through the VIE and its subsidiaries. Our operations in China are governed by PRC laws and regulations. The PRC legal system is a civil law system based on written statutes. Unlike the common law system, prior court decisions under the civil law system may be cited for reference but have limited precedential value. In addition, any new or changes in PRC laws and regulations related to foreign investment in China could affect the business environment and our ability to operate our business in China.

From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. Any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention. Since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory provisions and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. These uncertainties may impede our ability to enforce the contracts into which we have entered and could materially and adversely affect our business and results of operations. Furthermore, the PRC legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or at all and may have retroactive effect. As a result, we may not be aware of our violation of any of these policies and rules until sometime after the violation. Such unpredictability towards our contractual, property and procedural rights could adversely affect our business and impede our ability to continue our operations.

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We may be required to obtain permission or approval or other compliance procedures from Chinese authorities to operate and issue ordinary shares to foreign investors in our offering and/or listing on the NASDAQ Capital Market, and if required, if we or the VIE or the VIE’s subsidiaries are not able to obtain such permission or approval in a timely manner, our ordinary shares may substantially decline in value and become worthless.

The General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the Opinions on Severe and Lawful Crackdown on Illegal Securities Activities, which was 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 of the date of this annual report, we have not received or denied any permission from the PRC authorities regarding our listing on the Nasdaq Capital Market. As these opinions were recently issued, official guidance and interpretation of the opinions remain unclear in several respects at this time. Therefore, we cannot assure you that we will remain fully compliant with all new regulatory requirements of these opinions or any future implementation rules on a timely basis, or at all. We face uncertainty about future actions by the PRC government that could significantly affect the operating company’s financial performance and the enforceability of the VIE Agreements.

The General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the Opinions on Severe and Lawful Crackdown on Illegal Securities Activities, which was 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 of the date of this annual report, we have not received or denied any permission from the PRC authorities regarding our listing on the Nasdaq Capital Market. As these opinions were recently issued, official guidance and interpretation of the opinions remain unclear in several respects at this time. Therefore, we cannot assure you that we will remain fully compliant with all new regulatory requirements of these opinions or any future implementation rules on a timely basis, or at all. We face uncertainty about future actions by the PRC government that could significantly affect the operating company’s financial performance and the enforceability of the VIE Agreements.

In addition, on February 24, 2023, the CSRC, together with Ministry of Finance of the PRC, National Administration of State Secrets Protection and National Archives Administration of China, revised the Provisions on Strengthening Confidentiality and Archives Administration for Overseas Securities Offering and Listing which was issued by the CSRC, National Administration of State Secrets Protection and National Archives Administration of China in 2009, or the Provisions. The revised Provisions is issued under the title the Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies, and came into effect on March 31, 2023 together with the Trial Measures. One of the major revisions to the revised Provisions is expanding its application to cover indirect overseas offering and listing, as is consistent with the Trial Measures. The revised Provisions require that, including but not limited to (a) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals or entities including securities companies, securities service providers and overseas regulators, any documents and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level; and (b) domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals and entities including securities companies, securities service providers and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations. Where a PRC domestic company, after completing the relevant procedures, provides to securities companies, securities service providers or other entities with any documents and materials that contain state secrets or working secrets of government agencies, or any other documents and materials that would be detrimental to national security or public interest if leaked, a non-disclosure agreement must be signed between the provider and receiver of such information according to the relevant PRC laws and regulations, which must specify, among others, the obligations and liabilities on confidentiality held by such securities companies and securities service providers. Specifically, when a PRC domestic company provides accounting archives or copies of accounting archives to any entities including securities companies, securities service providers or overseas regulators and individuals, it must complete the due procedures in compliance with applicable national regulations.

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As of the date of this annual report, no currently effective laws or regulations in the PRC explicitly require us to seek approval from the CSRC or any other PRC governmental authorities for our offering and/or list on the NASDAQ Capital Market, nor has we, any of our subsidiaries or the VIE or the VIE’s subsidiaries received any inquiry, notice, warning or sanctions regarding our planned offering from the CSRC or any other PRC governmental authorities. We believe that we are not required to obtain permission or approval from Chinese authorities to operate and issue these ordinary shares to foreign investors or list on the NASDAQ Capital Market based on the PRC laws, regulations and rules currently in effect. There is also the possibility that we may not be able to obtain or maintain such approval or that we inadvertently concluded that such approval was not required. Any failure of us to fully comply with new regulatory requirements may significantly limit or completely hinder our ability to continue to offer our ordinary shares, cause significant disruption to our business operations, and severely damage our reputation, which would materially and adversely affect our financial condition and results of operations and cause our ordinary shares to significantly decline in value or become worthless.

The PRC government exerts substantial influence over the manner in which we conduct our business activities. The PRC government may also intervene or influence our operations at any time, which could result in a material change in our operations and our ordinary shares could decline in value or become worthless.

We are currently not required to obtain approval from Chinese authorities to list on U.S. exchanges nor the execution of contractual arrangements with the VIE (“VIE Agreements”), however, if our VIE or the holding company were required to obtain approval in the future and were denied permission from Chinese authorities to list on U.S. exchanges, we will not be able to continue listing on U.S. exchange, continue to offer ordinary shares to investors. The loss of permission or denial will have a material, negative impact on our investors and would likely significantly reduce of our price of ordinary shares.

The Chinese government has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. Our ability to operate in the PRC may be significantly harmed by changes in its laws and regulations, including those relating to taxation, environmental regulations, land use rights, property and other matters. The central or local governments of these jurisdictions may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts on our part to ensure our compliance with such regulations or interpretations. Accordingly, government actions in the future, including regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions in China or particular regions thereof, and could require us to divest ourselves of any interest we then hold in our operations in China.

For example, the Chinese cybersecurity regulator announced on July 2, 2021, that it had begun an investigation of a U.S.-listed company with Chinese operations and two days later ordered that the company’s app be removed from smartphone app stores. Similarly, our business segments may be subject to various government and regulatory interference in the regions in which we operate. We could be subject to regulation by various political and regulatory entities, including various local and municipal agencies and government sub-divisions. We 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 or enter into VIE Agreements in the future, and even when such permission is obtained, whether it will be denied or rescinded. Although we are currently not required to obtain permission from any of the PRC central or local government to obtain such permission and has not received any denial to list on the U.S. exchange and or enter into VIE Agreements, our operations could be adversely affected, directly or indirectly, by existing or future laws and regulations relating to our business or industry. Recent statements by the Chinese government indicating an intent, and the PRC government may take actions to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in PRC-based issuers, which could significantly limit or completely hinder our ability to offer or continue to offer ordinary shares to investors and cause the value of our ordinary shares to significantly decline or become worthless.

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Changes in international trade policies, trade dispute or the emergence of a trade war, may have a material adverse effect on our business.

Political events, international trade disputes, and other business interruptions could harm or disrupt international commerce and the global economy, and could have a material adverse effect on us and our customers, service providers, network carriers and other partners.

International trade disputes could result in tariffs and other protectionist measures that could adversely affect our business. Tariffs could increase the cost of the goods and products which could affect consumers’ discretionary spending levels and therefore adversely impact our business. In addition, political uncertainty surrounding international trade disputes and the potential of the escalation to trade war and global recession could have a negative effect on consumer confidence, which could adversely affect our business.

There are significant uncertainties under the PRC Enterprise Income Tax Law relating to the withholding tax liabilities of our PRC Subsidiary, and dividends payable by our PRC Subsidiary to us through our Hong Kong subsidiary may not qualify to enjoy certain treaty benefits.

We are an exempted company incorporated under the laws of the Cayman Islands and as such rely on dividends and other distributions on equity from our PRC Subsidiary to satisfy part of our liquidity requirements. Pursuant to the PRC Enterprise Income Tax Law, a withholding tax rate of 10% currently applies to dividends paid by a PRC “resident enterprise” to a foreign enterprise investor, unless any such foreign investor’s jurisdiction of incorporation has a tax treaty with China that provides for preferential tax treatment.

Pursuant to the Arrangement between the Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, or the Double Tax Avoidance Arrangement came into effect on December 8, 2006, and four conventions implemented as of June 11, 2008, December 20, 2010, December 29, 2015 and December 6, 2019, such withholding tax rate may be lowered to 5% if a Hong Kong resident enterprise owns no less than 25% of a PRC enterprise. Under the Circular on Certain Issues with Respect to the Enforcement of Dividend Provisions in Tax Treaties issued in February 2009 by the SAT, the taxpayer needs to satisfy certain conditions to enjoy the benefits under a tax treaty. These conditions include: (i) the taxpayer must be the beneficial owner of the relevant dividends, and (ii) the corporate shareholder to receive dividends from the PRC Subsidiary must have met the direct ownership thresholds during the 12 consecutive months preceding the receipt of the dividends. However, if the main purpose of an offshore arrangement is to obtain a preferential tax treatment, the PRC tax authorities have the discretion to adjust the preferential tax rate enjoyed by the relevant offshore entity. Further, the SAT promulgated the Notice on How to Understand and Recognize the “Beneficial Owner” in Tax Treaties in 2009, which limits the “beneficial owner” to individuals, enterprises or other organizations normally engaged in substantive operations, and sets forth certain detailed factors in determining “beneficial owner” status; and based on the Announcement on Certain Issues with Respect to the “Beneficial Owner” in Tax Treaties, issued on February 3, 2018, and effective on April 1, 2018, that the business activities conducted by the applicant do not constitute substantive business activities is one of the factors which are not conductive to the determination of an applicant’s status as a “beneficial owner”.

In addition, the Administrative Measures for Non-Resident Enterprises to Enjoy Treatments under Tax Treaties, or SAT Public Notice No.60, which became effective in August 2015, require non-resident enterprises to determine whether they are qualified to enjoy the preferential tax treatment under the tax treaties and file relevant report and materials with the tax authorities. In October 2019, the State Administration of Taxation (SAT) issued the Announcement of the SAT on Issuing the Measures for the Administration of Non-resident Taxpayers’ Enjoyment of Treaty Benefits (SAT Public Notice No.35), which took effect on January 1, 2020, while SAT Public Notice No.60 will be abolished at the same time. SAT Public Notice No.35 stipulates that non-resident taxpayers can enjoy tax treaty benefits via the “self-assessment of eligibility, claiming treaty benefits, retaining documents for inspection” mechanism. There are also other conditions for enjoying the reduced withholding tax rate according to other relevant tax rules and regulations. As of March 31, 2023 and 2022, we did not record any withholding tax on the retained earnings of our subsidiaries in the PRC as we intended to re-invest all earnings generated from our PRC Subsidiary for the operation and expansion of our business in China, and we intend to continue this practice in the foreseeable future. Should our tax policy change to allow for offshore distribution of our earnings, we would be subject to a significant withholding tax. We cannot assure you that our determination regarding our qualification to enjoy the preferential tax treatment will not be challenged by the relevant tax authority or we will be able to complete the necessary filings with the relevant tax authority and enjoy the preferential withholding tax rate of 5% under the Double Taxation Arrangement with respect to dividends to be paid by our PRC Subsidiary to UTime HK, our Hong Kong subsidiary.

Our ordinary shares may be delisted under the HFCA Act if the PCAOB is unable to adequately inspect audit documentation located in China. The delisting of our ordinary shares, or the threat of their being delisted, may materially and adversely affect the value of your investment. Additionally, the inability of the PCAOB to conduct adequate inspections deprives our investors with the benefits of such inspections. Furthermore, on June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, and on December 29, 2022, a legislation entitled “Consolidated Appropriations Act, 2023” (the “Consolidated Appropriations Act”) was signed into law by President Biden, which contained, among other things, an identical provision to Accelerating Holding Foreign Companies Accountable Act and amended the Holding Foreign Companies Accountable Act by reducing the period of time for foreign companies to comply with PCAOB audits to two consecutive years, instead of three, thus reducing the time period before our securities may be prohibited from trading or delisted.

The HFCA Act, which was signed into law on December 18, 2020, states if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspection for the PCAOB for three consecutive years beginning in 2021, the SEC shall prohibit our shares from being traded on a national securities exchange or in the over-the-counter trading market in the United States. On December 2, 2021, the SEC adopted final amendments implementing the disclosure and submission requirements of the HFCA Act, pursuant to which the SEC will identify an issuer as a “Commission-Identified Issuer” if the issuer has filed an annual report containing an audit report issued by a registered public accounting firm that the PCAOB has determined it is unable to inspect or investigate completely, and will then impose a trading prohibition on an issuer after it is identified as a Commission-Identified Issuer for three consecutive years. On December 16, 2021, the PCAOB issued a report to notify the SEC of its determination that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong.

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On August 26, 2022, the PCAOB announced that it had signed the Statement of Protocol with the CSRC and the MOFCOM. The terms of the Statement of Protocol would grant the PCAOB complete access to audit work papers and other information so that it may inspect and investigate PCAOB-registered accounting firms headquartered in mainland China and Hong Kong. According to the PCAOB, its December 2021 determinations under the HFCA ACT remain in effect. The PCAOB is required to reassess these determinations by the end of 2022. Under the PCAOB’s rules, a reassessment of a determination under the HFCAA may result in the PCAOB reaffirming, modifying or vacating the determination.

Our auditor Audit Alliance LLP. (“AA”), as an auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. Our auditor is headquartered in Singapore, and is subject to inspection by the PCAOB on a regular basis.

However, majority of the audit workpapers for our company and the VIE’s operations are located in China, and the PCAOB is currently unable to conduct inspections in China without the approval of Chinese government authorities, but access to audit work and papers may be available in the near future, as a result of the Statement of Proposal. If the PCAOB does gain such access, there is no assurance that it may not later be determined that the PCAOB is unable to inspect or investigate our auditor completely, and investors may be deprived of the benefits of such inspection. Any audit reports not issued by auditors that are completely inspected by the PCAOB, or a lack of PCAOB inspections of audit work undertaken in China that prevents the PCAOB from regularly evaluating our auditor’ audits and their quality control procedures, could result in a lack of assurance that our financial statements and disclosures are adequate and accurate, then such lack of inspection could cause our securities to be delisted from the stock exchange.

Whether the PCAOB will be able to conduct inspections of our auditor before the issuance of our financial statements on the annual report on Form 20-F for the year ending March 31, 2024 which is due by July 31, 2024, or at all, is subject to substantial uncertainty and depends on a number of factors out of our and our auditor’s control. If our shares are prohibited from trading in the United States, there is no certainty that we will be able to list on additional non-U.S. exchange to facilitate the trading in our securities. Such a prohibition would substantially impair your ability to sell or purchase our shares when you wish to do so, and the risk and uncertainty associated with delisting would have a negative impact on the price of our shares. Also, 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.

On June 22, 2021, the U.S. Senate passed a bill which would reduce the number of consecutive non-inspection years required for triggering the prohibitions under the HFCA Act from three years to two, and on December 29, 2022, a legislation entitled “Consolidated Appropriations Act, 2023” (the “Consolidated Appropriations Act”) was signed into law by President Biden, which contained, among other things, an identical provision to Accelerating Holding Foreign Companies Accountable Act and amended the Holding Foreign Companies Accountable Act by reducing the period of time for foreign companies to comply with PCAOB audits to two consecutive years, instead of three, thus reducing the time period before our securities may be prohibited from trading or delisted

Recent joint statement by the SEC and the Public Company Accounting Oversight Board (United States), or the “PCAOB,” rule changes by Nasdaq, and an act passed by the U.S. Senate all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB. These developments could negatively affect our securities.

On April 21, 2020, SEC Chairman Jay Clayton and PCAOB Chairman William D. Duhnke III, along with other senior SEC staff, released a joint statement highlighting the risks associated with investing in companies based in or have substantial operations in emerging markets including China. The joint statement emphasized the risks associated with lack of access for the PCAOB to inspect auditors and audit work papers in China and higher risks of fraud in emerging markets.

On May 18, 2020, Nasdaq filed three proposals with the SEC to (i) apply a minimum offering size requirement for companies primarily operating in a “Restrictive Market,” (ii) adopt a new requirement relating to the qualification of management or the board of directors for Restrictive Market companies, and (iii) apply additional and more stringent criteria to an applicant or listed company based on the qualifications of the company’s auditor. On October 4, 2021, the SEC approved Nasdaq’s revised proposal for the rule changes.

On May 20, 2020, the U.S. Senate passed the HFCA Act, requiring a foreign company to certify it is not owned or manipulated by a foreign government if the PCAOB is unable to audit specified reports because the company uses a foreign auditor not subject to PCAOB inspection. If the PCAOB is unable to inspect the company’s auditor for three consecutive years, the issuer’s securities are prohibited to trade on a national exchange or in the over-the-counter trading market in the United States. On December 2, 2020, the U.S. House of Representatives approved the HFCA Act. On December 18, 2020, the HFCA Act was signed into law.

On June 4, 2020, the U.S. President issued a memorandum ordering the President’s working group on financial markets, or the “PWG,” to submit a report to the President within 60 days of the date of the memorandum that should include recommendations for actions that can be taken by the executive branch and by the SEC or PCAOB to enforce U.S. regulatory requirements on Chinese companies listed on U.S. stock exchanges and their audit firms.

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On August 6, 2020, the PWG released a report recommending that the SEC take steps to implement the five recommendations outlined in the report. In particular, to address companies from jurisdictions that do not provide the PCAOB with sufficient access to fulfill its statutory mandate, or “NCJs”, the PWG recommends enhanced listing standards on U.S. stock exchanges. This would require, as a condition to initial and continued exchange listing, PCAOB access to work papers of the principal audit firm for the audit of the listed company. Companies unable to satisfy this standard as a result of governmental restrictions on access to audit work papers and practices in NCJs may satisfy this standard by providing a co-audit from an audit firm with comparable resources and experience where the PCAOB determines it has sufficient access to audit work papers and practices to conduct an appropriate inspection of the co-audit firm. The report permits the new listing standards to provide for a transition period until January 1, 2022 for listed companies, but would apply immediately to new listings once the necessary rulemakings and/or standard-setting are effective.

On August 10, 2020, the SEC announced that SEC Chairman had directed the SEC staff to prepare proposals in response to the PWG Report, and that the SEC was soliciting public comments and information with respect to these proposals. If we are listed on Nasdaq and fail to meet the new listing standards before the deadline specified thereunder due to factors beyond our control, we could face possible de-listing from the Nasdaq Capital Market, deregistration from the SEC, and/or other risks, which may materially and adversely affect, or effectively terminate, the trading of our Ordinary Shares in the United States.

The HFCA Act requires certain issuers of securities to establish that they are not owned or controlled by a foreign government. Specifically, an issuer must make this certification if the PCAOB is unable to audit specified reports because the issuer has retained a foreign public accounting firm not subject to inspection by the PCAOB. Furthermore, if the PCAOB is unable to inspect the issuer’s public accounting firm for three consecutive years, the issuer’s securities are banned from trade on a national exchange or in the over-the-counter trading market in the United States or through other methods.

On March 24, 2021, the SEC announced that it had adopted interim final amendments to implement congressionally mandated submission and disclosure requirements of the HFCA Act. The interim final amendments will apply to registrants that the SEC identifies as having filed an annual report on Forms 10-K, 20-F, 40-F or N-CSR with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that the PCAOB has determined it is unable to inspect or investigate completely because of a position taken by an authority in that jurisdiction. The SEC will implement a process for identifying such a registrant and any such identified registrant will be required to submit documentation to the SEC establishing that it is not owned or controlled by a governmental entity in that foreign jurisdiction, and will also require disclosure in the registrant’s annual report regarding the audit arrangements of, and governmental influence on, such a registrant.

On June 22, 2021, the U.S. Senate passed the Accelerating HFCA Act, which, if passed by the U.S. House of Representatives and signed into law, would decrease the number of non-inspection years for foreign companies to comply with PCAOB audits from three to two, thus reducing the time period before their securities may be prohibited from trading or delisted.

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

On November 5, 2021, the SEC approved the PCAOB’s Rule 6100, Board Determinations Under the Holding Foreign Companies Accountable Act. Rule 6100 provides a framework for the PCAOB to use when determining, as contemplated under the HFCA Act, whether it is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction.

On December 2, 2021, the SEC issued amendments to finalize rules implementing the submission and disclosure requirements in the HFCA Act, which became effective on January 10, 2022. The rules apply to registrants that the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that PCAOB is unable to inspect or investigate completely because of a position taken by an authority in foreign jurisdictions.

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On December 16, 2021, the PCAOB issued a report on its determinations that it is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong because of positions taken by mainland China and Hong Kong authorities in those jurisdictions. The PCAOB has made such designations as mandated under the HFCA Act. Pursuant to each annual determination by the PCAOB, the SEC will, on an annual basis, identify issuers that have used non-inspected audit firms and thus are at risk of such suspensions in the future. As of the date of this annual report, our auditor is not subject to the determinations announced by the PCAOB on December 16, 2021. On August 26, 2022, the PCAOB signed the Statement of Protocol (SOP) Agreements with the China Securities Regulatory Commission (CSRC) and China’s Ministry of Finance. The SOP, together with two protocol agreements governing inspections and investigations (together, the “SOP Agreements”), establish a specific, accountable framework to make possible complete inspections and investigations by the PCAOB of audit firms based in mainland China and Hong Kong, as required under U.S. law. On December 15, 2022, the PCAOB Board determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate its previous determinations to the contrary. However, should PRC authorities obstruct or otherwise fail to facilitate the PCAOB’s access in the future, the PCAOB Board will consider the need to issue a new determination.

On December 23, 2022, the Accelerating HFCA Act was signed into law, which amended the HFCA Act by requiring the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three. On December 29, 2022, the Consolidated Appropriations Act was signed into law by President Biden. The Consolidated Appropriations Act contained, among other things, an identical provision to Accelerating HFCA Act, which reduces the number of consecutive non-inspection years required for triggering the prohibitions under the HFCA Act from three years to two.

The SEC may propose additional rules or guidance that could impact us if our auditor is not subject to PCAOB inspection in the future.

It remains unclear what the SEC’s implementation process related to the above rules will entail or what further actions the SEC, the PCAOB or Nasdaq will take to address these issues and what impact those actions will have on the companies that have significant operations in the PRC and have securities listed on a U.S. stock exchange (including a national securities exchange or over-the-counter stock market). In addition, the above amendments and any additional actions, proceedings, or new rules resulting from these efforts to increase U.S. regulatory access to audit information could create some uncertainty for investors, the market price of our Class A Ordinary Shares could be adversely affected, and we could be delisted if we and our auditor are unable to meet the PCAOB inspection requirement or being required to engage a new audit firm, which would require significant expense and management time.

Furthermore, new laws and regulations or changes in laws and regulations in both the United States and China could affect our ability to list our securities on the Nasdaq Capital Market, which could materially impair the market for and the market price of our securities.

You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in China against us or our management named in this report based on foreign laws.

We are an exempted company incorporated under the laws of the Cayman Islands, we conduct substantially most of our operations in China and substantially most of our assets are located in China. In addition, most of our senior executive officers and directors, including Mr. Minfei Bao, Mr, Yihuang Chen, Mr. Honggang Cao, Ms. Na Cai, Mr. Hengcong Qiu, Mr. Shibin Yu, Mr. Xiaoqian Jia, and Mr. Hailin Xie, are PRC nationals and reside within China for a significant portion of the time. As a result, it may be difficult for you to effect service of process upon us or those persons inside mainland China. It may also be difficult for you to enforce in U.S. courts judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors who reside and whose assets are located outside the United States. In addition, there is uncertainty as to whether the courts of the Cayman Islands or the PRC would recognize or enforce judgments of U.S. courts against us or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state.

The recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based either on treaties between China and the country where the judgment is made or on principles of reciprocity between jurisdictions. China does not have any treaties or other forms of reciprocity with the United States that provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedures Law, the PRC courts will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates the basic principles of PRC laws or national sovereignty, security or public interest. As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by a court in the United States.

See also “Risks Related to our Corporate Structure - Because we are incorporated under the laws of the Cayman Islands, you may face difficulties in protecting your interests, and your ability to protect your rights through the U.S. Federal courts may be limited” for risks associated with investing in us as a Cayman Islands company.

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There are uncertainties under the PRC laws relating to the procedures for U.S. regulators to investigate and collect evidence from companies located in the PRC.

According to Article 177 of the newly amended PRC Securities Law which became effective in March 2020 (the “Article 177”), the securities regulatory authority of the PRC State Council may collaborate with securities regulatory authorities of other countries or regions in order to monitor and oversee cross border securities activities. Article 177 further provides that overseas securities regulatory authorities are not allowed to carry out investigation and evidence collection directly within the territory of the PRC, and that any Chinese entities and individuals are not allowed to provide documents or materials related to securities business activities to overseas agencies without prior consent of the securities regulatory authority of the PRC State Council and the competent departments of the PRC State Council.

Our PRC legal counsel, Zhejiang Taihang Law Firm, has advised us of their understanding that (i) the Article 177 is applicable in the limited circumstances related to direct investigation or evidence collection conducted by overseas authorities within the territory of the PRC (in such case, the foregoing activities are required to be conducted through collaboration with or by obtaining prior consent of competent Chinese authorities); (ii) from the view of the internal logical relations of the Article 177, it seems that the Article 177 does not limit or prohibit the Company, as a company duly incorporated in Cayman Islands and to be listed on NASDAQ, from providing the required documents or information to NASDAQ or the SEC pursuant to applicable Listing Rules and U.S. securities laws; and (iii) as the Article 177 is relatively new and there is no implementing rules or regulations which have been published regarding application of the Article 177, it remains unclear how the law will be interpreted, implemented or applied by the Chinese Securities Regulatory Commission or other relevant government authorities. As of the date hereof, we are not aware of any implementing rules or regulations which have been published regarding application of Article 177. However, we cannot assure you that relevant PRC government agencies, including the securities regulatory authority of the PRC State Council, would reach the same conclusion as we do. As such, there are uncertainties as to the procedures and time requirement for the U.S. regulators to bring about investigations and evidence collection within the territory of the PRC.

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

If we become directly subject to the scrutiny, criticism, and negative publicity involving U.S.-listed Chinese companies, we may have to expend significant resources to investigate and resolve the matter which could harm our business operations, stock price, and reputation.

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

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

The conversion of Renminbi into foreign currencies, including U.S. dollars, is based on rates set by the People’s Bank of China. The Renminbi has fluctuated against the U.S. dollar, at times significantly and unpredictably. The value of Renminbi against the U.S. dollar and other currencies is affected by changes in China’s political and economic conditions and by China’s foreign exchange policies, among other things. We cannot assure you that Renminbi will not appreciate or depreciate significantly in value against the U.S. dollar in the future. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between Renminbi and the U.S. dollar in the future.

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Significant revaluation of the Renminbi may have a material and adverse effect on your investment. For example, to the extent that we need to convert U.S. dollars we receive from our initial public offering into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount we would receive from the conversion. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of making payments for dividends on our ordinary shares or for other business purposes, appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S. dollar amount available to us.

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.

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

The PRC government imposes controls on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. We receive substantially all of our revenues in Renminbi. Under our current corporate structure, our Cayman Islands exempted company primarily relies on dividend payments from our PRC Subsidiary to fund any cash and financing requirements we may have. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval of SAFE by complying with certain procedural requirements. Specifically, under the existing exchange restrictions, without prior approval of SAFE, cash generated from the operations of our PRC Subsidiary in China may be used to pay dividends to our company. However, approval from or registration with appropriate government authorities is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. As a result, we need to obtain SAFE approval to use cash generated from the operations of our PRC Subsidiary, VIE and UTime GZ 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 RMB, 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.

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The M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of PRC companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China.

The Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, and other recently adopted regulations and rules concerning mergers and acquisitions established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time consuming and complex. For example, the M&A Rules require that MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise, if (i) any important industry is concerned, (ii) such transaction involves factors that impact or may impact national economic security, or (iii) such transaction will lead to a change in control of a domestic enterprise which holds a famous trademark or PRC time-honored brand. Moreover, the Anti-Monopoly Law promulgated by the SCNPC effective in 2008 requires that transactions which are deemed concentrations and involve parties with specified turnover thresholds (i.e., during the previous fiscal year, (i) the total global turnover of all operators participating in the transaction exceeds RMB10 billion (US$1.5 billion) and at least two of these operators each had a turnover of more than RMB400 million (US$60.9 million) within China, or (ii) the total turnover within China of all the operators participating in the concentration exceeded RMB2 billion, and at least two of these operators each had a turnover of more than RMB400 million (US$60.9 million) within China) must be cleared by MOFCOM before they can be completed.

In addition, in 2011, the General Office of the State Council promulgated a Notice on Establishing the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, also known as Circular 6, which officially established a security review system for mergers and acquisitions of domestic enterprises by foreign investors. Further, MOFCOM promulgated the Regulations on Implementation of Security Review System for the Merger and Acquisition of Domestic Enterprises by Foreign Investors, effective 2011, to implement Circular 6. Under Circular 6, a security review is required for mergers and acquisitions by foreign investors having “national defense and security” concerns and mergers and acquisitions by which foreign investors may acquire the “de facto control” of domestic enterprises with “national security” concerns. Under the foregoing MOFCOM regulations, MOFCOM will focus on the substance and actual impact of the transaction when deciding whether a specific merger or acquisition is subject to security review. If MOFCOM decides that a specific merger or acquisition is subject to a security review, it will submit it to the Inter-Ministerial Panel, an authority established under Circular 6 led by the NDRC, and MOFCOM under the leadership of the State Council, to carry out security review. The regulations prohibit foreign investors from bypassing the security review by structuring transactions through trusts, indirect investments, leases, loans, control through contractual arrangements or offshore transactions. 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 the future, we may grow our business by acquiring complementary businesses. Complying with the requirements of the above-mentioned regulations and other relevant rules to complete such transactions could be time consuming, and any required approval processes, including obtaining approval from MOFCOM or its local counterparts may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share. It is unclear whether our business would be deemed to be in an industry that raises “national defense and security” or “national security” concerns. However, MOFCOM or other government agencies may publish explanations in the future determining that our business is in an industry subject to the security review, in which case our future acquisitions in China, including those by way of entering into contractual control arrangements with target entities, may be closely scrutinized or prohibited. There is no assurance that, if we plan to make an acquisition, we can obtain such approval from the MOFCOM or any other relevant PRC governmental authorities for our mergers and acquisitions, and if we fail to obtain those approvals, we may be required to suspend our acquisition and be subject to penalties. Any uncertainties regarding such approval requirements could have a material adverse effect on our business, results of operations and corporate structure. Any action by the PRC government to exert more oversight and control over foreign investment in China-based companies could result in a material change in our operation, cause the value of our ordinary shares to significantly decline or become worthless, and significantly limit, or completely hinder our ability to continue to offer our ordinary shares to investors.

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

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

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

If our shareholders who are PRC residents or entities do not complete their registration with the local SAFE branches, our PRC Subsidiary may be prohibited from distributing their profits and any proceeds from any reduction in capital, share transfer or liquidation to us, and we may be restricted in our ability to contribute additional capital to our PRC Subsidiary. Moreover, failure to comply with SAFE registration requirements could result in liability under PRC laws for evasion of applicable foreign exchange restrictions.

Mr. Bao and Mr. He, who indirectly hold a majority of our shares, and who are known to us as being PRC residents have completed the initial SAFE registration in connection with our financings and will update their registration filings with SAFE under SAFE Circular 37 when any changes should be registered under SAFE Circular 37.

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 registrations, and we cannot compel our beneficial owners to comply with SAFE registration requirements. As a result, we cannot assure you that all of our shareholders or beneficial owners who are PRC residents or entities have complied with, and will in the future make or obtain 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 Subsidiary, could subject us to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit our subsidiary’s ability to make distributions or pay dividends or affect our ownership structure, which could adversely affect our business and prospects.

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Any failure to comply with PRC regulations regarding the registration requirements for employee stock incentive plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions.

In February 2012, SAFE promulgated the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plans of Overseas Publicly Listed Company, 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 other material changes. We and our PRC employees who have been granted share-based awards are subject to SAFE Circular 7 and other relevant rules and regulations these regulations. Failure of our PRC share-based award holders to complete their SAFE registrations may subject these PRC residents to fines and legal sanctions and may also limit our ability to contribute additional capital into our PRC subsidiary, limit our PRC subsidiary’s ability to distribute dividends to us, adopt additional incentive plans for our directors or employees under PRC law or otherwise materially adversely affect our business. As of the date of this annual report, we are preparing for such SAFE registrations for PRC share-based award holders.

In addition, the State Administration of Taxation, or the SAT, has issued certain circulars concerning employee share options and restricted shares. Under these circulars, our employees working in China who exercise share options or are granted restricted shares will be subject to PRC individual income tax. Our PRC subsidiary has obligations to file documents related to employee share options or restricted shares with relevant tax authorities and to withhold individual income taxes of those employees who exercise their share options. If our employees fail to pay or we fail to withhold their income taxes according to relevant laws and regulations, we may face sanctions imposed by the tax authorities or other PRC government authorities.

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.

Under the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside of the PRC with “de facto management body” within the PRC is considered a “resident enterprise” and will be subject to the enterprise income tax on its global income at the rate of 25%. The implementation rules define the term “de facto management body” as the body that exercises full and substantial control and overall management over the business, productions, personnel, accounts and properties of an enterprise. In 2009, the State Administration of Taxation, or SAT, issued the Circular on Issues Concerning the Identification of Chinese-Controlled Overseas Registered Enterprises as Resident Enterprises in Accordance With the Actual Standards of Organizational Management, known as SAT Circular 82, which has been revised by the Decision of the State Administration of Taxation on Issuing the Lists of Invalid and Abolished Tax Departmental Rules and Taxation Normative Documents on December 29, 2017 and by the Decision of the State Council on Cancellation and Delegation of a Batch of Administrative Examination and Approval Items on November 8, 2013. Circular 82 has provided certain specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is located in China. Further to SAT Circular 82, the SAT issued the Administrative Measures for Enterprise Income Tax of PRC-Controlled Offshore Incorporated Resident Enterprises (Trial), or SAT Bulletin 45, effective 2011, to provide more guidance on the implementation of SAT Circular 82. SAT Bulletin 45 clarified certain issues in the areas of resident status determination, post-determination administration and competent tax authorities’ procedures.

According to SAT Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “de facto management body” in China and will be subject to PRC enterprise income tax on its global income only if all of the following conditions are met: (i) the places where the senior management and senior management departments responsible for the daily production, operation and management of the enterprise perform their duties are mainly located within the territory of the PRC; (ii) decisions relating to the enterprise’s financial matters (such as money borrowing, lending, financing and financial risk management) and human resource matters (such as appointment, dismissal and salary and wages) are made or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise’s primary assets, accounting books and records, company seals, and board and shareholder resolutions, are located or maintained in the PRC; and (iv) at least 50% of voting board members or senior executives habitually reside in the PRC. Although SAT Circular 82 and SAT Bulletin 45 only apply to offshore incorporated enterprises controlled by PRC enterprises or PRC enterprise groups and not those controlled by PRC individuals or foreigners, the determination criteria set forth therein may reflect the SAT’s general position on how the term “de facto management body” could be applied in determining the tax resident status of offshore enterprises, regardless of whether they are controlled by PRC enterprises, individuals or foreigners.

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In addition, the SAT issued the Announcement of the State Administration of Taxation on Issues concerning the Determination of Resident Enterprises Based on the Standards of Actual Management Institutions in January 2014 to provide more guidance on the implementation of SAT Circular 82. This bulletin further provides that, among other things, an entity that is classified as a “resident enterprise” in accordance with the circular shall file the application for classifying its status of residential enterprise with the local tax authorities where its main domestic investors are registered. From the year in which the entity is determined to be a “resident enterprise,” any dividend, profit and other equity investment gain shall be taxed in accordance with the enterprise income tax law and its implementing rules.

We believe that none of our entities outside of China is a PRC resident enterprise for PRC tax purposes. See “Regulation - Regulations on Tax - PRC Enterprise Income Tax”. 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.” Our PRC legal counsel has also advised us that there is a risk that the PRC tax authorities may deem us as a PRC resident enterprise since a substantial majority of the members of our management team are located in China. If the PRC tax authorities determine that we are a PRC resident enterprise for enterprise income tax purposes, we will be subject to the enterprise income tax on our global income at the rate of 25% and we will be required to comply with PRC enterprise income tax reporting obligations. In addition, we may be required to withhold a 10% withholding tax from dividends we pay to our shareholders that are non-resident enterprises, and non-resident enterprise shareholders may be subject to PRC tax on gains realized on the sale or other disposition of ordinary shares, if such income is treated as sourced from within the PRC. Furthermore, if we are deemed a PRC resident enterprise, dividends payable to our non-PRC individual shareholders and any gain realized on the transfer of ordinary shares by such shareholders may be subject to PRC tax at a rate of 20% unless a reduced rate is available under an applicable tax treaty. It is unclear whether non-PRC shareholders of our company would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that we are treated as a PRC resident enterprise. Any such tax may reduce the returns on your investment in the ordinary shares.

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

On December 10, 2009, SAT issued the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises, or SAT Circular 698, with retroactive effect from January 1, 2008. Pursuant to the SAT Circular 698, where a non-resident enterprise transfers the equity interests of a PRC resident enterprise indirectly by disposition of the equity interests of an overseas holding company, or an Indirect Transfer, and such overseas holding company is located in a tax jurisdiction that: (i) has an effective tax rate less than 12.5% or (ii) does not tax foreign income of its residents, the non-resident enterprise, being the transferor, shall report to the competent tax authority of the PRC resident enterprise this Indirect Transfer.

On February 3, 2015, the SAT issued the Announcement of the State Administration of Taxation on Several Issues Relating to Enterprise Income Tax of Transfers of Assets between Non-resident Enterprises, or SAT Bulletin 7. SAT Bulletin 7 has introduced a new tax regime that is significantly different from the previous one under former SAT Circular 698 (which was repealed by the Announcement of the State Administration of Taxation on Matters Concerning Withholding of Income Tax of Non-resident Enterprises at Source by SAT). SAT Bulletin 7 extends its tax jurisdiction to not only Indirect Transfers set forth under former SAT Circular 698 but also transactions involving transfer of other taxable assets through offshore transfer of a foreign intermediate holding company. In addition, SAT Bulletin 7 provides clearer criteria than former SAT Circular 698 for assessment of reasonable commercial purposes and has introduced safe harbors for internal group restructurings and the purchase and sale of equity of a same listed foreign enterprise by a non-resident enterprise through a public securities market. SAT Bulletin 7 also brings challenges to both foreign transferor and transferee (or other person who is obligated to pay for the transfer) of taxable assets. Where a non-resident enterprise transfers taxable assets indirectly by disposing of the equity interests of an overseas holding company, which is an Indirect Transfer, the non-resident enterprise, being the transferor, or the transferee, or the PRC entity that directly owns the taxable assets, may report such Indirect Transfer to the relevant tax authority. Using a “substance over form” principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring PRC tax. As a result, gains derived from such Indirect Transfer may be subject to PRC enterprise income tax, and the transferee or other person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a rate of 10% for the transfer of equity interests in a PRC resident enterprise. Both the transferor and the transferee may be subject to penalties under PRC tax laws if the transferee fails to withhold the taxes and the transferor fails to pay the taxes. However, according to the aforesaid safe harbor rule, the PRC tax would not be applicable to the transfer by any non-resident enterprise of our ordinary shares acquired and sold on public securities markets.

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On October 17, 2017, SAT issued the Announcement of the State Administration of Taxation on Issues Concerning the Withholding of Non-resident Enterprise Income Tax at Source, or SAT Bulletin 37, which, among others, repealed the Circular 698 on December 1, 2017. SAT Bulletin 37 further details and clarifies the tax withholding methods in respect of income of non-resident enterprises under Circular 698. And certain rules stipulated in SAT Bulletin 7 are replaced by SAT Bulletin 37. Where the non-resident enterprise fails to declare the tax payable pursuant to Article 39 of the Enterprise Income Tax Law, the tax authority may order it to pay the tax due within required time limits, and the non-resident enterprise shall declare and pay the tax payable within such time limits specified by the tax authority; however, if the non-resident enterprise voluntarily declares and pays the tax payable before the tax authority orders it to do so within required time limits, it shall be deemed that such enterprise has paid the tax in time.

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

The approval of or filing and reporting with the CSRC or other PRC government authorities may be required in connection with our overseas offerings under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing and reporting procedures.

The Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies requires an overseas special purpose vehicle formed for listing purposes through acquisitions of PRC domestic companies and controlled by PRC companies or individuals to obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange. However, the application of the M&A Rules remains unclear.

Our PRC legal counsel has advised us based on their understanding of the current PRC laws, rules and regulations that the CSRC’s approval is not required for the listing and trading of our ordinary shares on NASDAQ in the context of our initial public offering, given that: (i) our PRC Subsidiary was incorporated as wholly foreign-owned enterprises by means of direct investment rather than by merger or acquisition of equity interest or assets of a PRC domestic company owned by PRC companies or individuals as defined under the M&A Rules that are our beneficial owners; and (ii) no provision in the M&A Rules clearly classifies contractual arrangements as a type of transaction subject to the M&A Rules.

However, our PRC legal counsel has further advised us that there remains some uncertainty as to how the M&A Rules will be interpreted or implemented in the context of an overseas offering and its opinions summarized above are subject to any new laws, rules and regulations or detailed implementations and interpretations in any form relating to the M&A Rules. The interpretation and application of the regulations remain unclear, and our future overseas offerings may ultimately require approval of the CSRC. If the CSRC approval is required, it is uncertain whether we can or how long it will take us to obtain the approval and, even if we obtain such CSRC approval, the approval could be rescinded. Any failure to obtain or delay in obtaining the CSRC approval for any of our future overseas offerings, or a rescission of such approval if obtained by us, would subject us to sanctions imposed by the CSRC or other PRC regulatory authorities, which could include fines and penalties on our operations in China, restrictions or limitations on our ability to pay dividends outside of China, and other forms of sanctions that may materially and adversely affect our business, financial condition, and results of operations.

The General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the Opinions on Strictly Cracking Down on Illegal Securities Activities, or the Opinions, which was made available to the public on July 6, 2021. The Opinions emphasized the need to strengthen the administration over illegal securities activities, and the need to strengthen the supervision over overseas listings by Chinese companies. Pursuant to the Opinions, Chinese regulators are required to accelerate rulemaking related to the overseas issuance and listing of securities, and update the existing laws and regulations related to data security, cross-border data flow, and management of confidential information. As the Opinions was recently issued, there are great uncertainties with respect to the interpretation and implementation thereof. The Chinese government may promulgate relevant laws, rules and regulations that may impose additional and significant obligations and liabilities on overseas listed Chinese companies regarding data security, cross-border data flow, and compliance with China’s securities laws. These laws and regulations can be complex and stringent, and many are subject to change and uncertain interpretation, which could result in claims, change to our data and other business practices, regulatory investigations, penalties, increased cost of operations, or declines in user growth or engagement, or otherwise affect our business. It is uncertain whether or how these new laws, rules and regulations and the interpretation and implementation thereof may affect us, but among other things, our ability and the ability of our subsidiaries to obtain external financing through the issuance of equity securities overseas could be negatively affected.

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Numerous regulations, guidelines and other measures are expected to be adopted under the umbrella of or in addition to the Cybersecurity Law and Data Security Law. Effective measures, such as promoting the construction of relevant regulatory systems will be taken to deal with the risks and incidents of China-concept overseas listed companies, and cybersecurity and data privacy protection requirements and similar matters. On July 10, 2021, the CAC issued a revised draft of the Measures for Cybersecurity Review for public comments. Further, on December 28, 2021, thirteen PRC regulatory agencies, namely, the CAC, the NDRC, the Ministry of Industry and Information Technology, the Ministry of Public Security, the Ministry of State Security, the Ministry of Finance, MOFCOM, SAMR, CSRC, the People’s Bank of China, the National Radio and Television Administration, National Administration of State Secrets Protection and the National Cryptography Administration, jointly adopted and published the Measures for Cybersecurity Review (2021), which became effective on February 15, 2022. The Measures for Cybersecurity Review (2021) authorized the relevant government authorities to conduct cybersecurity review on a range of activities that affect or may affect national security, and required that, among others, in addition to “operator of critical information infrastructure” any “operator of network platform” holding personal information of more than one million users which seeks to list in a foreign stock exchange should also be subject to cybersecurity review, and further elaborated the factors to be considered when assessing the national security risks of the relevant activities. On November 14, 2021, the CAC released the Regulations on Network Data Security (draft for public comments), or the draft Regulations on Network Data Security, which reiterates that data processors that process the personal information of more than one million users listing in a foreign country should apply for a cybersecurity review. The draft Regulations on Network Data Security will accept public comments until December 13, 2021. We do not believe the VIE or the VIE’s subsidiaries are among the “operator of critical information infrastructure,” “data processor” carrying out data processing activities that affect or may affect national security, or “operator of network platform” holding personal information of more than one million users as mentioned above, however, the revised draft Regulations on Network Data Security is in the process of being formulated and subject to further changes, and the Opinions remain unclear on how it will be interpreted, amended and implemented by the relevant PRC governmental authorities.

On July 7, 2022, the CAC promulgated the Outbound Data Transfer Security Assessment Measures, which became effective on September 1, 2022. According to the Outbound Data Transfer Security Assessment Measures, to provide data abroad under any of the following circumstances, a data processor shall declare security assessment for its outbound data transfer to the CAC through the local cyberspace administration at the provincial level: (i) where the data processor will provide important data abroad; (ii) where operator of critical information infrastructure or the data processor processing the personal information of more than one million individuals will provide personal information abroad; (iii) where the data processor who has provided personal information of 100,000 individuals or sensitive personal information of 10,000 individuals in total abroad since January 1 of the previous year, will provide personal information abroad; and (iv) other circumstances where the security assessment is required as prescribed by the CAC. Prior to declaring security assessment for outbound data transfer, the data processor shall conduct self-assessment on the risks of the outbound data transfer. For outbound data transfers that have been carried out before the effectiveness of the Outbound Data Transfer Security Assessment Measures, if it is not in compliance with these measures, rectification shall be completed within six months starting from September 1, 2022. Since the Outbound Data Transfer Security Assessment Measures is extremely new, there remain substantial uncertainties about its interpretation and implementation, it is unclear whether we shall declare a security assessment. As of the date of this annual report, we have not received any penalty, investigation or warning with respect to our business operation from the CAC, nor have we received any notice or instructions from the CAC requiring us to declare a security assessment. If it is determined in the future that we are required to declare a security assessment, it is uncertain whether we can or how long it will take us to complete such declaration or rectification.

On February 17, 2023, the CSRC promulgated the Trial Administrative Measures of the Overseas Securities Offering and Listing by Domestic Companies (the “Trial Measures”) and five supporting guidelines, which became effective on March 31, 2023. According to the Trial Measures, among other requirements, any domestic companies that seek to offer or list securities overseas, both directly and indirectly, should fulfil the filing procedures with the CSRC within three business days after the submission of the overseas offering and listing application. The Trial Measures provide that if an issuer meets both of the following criteria, the overseas offering and listing of securities conducted by such issuer shall be determined as an indirect overseas offering and listing by a PRC domestic enterprise and is therefore subject to the filing and reporting requirements as required thereunder: (i) any of the operating revenue, total profits, total assets or net assets of the PRC domestic enterprise(s) of the issuer in the most recent fiscal year accounts for more than 50% of the corresponding item in the issuer’s audited consolidated financial statements for the same period; and (ii) the main parts of the issuer’s operation activities are conducted in mainland China, or the principal operation premises are located in mainland China, or the majority of senior management personnel in charge of its business operations and management are PRC citizens or have habitual residences located in mainland China. The Trial Measures further stipulate that the determination as to whether a PRC domestic company is indirectly offering and listing securities in an overseas market shall be made on a substance-over-form basis. According to one of the Guidelines for Overseas Listing, where an issuer does not fall within the circumstances as stipulated aforementioned, but the risk factors disclosed in the submitted listing application documents pursuant to the relevant overseas market regulations are mainly related to mainland China, the securities companies and the PRC counsels of the issuer shall, act in accordance with the Trial Measures for Overseas Listing and follow the principle of substance-over-form, conduct comprehensive demonstration and identification with regard to whether the issuer falls within the scope which is subject to the filing requirements under the Trial Measures for Overseas Listing. If a PRC company fails to complete required filing procedures or conceals any material fact or falsifies any major content in its filing documents, such PRC company may be subject to administrative penalties, such as order to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties, such as warnings and fines. On the same day, the CSRC also held a press conference for the release of the Trial Measures and issued the Notice on Administration for the Filing of Overseas Offering and Listing by Domestic Companies, which, among others, clarifies that PRC domestic companies that have already been listed overseas on or before the effective date of the Trial Measures for Overseas Listing (i.e., March 31, 2023) can be deemed as existing issuers, or the Existing Issuers. Existing Issuers are not required to complete the filling procedures immediately for their historical offerings and listing, and they are required to file with the CSRC when they conduct subsequent financing activities We do not believe that we are required to obtain the approval from or complete the filing with the CSRC because we became a public company before the Trial Measures went into effect. If in the future we are going to conduct any offering or financing in the U.S., we will complete filing procedures with the CSRC pursuant to the requirements of the Trial Measures. In addition, we have not received any formal inquiry, notice, warning, sanction, or objection from the CSRC with respect our listing on the Nasdaq Capital Market.

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In addition, on February 24, 2023, the CSRC, together with Ministry of Finance of the PRC, National Administration of State Secrets Protection and National Archives Administration of China, revised the Provisions on Strengthening Confidentiality and Archives Administration for Overseas Securities Offering and Listing which was issued by the CSRC, National Administration of State Secrets Protection and National Archives Administration of China in 2009, or the Provisions. The revised Provisions is issued under the title the Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies, and came into effect on March 31, 2023 together with the Trial Measures. One of the major revisions to the revised Provisions is expanding its application to cover indirect overseas offering and listing, as is consistent with the Trial Measures. The revised Provisions require that, including but not limited to (a) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals or entities including securities companies, securities service providers and overseas regulators, any documents and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level; and (b) domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals and entities including securities companies, securities service providers and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations. Where a PRC domestic company, after completing the relevant procedures, provides to securities companies, securities service providers or other entities with any documents and materials that contain state secrets or working secrets of government agencies, or any other documents and materials that would be detrimental to national security or public interest if leaked, a non-disclosure agreement must be signed between the provider and receiver of such information according to the relevant PRC laws and regulations, which must specify, among others, the obligations and liabilities on confidentiality held by such securities companies and securities service providers. Specifically, when a PRC domestic company provides accounting archives or copies of accounting archives to any entities including securities companies, securities service providers or overseas regulators and individuals, it must complete the due procedures in compliance with applicable national regulations.

Uncertainties regarding the enforcement of laws and the fact that rules and regulations in China can change quickly with little advance notice, along with the risk that the Chinese government may intervene or influence operations of the VIE or the VIE’s subsidiaries at any time, or may exert more control over offerings conducted overseas and/or foreign investment in China-based issuers could result in a material change in our operations, financial performance and/or the value of our ordinary shares or impair our ability to raise capital on terms acceptable to us, or at all. We cannot assure you that any new rules or regulations promulgated in the future will not impose additional requirements on us. If it is determined in the future that approval and filing from the CSRC or other regulatory authorities or other procedures, such as a cybersecurity review, are required for our future overseas offerings, it is uncertain whether we can or how long it will take us to obtain such approval or complete such filing procedures and any such approval or filing could be rescinded or rejected. Any failure to obtain or delay in obtaining such approval or completing such filing procedures for our overseas offerings, or a rescission of any such approval or filing if obtained by us, would subject us to sanctions by the CSRC or other PRC regulatory authorities for failure to seek CSRC approval or filing or other government review or authorization for our overseas offerings. 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 overseas 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 listed ordinary shares. The CSRC or other PRC regulatory authorities also may take actions requiring us, or making it advisable for us, to halt our overseas 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 overseas 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 listed ordinary shares.

Failure to make adequate contributions to various government-sponsored employee benefits plans as required by PRC laws and regulations may subject us to penalties.

Companies operating in China are required to participate in various government-sponsored employee benefit plans, including certain social insurance, housing provident funds and other welfare-oriented payment obligations, and contribute to the plans in amounts equal to certain percentages of salaries, including bonuses and allowances, of employees up to a maximum amount specified by the local government from time to time at locations where the labor relations between us and our employees are based. The laws and regulations on employee benefit plans have not been enforced consistently by the local governments in China given the different levels of economic development in different locations. Following local common practice, we do not pay certain social insurance or housing fund contributions for each of our employees and the amount we paid was lower than the requirements of relevant PRC regulations. Therefore, in our consolidated financial statements, we have made an estimate and accrued a provision in relation to the potential make-up of our contributions for these plans. If we are determined by local authorities to have failed to make adequate contributions to any employee benefits as required by relevant PRC laws and regulations, we may face late fees or fines in relation to the underpaid employee benefits. As a result, our financial condition and results of operations may be materially and adversely affected.

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Increases in labor costs and enforcement of stricter labor laws and regulations in the PRC may adversely affect our business and our profitability.

China’s overall economy and the average wage in China have increased in recent years and are expected to continue to grow. The average wage level for our employees has also increased in recent years. We expect that our labor costs, including wages and employee benefits, will continue to increase. Unless we are able to pass on these increased labor costs to those who pay for our services, our profitability and results of operations may be materially and adversely affected.

In addition, we have been subject to stricter regulatory requirements in terms of entering into labor contracts with our employees and paying various statutory employee benefits, including pensions, housing fund, medical insurance, work-related injury insurance, unemployment insurance and maternity insurance to designated government agencies for the benefit of our employees. Pursuant to the PRC Labor Contract Law and its implementation rules, employers are subject to stricter requirements in terms of signing labor contracts, minimum wages, paying remuneration, determining the term of employee’s probation and unilaterally terminating labor contracts. In the event that we decide to terminate some of our employees or otherwise change our employment or labor practices, the PRC Labor Contract Law and its implementation rules may limit our ability to effect those changes in a desirable or cost-effective manner, which could adversely affect our business and results of operations.

In October 2010, the SCNPC promulgated the Law on Social Insurance of the PRC, effective on July 1, 2011. On April 3, 1999, the State Council promulgated the Regulations on the Administration of Housing Provident Fund, which was amended on March 24, 2002. Companies registered and operating in China are required under the Law on Social Insurance of the PRC and the Regulations on the Administration of Housing Provident Fund to apply for social insurance registration and housing fund deposit registration within 30 days of their establishment and to pay for their employees different social insurance including pension insurance, medical insurance, work-related injury insurance, unemployment insurance and maternity insurance to the extent required by law. We could be subject to orders by the competent labor authorities for rectification and failure to comply with the orders which may further subject us to administrative fines. See “Regulations - Regulations on Labor Protection”.

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 including those relating to obligations to make social insurance payments and contribute to the housing provident 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.

If our preferential tax treatments are revoked, become unavailable or if the calculation of our tax liability is successfully challenged by the PRC tax authorities, we may be required to pay tax, interest and penalties in excess of our tax provisions, and our results of operations could be materially and adversely affected.

The PRC government has provided tax incentives to our VIE. These incentives include reduced enterprise income tax rates. For example, under the Enterprise Income Tax Law and its implementation rules, the statutory enterprise income tax rate is 25%. However, the income tax of an enterprise that has been determined to be a high and new technology enterprise can be reduced to a preferential rate of 15%, and the certificate of a high and new technology enterprise is valid for three years.

