UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

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

OR

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

For the fiscal year ended December 31, 2025.

OR

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

OR

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

Date of event requiring this shell company report ___________

For the transition period from ___________ to ___________

Commission file number: 001-36363

VisionSys AI Inc

(Exact name of Registrant as specified in its charter)

N/A

(Translation of Registrant’s name into English)

Cayman Islands

(Jurisdiction of incorporation or organization)

Room 1501, 15F, Building A2, Yanjing Headquarters Base

Yanjiao, Sanhe City, Langfang, Hebei Province 065201

The People’s Republic of China

Telephone: +86(0316)83318177 

(Address of principal executive offices)

Tianlong Wang, Chief Executive Officer

Email: wtl2026@visysai.com

Room 1501, 15F, Building A2, Yanjing Headquarters Base

Yanjiao, Sanhe City, Langfang, Hebei Province 065201

The People’s Republic of China

Telephone: +86(0316)83318177 

(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)

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

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

None

(Title of Class)

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

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report. As of December 31, 2025, there were 567,229,888 ordinary shares outstanding, par value $0.001 per share, being the sum of 560,023,829 Class A ordinary shares and 7,206,059 Class B ordinary shares. 

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 “accelerated filer,” “large accelerated filer” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. ☐ Item 17 ☐ Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

☐ Yes ☐ No

TABLE OF CONTENTS

INTRODUCTION

In this annual report, except where the context otherwise requires and for purposes of this annual report only:

This annual report on Form 20-F includes our audited consolidated financial statements for the fiscal years ended December 31, 2025, 2024, and 2023. We present our financial results in RMB. We make no representation that any RMB or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or RMB, as the case may be, at any particular rate, or at all. The government in mainland China imposes control over its foreign currency reserves in part through direct regulation of the conversion of RMB into foreign exchange and through restrictions on foreign trade. This annual report contains translations of certain foreign currency amounts into U.S. dollars for the convenience of the reader. Unless otherwise stated, all translations of Renminbi into U.S. dollars were made at the rate of RMB6.9931 to US$1.00, the exchange rate as set forth in the H.10 statistical release of the Board of Governors of the Federal Reserve System in effect as of December 31, 2025 (except the cash dividend, which is translated at the rate on the exercise date.

FORWARD-LOOKING INFORMATION

This annual report on Form 20-F contains forward-looking statements that involve risks and uncertainties. All statements other than statements of historical facts are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements.

You can identify these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “likely to” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, but are not limited to, statements about:

You should read thoroughly this annual report and the documents that we refer to in this annual report with the understanding that our actual future results may be materially different from and worse than what we expect. Other sections of this annual report include additional factors which could adversely impact our business and financial performance. Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time and it is not possible for our management to predict all risk factors and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements.

You should not rely upon forward-looking statements as predictions of future events. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

PART I.

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not Applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not Applicable.

ITEM 3. KEY INFORMATION

Our Company Structure

VSA is not a PRC operating company but a Cayman Islands holding company with operations primarily conducted through: (i) Medintel Technology Inc, VSA’s wholly-owned subsidiary in the United States; (ii) EverWin Group Limited, VSA’s wholly-owned subsidiary in Hong Kong; (iii) VisionSys (HK) Limited, VSA’s wholly-owned subsidiary in Hong Kong; (iv) VisionSys Limited, VSA’s wholly-owned subsidiary in United States; (v) Deniz Inc, VSA’s wholly-owned subsidiary in United States; and (vi) Beijing Wangwen Zhisuan Technology Co., Ltd., EverWin’s VSA’s wholly-owned subsidiary in the PRC (“Beijing Wangwen”).

Revenues from continuing operations contributed by our subsidiary accounted for nil for each of the years ended 2023 and 2024, as neither the Company nor its subsidiary generated any revenue from continuing operations during these periods, and 100% for the year ended 2025. As used in this annual report, “we,” “us,” “our” or “VSA” refers to VisionSys AI Inc (formerly known as Tarena International, Inc. and TCTM Kids IT Education Inc), its subsidiaries, and, in the context of describing our operations and consolidated financial information, the former variable interest entities in mainland China, including but are not limited to, former Beijing Tongcheng VIE and former Beijing Tarena VIE for the effective period of their respective contractual arrangements with us. Investors in our ADSs are not purchasing any equity interest in our Operating Subsidiaries, but instead are purchasing equity interest in a holding company incorporated in the Cayman Islands, and may never directly hold equity interests in our Operating Subsidiaries.

Former Beijing Tarena VIE and Divestiture 2024

In December 2023, we entered into an equity transfer agreement to dispose of our equity interests in the professional education business to a buyer consortium led by Tarena Weishang Technology (Hainan) Co., Ltd, or the Divestiture 2024. Ms. Lijuan Han, sister of our former founder and chairman Mr. Shaoyun Han, is a member of the buyer consortium and has an interest in the Divestiture 2024. The Divestiture 2024 had been consummated at the end of March 2024. Upon the consummation of the Divestiture 2024, the professional education business, including the business operated by the former Beijing Tarena VIE, had been divested; and the STEM education business operated by the former Beijing Tarena VIE had been transferred to the former Beijing Tongcheng VIE. The Divestiture 2024 represented a strategic shift that has a major effect on our company’s operations and financial results. As a result of the Divestiture 2024, the professional education business has been reclassified as discontinued operations and our remaining business after the Divestiture 2024 has been reclassified as continuing operations. For detailed information regarding all material financial impacts related to the Divestiture 2024, see “Item 5. Operating and Financial Review and Prospects-A. Operating Results-Financial Impact by the Divestiture 2024” and Note 3 to our consolidated financial statements, which are included in this annual report.