Our VIE has obtained the Certificate of High and New Technology Enterprise since November 2, 2015, which is renewed on December 23, 2021 and is thus eligible to enjoy a preferential tax rate of 15% for the periods presented, to the extent it has taxable income under the PRC Enterprise Income Tax Law. Any increase in the enterprise income tax rate applicable to our VIE in China, or any discontinuation or retroactive or future reduction of any of the preferential tax treatments currently enjoyed by our VIE, could adversely affect our business, financial condition and results of operations. In addition, in the ordinary course of our business, we are subject to complex income tax and other tax regulations and significant judgment is required in the determination of a provision for income taxes. Although we believe our tax provisions are reasonable, if the PRC tax authorities successfully challenge our position and we are required to pay tax, interest and penalties in excess of our tax provisions, our financial condition and results of operations would be materially and adversely affected.

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Discontinuation of any of the government subsidies or imposition of any additional taxes and surcharges could adversely affect our financial condition and results of operations.

Our VIE and UTime GZ have received various financial subsidies from PRC local government authorities. The financial subsidies result from discretionary incentives and policies adopted by PRC local government authorities. Meanwhile, to promote our productions and operations, our VIE and UTime GZ built cooperative relations with government authorities, based on which financial subsidies and a series of other governmental supports are provided for the purpose of facilitation of more tax payment to the local tax authorities. In order to attract investment, the Management Committee of Guizhou Xinpu Economic Development Zone offers preferential policies to UTime GZ, the PRC Subsidiary of our VIE, to establish its operations in Xinpu Economic Development Zone. As of the date of this annual report, UTime GZ has received subsidies of approximately RMB1.2 million (US$0.2 million) in the form of logistics and employees’ rent subsidies for public rental housing from the Management Committee of Guizhou Xinpu Economic Development Zone. However, local governments may decide to change, withdraw or discontinue such financial subsidies at any time. The discontinuation of such financial subsidies or imposition of any additional taxes could adversely affect our financial condition and results of operations.

If the custodians or authorized users of controlling non-tangible assets of our company, including our corporate chops and seals, fail to fulfill their responsibilities, or misappropriate or misuse these assets, our business and operations could be materially and adversely affected.

Under PRC laws, legal documents for corporate transactions are executed using the chops or seal of the signing entity or with the signature of a legal representative whose designation is registered and filed with the relevant branch of the Administration for Market Regulation.

Although we usually utilize company seals to enter into contracts, the designated legal representatives of our PRC Subsidiary, VIE and UTime GZ have the apparent authority to enter into contracts on behalf of such entities without chops and bind such entities. All designated legal representatives of our PRC Subsidiary, VIE and UTime GZ are members of our senior management team who have signed employment agreements with us or our PRC Subsidiary, VIE and UTime GZ under which they agree to abide by various duties they owe to us. In order to maintain the physical security of our chops and chops of our PRC entities, we generally store these items in secured locations accessible only by the authorized personnel in the legal or finance department of PRC Subsidiary, VIE and UTime GZ. Although we monitor such authorized personnel, there is no assurance such procedures will prevent all instances of abuse or negligence. Accordingly, if any of our authorized personnel misuse or misappropriate our corporate chops or seals, we could encounter difficulties in maintaining control over the relevant entities and experience significant disruption to our operations. If a designated legal representative obtains control of the chops in an effort to obtain control over PRC Subsidiary, VIE and UTime GZ, we or our PRC Subsidiary, VIE and UTime GZ would need to pass a new shareholder or board resolution to designate a new legal representative and we would need to take legal action to seek the return of the chops with the relevant authorities, or otherwise seek legal redress for the violation of the representative’s fiduciary duties to us, which could involve significant time and resources and divert management attention away from our regular business. In addition, the affected entity may not be able to recover corporate assets that are sold or transferred out of our control in the event of such a misappropriation if a transferee relies on the apparent authority of the representative and acts in good faith.

We face certain risks relating to the real properties that we lease.

We lease real properties from third parties primarily for our office and processing workshops being used in China, and most of our lease agreements for these properties have not been registered with the PRC governmental authorities as required by PRC laws. Although the failure to do so does not in itself invalidate the leases, we may be ordered by the PRC government authorities to rectify such noncompliance and, if such noncompliance were not rectified within a given period of time, we may be subject to fines imposed by PRC government authorities ranging from RMB1,000 and RMB10,000 for each lease agreement that has not been registered with the relevant PRC governmental authorities.

Most of the proof of ownership or proof of right to lease in relation to our leased real properties have not been provided to us by the relevant lessors. Therefore, we cannot assure you that such lessors are entitled to lease the relevant real properties to us. If the lessors are not entitled to lease the real properties to us and the owners of such real properties decline to ratify the lease agreements between us and the respective lessors, we may not be able to enforce our rights to keep leasing such properties under the respective lease agreements against the owners. As of the date of this annual report, we are not aware of any claim or challenge brought by any third parties concerning the use of our leased properties. If our lease agreements are claimed as null and void by third parties who are the real owners of such leased real properties, we could be required to vacate the properties, in the event of which we could only initiate the claim against the lessors under relevant lease agreements for indemnities for their breach of the relevant leasing agreements.

Furthermore, the registered office of UTime SZ is 64D-403, Tian Zhan Building F2, Tian’an Che Kung Temple Industrial Zone, Xiangmi Lake, Futian District, Shenzhen, while the principal executive office is located at 7th Floor, Building 5A, Shenzhen Software Industry Base, Nanshan District, Shenzhen. According to PRC laws, rules and regulations, a company shall register its main office as registered office. Where a company fails to undergo the relevant modification registration in accordance with relevant regulations for any modification of the contents of company registration, the company registration authority shall order the company to register within a prescribed time limit, and, if the company fails to do so, impose a fine of not less than RMB10,000 but not more than RMB100,000 on the company.

We cannot assure you that suitable alternative locations are readily available on commercially reasonable terms, or at all, and if we are unable to relocate our offices or processing workshops in a timely manner, our operations may be interrupted.

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Risks Related to Our Ordinary Shares

The trading prices of our ordinary shares are likely to be volatile, which could result in substantial losses to investors.

The market price of the ordinary shares on Nasdaq may fluctuate after listing as a result of several factors, including the following:

| ● | volatility in the mobile telecommunications and IoT industry, both in China and internationally;

| ● | variations in our operating results;

| ● | risks relating to our business and industry, including those discussed above;

| ● | strategic actions by us or our competitors;

| ● | reputational damage from accidents or other adverse events related to our company or its operations;

| ● | investor perception of us, the technology sector in which we operate, the investment opportunity associated with the ordinary shares and our future performance;

| ● | addition or departure of our executive officers or directors;

| ● | changes in financial estimates or publication of research reports by analysts regarding our ordinary shares, other comparable companies or our industry generally;

| ● | trading volume of our ordinary shares;

| ● | future sales of our ordinary shares by us or our shareholders;

| ● | domestic and international economic, legal and regulatory factors unrelated to our performance; or

| ● | the release or expiration of lock-up or other transfer restrictions on our outstanding ordinary shares.

Furthermore, the stock markets often experience significant price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political and market conditions such as recessions or interest rate changes may cause the market price of ordinary shares to decline.

Sales of a substantial number of our ordinary shares in the public market by our existing shareholders could cause our share price to fall.

Sales of a substantial number of our ordinary shares in the public market, or the perception that these sales might occur, could depress the market price of our ordinary shares and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that sales may have on the prevailing market price of our ordinary shares. All of the ordinary shares owned by our directors, officers and existing shareholders are subject to lock-up agreements with the underwriters in our initial public offering that restrict the shareholders’ ability to transfer our ordinary shares until after October 3, 2021. Substantially all of our outstanding ordinary shares will become eligible for unrestricted sale upon expiration of the lock-up period. In addition, ordinary shares issued or issuable upon exercise of options and warrants vested as of the expiration of the lock-up period will be eligible for sale at that time. Sales of ordinary shares by these shareholders could have a material adverse effect on the trading price of our ordinary shares.

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There are no assurance that our securities, including our ordinary shares, will continue to be listed or, if listed, that we will be able to comply with the continued listing standards of Nasdaq, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.

Even though our ordinary shares are currently listed on the NASDAQ, we cannot assure you that we will be able to meet NASDAQ’s continued listing requirement or maintain other listing standards. If our ordinary shares are delisted by NASDAQ, and we are not able to list our securities on another national securities exchange, we expect our securities could be quoted on an over-the-counter market. If this were to occur, then, we could face significant material adverse consequences, including:

| ● | less liquid trading market for our securities;

| ● | more limited market quotations for our securities;

| ● | determination that our ordinary shares are a “penny stock” that requires brokers to adhere to more stringent rules and possibly resulting in a reduced level of trading activity in the secondary trading market for our securities;

| ● | more limited research coverage by stock analysts;

| ● | loss of reputation; and

| ● | more difficult and more expensive equity financings in the future.

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

Future issuance of our ordinary shares could cause dilution of ownership interests and adversely affect our stock price.

We may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that additional capital is raised through the sale of our equity or convertible debt securities, the issuance of such securities could result in further dilution to our shareholders or result in downward pressure on the price of our ordinary shares

Shares eligible for future sale may depress our stock price.

As of the date of this annual report, we had450,930,953ordinary shares outstanding. All of the ordinary shares of held by affiliates are restricted or control securities under Rule 144 promulgated under the Securities Act. Sales of ordinary shares under Rule 144 or another exemption under the Securities Act or pursuant to a registration statement could have a material adverse effect on the price of the ordinary shares and could impair our ability to raise additional capital through the sale of equity securities.

We may issue preference shares to investor that grant them superior rights than holders of our ordinary shares without obtaining shareholder approval.

Our amended and restated memorandum and articles of association authorize our board of directors to issue one or more series of preference shares and set the terms of the preference shares without seeking any further approval from our shareholders. Any preference shares that are issued may rank ahead of our ordinary shares, in terms of dividends, liquidation rights and voting rights.

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If securities or industry analysts do not publish or cease publishing research reports about us, if they adversely change their recommendations regarding our ordinary shares or if our operating results do not meet their expectations, the price of our ordinary shares could decline.

The trading market for our ordinary shares will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors. Securities and industry analysts currently publish limited research on us. If there is limited or no securities or industry analyst coverage of our company, the market price and trading volume of our ordinary shares would likely be negatively impacted. Moreover, if any of the analysts who may cover us downgrade our ordinary shares, provide more favorable relative recommendations about our competitors or if our operating results or prospects do not meet their expectations, the market price of our ordinary shares could decline. If any of the analysts who may cover us were to cease coverage or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our share price or trading volume to decline.

As a foreign private issuer, we are subject to different U.S. securities laws and NASDAQ governance standards than domestic U.S. issuers. This may afford less protection to holders of our ordinary shares, and you may not receive corporate and company information and disclosure that you are accustomed to receiving or in a manner in which you are accustomed to receiving it.

As a foreign private issuer, the rules governing the information that we disclose differ from those governing U.S. corporations pursuant to the Exchange Act. Although we intend to report quarterly financial results and report certain material events, we are not required to file quarterly reports on Form 10-Q or provide current reports on Form 8-K disclosing significant events within four days of their occurrence and our quarterly or current reports may contain less information than required for domestic issuers. In addition, we are exempt from the SEC’s proxy rules, and proxy statements that we distribute will not be subject to review by the SEC. Our exemption from Section 16 rules regarding sales of ordinary shares by insiders means that you will have less data in this regard than shareholders of U.S. companies that are subject to the Exchange Act. As a result, you may not have all the data that you are accustomed to having when making investment decisions with respect to U.S. public companies.

As a foreign private issuer, we are exempt from complying with certain corporate governance requirements of the NASDAQ applicable to a U.S. issuer. As the corporate governance standards applicable to us are different than those applicable to domestic U.S. issuers, you may not have the same protections afforded under U.S. law and the Nasdaq Stock Market rules as shareholders of companies that do not have such exemptions.

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

We could cease to be a foreign private issuer if a majority of our outstanding voting securities are directly or indirectly held of record by U.S. residents and we fail to meet additional requirements necessary to avoid loss of foreign private issuer status. The regulatory and compliance costs to us under U.S. securities laws as a U.S. domestic issuer may be significantly higher than costs we incur as a foreign private issuer, which could have a material adverse effect on our business and financial results.

As an “emerging growth company” under the JOBS Act, we are allowed to postpone the date by which we must comply with some of the laws and regulations intended to protect investors and to reduce the amount of information we provide in our reports filed with the SEC, which could undermine investor confidence in our company and adversely affect the market price of our ordinary shares.

For so long as we remain an “emerging growth company” as defined in the JOBS Act, we have taken and intend to continue to take advantage of certain exemptions from various requirements that are applicable to public companies that are not “emerging growth companies” including:

| ● | being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced “Item 5. Operating And Financial Review And Prospects” disclosure;

| ● | not being required to comply with the auditor attestation requirements for the assessment of our internal control over financial reporting provided by Section 404 of the Sarbanes-Oxley Act of 2002;

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| ● | not being required to comply with any requirements adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and our financial statements;

| ● | reduced disclosure obligations regarding executive compensation; and

| ● | not being required to hold a nonbinding advisory vote on executive compensation or seek shareholder approval of any golden parachute payments not previously approved.

We have taken and intend to continue to take advantage of certain of these exemptions until we are no longer an “emerging growth company.” We will remain an emerging growth company until the earlier of: (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our initial public offering, (b) in which we have total annual gross revenue of at least $1.235 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, and (2) the date on which we have issued more than $1 billion in non-convertible debt during the prior three-year period.

If we are classified as a passive foreign investment company, United States taxpayers who own our ordinary shares may have adverse United States federal income tax consequences.

A non-U.S. corporation such as ourselves will be classified as a passive foreign investment company (“PFIC”) for any taxable year if, for such year, either

| ● | At least 75% of our gross income for the year is passive income; or

| ● | The average percentage of our assets (determined at the end of each quarter) during the taxable year which produce passive income or which are held for the production of passive income is at least 50%.

Passive income generally includes dividends, interest, rents and royalties (other than rents or royalties derived from the active conduct of a trade or business) and gains from the disposition of passive assets.

If we are determined to be a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. taxpayer who holds our ordinary shares, the U.S. taxpayer may be subject to increased U.S. federal income tax liability and may be subject to additional reporting requirements.

Taking the amount of cash we raised in our initial public offering into account, together with any other assets held for the production of passive income, it is possible that, for our 2021 taxable year or for any subsequent year, more than 50% of our assets may be assets which produce passive income. We will make this determination following the end of any particular tax year. Although the law in this regard is unclear, we treat our consolidated affiliated entities as being owned by us for United States federal income tax purposes, not only because we exercise effective control over the operation of such entities but also because we are entitled to substantially all of their economic benefits. For purposes of the PFIC analysis, in general, a non-U.S. corporation is deemed to own its pro rata share of the gross income and assets of any entity in which it is considered to own at least 25% of the equity by value.

For a more detailed discussion of the application of the PFIC rules to us and the consequences to U.S. taxpayers if we were determined to be a PFIC, see “Taxation - Material U.S. Federal Income Tax Considerations - Passive Foreign Investment Company”.

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ITEM 4. INFORMATION ON THE COMPANY

4A. History and Development of the Company

We commenced our operations in June 2008 through UTime SZ, a PRC company established by Mr. Bao, Mr. Junlin Zhou and Mr. Bo Tang. As of March 31, 2017, Mr. Bao, Mr. Zhou and Mr. Tang held 52%, 28% and 20% of the equity interests of UTime SZ, respectively. In February 2018, Mr. Bao acquired the equity interests of UTime SZ held by Mr. Zhou and Mr. Tang and became UTime SZ’s sole shareholder. In April 2019, UTime SZ approved a board resolution and in August 2019 approved a shareholder resolution, both of which approved Mr. He, the controlling shareholder of HMercury Capital Limited, to purchase a RMB21.4 million equity interest in UTime SZ which has been received. On September 3, 2019, UTime SZ approved a shareholder resolution to allow Mr. Bao to invest an additional RMB23.9 million equity interest in UTime SZ, for which the consideration primarily consisted of the amount due to Kaiweixin of RMB23.0 million as of March 31, 2019. Kaiweixin was controlled by Mr. Bao through an entrust agreement with Mr. Wukai Song, who owned 100% of equity interest of Kaiweixin and Mr. Bao assumed all creditor rights after Kaiweixin was deregistered on June 21, 2019. As of the date of this annual report, Mr. Bao and Mr. He held 96.95% and 3.05% equity interests of UTime SZ, respectively.

Beginning in late 2018, the following transactions were undertaken to reorganize the legal structure (the “Reorganization”) of the Company. In October 2018, UTime Limited was incorporated in the Cayman Islands. In November 2018, UTime HK, a WOS of the Company, was incorporated in Hong Kong and in December 2018, UTime WFOE, a WOS of the Company, was incorporated in China, respectively.

In March 2019, UTime WFOE entered into a series of contractual agreements with our VIE, UTime SZ and its principal shareholder, Mr. Bao, which were further amended and restated in August and September of 2019, respectively, and were entered into among UTime WFOE, VIE, Mr. Bao and Mr. He, respectively. Pursuant to these agreements, we believe that these contractual arrangements enable us to (1) have power to direct the activities that most significantly affects the economic performance of UTime SZ and its subsidiaries, and (2) receive the economic benefits of UTime SZ and its subsidiaries that could be significant to UTime SZ and its subsidiaries. As a result of these contractual arrangements, under U.S. GAAP, the Company is considered the primary beneficiary of UTime SZ for accounting purpose and is able to consolidate UTime SZ and its subsidiaries in its consolidated financial statements.

Do Mobile is a Company subsidiary that was incorporated by the Company on October 24, 2016 in New Delhi, India. Do Mobile is an operating entity that sells cell phone products and provides after-sale services of our own in-house brand in India. Prior to the Reorganization, the majority of Do Mobile’s equity interests were held by Mr. Bao through an entrustment agreement with Mr. Wukai Song through a holding company, Bridgetime. Bridgetime was incorporated on September 5, 2016 in the BVI under the laws of the BVI, with Mr. Wukai Song owning 70% of the equity interest of Bridgetime through an entrust agreement between him and Mr. Bao, and Mr. Yunchuan Li owning 30% of the equity interest of Bridgetime. Do Mobile has w.e.f. 15.04.2022 changed its registered office from House No. 25, Street No. 7, Goyala Vihar, Near Saint Thomas School, New Delhi-110071 to another location. The registered office of Do Mobile is now situated at New State Bank of Patyal New Sabzi Mandi Azadpur, New Delhi 110033. Further, Do Mobile is yet to make its annual filings with the Registrar of Companies in respect of the FY 2021-22.

On March 5, 2018, Bridgetime issued 100,000 ordinary shares to Mr. Wukai Song, changing the shareholders’ structure of Bridgetime so that Mr. Wukai Song owned a 90% equity interest in Bridgetime, which were controlled by Mr. Bao through an entrust agreement between him and Mr. Wukai Song, and Mr. Li owning 10% of equity interest. On December 5, 2018, Bridgetime approved a board resolution that appointed and registered Mr. Yihuang Chen a new director. On March 11, 2019, Bridgetime approved a board resolution that transferred 1 share of Do Mobile to Mr. Yihuang Chen and made him nominal shareholder of Do Mobile, removed Mr. Li as the director of Bridgetime and authorized representative of Do Mobile, and appointed Mr. Wukai Song as the authorized representative of Do Mobile. On April 4, 2019, Bridgetime approved a board resolution that forfeited 15,000 ordinary shares of Bridgetime held by Mr. Li, cancelled those shares accordingly and amended Bridgetime’s memorandum of association that changed the number of its authorized shares from 150,000 to 135,000 at a par value of US$1.00. After this, Mr. WuKai Song owned 100% of the equity interest of Bridgetime, which was controlled by Mr. Bao through an entrust agreement between him and Mr. Wukai Song. On May 23, 2019, Bridgetime approved a board resolution that transferred the 135,000 ordinary shares owned by Mr. Wukai Song to UTime Limited. As a result, Bridgetime is currently a WOS of the Company. Since inception, Bridgetime has only made nominal investments in Do Mobile and no substantial business operations have occurred.

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On May 20, 2019, the Company approved a board resolution that agreed to transfer 12,000,000 of its ordinary shares then owned by Mr. Bao to Grandsky Phoenix Limited, a company that was established under the laws of the BVI and 100% owned by Mr. Bao.

On June 3, 2019, the Company entered into a share subscription agreement with HMercury Capital Limited, a company that was incorporated under the laws of the BVI and controlled by Mr. He, one of our directors, pursuant to which HMercury Capital Limited purchased an aggregate of 377,514 of the Company’s ordinary shares. On the same day, the Company approved a board resolution for issuance of 377,514 of the Company’s ordinary shares at par value US$0.0001 to HMercury Capital Limited based on the share subscription agreement. As a result, Mr. Bao, through Grandsky Phoenix Limited, and Mr. He, through HMercury Capital Limited, owned 96.95% and 3.05% of the equity interest of the Company, respectively.

On April 29, 2020, the Company approved a board resolution that agreed to repurchase 7,620,000 and 239,721 ordinary shares, which were subsequently cancelled, at par value from Grandsky Phoenix Limited and HMercury Capital Limited, respectively, pursuant to a share repurchase agreement that the Company entered into with Grandsky Phoenix Limited and HMercury Capital Limited on April 29, 2020. On August 13, 2020, the Company approved a board resolution and signed capital contribution letter with Grandsky Phoenix Limited and HMercury Capital Limited, respectively. Based on the capital contribution letter, each shareholder opted not to receive the consideration for the Repurchased Shares and made a pure capital contribution in the sum of the purchase price in favor of the Company without the issue of additional shares of the Company. In April 2021, we completed our initial public offering of 3,750,000 ordinary shares. As a result, Mr. Bao, through Grandsky Phoenix Limited, and Mr. He, through HMercury Capital Limited, own 4,380,000 ordinary shares, representing 1.12% of equity interest and 137,793 ordinary shares, representing 0.04% of equity interest of the Company, respectively, as of the date of this annual report.

On February 7, 2019, UTime India Private Limited (“UTime India”) is incorporated in India and became a wholly owned subsidiary of UTime Trading.

On November 1, 2021, Guangxi Utime Technology Co., Ltd. (“UTime Guangxi”) is incorporated in Guangxi, China and became a wholly owned subsidiary of UTime Trading.

On December 17, 2021, UTime Trading acquired 51% of the equity interest of Gesoper S De R.L. De C.V. (“Gesoper”). Gesoper is incorporated in Mexico and is a subsidiary of UTime Trading.

On January 17, 2022, Gesoper S De R.L. De C.V. (“Gesoper”) acquired 85% of Firts Communications And Technologies De Mexico S.A. De C.V. (“Firts”) equity interest. Firts was incorporated in Mexico and is a subsidiary of Gesoper.

On August 2, 2023, the Company closed its subsidiary in India, UTime India.

On August 28, 2023, the Company announced a change of trading symbol for its ordinary shares from “UTME” to “WTO”, which became effective on September 5, 2023.

On November 15, 2023, the Company entered into a securities purchase agreement with certain non-U.S. persons, pursuant to which the Company agreed to sell an aggregate of 373,846,160 units, each of which consists of one ordinary share and a warrant to purchase three ordinary shares with an initial exercise price of $0.33, at a price of $0.13 per Unit, for an aggregate purchase price of approximately $48.6 million. This transaction closed on March 18, 2024 after the Company obtained its shareholders’ approval at its 2023 extraordinary general meeting of shareholders and the satisfaction of all other closing conditions.

On December 19, 2023, the Company, through its 2023 extraordinary general meeting of shareholders, approved a share consolidation of the Company’s ordinary shares at a ratio of one-for-twenty-five, and increased its authorized share capital from US$15,000 to US$100,000, consisting of 990,000,000 ordinary Shares of a par value of US$0.0001 each and 10,000,000 preference shares of a par value of US$0.0001 each.

On February 27, 2024, the Company established a subsidiary, Changsha UTime Business Management Co., Ltd. (“Changsha UTime”), in China. Changsha UTime is a wholly owned subsidiary of Shenzhen UTime Technology Consulting Co., Ltd.

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The following diagram illustrates our corporate structure as of the date of this annual report.

Ownership and Organization Chart

As of the date of this annual report, details of the material subsidiaries of the Company and UTime SZ are set forth below:

Name |  | Date of Incorporation |  | Jurisdiction of Incorporation |  | Percentage of beneficial ownership |  | Principal Activities
Subsidiaries of the Company |  |  |  |  |  |  |  |
UTime International Limited |  | November 1, 2018 |  | Hong Kong |  | 100% |  | Investment holding company
Shenzhen UTime Technology Consulting Co., Ltd. |  | December 18, 2018 |  | China |  | 100% |  | Investment holding company
Bridgetime Limited |  | September 5, 2016 |  | British Virgin Island |  | 100% |  | Investment holding company
Changsha UTime Business Management Co., Ltd |  | February 27, 2024 |  | China |  | 100% |  | Trading
VIE |  |  |  |  |  |  |  |
United Time Technology Co., Ltd. |  | June 12, 2008 |  | China |  | 100% |  | Research and development of products, and sales
Subsidiaries of the VIE |  |  |  |  |  |  |  |
Guizhou United Time Technology Co., Ltd. (“UTime GZ”) |  | September 23, 2016 |  | China |  | UTime SZ’s subsidiary |  | Manufacturing
UTime Technology (HK) Company Limited (“UTime Trading”) |  | June 25, 2015 |  | Hong Kong |  | UTime SZ’s subsidiary |  | Trading
Guangxi Utime Technology Co., Ltd. (“UTime Guangxi”) |  | November 1, 2021 |  | China |  | UTime Trading’s Subsidiary |  | Manufacturing of mobile devices and components

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Contractual Arrangements with the VIE and its Respective Shareholders

We conduct substantially all of our business in the PRC through a series of contractual arrangements with our VIE and its shareholders. The VIE and its subsidiaries hold the requisite licenses and permits necessary to conduct the Company’s business. In addition, the VIE and its subsidiaries hold the assets necessary to operate the Company’s business and generate substantially all of the Company’s revenues.

Our contractual arrangements with our VIE and its respective shareholders allow us to: (i) determine the most significant economic activities of the VIE; (ii) receive substantially all of the economic benefits of our VIE; and (iii) have an exclusive option to purchase all or part of the equity interest in and/or assets of our VIE when and to the extent permitted by PRC laws.

As a result of our direct ownership in UTime WFOE and the contractual arrangements with our VIE, we are regarded as the primary beneficiary of our VIE for accounting purposes, and we treat the VIE and its subsidiaries as our consolidated affiliated entities under U.S. GAAP. We have consolidated the financial results of our VIE and its subsidiaries in our consolidated financial statements in accordance with U.S. GAAP.

The following is a summary of the contractual arrangements by and among UTime WFOE, the VIE and the shareholders of the VIE and their spouses, as applicable.

Power of Attorney. Pursuant to a series of powers of attorney issued by each shareholder of the VIE, each shareholder of the VIE irrevocably authorizes UTime WFOE or any natural person duly appointed by UTime WFOE to exercise on the behalf of such shareholder with respect to all matters concerning the shareholding of such shareholder in the VIE, including without limitation, attending shareholders’ meetings of the VIE, exercising all the shareholders’ rights and shareholders’ voting rights, and designating and appointing the legal representative, the chairperson, directors, supervisors, the chief executive officer and any other senior management of the VIE.

On September 4, 2019, UTime WFOE, the VIE and Mr. Bao, a shareholder of the VIE, entered into the second amended and restated power of attorney, while UTime WFOE, the VIE and Mr. He, a shareholder of the VIE, entered into an amended and restated power of attorney, which contain terms substantially similar to the power of attorney executed by the shareholders of the VIE described above.

Equity Pledge Agreement. Pursuant to the Equity Pledge Agreement entered into among UTime WFOE, the VIE and the shareholders of the VIE, the shareholders of the VIE agreed to pledge their 100% equity interests in the VIE to UTime WFOE to secure the performance of the VIE’s obligations under the applicable existing exclusive call option agreement, power of attorney, exclusive technical consultation and service agreement, business operation agreement and also the equity pledge agreement. If events of default defined therein occur, upon giving written notice to the VIE shareholders, UTime WFOE may exercise its rights to enforce the pledged equity interest to the extent permitted by PRC laws.

On September 4, 2019, UTime WFOE, the VIE and the shareholders of the VIE entered into the second amended and restated equity pledge agreement, which contains terms substantially similar to the equity pledge agreement described above.

We have completed the equity pledge registration with the competent Administration for Market Regulation in accordance with the PRC Property Rights Law and the Civil Code of the PRC.

Spouse Consent Letter. Pursuant to a series of spousal consent letters, executed by the spouses of the shareholders of the VIE, Mr. Bao and Mr. He, such signing spouses confirmed and agreed that the equity interests of the VIE are the own property of their applicable spouses and shall not constitute the community property of the couples. Such spouses also irrevocably waived any potential right or interest that may be granted by operation of applicable law in connection with the equity interests of the VIE held by their applicable spouses.

On September 4, 2019, Mr. Bao’s spouse executed the second amended and restated spousal consent letter while Mr. He’s spouse executed an amended and restated spousal consent letter, which contains terms substantially similar to the spousal consent letter described above.

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Business Operation Agreement. Pursuant to the business operation agreement entered into among UTime WFOE, the VIE and the shareholders of the VIE, the shareholders of the VIE agreed that without the prior written consent of UTime WFOE or any party designated by UTime WFOE, the VIE shall not engage in any transaction which may have a material or adverse effect on any of its assets, businesses, employees, obligations, rights or operations (except for those occurring in the due course of business or in day-to-day business operations, or those already disclosed to UTime WFOE and with the explicit prior written consent of UTime WFOE). In addition, the VIE and its shareholders jointly agreed to accept and strictly implement any proposal made by UTime WFOE from time to time regarding the employment and removal of the VIE’s employees, its day-to-day business management and the financial management system of the VIE.

On September 4, 2019, UTime WFOE, the VIE and the shareholders of the VIE entered into the second amended and restated business operation agreement, which contains terms substantially similar to the business operation agreement described above.

Exclusive Technical Consultation and Service Agreement. Pursuant to the exclusive technical consultation and service agreement entered into between UTime WFOE and the VIE, dated March 19, 2019, UTime WFOE has the exclusive right to provide or designate any entity to provide the VIE business support, technical and consulting services. Pursuant to such agreement, the VIE agreed to pay UTime WFOE (i) the service fees equal to the sum of 100% of the net income of the VIE of that year or such other amount otherwise agreed by UTime WFOE and the VIE; and (ii) a service fee otherwise confirmed by UTime WFOE and the VIE for specific technical services and consulting services provided by UTime WFOE in accordance with the VIE’s needs from time to time. The exclusive consultation and service agreement will continue to be valid unless the written agreement is signed by all parties thereto to terminate it or a mandatory termination is requested in accordance with applicable PRC laws and regulations.

Exclusive call option agreement. Pursuant to the exclusive call option agreement entered into among UTime WFOE, the VIE and the shareholders of the VIE, each of the shareholders has irrevocably granted UTime WFOE an exclusive option to purchase all or part of its equity interests in the VIE, and the VIE has irrevocably granted UTime WFOE an exclusive option to purchase all or part of its assets.

With regard to the equity transfer option, the total transfer price to be paid by UTime WFOE or any other entity or individual designated by UTime WFOE for exercising such option shall be the capital contribution mirrored by the corresponding transferred equity in the registered capital of the VIE, provided that if the lowest price permitted by the then-effective PRC laws is lower than the above capital contribution, the transfer price shall be the lowest price permitted by the PRC laws. With regard to the asset purchase option, the transfer price to be paid by UTime WFOE or any other entity or individual designated by UTime WFOE for exercising such option shall be the lowest price permitted by the then-effective PRC laws.

On September 4, 2019, UTime WFOE, VIE and the shareholders of VIE entered into the second amended and restated exclusive call option agreement, which contains terms substantially similar to the exclusive call option agreement described above.

4B. Business Overview

We are committed to providing cost-effective mobile devices to consumers globally and to helping low-income individuals from established markets, including the United States, and emerging markets, including India and countries in South Asia and Africa, have better access to updated mobile technology.

We are mainly engaged in the design, development, production, sales and brand operation of mobile phones, accessories and related consumer electronics. We also provide Electronics Manufacturing Services (“EMS”), including Original Equipment Manufacturer (“OEM”), which we manufacture products solely pursuant to customers’ orders, and Original Design Manufacturer (“ODM”) services, which we not only manufacture but also design products based on clients’ demand, for well-known brands, such as TCL Communication Technology Holdings, Ltd., a subsidiary of TCL Corporation, Swagtek Inc., Shanghai Sunvov Communications Technology Co., Ltd. and T2Mobile International Limited. Our operations are based in China but most of our products are sold overseas, including India, Brazil, the United States, and other emerging markets countries in South Asia, Africa and Europe. We have two in-house brands, “UTime,” which is our middle-to-high end label and targets middle class consumers from emerging markets; and “Do”, our low- to mid-end brand, which is positioned to target grassroots consumers and price-sensitive consumers in emerging markets. Our prime end user groups are segmented into regions like South America, South Asia, Southeast Asia and Africa.

We value systematic management and organize production with strictly high-quality standards and production technology. We continuously endeavor to improve our overall manufacturing service level, to strengthen our cost control processes, and to enhance our ability to respond rapidly to market dynamics in order to ensure a sustainable development in our EMS segment, especially in Printed Circuit Board and Assembly (“PCBA”) for consumer electronic products.

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Market Opportunities

Global Mobile Phone Market Overview

We believe that the global mobile phone market has huge potential and broad development prospects

Benefiting from the continuous upgrading of communication technologies and mobile phone parts, we believe that the global mobile phone market is currently maintaining a steady growth trend. With the advent of the Fifth-Generation (“5G”) era, we estimate that the average annual shipments value of mobile phones worldwide are expected to increase steadily from 2019 to 2022.

Due to a fast increase in the population of Fourth-Generation (“4G”) mobile phones from 2013 to 2015, we believe that the global mobile phone shipments volume reached its peak and the speed has tended to slow down because of the saturated market of 4G mobile phones. However, we estimate that the mobile phone manufacturing industry, especially in China, will continue to grow and we expect the mobile phone shipments value will increase mainly driven by the growing demand for 5G mobile phones.

Tablets and wearable devices, especially smart watch, are the next driven markets that we believe have great opportunities. 5G implementation will bring more orders of tablets and smart accessories in both developed and emerging markets.

We believe that the industry is in a transitional period and product performance continues to evolve.

The strong demand for new products triggered by technology upgrades and functional innovations has driven the mobile phone industry to achieve rapid penetration rate. However, as the industry matures and enters the transition period from 4G to 5G, we believe that the industry growth rate will slow down along with product homogenization. At the same time, we believe that the gradual increase driven by the demand of 5G will make the relevant manufacturers in the mobile phone industry pay more attention to the sales growth brought by higher quality products, which may also encourage the users to increase their frequency in changing models.

Emerging Markets Mobile Phone Markets Overview

The market starts late and has great potential to grow.

Consumer electronics, for instance, mobile phones, focus more on emerging markets, where disposable income is growing fast and the market is far less penetrated. Emerging markets are typically referred to as areas in Asia, South America, Eastern Europe and Africa. The populations in those areas are large and the increasing household income makes consumer electronics, like mobile phones, more affordable. We believe that predicted rapid economic development, the release of demographic dividends (in the form of an accelerated economic growth and improved productivity from youth) and the construction of communication technology facilities will drive rapid growth in sales in emerging markets.

The proportion of smartphones has increased with a stronger demand.

Currently, we believe the proportion of feature phones is still higher than that of smartphones. However, with the gradual maturity of emerging markets, the smartphones market continues to expand. The market share of smartphones in this market has increased, and we anticipate there will be a large structural improvement. Combining the factors of great growth potential in emerging markets and the demand for smartphones due to the development of 5G infrastructure, we believe that the smartphone shipment volume is expected to increase over from 2019 to 2022.

Why We are Focusing on Emerging Markets

We estimate that from 2019 to 2022, the average annual growth rate of smartphone shipments in the world’s major emerging markets, represented by Africa, Latin America, and other South Asia countries, among others, will be significantly higher than the annual growth of smartphone shipments in global established markets. Therefore, we believe that emerging markets will be the main sources of growth in global mobile phone sales for many years to come.

As far as emerging markets are concerned, feature phones still retain a large market share. On one hand, due to the differences in the level of economic development in various countries, a certain proportion of the population in emerging markets has not obtained got access to mobile phones, and the upgrade of telecommunication infrastructures from Second-Generation (“2G”) to Third-Generation (“3G”) and 4G is constrained due to a shortage of foundational funding in emerging markets. Meanwhile, emerging markets can be affected by factors like shortage of power supply and lagging telecommunication infrastructure, extending the life cycle of feature phones in the market to a certain extent. In summary, feature phones still have a large market and structural demand in major emerging markets around the world.

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On the other hand, emerging markets generally have a relatively younger population structure in terms of age. Millions of young people rush into labor market every year, forming a rigid demand for mobile phone consumption.

Reinforce our Focus in Established Markets

We have developed a partnership with Quality One Wireless LLC, our client in the United States, through ODM orders since 2015, and those orders contributed a significant portion, over 10%, of our entire revenue stream from 2017 to 2019. In fiscal year 2023, orders from Quality One Wireless LLC contributed 1.3% of total revenue. We also develop other clients like Swagetk Inc., which has become the largest client in the United States, representing 4.7% and 7.7% of the total revenue in fiscal year 2022 and 2023. To align our corporate strategy with the global trend of consumer electronics, especially mobile phones, we believe that expanding our business in established markets, like the United States and European countries, is vital to our future. Compared to emerging markets, established markets are well developed in terms of telecommunication infrastructure and more saturated.

In fiscal year 2022, We entered the Japan market through an ODM order and we are developing our first tablet product for our Japanese client. Tablets have a relatively higher margin compared to some of our other products ranging from 25% to 30% due to our client’s demand. We launched the tablet and deliver the order to our Japanese client in September 2022. Japanese customer like Ohyama Co. Ltd., contributed 8.0% of our entire revenue for the fiscal year 2023 and we are expecting more orders and higher portion of the entire revenue from Japanese market.

We are transforming from an EMS provider to a comprehensive technology company engaging in the design, development, production, sales and brand operation of mobile phones, accessories and related consumer electronics. We intend to bring our own products to established markets, including the United States, Canada and European countries. Our Amazon stores have been established in Europe, and we believe that our recently launched products like triple-proof mobile phones and sunglasses with built-in speakers will be competitive in those markets. We are actively evaluating the feasibility of business opportunities with wireless carriers, such as Verizon, AT&T, Sprint and T-Mobile, in the United States.

Our Strategies

We intend to achieve our mission through successful execution of the key elements of our growth strategy, which include:

Optimize the structure of OEM/ODM customers and orders.

We have accumulated business resources and experience in both domestic and overseas OEM/ODM markets for the last decade. We are seeking to leverage our first mover advantage in changing markets to become an international enterprise through continuous innovation. In addition, we will seek to optimize current customer and order structure by deprioritizing small and unstable customers and eliminating low margin orders to increase our gross profit margin. Small customers typically cannot provide sustainable OEM/ODM orders when comparing to large customers, like TCL, and those small customers tend to negotiate a lower price per order that can decrease gross margin. Therefore, keeping relatively large clients will help us maintain sustainable OEM/ODM orders and a higher margin.

Develop our own brand and enhance brand recognition.

We have sought, and will continue to develop, our brands by delivering a superior user experience to our customers in emerging markets, such as India, Southeast Asia and Africa. We are seeking to offer an enhanced shopping experience by effectively managing our existing distribution network and upgrading our franchised stores. Our first step will be to open (direct-sell) retail stores in key and high-traffic locations in India and to establish a comprehensive sales network with our distributors. Then, we intend to replicate this pattern in other emerging markets and adjust it accordingly. As a result, we intend to increase our market share and expand our brand recognition for both “UTime” and “Do”.

Expand our (local) sales network overseas.

We are seeking to develop and expand our sales network in Mexico and to establish a representative office in the United States. In addition, we plan to further explore the African and South American markets. We believe that the representative office will help us strengthen our business network and marketing channels in the United States and other North American regions, for instance, through participating in telecom and technology exhibitions. We will seek to strengthen our efficient sales network and streamline our supply chain process to keep our products and services at a reasonable price level in order to increase our user base.

As part of our expansion strategy, we are actively evaluating opportunities for strategic cooperation with telecommunication carriers through our existing clients in Southern Asia, Africa, the United States and South America. We intend to expand into more markets including emerging and established markets through business with carriers.

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Dual-brand pricing strategy.

We plan to restructure our existing product pipeline by developing the “Do” and “UTime” brands at the same time, but targeted to different segments. Through the “Do” brand, we target customers who are price-sensitive and cost-effective, and let them enjoy the latest communication technology products with an affordable price. At the same time, through the “UTime” brand, we target the newly emerging quasi-middle-class customer base in both established and emerging market countries.

Expand and diversify our product portfolio.

We plan to expand and diversify our product portfolio to meet the fast-changing market. More types of consumer electronics will be added and offered to our customers. We plan to develop a range of distinctive electronic products, including triple-proof mobile phones that are water-proof, dust-proof and puncture-, shock-, pressure- and impact-proof, portable Bluetooth speakers, sunglasses with built-in speakers, tablets, and wearable devices, among others.

Our Products and Services

We design, manufacture, and distribute mobile phones and other consumer electronics through our operation plants in and outside China. Our products are categorized into three major categories:

Feature phones

Feature phones do not have an independent operating system nor adapted third party software applications. Feature phones have tangible keyboards, smaller screen size that is usually below 3 inches, and integrate basic functions, such as cellular call and cellular message. Camera, FM radio and Bluetooth are typically optional functions.

Smartphones

Smartphones have an independent operating system and allow for installation of software applications developed by third parties. Compared with feature phones, smartphones tend to have a full view display without tangible keyboards. Screen size is usually over 5 inches. Our smartphone products are Android-based and certified as Android Enterprise Recommended by Google.

Others

Our other products mainly consists of cell phone accessories, parts of mobile phone and molds for mobile phones, as well as other consumer electronic accessories. Our mobile phone accessories contain two categories. One is for our OEM/ODM clients, mainly including spare parts and supplemental components that we sell to our clients. The other is for our in-house brand including consumer electronics, such as, power bank, Bluetooth speaker, and spare parts like batteries, chargers, and cell phone shells.

Most of our products are produced through OEM/ODM orders received from our long-term clients and sold overseas. The following charts display our product contribution for the years ended March 31, 2022, 2023 and 2024:

|  | Year ended March 31, |
|  | 2022 |  |  | 2023 |  |  | 2024 |
Category |  | Amount |  |  | % |  |  | Amount |  |  | % |  |  | Amount |  |  | % |
|  | RMB |  |  |  |  |  | RMB |  |  |  |  |  | RMB |  |  | US$ |  |  |  |
|  | (in thousands, except for percentages) |
Feature phone |  |  | 111,066 |  |  |  | 40.3 |  |  |  | 106,279 |  |  |  | 53 |  |  |  | 105,277 |  |  |  | 14,838 |  |  |  | 61.2 |
Smart phone |  |  | 154,143 |  |  |  | 56 |  |  |  | 73,819 |  |  |  | 36.8 |  |  |  | 41,348 |  |  |  | 5,828 |  |  |  | 24 |
Others |  |  | 10,299 |  |  |  | 3.7 |  |  |  | 20,449 |  |  |  | 10.2 |  |  |  | 25,531 |  |  |  | 3,598 |  |  |  | 14.8 |
Total |  |  | 275,508 |  |  |  | 100 |  |  |  | 200,547 |  |  |  | 100 |  |  |  | 172,156 |  |  |  | 24,264 |  |  |  | 100 |

Do Feature Phones

Do Feature Phones are a feature phones with dual-SIM function that offer our customers a cost-effective product by implementing call features like Speed Dial, Auto-Call Recording with folder and Blacklist. Built with 1.77 to 2.4 inches bright display, batteries sized from 800 to 1450 mAh, a physical numeric keyboard and a loud front-facing speaker, Do Feature Phones offer reliable voice experience to customers and enrich leisure experience by attaching Bluetooth and FM radio function inside. Do Feature Phones also enable end users an expandable memory card slot up to 32 GB.

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Do Smartphones

The Smartphones are Android-based 4G VoLTE smartphone that is certified as Android Enterprise Recommended by Google. The Do Mate 1 equips with a 5.7-inch durable full display, 2000 to 3000 mAh batteries, a set of 5 to 13 plus 0.3 MP dual rear camera and 8 MP front camera with flash. Do Smartphones have Mode SC 9832E, a product of Spreadtrum Communications, Inc. or MT 6580, a product of MediaTek Inc., processor, 1 to 2GB RAM and 8 to 16GM ROM and light, proximity and gravity sensors inside. Do Smartphones also enable end users to experience Dual-SIM with Micro and Nano SIM card.

Others

The Bluetooth speaker has a 400 mAh capacity battery and 4 Omega/3W speaker power. Play mode contains: Micro card, Line-in and Bluetooth connection. The Bluetooth Box uses Bluetooth 5.0 profiles and has 12-meter connection distance. Output power is 15W with two batteries of 2500 mAh. Its frequency range is from 2.4 to 2.480 GHz. The Bluetooth glasses apply Bluetooth 5.0 profile and True Wireless Stereo, the battery size is 70 mAh.

Our Operations

Order Placement and Fulfillment Process

Procurement

We adopt an order-oriented procurement model. Specifically, according to our forecasts towards the market and customer orders, we estimate the total demand and actual demand of materials through Material Requirements Planning (“MRP”), plus a certain level of inventory, and finally place the procurement order to our suppliers. MRP is a production planning, scheduling, and inventory control system used to manage manufacturing processes. Most MRP systems are software-based, but it is possible to conduct MRP by hand as well.

The main raw materials purchased by us can be classified into electronic components, optical components, electronic components and packaging materials, and structural devices. According to the different procurement areas, the Company’s procurement activities can be divided into domestic procurement and overseas procurement. The raw materials from overseas mainly include baseband chips and memory which originally produced outside of China, and we purchase other raw materials primarily in mainland China.

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Production

Our production schedule department is responsible for coordinating all the materials planning, production planning and shipping planning, arranging the production of our own factories, outsourcing factories and other ODMs. We also focus on improving production efficiency and cost control while meeting customer needs. We determine the applicable production method based on our sales prospects, capacity utilization, cost control requirements and other factors. Our production cycle takes on average 75 days, which was calculated from receiving orders to completing production, for each new launched OEM/ODM order or own brand product. Usually, we will spend about 40 days in preparation including material procurement, prototyping, testing and obtaining certifications. Then, it takes approximately 30 days for mass production and fulfill the OEM/ODM order.

Our Factory

We established our own factory in Guizhou, China through UTime GZ. We have built a diversified flexible manufacturing system that adopts multi-order, small-batch production methods to meet market differentiation needs under a global strategy. With the continuous growth of business and the entry into the emerging markets, we are always striving to meet the needs of customers, taking into account the factors such as sales forecast and orders, capacity utilization, cost control requirements and product positioning. Our factory takes almost all the production assignments including our orders from OEM/ODM clients and our own brand products. However, before assigning the order to our factory, the production management department will evaluate the overall cost and production schedule, if the order failed to meet our cost budget, we will outsource the order to our collaborating factories.

On October 6, 2021, we entered into an investment agreement (the “Investment Agreement”) with the local government of Jiangnan, Nanning (the “Jiangnan Government”) pursuant to which UTime SZ agreed to invest an aggregate of RMB 150 million (approximately US$23.2 million) by establishing manufacturing facilities and producing electronic devices at Jiangnan, Nanning. Our second factory in Nanning went into service in May, 2022.

Outsourcing Factories

Our production management department is responsible for the resource development and management of factories on which we rely to outsource our manufacturing needs. We manage the outsourced manufacturers by imposing certain requirements such as processing requirements, limiting labor costs, and imposing quality control and other special requirements. We signed an entrusted production agreement with the outsourcing manufacturers. We are responsible for the product design and development as well as the raw materials procurement. The outsourcing manufacturer is responsible for processing and assembling products according to our requirements. We provide design and production plans to the outsourcing manufacturers and guide them to finish qualified products.

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For the feature phones offering to our American clients, we cooperate with other ODMs. We provide bill of materials (“BOM”) requirements to other ODMs, and they participate in design, raw materials procurement, manufacturing and sell finished products to us. We often assist other ODMs in managing the production process and offer critical structural components referring to PCBA, mobile screen and batteries, to ensure production yield and product quality, as well as “Just-in-time” delivery rates.

For our “Do” brand, we cooperate with an outsourced factory in India due to cost consideration. The Indian government imposes a higher import tax on finished goods than the partially assembled one, such as a Semi-Knocked Down (“SKD”) for consumer electronics. Therefore, we ship SKD to Do Mobile from our factory operated by UTime GZ and finish final assembling process in our outsourced factory in India.

Quality Control Management

We believe that the quality of our products is crucial to our continued growth. We place great emphasis on quality control and have implemented Total Quality Management (“TQM”) to manage our operations. Before entering our production flow, the raw materials must be certified for quality. We also perform inspections on raw materials in the mass production flow.

Our quality control system covers each stage of our production process. When we establish or adapt an assembly line for a new product or model, we trial-run the assembly line to produce a sample for quality examination. The assembly line can start mass production only if the produced sample is of adequate quality. When the in-progress product moves from one work station to another one along the assembly line, it must be checked for quality by the responsible assembly specialists in both work stations. A product may be shipped out of manufacturing facility only after it passes all quality control examinations and is properly documented as such. By logging and breaking down the pass rates along our products in the production process, we are able to identify our quality control weak spots, and improve our operation accordingly.

Supply Chain Management

Supply Chain Management Process

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Materials, Products and Other Suppliers

We purchase key components from our suppliers, such as chips, batteries, mainboard, screens, battery chargers and controllers. We strategically select our suppliers to minimize over-concentration, control our cost and maintain a good relationship with our suppliers.

To reduce over-concentration of supply, to manage costs and to control product quality, we generally engage at least two (2) suppliers for each of our key components. We select our suppliers based on a variety of criteria, including, among others, production capacity, technological sophistication, quality assurance, professional certification, manpower adequacy, financial position and environmental compliance. In addition, we review the performance of our suppliers quarterly, and make necessary adjustments to our supply chain, including termination of under-performing suppliers. Although we have been able to maintain good and long-lasting relationships with our suppliers, we do not formally engage them under long-term contracts or on an exclusive basis, so we retain considerable pricing power in the meantime.

Distribution and Logistics

We deliver our products to overseas end customers through the services provided by the third-party supply chain companies. The third-party supply chain companies provide import and export customs declaration, customs clearance, logistics and other services, so that we can operate more efficiently. In order to reduce the concentration of third-party delivery supply chain companies, we usually have more than three delivery supply chain companies to provide services at the same time.

Our Technology

We are an EMS service provider, mainly offering OEM/ODM services to our engaged clients. We continue investing in technology to improve our ability in design, production, testing and software application. Our subsidiary, UTime SZ, is a national certified high technology enterprise that has certain benefits in tax deduction and government grants through 2024 and the certification is renewable every three years.

Our technology focuses on process optimization, which can contribute to improved accuracy or efficiency during production, and industrial design as well as mechanical design, which enables us to meet requirements from our OEM/ODM clients and fulfill the orders.

Major technologies applied in our operations are listed below:

Number |  | Category |  | Name |  | Description |  | Source
1 |  | Production |  | SMT Production line |  | The length of each SMT production line is 28 meters with antistatic function attached. |  | Purchased
2 |  | Production |  | Assembly line |  | The assembly line has a capacity of 45 operators working together |  | Purchased
3 |  | Testing |  | General Testing line |  | N/A |  | Purchased
4 |  | Design |  | Mobile phone Industrial Design Patent |  | An exterior used for smartphones |  | Self-developed
5 |  | Production |  | PCBA Calibration Fixture Tools |  | A clip that improves the accuracy for assembly activities |  | Self-developed
6 |  | Design |  | Flex Print Circuit Board (FPCB) for Smartphone |  | Circuit board used in smartphones with enhanced function |  | Self-developed
7 |  | Testing |  | Application for Water proof Test |  | Application used to test water damage of electronic components |  | Self-developed
8 |  | Design |  | Application for Access to Public Warning System |  | Application installed in mobile phones to enhance signal |  | Self-developed
9 |  | Design |  | Call Filter |  | Application installed in mobile phones to filter harmful incoming messages |  | Self-developed

Research and Development

Our research and development activities include two major sections, which are our EMS section and our own brand section. EMS section’s purpose is to allocate a significant amount of resources and funds to developing cost-effective and reliable products for the OEM/ODM clients and ensuring that these products meet their exacting requirements for functionality and reliability. Own brand section’s purpose is to launch new products to obtain more market shares. Our research and development initiatives are led by our internal teams and are supported by third parties as needed. Our product management team and our sales and marketing team spend their time interacting with a combination of end users, distributors in our target markets, and wireless carriers to better understand the market requirements for our products. Once defined, our design and manufacturing team develops and tests the products against these requirements to be delivered to our clients and to be sold to the end users.

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Customers

The majority of our selling items are the feature phones and the smartphones as mentioned above. Our sales depend heavily on our major clients, Zhuohang electronic technology Limited, TCL Communication Limited, and Shenzhen Shixun Chuangxin Technology Co.,Ltd, representing 22.0%, 14.1% and 11.6% of the total revenue for fiscal year 2024, respectively. We regularly provide OEM and ODM business for them. In addition, we export our in-house brand products to emerging markets.

The following is a list of our top three customers for the fiscal year 2024:

Country/Area |  | Customer |  | Brand |  | Percentage of total revenue |
Asia |  | Zhuohang electronic technology Limited |  | ODM |  |  | 22.0 | %
Asia |  | TCL Communication Limited |  | ODM |  |  | 14.1 | %
Asia |  | Shenzhen Shixun Chuangxin Technology Co.,Ltd |  | ODM |  |  | 11.6 | %

The following is a list of our top three customers for the fiscal year 2023:

Country/Area |  | Customer |  | Brand |  | Percentage of total revenue |
Asia |  | TCL Communication Limited |  | ODM |  |  | 22.2 | %
Africa |  | Vida Resources Pte Ltd. |  | ODM |  |  | 12.9 | %
Mexico |  | Soluciones Profesionales Empresariales En Revolucion Sa. De. CV |  | ODM |  |  | 12.9 | %

The following is a list of our top three customers for the fiscal year 2022:

Country/Area |  | Customer |  | Brand |  | Percentage of total revenue |
South America |  | Philco Eletronicos S/A |  | ODM |  |  | 42.3 | %
Asia |  | TCL Communication Limited |  | ODM |  |  | 19.8 | %
United States |  | PCD International |  | ODM |  |  | 5.5 | %

Customer Services

To meet the requirements of our OEM and ODM customers, we support customized services for them. We assist our customers in research and development while launching new mobile products based on our industry experience. To date, we have maintained long-term cooperation with our main customers listed above. We have also built nearly 800 service centers for our in-house brand customer in India. During the one-year warranty period that we provide on our phone products, customers can phone returned or repaired according to the actual situation.

Global Operations

Historically, most of our OEM and ODM customers have come from established markets, including the United States, and emerging economies, including India and countries in South Asia and Africa, which have contributed considerably to our revenue. In line with our vision to expand globally, we started to use our new brand name “Do” in India in 2017 to develop in-house brand business. Emerging markets are the main consideration for our in-house brand sales and marketing, and historically India has been the primary focus of Do Mobile because of its large population. However, due to a negative change of business environment in India since mid-2020, we have decided to shift our strategic focus from India to Latin America. Mexico is our first step for business expansion in Latin America and in December 2021, we have acquired two local companies in telecom industries to expand our business in Mexico with local telecom carriers. We also plan to establish a representative office in the United States to further strengthen our business network in established markets.

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Sales and Marketing

China and other markets

We directly provide OEM and ODM business for our customers in China and overseas. In order to maintain close relationships with these customers, we have built a strong marketing team consisting of 15 sales force members, including a domestic client division, overseas client division and key accounts division. Our marketing efforts consist of product marketing and orders partner marketing. Product marketing focuses on ensuring OEM/ODM requirements related to products. Order partner marketing focuses on engaging sustainable clients, participating in telecom and technology exhibitions, as well as developing supplemental sales tools, industry trade show materials and brand awareness.

India

We have closed our Indian subsidiary due to our strategic shift. Our Indian operations were maintained at a limited level since fiscal year 2022.

United States

We cooperate with our clients in the United States through ODM orders. We intend to strengthen our business connections by establishing a representative office in the United States. This office will help us increase our marketing efforts, such as by participating in conferences and events that focus on the United States and other regions in North America. Our operation in this region through online platform Amazon were maintained at a relatively low level and only launched our experimental products.

Mexico

We have started to develop Mexico market as part of a broader corporate strategic shift, in connection with which we have decided to shift our emerging markets from India to Mexico. As a result, we have acquired two local companies in Mexico during the fiscal year 2022 and started business with local telecom carriers through ODM/OEM orders in August, 2022. We are in the process of obtaining vendor certificates with these telecom carriers and plan to sell products through these carriers with our own brand “UTime” and “Do”.

Africa

We entered the African market through ODM orders, including smartphones and feature phones, in 2018. Our African team contains two account managers, a product manager and two marketing specialists, because having a local distribution network is our main focus in the African market. We stopped cooperation with online platform, such as Jumia, during the fiscal year 2022 and have been focusing solely on local distribution channels.

Japan

We started to develop Japanese market through ODM orders of tablet and intended to expand this market. Our tablet products are fully tailored and designed according to client’s demand. A team of five specialists were formed including one project manager, two product specialists and two marketing specialists. Differed from our cellphone products, tablet products adopted a special strategy that focusing on unique design and tailorship to meeting various demand from both customer end and business end and we expected much high margin from our tablet products. Japanese market will be our strategic focus and we intend to develop more clients and more tailored products.

Seasonality

Our business has historically been subject to seasonal fluctuations, which may be caused by product launches and various promotional events hosted by us and our distributors. Although we have generally experienced higher sales during the fourth quarter since our customers usually launch new products during the fourth quarter of the calendar years, this pattern does not repeat itself every year. We typically experience our lowest sales volume in the first quarter of each year.

Competition

Overall Competition Landscape

We operate in a highly competitive environment serving industrial enterprises and end customers. Competition in our market is high and tends to increase. Price is a major source of competition, while product quality, differentiation, service, research, development and commercialization capacity, and distribution channels are also critical factors. Competition in our industry is intense and has been characterized by technology levels, production scale and economies of scale, evolving industry standards, frequent new product introductions and rapid changes in end user requirements.

We face competition from manufacturers that also provide EMS, such as Wentai and XiaoMi, to the extent industrial enterprises decide to engage and outsource production. We also face competition from mobile phone manufacturers that have a portfolio of products covering low-end feature phones and high-end smartphones, such as Samsung Electronics Co. Ltd. We also face competition from mobile phone companies who also target emerging markets, such as, Shenzhen Transsion Holding Limited. We believe that we compete favorably with respect to the factors described above.

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Our Competitive Strengths

We believe that the following competitive strengths have contributed to, or will contribute to, our recent and ongoing growth:

| ● | Experienced management. Our core management team members (Chief Executive Officer, Chief Operating Officer and Chief Manufacturing Officer) have at least 10 years of experience in the mobile phone industry, and most of them formerly worked at well-known publicly traded companies.

| ● | Comprehensive global industry ecosystem. Our integration of development, manufacturing, PCBA, Industrial Design (“ID”), Mechanic Design (“MD”), sales and after-sale services in China, Africa, the United States and South America, combined with our extensive industry experience, provides us a comprehensive global ecosystem for our products. We acquired two companies in Mexico which are mainly focus on business with telecom carriers and manage local distributors and after-sales services.

| ● | Strong production capacity. Currently, we have six high-end Surface Mounting Technology (“SMT”) production lines and test lines, eleven assembly lines of which six lines are leased, and four leased packaging lines. Each SMT has a production capacity of 600,000 units per month, and our monthly assembling capacity has reached over one million units. Due to the seasonality of the mobile phone industry, we also cooperate with six manufacturers to fulfill our peak season orders, and we believe this strategy is cost-effective.

| ● | Niche market positioning. We have accumulated extensive business resources and partners both domestic and abroad over the past 10 years, and we have laid our focus in the middle and low-end markets of developing countries, where the markets are fairly new and generally devoid of intense competition that could create new demands, ahead of our competitors in the same industry segment, such as the markets in Mexico.

| ● | Cost-effective products. We primarily cover two product categories: 13 types of smartphones and 8 types of feature phones. We believe our products are comparable in quality to the large brands and are price competitive. We believe we fit the needs of low-to-mid income groups of many developing countries and we believe we avoid the vicious competition from large international brands.

Intellectual Property

Protection of our intellectual property is a strategic priority for our business. We rely on a combination of patent, copyright, trademark and trade secret laws, as well as confidentiality agreements, to establish and protect our proprietary rights. Except for certain licenses for the off-the-shelf software used in connection with our day-to-day operations, we generally do not rely on third-party licenses of intellectual property for use in our business.

As of the date of this annual report, we had obtained 50 patents and 43 registered software copyrights, registered 39 trademarks inside and outside of China, and submitted nil additional trademark applications.

Patents. We had 50 registered patents in China, which cover technologies for PCAB processing, Industrial Design and testing process. All registered patents in China are currently registered under the name of UTime SZ owning 38 UTime NN owning 4 and UTime GZ owning 8. Among them, 28 registered patents were granted as utility model patents, 18 registered patents were granted as design patents and 4 registered patents were granted as invention patents. We also have 0 pending patent in China.

Software copyrights. We maintain a portfolio of copyright-protected software. We had 43 registered software copyrights in China.

Trademarks. We had 18 registered trademarks in China and 21 registered trademarks outside of China in Africa, Asia, America and Europe. We also have nil pending trademark applications outside of China in the Philippines, Kenya and other jurisdictions.

Domain names. We had 7 registered domain names in China and 8 global domain names.

In addition to the foregoing protections, we generally control access to and use of our proprietary and other confidential information through the use of internal and external controls, such as use of confidentiality agreement with our employees and outside consultants.

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Employees

As of the date of this annual report, we had 172 full-time employees and nil part-time employees. Our employees are not represented by a labor organization or covered by a collective bargaining agreement. We believe we maintain good relationships with our employees. The table below sets forth the breakdown of our employees by function as of the date of this annual report:

Function |  | Number of Employees |  |  | % of Total |
Administration and Human Resources |  |  | 13 |  |  |  | 7.6 | %
Finance and Accounting |  |  | 9 |  |  |  | 5.2 | %
Production |  |  | 74 |  |  |  | 43.0 | %
Procurement |  |  | 5 |  |  |  | 2.9 | %
Sales and Marketing |  |  | 16 |  |  |  | 9.3 | %
Customer Services |  |  | 1 |  |  |  | 0.6 | %
Research and Development |  |  | 16 |  |  |  | 9.3 | %
Quality Control |  |  | 25 |  |  |  | 14.5 | %
Project and Scheduling |  |  | 13 |  |  |  | 7.6 | %
Total |  |  | 172 |  |  |  | 100 | %

Properties

Our headquarters are located in Shenzhen, China, where we own the office building with an aggregate floor area of approximately 640 square meters. Our operations facilities, including those for accounting, supply chain management, quality assurance and customer services, are located at our headquarters. We have supply chain management, sales and marketing, communication and business development personnel at our office in Shenzhen. Our manufacturing facilities, including those for engineering and assembling, are located at our leased factory in Guizhou. Our second factory was established in May 2022 and started operation since then.

We currently lease and occupy approximately 17,478 square meters of office and factory space in Guizhou, China. These leases vary in duration from 1 year to 5 years. We believe that our facilities are adequate to meet our needs for the immediate future.

Insurance

We do not maintain property insurance policies covering potential damage to our property. We also do not maintain business interruption insurance or general third-party liability insurance, nor do we maintain product liability insurance or key-man insurance.

Regulations

China

This section sets forth a summary of the most significant rules and regulations that affect our business activities in China.

Regulations relating to Foreign Investment

The Guidance Catalogue of Industries for Foreign Investment

Investment activities in the PRC by foreign investors are subject to the Catalogue for the Guidance of Foreign Investment Industry, or the Catalogue, which was promulgated and is amended from time to time by the MOFCOM and the NDRC. The Foreign Investment Catalogue which was promulgated jointly by MOFCOM and the NDRC, on June 28, 2017 and became effective on July 28, 2017, classifies industries into three categories with regard to foreign investment: (1) “encouraged”, (2) “restricted”, and (3) “prohibited”. The latter two categories are included in a negative list, which was first introduced into the Foreign Investment Catalog in 2017 and specified the restrictive measures for the entry of foreign investment.

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On June 28, 2018, MOFCOM and NDRC jointly promulgated the Special Administrative Measures for Access of Foreign Investment (Negative List), or the Negative List (Edition 2018), which replaced the negative list attached to the Foreign Investment Catalogue in 2017. On June 30, 2019, MOFCOM and NDRC jointly issued the Special Administrative Measures for Access of Foreign Investment (Negative List), or the Negative List (Edition 2019), which replaced the Negative List (Edition 2018), and the Catalogue of Industries for Encouraging Foreign Investment (Edition 2019), or the Encouraging Catalogue (Edition 2019), which replaced the encouraged list attached to the Foreign Investment Catalogue in 2017. On June 23, 2020, MOFCOM and NDRC jointly issued the Special Administrative Measures for Access of Foreign Investment (Negative List), or the Negative List (Edition 2020), which replaced the Negative List (Edition 2019).

On December 27, 2021, the NDRC and the MOFCOM promulgated the latest Special Entry Management Measures (Negative List) for the Access of Foreign Investment (Edition 2021), or the Negative List (Edition 2021), which came into effect on January 1, 2022. Pursuant to the Negative List (Edition 2021), any industry that is not listed in any of the restricted or prohibited categories is classified as a permitted industry for foreign investment. Establishment of wholly foreign-owned enterprises is generally allowed for industries outside of the Negative List. For the restricted industries within the Negative List, some are limited to equity or contractual joint ventures, while in some cases Chinese partners are required to hold the majority interests in such joint ventures. In addition, restricted category projects are subject to higher-level government approvals and certain special requirements. Foreign investors are not allowed to invest in industries in the prohibited category. Industries not listed in the Negative List are generally open to foreign investment unless specifically restricted by other PRC regulations.

In addition, the NDRC and the Ministry of Commerce promulgated the Encouraged Industry Catalogue for Foreign Investment (Edition 2020), or the Encouraging Catalogue (Edition 2020), which came into effect on January 27, 2021 and replaced the Encouraging Catalogue (Edition 2019) effective on July 30, 2019. The Encouraging Catalogue (Edition 2020) is divided into two parts, namely the Nationwide Catalogue of Encouraged Industries for Foreign Investment and the Catalogue of Priority Industries for Foreign Investment in Central and Western China. The Nationwide Catalogue of Encouraged Industries for Foreign Investment lists a total of 480 industry sectors that encourage foreign investments; the Catalogue of Priority Industries for Foreign Investment in Central and Western China lists industry sectors that each province and city wish to introduce.

In October 2016, the MOFCOM issued the Interim Measures for Record-filing Administration of the Establishment and Change of Foreign-invested Enterprises or FIE Record-filing Interim Measures, which was revised in June 2018. Pursuant to FIE Record-filing Interim Measures, the establishment and change of FIE are subject to record-filing procedures, instead of prior approval requirements, provided that the establishment or change does not involve special entry administration measures. If the establishment or change of FIE matters involves the special entry administration measures, the approval of the MOFCOM or its local counterparts is still required. Pursuant to the Announcement [2016] No. 22 of the NDRC and the MOFCOM dated October 8, 2016, the special entry administration measures for foreign investment apply to restricted and prohibited categories specified in the Catalogue, and the encouraged categories are subject to certain requirements relating to equity ownership and senior management under the special entry administration measures. However, as the PRC Foreign Investment Law has taken effect, the MOFCOM and the SAMR, jointly approved the Foreign Investment Information Report Measures on December 19, 2019, which went into effect on January 1, 2020. According to the Foreign Investment Information Report Measures, which repealed the FIE Record-filing Interim Measures, foreign investors or FIEs shall report their investment-related information to the competent local counterparts of the MOFCOM through the Enterprise Registration System and National Enterprise Credit Information Notification System.

Currently, our business related to the operation of designing, manufacturing and marketing mobile communication devices, and selling a variety of related accessories falls within the permitted category.

The Foreign Investment Law

On March 15, 2019, the National People’s Congress approved the Foreign Investment Law, which took effect on January 1, 2020 and replaced three existing laws on foreign investments in China, namely, the PRC Sino-foreign Equity Joint Venture Law, the PRC Sino-foreign Cooperative Joint Venture Law and the PRC Wholly Foreign-owned Enterprise Law, together with their implementation rules and ancillary regulations. On December 26, 2019, the Regulation on the Implementation of the Foreign Investment Law of the People’s Republic of China, was issued by the State Council and came into force on January 1, 2020. The organization form, organization and activities of foreign-invested enterprises shall be governed, among others, by the PRC Company Law and the PRC Partnership Enterprise Law. Foreign-invested enterprises established before the implementation of this Law may retain the original business organization and so on within five years after the implementation of this Law. The Foreign Investment Law embodies an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic invested enterprises in China. The Foreign Investment Law establishes the basic framework for the access to, and the promotion, protection and administration of foreign investments in view of investment protection and fair competition.

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According to the Foreign Investment Law, “foreign investment” refers to investment activities directly or indirectly conducted by one or more natural persons, business entities, or otherwise organizations of a foreign country (collectively referred to as “foreign investor”) within China, and the investment activities include the following situations: (i) a foreign investor, individually or collectively with other investors establishes a foreign-invested enterprise within China; (ii) a foreign investor acquires stock shares, equity shares, shares in assets, or other like rights and interests of an enterprise within China; (iii) a foreign investor, individually or collectively with other investors, invests and establishes new projects within China; and (iv) a foreign investor invests through other approaches as stipulated by laws, administrative regulations, or otherwise regulated by the State Council.

According to the Foreign Investment Law, the State Council will publish or approve to publish the “negative list” for special administrative measures concerning foreign investment. The Foreign Investment Law grants national treatment to foreign-invested entities, or FIEs, except for those FIEs that operate in industries deemed to be either “restricted” or “prohibited” in the “negative list”. The Foreign Investment Law provides that FIEs operating in foreign restricted or prohibited industries will require market entry clearance and other approvals from relevant PRC governmental authorities. If a foreign investor is found to invest in any prohibited industry in the “negative list”, such foreign investor may be required to, among other aspects, cease its investment activities, dispose of its equity interests or assets within a prescribed time limit and have its income confiscated. If the investment activity of a foreign investor is in breach of any special administrative measure for restrictive access provided for in the “negative list”, the relevant competent department shall order the foreign investor to make corrections and take necessary measures to meet the requirements of the special administrative measure for restrictive access. On December 27, 2021, MOFCOM and NDRC jointly issued the latest version of Negative List (Edition 2021). See “Regulations - Regulations relating to Foreign Investment - The Guidance Catalogue of Industries for Foreign Investment”.

Besides, the PRC government will establish a foreign investment information reporting system, according to which foreign investors or foreign-invested enterprises shall submit investment information to the competent department for commerce concerned through the enterprise registration system and the enterprise credit information publicity system, and a security review system under which the security review shall be conducted for foreign investment affecting or likely affecting the state security.

Furthermore, the Foreign Investment Law provides that foreign invested enterprises established according to the existing laws regulating foreign investment may maintain their structure and corporate governance within five years after the implementing of the Foreign Investment Law.

In addition, the Foreign Investment Law also provides several protective rules and principles for foreign investors and their investments in the PRC, including, among others, that a foreign investor may freely transfer into or out of China, in Renminbi or a foreign currency, its contributions, profits, capital gains, income from disposition of assets, royalties of intellectual property rights, indemnity or compensation lawfully acquired, and income from liquidation, among others, within China; local governments shall abide by their commitments to the foreign investors; governments at all levels and their departments shall enact local normative documents concerning foreign investment in compliance with laws and regulations and shall not impair legitimate rights and interests, impose additional obligations onto FIEs, set market access restrictions and exit conditions, or intervene with the normal production and operation activities of FIEs; except for special circumstances, in which case statutory procedures shall be followed and fair and reasonable compensation shall be made in a timely manner, expropriation or requisition of the investment of foreign investors is prohibited; and mandatory technology transfer is prohibited.

Company Law

Pursuant to the PRC Company Law, promulgated by the Standing Committee of the National People’s Congress (the “SCNPC”) on December 29, 1993, effective as of July 1, 1994, and as revised on December 25, 1999, August 28, 2004, October 27, 2005, December 28, 2013 and October 26, 2018, the establishment, operation and management of corporate entities in the PRC are governed by the PRC Company Law. The PRC Company Law defines two types of companies: limited liability companies and companies limited by shares.

Our PRC Subsidiary is a limited liability company. Unless otherwise stipulated in the related laws on foreign investment, foreign invested companies are also required to comply with the provisions of the PRC Company Law.

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Regulations Relating to Overseas Investment

On December 26, 2017, the NDRC issued the Management Rules for Overseas Investment by Enterprises, or the NDRC Order 11. As defined in the NDRC Order 11, “overseas investment” refers to the investment activities conducted by an enterprise located in the territory of China, either directly or through an offshore enterprise under its control, by making investment with assets and equities or providing financing or a guarantee in order to acquire overseas ownership, control, management rights and other related interests. Furthermore, overseas investment by a Chinese individual through overseas enterprises under his/her control is also subject to the NDRC Order 11. According to the NDRC Order 11, (i) direct overseas investment by Chinese enterprises or indirect overseas investment by Chinese enterprises or individuals in sensitive industries or sensitive countries and regions requires prior approval by the NDRC; (ii) direct overseas investment by Chinese enterprises in non-sensitive industries and non-sensitive countries and regions requires prior filing with the NDRC; and (iii) indirect overseas investment of over US$300 million by Chinese enterprises or individuals in non-sensitive industries and non-sensitive countries and regions requires reporting with the NDRC. Uncertainties remain with respect to the application of the NDRC Order 11, there are very few interpretations, implementation guidance or precedents to follow in practice. We are not sure if UTime Limited was to use a portion of the proceeds raised from our initial public offering to fund investments in and acquisitions of complementary business and assets outside of China, such use of U.S. dollars funds held outside of China would be subject to the NDRC Order 11. We will continue to monitor any new rules, interpretation and guidance promulgated by the NDRC and communicate with the NDRC and its local branches to seek their opinions, when necessary.

Regulations Relating to Manufacture and Sale of Mobile Phones

General Administration of Manufacturing and Selling Mobile Phones

According to the Administrative Regulations for Compulsory Product Certification, which was promulgated by the General Administration of Quality Supervision, Inspection and Quarantine PRC (the “AQSIQ”) (which has merged into the State Administration for Market Regulation) on July 3, 2009, products specified by the state shall not be delivered, sold, imported or used in other business activities until they are certified (the “Compulsory Product Certification”) and labeled with China Compulsory Certification mark. For products that are subject to Compulsory Product Certification, the state implements unified product catalogs (the “3C Catalog”), unified compulsory requirements, standards and compliance assessment procedures in technical specification, unified certification marks and unified charging standards. Pursuant to the First Batch Compulsory Product Certification Product Catalog (the “First Batch 3C Product Catalog”) by the AQSIQ and the Certification and Accreditation Administration of the People’s Republic of China (the “CNCA”) on December 3, 2001, mobile user terminals and CDMA digital cellular mobile station are required to obtain the Compulsory Product Certification in order to be delivered, sold, imported or used.

The Regulations on Radio Administration of the PRC jointly issued by the State Council and the Central Military Commission on November 11, 2016 and became effective on December 1, 2016, provide requirements concerning verification and approval of the models of radio transmission equipment. Pursuant to this law, except for micro-power short-range radio transmission equipment, whoever manufactures or imports other radio transmission equipment for sales or use on the domestic market shall apply to the State Radio Administration for model verification and approval. Whoever manufactures or imports radio transmission equipment that has not obtained model verification and approval for sales or use on the domestic market shall be ordered by the relevant radio administration to make correction and subject to fines.

In addition, the Administrative Measures for the Network Access of Telecommunications Equipment, which was promulgated by the Ministry of Information Industry on May 10, 2001 and revised by the Ministry of Industry and Information Technology (the “MIIT”) on September 23, 2014 provide that the State applies the network access permit system to the telecommunications terminal equipment, radio communications equipment, and equipment relating to network interconnection that is connected to public telecommunications networks. The telecommunications equipment subject to the network access permit system shall obtain the Telecommunications Equipment Network Access Permit issued by the MIIT (the “Network Access Permit”). Without the Network Access Permit, no telecommunications equipment is allowed to be connected to the public telecommunications networks for use nor sold on the domestic market. In the event of an application for the Network Access Permit, a production enterprise shall submit a testing report issued by a telecommunications equipment testing institution or a Compulsory Product Certification. In the event of an application for the network access permit for radio transmission equipment, a Radio Transmission Equipment Type Approval Certificate issued by the MIIT shall also be submitted.

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Regulations on Production Safety

Pursuant to the Production Safety Law of the PRC, or the Production Safety Law, which took effect on November 1, 2002 and was amended on August 31, 2014, the entities that are engaged in production and business operation activities must implement national industrial standards which guarantee the production safety and comply with production safety requirements provided by the laws, administrative regulations and national or industrial standards. An entity must take effective measures for safety production, maintain safety facilities, examine the safety production procedures, educate and train employees and take any other measures to ensure the safety of its employees and the public. An entity or its relevant persons-in-charge which has failed to perform such safety production liabilities will be required to make amends within a time limit or face administrative penalties. If it fails to amend within the prescribed time limit, the production and business operation entity may be ordered to suspend business for rectification, and serious violations may result in criminal liabilities.

Regulations on Product Quality

The PRC Product Quality Law, or the Product Quality Law, which was promulgated by the MOFCOM in February 1993 and most recently amended in December 2018, applies to all production and sale activities in China. Pursuant to this law, products offered for sale must satisfy the relevant quality and safety standards. Enterprises may not produce or sell counterfeit products in any fashion, including forging brand labels or giving false information regarding a product’s manufacturer. Any producer or seller producing or selling products that do not conform to the national standards or trade standards for ensuring human health and the personal or property safety shall be ordered to stop production or sale of the products; the products illegally produced or sold shall be confiscated; a fine no less than the equivalent of, but not more than three times, the value of the products illegally produced or sold (including those already sold and those not yet sold, hereinafter the same) shall be imposed concurrently; if there are illegal proceeds, such proceeds shall be confiscated concurrently; if the circumstances are serious, the business license shall be revoked. If the case constitutes a crime, criminal liability shall be investigated. Where a defective product causes physical injury to a person or damage to another person’s property, the victim may claim compensation from the manufacturer or from the seller of the product. If the seller pays compensation and it is the manufacturer that should bear the liability, the seller has a right of recourse against the manufacturer and may seek full reimbursement from the manufacturer. Similarly, if the manufacturer pays compensation and it is the seller that should bear the liability, the manufacturer has a right of recourse against the seller and may seek full reimbursement from the seller.

Pursuant to the General Principles of the Civil Law of the PRC promulgated by the National People’s Congress, or NPC, on April 12, 1986 and amended on August 27, 2009, both manufacturers and sellers shall be held liable where the defective products result in property damages or bodily injuries to others. Pursuant to the Tort Liability Law of the PRC promulgated by the Standing Committee of the NPC on December 26, 2009 and effective from July 1, 2010, manufacturers shall assume tort liabilities where the defects in products cause damages to others. Sellers shall assume tort liabilities where the defects in products that have caused damages to others are attributable to the sellers. The aggrieved party may claim for compensation from the manufacturer or the seller of the defected product that has caused damage.

On May 28, 2020, the Third Session of the 13th National People’s Congress passed the Civil Code of the People’s Republic of China which took effect on January 1, 2021, and replaced the Tort Liability Law of the PRC. According to the Civil Code of the People’s Republic of China, the aggrieved party shall be entitled to require the manufacturer or seller to assume the tort liability by ceasing infringement, removing the obstruction, or eliminating the danger when the defect of a product endangers the personal or property safety.

Regulations on Consumer Protection

The PRC Consumer Protection Law, as amended on October 25, 2013 and effective on March 15, 2014, sets out the obligations of business operators and the rights and interests of the consumers. Pursuant to this law, business operators must guarantee that the commodities they sell satisfy the requirements for personal or property safety, provide consumers with authentic information about the commodities, and guarantee the quality, function, usage and term of validity of the commodities. Failure to comply with the Consumer Protection Law may subject business operators to civil liabilities such as refunding purchase prices, exchange of commodities, repairing, ceasing damages, compensation, and restoring reputation, and even subject the business operators or the responsible individuals to criminal penalties if business operators commit crimes by infringing the legitimate rights and interests of consumers. The amended PRC Consumer Protection Law further strengthens the protection of consumers and imposes more stringent requirements and obligations on business operators, especially on the business operators through the Internet. For example, the consumers are entitled to return the goods (except for certain specific goods) within seven days upon receipt without any reasons when they purchase the goods from business operators via the Internet. The consumers whose interests have been damaged due to their purchase of goods or acceptance of services on online marketplace platforms may claim damages from sellers or service providers.

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Where business operators use internet, television, telephone, mail or other means to provide goods or services, or provide securities, insurance, banking or other financial services, they shall provide consumers with information in regard to themselves and the goods or services provided such as business address, contact information, quantity and quality, price or fees, term and method of performance, safety precautions, risk warnings, after-sale services, and civil liabilities. Consumers whose legitimate rights and interests are infringed while purchasing goods or receiving services via an online trading platform shall have the right to claim compensation from the vendor of the goods or the provider of the services. If the goods or services a business operator provide have caused personal injuries to consumers or other victims, the business operator shall compensate for the medical expenses, nursing expenses, transportation expenses and other reasonable fees for treatment and rehabilitation as well as the reduced income for loss of working time.

According to the Civil Code of the People’s Republic of China effective on January 1, 2021, producers shall bear tortious liability for any damage caused by their defective products, while distributors shall bear tortious liability for any damage caused due to defects resulting from their own fault.

Registrations on Import and Export of Goods

The major PRC laws and regulations governing import and export of goods are Foreign Trade Law of the PRC, or the Foreign Trade Law, Regulations of the PRC on the Administration of Import and Export of Goods, or the Regulations on Import and Export of Goods, Customs Law of the PRC and Provisions of the Customs of the PRC on the Administration of Registration of Customs Declaration Entities.

Pursuant to the Customs Law of the People’s Republic of China promulgated by the SCNPC on January 22, 1987, as amended on April 29, 2021, unless otherwise stipulated, the declaration of import and export goods may be made by consignees and consignors themselves, and such formalities may also be completed by their entrusted customs brokers that have registered with the Customs. The consignees and consignors for import or export of goods and the customs brokers engaged in customs declaration shall register with the Customs in accordance with the laws. The Regulations on Import and Export Duties of the People’s Republic of China, promulgated by the State Council on March 7, 1985, as amended on March 1, 2017, further stipulated that, unless otherwise provided by the relevant laws and regulations, goods permitted to be imported into or exported out of China shall be subject to payment of customs duties. The consignees of imported goods, consigners of exported goods or owners of inward articles shall undertake the obligation of the payment of customs duties. The State Council also promulgated implementation rules and tariff schedules to regulate the items and rates of the customs duties.

In accordance with the Measures for the Archival Filing and Registration of Foreign Trade Business Operators amended on May 10, 2021, any foreign trade business operator undertaking the import or export of goods or technology shall go through the archival filing and registration to the MOFCOM or the institutions entrusted by the MOFCOM. But those for whom there is no need to make archival filing and registration as prescribed by laws, administrative regulations and the provisions of the MOFCOM shall be excluded. In case a foreign trade business operator fails to go through the archival filing and registration according to the present Measures, the customs shall not handle the formalities for declaration of release for import and export.

Pursuant to the Administrative Provisions of the Customs of the People’s Republic of China on Record-filing of Customs Declaration Entities promulgated by the General Administration of Customs on November 19, 2021 and became effective on January 1, 2022, a consignor or consignee of imported and exported goods shall go through customs declaration entity record-filing formalities with the competent customs in accordance with the applicable provisions. Customs declaration entities may handle customs declarations business within the customs territory of the PRC.

According to the Import and Export Commodity Inspection Law of the People’s Republic of China promulgated by the SCNPC on February 21, 1989, as amended on April 29, 2021 and its implementation rules, the imported and exported goods that are subject to compulsory inspection listed in the catalog compiled by the import and export commodity inspection department established by the State Council shall be inspected by the commodity inspection organizations, and the imported and exported goods that are not subject to statutory inspection shall be subject to random inspection. Consignees and consignors or their entrusted customs brokers may apply for inspection to the goods inspection authorities.

Regulation on Security Review

In August 2011, the MOFCOM promulgated the Rules of Ministry of Commerce on Implementation of Security Review System of Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the MOFCOM Security Review Rule, which came into effect on September 1, 2011, to implement the Notice of the General Office of the State Council on Establishing the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors promulgated on February 3, 2011. Under these regulations, a security review is required for foreign investors’ mergers and acquisitions having “national defense and security” implications and mergers and acquisitions by which foreign investors may acquire “de facto control” of domestic enterprises having “national security” implications. In addition, when deciding whether a specific merger or acquisition of a domestic enterprise by foreign investors is subject to a security review, the MOFCOM will look into the substance and actual impact of the transaction. The MOFCOM Security Review Rule further prohibits foreign investors from bypassing the security review requirement by structuring transactions through proxies, trusts, indirect investments, leases, loans, control through contractual arrangements or offshore transactions.

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On December 19, 2020, the NDRC and MOFCOM promulgated the Measures for the Security Review of Foreign Investments which became effective on January 18, 2021. Under the Security Review of Foreign Investments, for foreign investments that affect or may affect national security, security review shall be conducted by the office led by NDRC and MOFCOM. For the purpose of these Measures, the term “foreign investment” refers to the investment activities carried out by foreign investors directly or indirectly within the territory of the PRC, including the following circumstances:

| ● | where foreign investors invest, solely or jointly with other investors, in new projects or establishing enterprises in the PRC;

| ● | where foreign investors acquire equity or assets of domestic enterprises by way of merger and acquisition; or

| ● | where foreign investors make investments in the PRC in any other form.

Regulation on Information Security and Censorship

On July 1, 2015, the Standing Committee of the National People’s Congress promulgated the PRC National Security Law, which came into effect on the same day. The PRC National Security Law provides that the state shall safeguard the sovereignty, security and cyber security development interests of the state, and that the state shall establish a national security review and supervision system to review, among other things, foreign investment, key technologies, internet and information technology products and services, and other important activities that are likely to impact the national security of the PRC.

The SCNPC promulgated the Cybersecurity Law of the PRC, or the Cybersecurity Law, which became effective on June 1, 2017, to protect cyberspace security and order. Pursuant to the Cybersecurity Law, any individual or organization using the network must comply with the constitution and the applicable laws, follow the public order and respect social moralities, and must not endanger cyber security, or engage in activities by making use of the network that endanger the national security, honor and interests, or infringe on the fame, privacy, intellectual property and other legitimate rights and interests of others. The Cybersecurity Law sets forth various security protection obligations for network operators, which are defined as “owners and administrators of networks and network service providers”, including, among others, complying with a series of requirements of tiered cyber protection systems; verifying users’ real identity; localizing the personal information and important data gathered and produced by key information infrastructure operators during operations within the PRC; and providing assistance and support to government authorities where necessary for protecting national security and investigating crimes. To comply with these laws and regulations, we have adopted security policies and measures to protect our cyber system and user information.

On July 6, 2021, certain PRC regulatory authorities issued Opinions on Strictly Cracking Down on Illegal Securities Activities, which, among others, provides for improving relevant laws and regulations on data security, cross-border data transmission, and confidential information management. It provided that efforts will be made to revise the regulations on strengthening the confidentiality and file management relating to the offering and listing of securities overseas, to implement the responsibility on information security of overseas listed companies, and to strengthen the standardized management of cross-border information provision mechanisms and procedures.

On June 10, 2021, the Standing Committee of the PRC National People’s Congress published the PRC Data Security Law, which took effect on September 1, 2021. The PRC Data Security Law requires data processing, which includes the collection, storage, use, processing, transmission, provision, publication of data, to be conducted in a legitimate and proper manner. The PRC Data Security Law provides for data security and privacy obligations on entities and individuals carrying out data activities. The PRC Data Security Law also introduces a data classification and hierarchical protection system based on the importance of data in economic and social development, and the degree of harm it may cause to national security, public interests, or legitimate rights and interests of individuals or organizations if such data are tampered with, destroyed, leaked, illegally acquired or illegally used. The appropriate level of protection measures is required to be taken for each respective category of data. For example, a processor of important data is required to designate the personnel and the management body responsible for data security, carry out risk assessments of its data processing activities and file the risk assessment reports with the competent authorities. State core data, i.e. data having a bearing on national security, the lifelines of national economy, people’s key livelihood and major public interests, shall be subject to stricter management system. Moreover, the PRC Data Security Law provides a national security review procedure for those data activities which affect or may affect national security and imposes export restrictions on certain data and information. In addition, the PRC Data Security Law also provides that any organization or individual within the territory of the PRC shall not provide any foreign judicial body and law enforcement body with any data without the approval of the competent PRC governmental authorities.

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On August 17, 2021, the State Council promulgated the Regulations on Security Protection of Critical Information Infrastructure, which became effective on September 1, 2021. Pursuant to such regulation, critical information infrastructure refers to any important network facilities and information systems of an important industry and field such as public communication and information service, energy, transport, water conservation, finance, public services, e-government affairs and national defense related science and technology industry, and other industries and fields that may seriously endanger national security, people’s livelihood and public interest in case of damage, function loss or data leakage. In addition, relevant administration departments of each important industry and field are responsible for formulating eligibility criteria and determining the critical information infrastructure in the respective industry or field. The operators will be informed by the relevant regulatory authority about the final determination as to whether they are categorized as “critical information infrastructure operators.”

On August 20, 2021, the Standing Committee of the National People’s Congress of the PRC promulgated the PRC Personal Information Protection Law, which integrates the scattered rules with respect to personal information rights and privacy protection and took effect on November 1, 2021. Pursuant to the PRC Personal Information Protection Law, “personal information” refers to any kind of information related to an identified or identifiable individual as electronically or otherwise recorded but excluding the anonymized information. The processing of personal information includes the collection, storage, use, processing, transmission, provision, disclosure and deletion of personal information. The PRC Personal Information Protection Law applies to the processing of personal information of individuals within the territory of the PRC, as well as personal information processing activities outside the territory of the PRC, for the purpose of providing products or services to natural persons located within China, for analyzing or evaluating the behaviors of individuals located within China, or for other circumstances as prescribed by laws and administrative regulations. The PRC Personal Information Protection Law provides a personal information processor may process the personal information of this individual only under the following circumstances: (i) where consent is obtained from the individual; (ii) where it is necessary for the execution or performance of a contract to which the individual is a party, or where it is necessary for carrying out human resource management pursuant to employment rules legally adopted or a collective contract legally concluded; (iii) where it is necessary for performing a statutory responsibility or statutory obligation; (iv) where it is necessary in response to a public health emergency, or for protecting the life, health or property safety of a natural person in the case of an emergency; (v) where the personal information is processed within a reasonable scope to carry out any news reporting, supervision by public opinions or any other activity for public interest purposes; (vi) where the personal information, which has already been disclosed by an individual or otherwise legally disclosed, is processed within a reasonable scope; or (vii) any other circumstance as provided by laws or administrative regulations. In principle, the consent of an individual must be obtained for the processing of his or her personal information, except under the circumstances of the aforementioned items (ii) to (vii). Where personal information is to be processed based on the consent of an individual, such consent shall be a voluntary and explicit indication of intent given by such individual on a fully informed basis. If laws or administrative regulations provide that the processing of personal information shall be subject to the separate consent or written consent of the individual concerned, such provisions shall prevail. In addition, the processing of the personal information of a minor under 14 years old must obtain the consent by a parent or a guardian of such minor and the personal information processors must adopt special rules for processing personal information of minors under 14 years old. The PRC Personal Information Protection Law also contains certain specific provisions with respect to the obligations of a personal information processor and imposes further obligations on a personal information processor that provides for basic internet platform services, has large amount of users, or has complicated business activities. These obligations include, without limitation, formulation of an independent institution mainly comprising of outside members to supervise personal information processing activities, termination of provision of services for product or service providers on the platform whose personal information processing activities are in material violation of laws and regulations, and issuing personal information protection social responsibilities reports regularly.

On November 14, 2021, the CAC published the Regulations on Network Data Security (draft for public comments), or the draft Regulations on Network Data Security, which reiterates that data processors that process the personal information of more than one million users intends to list overseas should apply for a cybersecurity review. In addition, data processors that process important data or are listed overseas shall carry out an annual data security assessment on their own or by engaging a data security services institution, and the data security assessment report for the prior year should be submitted to the local cyberspace affairs administration department before January 31 of each year.

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On December 28, 2021, thirteen PRC regulatory agencies, namely, the CAC, the NDRC, the Ministry of Industry and Information Technology, the Ministry of Public Security, the Ministry of State Security, the Ministry of Finance, MOFCOM, SAMR, CSRC, the People’s Bank of China, the National Radio and Television Administration, National Administration of State Secrets Protection and the National Cryptography Administration, jointly adopted and published the Measures for Cybersecurity Review (2021), which became effective on February 15, 2022. The Measures for Cybersecurity Review (2021) authorized the relevant government authorities to conduct cybersecurity review on a range of activities that affect or may affect national security, and required that, among others, in addition to “operator of critical information infrastructure” any “operator of network platform” holding personal information of more than one million users which seeks to list in a foreign stock exchange should also be subject to cybersecurity review. The Measures for Cybersecurity Review (2021) further elaborated the factors to be considered when assessing the national security risks of the relevant activities, including, among others, (i) the risk of core data, important data or a large amount of personal information being stolen, leaked, destroyed, and illegally used or exited the country; (ii) the risk of critical information infrastructure, core data, important data or a large amount of personal information being affected, controlled, or maliciously used by foreign governments if going public; and (iii) the risks of network information security. The cybersecurity review will also look into the potential national security risks from overseas IPOs.

On July 7, 2022, the CAC promulgated the Outbound Data Transfer Security Assessment Measures, which became effective on September 1, 2022. According to the Outbound Data Transfer Security Assessment Measures, to provide data abroad under any of the following circumstances, a data processor shall declare security assessment for its outbound data transfer to the CAC through the local cyberspace administration at the provincial level: (i) where the data processor will provide important data abroad; (ii) where operator of critical information infrastructure or the data processor processing the personal information of more than one million individuals will provide personal information abroad; (iii) where the data processor who has provided personal information of 100,000 individuals or sensitive personal information of 10,000 individuals in total abroad since January 1 of the previous year, will provide personal information abroad; and (iv) other circumstances where the security assessment is required as prescribed by the CAC. Prior to declaring security assessment for outbound data transfer, the data processor shall conduct self-assessment on the risks of the outbound data transfer. For outbound data transfers that have been carried out before the effectiveness of the Outbound Data Transfer Security Assessment Measures, if it is not in compliance with these measures, rectification shall be completed within six months starting from September 1, 2022.

Regulations on Intellectual Property Rights

The PRC has adopted comprehensive legislation governing intellectual property rights, including patents, trademarks, copyrights and domain names.

Patents

Pursuant to the PRC Patent Law, promulgated in December 2008 and which was revised by the SCNPC on October 17, 2020 and became effective on June 1, 2021, and its implementation rules, most recently amended on January 9, 2010, patents in China fall into three categories: invention, utility model and design. An invention patent is granted to a new technical solution proposed in respect of a product or method or an improvement of a product or method. A utility model is granted to a new technical solution that is practicable for application and proposed in respect of the shape, structure or a combination of both of a product. A design patent is granted to a new design of the shape, pattern, or a combination thereof, as well as a combination of the color, shape and pattern, of the entirety or a portion of a product, which creates an aesthetic feeling and is fit for industrial application. Under the PRC Patent Law, the term of patent protection starts from the date of application. The duration of patent right for inventions shall be twenty years, and the duration of patent right for utility models shall be ten years, and the duration of patent right for designs shall be 15 years, counted from the date of filing. The PRC Patent Law adopts the principle of “first-to-file” system, which provides that where more than one person files a patent application for the same invention, a patent will be granted to the person who files the application first.

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Existing patents can become narrowed, invalid or unenforceable due to a variety of grounds, including lack of novelty, creativity, and deficiencies in patent application. In China, a patent must have novelty, creativity and practical applicability. Under the PRC Patent Law, novelty means that before a patent application is filed, no identical invention or utility model has been publicly disclosed in any publication in China or overseas or has been publicly used or made known to the public by any other means, whether in or outside of China, nor has any other person filed with the patent authority an application that describes an identical invention or utility model and is recorded in patent application documents or patent documents published after the filing date. Creativity means that, compared with existing technology, an invention has prominent substantial features and represents notable progress, and a utility model has substantial features and represents any progress. Practical applicability means an invention or utility model can be manufactured or used and may produce positive results. Patents in China are filed with the State Intellectual Property Office, or SIPO. Normally, the SIPO publishes an application for an invention patent within 18 months after the filing date, which may be shortened at the request of applicant. The applicant must apply to the SIPO for a substantive examination within three years from the date of application.

Article 20 of the PRC Patent Law provides that, for an invention or utility model completed in China, any applicant (not just Chinese companies and individuals), before filing a patent application outside of China, must first submit it to the SIPO for a confidential examination. Failure to comply with this requirement will result in the denial of any Chinese patent for the relevant invention. This added requirement of confidential examination by the SIPO has raised concerns by foreign companies who conduct research and development activities in China or outsource research and development activities to service providers in China.

Patent Enforcement

Unauthorized use of patents without consent from owners of patents, forgery of the patents belonging to other persons, or engagement in other patent infringement acts, will subject the infringers to infringement liability. Serious offences such as forgery of patents may be subject to criminal penalties.

When a dispute arises out of infringement of the patent owner’s patent right, Chinese law requires that the parties first attempt to settle the dispute through mutual consultation. However, if the dispute cannot be settled through mutual consultation, the patent owner, or an interested party who believes the patent is being infringed, may either file a civil legal suit or file an administrative complaint with the relevant patent administration authority. A Chinese court may issue a preliminary injunction upon the patent owner’s or an interested party’s request before instituting any legal proceedings or during the proceedings. Damages for infringement are calculated as the loss suffered by the patent holder arising from the infringement, or the benefit gained by the infringer from the infringement. If it is difficult to ascertain damages in this manner, damages may be determined by using a reasonable multiple of the license fee under a contractual license. Statutory damages may be awarded in the circumstances where the damages cannot be determined by the above mentioned calculation standards. Generally, the patent owner has the burden of proving that the patent is being infringed. However, if the owner of an invention patent for manufacturing process of a new product alleges infringement of its patent, the alleged infringer has the burden of proof.

As of the date of this annual report, we had 50 patents granted in China.

Trademark Law

The PRC Trademark Law and its implementation rules protect registered trademarks. The PRC Trademark Office of National Intellectual Property Administration is responsible for the registration and administration of trademarks throughout the PRC. The Trademark Law has adopted a “first-to-file” principle with respect to trademark registration. The validity period of registered trademarks is ten years from the date of approval of trademark application, and may be renewed for another ten years provided relevant application procedures have been completed within twelve months before the end of the validity period. As of the date of this annual report, we owned 18 registered trademarks in different applicable trademark categories in China and we owned 21 registered trademarks in different applicable trademark categories outside of China and were in the process of applying to register nil trademarks outside of China.

In addition, pursuant to the PRC Trademark Law, counterfeit or unauthorized production of the label of another person’s registered trademark, or sale of any label that is counterfeited or produced without authorization will be deemed as an infringement to the exclusive right to use a registered trademark. The infringing party will be ordered to stop the infringement immediately, a fine may be imposed and the counterfeit goods will be confiscated. The infringing party may also be held liable for the right holder’s damages, which will be equal to the gains obtained by the infringing party or the losses suffered by the right holder as a result of the infringement, including reasonable expenses incurred by the right holder for stopping the infringement. If the gains or losses are difficult to determine, the court may render a judgment awarding damages of no more than RMB5 million.

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Software Copyright Law

The newly amended Copyright Law or the Copyright Law, consists of 67 articles in six chapters, and came into force on June 1, 2021. The Copyright Law provides that Chinese citizens, legal entities or unincorporated organizations, whether published or not, shall enjoy copyright in their works, which refer to ingenious intellectual achievements in the fields of literature, art and science that can be presented in a certain form. The purpose of the Copyright Law aims to encourage the creation and dissemination of works that are beneficial for the construction of socialist spiritual civilization and material civilization and promote the development and prosperity of Chinese culture. The term of protection for copyrighted software of legal persons is fifty years and ends on December 31 of the 50th year from the date of first publishing of the software.

In order to further implement the Computer Software Protection Regulations promulgated by the State Council in 2001, and amended subsequently, the State Copyright Bureau issued the Computer Software Copyright Registration Procedures in 2002, which apply to software copyright registration, license contract registration and transfer contract registration.

As of the date of this annual report, we had registered 43 software copyrights in China.

Regulation on Domain Name

The domain names are protected under the Administrative Measures on the Internet Domain Names of China promulgated by MIIT on November 5, 2004 and effective on December 20, 2004, and was replaced by the Administrative Measures on the Internet Domain Names promulgated by MIIT on August 24, 2017, which became effective on November 1, 2017. MIIT is the major regulatory body responsible for the administration of the PRC Internet domain names, under supervision of which China Internet Network Information Center, or CNNIC, is responsible for the daily administration of CN domain names and Chinese domain names. On September 25, 2002, CNNIC promulgated the Implementation Rules of Registration of Domain Name, or the CNNIC Rules, which was renewed on June 5, 2009 and May 29, 2012, respectively. Pursuant to the Administrative Measures on the Internet Domain Names and the CNNIC Rules, the registration of domain names adopts the “first to file” principle and the registrant shall complete the registration via the domain name registration service institutions. In the event of a domain name dispute, the disputed parties may lodge a complaint to the designated domain name dispute resolution institution to trigger the domain name dispute resolution procedure in accordance with the CNNIC Measures on Resolution of the Top Level Domains Disputes, file a suit to the People’s Court or initiate an arbitration procedure.

As of the date of this annual report, we had registered 15 domain names.

Regulations on Labor Protection

The principal laws that govern employment include: (i) the Labor Law of the PRC, or the Labor Law, promulgated by the SCNPC on July 5, 1994, which has been effective since January 1, 1995 and most recently amended on December 29, 2018; and (ii) the Labor Contract Law of the PRC, or the Labor Contract Law, which was promulgated by the SCNPC on June 29, 2007, came into effect on January 1, 2008, and was amended on December 28, 2012 and became effective as of July 1, 2013, and the Implementation Regulations on Labor Contract Law, which was promulgated on September 18, 2008, and became effective since the same day.

According to the Labor Law, an employer shall develop and improve its rules and regulations to safeguard the rights of its workers. An employer shall develop and improve its labor safety and health system, stringently implement national protocols and standards on labor safety and health, conduct labor safety and health education for workers, guard against labor accidents and reduce occupational hazards. Labor safety and health facilities must comply with relevant national standards. An employer must provide workers with the necessary labor protection gear that complies with labor safety and health conditions stipulated under national regulations, as well as provide regular health checks for workers that are engaged in operations with occupational hazards. Laborers engaged in special operations shall have received specialized training and have obtained the pertinent qualifications. An employer shall develop a vocational training system. Vocational training funds shall be set aside and used in accordance with national regulations and vocational training for workers shall be carried out systematically based on the actual conditions of the company.

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The Labor Contract Law and its implementation rules regulate both parties through a labor contract, namely the employer and the employee, and contain specific provisions involving the terms of the labor contract. It is stipulated under the Labor Contract Law and the Implementation Regulations on Labor Contract Law that a labor contract must be made in writing. If an employer fails to enter into a written employment contract with an employee within one year from the date on which the employment relationship is established, the employer must rectify the situation by entering into a written employment contract with the employee and pay the employee twice the employee’s salary for the period from the day following the lapse of one month from the date of establishment of the employment relationship to the day prior to the execution of the written employment contract. In addition, an employer is obligated to sign an indefinite term labor contract with an employee if the employer continues to employ the employee after two consecutive fixed term labor contracts. The Labor Contract Law and its implementation rules also require compensation to be paid upon certain terminations, which significantly affects the cost of reducing workforce for employers. In addition, if an employer intends to enforce a non-compete provision in an employment contract or non-competition agreement with an employee, it has to compensate the employee on a monthly basis during the term of the restriction period after the termination or expiry of the labor contract. Employers in most cases are also required to provide severance payment to their employees after their employment relationships are terminated.

Enterprises in China are required by PRC laws and regulations to participate in certain employee benefit plans, including social insurance funds, namely a pension plan, a medical insurance plan, an unemployment insurance plan, a work-related injury insurance plan and a maternity insurance plan, and a housing provident fund, and contribute to the plans or funds in amounts equal to certain percentages of salaries, including bonuses and allowances, of the employees as specified by the local government from time to time at locations where they operate their businesses or where they are located.

According to the Interim Regulations on the Collection and Payment of Social Insurance Premiums, the Regulations on Work Injury Insurance, the Regulations on Unemployment Insurance and the Trial Measures on Employee Maternity Insurance of Enterprises, enterprises in the PRC shall provide benefit plans for their employees, which include basic pension insurance, unemployment insurance, maternity insurance, work injury insurance and basic medical insurance. An enterprise must provide social insurance by processing social insurance registration with local social insurance agencies, and shall pay or withhold relevant social insurance premiums for or on behalf of employees. The Law on Social Insurance of the PRC, which was promulgated by the SCNPC on October 28, 2010, became effective on July 1, 2011, and was most recently updated on December 29, 2018, has consolidated pertinent provisions for basic pension insurance, unemployment insurance, maternity insurance, work injury insurance and basic medical insurance, and has elaborated in detail the legal obligations and liabilities of employers who do not comply with relevant laws and regulations on social insurance. Without force majeure reasons, employers must not suspend or reduce their payment of social insurance for employees, otherwise, competent governmental authorities will have the power to enforce employers to pay up social insurance within a prescribed time limit, and a fine of 0.05% of the unpaid social insurance can be charged on the part of the employers per day commencing from the first day of default. Provided that the employers still fail to make the payment within the prescribed time limit, a fine of over one time and up to three times of the unpaid sum of social insurance can be charged.

According to the Regulations on the Administration of Housing Provident Fund, which was promulgated by the State Counsel and became effective on April 3, 1999, and was amended on March 24, 2002 and was partially revised on March 24, 2019 by Decision of the State Council on Revising Some Administrative Regulations (Decree No. 710 of the State Council), housing provident fund contributions by an individual employee and housing provident fund contributions by his or her employer shall belong to the individual employee. Registration by PRC companies at the applicable housing provident fund management center is compulsory and a special housing provident fund account for each of the employees shall be opened at an entrusted bank.

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The employer shall timely pay up and deposit housing provident fund contributions in full amount and late or insufficient payments shall be prohibited. The employer shall process housing provident fund payment and deposit registrations with the housing provident fund administration center. Under the circumstances where financial difficulties do exist due to which an employer is unable to pay or pay up housing provident funds, permission of labor union of the employer and approval of the local housing provident funds commission must first be obtained before the employer can suspend or reduce their payment of housing provident funds. With respect to companies who violate the above regulations and fail to process housing provident fund payment and deposit registrations or open housing provident fund accounts for their employees, such companies shall be ordered by the housing provident fund administration center to complete such procedures within a designated period. Those who fail to process their registrations within the designated period shall be subject to a fine ranging from RMB10,000 to RMB50,000. When companies breach these regulations and fail to pay up housing provident fund contributions in full amount as due, the housing provident fund administration center shall order such companies to pay up within a designated period, and may further apply to the People’s Court for mandatory enforcement against those who still fail to comply after the expiry of such period.

Regulations on Tax

PRC Enterprise Income Tax

The PRC Enterprise Income Tax Law, or EIT Law, which was promulgated on March 16, 2007 and took effect on January 1, 2008, and further amended on February 24, 2017 and December 29, 2018, imposes a uniform enterprise income tax rate of 25% on all PRC resident enterprises, including foreign-invested enterprises, unless they qualify certain exceptions. The enterprise income tax is calculated based on the PRC resident enterprise’s global income as determined under PRC tax laws and accounting standards. Under the PRC EIT Law, an enterprise established outside China with “de facto management bodies” within China is considered a “resident enterprise” for PRC enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income. Under the implementation regulations to the PRC Enterprise Income Tax Law, a “de facto management body” is defined as the body that exercises full and substantial control and overall management over the business, productions, personnel, accounts and properties of an enterprise. If a non-resident enterprise sets up an organization or establishment in the PRC, it will be subject to enterprise income tax for the income derived from such organization or establishment in the PRC and for the income derived from outside the PRC but with an actual connection with such organization or establishment in the PRC. However, if non-resident enterprises have not formed permanent establishments or premises in the PRC, or if they have formed permanent establishments or premises in the PRC but their relevant income derived in the PRC is not related to those establishments, then their enterprise income tax would be set at a rate of 10% for their income sourced from inside the PRC.

The PRC EIT Law and its implementation rules, which was promulgated on December 6, 2007 and took effect on January 1, 2008 and partly amended on April 23, 2019 and became effective on the same date, permit certain “high and new technology enterprises strongly supported by the state” that independently own core intellectual property and meet statutory criteria, to enjoy a reduced 15% enterprise income tax rate. On January 29, 2016, the State Administration for Taxation, or SAT, the Ministry of Science and Technology and the Ministry of Finance jointly issued the Administrative Rules for the Certification of High and New Technology Enterprises specifying the criteria and procedures for the certification of High and New Technology Enterprises, and the certificate of a high and new technology enterprise, is valid for three years.

Pursuant to Circular of the State Administration of Taxation on Printing and Distributing the Implementing Measures for Special Tax Adjustments (for Trial Implementation), effective on January 1, 2008, enterprises shall adopt a reasonable transfer pricing method when conducting transactions with their affiliates. Tax authorities have the power to assess whether related transactions conform to the principle of equity and make adjustments accordingly. Therefore, the invested enterprise should faithfully report relevant information of its related transactions. Pursuant to the Announcement of the State Administration of Taxation on Issuing the Administrative Measures for Special Tax Adjustment and Investigation and Mutual Consultation Procedures, effective on May 1, 2017, an enterprise may adjust and pay taxes at its own discretion when it receives a special tax adjustment risk warning or identifies its own special tax adjustment risks, and the tax authorities may also carry out special tax investigation and adjustment in accordance with the relevant provisions in regard to enterprises that adjust and pay taxes at their own discretion.

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In January 2009, the SAT promulgated the Provisional Measures for the Administration of Withholding of Enterprise Income Tax for Non-resident Enterprises, or the Non-resident Enterprises Measures, which was repealed by Announcement of the State Administration of Taxation on Issues Relating to Withholding at Source of Income Tax of Non-resident Enterprises in December 2017. According to the new announcement, it shall apply to handling of matters relating to withholding at source of income tax of non-resident enterprises pursuant to the provisions of Article 37, Article 39 and Article 40 of the Enterprise Income Tax Law. According to Article 37, Article 39 of the Enterprise Income Tax Law, income tax over non-resident enterprise income pursuant to the provisions of the third paragraph of Article 3 shall be subject to withholding at the source, where the payer shall act as the withholding agent. The tax amount for each payment made or due shall be withheld by the withholding agent from the amount paid or payable. Where a withholding agent fails to withhold tax or perform tax withholding obligations pursuant to the provisions of Article 37, the taxpayer shall pay tax at the place where the income is derived. Where the taxpayer fails to pay tax pursuant to law, the tax authorities may demand payment of the tax amount payable, from a payer of the taxpayer with payable tax amounts from other taxable income items in China.