Former Beijing Tongcheng VIE and Disposition 2025

On July 22, 2025, we entered into a share sales and purchase agreement (the “Agreement”) with First Winner Management Limited, a British Virgin Islands company (the “Buyer”), for the sale of all of our equity interests in our wholly owned subsidiaries, Kids IT Education Inc. and Tarena Hong Kong Limited (collectively, the “Targets”), to the Buyer. Pursuant to the Agreement, the Buyer agreed to acquire the Targets in exchange for nominal cash consideration of US$1 (the “Disposition 2025”).The Disposition 2025 was approved by our shareholders at an extraordinary general meeting held on August 25, 2025 and our STEM education business was divested after Disposition 2025.

Our Brain-Computer Interface Business

Following the completion of Divestiture 2024 and Disposition 2025, we have focused exclusively on the development of BCI technologies and related businesses as described herein. Our BCI business is administered through our PRC subsidiary, Beijing Wangwen, and is expected to be centered on the development and application of core algorithms, as well as related software and hardware systems for brain-computer interaction. Through these capabilities, we intend to develop, procure, sell, and distribute BCI-enabled or BCI-adjacent products and solutions, and to provide related technical services.

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

Permissions Required from the PRC Government Authorities for Our Operations 

We conduct our business primarily through our PRC subsidiary in mainland China. Our operations in mainland China are governed by laws and regulations of mainland China. As of the date of this annual report, we believe our PRC subsidiary in mainland China has obtained the requisite licenses and permits from the PRC government authorities that are material for our business operations. However, we cannot assure you that relevant government authorities would reach the same conclusion. Given the uncertainties of interpretation and implementation of relevant laws and regulations and the enforcement practice by the government authorities, we may be required to obtain additional licenses, permits, filings or approvals for the functions and services of our platform in the future.

Furthermore, as advised by Zhejiang Taihang Law Firm, our PRC legal counsel, in connection with our historical issuance of securities to foreign investors that was consummated in the year of 2014, under current PRC laws, regulations and regulatory rules, as of the date of this annual report, we, our mainland China subsidiary, (i) are not required to obtain permission from the China Securities Regulatory Commission, or the CSRC, and (ii) are not required to go through a cybersecurity review by the Cyberspace Administration of China; and (iii) As of the date of this annual report, we, our mainland China subsidiary have not been asked to obtain, or been denied by any PRC government authority for, permission by any other PRC government authority. If (i) we inadvertently conclude that such permissions or approvals are not required, or (ii) applicable laws, regulations, or interpretations change and we are required to obtain such permissions or approvals in the future, we may have to expend significant time and costs to procure them. If we or our subsidiaries are unable to do so, on commercially reasonable terms, in a timely manner or otherwise, we may become subject to sanctions imposed by the PRC regulatory authorities, which could include fines and penalties, proceedings against us, and other forms of sanctions, and our ability to conduct our business, invest into China as foreign investments or accept foreign investments, or be listed on a U.S. or other overseas exchange may be restricted, and our business, reputation, financial condition, and results of operations may be materially and adversely affected. 

However, the PRC government has promulgated certain regulations and rules to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers. On February 17, 2023, the CSRC released the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies and five supporting guidelines, or, collectively, the Filing Rules, which took effect on March 31, 2023. According to the Filing Rules, domestic companies in mainland China that directly or indirectly offer or list their securities in an overseas market are required to file with the CSRC. In addition, an overseas listed company must also submit the filing with respect to its follow-on offerings, issuance of convertible corporate bonds and exchangeable bonds, and other equivalent offering activities, within a specific time frame requested under the Filing Rules. Therefore, On February 17, 2023, the CSRC also held a press conference for the release of the Filing Rules, which, among others, clarified that the companies in mainland China that have been listed overseas before March 31, 2023 are not required to file with the CSRC immediately, but these companies should complete filing with the CSRC for their future equity and equity-linked securities financing activities in accordance with the Filing Rules. Based on the foregoing, we are not required to complete filing with the CSRC for our prior offshore offerings and listing at this stage, but we will be required to file with the CSRC for our overseas offering of equity and equity linked securities in the future within the applicable scope of the Filing Rules. For more detailed information, see “Item 3. Key Information-D. Risk Factors-Risks Related to Doing Business in China - The approval of and filing with the CSRC or other PRC government authorities may be required in connection with our offshore offerings under the laws of mainland China, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing” and “-Risks Related to Our Business-Our business is subject to complex and evolving Chinese laws and regulations regarding cybersecurity, information security, privacy and data protection. Many of these laws and regulations are subject to change and uncertain interpretation, and any failure or perceived failure to comply with these laws and regulations could result in claims, changes to our business practices, negative publicity, legal proceedings, increased cost of operations, or declines in student base, or otherwise harm our business.” 