On April 30, 2009, the MOFCOM and the SAT jointly issued the Circular on Issues Concerning Treatment of Enterprise Income Tax in Enterprise Restructuring Business, or Circular 59, which became effective retroactively as of January 1, 2008 and was partially revised on January 1, 2014. By promulgating and implementing this circular, the PRC tax authorities have enhanced their scrutiny over the direct or indirect transfer of equity interests in a PRC resident enterprise by a Non-resident Enterprise.

On February 3, 2015, the SAT issued the Announcement of the State Administration of Taxation on Several Issues Relating to Enterprise Income Tax of Transfers of Assets between Non-resident Enterprises, or SAT Bulletin 7, which was partially abolished on December 29, 2017. SAT Bulletin 7 extends its tax jurisdiction to transactions involving transfer of immovable property in China and assets held under the establishment, and placement in China, of a foreign company through the offshore transfer of a foreign intermediate holding company. SAT Bulletin 7 also addresses transfer of the equity interest in a foreign intermediate holding company broadly. In addition, SAT Bulletin 7 introduces safe harbor scenarios applicable to internal group restructurings. However, it also brings challenges to both the foreign transferor and transferee of the Indirect Transfer as they have to assess whether the transaction should be subject to PRC tax and to file or withhold the PRC tax accordingly.

On October 17, 2017, the SAT issued the Announcement of the State Administration of Taxation on Issues Concerning the Withholding of Non-resident Enterprise Income Tax at Source, or SAT Bulletin 37, which came into effect on December 1, 2017 and was revised on June 15, 2018. The SAT Bulletin 37 further clarifies the practice and procedure of withholding of non-resident enterprise income tax.

If non-resident investors were involved in our private equity financing, if such transactions were determined by the tax authorities to lack reasonable commercial purpose, we and our non-resident investors may be at risk of being required to file a return and be taxed under SAT Bulletin 7 and we may be required to expend valuable resources to comply with SAT Bulletin 7 or to establish that we should not be held liable for any obligations under SAT Bulletin 7.

PRC Value Added Tax

According to the Temporary Regulations on Value-added Tax, which was most recently amended on November 19, 2017, and the Detailed Implementing Rules of the Temporary Regulations on Value-added Tax, which was amended on October 28, 2011, and became effective on November 1, 2011, all taxpayers selling goods, providing processing, repair or replacement services or importing goods within the PRC shall pay Value-Added Tax. The tax rate of 17% shall be levied on general taxpayers selling or importing various goods; the tax rate of 17% shall be levied on the taxpayers providing processing, repairing or replacement service; the applicable rate for the export of goods by taxpayers shall be zero, unless otherwise stipulated.

On January 1, 2012, the State Council officially launched a pilot value-added tax reform program, or the Pilot Program, applicable to businesses in selected industries. Businesses in the Pilot Program would pay value added tax, or VAT, instead of business tax. The Pilot Program initially applied only to transportation industry and “modern service industries” in Shanghai and would be expanded to eight trial regions (including Beijing and Guangdong province) and nationwide if conditions permit. The pilot industries in Shanghai included industries involving the leasing of tangible movable property, transportation services, research and development and technical services, information technology services, cultural and creative services, logistics and ancillary services, certification and consulting services. Revenues generated by advertising services, a type of “cultural and creative services”, are subject to the VAT tax rate of 6%. According to official announcements made by competent authorities in Beijing and Guangdong province, Beijing launched the same Pilot Program on September 1, 2012, and Guangdong province launched it on November 1, 2012.

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On May 24, 2013, the MOFCOM and the SAT issued the Circular on Tax Policies in the Nationwide Pilot Collection of Value Added Tax in Lieu of Business Tax in the Transportation Industry and Certain Modern Services Industries, or the Pilot Collection Circular. The scope of certain modern services industries under the Pilot Collection Circular extends to the inclusion of radio and television services.

On March 23, 2016, the MOFCOM and the SAT jointly issued the Circular on the Pilot Program for Overall Implementation of the Collection of Value Added Tax Instead of Business Tax, or Circular 36, which took effect on May 1, 2016. Pursuant to the Circular 36, all of the companies operating in construction, real estate, finance, modern service or other sectors which were required to pay business tax are required to pay VAT, in lieu of business tax. The VAT rate is 6%, except for rate of 11% for real estate sale, land use right transferring and providing service of transportation, postal sector, basic telecommunications, construction, real estate lease; rate of 17% for providing lease service of tangible property; and rate of zero for specific cross-bond activities.

At the State Council executive meeting on March 28, 2018, China’s State Council has announced the VAT rate on manufacturing is to be cut by one percent to 16% which took effect on May 1, 2018. On April 4, 2018, the Ministry of Finance and the SAT promulgated the Notice on Adjusting Value-added Tax Rates, which reduced the tax rates for sale, import and export of goods, as well as the deduction rate for taxpayer’s purchaser of agricultural products. According to the Announcement on Relevant Policies for Deepening the Value-Added Tax Reform, which is jointly issued by Ministry of Finance, SAT and the General Administration of Customs on March 20, 2019 and took effect on April 1, 2019, The tax rate of 16% applicable to the VAT taxable sale or import of goods by a general VAT taxpayer shall be adjusted to 13%.

According to the Circular of the SAT on Printing and Distributing the Administrative Measures for Tax Refund (Exemption) for Exported Goods (for Trial Implementation), effective on May 1, 2005, unless otherwise provided by law, for the goods as exported via an export agency, the exporter may, after the export declaration and the conclusion of financial settlement for sales, file a report to competent State Taxation Bureau for the approval of refund or exemption of VAT or consumption tax on the strength or the relevant certificates.

PRC Dividend Withholding Tax

Under the PRC tax laws effective prior to January 1, 2008, dividends paid to foreign investors by foreign-invested enterprises were exempt from PRC withholding tax. Pursuant to the EIT Law and the Implementation Rules, dividends generated after January 1, 2008 and payable by a foreign-invested enterprise in China to its foreign enterprise investors are subject to a 10% withholding tax, unless any such foreign investor’s jurisdiction of incorporation has a tax treaty with China that provides for a different withholding arrangement.

Pursuant to an Arrangement Between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, or the Double Tax Avoidance Arrangement came into effect on December 8, 2006, and other applicable PRC laws and regulations, if a Hong Kong resident enterprise is determined by the competent PRC tax authority to have satisfied the relevant conditions and requirements under such Double Tax Avoidance Arrangement and other applicable laws and regulations, the 10% withholding tax on the dividends the Hong Kong resident enterprise receives from a PRC resident enterprise may be reduced to 5%. According to the Announcement of the SAT on Issuing the Measures for the Administration of Non-resident Taxpayers’ Enjoyment of Treaty Benefits effective on January 1, 2020, non-resident taxpayers can enjoy tax treaty benefits via the “self-assessment of eligibility, claiming treaty benefits, retaining documents for inspection” mechanism. Non-resident taxpayers who have self-assessed that they are eligible for the treaty benefits can claim such tax treaty benefits accordingly provided that they have collected and retained relevant supporting documents for inspection by the tax authorities in their post-filing administration process. Pursuant to the Announcement on Certain Issues with Respect to the “Beneficial Owner” in Tax Treaties, issued by the SAT on February 3, 2018, and effective on April 1, 2018, when determining an applicant’s “beneficial owner” status regarding tax treatments in connection with dividends, interests or royalties in tax treaties, several factors set forth below will be taken into account, although the actual analysis will be fact-specific: (i) whether the applicant is obligated to pay more than 50% of his or her income in 12 months to residents in a third country or region; (ii) whether the business operated by the applicant constitutes a substantial business operation; and (iii) whether the counterparty country or region to the tax treaties does not levy any tax or grant tax exemption on relevant incomes or levy tax at an extremely low rate. The applicant must submit relevant documents to the competent tax authorities to prove his or her “beneficial owner” status. Although our WFOE is currently wholly owned by UTime International Limited, we cannot assure you that we will be able to enjoy the preferential withholding tax rate of 5% under the China-HK Taxation Arrangement.

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Regulations on Foreign Exchange

The principal regulations governing foreign currency exchange in China are the PRC Foreign Exchange Administration Regulations, which were promulgated by the State Council on January 29, 1996 and last amended on August 5, 2008. Under the Foreign Exchange Administration Regulations, payments of current account items, such as profit distributions and trade and service-related foreign exchange transactions can be made in foreign currencies without prior approval from State Administration of Foreign Exchange, or SAFE, by complying with certain procedural requirements. However, approval from or registration with appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of foreign currency-denominated loans.

On August 29, 2008, SAFE issued the Circular on the Relevant Operating Issues Concerning the Improvement of the Administration of the Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, or SAFE Circular 142, regulating the conversion by a foreign-invested enterprise of foreign currency-registered capital into RMB by restricting how the converted RMB may be used. SAFE Circular 142 provides that the RMB capital converted from foreign currency registered capital of a foreign-invested enterprise may only be used for purposes within the business scope approved by the applicable government authority and may not be used for equity investments within China. SAFE also strengthened its oversight of the flow and use of the RMB capital converted from foreign currency registered capital of foreign-invested enterprises. The use of such RMB capital may not be changed without SAFE’s approval, and such RMB capital may not in any case be used to repay RMB loans if the proceeds of such loans have not been used. On March 30, 2015, SAFE issued SAFE Circular 19, which took effective and replaced SAFE Circular 142 on June 1, 2015. Although SAFE Circular 19 allows for the use of RMB converted from the foreign currency-denominated capital for equity investments in China, the restrictions continue to apply as to foreign-invested enterprises’ use of the converted RMB for purposes beyond the business scope, for entrusted loans or for inter-company RMB loans. SAFE promulgated the Notice of the State Administration of Foreign Exchange on Reforming and Standardizing the Foreign Exchange Settlement Management Policy of Capital Account, or SAFE Circular 16, effective on June 9, 2016, which reiterates some of the rules set forth in SAFE Circular 19, but changes the prohibition against using RMB capital converted from foreign currency-denominated registered capital of a foreign-invested company to issue RMB entrusted loans to a prohibition against using such capital to issue loans to non-associated enterprises. Violations of SAFE Circular 19 or SAFE Circular 16 could result in administrative penalties.

On November 19, 2012, SAFE promulgated the Circular of Further Improving and Adjusting Foreign Exchange Administration Policies on Foreign Direct Investment, which was most recently amended in May 14, 2015, substantially amends and simplifies the current foreign exchange procedure. Pursuant to this circular, the opening of various special purpose foreign exchange accounts (e.g., pre-establishment expenses accounts, foreign exchange capital accounts and guarantee accounts), the reinvestment of lawful incomes derived by foreign investors in China (e.g. profit, proceeds of equity transfer, capital reduction, liquidation and early repatriation of investment), and purchase and remittance of foreign exchange as a result of capital reduction, liquidation, early repatriation or share transfer in a foreign-invested enterprise no longer require SAFE approval, and multiple capital accounts for the same entity may be opened in different provinces, which was not possible before. In addition, SAFE promulgated the Circular on Printing and Distributing the Provisions on Foreign Exchange Administration over Domestic Direct Investment by Foreign Investors and the Supporting Documents in May 2013, which specifies that the administration by SAFE or its local branches over direct investment by foreign investors in the PRC shall be conducted by way of registration and banks shall process foreign exchange business relating to the direct investment in China based on the registration information provided by SAFE and its branches.

On February 13, 2015, SAFE promulgated the Circular on Further Simplifying and Improving the Policies Concerning Foreign Exchange Control on Direct Investment, or SAFE Circular 13, which took effect on June 1, 2015. SAFE Circular 13 delegates the authority to enforce the foreign exchange registration in connection with the inbound and outbound direct investment under relevant SAFE rules to certain banks and therefore further simplifies the foreign exchange registration procedures for inbound and outbound direct investment.

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Regulations on loans to and direct investment in the PRC entities by offshore holding companies

According to the Implementation Rules for the Provisional Regulations on Statistics and Supervision of Foreign Debt promulgated by SAFE on September 24, 1997 and the Interim Provisions on the Management of Foreign Debts promulgated by SAFE, the NDRC and the MOFCOM and effective from March 1, 2003, loans by foreign companies to their subsidiaries in China, which accordingly are FIEs, are considered foreign debt, and such loans must be registered with the local branches of the SAFE. Under the provisions, the total amount of accumulated medium-term and long-term foreign debt and the balance of short-term debt borrowed by a FIE is limited to the difference between the total investment and the registered capital of the foreign-invested enterprise.

On January 12, 2017, the People’s Bank of China promulgated the Circular of the People’s Bank of China on Matters relating to the Macro-prudential Management of Comprehensive Cross-border Financing, or PBOC Circular 9, which took effect on the same date. The PBOC Circular 9 established a capital or net assets-based constraint mechanism for cross-border financing. Under such mechanism, a company may carry out cross-border financing in Renminbi or foreign currencies at their own discretion. The total cross-border financing of a company shall be calculated using a risk-weighted approach and shall not exceed an upper limit. The upper limit is calculated as capital or assets multiplied by a cross-border financing leverage ratio and multiplied by a macro-prudential regulation parameter.

In addition, according to PBOC Circular 9, as of the date of the promulgation of PBOC Circular 9, a transition period of one year is set for foreign-invested enterprises and during such transition period, FIEs may apply either the current cross-border financing management mode, namely the mode provided by Implementation Rules for the Provisional Regulations on Statistics and Supervision of Foreign Debt and the Interim Provisions on the Management of Foreign Debts, or the mode in this PBOC Circular 9 at its sole discretion. After the end of the transition period, the cross-border financing management mode for FIEs will be determined by the People’s Bank of China and SAFE after assessment based on the overall implementation of this PBOC Circular 9.

According to applicable PRC regulations on FIEs, capital contributions from a foreign holding company to its PRC subsidiaries, which are considered FIEs, may be made when approval by or registration with the SAFE and MOFCOM or their respective local counterpart is obtained.

Regulations on Foreign Exchange Registration of Offshore Investment by PRC Residents

On July 4, 2014, SAFE issued the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, and its implementation guidelines, which abolished and superseded the Circular on Several Issues concerning Foreign Exchange Administration for Domestic Residents to Engage in Financing and in Return Investments via Overseas Special Purpose Companies, SAFE Circular 75. Pursuant to SAFE Circular 37 and its implementation guidelines, PRC residents (including PRC institutions and individuals) must register with local branches of SAFE in connection with their direct or indirect offshore investment in an overseas special purpose vehicle, or SPV, directly established or indirectly controlled by PRC residents for the purposes of offshore investment and financing with their legally owned assets or interests in domestic enterprises, or their legally owned offshore assets or interests. Such PRC residents are also required to amend their registrations with SAFE when there is a change to the basic information of the SPV, such as changes of a PRC resident individual shareholder, the name or operating period of the SPV, or when there is a significant change to the SPV, such as changes of the PRC individual resident’s increase or decrease of its capital contribution in the SPV, or any share transfer or exchange, merger, division of the SPV. Failure to comply with the registration procedures set forth in the Circular 37 may result in restrictions being imposed on the foreign exchange activities of the relevant onshore company, including the payment of dividends and other distributions to its offshore parent or affiliate, the capital inflow from the offshore entities and settlement of foreign exchange capital, and may also subject relevant onshore company or PRC residents to penalties under PRC foreign exchange administration regulations.

Mr. Bao and Mr. He, our PRC resident shareholders, have completed the required registrations with the local counterpart of SAFE in relation to our financing and restructuring to our shareholding structure.

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Regulations on Dividend Distributions

The principal regulations governing distribution of dividends paid by wholly foreign-owned enterprises include:

| ● | Company Law of the PRC (1993), as amended in 1999, 2004, 2005, 2013 and 2018;

| ● | The Foreign Investment Law, which came into effect on January 1, 2020;

| ● | The Implementation of the Foreign Investment Law of the People’s Republic of China, which came into effect on January 1, 2020.

Under these laws and regulations, foreign-invested enterprises in China may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, a wholly foreign-owned enterprise in China is required to set aside at least 10% of its after-tax profit based on PRC accounting standards each year to its general reserves until the accumulative amount of such reserves reach 50% of its registered capital. These reserves are not distributable as cash dividends. The foreign-invested enterprise has the discretion to allocate a portion of its after-tax profits to staff welfare and bonus funds. A PRC company is not permitted to distribute any profits until any losses from prior fiscal years have been offset. Profits retained from prior fiscal years may be distributed together with distributable profits from the current fiscal year.

Regulations on Stock Incentive Plans

Pursuant to the Notice on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Publicly Listed Company, issued by SAFE on February 15, 2012, employees, directors, supervisors and other senior management participating in any stock incentive plan of an overseas publicly listed company who are PRC citizens or who are non PRC citizens residing in China for a continuous period of not less than one year, subject to a few exceptions, are required to register with SAFE through a domestic qualified agent, which could be a PRC subsidiary of such overseas listed company, and complete certain other procedures. Failure to complete the SAFE registrations may subject them to fines and legal sanctions and may also limit our ability to contribute additional capital into our wholly foreign owned subsidiary in China and limit this subsidiary’s ability to distribute dividends to us. The PRC agents shall, on behalf of the PRC residents who have the right to exercise the employee share options, apply to SAFE or its local branches for an annual quota for the payment of foreign currencies in connection with the PRC residents’ exercise of the employee share options. The foreign exchange proceeds received by the PRC residents from the sale of shares under the stock incentive plans granted and dividends distributed by the overseas listed companies must be remitted into the bank accounts in the PRC established by the PRC agents before distribution to such PRC residents. In addition, the PRC agents shall quarterly submit the form for record-filing of information of the Domestic Individuals Participating in the Stock Incentive Plans of Overseas Listed Companies with SAFE or its local branches. We and our PRC citizen employees who have been granted share options, or PRC optionees, are subject to the Stock Option Rules. If we or our PRC optionees fail to comply with the Individual Foreign Exchange Rule or the Stock Option Rules, we and our PRC optionees may be subject to fines and other legal sanctions. In addition, the PRC agents are required to amend the SAFE registration with respect to the stock incentive plan if there is any material change to the stock incentive plan. Moreover, the SAFE Circular 37 provides that PRC residents who participate in a share incentive plan of an overseas unlisted special purpose company may register with local branches of SAFE before exercising rights.

In addition, the SAT has issued circulars concerning employee share options, under which our employees working in the PRC who exercise share options will be subject to PRC individual income tax. Our PRC subsidiaries have obligations to file documents related to employee share options with relevant tax authorities and to withhold individual income taxes of those employees who exercise their share options. If our employees fail to pay or if we fail to withhold their income taxes as required by relevant laws and regulations, we may face sanctions imposed by the PRC tax authorities or other PRC government authorities.

Regulations on Overseas Listings

On August 8, 2006, six PRC regulatory agencies, namely, the Ministry of Commerce, the State Assets Supervision and Administration Commission, SAT, SAIC, China Securities Regulatory Commission, or the CSRC, and SAFE, jointly adopted the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, which became effective on September 8, 2006 and were amended on June 22, 2009. The M&A Rules purport, among other things, to require that offshore special purpose vehicles, or SPVs, that are controlled by PRC companies or individuals and that have been formed for overseas listing purposes through acquisitions of PRC domestic interest held by such PRC companies or individuals, to obtain the approval of the CSRC prior to publicly listing their securities on an overseas stock exchange. On September 21, 2006, the CSRC published a notice on its official website specifying documents and materials required to be submitted to it by SPVs seeking CSRC approval of their overseas listings. While the application of the M&A Rules remains unclear, our PRC legal counsel has advised us that based on its understanding of the current PRC laws, rules and regulations and the M&A Rules, prior approval from the CSRC is not required under the M&A Rules for the listing and trading of our ordinary shares on the NASDAQ given that (i) our PRC Subsidiary was directly established by us as a wholly foreign-owned enterprise, and we have not acquired any equity interest or assets of a PRC domestic company owned by PRC companies or individuals as defined under the M&A Rules that are our beneficial owners after the effective date of the M&A Rules, and (ii) no provision in the M&A Rules clearly classifies the contractual arrangements as a type of transaction subject to the M&A Rules.

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On July 6, 2021, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the “Opinions on Severely Cracking Down on Illegal Securities Activities According to Law,” or the Opinions. The Opinions emphasized the need to strengthen the administration over illegal securities activities, and the need to strengthen the supervision over overseas listings by Chinese companies. Effective measures, such as promoting the construction of relevant regulatory systems will be taken to deal with the risks and incidents of China-concept overseas listed companies, and cybersecurity and data privacy protection requirements and similar matters. The Opinions and any related implementing rules to be enacted may subject us to compliance requirement in the future. Given the current regulatory environment in the PRC, we are still subject to the uncertainty of different interpretation and enforcement of the rules and regulations in the PRC adverse to us, which may take place quickly with little advance notice.

On February 17, 2023, the CSRC promulgated the Trial Administrative Measures of the Overseas Securities Offering and Listing by Domestic Companies (the “Trial Measures”) and five supporting guidelines, which became effective on March 31, 2023. According to the Trial Measures, among other requirements, any domestic companies that seek to offer or list securities overseas, both directly and indirectly, should fulfil the filing procedures with the CSRC within three business days after the submission of the overseas offering and listing application. The Trial Measures provide that if an issuer meets both of the following criteria, the overseas offering and listing of securities conducted by such issuer shall be determined as an indirect overseas offering and listing by a PRC domestic enterprise and is therefore subject to the filing and reporting requirements as required thereunder: (i) any of the operating revenue, total profits, total assets or net assets of the PRC domestic enterprise(s) of the issuer in the most recent fiscal year accounts for more than 50% of the corresponding item in the issuer’s audited consolidated financial statements for the same period; and (ii) the main parts of the issuer’s operation activities are conducted in mainland China, or the principal operation premises are located in mainland China, or the majority of senior management personnel in charge of its business operations and management are PRC citizens or have habitual residences located in mainland China. The Trial Measures further stipulate that the determination as to whether a PRC domestic company is indirectly offering and listing securities in an overseas market shall be made on a substance-over-form basis. According to one of the Guidelines for Overseas Listing, where an issuer does not fall within the circumstances as stipulated aforementioned, but the risk factors disclosed in the submitted listing application documents pursuant to the relevant overseas market regulations are mainly related to mainland China, the securities companies and the PRC counsels of the issuer shall, act in accordance with the Trial Measures for Overseas Listing and follow the principle of substance-over-form, conduct comprehensive demonstration and identification with regard to whether the issuer falls within the scope which is subject to the filing requirements under the Trial Measures for Overseas Listing. If a PRC company fails to complete required filing procedures or conceals any material fact or falsifies any major content in its filing documents, such PRC company may be subject to administrative penalties, such as order to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties, such as warnings and fines.

On the same day, the CSRC also held a press conference for the release of the Trial Measures and issued the Notice on Administration for the Filing of Overseas Offering and Listing by Domestic Companies, which, among others, clarified that (1) domestic companies that have submitted valid applications for their indirect overseas offering and listing prior to the effective date of the Trial Measures, March 31, 2023, but have not yet obtained approval from overseas regulatory authorities or stock exchanges, are allowed to reasonably arrange the timing for submitting their filing applications with the CSRC, and must complete the filing before the completion of their overseas offering and listing; (2) domestic companies that have obtained approval from overseas regulatory authorities or stock exchanges for their indirect overseas offering and listing prior to the effective date of the Trial Measures but have not yet completed their indirect overseas listing, are granted a six-month transition period from March 31, 2023. If these domestic companies fail to complete their indirect overseas offering and listing within such six-month transition period, they will be required to make filings with the CSRC pursuant to the Trial Measures; and (3) the CSRC will solicit opinions from relevant regulatory authorities and complete the filing of the overseas listing of companies seeking listing with contractual arrangements if they duly meet the compliance requirements, and support the development and growth of these companies by enabling them to utilize two markets and two kinds of resources.

In addition, on February 24, 2023, the CSRC, together with Ministry of Finance of the PRC, National Administration of State Secrets Protection and National Archives Administration of China, revised the Provisions on Strengthening Confidentiality and Archives Administration for Overseas Securities Offering and Listing which was issued by the CSRC, National Administration of State Secrets Protection and National Archives Administration of China in 2009, or the Provisions. The revised Provisions is issued under the title the Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies, and came into effect on March 31, 2023 together with the Trial Measures. One of the major revisions to the revised Provisions is expanding its application to cover indirect overseas offering and listing, as is consistent with the Trial Measures. The revised Provisions require that, including but not limited to (a) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals or entities including securities companies, securities service providers and overseas regulators, any documents and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level; and (b) domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals and entities including securities companies, securities service providers and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations. Where a PRC domestic company, after completing the relevant procedures, provides to securities companies, securities service providers or other entities with any documents and materials that contain state secrets or working secrets of government agencies, or any other documents and materials that would be detrimental to national security or public interest if leaked, a non-disclosure agreement must be signed between the provider and receiver of such information according to the relevant PRC laws and regulations, which must specify, among others, the obligations and liabilities on confidentiality held by such securities companies and securities service providers. Specifically, when a PRC domestic company provides accounting archives or copies of accounting archives to any entities including securities companies, securities service providers or overseas regulators and individuals, it must complete the due procedures in compliance with applicable national regulations.

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Enforceability of Civil Liabilities

We conduct substantially most of our operations in China and substantially most of our assets are located in China. In addition, most of our senior executive officers reside within China for a significant portion of the time and most are PRC nationals. As a result, it may be difficult or impossible for a shareholder to effect service of process within the United States upon us or these persons, or to enforce against us or them judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States. It may also be difficult for a shareholder to enforce judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and our executive officers and directors.

The recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based either on treaties between China and the country where the judgment is made or on principles of reciprocity between jurisdictions. China does not have any treaties or other forms of reciprocity with the United States that provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedures Law, the PRC courts will not enforce a foreign judgment against us or our directors and officers if they determine that the judgment violates the basic principles of PRC laws or national sovereignty, national security or public interest. As a result, it is uncertain whether a PRC court would enforce a judgment rendered by a court in the United States. Although under the PRC Civil Procedures Law, foreign shareholders may originate actions based on PRC law against us in the PRC, if they can establish sufficient nexus to the PRC for a PRC court to have jurisdiction, and meet other procedural requirements, including, among others, the foreign shareholders as plaintiff must have a direct interest in the case, and there must be a concrete claim, a factual basis and a cause for the suit.

4C. Organizational Structure

The following chart reflects our organizational structure as of the date of this annual report. For descriptions of our subsidiaries and variable interest entity, please see “4A. History and Development of the Company.”

4D. Property, Plants and Equipment

Under PRC law, land is owned by the state. “Land use rights” are granted to an individual or entity after payment of a land use right fee is made to the applicable state or rural collective economic organization. Land use rights allow the holder the right to use the land for a specified long-term period. We do not currently own any real estate or land use rights. For descriptions of our leased properties, please see “Item 4B. Business Overview - Facilities.”

ITEM 4A. UNRESOLVED STAFF COMMENTS

Not Applicable

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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion and analysis should be read in conjunction with our consolidated financial statements, the notes to those financial statements and other financial data that appear elsewhere in this annual report. In addition to historical information, the following discussion contains forward-looking statements based on current expectations that involve risks and uncertainties. Actual results and the timing of certain events may differ significantly from those projected in such forward-looking statements due to a number of factors, including those set forth in “Risk Factors” and elsewhere in this report. Our consolidated financial statements are prepared in conformity with U.S. GAAP.

5A. Operating Results

We design, manufacture, and distribute mobile phones and other consumer electronics through our operation plants in China. Our products are categorized into the following major categories: feature phone, smartphone and mobile phone accessories. Most of our products are produced to fulfill OEM/ODM orders received from our long-term clients and sold globally, including Mexico, Brazil, the United States, and other emerging markets in South Asia and Africa as well as Europe. The following charts display our products contribution for the fiscal years ended March 31, 2022, 2023 and 2024.

The following table sets forth our revenues by type of contract and as a percentage of revenue for the fiscal years indicated (excluding revenue from discontinued operations):

|  | Year ended March 31, |
|  | 2022 |  |  | 2023 |  |  | 2024 |
Category |  | Amount |  |  | % |  |  | Amount |  |  | % |  |  | Amount |  |  | % |
|  | RMB |  |  |  |  |  | RMB |  |  |  |  |  | RMB |  |  | US$ |  |  |  |
|  | (in thousands, except for percentages) |
OEM/ODM |  |  | 273,922 |  |  |  | 100 |  |  |  | 197,564 |  |  |  | 100 |  |  |  | 172,156 |  |  |  | 24,264 |  |  |  | 100 |
In-house brand |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Total |  |  | 273,922 |  |  |  | 100 |  |  |  | 197,564 |  |  |  | 100 |  |  |  | 172,156 |  |  |  | 24,264 |  |  |  | 100 |

The following table sets forth our revenues by product lines and as a percentage of revenue for the fiscal years indicated:

|  | Year ended March 31, |
|  | 2022 |  |  | 2023 |  |  | 2024 |
Category |  | Amount |  |  | % |  |  | Amount |  |  | % |  |  | Amount |  |  | % |
|  | RMB |  |  |  |  |  | RMB |  |  |  |  |  | RMB |  |  | US$ |  |  |  |
|  | (in thousands, except for percentages) |
Feature phone |  |  | 110,025 |  |  |  | 40.2 |  |  |  | 106,150 |  |  |  | 53.7 |  |  |  | 105,277 |  |  |  | 14,838 |  |  |  | 61.2 |
Smart phone |  |  | 153,754 |  |  |  | 56.1 |  |  |  | 70,965 |  |  |  | 35.9 |  |  |  | 41,348 |  |  |  | 5,828 |  |  |  | 24.0 |
Others |  |  | 10,143 |  |  |  | 3.7 |  |  |  | 20,449 |  |  |  | 10.4 |  |  |  | 25,531 |  |  |  | 3,598 |  |  |  | 14.8 |
Total |  |  | 273,922 |  |  |  | 100 |  |  |  | 197,564 |  |  |  | 100 |  |  |  | 172,156 |  |  |  | 24,264 |  |  |  | 100 |

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The following table sets forth our revenues by geographic region and as a percentage of revenue for the fiscal years indicated:

|  | Year ended March 31, |
|  | 2022 |  |  | 2023 |  |  | 2024 |
Category |  | Amount |  |  | % |  |  | Amount |  |  | % |  |  | Amount |  |  | % |
|  | RMB |  |  |  |  |  | RMB |  |  |  |  |  | RMB |  |  | US$ |  |  |  |
|  | (in thousands, except for percentages) |
PRC |  |  | 70,314 |  |  |  | 25.7 |  |  |  | 82,481 |  |  |  | 41.7 |  |  |  | 106,216 |  |  |  | 14,971 |  |  |  | 61.7 |
Hong Kong |  |  | 18,949 |  |  |  | 6.90 |  |  |  | 14,228 |  |  |  | 7.20 |  |  |  | - |  |  |  | - |  |  |  | - |
Africa |  |  | 25,905 |  |  |  | 9.5 |  |  |  | 39,515 |  |  |  | 20 |  |  |  | 21,478 |  |  |  | 3,027 |  |  |  | 12.5 |
The United States |  |  | 28,154 |  |  |  | 10.3 |  |  |  | 18,158 |  |  |  | 9.2 |  |  |  | 15,415 |  |  |  | 2,173 |  |  |  | 9.0 |
Mexico |  |  | 12,315 |  |  |  | 4.5 |  |  |  | 26,199 |  |  |  | 13.3 |  |  |  | 8,465 |  |  |  | 1,193 |  |  |  | 4.9 |
South America |  |  | 118,285 |  |  |  | 43.2 |  |  |  | 951 |  |  |  | 0.5 |  |  |  | 14,431 |  |  |  | 2,033 |  |  |  | 8.4 |
Japan |  |  | - |  |  |  | - |  |  |  | 16,032 |  |  |  | 8.1 |  |  |  | 6,151 |  |  |  | 867 |  |  |  | 3.6 |
Total |  |  | 273,922 |  |  |  | 100 |  |  |  | 197,564 |  |  |  | 100 |  |  |  | 172,156 |  |  |  | 24,264 |  |  |  | 100 |

Overview

The table below sets forth certain line items from our consolidated statement of comprehensive loss (income) for the fiscal years ended March 31, 2022 and 2023:

|  | Year ended March 31, |
|  | 2022 |  |  | 2023 |  |  | 2024 |
|  | RMB |  |  | RMB |  |  | RMB |  |  | US$ |
|  | (in thousands) |
Revenues |  |  | 273,922 |  |  |  | 197,564 |  |  |  | 172,156 |  |  |  | 24,264 |
Costs of sales |  |  | 259,904 |  |  |  | 167,143 |  |  |  | 163,286 |  |  |  | 23,014 |
Gross profit |  |  | 14,018 |  |  |  | 30,421 |  |  |  | 8,870 |  |  |  | 1,250 |
Operating expenses |  |  | 44,619 |  |  |  | 108,026 |  |  |  | 39,010 |  |  |  | 5,498 |
Interest expenses |  |  | 4,875 |  |  |  | 6,149 |  |  |  | 3,617 |  |  |  | 510 |
Income (loss) before income taxes |  |  | (35,476 | ) |  |  | (83,754 | ) |  |  | (33,757 | ) |  |  | (4,758 | )
Income tax benefit |  |  | (46 | ) |  |  | (171 | ) |  |  | (171 | ) |  |  | (24 | )
Net loss from continuing operations |  |  | (35,430 | ) |  |  | (83,583 | ) |  |  | (33,586 | ) |  |  | (4,734 | )

| ● | We incurred net loss of RMB35.4 million and net loss of RMB83.6 million for the fiscal years ended March 31, 2022 and 2023, respectively. The 136% increase in loss was mainly due to the decrease of gross profit, increase of operating expenses and increase of interest expenses. For the fiscal years ended March 31, 2023 and 2024, we incurred net loss of RMB83.6 million and RMB33.6 million (US$4.7 million). The 59.8% decrease in loss was mainly due to the decrease of operating expenses and decrease of interest expenses, partially offset by the decrease of gross profit.

| ● | OEM/ODM revenue decreased from RMB274.0 million for the year ended March 31, 2022 to RMB197.6 million for the year ended March 31, 2023, representing a 28% decrease, which was mainly due to the decrease in smart phone and feature phone sales to customers in South America and the United states, partially offset by the increase in OEM/ODM sales in Mexico, Japan, Africa and China. OEM/ODM revenue decreased from RMB197.6 million for the year ended March 31, 2023 to RMB172.2 million (US$24.3 million) for the year ended March 31, 2024, representing a 13% decrease, which was mainly due to the decrease in smart phone and feature phone sales to customers in Mexico, Japan, Africa and the United states, partially offset by the increase in OEM/ODM sales in South America and China.

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| ● | We established sales channels in Mexico, Japan and Africa in 2022. We had a rapid growth in OEM/ODM revenue, especially in sales of feature phone and tablets, in these areas, such that aggregate sales in Mexico, Japan, and Africa contributed 14% and 41.4% of total revenue for the fiscal year ended March 31, 2022 and 2023, respectively. We switched our focus to Mainland China and South America markets, which showed great market potentials in the years ended March 31, 2023 and 2024. Aggregate sales in Mainland China and South America contributed 42.2% and 70.1% of total revenue for the fiscal year ended March 31, 2023 and 2024, respectively.

| ● | Operating expenses consist of selling expenses, general and administrative expenses, research and development (“R&D”) expenses and other (income) expense. The increase in operating expense for the fiscal year ended March 31, 2023 (compared to year ended March 31, 2022) was mainly due to the increase in general and administrative expenses, increase in R&D expenses and increase in selling expenses. The decrease in operating expense for the fiscal year ended March 31, 2024 (compared to year ended March 31, 2023) was mainly due to the decrease in general and administrative expenses and decrease in selling expenses.

| ● | Exchange rate between RMB and US Dollar considerably affected our financial results as approximately 40%-60% of our products were sold to customers outside of mainland China, and the exchange rate between the US Dollar and RMB considerably affected our financial results. We incurred RMB2.2 million exchange loss, and RMB4 million and RMB4.9 million of exchange gain for fiscal years ended March 31, 2022, 2023 and 2024, respectively, mainly due to fluctuations of exchange rates of RMB against US Dollar.

| ● | We provided RMB1.7 million, wrote off RMB0.4 million and provided RMB 0.7 million of impairment reserve on obsolete inventory for the fiscal years ended March 31, 2022, 2023 and 2024. We also provided allowance of RMB1.4 million and RMB nil and RMB 0.2 million on doubtful receivables for the fiscal years ended March 31, 2022, 2023 and 2024, respectively.

Comparison of the fiscal years ended March 31, 2024 and 2023

Revenue

Revenue for the year ended March 31, 2024 was RMB172.2 million (US$24.3 million), a decrease of RMB25.4 million, or 12.9%, from RMB197.6 million for the year ended March 31, 2023. The decrease was attributable to the decrease in OEM/ODM sales.

Cost of sales

Cost of sales for the fiscal year ended March 31, 2024 was RMB163.3 million (US$23 million), a decrease of RMB3.8 million, or 2.3%, from RMB167.1 million for the year ended March 31, 2023. The decrease was mainly due to the decrease of sales volume and change of product mix.

Our cost of sales mainly consists of cost of raw materials, third party processing fees and rental of building and machinery.

We import screens and mother boards from overseas and purchase camera, battery and electronic components from domestic markets for mobile phone processing and assembling.

We wrote off impairment reserve of RMB0.4 million and provided impairment reserve of RMB 0.7 million on obsolete inventory, which are recorded in cost of sales for the years ended March 31, 2023 and 2024.

Gross profit

Gross profit for the year ended March 31, 2024 was RMB8.9 million (US$1.3 million), representing a decrease of RMB21.5 million, or 70.8%, from the gross profit of RMB30.4 million for the year ended March 31, 2023 as a result of factors mentioned above.

Overall gross profit margin for the fiscal year ended March 31, 2024 was 5.2%, or 10.2% lower, as compared to gross profit margin of 15.4% for the fiscal year ended March 31, 2023. The decrease was mainly due to decrease of average selling price of feature phones and the increasing unit cost of materials.

Operating expenses

|  | Year ended March 31, |
|  | 2023 |  |  | 2024 |
|  | RMB |  |  | US$ |  |  | RMB |  |  | US$ |
|  | (in thousands) |
Selling expenses |  |  | 7,373 |  |  |  | 1,073 |  |  |  | 6,356 |  |  |  | 896 |
General and administrative expenses(1) |  |  | 89,206 |  |  |  | 12,982 |  |  |  | 24,065 |  |  |  | 3,392 |
R&D related expenses(1) |  |  | 15,980 |  |  |  | 2,325 |  |  |  | 16,646 |  |  |  | 2,346 |
Other (income) expenses, net |  |  | (4,533 | ) |  |  | (660 | ) |  |  | (8,057 | ) |  |  | (1,136 | )
Total |  |  | 108,026 |  |  |  | 15,720 |  |  |  | 39,010 |  |  |  | 5,498 |

(1) | These expenses are combined as general and administrative expenses in consolidated statements of comprehensive income (loss).

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Our operating expenses consist of selling expenses, general and administrative expenses, R&D expenses and other expenses, net. Operating expenses decreased by RMB69 million, or 63.9%, from RMB108 million for the year ended March 31, 2023 to RMB39 million (US$5.5 million) for year ended March 31, 2022. The net decrease in our operating expenses was attributed to (i) decrease in general and administrative expenses by RMB65.1 million (ii) increase in R&D expenses by RMB0.6 million (iii) decrease in selling expenses by RMB1.0 million and (iv) net increase of other income by RMB3.5 million for the year ended March 31, 2024.

Selling expenses consist of salary and benefits, business travel, shipping expenses, entertainment, market promotion and other expenses relating to our sales and marketing activities. The increase in selling expense was mainly due to increase expenses on consumables.

General and administrative expenses primarily include salary and benefits to our accounting, human resources, design and executive office staff, rental expenses, property management and utilities, office supplies. The decrease was mainly due to (i) issuance of 5,300,000 shares of common stock valued at $9,301,500 to participants in September 2022, and (ii) decrease in manpower costs due to optimization of resources.

R&D related expenses mainly consist of salary and benefits, material and consumables and other expenses to carry out R&D activities. The increase in R&D expenses was mainly due to increase in R&D expenses incurred in the UTime Guangxi. R&D related expenses are included in general and administrative expenses in the income statement.

Other expenses, net for the year ended March 31, 2024 was net income of RMB8.1 million (US$1.1 million), as compared to net income of RMB4.5 million for the year ended March 31, 2023. The increase of income was mainly attributed to the exchange gain due to appreciation of U.S. Dollar against RMB and increase in government subsidy.

Income tax benefits

Income tax deferred benefit is RMB0.1 million for the years ended March 31, 2023 and 2024.

Net loss

As a result of the above, net loss was RMB33.6 million (US$4.7 million) for the year ended March 31, 2024 compared to net loss of RMB83.6 million for the year ended March 31, 2023.

Comparison of the fiscal years ended March 31, 2023 and 2022

Revenue

Revenue for the year ended March 31, 2023 was RMB197.6 million (US$28.8 million), a decrease of RMB76.3 million, or 27.9%, from RMB273.9 million for the year ended March 31, 2022. The decrease was attributable to the decrease in OEM/ODM sales.

Cost of sales

Cost of sales for the fiscal year ended March 31, 2023 was RMB167.1 million (US$24.3 million), a decrease of RMB92.8 million, or 35.7%, from RMB259.9 million for the year ended March 31, 2022. The decrease was mainly due to the decrease of sales volume and change of product mix.

Our cost of sales mainly consists of cost of raw materials, third party processing fees and rental of building and machinery.

We import screens and mother boards from overseas and purchase camera, battery and electronic components from domestic markets for mobile phone processing and assembling.

We provided impairment reserve on obsolete inventory of RMB0.3 million and wrote off RMB0.4 million (US$0.06 million), which are recorded in cost of sales for the year ended March 31, 2022 and 2023.

Gross profit

Gross profit for the year ended March 31, 2023 was RMB30.4 million (US$4.4 million), representing an increase of RMB16.4 million, or 117.1%, from the gross profit of RMB14.0 million for the year ended March 31, 2022 as a result of factors mentioned above.

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Overall gross profit margin for the fiscal year ended March 31, 2023 was 15.4%, or 10.3% higher, as compared to gross profit margin of 5.1% for the fiscal year ended March 31, 2022. The increase was mainly due to increase of sales of higher-end feature phones, tablets and technical services provided to customers, which had contributed to higher margin in the year ended March 31, 2023.

Operating expenses

|  | Year ended March 31, |
|  | 2022 |  |  | 2023 |
|  | RMB |  |  | US$ |  |  | RMB |  |  | US$ |
|  | (in thousands) |
Selling expenses |  |  | 5,282 |  |  |  | 832 |  |  |  | 7,373 |  |  |  | 1,073 |
General and administrative expenses(1) |  |  | 23,762 |  |  |  | 3,743 |  |  |  | 89,206 |  |  |  | 12,982 |
R&D related expenses(1) |  |  | 14,070 |  |  |  | 2,216 |  |  |  | 15,980 |  |  |  | 2,325 |
Other (income) expenses, net |  |  | 1,505 |  |  |  | 237 |  |  |  | (4,533 | ) |  |  | (660 | )
Total |  |  | 44,619 |  |  |  | 7,029 |  |  |  | 108,026 |  |  |  | 15,720 |

(1) | These expenses are combined as general and administrative expenses in consolidated statements of comprehensive income (loss).

Our operating expenses consist of selling expenses, general and administrative expenses, R&D expenses and other expenses, net. Operating expenses increased by RMB63.4 million, or 142.1%, from RMB44.6 million for the year ended March 31, 2022 to RMB108 million (US$15.7 million) for year ended March 31, 2023. The net increase in our operating expenses was attributed to (i) increase in general and administrative expenses by RMB65.4 million (ii) increase in R&D expenses by RMB1.9 million (iii) increase in selling expenses by RMB2.1 million and (iv) net increase of other income by RMB6.0 million for the year ended March 31, 2023.

Selling expenses consist of salary and benefits, business travel, shipping expenses, entertainment, market promotion and other expenses relating to our sales and marketing activities. The increase in selling expense was mainly due to increase expenses on moulds and consumables.

General and administrative expenses primarily include salary and benefits to our accounting, human resources, design and executive office staff, rental expenses, property management and utilities, office supplies. The increase was mainly due to (i) issuance of 5,300,000 shares of common stock valued at $9,301,500 to participants and (ii) increase in manpower costs in new subsidiaries in Guangxi, China.

R&D related expenses mainly consist of salary and benefits, material and consumables and other expenses to carry out R&D activities. The increase in R&D expenses was mainly due to increase in R&D expenses incurred in the new subsidiary in Guangxi, China. R&D related expenses are included in general and administrative expenses in the income statement.

Other expenses, net for the year ended March 31, 2023 was net income of RMB4.5 million (US$0.7 million), as compared to net expense of RMB1.5 million for the year ended March 31, 2022. The increase of income was mainly attributed to the exchange gain due to appreciation of U.S. Dollar against RMB and changes in doubtful account provision, partially offset by decrease in government subsidy.

Income tax expenses (benefits)

Income tax deferred benefit is RMB0.05 million and RMB0.1 million for the year ended March 31, 2022 and 2023, respectively.

Net loss

As a result of the above, net loss was RMB83.6 million (US$12.1 million) for the year ended March 31, 2023 compared to net loss of RMB35.4 million for the year ended March 31, 2022.

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Cash, Cash Equivalents and restricted cash

The following table sets forth certain historical information with respect to our statements of cash flows:

|  | Year ended March 31, |
|  | 2022 |  |  | 2023 |  |  | 2024 |
|  | RMB |  |  | RMB |  |  | RMB |  |  | US$ |
|  | (in thousands) |
Net cash provided by (used) in operating activities |  |  | (20,865 | ) |  |  | (15,138 | ) |  |  | (376,176 | ) |  |  | (53,021 | )
Net cash used in investing activity |  |  | (5,832 | ) |  |  | (2,900 | ) |  |  | 5,520 |  |  |  | 778 |
Net cash provided by financing activities |  |  | 86,888 |  |  |  | 18,295 |  |  |  | 372,163 |  |  |  | 52,455 |
Effect of exchange rate changes on cash and cash equivalents |  |  | (2,476 | ) |  |  | 4,985 |  |  |  | 3,234 |  |  |  | 456 |
Net increase (decrease) in cash and cash equivalents and restricted cash |  |  | 57,715 |  |  |  | 5,242 |  |  |  | 4,741 |  |  |  | 668 |

We had cash, cash equivalent and restricted cash of approximate RMB67.2 million, RMB72.4 million and RMB77.2 million (US$10.9 million) as of March 31, 2022 and 2023 and March 31, 2024, respectively.

Operating activities

Net cash used in operating activities was RMB376.2 million (US$53 million) for the year ended March 31, 2024. The balance represented a decrease of cash flow of RMB361.1 million from RMB15.1 million used in the year ended March 31, 2023. Total net loss for the year ended March 31, 2024 was RMB62.2 million (US$8.8 million), including a loss of RMB28.6 million from discontinued operations. The difference between total net loss and the net cash used in operating activities are attributed to the changes in various asset and liability account balances throughout the year ended March 31, 2024. Major changes are i) decrease of accounts receivable in the amount of RMB4.1 million (US$0.6 million, an increase to cash) resulted from a decline in sales, ii) decrease of accounts payable in the amount of RMB10.6 million (US$1.5 million, a decrease to cash), iii) decrease of RMB4.5 million (US$0.6 million, an increase to cash) in the ending inventory balance as of March 31, 2024, iv) increase of RMB361.6 million (US$51.0 million) in prepayment and other current assets (a decrease to net cash) which was mainly due to the advance paid to suppliers, v) increase of RMB4.2 million (US$0.6 million) in other payables and accrued liabilities (an increase to net cash), vi) increase of RMB2.9 million (US$0.4 million) in net amount of related parties (an increase to net cash) during the year ended March 31, 2024. In addition, the Company had non-cash expenses relating to depreciation and amortization in the amount of RMB6.7 million (US$0.9 million), provision of impairment reserve of RMB 0.7 million on obsolete inventory, provision for doubtful account of RMB0.2 million (US$0.02 million) and issuance of common stock as incentive of RMB8.9 million (US$1.3 million).

Net cash used in operating activities was RMB15.1 million (US$2.2 million) for the year ended March 31, 2023. The balance represented an increase of cash flow of RMB5.8 million (US$1.1 million), or 27.5%, from RMB20.9 million used in the year ended March 31, 2022. Net loss for the year ended March 31, 2023 was RMB90.0 million (US$13.1 million), including a loss RMB6.4 million from discontinued operations.. The difference between net loss and the net cash used in operating activities are attributed to the changes in various asset and liability account balances throughout the year ended March 31, 2023. Major changes are i) increase of accounts receivable in the amount of RMB27.5 million (US$4.0 million, a decrease to cash) resulted from a decline in sales, ii) increase of accounts payable in the amount of RMB18.2 million (US$2.7 million, an increase to cash), iii) decrease of RMB17.3 million (US$2.5 million, an increase to cash) in the ending inventory balance as of March 31, 2023, iv) increase of RMB22.9 million (US$3.3 million) in prepayment and other current assets (a decrease to net cash) v) increase of RMB8.3 million (US$1.2 million) in other payables and accrued liabilities (an increase to net cash), vi) increase of RMB0.9 million (US$0.1 million) in net amount of related parties (an increase to net cash) during the year ended March 31, 2023. In addition, the Company had non-cash expenses relating to depreciation and amortization in the amount of RMB5.8 million (US$0.8 million), written-off provision for obsolete inventory of RMB0.4 million (US$0.1 million), and issuance of common stock as incentive of RMB63.7 million (US$9.3 million).

Investing activities

Net cash provided by investing activities for fiscal year ended March 31, 2024 was RMB5.5 million (US$0.8 million) as compared to net cash used in investing activities of RMB2.9 million for the fiscal year ended March 31, 2023. Cash proceed of RMB6.5 million (US$0.9 million) was received for sale-leaseback of equipment.

Net cash used in investing activities for fiscal year ended March 31, 2023 was RMB2.9 million (US$0.4 million) as compared to net cash used in investing activities of RMB5.8 million for the fiscal year ended March 31, 2022. Cash used in the year ended March 31, 2022 were for payments of property and equipment of RMB2.6 million (US$0.4 million).

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Financing activities

Net cash provided by financing activities for year ended March 31, 2024 was RMB372.1 million (US$52.5 million) as compared to RMB18.3 million for the year ended March 31, 2022. The cash inflow was mainly attributable to proceeds from issuance of common stock to non-U.S. Persons in March 2024.

Net cash provided by financing activities for year ended March 31, 2023 was RMB18.3 million (US$2.7 million) as compared to RMB86.9 million for the year ended March 31, 2022. The cash inflow was mainly attributable to proceeds from short-term borrowings.

Contractual Obligations

In September 2019, UTime SZ signed a lease agreement with Fumeibang for a term of one year, with an annual rental payment of approximately RMB1.0 million (US$0.15 million) and was most recently renewed on April 1, 2022.

On September 1, 2017, UTime GZ entered a lease agreement with Guizhou Jietongda Technology Co., Ltd. (“Jietongda”). Jietongda agreed to lease the factory building located in Xinpu District of Guizhou, China to UTime GZ, for a term of up to 4.5 years, with an annual rental payment of approximately RMB 4.2 million (US$0.6 million).

During the year ended March 31, 2020, UTime GZ entered into supplementary agreement with Jietongda and modified the original warehouse lease contract effective since September 1, 2017. Total lease amount reduced from RMB18.9 million (US$2.7 million) to RMB7.5 million (US$1.1 million) for the 4 years and 6 months’ lease period.

On September 1, 2017, UTime GZ entered into a lease agreement with Jietongda. Jietongda agreed to lease the equipment for processing mobile phones to UTime GZ, for a term of up to 5 years, with an annual rental payment of approximately RMB0.6 million (US$0.1 million).

In November 2021, UTime Guangxi entered into a Factory Lease Agreement to lease Factory for production from Nanning Industrial Investment Group Cp., Ltd, for a term of up to 5 years, with a monthly rental payment of RMB 384,853.8 (including 6 months rent-free period).

In March 2022, UTime Guangxi entered into a Lease Agreement to lease dormitory for staff from Nanning Industrial Investment Group Cp., Ltd, for a term from March 25, 2022 to March 31, 2027, with a monthly rental payment of RMB 30,706.06.

Financing with Sale-Leaseback

UTime Guangxi entered into a sale-leaseback arrangement (the “Lease Financing Agreement”) with Chailease International Financial Leasing Corp. (“CIFLC”) on January 31, 2024, for a total financing proceeds in the amount of RMB 6.5 million (approximately US$0.9 million). Under the sale-leaseback arrangement, UTime Guangxi sold the Leased Equipment to CIFLC for RMB 6.5 million (approximately US$0.9 million). Concurrent with the sale of equipment, UTime Guangxi leases back the equipment sold to CIFLC for a lease term of five years. At the end of the lease term, UTime Guangxi may buy back the Leased Equipment for free. The Leased Equipment in amount of RMB 6.5 million was recorded as right of use assets and the net present value of the minimum lease payments was recorded as lease liability and calculated with CIFLC’s implicit interest rate of 10.7% per annum and stated at RMB 6.45 million at the inception of the lease on January 31, 2024.

UTime Guangxi made payments due according to the schedule. As of March 31, 2024, the balance of Leased Equipment net of amortization was RMB 6.46 million. The lease liability was RMB 3.1 million and its current portion in the amount of RMB 2.9 million as of March 31, 2024.

The following table sets forth our contractual obligations as of March 31, 2024, which included the lease and loan arrangement described above:

Payments due by period (in thousands) |
Contractual obligations |  | Total |  |  | Less than 1 year |  |  | 1-2 years |  |  | 2-3 years |  |  | More than 3 years |
Short term borrowings |  |  | 56,949 |  |  |  | 56,949 |  |  |  | - |  |  |  | - |  |  |  | - |
Current portion of long-term borrowings |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Long term borrowings |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Operating lease payments |  |  | 11,931 |  |  |  | 4,575 |  |  |  | 4,575 |  |  |  | 2,781 |  |  |  | - |
Finance lease payments |  |  | 6,715 |  |  |  | 3,390 |  |  |  | 3,104 |  |  |  | 78 |  |  |  | 143 |
Total |  |  | 75,595 |  |  |  | 64,914 |  |  |  | 7,679 |  |  |  | 2,859 |  |  |  | 143 |

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5C. Research and Development, Patents and Licenses, etc.

See the discussion under the headings “Research and Development” and “Intellectual Property” in Item 4 above.

5D. Trend Information

The factors that will most significantly affect results of operations will be (i) the industry outlook of cell phone and consumer electronics, (ii) the sustainability of our client source, (iii) the development and penetration of existing market and new market, (iv) the ability of our R&D capacity, and (v) the outbreak of coronavirus. Our revenues will be significantly impacted by the combination of the above factors discussed.

The global consumer electronics, network communication and other products have a shorter update cycle, which has brought huge market demand and is expected to maintain rapid development in the future. However, the shorter product update cycle and increasing market demand also strengthen the competition. Overall, demand of feature phones is decreasing and being replaced by smartphones while smartphones are upgraded faster and demand of them becomes more unstable.

OEM/ODM orders were our principal source of revenue for the fiscal years ended March 31, 2023 and 2024, respectively. Sustaining the customer source may help us secure our OEM/ODM orders. We developed a few new customers in mainland China and South America. We also developed business in Mexico and Africa. During the fiscal year ended March 31, 2023 and 2024, aggregate sales in mainland China, South America, Mexico, and Africa contributed 75.5% and 87.5% of total revenue, respectively.

The implementation of our strategy in new markets depends on our R&D capacity in feature phones, smartphones and other consumer electronics considerably. If we had sufficient R&D capacity, we might have the opportunity to penetrate the existing market faster, retain more market shares and be able to develop another replicable market.

Although we intend to grow our in-house brands, it is expected that in the near term, both OEM/ODM orders and sale of our own in-house brand sales will be our principal sources of cash flow over the next two years. Cash flow from the OEM/ODM orders depends on the quantity and the price of the order, whereas cash flow from sale of in-house brand cell phone product depends on the quality of production and the profit obtained by the production. An increase in OEM/ODM orders or sale of in-house brand cell phone products will enable us to expand our operations with the increasing internally-generated funds and may allow us to obtain equity and debt financing more easily or on better terms, lessening the difficulty of obtaining financing.

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A decline in sales (i) will reduce our internally-generated cash flow, which in turn will reduce the available funds for securing clients and developing existing markets, (ii) will increase the difficulty of obtaining equity and debt financing and worsen the terms on which such financing may be obtained, and (iii) will affect the activities of R&D which considerably determines our development in new products and new markets.

The continuing outbreak of the coronavirus in China and globally (i) could affect our production utilization and logistics, which could directly affect our timely delivery of our products and collection of cash flow, (ii) if outbreaks recur worldwide, the entire industry could be negatively affected, leading to a certain extent of shortages in supply that could eventually raise key components price overall. As a consequence, our production cost could increase whereas our profit could decrease.

Other than the foregoing, the management is unaware of any trends, events or uncertainties that will have, or are reasonably expected to have, a material impact on sales, revenues or expenses.

5E. Critical Accounting Estimates

Management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP). The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expense during the reporting period.

We have identified the following accounting estimates and assumptions which involve significant subjectivity and judgment, and changes to such estimates or assumptions could have a material impact on our financial condition or operating results. Therefore, we consider an understanding of the variability and judgment required in making these estimates and assumptions to be critical in fully understanding and evaluating our reported financial results.

Allowances of Doubtful Accounts

Description: Accounts receivable and other receivables are reflected in our consolidated balance sheets at their estimated collectible amounts. A substantial majority of our accounts receivable are derived from sales to well-known technological clients. We follow the allowance method of recognizing uncollectible accounts receivable and other receivables, pursuant to which we regularly assess our ability to collect outstanding customer invoices and make estimates of the collectability of accounts receivable and other receivables. We provide an allowance for doubtful accounts when we determine that the collection of an outstanding customer receivable is not probable.

Judgments and Uncertainties: The allowance for doubtful accounts is reviewed on a timely basis to assess the adequacy of the allowance. We take into consideration (a) historical bad debts experience, (b) any circumstances of which we are aware of a customer’s or debtor’s inability to meet its financial obligations, (c) changes in our customer or debtor payment history, and (d) our judgments as to prevailing economic conditions in the industry and the impact of those conditions on our customers and debtors.

Sensitivity of Estimate to Change: The uncollectible amounts estimated are based on review on regular basis. If circumstances change, such that the financial conditions of our customers or debtors are adversely affected and they are unable to meet their financial obligations to us, we may need to record additional allowances, which would result in a reduction of our net income

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Impairment of Inventories

Description: Inventories of the Company consist of raw materials, finished goods and work in process. Inventories are stated at lower of cost or net realizable value with cost being determined on the weighted average method. Inventory is stated at cost unless an impairment exists, in which case it is written down to fair value in accordance with GAAP.

Judgments and Uncertainties: The Company assesses the valuation of inventory and periodically writes down the value for estimated excess and obsolete inventory based upon the product life-cycle. The market value of the inventories are estimated based on the current market situation and historical experience on similar inventories.

Sensitivity of Estimate to Change: Should the estimates or expectations used in determining estimated net realizable value deteriorate in the future, we may be required to recognize additional impairment charges and write-offs and such amounts could be material.

Impairment of long-lived assets

Description: We review the carrying value of long-lived assets to be held and used when events and circumstances warrants such a review. The carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash flow from such asset is separately identifiable and is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair market value of the long-lived asset.

Judgments and Uncertainties: Since the market value of the assets cannot be obtained reliably, we evaluate the impairment of the long-lived assets by comparing the carrying value of the assets to an estimate of future undiscounted cash flows expected to be generated from the use of the assets and their eventual disposition based on the historical trends and existing macroeconomic conditions.

Sensitivity of Estimate to Change: Should the estimates or expectations deteriorate in the future, we may be required to recognize additional impairment charges and write-offs and such amounts could be material.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

6.A. Directors, Executive Officers and Key Employees

The following table sets forth the name, age, positions and a brief description of the business experience of each of our directors, executive officers and key employees as of the date hereof.

Name |  | Age |  | Position
Hengcong Qiu |  | 39 |  | Chief Executive Officer and Chairman of the Board of Directors
Minfei Bao |  | 51 |  | Director
Yihuang Chen |  | 44 |  | Chief Operating Officer
Honggang Cao |  | 43 |  | Chief Manufacturing Officer
Shibin Yu |  | 40 |  | Chief Financial Officer
Xiaoqian Jia |  | 41 |  | Independent Director and Chair of Nominating and Corporate Governance Committee
Na Cai |  | 38 |  | Independent Director and Chair of Audit Committee
Hailin Xie |  | 44 |  | Independent Director and Chair of Compensation Committee

There are no family relationships among our directors and officers. There are no arrangements or understandings with major shareholders, customers, suppliers or others, pursuant to which any person referred to above was selected as a director or member of senior management. The address of each of our directors and executive officers is c/o UTime Limited, 7th Floor, Building 5A, Shenzhen Software Industry Base, Nanshan District, Shenzhen, People’s Republic of China, 518061.

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Executive Officers and Directors

Hengcong Qiu has been served as our Chief Executive Officer and Chairman of the Board of Directors since May 2023. Before joining our company, Mr. Qiu served as a Marketing VP of Shenzhen Radical Stone Weiye Fund Management Co., Ltd. between September 2020 to September 2021. He was responsible for the fund-raising business, sales management, branch and subsidiary management as well as partner institution management. Prior to that, Mr. Qiu served as a VP at Zhuhai Huiyin Chengyuan Investment Management Co., Ltd. from August 2017 until August 2020. He was responsible for fund raising business as well as client management. From June 2015 to July 2017, Mr. Qiu served as Sales Director at Shenzhen Radical Stone Weiye Fund Management Co., Ltd. From December 2011 to August 2015, Mr. Qiu served as a Department Manager in Everbright Bank. Mr. Qiu earned a bachelor’s degree in Guangdong University of Technology in China and is currently enrolled in EMBA program in Tsinghua University.

Minfei Bao is our founder and has served as our director since December 2019. Between December 2019 to May 2023, Mr. Bao was our Chief Executive Officer, and between October 2018 to May 2023, he served as our Chairman of the Board of Directors. Mr. Bao has also served as the Chief Executive Officer of UTime SZ since June 2008. From March 2006 to March 2008, Mr. Bao served as the general manager at United Creation Technology Co., Ltd., a mobile phone manufacturer (currently publicly traded on Chinese National Equities Exchange And Quotations Co., Ltd., or NEEQ). From March 1999 to March 2006, Mr. Bao served as Vice President at TCL Communication Technology Holdings Limited, a global mobile terminal manufacturer and internet service provider. From May 1997 to March 1999, Mr. Bao served as a manager in wireless technology application department at UTStarcom Incorporated, a global telecom infrastructure provider (NASDAQ: UTSI). Mr. Bao received a B.A. from the University of Electronic Science and Technology of China (UESTC). We believe Mr. Bao’s extensive experience qualifies him to serve on our board of directors.

Yihuang Chen has served as our Chief Operating Officer since December 2019 and has been the Senior Vice President of Product of UTime SZ since March 2015. From July 2011 to August 2015, Mr. Chen served as a Vice President of Product at Shenzhen Hongyu Technology Co., Ltd, an optical and optoelectronic materials provider. From April 2009 to June 2011, Mr. Chen served as a Vice President at Shenzhen Suopuxunda Technology Co., Ltd, a mobile terminal provider. From July 2008 to March 2009, Mr. Chen served as a Director of Product at Beijing Songliankate Co., Ltd. From July 2003 to June 2008, Mr. Chen served as a Senior Project Manager and Senior Structural Engineer at Amoi Technology Co., Ltd, a mobile terminal manufacturer and service provider (currently publicly traded on Shanghai Stock Exchange). Mr. Chen received a B.A. from the Guilin University of Technology.

Honggang Cao has served as our Chief Manufacturing Officer since December 2019 and has been the Senior Vice President of Manufacture of UTime SZ since December 2010. From December 2009 to 2010, Mr. Cao served as the Head of Quality Control and Procurement Manager at Shenzhen Geli Telecommunication Technology Co., Ltd. From September 2006 to August 2008, Mr. Cao served as the Head of Quality Control at United Creation Technology Co., Ltd, a mobile phone manufacturer (currently publicly traded on NEEQ). From July 2004 to August 2006, Mr. Cao served as a Quality Engineer at TCL Communication Technology Holdings Limited, a global mobile terminal manufacturer and internet service provider. Mr. Cao received a B.A. from the North University of China.

Shibin Yu has served as our Chief Financial Officer since December 2019 and has been the financial manager and controller of UTime SZ since March 2019. From June 2017 to March 2019, Mr. Yu served as a senior associate at BDO China Shu Lun Pan Certified Public Accountants LLP. From November 2013 to April 2017, Mr. Yu served as the Taxation Supervisor at Edan Instruments, Inc, a Medical Electronic Equipment manufacturer (currently publicly traded on SZSE: 300326). From February 2012 to September 2013, Mr. Yu served as the Accounting Head at Shenzhen Dazu Photovoltaic Technology Co., Ltd, a photovoltaic equipment provider. Mr. Yu received a B.A. from Dezhou University. Mr. Yu is also qualified as a Certified Public Accountants in China and is a CFA Charterholder.

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Xiaoqian Jia has served as our director since May 2023. Mr. Jia has been serving as Chief Executive Officer of CORNS (Singapore)’s Thailand Operation Center since 2022. From 2021 to 2022, Mr. Jia served as COO and operating director of YD PLASTICS. He formulated development and sales strategies, annual plans, and budgets for investment operations. Prior to YD PLASTICS, Mr. Jia served as CEO of Beijing Dynamic Future Technology Education Co. between 2020 and 2021. From 2016 to 2018, Mr. Jia served as Chief Operating Officer of Harbin Wright Brothers Flight Technology Co., Ltd. As COO, Mr. Jia assisted the technical research and development department to improve simulators. Mr. Jia also assisted in implementing product promotion and project implementation and completed the launch of 1000 simulation machines in the Chinese market. Mr. Jia earned a bachelor’s degree in Electronic Computer Communication Engineering from Nanyang Technological University and a master’s degree in Business Administration from University of Southampton. He is pursuing PhD degree of Business Administration in the Bangkokthonburi University.

Na Cai has over 10 years of financial and managerial experience in the technology and financial service industry and has served as our director since July 2023. Since 2015, Ms. Cai has served as a director of Bluestone Securities (HK) Co., Limited and the Chief Financial Officer of Bluestone International Holdings (HK) Co., Ltd. She was the Finance Manager at Shenzhen Qianhai Sanchuan Asset Management Co., Ltd. between 2013 and 2015. From 2011 to 2013, Ms. Cai served as the Finance Controller of Shenzhen Qingfengyuan Environmental Protection Technology Co., Ltd. During her tenure, Ms. Cai demonstrated leadership and experience in financial management, strategy development, and operations. Ms. Cai received her bachelor’s degree from Taishan Medical College, now known as Shandong First Medical University.

Hailin Xie, a director since July 2023, has over 20 years of business development and managerial experience in the healthcare industry. Since 2000, Mr. Xie has established several businesses in the healthcare industry that research, develop, and manufacture health supplements in China. Mr. Xie is the Chairman of Guangxi Fuxingyi Investment Group and the President of Guangxi God Fly Investment Group. Mr. Xie attended Guangxi University, where he majored in marketing.

Each of our directors will serve as a director until our next annual general meeting and until their successors are duly elected and qualified.

Board Diversity Matrix

The table below provides certain information regarding the diversity of our board of directors as of the date of this annual report.

Board Diversity Matrix
Country of Principal Executive Offices: |  |  | China |
Foreign Private Issuer |  |  | Yes |
Disclosure Prohibited under Home Country Law |  |  | No |
Total Number of Directors |  |  | 5 |

|  | Female |  |  | Male |  |  | Non-Binary |  |  | Did Not Disclose Gender |
Part I: Gender Identity |  |  |  |  |  |  |  |  |  |  |  |
Directors |  |  | 1 |  |  |  | 4 |  |  |  | - |  |  |  | - |
Part II: Demographic Background |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Underrepresented Individual in Home Country Jurisdiction |  |  |  |  |  |  |  |  |  |  | - |  |  |  |  |
LGBTQ+ |  |  |  |  |  |  |  |  |  |  | - |  |  |  |  |
Did Not Disclose Demographic Background |  |  |  |  |  |  |  |  |  |  | - |  |  |  |  |

6.B. Compensation

For the fiscal years ended March 31, 2024, we paid an aggregate of RMB 0.7 million (approximately $ 0.1 million) to our executive officers, and we paid an aggregate of US$ nil cash compensation to our non-executive directors. We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our directors and executive officers. Our PRC subsidiaries and consolidated variable interest entity 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.

Equity Awards

We have not granted any equity awards to our directors or executive officers during the fiscal year ended March 31, 2024.

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Employment Agreements

We have entered into employment agreements with each of our executive officers. Under these agreements, each of our executive officers is employed for an initial term of one year and is subject to successive, automatic one-year extensions unless either party gives notice of non-extension to the other party at least 30 days prior to the end of the applicable term.

The executive officers are entitled to a fixed salary and to participate in our equity incentive plans, if any and other company benefits, each as determined by the Board from time to time.

We may terminate the executive officer’s employment for cause, at any time, without notice or remuneration, for certain acts, such as conviction or plea of guilty to a felony or grossly negligent or dishonest acts to our detriment, or misconduct or a failure to perform agreed duties. In such case, the executive officer will not be entitled to receive payment of any severance benefits or other amounts by reason of the termination, and his right to all other benefits will terminate, except as required by any applicable law. We may also terminate his employment without cause upon 30 days’ advance written notice. In such case of termination by us, we are required to provide the following severance payments and benefits to the executive officer: a cash payment of one month of base salary as of the date of such termination for each year (which is any period longer than six months but no more than one year) and a cash payment of half month of base salary as of the date of such termination for any period of employment no more than six months, provided that the total severance payments shall not exceed twelve months of base salary.

The executive officer may terminate his employment at any time with 30 days’ advance written notice if there is any significant change in his duties and responsibilities or a material reduction in his annual salary. In such a case, the executive officer will be entitled to receive compensation equivalent to 3 months of his base salary. In addition, if we or our successor terminates the employment agreements upon a merger, consolidation, or transfer or sale of all or substantially all of our assets with or to any other individual(s) or entity, the executive officer shall be entitled to the following severance payments and benefits upon such termination: (1) a lump sum cash payment equal to 3 months of base salary at a rate equal to the greater of his annual salary in effect immediately prior to the termination, or his then current annua1 salary as of the date of such termination; (2) a lump sum cash payment equal to a pro-rated amount of target annual bonus for the year immediately preceding the termination; (3) payment of premiums for continued health benefits under our health plans for 3 months fo1lowing the termination; and (4) immediate vesting of 100% of the then-unvested portion of any outstanding equity awards held by the executive officer. The employment agreements also contain customary restrictive covenants relating to confidentiality, non-competition and non-solicitation, as well as indemnification of the executive officer against certain liabilities and expenses incurred by him in connection with claims made by reason of him being an officer of our company.

Director Agreements

In connection with the IPO, on April 5, 2021, the Company entered into director offer letters with David Bolocan, Lawrence G. Eckles and Mo Zou, respectively setting forth the terms and conditions of each of their service as independent directors to the Company. As such, effective April 5, 2021, the annual cash compensation for Mr. Bolocan, Mr. Eckles and Mr. Zou are $120,000, $100,000 and $100,000, respectively. Pursuant to the director offer letters, all or a portion of such fees may, in the sole discretion of the Board of Directors of the Company or a designated committee thereof, be paid in equity in lieu of cash; provided, that any such equity payments shall be made from the Company’s equity incentive plan.

On May 24, 2022, Mr. Eckles resigned from the Board of Directors, member of the Audit Committee and the Compensation Committee and Chairperson of the Nominating and Corporate Governance Committee of the Company due to his personal reasons. Mr. Eckles’ decision to resign did not arise or result from any disagreement with the Board or the Company on any matter relating to the Company’s operations, policies or practices.

Effective May 25, 2022, the Board appointed Weiyuan Wang to serve as a director on the Board, member of the Audit Committee and the Compensation Committee and Chairperson of the Nominating and Corporate Governance Committee to fill in the vacancy created by Mr. Eckles’ resignation until the Company’s next general meeting called for the election of directors. On May 27, 2022, the Company entered into a director offer letter with Mr. Wang pursuant to which Mr. Wang shall receive an annual compensation of $50,000.

On May 8, 2023, Mr. Min He and Mr. Weiyuan Wang resigned from the Board of Directors of the Company due to their personal reasons. Mr. He and Mr. Wang’s decisions to resign were not the result of any disagreement with the Company on any matter regarding its operation, policies (including accounting or financial policies) or practices.

Effective May 8, 2023, the Board appointed Hengcong Qiu and Xiaoqian Jia to serve as directors on the Board. The cash compensation for Mr. Qiu and Mr. Jia are approximately $435.60 (RMB 3,000) per person for each calendar year of service on a pro-rated basis which shall be paid on a quarterly basis in arrears plus reimbursement of reasonable pre-approved expenses in connection of performing their duties as the directors of the Company. All fees are subject to approval and/or change as deemed appropriate by the Board.

Effective June 11, 2023, the Board appointed Na Cai and Hailin Xie to serve as directors on the Board. The cash compensation for Ms. Cai and Mr. Xie are approximately $435.60 (RMB 3,000) per person for each calendar year of service on a pro-rated basis which shall be paid on a quarterly basis in arrears plus reimbursement of reasonable pre-approved expenses in connection of performing their duties as the directors of the Company. All fees are subject to approval and/or change as deemed appropriate by the Board.

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6.C. Board Practices

Terms of Directors and Officers

Expiration of Term of Directors

Our officers are appointed by and serve at the discretion of our board of directors and the shareholders voting by ordinary resolution. Our directors are not subject to a set term of office and hold office until the next general meeting called for the election of directors and until their successor is duly appointed or such time as they die, resign or are removed from office by a shareholders’ ordinary resolution. The office of a director will be vacated automatically if, among other things, the director resigns in writing, becomes bankrupt or makes any arrangement or composition with his/her creditors generally or is found to be or becomes of unsound mind.

Director Remuneration Upon Termination

The directors may receive such remuneration as our board of directors may determine from time to time. The compensation committee will assist the directors in reviewing and approving the compensation structure for the directors. Currently, our directors are not entitled to receive any remuneration upon termination of employment.

Audit Committee

Our board of directors consists of five directors, including two executive directors and three independent directors. We have also established an Audit Committee, a Nominating and Corporate Governance Committee and a Compensation Committee. We have adopted a charter for each of the three committees. Each of the committees of our board of directors has the composition and responsibilities described below.

Na Cai, Xiaoqian Jia and Hailin Xie serve as members of our Audit Committee. Ms. Na Cai serves as the chairman of the Audit Committee. Each of our Audit Committee members satisfies the “independence” requirements of the Nasdaq listing rules and meet the independence standards under Rule 10A-3 under the Exchange Act. We have determined that Na Cai possesses accounting or related financial management experience that qualifies him as an “audit committee financial expert” as defined by the rules and regulations of the SEC. Our Audit Committee oversees our accounting and financial reporting processes and the audits of our financial statements. Our Audit Committee performs several functions, including:

| ● | 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 the adequacy and effectiveness of our accounting and internal control policies and procedures and any special steps taken to monitor and control major financial risk exposures;

| ● | annually reviewing and reassessing 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 ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance; and

| ● | reporting regularly to the board.

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Compensation Committee

Na Cai, Xiaoqian Jia and Hailin Xie serve as members of our Compensation Committee. Mr. Hailin Xie serves as the chair of the Compensation Committee. All of our Compensation Committee members satisfy the “independence” requirements of the Nasdaq listing rules and meet the independence standards under Rule 10A-3 under the Exchange Act. Our Compensation Committee is responsible for overseeing and making recommendations to our board of our directors regarding the salaries and other compensation of our executive officers and general employees and providing assistance and recommendations with respect to our compensation policies and practices.

Nominating and Corporate Governance Committee

Na Cai, Xiaoqian Jia and Hailin Xie serve as members of our Nominating and Corporate Governance Committee. Mr. Xiaoqian Jia serves as the chair of the Nominating and Corporate Governance Committee. All of our Nominating and Corporate Governance Committee members satisfy the “independence” requirements of the Nasdaq listing rules and meet the independence standards under Rule 10A-3 under the Exchange Act. Our Nominating and Corporate Governance Committee is responsible for identifying and proposing new potential director nominees to the board of directors for consideration and reviewing our corporate governance policies.

6.D. Employees

See the section entitled “Employees” in Item 4.B above.

6.E. Share Ownership

As of July 29, 2024, there are 450,930,953 ordinary shares issued and outstanding. Holders of our ordinary shares are entitled to vote together as a single class on all matters submitted to shareholders for approval. No holder of ordinary shares has different voting rights from any other holders of ordinary shares.

Beneficial ownership is determined in accordance with the rules and regulations of the SEC. The percentages of shares beneficially owned in the table below are based on 450,930,953 ordinary shares outstanding as of July 29, 2024.

The following table sets forth information with respect to the beneficial ownership of our common shares as of July 29, 2024 by:

| ● | each of our directors and executive officers; and

| ● | each person known to us to beneficially own more than 5% of our outstanding ordinary shares.

Unless otherwise noted below, the address for each listed shareholder, director or executive officer is 7th Floor, Building 5A, Shenzhen Software Industry Base, Nanshan District, Shenzhen, People’s Republic of China, 518061.

|  | Ordinary shares beneficially owned |
Name |  | Number |  |  | % |
Directors and Executive Officers(1): |  |  |  |  |  |
Hengcong Qiu |  |  | - |  |  |  | - |
Minfei Bao |  |  | 4,380,000 |  |  |  | 0.97 |
Yihuang Chen |  |  | - |  |  |  |  |
Honggang Cao |  |  | - |  |  |  |  |
Shibin Yu |  |  | - |  |  |  | - |
Xiaoqian Jia |  |  | - |  |  |  | - |
Na Cai |  |  | - |  |  |  | - |
Hailin Xie |  |  | - |  |  |  | - |
All directors and executive officers as a group (eight persons) |  |  | 4,380,000 |  |  |  | 0.97 |
Principal Shareholders: |  |  |  |  |  |  |  |

(1) | Unless otherwise noted, the business address of each of the following entities or individuals is 7th Floor, Building 5A, Shenzhen Software Industry Base, Nanshan District, Shenzhen, People’s Republic of China, 518061.

None of our major shareholders have differing voting rights, and as of the date of this annual report, none of our outstanding ordinary shares are held by record holders in the United States. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company.

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Incentive Compensation

On April 24, 2024, we registered an aggregate of 58,817,092 ordinary shares, par value US$0.0001 per share, reserved for issuance under the UTime Limited 2024 Performance Incentive Plan (the “Plan”).

We have not issued any shares as of the date of this report.

The following is a summary of the principal terms of the Plan.

| ● | Purpose of Plan

The purpose of the Plan is to promote the success of the Company and to increase shareholder value by providing an additional means through the grant of awards to attract, motivate, retain and reward selected employees and other eligible persons and to enhance the alignment of the interests of the selected participants with the interests of the Company’s shareholders.

| ● | Eligibility and Plan Administration

Employees or directors or consultants or advisors may be determined as Eligible Persons and be granted awards under the Plan. The Board or committees established by the Board will administer the Plan as Administrator.

| ● | Ordinary Shares Subject to The Plan; Share Limits

The shares that may be issued under this Plan shall be the Company’s authorized but unissued Ordinary Shares and any Ordinary Shares held as treasury shares. The maximum number of Ordinary Shares that may be issued pursuant to awards granted to each Eligible Person under this Plan is equal to 58,817,092 Ordinary Shares; the maximum number of Ordinary Shares that may be issued under this Plan is 58,817,092 Ordinary Shares.

| ● | Awards

The types of awards that may be granted under this Plan are (i) Share Options, the grant of a right to purchase a specified number of Ordinary Shares during a specified period as determined by the Administrator; (ii) Share Appreciation Rights (“SAR”), a right to receive a payment, in cash and/or Ordinary Shares, equal to the excess of the fair market value of a specified number of Ordinary Shares on the date the SAR is exercised over the “base price” of the award, which base price shall be determined by the Administrator and set forth in the applicable award agreement; (iii) other awards, including restricted shares, restricted share units, and dividend equivalent rights.

| ● | Effective Date, Termination and Suspension, Amendments

Unless earlier terminated by the Board, this Plan shall terminate at the close of business on the day before the tenth anniversary of the Effective Date. After the termination of this Plan, no additional awards may be granted under this Plan, but previously granted awards shall remain outstanding in accordance with their applicable terms and conditions and the terms and conditions of this Plan. The Board may, at any time, terminate or, from time to time, amend, modify or suspend this Plan, in whole or in part. No awards may be granted during any period that the Board suspends this Plan.

F. Disclosure of a registrant’s action to recover erroneously awarded compensation.

Not applicable.

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ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

7.A. Major Shareholders

See Item 6.E., “Share Ownership,” for a description of our major shareholders.

7.B. Related Party Transactions

Set forth below are the related party transactions of our company that occurred since the beginning of the last fiscal year up to the date of this report. The transactions are identified in accordance with the rules prescribed under Form 20-F and may not be considered as related party transactions under PRC law.

Amounts due from/to Philectronics Inc. (“Philectronics”)

As of the date of this annual report, the amount due from Philectronics was RMB0.5 million (US$0.1 million). As of the date of this annual report, the amount due to Philectronics was RMB0.5 million (US$0.1 million).

Due from Related Parties

As of March 31, 2022, the Company had amounts due from Mr. Bao of RMB0.05 million (US$0.01 million). which was received by the Company on August 15, 2022. As of the date of this annual report, the Company had no amounts due from Mr. Bao.

As of March 31, 2022, the Company had amounts due from Grandsky Phoenix Limited of RMB0.9 million (US$0.1 million), which was received by the Company on August 26, 2022.

As of the date of this annual report, the Company had no amounts due from Grandsky Phoenix Limited.

Due to Related Parties

As of March 31, 2023, the Company had amounts due to Mr. Bao of RMB4.8 million (US$0.7 million).

In April and May 2020, Mr. Bao provided loans of RMB0.9 million (US$0.1 million) to the Company and the Company paid RMB1.5 million (US$0.2 million) to Mr. Bao. On September 17, 2021, Mr. Bao entered into a loan agreement with China Resources Bank of Zhuhai Co., Ltd. and borrowed RMB3.0 million (US$0.5 million). The loan is restricted on purpose only to support daily operation for the Companies that is controlled by Mr. Bao. The loan was repaid on March 17, 2022 and the agreement was renewed on March 18, 2022. On September 19, 2022, this loan was repaid and renewed, total loan amount was reduced to RMB 2.0 million (US$0.3 million).

As of the date of this annual report, the Company has amounts due to Mr. Bao of RMB11.8 million (US$1.7 million).

Loans from Mr. Bao

As of March 31, 2024, a loan balance of RMB 11.5 (US$ 1.6 million) was included in the total amounts due to Mr. Bao. See “Due to Related Parties” above.

Variable Interest Entity Arrangements

See “History and Corporate Structure - Contractual Arrangements with the VIE and its Respective Shareholders.”

Share Issuances

In April 2020, we repurchased 7,620,000 and 239,721 ordinary shares, which were subsequently cancelled, at par value from our shareholders Grandsky Phoenix Limited and HMercury Capital Limited, respectively, pursuant to a share repurchase agreement that the Company entered into with Grandsky Phoenix Limited and HMercury Capital Limited on April 29, 2020. Both Grandsky Phoenix Limited and HMercury Capital Limited confirmed that they have opted not to receive the consideration for the Repurchased Shares and made a pure capital contribution in the sum of the purchase price in favor of the Company without the issue of additional shares of the Company. In April 2021, we completed our initial public offering of 3,750,000 ordinary shares. On November 7, 2022, we issued the aggregate of 5,300,000 ordinary shares, par value US$0.0001 per share under the UTime Limited 2022 Performance Incentive Plan (the “Plan”). As a result, Mr. Bao, through Grandsky Phoenix Limited, and Mr. He, through HMercury Capital Limited, own 4,380,000 ordinary shares, representing 1.12% of equity interest and 137,793 ordinary shares, representing 0.04% of equity interest of the Company, respectively, as of the date of this annual report.

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7.C. Interests of Experts and Counsel

Not applicable.

ITEM 8. FINANCIAL INFORMATION

8.A. Consolidated Statements and Other Financial Information

The financial statements required by this item may be found at the end of this report on 20-F, beginning on page F-1.

Legal Proceedings

We are subject to legal proceedings and claims that have not been fully resolved and that have arisen in the ordinary course of business. Except as described below, there was not at least a reasonable possibility the Company may have incurred a material loss, or a material loss in excess of a recorded accrual, with respect to loss contingencies for asserted legal and other claims.

Regarding the construction contract dispute between UTime GZ and Guizhou Branch of Guangdong Jian ‘an Fire Electromechanical Engineering Co., Ltd (“Guangdong Jian ‘an”), on December 1, 2021, the People’s Court of Honghuagang District of Zunyi City, Guizhou Province (“Honghuagang Court”) issued the civil judgment (No. (2021) Qian 0302 Min Chu 20364 ), ruling that the defendant UTime GZ shall pay the amount of RMB 2,230,293.46 to the plaintiff Guangdong Jian ‘an within 10 days from the effective date of the judgment. On December 24, 2021, Utime GZ has appealed to the Intermediate People’s Court of Zunyi City, Guizhou Province (Zunyi Intermediate Court). On April 25, 2022, the Intermediate People’s Court of Zunyi City issued a civil ruling (No. (2022) Qian 03 Min Zhong 642). The Zunyi Intermediate Court held that the facts determined in the first instance were basically unclear and ruled to revoke the civil judgment of No. (2021) Qian 0302 Min Chu 20364. The case was remanded to the Honghuagang Court for retrial. On December 22, 2022, Honghuagang Court issued the civil judgment (No. (2022) Qian 0302 Min Chu 9108) after retrial, ruling that UTime GZ shall pay the amount of RMB 2,230,293.46 to the plaintiff Guangdong Jian’an within 10 days from the effective date of the judgment. Utime GZ has appealed to Zunyi Intermediate Court. On April 26, 2023, the Zunyi Intermediate Court issued a civil ruling (No. (2023) Qian 03 Min Zhong No. 671). The Zunyi Intermediate Court rejected the appeal and upheld the original judgment. On May 29, 2023, Guangdong Jian’an, Utime GZ, Jietongda and Utime SZ entered into the Implementation of Settlement Agreement based on the civil judgment (No. (2022) Qian 0302 Minchu 9108), with Utime SZ as the guarantor. According to the Implementation of Settlement Agreement, with regard to the payment of RMB 223,0293.46 and the first instance case acceptance fee of RMB 25,440, starting from June 2023, Utime GZ and Jietongda promise to pay RMB 300,000 Guangdong Jian’an before the end of each month (“Settlement Payment”), and complete the above payment before the end of January 2024. If either Utime SZ and Jietongda fails to make payment in accordance with this agreement, Guangdong Jian’an has the right to resume enforcement of all outstanding payments. As of the date of this annual report, the Settlement Payment has been paid by Jietongda.

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Utime SZ and Dongguan Qinling Electronic Technology Co., Ltd (“Dongguan Qinling”) had a sales contract dispute case. On September 29, 2020, People’s Court of Futian District of Shenzhen, Guangdong Province (“Futian Court”) issued the civil judgment (No.（2019）Yue 0304 Min Chu 51640), ruling that the defendant Dongguan Qinling should return the loan amount of RMB 300,000 and pay relevant interest to the plaintiff Utime SZ within 10 days from the effective date of the judgment. As of the date of this annual report, Dongguan Qinling has not actually performed the judgment, and has not paid any payment and interest to Utime SZ. Furthermore, the business license of Dongguan Qinling has been revoked, and it is unlikely for Dongguan Qinling to perform this judgment as of the date of this annual report.

Besides, there is a case for sales contract dispute between Utime SZ and Jiangsu Jutai Technology Co., Ltd (“Jiangsu Jutai”). On July 27, 2022, Futian Court issued the civil judgment (No. (2021) Yue 0304 Min Chu 41025), ruling that 1) confirming that the “Procurement Framework Contract” (Contract No. CG20201231001) and “Purchase Order Contract” (Order No. SUTPOORD2020121921045) signed between the plaintiff UTime SZ and the defendant Jiangsu Jutai were terminated on March 12, 2021; 2) The defendant Jiangsu Jutai shall compensate the plaintiff UTime SZ with a loss of RMB 239,547 within ten days from the effective date of the judgment; 3) The defendant Jiangsu Jutai shall pay a guarantee fee of RMB 700 and a lawyer’s fee of RMB 30,000 to the plaintiff UTime SZ within ten days from the effective date of the judgment. On June 28, 2023, UTime SZ and Jiangsu Jutai entered into a Settlement Agreement based on the civil judgment (No. (2021)Yue 0304 Min Chu 41025). According to the Settlement Agreement, Jiangsu Jutai shall pay the full amount of the judgment amount of RMB 243,222.3 (calculated at 90% of the judgment amount, “Settlement Amount”) to UTime SZ in a lump sum before June 30, 2023. Jiangsu Jutai paid the Settlement Amount to UTime SZ on June 30, 2023.

Utime SZ and Shenzhen Wanhua Supply Chain Co., Ltd (“Shenzhen Wanhua”) had a entrustment agreement contract dispute case. On March 31, 2023, People’s Court of Shenzhen Qianhai Cooperation Zone, Guangdong Province issued the civil judgment ((No. (2023) Yue 0391 Min Chu 762), ruling that 1) the defendant Shenzhen Wanhua shall pay the plaintiff UTime SZ USD 76,639.91 within seven days from the effective date of the judgment; 2) the defendant Shenzhen Wanhua shall compensate the plaintiff UTime SZ for the overdue payment loss within seven days from the effective date of the judgment (the calculation method for the overdue payment loss is based on USD 76,639.91 , and from December 14, 2022, it shall be paid according to the same period US dollar loan interest rate standard of Bank of China until the actual settlement date). As of the date of this annual report, Shenzhen Wanhua has not actually performed the judgment, and has not paid any payment and interest to Utime SZ.

UTime SZ and Shenzhen Zhonghang Jiayikang Electronics Co., Ltd(“Jiayikang”) had a sales contract dispute. Jiayikang, which was heard by Futian Court on May 6, 2023. Jiayikang requests the judgment to 1) order the defendant UTime SZ to repay the outstanding payment to the plaintiff Jiayikang, totaling RMB 2,224,638.78; 2) order to calculate the loss of overdue payment from March 1, 2020 to the date when the principal of the loan has been fully repaid, with RMB 2,224,638.78 as the base number and 50% higher than the standard of one-year loan market quotation rate published by the National Interbank lending market Center authorized by the People’s Bank of China: the current loss of overdue payment is temporarily calculated to be RMB 354,736.94 by December 15, 2022. As of the date of this annual report, the Company is currently subject to ongoing appellate proceedings following a first-instance judgment (No. (2023) Yue 0304 Min Chu 13831) rendered by Futian court on February 27, 2024.

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The outcome of litigation is inherently uncertain. If one or more legal matters were resolved against us in a reporting period for amounts in excess of management’s expectations, our financial condition and operating results for that reporting period could be materially adversely affected. Refer to the risk factor “We could be impacted by unfavorable results of legal proceedings, and may, from time to time, be involved in future litigation in which substantial monetary damages are sought.”

Dividends

We have never declared or paid any dividend on our ordinary shares and we do not anticipate paying any dividends on our ordinary shares in the future. We currently intend to retain all future earnings to finance our operations and to expand our business.

8.B. Significant Changes

No significant changes to our financial condition have occurred since the date of the annual financial statements contained herein.

ITEM 9. THE OFFER AND LISTING

9.A. Offer and Listing Details

Our ordinary shares, par value $0.0001 per share, used to be listed for trading on the NASDAQ Capital Market under the symbol “UTME” since April 5, 2021. We later changed the symbol from “UTIME” to “WTO”, effective on September 5, 2023.

9.B. Plan of Distribution

Not Applicable.

9.C. Markets

Our ordinary shares are currently traded on the NASDAQ Capital Market.

9.D. Selling Shareholders

Not Applicable.

9.E. Dilution

Not Applicable.

9.F. Expenses of the Issuer

Not Applicable.

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ITEM 10. ADDITIONAL INFORMATION

10.A. Share Capital

Not Applicable.

10.B. Memorandum and Articles of Association

We are a Cayman Islands company and our affairs are governed by our amended and restated memorandum and articles of association and the Companies Act (As Revised) of the Cayman Islands, which we refer to as the Companies Act below.

Our authorized share capital is US$100,000 divided into 1,000,000,000 shares of a par value of US$0.0001 each, comprising of of 990,000,000 ordinary shares, par value $0.0001 per share, and 10,000,000 preference shares, par value $0.0001 per share. As of the date of this annual report, 450,930,953 ordinary shares were issued and outstanding and no preference shares were issued and outstanding.

Share Rights

Without prejudice to any rights attached to any existing ordinary shares or class of shares, any share may be issued with such preferred, deferred or other special rights or subject to such restrictions as our board of directors shall determine. We may issue redeemable shares.

Our memorandum and articles of association provide that, subject to Cayman Islands law, all or any of the special rights for the time being attached to the shares or any class of shares may, unless otherwise provided by the terms of issue of the shares of that class, from time to time be varied, modified or abrogated with the sanction of a special resolution passed at a separate general meeting of the holders of the shares of that class.

Voting Rights

A quorum required for a meeting of shareholders consists of two or more holders of shares together holding (or representing by proxy) not less than an aggregate of a majority of the total voting power of all shares in issue and entitled to vote present in person or by proxy or, if a corporation or other non-natural person, by its duly authorized representative. If a quorum is not present within half an hour from the time appointed for a general meeting to commence or if during such a general meeting a quorum ceases to be present, the meeting, if convened upon a shareholders’ requisition, shall be dissolved and in any other case it shall stand adjourned to the same day in the next week at the same time and/or place or to such other day, time and/or place as our board of directors may determine, and if at the adjourned meeting a quorum is not present within half an hour from the time appointed for the meeting to commence, the shareholders present shall be a quorum.

Voting at meetings takes place by show of hands or by a poll of shares represented at the meeting. Subject to any special rights or restrictions attached to a class of shares, a shareholder present in person (or if an entity, present by a duly authorized representative, which is deemed equivalent to being present in person and is referred to as such hereafter) or by proxy is entitled to one vote on a show of hands regardless of the number of shares held, provided that where more than one proxy is appointed by a shareholder that is a clearing house or central depository house (or its nominee(s)), each such proxy shall have one vote on a show of hands. On a poll every shareholder present in person or by proxy shall have one vote for every fully paid share held.

Voting will be by show of hands unless (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) a poll is demanded by: the chairman of the meeting or a shareholder or shareholders present in person or by proxy and representing not less than one-tenth of the total voting rights of all shareholders having the right to vote at the meeting.

An ordinary resolution to be passed by the shareholders requires a simple majority of votes cast in a general meeting, while a special resolution requires no less than two-thirds of the votes cast. A special resolution is required for important matters such as a change of name. Our shareholders may effect certain changes by ordinary resolution, including increasing the amount of our authorized share capital, consolidating and dividing all or any of our share capital into shares of larger amounts than our existing shares and cancelling any shares. As described below, some types of corporate actions may be approved only by special resolution.

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Dividends and Other Distributions; Liquidation Rights

Subject to the capital maintenance provisions of the Companies Act, which, inter alia, permit distributions to be made only out of profits available for the purpose or from share premium, the directors may declare and pay dividends and other distributions out of the funds of the Company available therefor. The Companies Act prohibits the payment of any dividend if payment would cause us to be unable to pay our debts as they fall due in the ordinary course of business. Only our board of directors may declare dividends and, except as otherwise provided by the rights attached to a particular class of shares, all dividends shall be declared and paid pro rata according to the amounts paid up on the ordinary shares on which the dividend is paid.

Except as provided by the rights and restrictions attached to any class of ordinary shares, under general law, the holders of our shares will be entitled to participate in any surplus assets in a winding up in proportion to their shareholdings. A liquidator may, with the sanction of a special resolution and any other sanction required by the Companies Act, divide among the members in specie the whole or any part of our assets and may, for that purpose, value any assets and determine how the division shall be carried out as between the members or different classes of members.

Variations of Rights of Shares

All or any of the special rights attached to any class of shares may, subject to the provisions of the Companies Act, be varied either with the consent in writing of the holders of not less than two thirds of the issued shares of that class or with the approval of a resolution passed by a majority of not less than two thirds of the votes cast at a separate meeting of the holders of the shares of that class. The rights conferred upon the holders of the shares of any class issued with preferred or other rights shall not, subject to any rights or restrictions for the time being attached to the shares of that class, be deemed to be materially adversely varied by, inter alia, the creation, allotment or issue of further shares ranking pari passu with or subsequent to them, the creation, allotment or issuance of further shares (whether ranking in priority to, pari passu or subsequent to them) pursuant to the board of director’s ability to issue preference shares in the manner described herein or the redemption or purchase of any shares of any class by the Company. The rights of the holders of shares shall not be deemed to be materially adversely varied by the creation or issue of shares with preferred or other rights including, without limitation, the creation of shares with enhanced or weighted voting rights.

Pre-Emption Rights

There are no pre-emption rights applicable to the issue of new shares under either Cayman Islands law or our memorandum and articles of association.

Alteration of Share Capital

We may by ordinary resolution increase, consolidate or sub-divide our share capital.

Purchase of Own Ordinary Shares

Subject to the provisions of the Companies Act, our board of directors may authorize the purchase of any of our own shares of any class in any way and at any price (whether at par or above or below par) out of our distributable profits, share premium capital, capital and/or the proceeds of a fresh issue of shares made for the purpose of financing the purchase, in accordance with the Companies Act.

Shareholder Meetings

Meetings of shareholders are known as general meetings and comprise of an annual general meeting and any other general meetings, known as extraordinary general meetings, that may be called and held from time to time. We may but are not obliged by our memorandum and articles of association to hold an annual general meeting in each year, other than the year in which these articles are adopted. General meetings may be held at such times and places as may be determined by our board of directors.

Extraordinary general meetings may be called only:

| ● | by a majority of our board of directors; or

| ● | on the requisition of shareholders holding not less than one third of the votes attributable to the issued shares giving the right to attend and vote thereat.

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A general meeting must be called by not less than 5 clear days’ notice (meaning calendar days excluding the date the notice is given or deemed given and the date of the meeting), unless shorter notice is agreed.

No business, except for the appointment of a chairman for the meeting, shall be transacted at any general meeting unless a quorum of shareholders is present at the time when the meeting proceeds to business. Other than a meeting or action regarding the modification of the rights of any class of shares, two shareholders present at a meeting in person or by proxy, entitled to vote shall be a quorum.

Directors

Our board of directors must consist of at least one director who can be appointed by ordinary resolution of shareholders or, in the case of vacancies and newly created directorships, by our board of directors. Our directors are not required to hold any ordinary shares in the capital of the Company to qualify.

Our directors may receive such compensation as they may from time to time determine. A director may be entitled to be repaid all traveling, hotel and incidental expenses reasonably incurred by him or her in attending meetings of the board of directors or committees of the board or general meetings or separate meetings of any class of shares or of debentures or otherwise in connection with the discharge of his or her duties as a director.

Our board of directors may provide benefits, whether by the payment of gratuities or pensions or by insurance or otherwise, for any past or present director or employee of our Company or any of its subsidiaries or any corporate body associated with, or any business acquired by, any of them, and for any member of his family or any person who is or was dependent on him.

Borrowing Powers

Our board of directors may exercise all the powers of our Company to borrow money and to mortgage or charge its undertaking, property and assets (present and future) and uncalled capital of our Company, and to issue debentures, debenture shares and other securities whenever money is borrowed or as security for any debt, liability or obligation of our Company or of any third-party.

Indemnity of Directors and Officers

Our amended and restated memorandum and articles of association provide that our current and former directors and officers will be indemnified out of our assets against any liability, action, proceeding, claim, demand, costs, damages or expenses, including legal expenses, whatsoever which they or any of them may incur as a result of any act or failure to act in carrying out their functions other than such liability (if any) that they may incur by reason of their own actual fraud or willful default. In addition, our memorandum and articles of association provide that our directors will not be personally liable for monetary damages to us for breaches of their fiduciary duty as directors, unless their liability arises out of actual fraud or willful default.

We intend to enter into agreements with our directors and officers to provide contractual indemnification in addition to the indemnification provided in our memorandum and articles of association. We intend to purchase a policy of directors’ and officers’ liability insurance that insures our directors and officers against the cost of defense, settlement or payment of a judgment in some circumstances and insures us against our obligations to indemnify the directors and officers.

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These provisions may discourage shareholders from bringing a lawsuit against our directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit us and our shareholders. Furthermore, a shareholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. We believe that these provisions, the insurance and the indemnity agreements are necessary to attract and retain talented and experienced directors and officers.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

Change of Control

Provisions in our amended and restated memorandum and articles of association may discourage, delay or prevent a merger, acquisition or other change in control that shareholders may consider favorable, including transactions in which shareholders might otherwise receive a premium for their shares. In addition, these provisions may frustrate or prevent any attempt by our shareholders to replace or remove our current management by making it more difficult to replace or remove our board of directors. Such provisions may reduce the price that investors may be willing to pay for our ordinary shares in the future, which could reduce the market price of our ordinary shares.

These provisions include:

| ● | a requirement that extraordinary general meetings of shareholders be called only by a majority of the board of directors or, in limited circumstances, by the board upon shareholder requisition; and

| ● | the authority of our board of directors to issue preference shares with such terms as our board of directors may determine.

However, under Cayman Islands law, our directors may only exercise the rights and powers granted to them under our post-offering memorandum and articles of association for a proper purpose and for what they believe in good faith to be in the best interests of the Company. As described below in “- Differences in Corporate Law - Mergers and Similar Arrangements” the Companies Act provides for arrangements or compromises between a company and its shareholders, creditors, any class of its shareholders, or any class of its creditors that are used for certain types of reconstructions, amalgamations, capital reorganizations or takeovers.

The Companies Act includes provisions relating to takeovers and provides that where a takeover offer is made for the shares of a company incorporated in the Cayman Islands and, within four months after the making of the offer the offeror has been approved by the holders of not less than 90 percent in value of the shares affected, the offeror may, within two months, by notice require shareholders who do not accept the offer to transfer their shares to the offeror on the terms of the offer.

Authorized but Unissued Shares

Our authorized but unissued shares are available for future issuances without shareholder approval and could be utilized for a variety of corporate purposes, including future offerings to raise additional capital, acquisitions and employee benefit plans. In order to increase the number of authorized shares, we are required to obtain the approval of a majority of our shareholders.

Our board of directors is empowered to authorize and issue, out of our authorized but unissued shares, one or more classes or series of preference shares and to fix the designations, powers, preferences and relative, participating, optional and other rights, if any, and the qualifications, limitations and restrictions thereof, if any, including, without limitation, the number of shares constituting each such class or series, dividend rights, conversion rights, redemption privileges, voting powers, full or limited or no voting powers, and liquidation preferences, and to increase or decrease the size of any such class or series (but not below the number of shares of any class or series of preference shares then outstanding) to the extent permitted by Cayman Islands law. The resolution or resolutions providing for the establishment of any class or series of preference shares may, to the extent permitted by law, provide that such class or series shall be superior to, rank equally with or be junior to the preference shares of any other class or series. The existence of authorized but unissued shares and our board of directors’ authority to issue new classes of shares could render more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.

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Exempted Company

We are an exempted company with limited liability under the Companies Act. The Companies Act distinguishes between ordinary resident companies and exempted companies. Any company that is registered in the Cayman Islands but conducts business mainly outside of the Cayman Islands may apply to be registered as an exempted company. The requirements for an exempted company are essentially the same as for an ordinary company except for the exemptions and privileges listed below:

| ● | an exempted company does not have to file an annual return of its shareholders with the Registrar of Companies;

| ● | an exempted company’s register of members is not open to inspection;

| ● | an exempted company does not have to hold an annual general meeting;

| ● | an exempted company may issue shares with no par value;

| ● | an exempted company may obtain an undertaking against the imposition of any future taxation (such undertakings are usually given for 20 years in the first instance);

| ● | an exempted company may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands;

| ● | an exempted company may register as a limited duration company; and

| ● | an exempted company may register as a segregated portfolio company.

“Limited liability” means that the liability of each shareholder is limited to the amount unpaid by the shareholder on the shares of the company (except in exceptional circumstances, such as involving fraud, the establishment of an agency relationship or an illegal or improper purpose or other circumstances in which a court may be prepared to pierce or lift the corporate veil).

Differences in Corporate Law

Cayman Islands companies are governed by the Companies Act. The Companies Act is modeled on English Law but does not follow recent English Law statutory enactments, and differs from laws applicable to U.S. corporations and their shareholders. Set forth below is a summary of some significant differences between the provisions of the Companies Act applicable to us and the laws applicable to companies incorporated in the State of Delaware in the United States and their shareholders.

We believe that the differences with respect to our being a Cayman Islands exempted company as opposed to a Delaware corporation do not pose additional material risks to investors, other than the risks described under “Risk Factors - As a foreign private issuer, we are subject to different U.S. securities laws and NASDAQ governance standards than domestic U.S. issuers. This may afford less protection to holders of our ordinary shares, and you may not receive corporate and company information and disclosure that you are accustomed to receiving or in a manner in which you are accustomed to receiving it, “- We may become subject to taxation in the Cayman Islands which would negatively affect our results,” “- There may be a risk of us being subject to tax in jurisdictions in which we do not currently consider ourselves to have any tax resident subsidiaries or permanent establishments” and “- Because we are incorporated under the laws of the Cayman Islands, you may face difficulties in protecting your interests, and your ability to protect your rights through the U.S. Federal courts may be limited.”

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Mergers and Similar Arrangements

In certain circumstances, the Companies Act permits mergers and consolidations between Cayman Islands companies and between Cayman Islands companies and non-Cayman Islands companies (provided that is facilitated by the laws of the other jurisdiction) and any such company may be the surviving entity for the purposes of mergers or the consolidated company for the purposes of consolidations. For these purposes, (a) “merger” means the merging of two or more constituent companies and the vesting of their undertaking, property and liabilities in one of such companies as the surviving company and (b) a “consolidation” means the combination of two or more constituent companies into a consolidated company and the vesting of the undertaking, property and liabilities of such companies to the consolidated company. In order to effect such a merger or consolidation, the directors of each constituent company must approve a written plan of merger or consolidation, which must, in most instances, then be authorized by a special resolution (usually a majority of 66 2/3% in value) of the shareholders of each constituent company and such other authorization, if any, as may be specified in such constituent company’s articles of association. A merger between a Cayman parent company and its Cayman subsidiary or subsidiaries does not require authorization by a resolution of shareholders, provided a copy of the plan of merger is given to every member of each subsidiary company to be merged (unless waived by such members). For this purpose a subsidiary is a company of which at least 90% of the votes cast at its general meeting are held by the parent company. The consent of each holder of a fixed or floating security interest over a constituent company is required unless this requirement is waived by a court in the Cayman Islands. The plan of merger or consolidation must be filed with the Registrar of Companies who, if satisfied that the requirements of the Companies Act (As Revised) which includes certain other formalities, have been complied with, will register it. The filing must include a declaration as to the solvency of the consolidated or surviving company, a list of the assets and liabilities of each constituent company and an undertaking that a copy of the certificate of merger or consolidation will be given to the members and creditors of each constituent company and published in the Cayman Islands Gazette. Dissenting shareholders have the right to be paid the fair value of their shares (which, if not agreed between the parties, will be determined by the Cayman Islands court) if they follow the required procedures, subject to certain exceptions. Court approval is not required for a merger or consolidation which is effected in compliance with these statutory procedures.

In addition, there are statutory provisions that facilitate the reconstruction and amalgamation of companies in certain circumstances, provided that the arrangement is approved by a majority in number of each class of shareholders and creditors with whom the arrangement is to be made, and who must in addition represent two-thirds in value of each such class of shareholders or creditors, as the case may be, that are present and voting either in person or by proxy at a meeting, or meetings, convened for that purpose. The convening of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of the Cayman Islands. While a dissenting shareholder has the right to express to the court the view that the transaction ought not be approved, the court can be expected to approve the arrangement if it determines that:

| ● | the company is not proposing to act illegally or beyond the scope of its corporate authority and the statutory provisions as to the required majority vote have been met;

| ● | the shareholders have been fairly represented at the meeting in question, the statutory majority are acting bona fide without coercion of the minority to promote interests adverse to those of the class and that the meeting was properly constituted;

| ● | the arrangement is such that it may reasonably be approved by an intelligent and honest man of that share class acting in respect of his interest; and

| ● | the arrangement is not one which would be more properly sanctioned under some other provision of the Companies Act, or that would amount to ‘fraud on the minority’.

When a takeover offer is made and accepted by holders of 90% of the shares affected within four months, the offeror may after the expiration of such four months, within a two-month period, require the holders of the remaining shares to transfer such shares on the terms of the offer. An objection can be made to the Grand Court of the Cayman Islands but this is unlikely to succeed unless there is evidence of fraud, bad faith, collusion or inequitable treatment of the shareholders.

If the arrangement and reconstruction is thus approved, the dissenting shareholder would have no rights comparable to appraisal rights, which would otherwise ordinarily be available to dissenting shareholders of U.S. corporations, providing rights to receive payment in cash for the judicially determined value of the shares.

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Shareholder Suits

In general, we will be the proper plaintiff in any action to protect and enforce our rights and such an action cannot be brought by a minority shareholder on behalf of our company. However, this does not prevent a shareholder bringing proceedings to protect its individual rights. In addition, in some circumstances, a minority shareholder may be able to bring a derivative action on behalf of our company where:

| ● | Those who control our company are perpetrating a ‘fraud on the minority’;

| ● | We are acting or proposing to act illegally or beyond the scope of its authority;

| ● | The act complained of, although not beyond the scope of our company’s authority, could be effected only if duly authorized by more than a simple majority vote, which has not been obtained.

Protection of Minority Shareholders

In the case of a company (not being a bank) having its share capital divided into shares, the Grand Court of the Cayman Islands may, on the application of members holding not less than one fifth of the shares of the company in issue, appoint an inspector to examine the affairs of the company and to report thereon in such manner as the Grand Court of the Cayman Islands shall direct.