Cash and Asset Flows through Our Organization

VSA is a holding company with no operations of its own. We conduct our operations in mainland China primarily through our PRC subsidiary in mainland China. As a result, although other means are available for us to obtain financing at the holding company level, VSA’s ability to pay dividends to the shareholders and to service any debt it may incur may depend upon dividends paid by our subsidiary in mainland China. If any of our subsidiaries incurs debt on its own behalf in the future, the instruments governing such debt may restrict its ability to pay dividends to VSA. In addition, to the extent cash or assets in our business is in mainland China or Hong Kong or a mainland China or Hong Kong entity, the funds or assets may not be available to fund operations or for other use outside of mainland China or Hong Kong as we, or our subsidiaries are subject to certain restrictions with respect to paying dividends or otherwise transferring any of their cash or assets offshore, and there is no assurance the PRC government will not intervene in or impose restrictions on the ability of us or our subsidiaries to transfer cash (or assets). See “Item 3. Key Information-D. Risk Factors-Risks Related to Our Corporate Structure-We may rely on dividends and other distributions on equity paid by our subsidiaries in mainland China to fund any cash and financing requirements we may have. To the extent cash or assets in the business is in mainland China or Hong Kong or a mainland China or Hong Kong entity, the funds or assets may not be available to fund operations or for other use outside of mainland China or Hong Kong as we, our subsidiaries are subject to certain restrictions with respect to paying dividends or otherwise transferring any of their cash or assets offshore, and any such restriction could have a material and adverse effect on our ability to conduct our business.” and “Item 5. Operating and Financial Review and Prospects-B. Liquidity and Capital Resources-Holding Company Structure.” In addition, our subsidiary in mainland China are permitted to pay dividends to VSA only out of their retained earnings, if any, as determined in accordance with accounting standards and regulations of mainland China. Further, our PRC subsidiary in mainland China are required to make appropriations to certain statutory reserve funds or may make appropriations to certain discretionary funds, which are not distributable as cash dividends except in the event of a solvent liquidation of the companies. For more details, see “Item 5. Operating and Financial Review and Prospects-B. Liquidity and Capital Resources-Holding Company Structure.”

Under the laws of mainland China, VSA may provide funding to our subsidiary in mainland China only through capital contributions or loans, and to the former variable interest entities only through loans or payment for inter-group transactions, subject to satisfaction of applicable government registration and approval requirements. For the years ended December 31, 2023, 2024 and 2025, there was no capital contribution from VisionSys AI Inc to its subsidiaries or former variable interest entities, and VSA did not extend any loans to, or receive any repayments from, its subsidiaries or former variable interest entities.

For the years ended December 31, 2023, 2024 and 2025, no dividends or distributions were made to VSA by its subsidiaries or its former variable interest entities. Under laws and regulations of mainland China, our PRC subsidiary in mainland China are subject to certain restrictions with respect to paying dividends or otherwise transferring any of their net assets to us. Remittance of dividends by a wholly foreign-owned enterprise, or WFOE, out of mainland China is also subject to examination by the banks designated by SAFE. The amounts restricted include the paid-up capital and the statutory reserve funds of our subsidiary in mainland China and the net assets of the former variable interest entities in which we have no legal ownership, totaling RMB1,228.2 million, RMB1,236.9 million, and RMB217.0 million(US$31.0 million) as of December 31, 2023, 2024 and 2025, respectively. For risks related to the fund flows of our operations in mainland China, see “Item 3. Key Information-D. Risk Factors-Risks Related to Our Corporate Structure - We may rely on dividends and other distributions on equity paid by our subsidiaries in mainland China to fund any cash and financing requirements we may have. To the extent cash or assets in the business is in mainland China or Hong Kong or a mainland China or Hong Kong entity, the funds or assets may not be available to fund operations or for other use outside of mainland China or Hong Kong as we, our subsidiaries are subject to certain restrictions with respect to paying dividends or otherwise transferring any of their cash or assets offshore, and any such restriction could have a material and adverse effect on our ability to conduct our business..”

There are certain restrictions on our ability to convert Renminbi into foreign currencies. Approval from State Administration of Foreign Exchange, or “SAFE”, and the People’s Bank of China, or “PBOC”, may be required where RMB are to be converted into foreign currencies, including U.S. dollars, and approval from SAFE and PBOC or their branches may be required where RMB are to be remitted out of China. See “Item 3. Key Information-D. Risk Factors-Risks Related to Doing Business in China - Governmental control of currency conversion may affect the value of your investment.”

For the years ended December 31, 2023, 2024 and 2025, no assets other than cash were transferred through our organization.

Our Company has established a centralized cash management policy to direct how funds are transferred between the Company, our subsidiaries, and the former variable interest entities to improve the efficiency and ensure the security of cash management. Our treasury department prepares the rolling cash flow forecast of our Company and also prepares fund management reports regularly to our management team. We only allow authorized departments and personnel to have access to our funds, and we also segregate duties among our personnel involved in funds management. Furthermore, all funds are transferred in accordance with the applicable PRC laws and regulations.

For more details, see our selected condensed consolidating schedule starting on page F-34 and the consolidated financial statements starting on page F-1. 

VSA has not declared or paid any cash dividends since the beginning of 2019, nor does it have any present plan to pay any cash dividends on our 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. See “Item 8. Financial Information-A. Consolidated Statements and Other Financial Information-Dividend Policy.” For the Cayman Islands, mainland China and United States federal income tax considerations of an investment in our ADSs, see “Item 10. Additional Information-E. Taxation.”

For purposes of illustration, the following discussion reflects the hypothetical taxes that might be required to be paid within mainland China, assuming that: (i) we have taxable earnings, and (ii) we determine to pay a dividend in the future:

Notes:

Not Applicable.

Not Applicable.

Summary of Risk Factors

An investment in our ADSs involves significant risks. Below is a summary of material risks we face, organized under relevant headings. With respect to the legal risks associated with being based in and having operations in mainland China, the laws, regulations and the discretion of mainland China governmental authorities discussed in this annual report are expected to apply to mainland China entities and businesses, rather than entities or businesses in Hong Kong which operate under a different set of laws from mainland China. These risks are discussed more fully in Item 3. Key Information-D. Risk Factors.

Risks Related to Our BCI Business

Risks Related to Our Operation

Risks Related to Our Corporate Structure

Risks Related to Doing Business in China

Risks Related to Our ADSs

Risks Related to Our BCI Business

Regulatory policies in the medical and technology sectors may change in the jurisdictions where we operate.

The development and use of our core algorithms and related software-hardware systems for brain-computer interfaces may be subject to evolving regulatory requirements, particularly in the medical and technology sectors. Regulatory policies in the jurisdictions where we currently operate—primarily in Asia—as well as in potential future markets, may change or become more stringent. Such changes could lead to increased compliance costs, delays in product development or deployment, or limitations on our ability to commercialize BCI technologies across different regions.

The actual commercialization progress may fall short of expectations, and the market acceptance of our services or products may be limited.

The development and commercialization of our core algorithms and related software-hardware systems for BCI technologies are subject to significant uncertainty. Despite ongoing R&D efforts, the actual progress may fall short of expectations due to technical challenges, regulatory hurdles, or resource constraints. In addition, the market acceptance of BCI-based products and services remains nascent and unproven at scale. If users, developers, or commercial partners do not adopt our solutions as anticipated, our business prospects, financial performance, and competitive position could be adversely affected.

Implementation challenges may arise due to the need to integrate complex software and hardware systems, along with user testing, potentially leading to a prolonged development cycle and deviations from forecast assumptions.

Implementation challenges may arise from the need to integrate complex software and hardware components within our brain-computer interface systems. This process often involves extensive user testing, iteration, and system optimization, which can lead to a prolonged development cycle. As a result, there may be delays or deviations from our projected timelines, cost estimates, or performance assumptions, potentially impacting our ability to achieve commercialization milestones.

The brain-computer interface industry is competitive, and we may be unable to compete with companies with greater financial or technical resources than us, which could negatively affect our operations.

The sector of brain-computer interfaces is characterized by rapid technological advancements and fierce competition. Our potential success is contingent upon several factors, including access to patents and other technology protections, the ability to effectively commercialize technological innovations, the availability of capital, access to market channels, and obtaining necessary approvals for testing, manufacturing, and commercialization.

We will encounter competition from major global technology firms, some of which may be integrating state-of-the-art biotechnology, signal analysis, sensor development, and computing logic into their products and services. These firms may also seek to exploit the unique patented technology we are developing. Furthermore, competition arises from academic institutions, government agencies, and private research organizations, competing with us in research and development, product development, and market and brand establishment. Additionally, these entities vie for highly skilled scientific personnel, consultants, and investment capital.

The successful development of this new business is highly speculative and dependent on numerous factors, many of which are beyond our control. Our business hinges on the successful development and implementation of the Core Algorithms and Related Software-Hardware Systems for Brain-Computer Interfaces. This underscores the speculative nature of our endeavors, subject to numerous risks and uncertainties.

Key aspects crucial to our success include establishing brand recognition and client and customer loyalty, effectively developing and deploying new products and services, competing in existing and emerging markets, managing administrative overhead costs, navigating economic conditions, developing our partner ecosystem, validating our technology with co-innovation partners, managing business growth, and expanding into adjacent markets.

There is no guarantee of success in addressing these risks and uncertainties or generating significant revenues or profits.

New products and services may subject us to additional risks, and a failure to successfully manage these risks may have a material adverse effect on our business.

Periodically, we may engage in the development and launch of new products and services. Such endeavors entail significant risks and uncertainties, particularly when entering markets that are not fully matured. The development and marketing of new products and services often requires substantial investments of time and resources. Initial timelines for product introduction and development may not be met, and targets for pricing and profitability may prove unattainable. Moreover, external factors, including regulatory compliance, competitive alternatives, and evolving market preferences, can influence the successful implementation of new offerings.

Failure to effectively manage these risks associated with the development and implementation of new products or services could materially impact our business, financial condition, and results of operations.

If we are unable to develop a partner ecosystem, sales, marketing and distribution channels, or enter into agreements with third parties to perform these functions on acceptable terms, we may be unable to generate revenue.

Presently, we lack any internal sales, marketing, or distribution capabilities. Upon introducing products or services to the market, we must establish sales, marketing, and distribution channels for their commercialization. This process may entail substantial expenses and time commitments. Alternatively, we may opt to engage in collaborations with third parties to perform these functions.

Should we choose to directly market our products or services, significant financial and managerial resources will be required to cultivate a specialized marketing and sales force, equipped with technical expertise, along with supporting distribution, administration, and compliance capabilities. Alternatively, if we rely on third-party collaborations or co-promotion agreements, we must establish and sustain marketing and distribution partnerships, with no guarantee of securing favorable terms or agreements.

In engaging third-party marketing or distribution collaborators, any revenue received, whether directly or indirectly, hinges upon the efforts and profitability of these parties. There exists uncertainty regarding their ability to establish adequate sales and distribution capabilities or achieve market acceptance for our products and services.

Failure to successfully commercialize products and services, whether independently or through third-party collaborations, could have a materially adverse impact on our business, financial condition, and results of operations.

We may face significant competition in Asia and in other markets, including the United States, and Europe where we may decide to operate in the future.

We anticipate encountering significant competition in Asia and potentially in other markets where we choose to introduce our services and products, including but not limited to the United States and Europe. This competition may extend to other products and services that we have yet to identify or develop. Many of our competitors may possess considerably greater financial, technical, and operational resources, such as larger research and development teams and established marketing departments. Furthermore, ongoing mergers and acquisitions within our industry could further consolidate resources among our competitors.