Any of our shareholders may petition the Grand Court of the Cayman Islands which may make a winding up order if the Grand Court of the Cayman Islands is of the opinion that it is just and equitable that we should be wound up or, as an alternative to a winding up order, (a) an order regulating the conduct of our affairs in the future, (b) an order requiring us to refrain from doing or continuing an act complained of by the shareholder petitioner or to do an act which the shareholder petitioner has complained we have omitted to do, (c) an order authorizing civil proceedings to be brought in our name and on our behalf by the shareholder petitioner on such terms as the Grand Court of the Cayman Islands may direct, or (d) an order providing for the purchase of the shares of any of our shareholders by other shareholders or us and, in the case of a purchase by us, a reduction of our capital accordingly.

Generally, claims against us must be based on the general laws of contract or tort applicable in the Cayman Islands or individual rights as shareholders as established by our memorandum and articles of association.

Fiduciary Duties of Directors

Under Cayman Islands law, directors and officers owe the following fiduciary duties:

| ● | duty to act in good faith in what the director or officer believes to be in the best interests of the company as a whole;

| ● | duty to exercise powers for the purposes for which those powers were conferred and not for a collateral purpose;

| ● | directors should not improperly fetter the exercise of future discretion;

| ● | duty to exercise powers fairly as between different sections of shareholders;

| ● | duty not to put themselves in a position in which there is a conflict between their duty to the company and their personal interests; and

| ● | duty to exercise independent judgment.

In addition to the above, directors also owe a duty of care which is not fiduciary in nature. This duty has been defined as a requirement to act as a reasonably diligent person having both the general knowledge, skill and experience that may reasonably be expected of a person carrying out the same functions as are carried out by that director in relation to the company and the general knowledge skill and experience of that director.

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As set out above, directors have a duty not to put themselves in a position of conflict and this includes a duty not to engage in self-dealing, or to otherwise benefit as a result of their position. However, in some instances what would otherwise be a breach of this duty can be forgiven and/or authorized in advance by the shareholders provided that there is full disclosure by the directors. This can be done by way of permission granted in the amended and restated memorandum and articles of association or alternatively by shareholder approval at general meetings.

However, by contrast to Delaware law, the fiduciary duties of directors are not as clearly established under Cayman Islands law.

Anti-Money Laundering - Cayman Islands

If any person in the Cayman Islands knows or suspects or has reasonable grounds for knowing or suspecting that another person is engaged in criminal conduct or money laundering or is involved with terrorism or terrorist financing and property and the information for that knowledge or suspicion came to their attention in the course of business in the regulated sector, or other trade, profession, business or employment, the person will be required to report such knowledge or suspicion to (i) the Financial Reporting Authority of the Cayman Islands, pursuant to the Proceeds of Crime Act (As Revised) of the Cayman Islands if the disclosure relates to criminal conduct or money laundering, or (ii) a police officer of the rank of constable or higher, or the Financial Reporting Authority, pursuant to the Terrorism Act (As Revised) of the Cayman Islands, if the disclosure relates to involvement with terrorism or terrorist financing and property. Such a report shall not be treated as a breach of confidence or of any restriction upon the disclosure of information imposed by any enactment or otherwise.

Data Protection - Cayman Islands

We have certain duties under the Data Protection Act (As Revised) of the Cayman Islands (the “Data Protection Act”) based on internationally accepted principles of data privacy.

Privacy Notice

Introduction

This privacy notice puts our shareholders on notice that through your investment in the Company you will provide us with certain personal information which constitutes personal data within the meaning of the Data Protection Act (“personal data”). In the following discussion, the “company” refers to us and our affiliates and/or delegates, except where the context requires otherwise.

Investor Data

We will collect, use, disclose, retain and secure personal data to the extent reasonably required only and within the parameters that could be reasonably expected during the normal course of business. We will only process, disclose, transfer or retain personal data to the extent legitimately required to conduct our activities of on an ongoing basis or to comply with legal and regulatory obligations to which we are subject. We will only transfer personal data in accordance with the requirements of the Data Protection Act, and will apply appropriate technical and organizational information security measures designed to protect against unauthorized or unlawful processing of the personal data and against the accidental loss, destruction or damage to the personal data.

In our use of this personal data, we will be characterized as a “data controller” for the purposes of the Data Protection Act, while our affiliates and service providers who may receive this personal data from us in the conduct of our activities may either act as our “data processors” for the purposes of the Data Protection Act or may process personal information for their own lawful purposes in connection with services provided to us.

We may also obtain personal data from other public sources. Personal data includes, without limitation, the following information relating to a shareholder and/or any individuals connected with a shareholder as an investor: name, residential address, email address, contact details, corporate contact information, signature, nationality, place of birth, date of birth, tax identification, credit history, correspondence records, passport number, bank account details, source of funds details and details relating to the shareholder’s investment activity.

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Who this Affects

If you are a natural person, this will affect you directly. If you are a corporate investor (including, for these purposes, legal arrangements such as trusts or exempted limited partnerships) that provides us with personal data on individuals connected to you for any reason in relation your investment in the company, this will be relevant for those individuals and you should transmit the content of this Privacy Notice to such individuals or otherwise advise them of its content.

How the Company May Use a Shareholder’s Personal Data

The company, as the data controller, may collect, store and use personal data for lawful purposes, including, in particular:

| a) | where this is necessary for the performance of our rights and obligations under any purchase agreements;

| b) | where this is necessary for compliance with a legal and regulatory obligation to which we are subject (such as compliance with anti-money laundering and FATCA/CRS requirements); and/or

| c) | where this is necessary for the purposes of our legitimate interests and such interests are not overridden by your interests, fundamental rights or freedoms.

Should we wish to use personal data for other specific purposes (including, if applicable, any purpose that requires your consent), we will contact you.

Why We May Transfer Your Personal Data

In certain circumstances we may be legally obliged to share personal data and other information with respect to your shareholding with the relevant regulatory authorities such as the Cayman Islands Monetary Authority or the Tax Information Authority. They, in turn, may exchange this information with foreign authorities, including tax authorities.

We anticipates disclosing personal data to persons who provide services to us and their respective affiliates (which may include certain entities located outside the United States, the Cayman Islands or the European Economic Area), who will process your personal data on our behalf.

The Data Protection Measures We Take

Any transfer of personal data by us or our duly authorized affiliates and/or delegates outside of the Cayman Islands shall be in accordance with the requirements of the Data Protection Act.

We and our duly authorized affiliates and/or delegates shall apply appropriate technical and organizational information security measures designed to protect against unauthorized or unlawful processing of personal data, and against accidental loss or destruction of, or damage to, personal data.

We shall notify you of any personal data breach that is reasonably likely to result in a risk to your interests, fundamental rights or freedoms or those data subjects to whom the relevant personal data relates.

Written Consent

Under the Delaware General Corporation Law, a corporation may eliminate the right of shareholders to act by written consent through amendment to its certificate of incorporation. Cayman Islands law enables, and our memorandum and articles of association provide, that any action required or permitted to be taken at any annual or extraordinary general meeting may be taken only upon the vote of shareholders at an annual or extraordinary general meeting duly and may not be taken by written resolution of shareholders without a meeting.

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Shareholder Proposals

Under the Delaware General Corporation Law, a shareholder has the right to put any proposal before the shareholders at the annual meeting, provided that such shareholder complies with the notice provisions in the governing documents. In general terms, Cayman Islands’ law does not provide shareholders with an express right to put any proposal before a general meeting of shareholders. Depending on the provision of the relevant Cayman Islands company’s articles of association, a shareholder may put a proposal before the shareholders at any general meeting if it is set out in the notice calling the meeting. There is no automatic right to introduce new business at any meeting. A general meeting may be called by the board of directors or any other person authorized to do so in the articles of association, but shareholders may be precluded from calling general meetings, except in certain circumstances.

Under the Delaware General Corporation Law, a corporation is required to set a minimum quorum of one-third of the issued and outstanding shares for a shareholders’ meeting. Cayman Islands law permits a company’s articles to have any quorum. Our amended and restated memorandum and articles of association provide that a quorum consists of two qualifying persons, other than for a meeting or action regarding the modification of the rights of any class of shares, present at a meeting and entitled to vote on the business to be dealt with.

Election of Directors

Under the Delaware General Corporation Law, unless otherwise specified in the certificate of incorporation or bylaws of the corporation, directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors and vacancies and newly created directorships may be filled by resolution of the board. Under the laws of the Cayman Islands, directors are appointed by the board of directors or, if provided for in the articles of association, by shareholders pursuant to an ordinary resolution. Our amended and restated articles of association provide that directors nominated for election be elected by the shareholders pursuant to an ordinary resolution at a general meeting and that a vacancy on our board of directors or any additions to the existing board of directors will be filled by the resolution of directors or by ordinary resolution of our shareholders.

Cumulative Voting

Under the Delaware General Corporation Law, cumulative voting for elections of directors is not permitted unless the corporation’s certificate of incorporation specifically provides for it. Cumulative voting potentially facilitates the representation of minority shareholders on a board of directors since it permits a minority shareholder to cast all the votes to which such shareholder is entitled on a single director, which increases such shareholder’s voting power with respect to electing such director. There are no prohibitions in relation to cumulative voting under the laws of the Cayman Islands, but our memorandum and articles of association do not provide for cumulative voting. As a result, our shareholders are not afforded any less protections or rights on this issue than shareholders of a Delaware corporation.

Removal of Directors

Under the Delaware General Corporation Law, a director of a corporation may be removed only for cause with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. Under our memorandum and articles of association, a director may be removed by way of an ordinary resolution of the shareholders at any time before the expiration of his period of office.

Actions by the Board of Directors

Under the Delaware General Corporation Law, unless the certificate of incorporation or bylaws of a Delaware corporation provide otherwise, a majority of the total number of directors shall constitute a quorum for the transaction of business, but in no case shall a quorum be less than one-third of the total number of directors unless the authorized number of directors is one, and an action of the board at a meeting with a quorum present requires at least a majority vote of those directors present. Directors of a Delaware corporation may also act by unanimous written consent unless the corporation’s certificate of incorporation or bylaws otherwise provide. Our amended and restated memorandum and articles of association provide for action by majority vote at a meeting or by unanimous written consent; however, the required quorum for a directors’ meeting is two directors unless our board of directors fixes a different number.

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Dissolution; Winding up

Under the Delaware General Corporation Law, unless the board of directors approves the proposal to dissolve, dissolution must be approved by shareholders holding 100% of the total voting power of the corporation. Only if the dissolution is initiated by the board of directors may it be approved by a simple majority of the corporation’s outstanding shares. Delaware law allows a Delaware corporation to include in its certificate of incorporation a supermajority voting requirement in connection with dissolutions initiated by the board. Under the Companies Act and our amended and restated memorandum and articles of association, our Company may be liquidated or wound up and subsequently dissolved by special resolution of our shareholders on the basis that we are unable to pay our debts as they fall due.

Variation of Rights of Shares

Under the Delaware General Corporation Law, a corporation may vary the rights of a class of shares with the approval of a majority of the outstanding shares of such class, unless the certificate of incorporation provides otherwise. Under our amended and restated memorandum and articles of association, if our share capital is divided into more than one class of shares, we may vary the rights attached to any class only with the vote at a separate class meeting of holders of two-thirds of the shares of such class.

Amendment of Governing Documents

Under the Delaware General Corporation Law, a corporation’s governing documents may be amended with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. As permitted by Cayman Islands law, except for certain amendments to the capital structure not affecting a shareholder’s economic rights, our memorandum and articles of association may only be amended with a special resolution at a general meeting.

Rights of Non-resident or Foreign Shareholders

There are no limitations imposed by our amended and restated memorandum and articles of association on the rights of non-resident or foreign shareholders to hold or exercise voting rights on our shares. In addition, there are no provisions in our memorandum and articles of association governing the ownership threshold above which shareholder ownership must be disclosed.

10.C. Material Contracts

Below is a summary of current material contracts to which we are a party as of the date this annual report:

Purchase Agreements (Production line purchase agreements)

Procurement Agreement |  | Guangxi Utime Technology Co., Ltd. |  | P.J. Advisory Company Limited |  | January 15, 2022 |  | N/A
Purchase Agreement |  | Guangxi Utime Technology Co., Ltd. |  | Shenzhen Chuangbaili Industrial Equipment Co., Ltd. |  | March 11, 2022 |  | N/A

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On January 15, 2022, we entered into a procurement agreement to acquire two solder pastes and ten SMT testing assembly lines for a total price of $3,997,980, inclusive of value added tax (the “Purchase Price”) from P.J. Advisory Company Limited. Pursuant to this agreement, we need to pay (i) 90% of the Purchase Price within 90 days after the equipment are transported to our place of delivery and accepted by us, and (ii) 10% of the Purchase Price after the installation and commissioning of the equipment.

On March 11, 2022, we entered into a purchase agreement to acquire an assembly production line for a total price of RMB 686,895, inclusive of 10% tax (the “Purchase Price”) from Shenzhen Chuangbaili Industrial Equipment Co., Ltd. Pursuant to this agreement, we need to pay (i) 30% of the Purchase Price as deposit within three days of signing this agreement, (ii) 50% of the Purchase Price as deposit before the equipment are transported, and (iii) the rest of the Purchase Price after the installation of the equipment and accepted by us.

Lease Agreements (Factory lease agreements)

Factory Lease Agreement |  | Guangxi Utime Technology Co., Ltd. |  | Nanning Industrial Investment Group Co., Ltd. |  | November 1, 2021 |  | 60 months

In November 2021, we entered into a Factory Lease Agreement to lease Factory for production from Nanning Industrial Investment Group Co., Ltd, which was executed in November 2021. Pursuant to this agreement, (i) the lease term is from November 1, 2021 to October 31, 2026, and (ii) the rent of factory is RMB 20/m² per month and the total amount of rent shall be RMB 19,066,152 inclusive of tax.

10.D. Exchange Controls

Cayman Islands

There are currently no exchange control regulations in the Cayman Islands applicable to us or our shareholders.

The PRC

China regulates foreign currency exchanges primarily through the following rules and regulations:

| ● | Foreign Currency Administration Rules of 1996, as amended; and

| ● | Administrative Rules of the Settlement, Sale and Payment of Foreign Exchange of 1996.

As we disclosed in the risk factors above, Renminbi is not a freely convertible currency at present. Under the current PRC regulations, conversion of Renminbi is permitted in China for routine current-account foreign exchange transactions, including trade and service related foreign exchange transactions, payment of dividends and service of foreign debts. Conversion of Renminbi for most capital-account items, such as direct investments, investments in PRC securities markets and repatriation of investments, however, is still subject to the approval of SAFE.

Pursuant to the above-mentioned administrative rules, foreign-invested enterprises may buy, sell and/or remit foreign currencies for current account transactions at banks in China with authority to conduct foreign exchange business by complying with certain procedural requirements, such as presentment of valid commercial documents. For capital-account transactions involving foreign direct investment, foreign debts and outbound investment in securities and derivatives, approval from SAFE is a pre-condition. Capital investments by foreign-invested enterprises outside China are subject to limitations and requirements in China, such as prior approvals from the PRC Ministry of Commerce or SAFE.

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10.E. Taxation

The following discussion of material Cayman Islands, PRC and United States federal income tax consequences of an investment in our ordinary shares is based upon laws and relevant interpretations thereof in effect as of the date of this annual report, all of which are subject to change. This discussion does not deal with all possible tax consequences relating to an investment in our ordinary shares, such as the tax consequences under state, local and other tax laws.

Cayman Islands Taxation

The following is a discussion on certain Cayman Islands income tax consequences of an investment in the Shares. The discussion is a general summary of the present law, which is subject to prospective and retroactive change. It is not intended as tax advice, does not consider any investor’s particular circumstances, and does not consider tax consequences other than those arising under Cayman Islands law.

Under Existing Cayman Islands Laws:

The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to us levied by the Government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or after execution brought within, the jurisdiction of the Cayman Islands. No stamp duty is payable in the Cayman Islands on the issue of shares by, or any transfers of shares of, Cayman Islands companies (except those which hold interests in land in the Cayman Islands). The Cayman Islands is not party to any double tax treaties which are applicable to any payments made to or by our company. There are no exchange control regulations or currency restrictions in the Cayman Islands.

Payments of dividends and capital in respect of our shares will not be subject to taxation in the Cayman Islands and no withholding will be required on the payment of dividends or capital to any holder of our shares, nor will gains derived from the disposal of our shares be subject to Cayman Islands income or corporation tax.

The Company has been incorporated under the laws of the Cayman Islands as an exempted company with limited liability and, as such, has applied for and received an undertaking from the Financial Secretary of the Cayman Islands in the following form:

The Tax Concessions Act

(As Revised)

Undertaking as to Tax Concessions

In accordance with the provision of Section 6 of The Tax Concessions Act (As Revised), the Financial Secretary undertakes with UTime Limited (the “Company”):

1. | That no law which is hereafter enacted in the Islands imposing any tax to be levied on profits, income, gains or appreciations shall apply to the Company or its operations; and

2. | In addition, that no tax to be levied on profits, income, gains or appreciations or which is in the nature of estate duty or inheritance tax shall be payable:

2.1 | On or in respect of the shares, debentures or other obligations of the Company; or

2.2 | by way of the withholding in whole or part, of any relevant payment as defined in Section 6(3) of the Tax Concessions Act (As Revised).

These concessions shall be for a period of 20 years from the date hereof.

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People’s Republic of China Taxation

Under the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established 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 and substantial management of the business, productions, personnel, accounts and properties of an enterprise. In April 2009, the State Administration of Taxation issued the Circular on Issues Concerning the Identification of Chinese-Controlled Overseas Registered Enterprises as Resident Enterprises in Accordance With the Actual Standards of Organizational Management, known as Circular 82, which has been revised by the Decision of the State Administration of Taxation on Issuing the Lists of Invalid and Abolished Tax Departmental Rules and Taxation Normative Documents on December 29, 2017 and by the Decision of the State Council on Cancellation and Delegation of a Batch of Administrative Examination and Approval Items on November 8, 2013. Circular 82 has provided 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 State Administration of Taxation’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: (i) the places where the senior management and senior management departments responsible for the daily production, operation and management of the enterprise perform their duties are mainly located within the territory of the PRC; (ii) decisions relating to the enterprise’s financial matters (such as money borrowing, lending, financing and financial risk management) and human resource matters (such as appointment, dismissal and salary and wages) are made or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise’s primary assets, accounting books and records, company seals, and board and shareholder resolutions, are located or maintained in the PRC; and (iv) at least 50% of voting board members or senior executives habitually reside in the PRC.

We believe that UTime Limited is not a PRC resident enterprise for PRC tax purposes. UTime Limited is not controlled by a PRC enterprise or PRC enterprise group and we do not believe that UTime Limited meets all of the conditions above. UTime Limited is a company incorporated outside the PRC. As a holding company, its key assets are its ownership interests in its subsidiaries, and its key assets are located, and its records (including the resolutions of its board of directors and the resolutions of its shareholders) are maintained, outside the PRC. For the same reasons, we believe our other entities outside of China are not PRC resident enterprises either. However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.” There can be no assurance that the PRC government will ultimately take a view that is consistent with us.

Our PRC legal counsel has also advised us that there is a risk that the PRC tax authorities may deem us as a PRC resident enterprise since a substantial majority of the members of our management team are located in China. If the PRC tax authorities determine that UTime Limited 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 our ordinary shares. In addition, non-resident enterprise shareholders may be subject to a 10% PRC tax on gains realized on the sale or other disposition of ordinary shares, if such income is treated as sourced from within the PRC. It is unclear whether our non-PRC individual shareholders would be subject to any PRC tax on dividends or gains obtained by such non-PRC individual shareholders in the event we are determined to be a PRC resident enterprise. If any PRC tax were to apply to such dividends or gains, it would generally apply at a rate of 20% unless a reduced rate is available under an applicable tax treaty. It is also unclear whether non-PRC shareholders of UTime Limited would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that UTime Limited is treated as a PRC resident enterprise. See “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 unfavourable tax consequences to us and our non-PRC shareholders.”

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In January 2009, the State Administration of Taxation promulgated the Provisional Measures for the Administration of Withholding of Enterprise Income Tax for Non-resident Enterprises, pursuant to which the entities that have the direct obligation to make certain payments to a non-resident enterprise should be the relevant tax withholders for the non-resident enterprise, and such payments include: income from equity investments (including dividends and other return on investment), interest, rents, royalties and income from assignment of property as well as other income subject to enterprise income tax received by non-resident enterprises in China. Further, the measures provide that in case of an equity transfer between two non-resident enterprises which occurs outside China, the non-resident enterprise which receives the equity transfer payment must, by itself or engage an agent to, file tax declaration with the PRC tax authority located at place of the PRC company whose equity has been transferred, and the PRC company whose equity has been transferred should assist the tax authorities to collect taxes from the relevant non-resident enterprise.

The State Administration of Taxation issued SAT Circular 59 together with the Ministry of Finance in April 2009 and SAT Circular 698 in December 2009. On February 28, 2011, the SAT issued the Notice on Several Issues Regarding the Income Tax of Non-PRC Resident Enterprises, or SAT Circular 24, which became effective on April 1, 2011. By promulgating and implementing these circulars, the PRC tax authorities have enhanced their scrutiny over the direct or indirect transfer of equity interests in a PRC resident enterprise by a non-resident enterprise. Under SAT Circular 698, where a non-resident enterprise transfers the equity interests of a PRC “resident enterprise” indirectly by disposition of the equity interests of an overseas holding company, and the overseas holding company is located in a tax jurisdiction that: (1) has an effective tax rate less than 12.5% or (2) does not tax foreign income of its residents, the non-resident enterprise, being the transferor, must report to the relevant tax authority of the PRC “resident enterprise” the indirect transfer. On February 3, 2015, the SAT issued the Public Notice Regarding Certain Corporate Income Tax Matters on Indirect Transfer of Properties by Non-Tax Resident Enterprises, or SAT Bulletin 7. SAT Bulletin 7 supersedes the rules with respect to the indirect transfer under SAT Circular 698, but does not touch upon the other provisions of SAT Circular 698. SAT Bulletin 7 has introduced a new tax regime that is significantly different from the previous one under SAT Circular 698. SAT Bulletin 7 extends its tax jurisdiction to not only indirect transfers set forth under SAT Circular 698 but also transactions involving transfer of other taxable assets through offshore transfer of a foreign intermediate holding company. In addition, SAT Bulletin 7 provides clearer criteria than SAT Circular 698 for assessment of reasonable commercial purposes and has introduced safe harbors for internal group restructurings and the purchase and sale of equity through a public securities market. SAT Bulletin 7 also brings challenges to both foreign transferor and transferee (or other person who is obligated to pay for the transfer) of taxable assets. On October 17, 2017, the SAT issued the Announcement of the State Administration of Taxation on Issues Concerning the Withholding of Non-resident Enterprise Income Tax at Source, or SAT Bulletin 37. SAT Bulletin 37, which took effect on December 1, 2017, superseded the Non-resident Enterprises Measures and SAT Circular 698 as a whole and partially amended some provisions in SAT Circular 24 and SAT Bulletin 7. SAT Bulletin 37 purports to clarify certain issues in the implementation of the above regime, by providing, among others, the definition of equity transfer income and tax basis, the foreign exchange rate to be used in the calculation of withholding amount, and the date of occurrence of the withholding obligation. Specifically, SAT Bulletin 37 provides that where the transfer income subject to withholding at source is derived by a non-PRC resident enterprise in instalments, the instalments may first be treated as recovery of costs of previous investments. Upon recovery of all costs, the tax amount to be withheld must then be computed and withheld.

Provided that our Cayman Islands exempted company, UTime Limited, is not deemed to be a PRC resident enterprise, holders of our 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. However, under SAT Bulletin 7 and SAT Bulletin 37, 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 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. We and our non-PRC resident investors may be at risk of being required to file a return and being taxed under SAT Bulletin 7 and SAT Bulletin 37, and we may be required to expend valuable resources to comply with SAT Bulletin 7 and SAT Bulletin 37, or to establish that we should not be taxed under these circulars. See “Risk Factors - Risks Related to Doing Business in China - We face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.”

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Material United States Federal Income Tax Considerations

Subject to the limitations described below, the following are the material U.S. federal income tax consequences of the purchase, ownership and disposition of ordinary shares to a “U.S. Holder.” Non-U.S. Holders are urged to consult their own tax advisors regarding the U.S. federal income tax consequences of the purchase, ownership and disposition of ordinary shares to them. For purposes of this discussion, a “U.S. Holder” means a beneficial owner of ordinary shares that is, for U.S. federal income tax purposes:

| ● | an individual who is a citizen or resident of the United States;

| ● | a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States or any of its political subdivisions;

| ● | an estate, whose income is includible in gross income for U.S. federal income tax purposes regardless of its source; or

| ● | a trust if (i) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (ii) it has a valid election to be treated as a U.S. person.

A “non-U.S. Holder” is any individual, corporation, trust or estate that is a beneficial owner of ordinary shares and is not a U.S. Holder or a partnership (or other entity treated as a partnership for U.S. federal income tax purposes).

This discussion is based on current provisions of the Internal Revenue Code of 1986, as amended, or the Code, applicable U.S. Treasury Regulations promulgated thereunder, and administrative and judicial decisions as of the date of this annual report, all of which are subject to change, possibly on a retroactive basis, and any change could affect the continuing accuracy of this discussion.

This summary does not purport to be a comprehensive description of all of the tax considerations that may be relevant to each person’s decision to purchase ordinary shares. This discussion does not address all aspects of U.S. federal income taxation that may be relevant to any particular U.S. Holder based on such holder’s particular circumstances, including Medicare tax imposed on certain investment income. In particular, this discussion considers only U.S. Holders that will own ordinary shares as capital assets within the meaning of section 1221 of the Code and does not address the potential application of U.S. federal alternative minimum tax or the U.S. federal income tax consequences to U.S. Holders that are subject to special treatment, including:

| ● | broker dealers or insurance companies;

| ● | U.S. Holders who have elected mark-to-market accounting;

| ● | tax-exempt organizations or pension funds;

| ● | regulated investment companies, real estate investment trusts, insurance companies, financial institutions or “financial services entities”;

| ● | U.S. Holders who hold ordinary shares as part of a “straddle,” “hedge,” “constructive sale” or “conversion transaction” or other integrated investment;

| ● | U.S. Holders who own or owned, directly, indirectly or by attribution, at least 10% of the voting power of our ordinary shares;

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| ● | U.S. Holders whose functional currency is not the U.S. Dollar;

| ● | U.S. Holders who received ordinary shares as compensation;

| ● | persons holding ordinary shares in connection with a trade or business outside of the United States; and

| ● | certain expatriates or former long-term residents of the United States.

This discussion does not address the tax treatment of holders that are entities treated as partnerships for U.S. federal income tax purposes or other pass-through entities or persons who hold ordinary shares through a partnership or other pass-through entity. In addition, this discussion does not address any aspect of state, local or non-U.S. tax laws, or the possible application of U.S. federal gift or estate tax.

BECAUSE OF THE COMPLEXITY OF THE TAX LAWS AND BECAUSE THE TAX CONSEQUENCES TO ANY PARTICULAR HOLDER OF ORDINARY SHARES MAY BE AFFECTED BY MATTERS NOT DISCUSSED HEREIN, EACH HOLDER OF ORDINARY SHARES IS URGED TO CONSULT WITH ITS TAX ADVISOR WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE ACQUISITION AND THE OWNERSHIP AND DISPOSITION OF ORDINARY SHARES, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL AND NON-U.S. TAX LAWS, AS WELL AS U.S. FEDERAL TAX LAWS AND APPLICABLE TAX TREATIES.

Taxation of Dividends Paid on Ordinary Shares

Subject to the passive foreign investment company rules discussed below, the gross amount of distributions made by us with respect to our ordinary shares generally will be includable in the gross income of U.S. Holders as dividend income. Because we do not determine our earnings and profits for U.S. federal income tax purposes, a U.S. Holder will be required to treat any distribution paid on ordinary shares, including the amount of non-U.S. taxes, if any, withheld from the amount paid, as a dividend on the date the distribution is received. Such distribution generally will not be eligible for the dividends-received deduction generally allowed to U.S. corporations in respect of dividends received from other U.S. corporations.

Cash distributions paid in a non-U.S. currency will be included in the income of U.S. Holders at a U.S. Dollar amount equal to the spot rate of exchange in effect on the date the dividends are includible in the income of the U.S. Holders, regardless of whether the payment is in fact converted to U.S. Dollars, and U.S. Holders will have a tax basis in such non-U.S. currency for U.S. federal income tax purposes equal to such U.S. Dollar value. If a U.S. Holder converts a distribution paid in non-U.S. currency into U.S. Dollars on the day the dividend is includible in the income of the U.S. Holder, the U.S. Holder generally should not be required to recognize gain or loss arising from exchange rate fluctuations. If a U.S. Holder subsequently converts the non-U.S. currency, any subsequent gain or loss in respect of such non-U.S. currency arising from exchange rate fluctuations will be U.S.-source ordinary income or loss.

Dividends we pay with respect to our ordinary shares to non-corporate U.S. Holders may be “qualified dividend income,” which is currently taxable at a reduced rate; provided that (i) our ordinary shares are readily tradable on an established securities market in the United States, (ii) we are not a passive foreign investment company (as discussed below) with respect to the U.S. Holder for either our taxable year in which the dividend was paid or the preceding taxable year, (iii) the U.S. Holder has held our ordinary shares for at least 61 days of the 121-day period beginning on the date which is 60 days before the ex-dividend date, and (v) the U.S. Holder is not under an obligation to make related payments on substantially similar or related property. We believe our ordinary shares, which are expected to be listed on the NASDAQ, will be considered to be readily tradable on an established securities market in the United States, although there can be no assurance that this will continue to be the case in the future. Any days during which a U.S. Holder has diminished its risk of loss on our ordinary shares are not counted towards meeting the 61-day holding period. U.S. Holders should consult their own tax advisors on their eligibility for reduced rates of taxation with respect to any dividends paid by us.

Distributions paid on ordinary shares generally will be foreign-source passive category income for U.S. foreign tax credit purposes and will not qualify for the dividends received deduction generally available to corporations. Subject to certain conditions and limitations, non-U.S. taxes, if any, withheld from a distribution may be eligible for credit against a U.S. Holder’s U.S. federal income tax liability. In addition, if 50 percent or more of the voting power or value of our shares is owned, or is treated as owned, by U.S. persons (whether or not we are a “controlled foreign corporation” for U.S. federal income tax purposes), the portion of our dividends attributable to income which we derive from sources within the United States (whether or not in connection with a trade or business) would generally be U.S.-source income. U.S. Holders would not be able directly to utilize foreign tax credits arising from non U.S. taxes considered to be imposed upon U.S.-source income.

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Taxation of the Sale or Other Disposition of Ordinary Shares

Subject to the passive foreign investment company rules discussed below, a U.S. Holder generally will recognize a capital gain or loss on the taxable sale or other disposition of our ordinary shares in an amount equal to the difference between the U.S. Dollar amount realized on such sale or other disposition (determined in the case of consideration in currencies other than the U.S. Dollar by reference to the spot exchange rate in effect on the date of the sale or other disposition or, if the ordinary shares are treated as traded on an established securities market and the U.S. Holder is a cash basis taxpayer or an electing accrual basis taxpayer, the spot exchange rate in effect on the settlement date) and the U.S. Holder’s adjusted tax basis in such ordinary shares determined in U.S. Dollars. The initial tax basis of ordinary shares to a U.S. Holder will be the U.S. Holder’s U.S. Dollar cost for ordinary shares (determined in the case of consideration in currencies other than the U.S. Dollar by reference to the spot exchange rate in effect on the date of the purchase or, if the ordinary shares are treated as traded on an established securities market and the U.S. Holder is a cash basis taxpayer or an electing accrual basis taxpayer, the spot exchange rate in effect on the settlement date).

Capital gain from the sale, exchange or other disposition of ordinary shares held more than one year generally will be treated as long-term capital gain and is eligible for a reduced rate of taxation for non-corporate holders. Gain or loss recognized by a U.S. Holder on a sale or other disposition of ordinary shares generally will be treated as U.S.-source income or loss for U.S. foreign tax credit purposes. The deductibility of a capital loss recognized on the sale or exchange of ordinary shares is subject to limitations. A U.S. Holder that receives currencies other than U.S. Dollars upon disposition of the ordinary shares and converts such currencies into U.S. Dollars subsequent to receipt will have foreign exchange gain or loss based on any appreciation or depreciation in the value of such currencies against the U.S. Dollar, which generally will be U.S.-source ordinary income or loss.

Passive Foreign Investment Company

In general, a non-U.S. corporation will be classified as a passive foreign investment company (a “PFIC”) for any taxable year if at least (i) 75% of its gross income is classified as “passive income” or (ii) 50% of its assets (determined on the basis of a quarterly average) produce or are held for the production of passive income. For these purposes, cash is generally considered a passive asset. In making this determination, the non-U.S. corporation is treated as earning its proportionate share of any income and owning its proportionate share of any assets of any corporation in which it holds 25% or more (by value) of the stock. Although the law in this regard is unclear, we treat our consolidated affiliated entities as being owned by us for United States federal income tax purposes, not only because we exercise effective control over the operation of such entities but also because we are entitled to substantially all of their economic benefits.

Based on our current composition of assets and income, we believe that we are not currently a PFIC for U.S. federal income tax purposes. However, the determination of whether we are a PFIC is made annually, after the close of the relevant taxable year. Therefore, it is possible that we could be classified as a PFIC for the current taxable year or in future years due to changes in the composition of our assets (including as a result of the cash we raise in our initial public offering) or income, as well as changes to our market capitalization. The market value of our assets may be determined in large part by reference to the market price of our ordinary shares, which may fluctuate.

Under the PFIC rules, if we were considered a PFIC at any time that a U.S. Holder holds our shares, we would continue to be treated as a PFIC with respect to such holder’s investment unless (i) we cease to be a PFIC and (ii) the U.S. Holder has made a “deemed sale” election under the PFIC rules.

If we are considered a PFIC at any time that a U.S. Holder holds our shares, and unless such U.S. Holder makes a valid and timely “mark to market” election as described below, any gain recognized by the U.S. Holder on a sale or other disposition of the shares, as well as the amount of an “excess distribution” (defined below) received by such holder, would be allocated ratably over the U.S. Holder’s holding period for the shares. The amounts allocated to the taxable year of the sale or other disposition and to any year before we became a PFIC would be taxed as ordinary income. The amount allocated to each other taxable year would be subject to tax at the highest rate in effect for individuals or corporations, as appropriate, for that taxable year, and an interest charge would be imposed. For purposes of these rules, an excess distribution is the amount by which any distribution received by a U.S. Holder on its shares exceeds 125% of the average of the annual distributions on the shares received during the preceding three years or the U.S. Holder’s holding period, whichever is shorter.

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If we are treated as a PFIC with respect to a U.S. Holder for any taxable year, the U.S. Holder will be deemed to own shares in any of our subsidiaries that are also PFICs. However, an election for mark-to-market treatment would likely not be available with respect to any such subsidiaries. If we are considered a PFIC, a U.S. Holder will also be subject to information reporting requirements on an annual basis. U.S. Holders should consult their own tax advisors about the potential application of the PFIC rules to an investment in our shares.

If we were classified as a PFIC, a U.S. Holder may be able to make a “mark-to-market” election with respect to our ordinary shares (but not with respect to the shares of any lower-tier PFICs) if the ordinary shares are “regularly traded” on a “qualified exchange”. In general, our ordinary shares will be treated as “regularly traded” in any calendar year in which more than a de minimis quantity of ordinary shares are traded on a qualified exchange on at least 15 days during each calendar quarter. However, the Company can make no assurance that the ordinary shares will be listed on a “qualified exchange” or that there will be sufficient trading activity for the ordinary shares to be treated as “regularly traded”. Accordingly, U.S. Holders should consult their own tax advisers as to whether their ordinary shares would qualify for the mark-to-market election.

If a U.S. Holder makes a valid mark-to-market election for the first taxable year that such U.S. Holder holds our ordinary shares and as to which the Company is classified as a PFIC, the holder will generally include as ordinary income the excess, if any, of the fair market value of the ordinary shares at the end of the taxable year over their adjusted tax basis, and will be permitted an ordinary loss in respect of the excess, if any, of the adjusted tax basis of the ordinary shares over their fair market value at the end of the taxable year (but only to the extent of the net amount of previously included income as a result of the mark-to-market election). If a U.S. Holder makes the election, the holder’s tax basis in our ordinary shares will be adjusted to reflect any such income or loss amounts. Any gain recognized on the sale or other disposition of our ordinary shares will be treated as ordinary income, and any loss will be treated as an ordinary loss to the extent of any prior mark-to-market gains.

If a U.S. Holder makes the mark-to-market election, it will be effective for the taxable year for which the election is made and all subsequent taxable years unless the ordinary shares are no longer regularly traded on a qualified exchange or the IRS consents to the revocation of the election.

If we were classified as a PFIC, U.S. Holders would not be eligible to make an election to treat us as a “qualified electing fund,” or a QEF election, because we do not anticipate providing U.S. Holders with the information required to permit a QEF election to be made.

U.S. Information Reporting and Backup Withholding

A U.S. Holder is generally subject to information reporting requirements with respect to dividends paid in the United States on ordinary shares and proceeds paid from the sale, exchange, redemption or other disposition of ordinary shares. A U.S. Holder is subject to backup withholding (currently at 24%) on dividends paid in the United States on ordinary shares and proceeds paid from the sale, exchange, redemption or other disposition of our ordinary shares unless the U.S. Holder is a corporation, provides an IRS Form W-9 or otherwise establishes a basis for exemption.

Backup withholding is not an additional tax. Amounts withheld under the backup withholding rules may be credited against a U.S. Holder’s U.S. federal income tax liability, and a U.S. Holder may obtain a refund from the IRS of any excess amount withheld under the backup withholding rules, provided that certain information is timely furnished to the IRS. Holders are urged to consult their own tax advisors regarding the application of backup withholding and the availability of and procedures for obtaining an exemption from backup withholding in their particular circumstances.

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Certain Reporting Obligations

If a U.S. Holder (together with persons considered to be related to the U.S. Holder) subscribes for ordinary shares for a total initial public offering price in excess of $100,000 (or the equivalent in a foreign currency), such holder may be required to file IRS Form 926 for the holder’s taxable year in which the initial public offering price is paid. U.S. Holders should consult their own tax advisors to determine whether they are subject to any Form 926 filing requirements.

Individuals that own “specified foreign financial assets” may be required to file an information report with respect to such assets with their tax returns. Subject to certain exceptions, “specified foreign financial assets” include any financial accounts maintained by foreign financial institutions, as well as any of the following, but only if they are not held in accounts maintained by financial institutions: (i) stocks and securities issued by non U.S. persons, (ii) financial instruments and contracts held for investment that have non U.S. issuers or counterparties, and (iii) interests in foreign entities. The ordinary shares may be subject to these rules. Persons required to file U.S. tax returns that are individuals are urged to consult their tax advisers regarding the application of this legislation to their ownership of the ordinary shares.

10.F. Dividends and Paying Agents

Not Applicable.

10.G. Statement by Experts

Not Applicable.

10.H. Documents on Display

The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and will file reports, registration statements and other information with the SEC. The Company’s reports, registration statements and other information can be inspected on the SEC’s website at www.sec.gov. You may also visit us on website at www.utimemobile.com. However, information contained on our website does not constitute a part of this annual report.

10.I. Subsidiary Information

Not Applicable.

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ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign exchange risk

We transact business globally in multiple currencies. Our international revenue, as well as costs and expenses denominated in foreign currencies, expose us to the risk of fluctuations in foreign currency exchange rates against the U.S. dollar. We have foreign currency risks related to our revenue and operating expenses denominated in currencies of the U.S. dollar and Renminbi. Accordingly, changes in exchange rates in the future may negatively affect our future revenue and other operating results as expressed in U.S. dollars. Our foreign currency risk is partially mitigated as our revenue recognized in currencies other than the U.S. dollar is diversified across geographic regions and we incur expenses in the same currencies in these regions. We have not used any derivative financial instruments to hedge exposure to such risk.

The value of U.S. dollar against Renminbi may fluctuate and is affected by, among other things, changes in political and economic conditions and the foreign exchange policy adopted by the PRC government. The Renminbi is not freely convertible into foreign currencies. Remittances of foreign currencies into the PRC or remittances of Renminbi out of the PRC as well as exchange between Renminbi and foreign currencies require approval by foreign exchange administrative authorities and certain supporting documentation. The State Administration for Foreign Exchange, under the authority of the People’s Bank of China, controls the conversion of Renminbi into other currencies. 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.

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. 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.

We may invest the net proceeds we received from our initial public offering in interest-earning instruments. 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.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

12.A. Debt Securities

Not applicable.

12.B. Warrants and Rights

Not applicable.

12.C. Other Securities

Not applicable.

12.D. American Depositary Shares

Not applicable.

139

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-B. Memorandum and Articles of Association” for a description of the rights of securities holders, which remain unchanged.

Use of Proceeds

The following “Use of Proceeds” information relates to the registration statement on Form F-1, as amended (File Number: 333-237260), or the Form F-1, in relation to our IPO of 3,750,000 ordinary shares at an initial offering price of US$4.00 per share. The Form F-1 was declared effective by the SEC on April 5, 2021. Our IPO closed on April 8, 2021. Our underwriters were Boustead Securities, LLC, Brilliant Norton Securities Company Limited and Fosun Hani Securities Ltd.

The total expenses incurred for our company’s account in connection with our IPO were approximately US$2.9 million, including underwriting discounts and commissions of approximately US$1.1 million and other expenses of approximately US$1.8 million. None of the fees and expenses were directly or indirectly paid to the directors, officers of our company or their associates, persons owning 10% or more of our ordinary shares, or our affiliates.

After deducting the total expenses, we received net proceeds of approximately US$12.1 million from our IPO.

None of the net proceeds from our initial public offering were directly or indirectly paid to the directors, officers of our company or their associates, persons owning 10% or more of our ordinary shares, or our affiliates.

ITEM 15. Controls and Procedures

(a) | Disclosure Controls and Procedures

Our management, under the supervision and with the participation of our chief executive officer and chief financial officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures, which is defined in Rules 13a-15(e) of the Exchange Act, as of March 31, 2023. Disclosure controls and procedures means controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rule and forms and that such information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosures.

Based upon that evaluation, our management, with the participation of our chief executive officer and chief financial officer, has concluded that, as of the end of the period covered by this annual report, our disclosure controls and procedures were not effective as of March 31, 2023, in ensuring that the information required to be disclosed by us in the reports that we file and furnish under the Exchange Act was recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure

140

(b) | Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, 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 framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management has concluded that our internal control over financial reporting was not effective as of March 31, 2024.

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 annual or interim financial statements will not be prevented or detected on a timely basis. Based on this evaluation, our management has concluded that our internal control over financial reporting was not effective as of March 31, 2023.

Based on the assessment, we identified material weaknesses. Specifically, we did not maintain appropriately designed entity-level controls impacting the control environment, risk assessment procedures, and effective monitoring controls to prevent or detect material misstatements to the consolidated financial statements. These deficiencies were attributed to (i) our lack of sufficient qualified financial reporting and accounting personnel with an appropriate knowledge under U.S. GAAP and (ii) our lack of comprehensive accounting policies and procedures manual in accordance with U.S. GAAP.

Following the identification of the material weaknesses, we have taken certain steps and plan to and will continue to take measures to strengthen our internal control over financial reporting including: (i) we are in the process of hiring additional qualified finance and accounting staff with working experience in U.S. GAAP and SEC reporting requirements; (ii) we have appointed three independent directors as of the date of this annual report. Furthermore, we plan to implement the following measures: (i) establishing a separate department which will be responsible for the reporting process; (ii) further streamlining our reporting process to support our business development as necessary; and (iii) engaging professional financial advisory firms if necessary, to provide ongoing training to our finance and accounting personnel as well as to strengthen our financial reporting expertise and system. We expect to complete the measures discussed above as soon as practicable and will continue to implement measures to remediate these material weaknesses. We expect that we will incur significant costs in the implementation of such measures.

However, the implementation of those measures may not fully address the material weaknesses identified in our internal control over financial reporting. We have disclosed the material weaknesses in our internal control over financial reporting in “Risk Factors” - Risks Related to Our Business and Industry. If we fail to develop and maintain an effective system of internal control over financial reporting, we may be unable to accurately report our financial results or prevent fraud.”

(c) | Attestation report of the registered public accounting firm

We did not include an attestation report of our registered public accounting firm in this annual report. As a company with less than US$1.235 billion of revenue for last financial year, we qualified 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 an emerging growth company’s internal control over financial reporting.

(d) | Changes in Internal Control over Financial Reporting

Other than those disclosed above, there were no changes in our internal controls over financial reporting during our fiscal year ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

141

ITEM 16. RESERVED

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

Our audit committee consists of Na Cai, Xiaoqian Jia and Hailin Xie. Our board of directors has determined that Na Cai, Xiaoqian Jia and Hailin Xie are “independent directors” within the meaning of NASDAQ Stock Market Rule 5605(a)(2) and meet the criteria for independence set forth in Rule 10A−3(b) of the Exchange Act. David Sherman meets the criteria of an audit committee financial expert as set forth under the applicable rules of the SEC.

ITEM 16B. CODE OF ETHICS

Our board of directors has adopted a code of ethics that applies to all of our executive officers, directors and employees in accordance with the rules of the NASDAQ and the SEC. The purpose of the code is to promote ethical conduct and deter wrongdoing. The policies outlined in the Code are designed to ensure that our directors, executive officers and employees act in accordance with not only the letter but also the spirit of the laws and regulations that apply to our business. We expect our directors, executive officers and employees to exercise good judgment, to uphold these standards in their day-to-day activities, and to comply with all applicable policies and procedures in the course of their relationship with the company. Any amendment to or waivers of the Code for members of our board of directors and our executive officers that are required to be disclosed by the rules of the SEC or NASDAQ will be disclosed on our website at www.utimemobile.com within four business days following the amendment or waiver. During fiscal year 2023, no amendments to or waivers from the Code were made or given for any of our executive officers.

Our code of ethics is publicly available on our website at investor.utimeworld.com.

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

|  | Year Ended March 31, 2024 |  |  | Year Ended March 31, 2023 |
Audit fees* |  |  |  |  |  |
Audit Alliance LLP |  | $ | 190,000 |  |  | $ | 180,000 |
Total |  | $ | 190,000 |  |  | $ | 180,000 |

* | Audit Fees consist of fees billed for the annual audit of our consolidated financial statements and review of our interim condensed consolidated financial statements. They also include fees billed for other audit services, which are those services that only the external auditor reasonably can provide, and include the provision for consents relating to the review of documents filed with the SEC.

The policy of our audit committee and our board of directors is to pre-approve all audit and non-audit services provided by our principal auditors, including audit services, audit-related services, and other services as described above, other than those for de minimis services which are approved by the audit committee or our board of directors prior to the completion of the services.

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not Applicable.

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

None.

ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

Not Applicable.

ITEM 16G. CORPORATE GOVERNANCE

Our ordinary shares are listed on the NASDAQ Capital Market, or NASDAQ. As such, we are subject to corporate governance requirements imposed by NASDAQ. Under NASDAQ rules, listed non-US companies such as ourselves may, in general, follow their home country corporate governance practices in lieu of some of the NASDAQ corporate governance requirements. A NASDAQ -listed non-US company is required to provide a general summary of the significant differences to its US investors either on the company website or in its annual report distributed to its US investors.

142

Certain corporate governance practices in Cayman Islands, which is our home country, may differ significantly from the Nasdaq corporate governance listing standards. The following summarizes some significant ways in which our corporate governance practices differ from those followed by domestic companies under the listing standards of the Nasdaq:

Pursuant to the home country rule exemption set forth under Nasdaq Listing Rule 5615(a)(3)(A), which provides (with certain exceptions not relevant to the conclusions expressed herein) that a foreign private issuer may follow its home country practice in lieu of the requirements of the Nasdaq Marketplace Rule 5600 Series, we elected to be exempt from the requirements as follows:

| (a) | Nasdaq Marketplace Rule 5620 which provides that (with certain exceptions not relevant to the conclusions expressed herein) each company listing common stock or voting preferred stock, and their equivalents, shall hold an annual meeting of shareholders no later than one year after the end of the company’s fiscal year-end; and

| (b) | Nasdaq Marketplace Rule 5635 which sets forth the circumstances under which shareholder approval is required prior to an issuance of securities in connection with: (i) the acquisition of the stock or assets of another company; (ii) equity-based compensation of officers, directors, employees or consultants; (iii) a change of control; and (iv) transactions other than public offerings.

| (c) | Nasdaq Listing Rule 5615(a)(3)(A) provides (with certain exceptions not relevant to the conclusions expressed herein) that a Foreign Private Issuer may follow its home country practice in lieu of the requirements of the Rule 5600 Series, the requirement to disclose third party director and nominee compensation set forth in Rule 5250(b)(3), and the requirement to distribute annual and interim reports set forth in Rule 5250(d), provided, however, that such a company shall: comply with the Notification of Noncompliance requirement (Rule 5625), the Voting Rights requirement (Rule 5640), have an audit committee that satisfies Rule 5605(c)(3), and ensure that such audit committee’s members meet the independence requirement in Rule 5605(c)(2)(A)(ii) and that Nasdaq Information Memorandum IM-5615-3 provides that a Foreign Private Issuer that elects to follow country practice in lieu of a requirement of Rules 5600, 5250(b)(3) or 5250(d) shall submit to Nasdaq a written statement from an independent counsel in such company’s home country certifying that the company’s practices are not prohibited by the home country’s laws.

Except for the foregoing, we endeavor to comply with the Nasdaq corporate governance practices and except for the foregoing, there is no significant difference between our corporate governance practices and what the Nasdaq requires of domestic U.S. companies.

ITEM 16H. MINE SAFETY DISCLOSURE

Not applicable.

ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

ITEM 16J. INSIDER TRADING POLICIES

We have adopted insider trading policies governing the purchase, sale, and other dispositions of our securities by directors, senior management, and employees. A copy of the insider trading policies is attached as Exhibit 19.1 to the Form 20-F filed on August 8, 2023.

ITEM 16K. CYBERSECURITY

Risk Management and Strategy

We have established cybersecurity risk assessment procedures to ensure effectiveness in cybersecurity management, strategy and governance and reporting cybersecurity risks. The process is in alignment with our strategic objectives and risk appetite.

We strive to manage cybersecurity risks and protect sensitive information through various means, such as technical safeguards, procedural requirements, close monitoring on our corporate network. We may engage assessors, consultants, auditors, or other third parties to enhance our cyber security risk management processes. Any cybersecurity incidents are closely monitored for their potential impact on our business strategy, operations, and financial condition.

As of the date of this annual report, we have not experienced any material cybersecurity incidents or identified any material cybersecurity threats that have affected or are reasonably likely to materially affect us, our business strategy, results of operations or financial condition.

Governance

Our Board oversees the Company’s cybersecurity risks management and receives and reviews management reports on material cybersecurity risks and issues on an as-needed basis. The chief executive officer, the chief financial officer and the principal officer in charge of the cybersecurity matters, who has extensive knowledge and skills in cybersecurity management and security compliance, are responsible for discussing material cybersecurity incidents or threats with specific constituencies before sign-off, ensuring thorough review of information and disclosures. The chief executive officer, the chief financial officer, and the principal officer in charge of the cybersecurity matters are also responsible for assessing, identifying and managing material risks from cybersecurity threats to our company and monitoring the prevention, detection, mitigation and remediation of material cybersecurity incident, maintaining oversight of the disclosure in the periodic reports (including our annual reports on Form 20-F) of the Company.

143

PART III

ITEM 17. FINANCIAL STATEMENTS

We have elected to provide financial statements pursuant to Item 18.

ITEM 18. FINANCIAL STATEMENTS

The consolidated financial statements and related notes required by this item are contained on pages F-1 through F-42.

ITEM 19. EXHIBITS

Exhibit Number |  | Description of Document
1.1 |  | Amended and Restated Memorandum and Article of Association(1)
2.1 |  | Description of Shares (1)
4.1 |  | English Translation of Factory Lease Agreement, dated November 1, 2021, by and between Guangxi Utime Technology Co., Ltd and Nanning Industrial Investment Group Co., Ltd. (2)
4.2 |  | English Translation of Procurement Agreement, dated January 15, 2022, by and between Guangxi Utime Technology Co., Ltd and P.J. Advisory Company Limited(2)
4.3 |  | English Translation of Purchase Agreement, by and between Guangxi Utime Technology Co., Ltd. and Shenzhen Chuangbaili Industrial Equipment Co., Ltd.(2)
8.1* |  | Subsidiaries of the Registrant
12.1* |  | Certificate of Principal Executive Officer pursuant to Rule 13a-14(a) / 15d-(14)a of the Exchange Act
12.2* |  | Certificate of Principal Financial Officer pursuant to Rule 13a-14(a) / 15d- (14)a of the Exchange Act
13.1* |  | Certificate of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
15.1* |  | Consent of Audit Alliance LLP
15.2* |  | Consent of Zhejiang Taihang Law Firm
19.1 |  | Insider Trading Policies(3)
97.1* |  | Compensation Recovery Policy
101.INS* |  | Inline XBRL Instance Document.
101.SCH* |  | Inline XBRL Taxonomy Extension Schema Document.
101.CAL* |  | Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF* |  | Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB* |  | Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE* |  | Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104* |  | Cover Page Interactive Data File (embedded within the Inline XBRL document)

* | Filed as an exhibit hereto.

(1) | Incorporated by reference to our annual report on Form 20-F, filed on July 22, 2021.

(2) | Incorporated by reference to our annual report on Form 20-F, filed on October 31, 2022.

| (3) | Incorporated by reference to Exhibit 19.1 of our annual report on Form 20-F, filed on August 8, 2023.

144

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.

| UTIME LIMITED
| /s/ Hengcong Qiu
| Name: | Hengcong Qiu
| Title: | Chief Executive Officer
Date: July 30, 2024 |  |

145

UTIME LIMITED

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Financial Statements |  |
Report of Independent Registered Public Accounting Firm (PCAOB ID #3487) |  | F-2
Consolidated Balance Sheets as of March 31, 2023 and 2024 |  | F-3
Consolidated Statements of Comprehensive Loss for the years ended March 31, 2023 and 2024 |  | F-4
Consolidated Statements of Shareholders’ Equity for the years ended March 31, 2022, 2023 and 2024 |  | F-5
Consolidated Statements of Cash Flows for the years ended March 31, 2023 and 2024 |  | F-6
Notes to the Consolidated Financial Statements |  | F-8

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the board of directors of UTime Limited

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of UTime Limited (the “Company”) as of March 31, 2024 and 2023, the related consolidated statements of comprehensive loss, shareholders’ equity, and cash flows for each of the two years ended March 31, 2024 and 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated balance sheets of the Company as of March 31, 2024, and the result of its operation and statements of cash flows for the year ended March 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Audit Alliance LLP

We have served as the Company’s auditor since 2022.