If we are unable to effectively protect our intellectual property and trade secrets, it may impair our ability to compete.

Our ability to achieve success is contingent, in part, upon securing and maintaining meaningful intellectual property (IP) protection for our assets.

We rely on patents, trademarks, copyrights, and trade secrets to safeguard our IP. However, there is a risk that these rights may be challenged by others, necessitating enforcement actions. Despite our efforts to protect trade secrets, inadvertent or deliberate disclosure by employees, consultants, contractors or advisors, or independent development by competitors, could compromise their confidentiality. Furthermore, courts outside the United States may offer less robust protection for trade secrets.

Infringement of our IP rights could result in significant litigation costs. Failure to adequately protect trade secrets could lead to competitors offering similar products, eroding our competitive advantage and reducing revenues. Existing IP laws provide limited protection, particularly in some foreign jurisdictions. Consequently, we may be unable to prevent unauthorized third-party use of our IP.

Enforcing claims against third-party infringement could be resource-intensive and unpredictable in outcome, potentially diverting resources and adversely affecting our operating results.

Client and customer complaints regarding our services or products could hurt our business.

We may receive client complaints regarding the quality of products and services acquired from or licensed by us. In the future, we may also receive correspondence from dissatisfied clients or customers seeking reimbursement, with some individuals threatening legal action if reimbursement is not provided. Moreover, we face the potential risk of product liability lawsuits from customers alleging injury due to perceived defects in our products or services and seeking substantial damages.

As participants in the product supply or distribution chain, we bear the risk of being held legally accountable for such issues. Furthermore, these claims may not fall within the coverage of our insurance policies. Litigation arising from such claims could prove costly, divert management attention, increase business expenses, or otherwise have a material adverse impact on our business, financial condition, and results of operations.

Any negative publicity stemming from client or customer dissatisfaction with our products, services, or websites could tarnish our reputation and diminish the value of our brand name. Such repercussions could have a material adverse effect on our business, financial condition, and results of operations.

Computer, website and/or information system breakdowns, as well as cyber security attacks, could affect our business.

Computer, website, and/or information system failures, along with cyber security breaches, have the potential to disrupt our ability to execute our business strategies. These disruptions may result in diminished revenue and/or reputational harm, which could significantly impact on our financial performance and the investments of our shareholders.

Software failures, breakdowns in the operations of our servers and communications systems or the failure to implement system enhancements could harm our business.

Our success depends on the efficient and uninterrupted operation of our BCI systems to be built. A failure of our network or data gathering procedures could impede services. Despite any precautions we may take, damage from fire, floods, hurricanes, power loss, telecommunications failures, computer viruses, break-ins, and similar events at our facilities could result in interruptions of our operations. In addition, any failure by our computer environment to provide our required data communications capacity could result in interruptions in our service.

Additionally, significant delays in the planned delivery of system enhancements, improvements and inadequate performance of the systems once they are completed could damage our reputation and harm our business. Long-term disruptions in the infrastructure caused by events such as natural disasters, the outbreak of war, the escalation of hostilities and acts of terrorism, particularly involving cities in which we have offices, could adversely affect our business, financial condition and results of operations. To the extent that we suffer loss or damage that is not covered by insurance or that exceeds our insurance coverage, or are required to pay higher insurance premiums, our business, financial condition and results of operations could be materially and adversely affected.

We will depend on third-party providers for a reliable Internet infrastructure as well as other aspects of our technology and applications and the failure of these third parties, or the Internet in general, for any reason would significantly impair our ability to conduct our business.

We intend to outsource certain aspects of our online presence, server requirements, technology development, and data management to third-party providers. These providers will host the physical servers, ensuring power and security in multiple data centers across various geographic locations. However, the uninterrupted operation of these servers is contingent upon consistent access to the Internet.

Our business is vulnerable to disruptions that may arise from various factors, including natural disasters, the financial insolvency of third-party providers, or malicious electronic intrusions into the data centers. Moreover, we may face “denial-of-service” attacks, where unidentified individuals overwhelm our computer servers with data requests, leading to performance degradation. Identifying and neutralizing these attacks may pose challenges.

The failure of a third-party facility, interference with our Internet access due to general Internet equipment failure, or malicious cyber-attacks could significantly damage our business.

Our business is dependent on our collaboration with our vendors and suppliers and changes or difficulties in our relationships with our vendors and suppliers may harm our business and financial results.

Our business is dependent on our collaboration with our vendors. Our vendors or suppliers may fail to meet timelines or contractual obligations, which may adversely affect our business. There is no guarantee that we may maintain stable and long-term business relationships with any vendors or suppliers. If our vendors or suppliers refuse to have business with us and if we are not able to replace these business partners on commercially reasonable terms in a timely manner or at all, our business and results of operations and financial condition would be materially and adversely affected.

Our ability to continue to develop and expand our service offerings to address emerging business demands and technological trends, including our ability to sell differentiated services, may impact our future growth. If we are not successful in meeting these business challenges, our business, financial condition and results of operations may be materially and adversely affected.

Our ability to provide tailored BCI services for our clients and customers, incorporating new developments and improvements in technology that translate into productivity improvements for our clients and customers, and our ability to develop products and other new service offerings that meet current and prospective clients’ and customers’ needs, as well as evolving industry standards, are critical to our success. Our competitors may develop services that make our offerings obsolete or may force us to decrease prices on our services, which can result in lower margins. Our ability to develop and implement up-to-date tailored services utilizing new technologies that meet evolving clients’ and customers’ technical specifications and requirements, in a timely or cost-effective manner, will impact our ability to retain and attract customers and our future revenue growth and earnings.

However, there can be no assurance that our services or products can meet prospective clients’ and customers’ needs and evolving industry standards. If we are unable to continue to execute our strategy and develop and expand our service offerings in a highly competitive and rapidly evolving environment, or if we are unable to commercialize such services and products and expand and scale them with sufficient speed and versatility, our growth, productivity objectives and profit margins could be adversely affected.

Technological developments may materially affect the cost and use of technology by our clients or customers. Customers may delay spending under existing contracts and engagements and entering into new contracts while they evaluate new technologies. Such delays can negatively impact our results of operations if the pace and level of spending on new technologies by some of our clients or customers is not sufficient to make up any shortfall from delays from other customers. Our growth strategy focuses on responding to these types of developments by driving innovation that will enable us to expand our services offering. If we do not sufficiently invest in new technology and adapt to industry developments, or evolve and expand our business at sufficient speed and scale, or if we do not make the right strategic investments to respond to these developments and successfully drive innovation, our business, financial condition and results of operations, as well as our services and solutions and our ability to develop and maintain a competitive advantage and to execute on our growth strategy could be adversely affected.

If we do not succeed in attracting new clients for our BCI services, we may not achieve our revenue growth goals.

Obtaining new clients is important for us to achieve rapid revenue growth. Our ability to attract new clients depends on a number of factors, including our ability to offer high quality tailored BCI services at competitive prices, the strength of our competitors and the capabilities of our marketing and sales teams to attract new clients and to sell additional services to existing clients. If we fail to attract new clients or to grow our revenues from existing clients in the future, we may not be able to grow our revenues as quickly as we anticipate or at all.

Our investment costs incurred in developing our BCI system may not yield the intended results and can adversely impact our results of operations.

Our investments in BCI system may not yield the intended results, especially from our research and development. Research and development investments and the consequent adoption of new technology, patents, intellectual property and software products on an ongoing basis are essential elements of our business strategy. This helps us to move up the value chain and be a more relevant technology partner to our customers. While we strive to ensure that our research and development expenditure will yield a sustained customer base and increased revenue, customer buy-in for any new investments in research and development carries with it a possibility of not yielding expected investment results, thereby hampering our growth prospects.

The AI industry faces its own risks and changing and extensive regulations.

Our BCI system utilizes AI algorithms to control external devices. As with most emerging technologies, AI comes with its own set of risks and challenges that could affect its adoption and our business. AI algorithms may be flawed, and the data used could be incomplete or biased. Inappropriate or controversial data practices, by us or by others, could limit the acceptance of our AI-enhanced products and content. Certain AI applications could trigger ethical issues. Should our AI-powered product become controversial due to their effects on human rights, privacy, employment, or other social matters, we risk reputational harm or legal repercussions. In addition, uncertainties regarding the development and application of AI technology present a potential risk. There remains the possibility that AI technology may not progress as anticipated or deliver expected benefits, which could limit the acceptance and popularity of our AI-powered services and products.

The development and adoption of generative AI technologies are still in their early stages, and their commercial viability is uncertain. There is a risk that the demand for connectivity solutions for such technologies may not meet our expectations or that market acceptance may be slower than anticipated. Failure to achieve widespread acceptance and generate significant revenues from generative AI technologies could negatively impact our financial condition and results of operations.

Furthermore, there are uncertainties around the ownership and intellectual property protection of AI generated content (“AIGC”) products. Using AIGC tools could also lead to potential copyright infringement and other legal challenges. If we are unable to secure the needed permissions or licenses for using AI tools—whether because we cannot identify the rights holder or for any other reason—we might infringe on others’ rights which could lead to monetary claims, fines, penalties, or less content for our users.

The regulatory landscape surrounding generative AI technologies is evolving, and there is currently significant uncertainty as to whether governmental authorities, self-regulatory institutions or other regulatory authorities will take additional action to curtail the development or use of generative AI technologies. Moreover, laws, regulations or industry standards that develop in response to generative AI technologies may be burdensome or may prohibit the deployment of generative AI technologies for one or more uses, any of which could result in lower than anticipated demand for our services or products.

The AI technologies we are incorporating into certain of our services or products and processes may present business, legal, and reputational risks.

We plan to use AI technologies in certain of our products and processes. The use of AI has recently become the source of significant media attention and political debate. The introduction of AI technologies, into new or existing offerings may result in new or expanded risks and liabilities, including due to enhanced governmental or regulatory scrutiny, litigation, compliance issues, ethical concerns, confidentiality or security risks, as well as other factors that could adversely affect our business, reputation, and financial results. For example, AI technologies can lead to unintended consequences, including generating content that appears correct but is factually inaccurate, misleading or otherwise flawed, or that results in unintended biases and discriminatory outcomes, which could harm our reputation and business and expose us to liability. We may also not identify inaccurate information, which may expose us to liability. Laws, regulations or industry standards that develop in response to the use of AI may be burdensome or may significantly restrict the deployment of AI, particularly generative AI technologies, in our services or products.