Singapore

July 30, 2024

PCAOB ID No. 3487

F-2

UTIME LIMITED
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data and per share data, or otherwise noted)

|  | As of March 31, |  |  | As of March 31, |
|  | 2023 |  |  | 2024 |
Assets |  | RMB |  |  | RMB |  |  | USD |
Current assets |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  |  | 71,920 |  |  |  | 76,675 |  |  |  | 10,807 |
Restricted cash |  |  | 500 |  |  |  | 500 |  |  |  | 70 |
Accounts receivable, net |  |  | 52,172 |  |  |  | 30,240 |  |  |  | 4,262 |
Prepaid expenses and other current assets, net |  |  | 91,440 |  |  |  | 457,654 |  |  |  | 64,504 |
Due from related parties |  |  | 584 |  |  |  | 553 |  |  |  | 78 |
Inventories |  |  | 16,169 |  |  |  | 11,026 |  |  |  | 1,651 |
Current assets related to discontinued operations |  |  | 4,218 |  |  |  | 1,438 |  |  |  | 203 |
Total current assets |  |  | 237,003 |  |  |  | 578,086 |  |  |  | 81,478 |
Non-current assets |  |  |  |  |  |  |  |  |  |  |  |
Property, plant and equipment, net |  |  | 61,407 |  |  |  | 54,188 |  |  |  | 7,637 |
Operating lease right-of-use assets, net |  |  | 13,030 |  |  |  | 9,781 |  |  |  | 1,379 |
Finance lease right-of-use assets, net |  |  | - |  |  |  | 6,460 |  |  |  | 911 |
Intangible assets, net |  |  | 1,677 |  |  |  | 662 |  |  |  | 93 |
Equity method investment |  |  | - |  |  |  | - |  |  |  | - |
Deferred loss on sale-leaseback |  |  | - |  |  |  | 767 |  |  |  | 108 |
Other non-current assets |  |  | - |  |  |  | 153 |  |  |  | 22 |
Non-current assets related to discontinued operation |  |  | 22 |  |  |  | 3 |  |  |  | - |
Total non-current assets |  |  | 76,136 |  |  |  | 71,861 |  |  |  | 10,128 |
Total assets |  |  | 313,139 |  |  |  | 649,947 |  |  |  | 91,606 |
Liabilities and shareholders’ equity |  |  |  |  |  |  |  |  |  |  |  |
Current liabilities |  |  |  |  |  |  |  |  |  |  |  |
Accounts payable |  |  | 125,374 |  |  |  | 106,092 |  |  |  | 14,953 |
Short-term borrowings |  |  | 53,935 |  |  |  | 56,949 |  |  |  | 8,027 |
Current portion of long-term borrowings |  |  | 1,080 |  |  |  | - |  |  |  | - |
Current portion of government grants |  |  | - |  |  |  | 1,812 |  |  |  | 255 |
Due to related parties |  |  | 4,779 |  |  |  | 35,244 |  |  |  | 4,967 |
Lease liabilities |  |  | 3,673 |  |  |  | 6,824 |  |  |  | 962 |
Other payables and accrued liabilities |  |  | 53,639 |  |  |  | 63,951 |  |  |  | 9,014 |
Income tax payables |  |  | 18 |  |  |  | 18 |  |  |  | 3 |
Current liabilities related to discontinued operations |  |  | 3,171 |  |  |  | 1,929 |  |  |  | 272 |
Total current liabilities |  |  | 245,669 |  |  |  | 272,819 |  |  |  | 38,453 |
Non-current liabilities |  |  |  |  |  |  |  |  |  |  |  |
Long-term borrowings |  |  | 6,870 |  |  |  | - |  |  |  | - |
Government grants |  |  | 8,697 |  |  |  | 4,342 |  |  |  | 612 |
Deferred tax liability |  |  | 295 |  |  |  | 125 |  |  |  | 18 |
Lease liabilities - non-current |  |  | 10,876 |  |  |  | 10,054 |  |  |  | 1,417 |
Total non-current liabilities |  |  | 26,738 |  |  |  | 16,333 |  |  |  | 2,302 |
Total liabilities (including amounts of the consolidated VIEs without recourse to the Company of RMB265,773 and RMB230,819 as of March 31, 2023 and 2024, respectively) |  |  | 272,407 |  |  |  | 287,340 |  |  |  | 40,500 |
Commitments and contingencies |  |  | - |  |  |  | - |  |  |  | - |
Shareholders’ equity |  |  |  |  |  |  |  |  |  |  |  |
Preference share, par value US$0.0001; Authorized:10,000,000 shares; none issued and outstanding As of March 31, 2023 and 2024, respectively |  |  | - |  |  |  | - |  |  |  | - |
Ordinary shares, par value US$0.0001; Authorized:990,000,000 shares; Issued and outstanding: 13,567,793 shares as of March 31,2023 and 392,113,953 shares as of March 31, 2024 |  |  | 9 |  |  |  | 278 |  |  |  | 39 |
Additional paid-in capital |  |  | 216,504 |  |  |  | 573,615 |  |  |  | 80,848 |
Accumulated deficit |  |  | (175,893 | ) |  |  | (208,828 | ) |  |  | (29,433 | )
Accumulated other comprehensive income |  |  | 3,469 |  |  |  | 2,733 |  |  |  | 384 |
Total UTime Limited shareholders’ equity |  |  | 44,089 |  |  |  | 367,798 |  |  |  | 51,838 |
Non-controlling interests |  |  | (3,357 | ) |  |  | (5,191 | ) |  |  | (732 | )
Total shareholders’ equity |  |  | 40,732 |  |  |  | 362,607 |  |  |  | 51,106 |
Total liabilities and shareholders’ equity |  |  | 313,139 |  |  |  | 649,947 |  |  |  | 91,606 |

The accompanying notes are an integral part of these consolidated financial statements.

F-3

UTIME LIMITED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Amounts in thousands, except share data and per share data, or otherwise noted)

|  |  |  |  | Year ended March 31, |
|  | Note |  |  | 2023 |  |  | 2024 |
|  |  |  |  | RMB |  |  | RMB |  |  | USD |
Revenue |  | 16 |  |  |  | 197,564 |  |  |  | 172,156 |  |  |  | 24,264 |
Cost of sales |  |  |  |  |  | 167,143 |  |  |  | 163,286 |  |  |  | 23,014 |
Gross profit |  |  |  |  |  | 30,421 |  |  |  | 8,870 |  |  |  | 1,250 |
Operating expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Selling expenses |  |  |  |  |  | 7,373 |  |  |  | 6,356 |  |  |  | 896 |
General and administrative expenses |  |  |  |  |  | 105,186 |  |  |  | 40,711 |  |  |  | 5,738 |
Other expenses (income), net |  | 11 |  |  |  | (4,533 | ) |  |  | (8,057 | ) |  |  | (1,136 | )
Total operating expenses |  |  |  |  |  | 108,026 |  |  |  | 39,010 |  |  |  | 5,498 |
Loss from operations |  |  |  |  |  | (77,605 | ) |  |  | (30,140 | ) |  |  | (4,248 | )
Interest expenses |  |  |  |  |  | 6,149 |  |  |  | 3,617 |  |  |  | 510 |
Loss before income taxes |  |  |  |  |  | (83,754 | ) |  |  | (33,757 | ) |  |  | (4,758 | )
Income tax benefits |  | 12 |  |  |  | (171 | ) |  |  | (171 | ) |  |  | (24 | )
Net loss from continuing operations |  |  |  |  |  | (83,583 | ) |  |  | (33,586 | ) |  |  | (4,734 | )
Discontinued operations |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loss on disposal of discontinued operation |  |  |  |  |  | - |  |  |  | (26,719 | ) |  |  | (3,766 | )
Loss from discontinued operations |  |  |  |  |  | (6,439 | ) |  |  | (1,903 | ) |  |  | (268 | )
Net loss from discontinued operations |  |  |  |  |  | (6,439 | ) |  |  | (28,622 | ) |  |  | (4,034 | )
Net loss |  |  |  |  |  | (90,022 | ) |  |  | (62,208 | ) |  |  | (8,768 | )
Less: Net loss attributable to non-controlling interests |  |  |  |  |  | (2,406 | ) |  |  | (1,324 | ) |  |  | (187 | )
Net loss attributable to UTime Limited |  |  |  |  |  | (87,616 | ) |  |  | (60,884 | ) |  |  | (8,581 | )
Comprehensive loss |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss attributable to UTime Limited |  |  |  |  |  | (87,616 | ) |  |  | (60,884 | ) |  |  | (8,581 | )
Foreign currency translation adjustment |  |  |  |  |  | 2,445 |  |  |  | 1,456 |  |  |  | 205 |
Total comprehensive loss |  |  |  |  |  | (85,171 | ) |  |  | (59,428 | ) |  |  | (8,376 | )
Comprehensive loss attributable to UTime Limited |  |  |  |  |  | (85,171 | ) |  |  | (59,428 | ) |  |  | (8,376 | )
Losses per share attributable to UTime Limited |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Continuing operations |  |  |  |  |  | (7.44 | ) |  |  | (2.03 | ) |  |  | (0.29 | )
Discontinued operations |  |  |  |  |  | (0.57 | ) |  |  | (1.73 | ) |  |  | (0.24 | )
Weighted average ordinary shares outstanding |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic and diluted |  |  |  |  |  | 11,229,985 |  |  |  | 16,550,762 |  |  |  | 16,550,762 |

The accompanying notes are an integral part of these consolidated financial statements.

F-4

UTIME LIMITED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Amounts in thousands, except share data, or otherwise noted)

|  | Equity attributable to UTime Limited |  |  |  |  |  |  |
|  | Ordinary shares |  |  | Additional |  |  | Retained Earnings |  |  | Accumulated Other |  |  | Non- |  |  | Total |
|  | Number of |  |  |  |  |  | Paid-in |  |  | (Accumulated |  |  | Comprehensive |  |  | controlling |  |  | Shareholders’ |
|  | Shares |  |  | Amount |  |  | Capital |  |  | Deficit) |  |  | Income (Loss) |  |  | Interests |  |  | Equity |
|  |  |  |  | RMB |  |  | RMB |  |  | RMB |  |  | RMB |  |  | RMB |  |  | RMB |
Balance as of April 1, 2022 |  |  | 8,267,793 |  |  |  | 5 |  |  |  | 152,236 |  |  |  | (88,277 | ) |  |  | 1,024 |  |  |  | (520 | ) |  |  | 64,468 |
Net loss |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (87,616 | ) |  |  | - |  |  |  | (2,406 | ) |  |  | (90,022 | )
Issuance of ordinary shares |  |  | 5,300,000 |  |  |  | 4 |  |  |  | 64,268 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 64,272 |
Foreign currency translation difference |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 2,445 |  |  |  | (431 | ) |  |  | 2,014 |
Balance as of March 31, 2023 |  |  | 13,567,793 |  |  |  | 9 |  |  |  | 216,504 |  |  |  | (175,893 | ) |  |  | 3,469 |  |  |  | (3,357 | ) |  |  | 40,732 |
Net loss |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (60,884 | ) |  |  | - |  |  |  | (1,324 | ) |  |  | (62,208 | )
Issuance of ordinary shares |  |  | 373,846,160 |  |  |  | 266 |  |  |  | 88,067 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 88,333 |
Issuance of warrants |  |  | - |  |  |  | - |  |  |  | 260,582 |  |  |  | - |  |  |  | - |  |  |  |  |  |  |  | 260,582 |
Issuance of shares to officers |  |  | 4,700,000 |  |  |  | 3 |  |  |  | 8,462 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 8,465 |
Disposal of discontinue operation |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 27,949 |  |  |  | (2,192 | ) |  |  | - |  |  |  | 25,757 |
Foreign currency translation difference |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,456 |  |  |  | (510 | ) |  |  | 946 |
Balance as of March 31, 2024 |  |  | 392,113,953 |  |  |  | 278 |  |  |  | 573,615 |  |  |  | (208,828 | ) |  |  | 2,733 |  |  |  | (5,191 | ) |  |  | 362,607 |

The accompanying notes are an integral part of these consolidated financial statements.

F-5

UTIME LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands or otherwise noted)

|  | Year ended March 31, |
|  | 2023 |  |  | 2024 |
|  | RMB |  |  | RMB |  |  | USD |
Cash flows from operating activities: |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  |  | (90,022 | ) |  |  | (62,208 | ) |  |  | (8,768 | )
Net loss from discontinued operations |  |  | (6,439 | ) |  |  | (28,622 | ) |  |  | (4,034 | )
Net loss from continuing operations |  |  | (83,583 | ) |  |  | (33,586 | ) |  |  | (4,734 | )
Adjustments to reconcile net loss from operations to net cash used by operating activities |  |  |  |  |  |  |  |  |  |  |  |
Depreciation and amortization |  |  | 5,769 |  |  |  | 6,736 |  |  |  | 949 |
Allowances for obsolete inventories, net |  |  | (356 | ) |  |  | 688 |  |  |  | 97 |
Provision for doubtful account, net |  |  | - |  |  |  | 152 |  |  |  | 21 |
Share-based compensation and expenses |  |  | 63,656 |  |  |  | 8,892 |  |  |  | 1,253 |
Loss on disposal of property and equipment |  |  | 184 |  |  |  | - |  |  |  | - |
Deferred tax |  |  | (171 | ) |  |  | (171 | ) |  |  | (24 | )
Net changes in operating assets and liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Accounts receivable |  |  | (27,463 | ) |  |  | 4,118 |  |  |  | 580 |
Prepaid expenses and other current assets |  |  | (22,908 | ) |  |  | (361,724 | ) |  |  | (50,983 | )
Inventories |  |  | 17,265 |  |  |  | 4,459 |  |  |  | 628 |
Accounts payable |  |  | 18,217 |  |  |  | (10,606 | ) |  |  | (1,495 | )
Other payables and accrued liabilities |  |  | 8,252 |  |  |  | 4,213 |  |  |  | 594 |
Related parties |  |  | 877 |  |  |  | 2,949 |  |  |  | 416 |
Government grants |  |  | 8,697 |  |  |  | (2,542 | ) |  |  | (358 | )
Net cash used in operating activities - Continuing operations |  |  | (11,023 | ) |  |  | (376,422 | ) |  |  | (53,056 | )
Net cash (used in) provided by operating activities - Discontinued operations |  |  | (4,115 | ) |  |  | 246 |  |  |  | 35 |
Net cash used in operating activities |  |  | (15,138 | ) |  |  | (376,176 | ) |  |  | (53,021 | )
Cash flow from investing activities: |  |  |  |  |  |  |  |  |  |  |  |
Acquisition of property, plant and equipment |  |  | (2,593 | ) |  |  | (971 | ) |  |  | (137 | )
Payment for intangible assets |  |  | (307 | ) |  |  | - |  |  |  | - |
Proceeds from sale of property, plant and equipment |  |  | - |  |  |  | 6,500 |  |  |  | 916 |
Net cash (used in) provided by investing activities - Continuing operations |  |  | (2,900 | ) |  |  | 5,529 |  |  |  | 779 |
Net cash used in investing activities - Discontinued operations |  |  | - |  |  |  | (9 | ) |  |  | (1 | )
Net cash (used in) provided by investing activities |  |  | (2,900 | ) |  |  | 5,520 |  |  |  | 778 |
Cash flow from financing activities: |  |  |  |  |  |  |  |  |  |  |  |
Proceeds from short-term borrowings |  |  | 66,300 |  |  |  | 60,571 |  |  |  | 8,537 |
Loan received from a shareholder |  |  | 4,010 |  |  |  | 41,796 |  |  |  | 5,891 |
Repayment of loan from a shareholder |  |  | (3,000 | ) |  |  | (14,200 | ) |  |  | (2,001 | )
Repayment of short-term borrowings |  |  | (48,145 | ) |  |  | (57,557 | ) |  |  | (8,112 | )
Repayments of long-term borrowings |  |  | (870 | ) |  |  | (7,950 | ) |  |  | (1,121 | )
Proceeds from issuance of ordinary shares |  |  | - |  |  |  | 350,001 |  |  |  | 49,331 |
Payment of capital lease obligation |  |  | - |  |  |  | (498 | ) |  |  | (70 | )
Net cash provided by financing activities |  |  | 18,295 |  |  |  | 372,163 |  |  |  | 52,455 |
Effect of exchange rate changes on cash and cash equivalent and restricted cash |  |  | 4,985 |  |  |  | 3,234 |  |  |  | 456 |
Net increase in cash and cash equivalent and restricted cash |  |  | 5,242 |  |  |  | 4,741 |  |  |  | 668 |
Cash and cash equivalents and restricted cash at beginning of year |  |  | 67,192 |  |  |  | 72,434 |  |  |  | 10,209 |
Cash and cash equivalents and restricted cash at end of year |  |  | 72,434 |  |  |  | 77,175 |  |  |  | 10,877 |
Less: Cash and cash equivalent and restricted cash - Discontinued operations |  |  | 14 |  |  |  | - |  |  |  | - |
Cash and cash equivalents and restricted cash at end of year - Continuing operations |  |  | 72,420 |  |  |  | 77,175 |  |  |  | 10,877 |

F-6

UTIME LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)
(Amounts in thousands or otherwise noted)

|  |  | Year ended March 31, |
|  |  | 2023 |  |  | 2024 |
|  |  | RMB |  |  |  | RMB |  |  |  | USD |
Supplemental disclosures of cash flow information: |  |  |  |  |  |  |  |  |  |  |  |
Income taxes paid (refunded) |  |  | - |  |  |  | - |  |  |  | - |
Interest paid |  |  | 4,075 |  |  |  | 3,635 |  |  |  | 512 |

|  |  | As of March 31, |
|  |  | 2023 |  |  | 2024 |
|  |  | RMB |  |  |  | RMB |  |  |  | USD |
Reconciliation of cash, cash equivalents and restricted cash in unaudited condensed consolidated statements of cash flows |  |  |  |  |  |  |  |  |  |  |  |
Restricted cash |  |  | 500 |  |  |  | 500 |  |  |  | 70 |
Cash and cash equivalents |  |  | 71,920 |  |  |  | 76,675 |  |  |  | 10,807 |
Cash, cash equivalents and restricted cash |  |  | 72,420 |  |  |  | 77,175 |  |  |  | 10,877 |

The accompanying notes are an integral part of these consolidated financial statements.

F-7

UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)

NOTE 1 — ORGANIZATION AND PRINCIPAL ACTIVITIES

UTime Limited was incorporated as an exempted company with limited liability under the laws of the Cayman Islands on October 9, 2018. UTime Limited does not conduct any substantive operations on its own but instead conducts its business operations through its subsidiaries, variable interest entity (“VIE”) and subsidiaries of the VIE. UTime Limited, its subsidiaries, VIE and subsidiaries of the VIE (together, the “Company”) is primarily engaged in the operation of designing, manufacturing and marketing mobile communication devices, and selling a variety of related accessories.

(a) History and Reorganization

The Company commenced its operations in June 2008 through United Time Technology Co., Ltd. (“UTime SZ” or “VIE”), a People’s Republic of China (the “PRC” or “China”) company established by Mr. Minfei Bao (“Mr. Bao”), Mr. Junlin Zhou (“Mr. Zhou”) and Mr. Bo Tang (“Mr. Tang”). As of March 31, 2017, Mr. Bao, Mr. Zhou and Mr. Tang held 52%, 28% and 20% equity interests of UTime SZ, respectively. In February 2018, Mr. Bao acquired 28% and 20% equity interests of UTime SZ from Mr. Zhou and Mr. Tang, respectively, with the total consideration of RMB9.6 million in cash through his private fund. As of the acquisition date, such non-controlling interests amounted to RMB17.2 million and were transferred to equity attributable to UTime Limited, of which RMB1.0 million relating to foreign currency translation was transferred to the accumulated other comprehensive income, and remaining balance of RMB16.2 million was transferred to additional paid-in capital. After the acquisition, Mr. Bao became the sole shareholder of UTime SZ. Prior to the reorganization, UTime SZ’s equity interests were held by Mr. Bao.

For the purpose of an initial public offering in the United States (“IPO”), the following transactions were undertaken to reorganize the legal structure (the “Reorganization”) of the Company. In October 2018, UTime Limited was incorporated in the Cayman Islands. In November and December 2018, UTime International Limited (“UTime HK”) was incorporated in Hong Kong and Shenzhen UTime Technology Consulting Co., Ltd. (“UTime WFOE”) was incorporated in China, respectively.

In March 2019, UTime WFOE entered into a series of contractual agreements with VIE and Mr. Bao, which were further amended and restated in August and September 2019, respectively, and were entered into among UTime WFOE, VIE, Mr. Bao and Mr. Min He (“Mr. He”). Pursuant to these agreements as detailed in note 1(b), the Company believes that these contractual arrangements would enable the Company to (1) have power to direct the activities that most significantly affect the economic performance of the VIE and its subsidiaries, and (2) receive the economic benefits of the VIE and its subsidiaries that could be significant to the VIE and its subsidiaries. Accordingly, the Company is considered the primary beneficiary of the VIE and is able to consolidate the VIE and its subsidiaries.

Do Mobile India Private Ltd. (“Do Mobile”) was incorporated on October 24, 2016 in New Delhi, India. It is an operating entity that sells cell phone products and provides after-sale services for the Company’s own in-house brand products in India. Prior to the reorganization, the majority of Do Mobile’s equity interests were held by Mr. Bao through an entrust agreement with Mr. Wukai Song through a holding company, Bridgetime Limited (“Bridgetime”). Bridgetime was incorporated on September 5, 2016 in British Virgin Island (“BVI”) under the laws of BVI, with Mr. Wukai Song owning 70% through an entrust agreement between him and Mr. Bao, and Mr. Yunchuan Li owning 30% of equity interest.

On March 5, 2018, Bridgetime issued 100,000 shares to Mr. Wukai Song, changing shareholders’ structure to Mr. Wukai Song owning 90% equity interest, which are controlled by Mr. Bao through an entrust agreement between Mr. Bao and Mr. Wukai Song, and Mr. Yunchuan Li owning 10% of equity interest. On December 5, 2018, Bridgetime approved a board resolution that appointed and registered Mr. Yihuang Chen as a new director. On March 11, 2019, Bridgetime approved a board resolution that transferred 1 share of Do Mobile to Mr. Yihuang Chen and made him nominal shareholder of Do Mobile, removed Mr. Yunchuan Li as the director of Bridgetime and authorized representative of Do Mobile, and appointed Mr. Wukai Song as the authorized representative of Do Mobile. On April 4, 2019, Bridgetime approved a board resolution that forfeited 15,000 shares held by Mr. Yunchuan Li, cancelled those shares accordingly and amended Bridgetime’s memorandum of association that changed authorized shares from 150,000 to 135,000 at a par value of US$1.00 which was accounted as a cancellation of non-controlling interest in the consolidated statements of shareholders’ equity.

F-8

UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)

NOTE 1 — ORGANIZATION AND PRINCIPAL ACTIVITIES (cont.)

After this, Mr. WuKai Song owned 100% of equity interest of Bridgetime, which are controlled by Mr. Bao through an entrust agreement between Mr. Bao and Mr. Wukai Song. On May 23, 2019, Bridgetime approved a board resolution that transferred 135,000 ordinary shares owning by Mr. Wukai Song to UTime Limited. Since inception, Bridgetime has only made nominal investments into Do Mobile and no substantial business operations have occurred.

On May 20, 2019, the Company approved a board resolution that agreed to transfer 12,000,000 ordinary shares being owned by Mr. Bao to Grandsky Phoenix Limited, a company that was established under the laws of the BVI and 100% owned by Mr. Bao.

As all the entities involved in the process of the Reorganization are under common control before and after the Reorganization, the Reorganization is accounted for in a manner similar to a pooling-of-interest with the assets and liabilities of the parties to the Reorganization carried over at their historical amounts.

On June 3, 2019, the Company entered into a share subscription agreement with HMercury Capital Limited, a company that was incorporated under the laws of the BVI and controlled by Mr. He. HMercury Capital Limited purchased an aggregation of 377,514 ordinary shares. On the same day, the Company approved a board resolution for issuance of 377,514 ordinary shares at par value US$0.0001 to HMercury Capital Limited based on the share subscription agreement. As a result, Grandsky Phoenix Limited and HMercury Capital Limited own 96.95% and 3.05% of equity interest of the Company.

On April 29, 2020, the Company approved a board resolution, which became effective immediately, that agreed to repurchase 7,620,000 and 239,721 ordinary shares, which were subsequently cancelled, at par value (the “Repurchased Shares”) from Grandsky Phoenix Limited and HMercury Capital Limited, respectively, in accordance with their respective share percentages based on the share repurchase agreement that the Company entered into with Grandsky Phoenix Limited and HMercury Capital Limited on April 29, 2020. On August 13, 2020, the Company approved a board resolution and signed capital contribution letter with Grandsky Phoenix Limited and HMercury Capital Limited, respectively. Based on the capital contribution letter, each shareholder opted not to receive the consideration for the Repurchased Shares and made a pure capital contribution in the sum of the purchase price in favor of the Company without the issue of additional shares of the Company. Before and after the repurchase of ordinary shares, Mr. Bao, through Grandsky Phoenix Limited, and Mr. He, through HMercury Capital Limited, own 96.95% and 3.05% of our issued and outstanding ordinary shares, respectively. The Company considers this repurchase of ordinary shares was part of the Company’s recapitalization to result in 4,517,793 ordinary shares issued and outstanding prior to completion of its IPO. The Company believes it is appropriate to reflect these nominal share repurchases to result in 4,517,793 ordinary shares being issued and outstanding or reduction of 63.5% of total ordinary shares being issued and outstanding after the repurchase of ordinary shares similar to 0.365-for-1 reverse stock split.

As of March 31, 2024, details of the subsidiaries and VIE of the Company are set out below:

Name |  | Date of Incorporation |  | Place of Incorporation |  | Percentage of Beneficial Ownership |  | Principal Activities
Subsidiaries |  |  |  |  |  |  |  |
UTime HK |  | November 1, 2018 |  | Hong Kong |  | 100% |  | Investment Holding
UTime WFOE |  | December 18, 2018 |  | China |  | 100% |  | Investment Holding
Bridgetime |  | September 5, 2016 |  | British Virgin Island |  | 100% |  | Investment Holding
Changsha UTime Business Management Co., Ltd |  | February 27, 2024 |  | China |  | 100% |  | Trading

F-9

UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)

NOTE 1 — ORGANIZATION AND PRINCIPAL ACTIVITIES (cont.)

Name |  | Date of Incorporation |  | Place of Incorporation |  | Percentage of Beneficial Ownership |  | Principal Activities
VIE |  |  |  |  |  |  |  |
UTime SZ |  | June 12, 2008 |  | China |  | 100% |  | Research and development of products, and sales
Subsidiaries of the VIE |  |  |  |  |  |  |  |
Guizhou United Time Technology Co., Ltd. (“UTime GZ”) |  | September 23, 2016 |  | China |  | VIE’s subsidiary |  | Manufacturing
UTime Technology (HK) Company Limited (“UTime Trading”) |  | June 25, 2015 |  | Hong Kong |  | VIE’s subsidiary |  | Trading
UTime India Private Limited (“UTime India”) |  | February 7, 2019 |  | India |  | UTime Trading’s subsidiary |  | Trading
Guangxi UTime Technology Co., Ltd. (“UTime Guangxi”) |  | November 1, 2021 |  | China |  | UTime Trading’s subsidiary |  | Manufacturing
Gesoper S De R.L. De C.V. (“Gesoper”) |  | October 21, 2020 |  | Mexico |  | UTime Trading’s subsidiary |  | Trading
Firts Communications And Technologies De Mexico S.A. De C.V. (“Firts”) |  | November 12, 2021 |  | Mexico |  | Gesoper’s subsidiary |  | Trading

(b) VIE Arrangements between the VIE and the Company’s PRC subsidiary

The Company conducts substantial majority of business in the PRC through a series of contractual arrangements with the VIE and its subsidiaries. The VIE and subsidiaries of the VIE hold the requisite licenses and permits necessary to conduct the Company’s business. In addition, the VIE and subsidiaries of the VIE hold the assets necessary to operate the Company’s business and generate substantial majority of the Company’s revenues.

Our contractual arrangements with the VIE and its respective shareholders allow us to (i) determine the most significant economic activities of the VIE; (ii) receive substantially all of the economic benefits of the VIE; and (iii) have an exclusive option to purchase all or part of the equity interest in and/or assets of the VIE when and to the extent permitted by PRC laws. As a result of our direct ownership in UTime WFOE and the contractual arrangements with the VIE, we are regarded as the primary beneficiary of the VIE, and we treat the VIE and its subsidiaries as our consolidated affiliated entities under generally accepted accounting principles in the United States of America (“US GAAP”). We have consolidated the financial results of the VIE and its subsidiaries in our consolidated financial statements in accordance with US GAAP.

The following is a summary of the contractual arrangements by and among UTime WFOE, the VIE and the shareholders of the VIE and their spouses, as applicable.

Exclusive Technical Consultation and Service Agreement. Pursuant to the exclusive technical consultation and service agreement entered into between UTime WFOE and the VIE, dated on March 19, 2019, UTime WFOE has the exclusive right to provide or designate any entity to provide the VIE business support, technical and consulting services. The VIE agrees to pay UTime WFOE (i) the service fees equal to the sum of 100% of the net income of the VIE of that year or such other amount otherwise agreed by UTime WFOE and the VIE; and (ii) service fee otherwise confirmed by UTime WFOE and the VIE for specific technical services and consulting services provided by UTime WFOE in accordance with the VIE’s requirement from time to time. The exclusive consultation and service agreement will continue to be valid unless the written agreement is signed by all parties to terminate it or a mandatory termination is requested in accordance with applicable PRC laws and regulations.

F-10

UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)

NOTE 1 — ORGANIZATION AND PRINCIPAL ACTIVITIES (cont.)

Equity Pledge Agreement. Pursuant to the equity pledge agreement dated March 19, 2019 and amended on September 4, 2019 among UTime WFOE, the VIE and the shareholders of the VIE, the shareholders of the VIE agree to pledge their 100% equity interests in the VIE to UTime WFOE to secure the performance of the VIE’s obligations under the existing exclusive call option agreement, power of attorney, exclusive technical consultation and service agreement, business operation agreement and also the equity pledge agreement. If events of default defined therein occur, upon giving written notice to the shareholders, UTime WFOE may exercise the right to enforce the pledge to the extent permitted by PRC laws.

Exclusive Call Option Agreements. Pursuant to the exclusive call option agreement dated March 19, 2019 and amended on September 4, 2019 among UTime WFOE, the VIE and the shareholders of the VIE, each of the shareholders has irrevocably granted UTime WFOE an exclusive option to purchase all or part of its equity interests in the VIE, and the VIE has irrevocably granted UTime WFOE an exclusive option to purchase all or part of its assets. With regard to the equity transfer option, the total transfer price to be paid by UTime WFOE or any other entity or individual designated by UTime WFOE for exercising such option shall be the capital contribution mirrored by the corresponding transferred equity in the registered capital of the VIE. But if the lowest price permitted by the then-effective PRC Law is lower than the above capital contribution, the transfer price shall be the lowest price permitted by the PRC Law. With regard to the asset purchase option, the transfer price to be paid by UTime WFOE or any other entity or individual designated by UTime WFOE for exercising such option shall be the lowest price permitted by the then-effective PRC Law.

Power of Attorney. Pursuant to a series of powers of attorney dated March 19, 2019 and amended on September 4, 2019 issued by each shareholder of the VIE, each shareholder of the VIE irrevocably authorizes UTime WFOE or any natural person duly appointed by UTime WFOE to exercise on the behalf of such shareholders with respect to all matters concerning the shareholding of such shareholders in the VIE, including without limitation, attending shareholders’ meetings of the VIE, exercising all the shareholders’ rights and shareholders’ voting rights, and designating and appointing the legal representative, the chairperson, directors, supervisors, the chief executive officer and any other senior management of the VIE.

Business Operation Agreement. Pursuant to the business operation agreement dated March 19, 2019 and amended on September 4, 2019 among UTime WFOE, the VIE and the shareholders of the VIE, the shareholders of the VIE hereby acknowledge, agree and jointly and severally warrant that without the prior written consent of UTime WFOE or any party designated by UTime WFOE, the VIE shall not engage in any transaction which may have a material or adverse effect on any of its assets, businesses, employees, obligations, rights or operations (except for those occurring in the due course of business or in day-to-day business operations, or those already disclosed to UTime WFOE and with the explicit prior written consent of UTime WFOE). In addition, the VIE and its shareholders hereby jointly agree to accept and strictly implement any proposal made by UTime WFOE from time to time regarding the employment and removal of the VIE’s employees, its day-to-day business management and the financial management system of the VIE.

Spouse Consent Letter. Pursuant to a series of spousal consent letters dated March 19, 2019 and amended on September 4, 2019, executed by the spouses of the shareholders of the VIE, Mr. Bao and Mr. He, the signing spouses confirmed and agreed that the equity interests of the VIE are the own property of their spouses and shall not constitute the community property of the couples. The spouses also irrevocably waived any potential right or interest that may be granted by operation of applicable law in connection with the equity interests of the VIE held by their spouses.

F-11

UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)

NOTE 1 — ORGANIZATION AND PRINCIPAL ACTIVITIES (cont.)

Risks in relation to VIE structure

The Company believes that the contractual arrangements with its VIEs and their respective shareholders are in compliance with PRC laws and regulations and are legally enforceable. However, uncertainties in the PRC legal system could limit the Company’s ability to enforce the contractual arrangements. If we or the VIE are found to be in violation of any existing or future PRC laws or regulations, or fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion to take action in dealing with such violations or failures, including:

| ● | revoke the business and operating licenses of the Company’s PRC subsidiary and VIE;

| ● | discontinue or restrict the operations of any related-party transactions between the Company’s PRC subsidiary and VIE;

| ● | limit the Company’s business expansion in China by way of entering into contractual arrangements;

| ● | imposing fines, confiscating the income from the Company’s PRC subsidiary or the VIE, or imposing other requirements with which we or the VIE may not be able to comply;

| ● | requiring us to restructure our ownership structure or operations, including terminating the contractual arrangements with the VIE and deregistering the equity pledges of the VIE, which in turn would affect our ability to consolidate, derive economic interests from, or determine the most significant economic activities of the VIE; or

| ● | restricting or prohibiting our use of the proceeds of its IPO to finance our business and operations in China.

The Company’s ability to conduct its business may be negatively affected if the PRC government were to carry out any of the aforementioned actions. As a result, the Company may not be able to consolidate its VIE in its consolidated financial statements as it may lose the ability to determine the most significant economic activities of the VIE and it may lose the ability to receive economic benefits from the VIE. The Company, however, does not believe such actions would result in the liquidation or dissolution of the Company, its PRC subsidiary or VIE.

Mr. Bao and Mr. He hold 96.95% and 3.05% equity interest in the VIE, respectively. The shareholders of the VIE may have potential conflicts of interest with us. The shareholders may breach, or cause the VIE to breach, or refuse to renew, the existing contractual arrangements we have with them and the VIE, which would have a material and adverse effect on our ability to determine the most significant economic activities of the VIE and receive economic benefits from it. For example, the shareholders may be able to cause our agreements with the VIE to be performed in a manner adverse to us by, among other things, failing to remit payments due under the contractual arrangements to us on a timely basis. We cannot assure you that when conflicts of interest arise the 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 the shareholders and our company. If we cannot resolve any conflict of interest or dispute between us and the 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.

F-12

UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)

NOTE 1 — ORGANIZATION AND PRINCIPAL ACTIVITIES (cont.)

The Company has aggregated the financial information of the VIE and subsidiaries of the VIE in the table below. The aggregate carrying value of assets and liabilities of VIE and its subsidiaries (after elimination of intercompany transactions and balances) in the Company’s consolidated balance sheets as of March 31, 2023 and 2024 are as follows:

|  | As of March 31, |
|  | 2023 |  |  | 2024 |
|  | RMB |  |  | RMB |
Assets |  |  |  |  |  |
Current assets |  |  |  |  |  |
Cash and cash equivalents |  |  | 272 |  |  |  | 2,704 |
Restricted cash |  |  | 500 |  |  |  | 500 |
Accounts receivable, net |  |  | 52,171 |  |  |  | 30,240 |
Prepaid expenses and other current assets, net |  |  | 66,133 |  |  |  | 81,729 |
Due from related parties |  |  | 584 |  |  |  | 553 |
Inventories |  |  | 16,169 |  |  |  | 11,026 |
Current assets related to discontinued operations |  |  | 3,946 |  |  |  | 1,438 |
Total current assets |  |  | 139,973 |  |  |  | 128,190 |
Non-current assets |  |  |  |  |  |  |  |
Property, plant and equipment, net |  |  | 61,407 |  |  |  | 54,188 |
Operating lease right-of-use assets, net |  |  | 13,030 |  |  |  | 9,781 |
Finance lease right-of-use assets, net |  |  | - |  |  |  | 6,460 |
Intangible assets, net |  |  | 1,677 |  |  |  | 662 |
Deferred loss on sale-leaseback |  |  | - |  |  |  | 767 |
Other non-current assets |  |  | - |  |  |  | 153 |
Non-current assets related to discontinued operations |  |  | 4 |  |  |  | 3 |
Total non-current assets |  |  | 76,118 |  |  |  | 72,014 |
Total assets |  |  | 216,091 |  |  |  | 200,051 |
Liabilities |  |  |  |  |  |  |  |
Current liabilities |  |  |  |  |  |  |  |
Accounts payable |  |  | 125,368 |  |  |  | 106,092 |
Short-term borrowings |  |  | 53,935 |  |  |  | 56,949 |
Current portion of long-term borrowings |  |  | 1,080 |  |  |  | - |
Current portion of government grants |  |  | - |  |  |  | 1,812 |
Due to related parties |  |  | 3,984 |  |  |  | 11,516 |
Lease liabilities |  |  | 3,673 |  |  |  | 6,824 |
Other payables and accrued liabilities |  |  | 47,806 |  |  |  | 31,157 |
Income tax payables |  |  | 18 |  |  |  | 18 |
Current liabilities related to discontinued operations |  |  | 3,171 |  |  |  | 1,929 |
Total current liabilities |  |  | 239,035 |  |  |  | 216,297 |
Non-current liabilities |  |  |  |  |  |  |  |
Long-term borrowings |  |  | 6,870 |  |  |  | - |
Government grants |  |  | 8,697 |  |  |  | 4,342 |
Deferred tax liability |  |  | 295 |  |  |  | 125 |
Lease liability - non-current |  |  | 10,876 |  |  |  | 10,054 |
Total non-current liabilities |  |  | 26,738 |  |  |  | 14,521 |
Total liabilities |  |  | 265,773 |  |  |  | 230,818 |

The table sets forth the revenue, net income and cash flows of the VIE and subsidiaries of VIE in the table below.

|  | Year ended March 31, |
|  | 2023 |  |  | 2024 |
|  | RMB |  |  | RMB |
Revenue |  |  | 197,564 |  |  |  | 172,156 |
Net loss |  |  | (19,221 | ) |  |  | (42,175 | )
Net cash used in operating activities |  |  | (15,269 | ) |  |  | (5,273 | )
Net cash provided by investing activities |  |  | (2,900 | ) |  |  | 5,529 |
Net cash provided by financing activities |  |  | 18,295 |  |  |  | 1,616 |

F-13

UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)

NOTE 1 — ORGANIZATION AND PRINCIPAL ACTIVITIES (cont.)

(c) Initial Public Offering

On April 8, 2021, the Company completed its IPO on Nasdaq Capital Market. In the offering, 3,750,000 of the Company’s ordinary shares were issued and sold to the public at a price of US$4 per share for gross proceeds of US$15 million. The Company recorded net proceeds (after deducting underwriting discounts and commissions and other offering fees and expenses) of approximately $13.9 million (approximately RMB88.2 million) from the offering.

(d) Asset Acquisitions

On December 17, 2021, the Company, through UTime Trading, acquired a 51% of the controlling equity interest of Gesoper. Subsequently, on January 17, 2022, Gesoper acquired 85% economic equity interest in Firts, which were determined to be variable interest entities of which the Company is considered the primary beneficiary.

(e) Termination of operation in India and Discontinued operation in Mexico

The Company terminated operations in India, where in-house brand products were produced, and ceased operations in Mexico for the year ended March 31, 2024. Due to an overall change of business environment in India and Mexico, the Company decided to make a strategic change. A loss on disposal of net assets related to operations in India was recorded in the consolidated financial statements. Assets, liabilities and expenses of Mexico are disclosed as assets, liabilities and loss of discontinued operations in the consolidated financial statements.

The following table presents the carrying amounts of assets and liabilities for the discontinued operations of Gesoper and Firts in Mexico, and Utime India and Do Mobile in India:

|  | As of March 31, |
|  | 2023 |  |  | 2024 |
|  | RMB |  |  | RMB |
Assets classified as discontinued operation |  |  | 4,240 |  |  |  | 1,441 |
Liabilities classified as discontinued operation |  |  | 3,171 |  |  |  | 1,929 |

The financial results of these operations are presented as following in the consolidated statement of comprehensive loss.

|  | Year ended March 31, |
|  | 2023 |  |  | 2024 |
|  | RMB |  |  | RMB |
Loss from discontinued operation, net of income taxes |  |  | 6,439 |  |  |  | 1,903 |
Loss on disposal of discontinued operation |  |  | - |  |  |  | 26,719 |

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).

F-14

UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Principles of consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries, VIE and VIE’s subsidiaries for which the Company is the primary beneficiary. All significant inter-company balances and transactions between the Company, its subsidiaries, VIE and VIE’s subsidiaries are eliminated.

Use of estimates

The preparation of the consolidated financial statements in conformity with US GAAP requires management of the Company to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. Management evaluates these estimates and assumptions on a regular basis. Significant accounting estimates reflected in the Company’s consolidated financial statements include but are not limited to estimates and judgments applied in the allowance for receivables, write down of other assets, estimated useful lives of property and equipment, impairment on inventory, sales return, product warranties, the valuation allowance for deferred tax assets and income tax and contingencies. Actual results could differ from those estimates and judgments.

Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, bank deposits and short-term, highly liquid investments with original maturities of three months or less at the date of purchase, that are readily convertible to known amounts of cash and have insignificant risk of changes in value related to changes in interest rates.

Restricted cash

Restricted cash consisted of collateral representing cash deposits for long-term borrowings.

F-15

UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Accounts receivable, net

Accounts receivable and other receivables are reflected in the Company’s consolidated balance sheets at their estimated collectible amounts. A substantial majority of its accounts receivable are derived from sales to well-known technological clients. The Company follows the allowance method of recognizing uncollectible accounts receivable and other receivables, pursuant to which the Company regularly assesses its ability to collect outstanding customer invoices and make estimates of the collectability of accounts receivable and other receivables. The Company provides an allowance for doubtful accounts when it determines that the collection of an outstanding customer receivable is not probable. The allowance for doubtful accounts is reviewed on a timely basis to assess the adequacy of the allowance. The Company takes into consideration (a) historical bad debts experience, (b) any circumstances of which it is aware of a customer’s or debtor’s inability to meet its financial obligations, (c) changes in its customer or debtor payment history, and (d) its judgments as to prevailing economic conditions in the industry and the impact of those conditions on its customers and debtors. If circumstances change, such that the financial conditions of its customers or debtors are adversely affected and they are unable to meet their financial obligations to the Company, it may need to record additional allowances, which would result in a reduction of its net income.

Concentration of credit risk and major customers

Assets that potentially subject the Company to significant concentration of credit risk primarily consist of cash and cash equivalents, restricted cash, accounts receivable and other current assets. The maximum exposure of such assets to credit risk is their carrying amounts as at the balance sheet dates. As of March 31, 2023 and 2024, the aggregate amounts of cash and cash equivalents, and restricted cash are RMB72.4million and RMB77.2 million respectively.

To limit exposure to credit risk relating to deposits, the Company primarily place cash deposits with large financial institutions in PRC. The Company conducts credit evaluations of its customers, and generally does not require collateral or other security from them. The Company establishes an accounting policy for allowance for doubtful accounts on the individual customer’s financial condition, credit history, and the current economic conditions. As of March 31, 2023 and 2024, the Company recorded RMB0.1 million and RMB0.3 million of allowances for accounts receivable, respectively.

Major customers and accounts receivable — During the year ended March 31, 2023, the Company had three customers that accounted over 10% of revenues, and revenue from the customers amounted to RMB44.4 million, RMB25.9 million and RMB25.8 million, respectively, relate to OEM/ ODM services segment. The Company had four customers that accounted over 10% of total accounts receivable at March 31, 2023, amounting to RMB14.0 million, RMB11.9 million, RMB9.4 million and RMB8.6 million, respectively. During the year ended March 31, 2024, the Company had three customers that accounted over 10% of revenues, and revenue from the customers amounted to RMB37.8 million, RMB24.3 million and RMB20.0 million, respectively, relate to OEM/ ODM services segment. The Company had four customers that accounted over 10% of total accounts receivable at March 31, 2024, amounting to RMB11.0 million, RMB6.0 million, RMB4.5 million and RMB3.9 million, respectively.

Major suppliers —During the year ended March 31, 2023, the Company had no supplier accounted over 10% of total purchases. During the year ended March 31, 2024, the Company had two suppliers accounted over 10% of total purchases and processing fees from the supplier amounted to RMB56.9 million.

Inventories

Inventories of the Company consist of raw materials, finished goods and work in process. Inventories are stated at lower of cost or net realizable value with cost being determined on the weighted average method. Elements of cost in inventories include raw materials, direct labor costs, other direct costs, consignment manufacturing cost and manufacturing overhead. The Company assesses the valuation of inventory and periodically writes down the value for estimated excess and obsolete inventory based upon the product life-cycle.

F-16

UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Property and equipment, net

Property and equipment are stated at cost less accumulated depreciation and impairment, if any. Cost represents the purchase price of the asset and other costs incurred to bring the asset into its existing use. Maintenance and repairs are charged to expenses as incurred. Depreciation of property and equipment are provided using the straight-line method over their estimated useful lives as follows:

| Useful life
Office real estate | 48 years
Furniture and equipment | 3 – 6 years
Production and other machineries | 5 – 10 years

Upon retirement or sale of an asset, the cost of the asset and the related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is credited or charged to other (income) expenses, net.

Intangible assets, net

Intangible asset results from the acquisition of the licensed software and customer relationships. Identifiable intangible assets are carried at acquisition cost less accumulated amortization and impairment loss, if any. The Company accounts for such licensed software with definite lives and amortized using the straight-line method over its estimated useful life of 3 to 10 years.

Impairment of long-lived assets

The Company reviews the carrying value of long-lived assets to be held and used when events and circumstances warrants such a review. The carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash flow from such asset is separately identifiable and is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair market value of the long-lived asset. Fair market value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. Losses on long-lived assets to be disposed are determined in a similar manner, except that fair market values are reduced for the cost to dispose. No impairment charge was recognized for all periods presented.

Equity method investment

The Company’s long-term investments consist of equity method investment. Investment in entities in which the Company can exercise significant influence and holds an investment in voting common stock or in-substance common stock (or both) of the investee but does not own a majority equity interest or control are accounted for using the equity method of accounting in accordance with ASC topic 323 (“ASC 323”), Investments-Equity Method and Joint Ventures. Under the equity method, the Company initially records its investment at cost. The Company subsequently adjusts the carrying amount of the investments to recognize the Company’s proportionate share of each equity investee’s net income or loss into earnings after the date of investment. The Company evaluates the equity method investment for impairment under ASC 323. An impairment loss on the equity method investment is recognized in earnings when the decline in value is determined to be other-than-temporary.

F-17

UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Fair value of financial instruments

Under the FASB’s authoritative guidance on fair value measurements, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining the fair value, the Company uses various methods including market, income and cost approaches. Based on these approaches, the Company often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated or generally unobservable inputs. The Company uses valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on observability of the inputs used in the valuation techniques, the Company is required to provide the following information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values.

Financial assets and liabilities carried at fair value are classified and disclosed in one of the following three categories:

Level 1 Valuations for assets and liabilities traded in active exchange markets. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2 Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third party pricing services for identical or similar assets or liabilities.

Level 3 Valuations for assets and liabilities that are derived from other valuation methodologies, including option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer or broker traded transactions. Level 3 valuations incorporate certain unobservable assumptions and projections in determining the fair value assigned to such assets.

All transfers between fair value hierarchy levels are recognized by the Company at the end of each reporting period. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. The inputs or methodology used for valuing financial instruments are not necessarily an indication of the risks associated with investment in those instruments.

Fair Value Measured or Disclosed on a Recurring Basis

Borrowings — Interest rates under the borrowing agreements with the lending parties were determined based on the prevailing interest rates in the market. The Company classifies the valuation techniques that use these inputs as Level 2 fair value measurement. The carrying value of the Company’s borrowings approximates fair value as the borrowing bears interest rates that are similar to existing market rates.

Other financial items for disclosure purpose — The fair value of other financial items of the Company for disclosure purpose, including cash and cash equivalents, restricted cash, accounts receivable, other receivables, other current assets, accounts payable, other payables and accrued liabilities, approximate their carrying value due to their short-term nature.

Government Grants

Government grants are recognized in the balance sheet initially when there is reasonable assurance that they will be received and that the enterprise will comply with the conditions attached to them. When the Company received the government grants but the conditions attached to the grants have not been fulfilled, such government grants are deferred and recorded as deferred revenue. As of March 31, 2023 and 2024, the deferred revenue were RMB 8.7 million and RMB 6.2 million, respectively. The classification of short-term or long-term liabilities is depended on the management’s expectation of when the conditions attached to the grant can be fulfilled. Grants that compensate the Company for expenses incurred are recognized as other income in statement of income on a systematic basis in the same periods in which the expenses are incurred. Government subsidies recognized as other income in the consolidated statement of comprehensive loss for the years ended March 31, 2022, 2023 and 2024 were RMB2.9 million, RMB0.6 million and RMB2.4 million, respectively.

F-18

UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Leases

The Company determines if an arrangement is a lease at inception. Operating leases and finance leases are included in operating lease, right-of-use (“ROU”) assets, finance lease ROU and lease liabilities in the consolidated balance sheets.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease, finance lease, ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. It uses the implicit rate when readily determinable. The operating lease, finance lease and, ROU asset also includes any lease payments made and excludes lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company have elected not to recognize ROU assets and lease liabilities for short-term leases for all classes of underlying assets. Short-term leases are leases with terms of 12 months or less and does not include a purchase option that is reasonably certain to exercise.

Commitments and Contingencies

In the normal course of business, the Company is subject to contingencies, including legal proceedings and claims arising out of the business that relate to a wide range of matters. The Company recognizes a liability for such contingency if it determines it is probable that a loss has occurred and a reasonable estimate of the loss can be made. The Company may consider many factors in making these assessments including historical and the specific facts and circumstances of each matter.

Revenue recognition

The Company derives revenue principally from the sale of mobile phones and accessories. Revenue from contracts with customers is recognized using the following five steps:

| 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) the entity satisfies a performance obligation.

A contract contains a promise (or promises) to transfer goods or services to a customer. A performance obligation is a promise (or a group of promises) that is distinct. The transaction price is the amount of consideration the Company expects to be entitled from a customer in exchange for providing the goods or services.

F-19

UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

The unit of account for revenue recognition is a performance obligation (a good or service). A contract may contain one or more performance obligations. Performance obligations are accounted for separately if they are distinct. A good or service is distinct if the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer, and the good or service is distinct in the context of the contract. Otherwise, performance obligations are combined with other promised goods or services until the Company identifies a bundle of goods or services that is distinct. Promises in contracts which do not result in the transfer of a good or service are not performance obligations, as well as those promises that are administrative in nature, or are immaterial in the context of the contract. The Company has addressed whether various goods and services promised to the customer represent distinct performance obligations. The Company applied the guidance of ASC Topic 606-10-25-16 through 18 in order to verify which promises should be assessed for classification as distinct performance obligations.

The Company’s revenue is primary derived from OEM and ODM services for well-known brands positioned in the emerging middle class consumer groups and price-sensitive consumers in emerging markets. Refer to Note 17 to the consolidated financial statements for disaggregation of the Company’s revenue by type of product and geography information for the years ended March 31, 2023 and 2024.

The following table disaggregates the Company’s revenue by type of contract for the years ended March 31, 2023 and 2024:

|  | Year ended March 31, |
|  | 2023 |  |  | 2024 |
|  | RMB |  |  | RMB |
OEM/ODM |  |  | 197,564 |  |  |  | 172,156 |
In-house brand |  |  | - |  |  |  | - |
Total |  |  | 197,564 |  |  |  | 172,156 |

1) Cooperation with OEM/ODM customers

Revenue is measured based on the consideration to which the Company expects to be entitled in a contract with a customer and excludes amounts collected on behalf of third parties. The Company generates its revenue through product sales, and shipping terms generally indicate when it has fulfilled its performance obligations and passed control of products to its customer, when the goods have been shipped to the customer’s specific location (delivery). Following delivery, the customer has full discretion over the manner of distribution and price to sell the goods, has the primary responsibility when selling the goods and bears the risks of obsolescence and loss in relation to the goods but has no right to return the products (other than for defective products). A receivable is recognized by the Company when the goods are delivered to the customer as this represents the point in time at which the right to consideration becomes unconditional, as only the passage of time is required before payment is due. Revenue from OEM/ODM customers does not meet the criteria to be recognized over time since 1) it does not have the right of payment for the performance completed to date, 2) its work neither creates or enhances an asset controlled by customers until goods are delivered to the customer, 3) customers do not receive and consume benefits simultaneously provided by its performance.

F-20

UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

2) Sales of products for in-house brands

For revenue realized in Indian market, additional term of goods return may apply. Under Do Mobile’s policy, end users have a right of return for defective devices within 7 days. At the point of sale, a refund liability and a corresponding adjustment to revenue is recognized for those products expected to be returned. At the same time, Do Mobile has a right to recover the product when customers exercise their right of return so consequently recognizes a right to returned goods asset and a corresponding adjustment to cost of sales. Do Mobile uses its accumulated historical experience to estimate the number of returns on a portfolio level using the expected value method, taking into consideration the type of products.

Contract assets and liabilities

Contract assets, such as costs to obtain or fulfill contracts, are an insignificant component of the Company’s revenue recognition process. The majority of the Company’s cost of fulfillment as a manufacturer of products is classified as inventories and property and equipment, which are accounted for under the respective guidance for those asset types. Other costs of contract fulfillment are immaterial due to the nature of the Company’s products and their respective manufacturing processes.

Contract liabilities are mainly advance from customers.

Warranty

The Company offers a standard product warranty that the product will operate under normal use. For products sold to OEM/ODM customers, the warranty period generally ranges from one to two years from the time of final acceptance. In general, the Company ships free spare parts as product warranty to these customers while the products are sold. For products sold to end users through retailers in India, the warranty period includes a one year warranty to end users. The Company has the obligation, at its option, to either repair or replace the defective product. The customers cannot separately purchase the warranty and the warranty doesn’t provide the customer with additional service other than assurance that the product will function as expected. At the time revenue is recognized, an estimate of future warranty costs is recorded as a component of cost of revenues. The reserves established are regularly monitored based upon historical experience and any actual claims charged against the reserve.

Value added tax

In the PRC, value added tax (the “VAT”) of 17% (before May 1, 2018), 16% (from May 1, 2018 to April 1, 2019) and 13% (after April 1, 2019 until now) on invoice amount is collected in respect of the sales of goods on behalf of tax authorities. The Company reports revenue net of VAT. VIE and its subsidiary in China that are VAT general tax payers are allowed to offset qualified VAT paid against their output VAT liabilities.

Cost of sales

Cost of sales consists primarily of material costs, direct labor costs, other direct costs, consignment manufacturing cost and manufacturing overhead, which are directly attributable to the production of products. Write-down of inventories to lower of cost or net realizable value is also recorded in cost of sales.

F-21

UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Selling and marketing expenses

Selling and marketing expenses consist primarily of (i) advertising and market promotion expenses, (ii) shipping expenses and (iii) salaries and welfare for sales and marketing personnel. The advertising and market promotion expenses amounted to RMB0.1 million, RMB0.1 million and RMBnil for the years ended March 31, 2022, 2023 and 2024, respectively. The shipping and handling fees amounted to RMB1.4 million, RMB1.6 million and RMB0.8 million for the years ended March 31, 2022, 2023 and 2024.

Research and development costs

All research and development costs, including patent application costs, are expensed as incurred. Research and development costs total RMB14.1 million, RMB16.0 and RMB16.6 million for the years ended March 31, 2022, 2023 and 2024, respectively, and are included within general and administrative expenses in the consolidated statements of comprehensive loss.

Employee social security and welfare benefits

The employees of the Company are entitled to social benefits in accordance with the relevant regulations of the countries in which these companies are incorporated. The social benefits of the employees of the Company in the PRC include medical care, welfare subsidies, unemployment insurance, employment housing fund and pension benefits. The Company’s subsidiary in India is also required to pay for employee social benefits based upon certain percentages of employees’ salaries in accordance with the relevant local regulation. The Company has no legal obligation for the benefits beyond the contributions made. The total amounts of such employee benefit expenses, which were expensed as incurred, were approximately RMB1.1 million, RMB1.3 million and RMB1.0 million for the years ended March 31, 2022, 2023 and 2024, respectively.

Borrowing cost

Borrowing costs attributable directly to the acquisition, construction or production of qualifying assets which require a substantial period of time to be ready for their intended use or sale, are capitalized as part of the cost of those assets. Income earned on temporary investments of specific borrowings pending their expenditure on those assets is deducted from borrowing costs capitalized. All other borrowing costs are recognized in interest expenses in the consolidated statement of comprehensive loss in the period in which they are incurred.

Income taxes

Income taxes are accounted for using the asset and liability method as prescribed by ASC 740 “Income Taxes.” Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which these 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. A valuation allowance would be provided for those deferred tax assets for which if it is more likely than not that the related benefit will not be realized.

Uncertain tax positions

The guidance on accounting for uncertainties in income taxes prescribes a more likely than not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Guidance was also provided on the recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods, and income tax disclosures. Significant judgment is required in evaluating the Company’s uncertain tax positions and determining its provision for income taxes. The Company recognizes interests and penalties, if any, under accrued expenses and other current liabilities on its balance sheet and under other expenses in its statement of comprehensive income. The Company did not recognize any interest and penalties associated with uncertain tax positions for the years ended March 31, 2022, 2023 and 2024. As of March 31, 2023 and 2024, the Company did not have any significant unrecognized uncertain tax positions.

F-22

UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Statutory reserves

Pursuant to the laws applicable to the PRC, domestic PRC entities must make appropriations from after-tax profit to non-distributable reserves funds. Subject to the limits of 50% of the entity’s registered capital, the statutory surplus reserve fund requires annual appropriations of 10% of after-tax profit (as determined under accounting principles generally accepted in the PRC (“PRC GAAP”) at each year-end). These reserve funds can only be used for specific purposes and are not distributable as cash dividends. Appropriation has been made to these statutory reserve funds of RMBnil for the years ended March 31, 2022, 2023 and 2024.

Non-controlling interest

A non-controlling interest in a subsidiary of the Company represents the portion of the equity (net assets) in the subsidiary not directly or indirectly attributable to the Company. Non-controlling interests are presented as a separate component of equity on the consolidated balance sheets and net loss and other comprehensive loss are attributed to controlling and non-controlling interests.

Foreign currency translation and transactions

The reporting currency of the Company is the RMB. The Company’s subsidiaries, consolidated VIE and VIE’s subsidiaries with operations in the PRC, Hong Kong, and other jurisdictions generally use their respective local currencies as their functional currencies, except that UTime Trading uses United States dollar (“US$”) as functional currency. The financial statements of the Company’s subsidiaries, other than the consolidated VIE and VIE’s subsidiary with the functional currency in RMB, are translated into RMB using the exchange rate as of the balance sheet date for assets and liabilities, historical exchange rate for equity amounts and the average rate during the reporting period for income and expense items. Translation gains and losses are recorded in accumulated other comprehensive income or loss as a component of shareholders’ equity.

In the financial statements of the Company’s subsidiaries and consolidated VIE and VIE’s subsidiary, transactions in currencies other than the functional currency are measured and recorded in the functional currency using the exchange rate in effect at the date of the transaction. At the balance sheet date, monetary assets and liabilities that are denominated in currencies other than the functional currency are translated into the functional currency using the exchange rate at the balance sheet date. All gains and losses arising from foreign currency transactions are recorded in other (income) expenses, net in the consolidated statements of comprehensive loss.

Convenience translation

Translations of balances in the consolidated balance sheets, consolidated statements of comprehensive loss and consolidated statements of cash flows from RMB into USD as of and for the year ended March 31, 2024 are solely for the convenience of the reader and has been made at the exchange rate quoted by the central parity of RMB against the USD by the People’s Bank of China on March 31, 2024 of USD1.00 = RMB7.095. No representation is made that the RMB amounts could have been, or could be, converted, realized or settled into USD at that rate on March 31, 2024, or at any other rate.

F-23

UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Comprehensive loss

Comprehensive loss is comprised of the Company’s net loss and comprehensive loss. The component of comprehensive loss is consisted solely of foreign currency translation adjustments.

Share-Based Compensation

The Company uses the fair value recognition provision of ASC Topic 718, Compensation-Stock Compensation, which requires the Company to expense the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of such instruments over the vesting period.

Related parties

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

Segment reporting

FASB ASC Topic 280, “Segment Reporting” establishes standards for reporting information about reportable segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group in deciding how to allocate resources and in assessing performance.

Management views the business as consisting of revenue streams; however, they do not produce reports for, assess the performance of, or allocate resources to these revenue streams based upon any asset-based metrics, or based upon income or expenses, operating income or net income. Therefore, the Company believes that it operates in one business segment. Substantively all of the Company’s long-lived assets are located in the PRC.

Loss per share

Basic net loss per share is the amount of net loss available to each share of ordinary shares outstanding during the reporting period. Diluted net loss per share is the amount of net loss available to each share of ordinary shares outstanding during the reporting period adjusted to include the effect of potentially dilutive ordinary shares, if any. Basic and diluted loss per share for each of the periods presented are calculated as follows:

|  | Year ended March 31, |
|  | 2023 |  |  | 2024 |
|  | RMB |  |  | RMB |
Numerator: |  |  |  |  |  |
Net loss attributable to UTime Limited, basic and diluted |  |  | (87,616 | ) |  |  | (60,884 | )
Denominator: |  |  |  |  |  |  |  |
Weighted average shares outstanding, basic and diluted |  |  | 11,229,985 |  |  |  | 16,550,762 |
Net loss attributable to UTime Limited per ordinary share: |  |  |  |  |  |  |  |
Continuing operations |  |  | (7.44 | ) |  |  | (2.03 | )
Discontinued operations |  |  | (0.57 | ) |  |  | (1.73 | )

F-24

UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Acquisitions

The Company accounts for acquisitions of an asset or group of similar identifiable assets that do not meet the definition of a business as an asset acquisition using the cost accumulated method, whereby the cost of the acquisition, including certain transaction costs, is allocated to the assets acquired on the basis of their relative fair values. No goodwill is recognized in an asset acquisition. Intangible assets acquired in an asset acquisition for use in research and development activities which have no alternative future use are expensed as in-process research and development on the acquisition date. Intangible assets acquired for use in research and development activities which have an alternative future use are capitalized as in-process research and development. Future costs to develop these assets are recorded to research and development expense as they are incurred.

Recently issued accounting standards

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (ASU 2021-08), which clarifies that an acquirer of a business should recognize and measure contract assets and contract liabilities in a business combination in accordance with Topic 606, Revenue from Contracts with Customers. The new amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The amendments should be applied prospectively to business combinations occurring on or after the effective date of the amendments, with early adoption permitted. The Company is currently evaluating the impact of the new guidance on the consolidated financial statements.

In November 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”). The pronouncement expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods beginning after December 15, 2024. We are currently in the process of determining the impact that ASU 2023-07 will have on the Company’s consolidated financial statement disclosures.

In December 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). The pronouncement expands the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. We are currently in the process of determining the impact that ASU 2023-09 will have on the Company’s consolidated financial statement disclosures.

NOTE 3 — ACCOUNTS RECEIVABLE, NET

|  | As of March 31, |
|  | 2023 |  |  | 2024 |
|  | RMB |  |  | RMB |
Accounts receivable |  |  | 52,308 |  |  |  | 30,533 |
Allowance for doubtful accounts |  |  | (136 | ) |  |  | (293 | )
Accounts receivable, net |  |  | 52,172 |  |  |  | 30,240 |

The Company analyzed the collectability of accounts receivable based on historical collection and the customers’ intention of payment. As a result of such analysis, the allowance for doubtful accounts was as follows:

|  | 2023 |  |  | 2024 |
Balance at beginning of year |  |  | 126 |  |  |  | 136 |
Additions for the year |  |  | - |  |  |  | 152 |
Foreign currency translation difference |  |  | 10 |  |  |  | 5 |
Balance at the end of year |  |  | 136 |  |  |  | 293 |

F-25

UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)

NOTE 3 — ACCOUNTS RECEIVABLE, NET (cont.)

As of March 31, 2023 and 2024, the allowance for doubtful accounts amounted to RMB0.1 million and RMB0.3 million, respectively. The Company determined that the collection of these customers’ receivable is not probable due to financial difficulties experienced by related customers.

NOTE 4 — PREPAID EXPENSES AND OTHER CURRENT ASSETS, NET

|  | As of March 31, |
|  | 2023 |  |  | 2024 |
|  | RMB |  |  | RMB |
Advance to suppliers |  |  | 63,295 |  |  |  | 433,363 |
Receivables from supply chain service provider |  |  | 7,648 |  |  |  | 6,114 |
Other receivables |  |  | 20,852 |  |  |  | 18,532 |
Allowance for doubtful accounts |  |  | (355 | ) |  |  | (355 | )
Prepaid expenses and other current assets, net |  |  | 91,440 |  |  |  | 457,654 |

The Company entered several agreements with four suppliers in China in March 2024 for purchase of raw materials. The goods will be delivered to the Company by October 31 and November 31, 2024 according to these agreements. Prepayment were made to the suppliers in the total amount of RMB350 million. The prepayment was recorded as ‘Prepaid expenses and other current assets, net in the consolidated balance sheet as of March 31, 2024.

As of March 31, 2023, other receivables consisted of deposits for leased equipment and VAT accrued for purchase of raw materials amounted to RMB2 million and RMB7 million. As of March 31, 2024, other receivables consisted of deposits for leased equipment and cash advance to employees amounted to RMB2 million and RMB3.8 million.

As of March 31, 2023 and 2024, the allowance for doubtful accounts on advance to suppliers of RMB0.4 million were primarily consist of unrecoverable prepayment related to cancellation of abundant purchase orders caused by termination of cooperation with certain OEM/ODM customers and VAT recoverable from certain supply chain companies.

F-26

UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)

NOTE 5 — INVENTORIES

|  | As of March 31, |
|  | 2023 |  |  | 2024 |
|  | RMB |  |  | RMB |
Raw materials |  |  | 12,294 |  |  |  | 9,522 |
Work in progress |  |  | 2,972 |  |  |  | 1,558 |
Finished goods |  |  | 11,136 |  |  |  | 10,866 |
Total inventory, gross |  |  | 26,402 |  |  |  | 21,946 |
Inventory reserve |  |  | (10,233 | ) |  |  | (10,920 | )
Total inventory, net |  |  | 16,169 |  |  |  | 11,026 |

The movement of inventory reserve was as follows:

|  | Year ended March 31, |
|  | 2023 |  |  | 2024 |
|  | RMB |  |  | RMB |
Balance at beginning of year |  |  | 10,792 |  |  |  | 10,233 |
Additional charge |  |  | 326 |  |  |  | 688 |
Foreign currency translation difference |  |  | (885 | ) |  |  | (1 | )
Balance at the end of year |  |  | 10,233 |  |  |  | 10,920 |

NOTE 6 — PROPERTY, PLANT AND EQUIPMENT, NET

|  | As of March 31, |
|  | 2023 |  |  | 2024 |
|  | RMB |  |  | RMB |
Office real estate |  |  | 20,996 |  |  |  | 20,995 |
Furniture and equipment |  |  | 5,987 |  |  |  | 10,768 |
Production and other machineries |  |  | 55,004 |  |  |  | 47,845 |
Total |  |  | 81,987 |  |  |  | 79,608 |
Less: accumulated depreciation |  |  | (20,580 | ) |  |  | (25,420 | )
Property and equipment, net |  |  | 61,407 |  |  |  | 54,188 |

Depreciation charged to expense amounted to RMB3.3 million, RMB4.6 million and RMB5.7 million for the years ended March 31, 2022, 2023 and 2024, respectively.

No impairment for property, plant and equipment was recorded for the years ended March 31, 2023 and 2024.

F-27

UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)

NOTE 6 — PROPERTY, PLANT AND EQUIPMENT, NET (cont.)

Details of production and other machineries lease out under operating lease are as follows:

|  | As of March 31, |
|  | 2023 |  |  | 2024 |
|  | RMB |  |  | RMB |
Cost |  |  | 29,578 |  |  |  | 26,629 |
Less: accumulated depreciation and amortization |  |  | (12,094 | ) |  |  | (13,363 | )
Net book value |  |  | 17,484 |  |  |  | 13,266 |

NOTE 7 — LEASES

Operating leases as lessor

The Company has non-cancellable agreements to lease our equipment to tenant under operating lease for 1 to 3 years. The leases do not contain contingent payments. At March 31, 2024, the minimum future rental income to be received is as follows:

Year ending March 31, |  | RMB |
2025 |  |  | 201 |
Total |  |  | 201 |

For the years ended March 31, 2022, 2023 and 2024 the operating lease income of RMB2.9 million, RMB3.1 million and RMB3.1 million, respectively, net of the depreciation charges of corresponding equipment of RMB2.7 million, RMB2.9 million and RMB2.6 million, respectively, were recorded in other expenses, net in the consolidated statements of comprehensive loss.

Operating leases as lessee

The Company leases space under non-cancelable operating leases for office and manufacturing locations and production equipment. These leases do not have significant rent escalation holidays, concessions, leasehold improvement incentives, or other build-out clauses. Further, the leases do not contain contingent rent provisions.

Most leases include option to renew in condition that it is agreed by the landlord before expiry. Therefore, the majority of renewals to extend the lease terms are not included in its right-of-use assets and lease liabilities as they are not reasonably certain of exercise. The Company regularly evaluate the renewal options and when they are reasonably certain of exercise, the Company includes the renewal period in its lease term.

As most of the Company’s leases do not provide an implicit rate, it uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments.

The components of the Company’s lease expense are as follows:

|  | Year ended March 31, |
|  | 2023 |  |  | 2024 |
|  | RMB |  |  | RMB |
Operating lease cost |  |  | 3,289 |  |  |  | 3,249 |
Short-term lease cost |  |  | - |  |  |  | - |
Lease cost |  |  | 3,289 |  |  |  | 3,249 |

F-28

UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)

NOTE 7 — LEASES (cont.)

Supplemental cash flow information related to its operating leases was as follows for the year ended March 31, 2023 and 2024:

|  | Year ended March 31, |
|  | 2023 |  |  | 2024 |
|  | RMB |  |  | RMB |
Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |  |  |  |  |
Operating cash outflow from operating leases |  |  | 4,514 |  |  |  | 4,151 |

Maturities of its lease liabilities for all operating leases are as follows as of March 31, 2024:

|  | Year Ended March 31, |
|  | RMB |
2025 |  |  | 4,575 |
2026 |  |  | 4,575 |
2027 and after |  |  | 2,781 |
Total lease payments |  |  | 11,931 |
Less: Interest |  |  | (1,056 | )
Present value of lease liabilities |  |  | 10,875 |
Less current portion, record in current liabilities |  |  | (3,938 | )
Present value of lease liabilities |  |  | 6,937 |

The weighted average remaining lease terms and discount rates for all of its operating leases were as follows as of March 31, 2023 and 2024:

|  | As of March 31, |
Remaining lease term and discount rate: |  | 2023 |  |  | 2024 |
|  | RMB |  |  | RMB |
Weighted average remaining lease term (years) |  |  | 3.61 |  |  |  | 2.61 |
Weighted average discount rate |  |  | 7.00 | % |  |  | 7.00 | %

Financing with Sale-Leaseback

UTime Guangxi entered into a sale-leaseback arrangement (the “Lease Financing Agreement”) with Chailease International Financial Leasing Corp. (“CIFLC”) on January 31, 2024, for a total financing proceeds in the amount of RMB6.5 million (approximately US$0.9 million). Under the sale-leaseback arrangement, UTime Guangxi sold the Leased Equipment to CIFLC for RMB6.5 million (approximately US$0.9 million). Concurrent with the sale of equipment, UTime Guangxi leases back the equipment sold to CIFLC for a lease term of five years. At the end of the lease term, UTime Guangxi may buy back the Leased Equipment for free. The Leased Equipment in amount of RMB6.5 million was recorded as right of use assets and the net present value of the minimum lease payments was recorded as lease liability and calculated with CIFLC’s implicit interest rate of 10.7% per annum and stated at RMB6.45 million at the inception of the lease on January 31, 2024.

UTime Guangxi made payments due according to the schedule. As of March 31, 2024, the balance of Leased Equipment net of amortization was RMB6.46 million. The lease liability was RMB3.1 million and its current portion in the amount of RMB2.9 million as of March 31, 2024.

Amortization of the Leased Equipment was RMB0.04 million for the year ended March 31, 2024. Total interest expenses for the sale lease back arrangement was RMB0.1 million for the year ended March 31, 2024.

As a result of the sale and leaseback, a deferred loss in the amount of RMB0.8 million was recorded. The deferred loss is amortized over the lease term and as an addition to amortization of the Leased Equipment.

The future minimum lease payments of the capital lease as of March 31, 2024 were as follows:

March 31, |  | Amount |
2025 |  |  | 3,390 |
2026 |  |  | 3,104 |
2027 |  |  | 78 |
2028 |  |  | 78 |
2029 |  |  | 65 |
Less: unearned discount |  |  | (712 | )
|  |  | 6,003 |
Less: Current portion lease liability |  |  | (2,886 | )
|  | $ | 3,117 |

F-29

UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)

NOTE 8 — EQUITY METHOD INVESTMENT

During the year ended March 31, 2018, the Company invested an aggregate amount of RMB1.4 million in exchange for 35% of the equity interest of Philectronics Inc. (“Philectronics”), which was recorded under the equity method. The Company recorded its pro-rata share of losses in Philectronics of as other (income) expenses, net in the consolidated statements of comprehensive loss. Philectronics has net liability position and temporarily ceased its operation without foreseeable plan for resuming its business operation. As of March 31, 2024, full provision was made for the impairment of the Company’s equity interest of Philectronics.

|  | March 31, |
|  | 2024 |
|  | RMB |
Cost |  |  | 1,425 |
Impairment provision |  |  | (1,425 | )
Net |  |  | - |

NOTE 9 — BORROWINGS

|  |  |  | As of March 31, |
|  | Note |  | 2023 |  |  | 2024 |
|  |  |  | RMB |  |  | RMB |
Short-term borrowings |  |  |  |  |  |  |  |  |  |
China Resources Bank of Zhuhai Co., Ltd. Loan 1 |  | (a) |  |  | 22,000 |  |  |  | - |
Secured loan |  | (b) |  |  | 7,800 |  |  |  | 2,853 |
Industrial and Commercial Bank of China (“ICBC”) Loan 1 |  | (c) |  |  | 5,000 |  |  |  | - |
ICBC Loan 2 |  | (d) |  |  | 5,000 |  |  |  | - |
China Resources SZITIC Trust Company Limited Loan 1 |  | (e) |  |  | 3,000 |  |  |  | - |
Baosheng County Bank |  | (f) |  |  | 2,400 |  |  |  | - |
PingAn Bank Co., Ltd. |  | (g) |  |  | 2,000 |  |  |  | - |
China Resources Bank of Zhuhai Co., Ltd. Loan 2 |  | (h) |  |  | 2,000 |  |  |  | - |
WeBank Co., Ltd. 1 |  | (i) |  |  | 1,990 |  |  |  | 853 |
WeBank Co., Ltd. 3 |  | (j) |  |  | 1,745 |  |  |  | 245 |
WeBank Co., Ltd. 2 |  | (k) |  |  | 1,000 |  |  |  | 428 |
China Resources Bank of Zhuhai Co., Ltd. Loan 3 |  | (l) |  |  | - |  |  |  | 22,000 |
ICBC Loan 3 |  | (m) |  |  | - |  |  |  | 8,000 |
Bank of Beijing Loan 1 |  | (n) |  |  | - |  |  |  | 5,000 |
Bank of Beijing Loan 2 |  | (o) |  |  | - |  |  |  | 5,000 |
China Resources SZITIC Trust Company Limited Loan 2 |  | (p) |  |  | - |  |  |  | 5,000 |
Guangxi Beibu Gulf Bank Loan 1 |  | (q) |  |  | - |  |  |  | 5,000 |
China Resources Bank of Zhuhai Co., Ltd. Loan 4 |  | (r) |  |  | - |  |  |  | 1,570 |
Guangxi Beibu Gulf Bank Loan 2 |  | (s) |  |  | - |  |  |  | 1,000 |
|  |  |  |  | 53,935 |  |  |  | 56,949 |
Long-term borrowings |  |  |  |  |  |  |  |  |  |
Shenzhen Rural Commercial Bank loan 1 |  | (t) |  |  | 6,370 |  |  |  | - |
Shenzhen Rural Commercial Bank loan 2 |  | (u) |  |  | 1,580 |  |  |  | - |
|  |  |  |  | 7,950 |  |  |  | - |
Representing by: |  |  |  |  |  |  |  |  |  |
Current portion of long-term borrowings |  |  |  |  | 1,080 |  |  |  | - |
Non-current portion of long-term borrowings |  |  |  |  | 6,870 |  |  |  | - |

(a) | On November 24, 2022, UTime SZ entered into a working capital loan agreement with China Resources Bank of Zhuhai Co., Ltd., to borrow RMB22 million as working capital at an annual effective interest rate of 5.5%. The loan is secured by the office owned by UTime SZ and guaranteed by UTime GZ, Mr. Bao and his spouse. The loan was due in November 2023.

F-30

UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)

NOTE 9 — BORROWINGS (cont.)

(b) | In November 2020, UTime SZ and TCL Commercial Factoring (Shenzhen) Company Limited (“TCL Factoring”) executed a factoring agreement, pursuant to which UTime SZ received a revolving credit facility and may submit unlimited number of loan applications, so long as, among other conditions, the balance of the loan does not exceed the credit line. The annual effective interest rate range is from 8.0% to 9.0%. TCL Factoring has the right of recourse to UTime SZ, and as a result, these transactions were recognized as secured borrowings. UTime SZ agreed to pledge to TCL Factoring its accounts receivable from TCL Mobile Communication Company Limited (“TCL Huizhou”). This credit facility was also guaranteed respectively by Mr. Bao and UTime GZ, each for an amount up to RMB20 million. UTime SZ agreed not to withdraw, utilize or dispose the accounts receivables paid to it by TCL Huizhou without the prior consent of TCL Factoring. As of March 31, 2023 and 2024, UTime SZ obtained loans under the factoring agreement at the total amount of RMB7.8 million and RMB2.9 million, respectively.

(c) | On December 2, 2022, UTime SZ entered into a loan agreement with Industrial and Commercial Bank of China (“ICBC”), to borrow RMB5 million as working capital at an annual effective interest rate of 3.75%. The loan is guaranteed by Mr. Bao and his spouse. The loan was due and repaid in December 2023.

(d) | On December 7, 2022, UTime SZ entered into a loan agreement with ICBC, to borrow RMB5 million as working capital at an annual effective interest rate of 3.75%. The loan is guaranteed by Mr. Bao and his spouse. The loan was due and repaid in December 2023.

(e) | On January 10, 2023, UTime SZ entered into a working capital loan agreement with China CITIC Bank, to borrow RMB3 million as working capital at an annual effective interest rate of 4.35%. The loan is guaranteed by Mr. Bao. The loan was due and repaid in January 2024.

(f) | On August 31, 2022, UTime SZ entered into a working capital loan agreement with Baosheng County Bank to borrow RMB2.4 million as working capital for one year at an annual effective interest rate of 8.0%. The loan was secured by the office owned by UTime SZ and guaranteed by UTime Guangxi, Mr. Bao and his spouse. The loan was fully repaid in August 2023.

(g) | In November 2021, UTime SZ entered into a credit agreement with PingAn Bank Co., Ltd. to borrow RMB2 million for a term of 3 years, with an annual effective rate of 12.96%. The loan is guaranteed by Mr. Bao and his spouse. The loan was due and repaid in May 2023.

(h) | On December 5, 2022, UTime SZ entered into a working capital loan agreement with China Resources Bank of Zhuhai Co., Ltd., to borrow RMB2 million as working capital at an annual effective interest rate of 8.0%. The loan is guaranteed by Mr. Bao. The loan was due and repaid in October 2023.

(i) | On May 19, 2022, UTime SZ entered into a credit line agreement with WeBank Co., Ltd. (“WeBank”) according to which WeBank agreed to provide UTime SZ with a credit facility of up to RMB1.99 million with a two-year term from May 19, 2022 to May 19, 2024, with an annual effective interest rate of 10.08%. The loan is guaranteed by Mr. Bao. As of March 31, 2024 and 2023, UTime SZ loans under the credit agreement was RMB0.9 million and RMB1.99 million, respectively.

(j) | On May 19, 2022, UTime SZ entered into a credit line agreement with WeBank according to which WeBank agreed to provide UTime SZ with a credit facility of up to RMB1 million with a two-year term from May 19, 2022 to May 19, 2024, with an annual effective interest rate of 10.08%. The loan is guaranteed by Mr. Bao. As of March 31, 2024 and 2023, UTime SZ loans under the credit agreement was RMB0.4 million and RMB1 million, respectively.

(k) | On May 18, 2022, UTime GZ entered into a credit line agreement with WeBank according to which WeBank agreed to provide UTime GZ with a credit facility of up to RMB3 million with a two-year term from May 18, 2022 to May 18, 2024, with an annual effective interest rate of 11.34%. The loan is guaranteed by Mr. Bao. As of March 31, 2024 and 2023, UTime GZ loans under the credit agreement was RMB0.2 million and RMB1.7 million, respectively.

(l) | On November 10, 2023, UTime SZ entered into a working capital loan agreement with China Resources Bank of Zhuhai Co., Ltd., to borrow RMB22 million as working capital at an annual effective interest rate of 3.55%. The loan will be due in November 2024.
(m) | On December 11, 2023, UTime SZ entered into a loan agreement with ICBC, to borrow RMB8 million as working capital at an annual effective interest rate of 3.85%. The loan will be due in December 2024.

F-31

UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)

NOTE 9 — BORROWINGS (cont.)

(n) | On On January 2, 2024, UTime SZ entered into a credit agreement with Bank of Beijing, according to which Bank of Beijing agreed to provide UTime SZ with a credit facility of up to RMB10 million with a three-year term from January 2, 2024 to January 2, 2027. On January 2, 2024, UTime SZ entered into a loan agreement with Bank of Beijing, to borrow RMB 5 million as working capital at an annual effective interest rate of 4.5%. The loan is guaranteed by Mr. Bao and his spouse and will be due in January 2025.
(o) | On February 27, 2024, UTime SZ entered into a loan agreement with Bank of Beijing, to borrow RMB5 million as working capital at an annual effective interest rate of 4.5%. The loan is guaranteed by Mr. Bao and his spouse and will be due in February 2025.
(p) | On March 14, 2024, UTime SZ entered into a working capital loan agreement with China CITIC Bank, to borrow RMB5 million as working capital at an annual effective interest rate of 4.35%. The loan is guaranteed by Mr. Bao and will be due in March 2025.
(q) | On January 25, 2024, UTime Guangxi entered into a working capital loan agreement with Guangxi Beibu Gulf Bank, to borrow RMB5 million as working capital at an annual effective interest rate of 3.35%. The loan is guaranteed by Mr. Bao and his spouse, Mr. He Bo, the legal representative of UTime Guangxi, UTime SZ and Nanning Nanfang Financing Guarantee Co., Ltd, a third party. The loan will be due in January 2025.
(r) | On November 16, 2023, UTime SZ entered into a working capital loan agreement with China Resources Bank of Zhuhai Co., Ltd., to borrow RMB1.57 million as working capital at an annual effective interest rate of 7.0%. The loan will be due in October 2024.
(s) | On January 26, 2024, UTime Guangxi entered into a working capital loan agreement with Guangxi Beibu Gulf Bank, to borrow RMB1 million as working capital at an annual effective interest rate of 3.35%. The loan is guaranteed by Mr. Bao and his spouse, Mr. He Bo, the legal representative of UTime Guangxi, UTime SZ and Nanning Nanfang Financing Guarantee Co., Ltd, a third party. The loan will be due in January 2025.
(t) | On June 29, 2021, UTime SZ entered into a credit agreement with Shenzhen Rural Commercial Bank to borrow RMB7 million for a term of 3 years, which is payable at monthly installment of RMB0.07 million from August 2022 to July 2024, with a balloon payment of the remaining balance in the last installment. The loan bore a fixed interest rate of 4.5% per annum. The loan was secured by real estate owned by Mr. Bao and guaranteed by Mr. Bao. The loan was fully repaid in February 2024.
(u) | In July 2021, UTime SZ entered into a credit agreement with Shenzhen Rural Commercial Bank to borrow RMB2 million for a term of 3 years, which is payable at monthly installment of RMB0.02 million from July 2021 to July 2024, with a balloon payment of the remaining balance in the last installment. The loan is secured by real estate owned by Mr. Bao and guaranteed by Mr. Bao. The loan was fully repaid in February 2024.

F-32

UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)

NOTE 10 — OTHER PAYABLES AND ACCRUED LIABILITIES

|  | As of March 31, |
|  | 2023 |  |  | 2024 |
|  | RMB |  |  | RMB |
Advance from customers |  |  | 16,088 |  |  |  | 7,166 |
Accrued payroll |  |  | 11,852 |  |  |  | 10,828 |
VAT payable |  |  | 7,284 |  |  |  | 4,759 |
Other payables |  |  | 18,415 |  |  |  | 41,198 |
Total |  |  | 53,639 |  |  |  | 63,951 |

As of March 31, 2023, other payables mainly included RMB6.8 million advance from supply chain service provider, RMB2.2 million advance refundable to a customer and RMB3 million refundable to a vendor. As of March 31, 2024, other payables mainly included RMB6.8 million advance from supply chain service provider, RMB2.2 million advance refundable to a customer and RMB22.3 million advances from a third party to the Company, for developing and promoting healthcare wearable devices in the US market.

NOTE 11 — OTHER EXPENSES, NET

|  | Year ended March 31, |
|  | 2023 |  |  | 2024 |
|  | RMB |  |  | RMB |
Unrealised exchange gains |  |  | (4,033 | ) |  |  | (4,873 | )
Provision for doubtful accounts, net |  |  | - |  |  |  | 152 |
Government grants |  |  | (594 | ) |  |  | (2,421 | )
Others |  |  | 94 |  |  |  | (915 | )
Total |  |  | (4,533 | ) |  |  | (8,057 | )

NOTE 12 — INCOME TAX BENEFITS

Net loss before taxes of RMB39.4 million, RMB90.2 million and RMB62.8 million were attributed by non-U.S. entities for the years ended March 31, 2022, 2023 and 2024, respectively.

Cayman Islands

UTime Limited is incorporated in the Cayman Islands. Under the current laws of the Cayman Islands, the Company is not subject to income or capital gains taxes. In addition, dividend payments are not subject to withholdings tax in the Cayman Islands.

British Virgin Islands

Bridgetime is incorporated in the British Virgin Islands and is not subject to tax on income or capital gains under current British Virgin Islands law. In addition, dividend payments are not subject to withholdings tax in British Virgin Islands.

Hong Kong

UTime HK and UTime Trading, which were incorporated in Hong Kong, are subject to a two-tiered income tax rates for taxable income earned in Hong Kong with effect from April 1, 2018. The first HK$2 million of profits earned will be taxed at 8.25%, while the remaining profits will continue to be taxed at the existing 16.5% tax rate. Additionally, payments of dividends by the subsidiary incorporated in Hong Kong to the Company are not subject to any Hong Kong withholding tax.

India

Do Mobile, which was incorporated in India, is subject to a corporate income tax rate of 25% on the assessable profits, plus any surcharge if required.

Mexico

Gesoper and Firts, which were incorporated in Mexico, are subject to federal corporate income tax rate of 30% on the assessable profits.

F-33

UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)

NOTE 12 — INCOME TAX BENEFITS (cont.)

PRC

In accordance with the Enterprise Income Tax Law (“EIT Law”), Foreign Investment Enterprises (“FIEs”) and domestic companies are subject to Enterprise Income Tax (“EIT”) at a uniform rate of 25%. The subsidiary, VIE and subsidiary of VIE in the PRC are subject to a uniform income tax rate of 25% for the years presented. UTime SZ is regarded as a Certified High and New Technology Enterprise (“HNTE”) and entitled to a favorable statutory tax rate of 15%. Preferential tax treatment of UTime SZ as HNTE from November 2, 2015 to December 23, 2024 has been granted by the relevant tax authorities. UTime SZ is entitled to a preferential tax rate of 15% which is subject to review by State Taxation Administration every three years. As a result of these preferential tax treatments, the reduced tax rates applicable to UTime SZ for the years ended March 31, 2021, 2022 and 2023 are 15%. However, UTime SZ has not enjoyed the above-mentioned preferential tax treatments for the years ended March 31, 2021, 2022 and 2023 due to its loss position and as such there is no impact of these tax holidays on net loss per share.

According to a policy promulgated by the State Tax Bureau of the PRC and effective from 2008 onwards, enterprises engaged in research and development activities are entitled to claim an additional tax deduction amounting to 50% of the qualified research and development expenses incurred in determining its tax assessable profits for that year. The additional tax deduction has been increased from 50% of the qualified research and development expenses to 75%, effective from January 1, 2018 according to a tax incentives policy promulgated by the State Tax Bureau of the PRC in September 2018 (“Super Deduction”). The additional tax deduction has been increased from 75% of the qualified research and development expenses to 100%, effective from October 1, 2022 according to a tax incentives policy promulgated by the State Tax Bureau of the PRC in September 2022.

In general, the PRC tax authority has up to five years to conduct examinations of the Company’s tax filings. In addition, under applicable PRC tax laws and regulations, arrangements and transactions among related parties may be subject to audit or scrutiny by the PRC tax authorities within ten years after the taxable year when the arrangements or transactions are conducted. The Company is subject to the applicable transfer pricing rules in the PRC in connection to the transactions between its subsidiaries, VIE and subsidiaries of VIE located inside and outside PRC.

Withholding tax on undistributed dividends

Under the EIT Law and its implementation rules, the profits of a foreign-invested enterprise arising in 2008 and thereafter that are distributed to its immediate holding company outside the PRC are subject to withholding tax at a rate of 10%. A lower withholding tax rate will be applied if there is a beneficial tax treaty between the PRC and the jurisdiction of the foreign holding company. A holding company in Hong Kong, for example, will be eligible, with approval of the PRC local tax authority, to be subject to a 5% withholding tax rate under Arrangement between the Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, or the Double Tax Avoidance Arrangement, if such holding company is considered to be a non-PRC resident enterprise and holds at least 25% of the equity interests in the PRC foreign-invested enterprise distributing the dividends. However, if the Hong Kong holding company is not considered to be the beneficial owner of such dividends under applicable PRC tax regulations, such dividend will remain subject to withholding tax at a rate of 10%. The Company does not intend to have any of its subsidiaries located in PRC distribute any undistributed profits of such subsidiaries in the foreseeable future, but rather expects that such profits will be reinvested by such subsidiaries for their PRC operations. Accordingly, no withholding tax was recorded as of March 31, 2023 and 2024.

The current and deferred components of income taxes appearing in the consolidated statements of comprehensive loss are as follows:

|  | Year ended March 31, |
|  | 2023 |  |  | 2024 |
|  | RMB |  |  | RMB |
Current tax expenses |  |  | - |  |  |  | - |
Deferred tax benefit |  |  | (171 | ) |  |  | (171 | )
Total income tax benefits |  |  | (171 | ) |  |  | (171 | )

F-34

UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)

NOTE 12 — INCOME TAX BENEFITS (cont.)

The principal components of the deferred tax assets and liabilities are as follows:

|  | As of March 31, |
|  | 2023 |  |  | 2024 |
|  | RMB |  |  | RMB |
Deferred income tax assets (liabilities) : |  |  |  |  |  |
Impairment on receivables |  |  | 450 |  |  |  | 111 |
Inventories |  |  | 1,889 |  |  |  | 1,784 |
Deferred revenue |  |  | 2,174 |  |  |  | - |
Accrued expenses and employee benefits |  |  | 3,258 |  |  |  | 2,399 |
Equity method investment and others |  |  | - |  |  |  | - |
Net operating loss carry forwards |  |  | 27,977 |  |  |  | 24,562 |
Total gross deferred tax assets |  |  | 35,748 |  |  |  | 28,796 |
Less: valuation allowances |  |  | (32,490 | ) |  |  | (26,457 | )
Total deferred tax assets, net of valuation allowance |  |  | 3,258 |  |  |  | 2,399 |
Prepaid expenses and other current assets |  |  | (3,258 | ) |  |  | (2,399 | )
Unrealized foreign exchange difference and others |  |  | - |  |  |  | - |
Amortisation & impairment of intangible asset |  |  | (295 | ) |  |  | (125 | )
Deferred tax liabilities, net |  |  | (295 | ) |  |  | (125 | )

The Company considers positive and negative evidence to determine whether some portion or all of the deferred tax assets will more likely than not be realized. This assessment considers, among other matters, the nature, frequency and severity of recent losses, forecasts of future profitability, the duration of statutory carry forward periods, the Company’s experience with tax attributes expiring unused and tax planning alternatives. Valuation allowances have been established for deferred tax assets based on a more-likely-than-not threshold. The Company’s ability to realize deferred tax assets depends on its ability to generate sufficient taxable income within the carry forward periods provided for in the tax law. While the Company has optimistic plans for its business strategy, it determined that a full valuation allowance was necessary against all net deferred tax assets as of March 31, 2023 and 2024, given the current and expected near term losses and the uncertainty with respect to its ability to generate sufficient profits from its business model.

As of March 31, 2022, the Company’s total net operating loss carry forwards of RMB116.2 million, out of which, RMB83.2 million would expire from 2022 through 2031, RMB33.9 million can be carried forward indefinitely. As of March 31, 2023, the Company’s total net operating loss carry forwards was RMB152.0 million out of which, RMB109.8 million would expire from 2023 through 2032, RMB42.2 million can be carried forward indefinitely.

Reconciliation between total income tax expenses and the amount computed by applying the statutory income tax rate to income before taxes is as follows:

|  | Year ended March 31, |
|  | 2023 |  |  | 2024 |
|  | % |  |  | % |
Statutory rate in PRC |  |  | 25 |  |  |  | 25 |
Effect of preferential tax treatment |  |  | (1 | ) |  |  | (4 | )
Effect of different tax jurisdiction |  |  | (19 | ) |  |  | (7 | )
Effect of permanence differences |  |  | - |  |  |  | - |
Research and development super-deduction |  |  | 2 |  |  |  | 2 |
Changes in valuation allowance |  |  | (7 | ) |  |  | (15 | )
Under provision in prior year |  |  |  |  |  |  |  |
Total income tax provision |  |  | - |  |  |  | - |

F-35

UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)

NOTE 12 — INCOME TAX BENEFITS (cont.)

The Company accounts for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. Interest and penalties related to uncertain tax positions are recognized and recorded as necessary in the provision for income taxes.

The Company evaluates the level of authority for each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measures the unrecognized benefits associated with the tax positions. As of March 31, 2023 and 2024, the Company did not have any significant uncertain tax positions.

The Company is subject to taxation in China, Hong Kong and India. According to the PRC Tax Administration and Collection Law, the statute of limitations is three years if the underpayment of taxes is due to computational errors made by the taxpayer or the withholding agent. The statute of limitations is extended to five years under special circumstances, where the underpayment of taxes is more than RMB0.1 million. In the case of transfer pricing issues, the statute of limitation is ten years. There is no statute of limitation in the case of tax evasion.

NOTE 13 — RELATED PARTIES BALANCES AND TRANSACTIONS

Related parties with whom the Company had transactions are:

Related Parties |  | Relationship
Mr. Bao |  | Controlling shareholder of the Company
Mr. He |  | Beneficial shareholder of the Company
Mr. Yu |  | Chief Financial Officer of the Company
Philectronics |  | An equity method investee of the Company
Grandsky Phoenix Limited |  | 100% owned by Mr. Bao

(1) | Due from related parties

|  | As of March 31, |
|  | 2023 |  |  | 2024 |
|  | RMB |  |  | RMB |
Philectronics |  |  | 536 |  |  |  | 553 |
Mr. Yu |  |  | 48 |  |  |  | - |
|  |  | 584 |  |  |  | 553 |

F-36

UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)

NOTE 13 — RELATED PARTIES BALANCES AND TRANSACTIONS (cont.)

(2) | Due to related parties

|  | As of March 31, |
|  | 2023 |  |  | 2024 |
|  | RMB |  |  | RMB |
Mr. Bao |  |  | 4,779 |  |  |  | 11,839 |
Grandsky Phoenix Limited |  |  | - |  |  |  | 23,405 |
|  |  | 4,779 |  |  |  | 35,244 |

| On April 1, 2023, the company entered into a loan agreement with Grandsky Phoenix Limited to borrow USD3.5 million, with a term of one year. The loan is interest free. On April 1, 2024 the Company entered into a supplementary agreement with Grandsky Phoenix Limited, who agreed to extend the term for additional one year.

NOTE 14 — SHAREHOLDERS’ EQUITY

Common Stock

On April 8, 2021, the Company completed its IPO on Nasdaq Capital Market. In the offering, 3,750,000 of the Company’s ordinary shares were issued and sold to the public at a price of US$4 per share for gross proceeds of US$15 million. The Company recorded net proceeds (after deducting underwriting discounts and commissions and other offering fees and expenses) of approximately $13.9 million (approximately RMB88.2 million) from the offering.

On June 29, 2022, the board of directors of the Company approved the 2022 Performance Incentive Plan (the “2022 PIP”). Under the 2022 PIP, the Company has reserved a total of 5,300,000 shares of common stock for issuance as or under awards to be made to the participants of the Company. On November 7, 2022, 5,300,000 shares of common stock were issued and granted under the 2022 PIP. Total fair value of the shares of common stock granted was calculated at $9,301,500 as of the date of issuance at $1.755 per share.

On November 15, 2023, an aggregate of 4,700,000 shares of common stock were granted and issued under the 2022 PIP. Total fair value of the shares of common stock granted was calculated at $1,179,700 as of the date of issuance at $0.251 per share.

On November 15, 2023, the Company entered into certain securities purchase agreement (the “SPA”) with certain “non-U.S. Persons” (the “Purchasers”), pursuant to which the Company agreed to sell to the Purchasers an aggregate of 373,846,160 units (the “Units”), each Unit consisting of one ordinary share of the Company, par value $0.0001 per share and a warrant to purchase three shares with an initial exercise price of $0.33 per share, at a price of $0.13 per Unit, for an aggregate purchase price of approximately $48.6 million. On March 18, 2024, the transaction contemplated by the SPA consummated when all the closing conditions of the SPA have been satisfied and the Company issued the Units to the Purchasers pursuant to the SPA.

As of March 31, 2024, the Company had 990,000,000 authorized ordinary shares, and 392,113,953 ordinary shares were issued and outstanding, respectively.

F-37

UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)

NOTE 14 — SHAREHOLDERS’ EQUITY (cont.)

Warrants

On March 18, 2024, the Company issued 373,846,160 shares of our common stock and warrants to purchase up to 1,121,538,480 shares of our common stock. The warrants are exercisable immediately upon the date of issuance at an initial exercise price of $0.33 for cash (the “Warrant Shares”). The Warrants may also be exercised cashlessly if at any time after the six-month anniversary of the issuance date, there is no effective registration statement registering, or no current prospectus available for, the resale of the Warrant Shares. These warrants have a term of exercise equal to five years from its date of issuance till March 18, 2029. The fair value of these shares is USD242.8 million as of March 18, 2024, based on which the warrants issued is calculated and classified in the equity.

The fair value of the warrants issued was estimated by using the Black-Scholes model with the following assumptions:

Terms of warrants |  |  | 5 years |
Expected average volatility |  |  | 213.65% - 217.19 | %
Expected dividend yield |  |  | - |
Risk-free interest rate |  |  | 4.34% - 4.36 | %

The Company applied judgment in estimating key assumptions in determining the fair value of the warrants on the date of issuance. The Company used historical data to estimate stock volatilities and expected dividend yield. The risk-free rates are consistent with the terms of the warrants and are based on the United States Treasury yield curve in effect at the time of issuance.

A summary of stock warrant activities is as below:

|  | Warrants Outstanding |
|  |  |  |  | Weighted Average |
|  | Shares |  |  | Exercise Price |
Outstanding and exercisable at beginning of the period |  |  | 1,121,538,480 |  |  | $ | 0.33 |
Issued during the period |  |  | - |  |  |  | - |
Exercised during the period |  |  | - |  |  |  | - |
Cancelled or expired during the period |  |  | - |  |  |  | - |
Outstanding and exercisable at end of the period |  |  | 1,121,538,480 |  |  | $ | 0.33 |

The weighted average fair value of warrants granted for the year ended March 31, 2024 was USD0.22 per share.

No warrants were issued, exercised, cancelled or expired during the year ended March 31, 2024. As of March 31, 2024, the aggregated intrinsic value of warrants outstanding and exercisable was $nil.

F-38

UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)

NOTE 15 — COMMITMENTS AND CONTINGENCIES

(a) | Capital commitment

At March 31, 2023 and 2024, the Company had no capital commitments.

(b) | Legal proceedings

Regarding the construction contract dispute between UTime GZ and Guizhou Branch of Guangdong Jian ‘an Fire Electromechanical Engineering Co., Ltd (“Guangdong Jian ‘an”), Utime GZ and Jietongda promise to pay RMB 300,000 Guangdong Jian’an before the end of each month (“Settlement Payment”), and complete the above payment before the end of January 2024.

Utime SZ and Dongguan Qinling Electronic Technology Co., Ltd (“Dongguan Qinling”) had a sales contract dispute case. On September 29, 2020, People’s Court of Futian District of Shenzhen, Guangdong Province (“Futian Court”) issued the civil judgment (No.（2019）Yue 0304 Min Chu 51640). As of the date of this annual report, Dongguan Qinling has not actually performed the judgment, and has not paid any payment and interest to Utime SZ.

Regarding the sales contract dispute between Utime SZ and Jiangsu Jutai Technology Co., Ltd (“Jiangsu Jutai”). On June 28, 2023, UTime SZ and Jiangsu Jutai entered into a Settlement Agreement based on the civil judgment (No. (2021)Yue 0304 Min Chu 41025). Jiangsu Jutai paid the Settlement Amount to UTime SZ on June 30, 2023.

Utime SZ and Shenzhen Wanhua Supply Chain Co., Ltd (“Shenzhen Wanhua”) had a entrustment agreement contract dispute case. On March 31, 2023, People’s Court of Shenzhen Qianhai Cooperation Zone, Guangdong Province issued the civil judgment ((No. (2023) Yue 0391 Min Chu 762). As of the date of this annual report, Shenzhen Wanhua has not actually performed the judgment, and has not paid any payment and interest to Utime SZ.

UTime SZ and Shenzhen Zhonghang Jiayikang Electronics Co., Ltd(“Jiayikang”) had a sales contract dispute. As of the date of this annual report, the Company is currently subject to ongoing appellate proceedings following a first-instance judgment (No. (2023) Yue 0304 Min Chu 13831) rendered by Futian court on February 27, 2024.

From time to time, the Company is involved in claims and legal proceedings that arise in the ordinary course of business. Based on currently available information, management does not believe that the ultimate outcome of these unresolved matters, individually and in the aggregate, is likely to have a material adverse effect on the Company’s financial position, results of operations or cash flows. The Company has not recorded any material liabilities in this regard as of March 31, 2023 and 2024. Refer to Item 8. Financial information, legal proceedings.

However, litigation is subject to inherent uncertainties and the Company’s view of these matters may change in the future. If an unfavorable outcome were to occur, there exists the possibility of a material adverse impact on the Company’s financial position and results of operations for the periods in which the unfavorable outcome occurs.

NOTE 16 — REVENUE AND GEOGRAPHY INFORMATION

|  | Year ended March 31, |
|  | 2023 |  |  | 2024 |
|  | RMB |  |  | RMB |
OEM/ODM |  |  | 197,564 |  |  |  | 172,156 |
In-house brand |  |  | - |  |  |  | - |
Total |  |  | 197,564 |  |  |  | 172,156 |

The Company’s sales breakdown based on location of customers is as follows:

|  | Year ended March 31, |
|  | 2023 |  |  | 2024 |
|  | RMB |  |  | RMB |
Mainland China |  |  | 82,481 |  |  |  | 106,216 |
Hong Kong |  |  | 14,228 |  |  |  | - |
India |  |  | - |  |  |  | - |
Africa |  |  | 39,515 |  |  |  | 21,478 |
The United States |  |  | 18,158 |  |  |  | 15,415 |
Mexico |  |  | 26,199 |  |  |  | 8,465 |
South America |  |  | 951 |  |  |  | 14,431 |
Others |  |  | 16,032 |  |  |  | 6,151 |
Total |  |  | 197,564 |  |  |  | 172,156 |

F-39

UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)

NOTE 16 — REVENUE AND GEOGRAPHY INFORMATION (cont.)

The location of the Company’s long-lived assets is as follows:

|  | As of March 31, |
|  | 2023 |  |  | 2024 |
|  | RMB |  |  | RMB |
PRC |  |  | 74,438 |  |  |  | 70,429 |
Mexico |  |  | 3 |  |  |  | 3 |
Total |  |  | 74,441 |  |  |  | 70,432 |

Pursuant to ASC 280-10-50-41, the other non-current assets of RMBnil and RMB0.2 million, and the intangible assets, net of RMB1.8 million and RMB0.7 million were excluded from long-lived assets as of March 31, 2023 and 2024 respectively.

F-40

UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)

NOTE 17 — CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY

The Company performed a test on the restricted net assets of consolidated subsidiary in accordance with Securities and Exchange Commission Regulation S-X Rule 4-08 (e) (3), “General Notes to Financial Statements” and concluded that it was applicable for the Company to disclose the financial statements for the parent company. The amounts restricted include paid-in capital, capital surplus and statutory reserves, after intercompany eliminations, as determined pursuant to PRC generally accepted accounting principles, totaling RMB72.1 million as of March 31, 2023 and 2024.

The subsidiaries did not pay any dividend to the parent for the periods presented. For the purpose of presenting parent only financial information, the Company records investment in its subsidiary under the equity method of accounting. Such investment is presented on the separate condensed balance sheets of the Company as “Investment in subsidiary” and the income of the subsidiary is presented as “Income from equity method investments.” Certain information and footnote disclosures generally included in financial statements prepared in accordance with U.S. GAAP have been condensed and omitted.

BALANCE SHEETS

|  | As of March 31, |
|  | 2023 |  |  | 2024 |
|  | RMB |  |  | RMB |
ASSETS |  |  |  |  |  |
Current assets |  |  |  |  |  |
Cash and cash equivalents |  |  | 2 |  |  |  | 1 |
Prepaid expenses and other current assets |  |  | 25,109 |  |  |  | 25,924 |
Inter-company receivable |  |  | 79,393 |  |  |  | 444,934 |
Non-current assets |  |  |  |  |  |  |  |
Investment in subsidiaries |  |  | (18,929 | ) |  |  | (43,653 | )
Total assets |  |  | 85,575 |  |  |  | 427,206 |
LIABILITIES AND SHAREHOLDERS’ EQUITY |  |  |  |  |  |  |  |
Current liabilities |  |  |  |  |  |  |  |
Inter-company payable |  |  | 35,634 |  |  |  | 2,886 |
Due to related parties |  |  | 313 |  |  |  | 23,728 |
Other payables and accrued liabilities |  |  | 5,539 |  |  |  | 32,794 |
Total liabilities |  |  | 41,486 |  |  |  | 59,408 |
Shareholders’ equity |  |  |  |  |  |  |  |
Preference share, par value US$0.0001; Authorized:10,000,000 shares; none issued and outstanding As of March 31, 2023 and As of March 31, 2024, respectively |  |  |  |  |  |  |  |
Ordinary shares, par value US$0.0001; Authorized:990,000,000 shares; Issued and outstanding: 13,567,793 shares as of March 31,2023 and 392,113,953 shares as of March 31, 2024 |  |  | 9 |  |  |  | 278 |
Additional paid-in capital |  |  | 216,504 |  |  |  | 573,615 |
Accumulated deficit |  |  | (175,893 | ) |  |  | (208,828 | )
Accumulated other comprehensive income |  |  | 3,469 |  |  |  | 2,733 |
Total shareholders’ equity |  |  | 44,089 |  |  |  | 367,798 |
Total liabilities and shareholders’ equity |  |  | 85,575 |  |  |  | 427,206 |

F-41

UTIME LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data and per share data, or otherwise noted)

NOTE 17 — CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (cont.)

STATEMENTS OF COMPREHENSIVE LOSS

|  | Year ended March 31, |
|  | 2023 |  |  | 2024 |
|  | RMB |  |  | RMB |
Loss from equity method investments |  |  | (18,396 | ) |  |  | (50,082 | )
Operating expenses |  |  | (69,220 | ) |  |  | (10,802 | )
Net loss |  |  | (87,616 | ) |  |  | (60,884 | )
Foreign currency translation difference |  |  | 2,445 |  |  |  | 1,456 |
Comprehensive loss |  |  | (85,171 | ) |  |  | (59,428 | )

STATEMENTS OF CASH FLOWS

|  | Year ended March 31, |
|  | 2023 |  |  | 2024 |
|  | RMB |  |  | RMB |
CASH FLOW FROM OPERATING ACTIVTIES |  |  |  |  |  |
Net income |  |  | (87,616 | ) |  |  | (60,884 | )
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |  |  |  |  |
Equity loss of subsidiaries |  |  | 18,396 |  |  |  | 50,082 |
Share-based compensation and expenses |  |  | 63,656 |  |  |  | 8,892 |
Changes in operating assets and liabilities: |  |  |  |  |  |  |  |
Inter-company receivable |  |  | 1,539 |  |  |  | (13,078 | )
Prepaid expenses and other current assets |  |  | - |  |  |  | (500 | )
Inter-company payable |  |  | - |  |  |  | (33,989 | )
Related-parties |  |  | - |  |  |  | 2,901 |
Other payables and accrued liabilities |  |  | 4,026 |  |  |  | 25,531 |
Net cash used in operating activities |  |  | 1 |  |  |  | (21,045 | )
Loan received from a shareholder |  |  | - |  |  |  | 20,546 |
Effect of exchange rate changes on cash and cash equivalent and restricted cash |  |  | - |  |  |  | 498 |
Net change in cash and cash equivalent |  |  | 1 |  |  |  | (1 | )
Cash and cash equivalents, beginning of year |  |  | 1 |  |  |  | 2 |
Cash and cash equivalents, end of year |  |  | 2 |  |  |  | 1 |

The Company did not have significant capital and other commitments, long-term obligations, or guarantees as of March 31, 2023 and 2024, respectively.

NOTE 18 — SUBSEQUENT EVENTS

Except as set forth below, there were no events that occurred subsequent to March 31, 2024 that require adjustment to or disclosure in the consolidated financial statements.

On April 12, 2024, the board of directors of the Company approved the 2024 Performance Incentive Plan (the “2024 PIP”). Under the 2024 PIP, the Company has reserved a total of 58,817,000 shares of common stock for issuance to directors, officers, employees and consultants of the Company.

F-42

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