We may use AI technologies from third parties, which may include open-source software. If we are unable to maintain rights to use these AI technologies on commercially reasonable terms, we may be forced to acquire or develop alternate AI technologies, which may limit or delay our ability to provide competitive offerings and may increase our costs. These AI technologies also may incorporate data from third-party sources, which may expose us to risks associated with data rights and protection and may also lead to the unintended consequences of using AI discussed above. The intellectual property ownership and license rights surrounding AI technologies as well as data protection laws related to the use and development of AI are currently not fully addressed by courts or regulators. The use or adoption of AI technologies into our services or products may result in exposure to claims by third parties of copyright infringement or other intellectual property misappropriation, which may require us to pay compensation or license fees to third parties. The evolving legal, regulatory and compliance framework for AI technologies may also impact our ability to protect our own data and intellectual property against infringement.

Our inability to protect our systems and data from continually evolving cybersecurity risks or other technological risks could affect our reputation among our clients and their customers and may expose us to liability.

In conducting our business, we may process and transmit sensitive business information and personal information about our clients, their customers and other parties. We may be a target of malicious third-party attempts to identify and exploit system vulnerabilities and penetrate or bypass our security measures in order to gain unauthorized access to our networks and systems or those of our associated third parties. A successful attempt could lead to the compromise of sensitive, business, personal or confidential information. As a result, we need to proactively employ multiple barriers and controls at different layers of our systems to defend our systems against intrusion and attack and to protect the data we collect. However, we cannot be certain that these measures will continue to successfully counter all current and emerging technology threats that are designed to breach our systems in order to gain access to confidential information.

We also rely on third-party vendors for aspects of our cybersecurity strategy, such as to conduct security reviews and penetration tests, and there can be no assurance that the tests conducted by these vendors, or measures we take in response to such tests, will be effective at identifying or preventing any cybersecurity threat.

Our computer systems and the computer systems of our clients could be in the future subject to breach, and our data protection measures may not prevent unauthorized access. The techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and are often difficult to detect. Threats to our systems and our associated third parties’ systems can derive from human error, fraud or malice on the part of employees or third parties or may result from accidental technological failure. Computer viruses and other malware can be distributed and could infiltrate our systems or those of our associated third parties. In addition, denial of service or other attacks could be launched against us for a variety of purposes, including to interfere with our services or create a diversion for other malicious activities. Our defensive measures may not prevent downtime, unauthorized access or use of sensitive data. Further, while we carefully select third parties with which we associate, we do not control their actions. Any problems experienced by these third parties, including those resulting from breakdowns or other disruptions in the services provided by such parties or cyber-attacks and security breaches, could adversely affect our ability to service our clients or their customers or otherwise conduct our business.

Furthermore, the costs of systems and procedures associated with any protective measures that we are required to take by our clients may increase and could adversely affect our ability to compete effectively. Any failure to adequately enforce or provide these protective measures could result in liability, protracted and costly litigation, governmental and card network intervention and fines and, with respect to misuse of our clients’ information, lost revenue and reputational harm.

We may be subject to privacy, data protection and information security laws in the jurisdictions in which we operate.

Any potential security breaches and cyber-attacks can lead to shutdowns or system interruptions, and potential unauthorized disclosure of sensitive or confidential information which may result in potentially costly litigation. If any person, including any of our employees, penetrates our network security or otherwise mismanages or misappropriates sensitive or confidential client or customer data, we could be subject to significant fines for violating privacy or data protection and consumer laws or lawsuits, legal liability, loss of clients and damage to our reputation. We may also be liable for damages in the case of such a security or network breach that results in an unauthorized or impermissible disclosure of client or customer data and information.

We also believe that we will be subject to additional such laws and regulations in the future that may be stricter than those currently in force. Although we will take extensive efforts to comply with such applicable laws and regulations, failure or perceived failure by us to comply with rapidly evolving privacy and security laws, policies (including our own policies, which we may update from time to time), legal obligations or industry standards may result in governmental enforcement actions, litigation, fines and penalties or adverse publicity, could require us or our clients to change our or their business practices and could cause our clients to lose trust in us.

Risks Related to Our Operation

Uncertainties and risks accompany our strategy to divest our professional education business and STEM education business.

Professional education business and STEM education business have long been drivers of our growth. In 2022 and 2023, revenues generated from our professional education business and STEM education business represented a significant portion of our total revenues. Upon the Divestiture 2024, we were primarily focused on providing IT-focused supplementary STEM courses for young children aged between three and eighteen. Upon the Disposition 2025, we divested our STEM education business. See “Item 4. Information on the Company—A. History and Development of the Company” for more details. In addition, our strategy of Divestiture 2024 and Disposition 2025 is largely based on our management’s assessment of our core strengths, business objectives, resource allocation, and likelihood of success for different business models. However, our judgment could be inaccurate, and we may not achieve the desired strategic and financial benefits from the Divestiture 2024 and the Disposition 2025.

We generated net income in 2023, and incurred net loss in 2024 and 2025. Our historical financial and operating results may not be indicative of future performance, which makes it difficult to predict our future business prospects and financial performance.

We generated net income of RMB10.4 million in 2023, incurred net loss of RMB587.1 million in 2024, and generated net income of RMB1,718.9 million (US$245.8 million) in 2025. In particular, upon the consummation of the Divestiture 2024 and the Disposition 2025, we had divested the professional education business and STEM education business, which represented a strategic shift that has a major effect on our results of operations. Our remaining business after the Divestiture 2024 and the Disposition 2025 has been reclassified as continuing operations. For our continuing operations, we incurred net loss of RMB11.5 million in 2023, RMB13.9 million in 2024, and RMB40.0 million (US$5.7 million) in 2025. We cannot assure you that we will be able to continue to generate positive net income in the future. Rather than relying on our historical operating and financial results to evaluate us, you should consider our business prospects in light of the strategic shift we took and the risks and difficulties we may encounter in this evolving industry. We may not achieve the desired benefits from the strategic shift and we may not be able to successfully address these risks and difficulties, which could significantly harm our business, results of operations and financial condition. Our ability to achieve profitability will depend in large part on our ability to increase our operating margin, either by growing our revenues at a rate faster than our operating expenses increase, or by reducing our operating expenses, especially our selling and marketing expenses, as a percentage of our net revenues. We intend to continue to invest in our branding and marketing activities to attract new students, and improve our online learning modules to enhance student experience. We cannot assure you that we will be successful in these efforts, and we may incur net losses for a period of time in the future.

Our business, financial condition and results of operations may be adversely affected by a downturn in the global or Chinese economy.

Our business may be adversely affected by a downturn in the global or Chinese economy. COVID-19 had a severe and negative impact on the Chinese and the global economy from 2020 through 2022, and the global macroeconomic environment still faces numerous challenges. The growth rate of the Chinese economy has been slowing since 2010 and the Chinese population began to decline in 2022. The Federal Reserve and other central banks outside of China have raised interest rates. The Russia-Ukraine conflict, the Hamas-Israel conflict, the Iran war and the attacks on shipping in the Red Sea have heightened geopolitical tensions across the world. The impact of the Russia-Ukraine conflict on Ukraine food exports has contributed to increases in food prices and thus to inflation more generally. There have also been concerns about the relationship between China and other countries which may potentially have economic effects. In particular, there is significant uncertainty about the future relationship between the United States and China with respect to a wide range of issues including trade policies, treaties, government regulations and tariffs. Economic conditions in China are sensitive to global economic conditions, as well as changes in domestic economic and political policies and the expected or perceived overall economic growth rate in China. It is unclear whether these challenges and uncertainties will be contained or resolved and what effects they may have on the global political and economic conditions in the long term. Therefore, a slowdown in China’s economy or the global economy may lead to a reduction in demand for our services, which could materially and adversely affect our financial condition and results of operations.

Our business depends on the market recognition of our brands, and if we are unable to maintain or enhance our brand recognition, our business, financial condition and results of operations may be materially and adversely affected.

We believe that the market recognition of our brand has significantly contributed to the success of our business and believe that maintaining and enhancing the reputation of our brand is critical to sustaining our competitive advantage. Our ability to maintain and enhance our brand recognition and reputation depends primarily on the perceived effectiveness and quality of our courses as well as the success of our marketing and promotion efforts. As we continue to grow and expand into new course areas, we may not be able to maintain the quality and consistency of our educational services as we did in the past. We have devoted significant resources to promoting our courses and brands, including internet-based marketing and advertising, traditional media advertising, press conferences and program launch events. However, our marketing and promotion efforts may not be successful or may inadvertently negatively impact our brand recognition and reputation. For example, if any governmental authority or competitor publicly alleges that any of our advertisements are misleading, our brand reputation may be adversely impacted. If we are unable to maintain and further enhance our brand recognition and reputation and increase awareness of our courses, or if we incur excessive marketing and promotion expenses, our results of operations may be materially and adversely affected. If we are unable to sustain our brand image, we may not be able to maintain premium tuition fees over our competitors, which may further exacerbate the extent of any adverse effect on our results of operations. Furthermore, any negative publicity relating to our company or our courses and services, regardless of its veracity, could harm our brand image and in turn materially and adversely affect our business and operating results.

Our success depends on the continuing efforts of our senior management team and other key personnel, and our business may be adversely affected if we lose their services.

Our future success depends heavily upon the continuing services of our senior management team. If any member of our senior management team leaves us and we fail to effectively manage a transition to new personnel, or if we fail to attract and retain experienced and passionate instructors, regional managers and other key personnel on acceptable terms, our business, financial conditions and results of operations could be adversely affected. We will need to continue to hire additional personnel, especially qualified instructors and regional managers, as our business grows. A shortage in the supply of personnel with requisite skills or our failure to attract and retain high-quality executives or key personnel could impede our ability to increase revenues from our existing courses, to launch new course offerings and to expand our operations and would have an adverse effect on our business and financial results.

Our business is subject to complex and evolving Chinese laws and regulations regarding cybersecurity, information security, privacy and data protection. Many of these laws and regulations are subject to change and uncertain interpretation, and any failure or perceived failure to comply with these laws and regulations could result in claims, changes to our business practices, negative publicity, legal proceedings, increased cost of operations, or declines in student base, or otherwise harm our business.

Our business generates and processes a large quantity of data. We face risks inherent in handling and protecting large volume of data. In particular, we face a number of challenges relating to data from transactions and other activities on our platforms, including:

We have adopted security policies and measures, including encryption technology, to protect our proprietary data and customer information. However, advances in technology, the expertise of hackers, improper use or sharing of data, new discoveries in the field of cryptography or other events or developments could result in a compromise or breach of the technology that we use to protect confidential information. We may not be able to prevent third parties, especially hackers or other individuals or entities engaging in similar activities, from illegally obtaining such confidential or private information we hold as a result of our customers’ visits to our websites. Such individuals or entities obtaining our customers’ confidential or private information may further engage in various other illegal activities using such information. In addition, we have limited control or influence over the security policies or measures adopted by business partners, including strategic partners or third-party providers of online payment services through which some of our customers may choose to make payment for purchases. Any negative publicity on our websites’ safety or privacy protection mechanisms and policies, and any claims asserted against us or fines imposed upon us as a result of actual or perceived failures, could have a material and adverse effect on our public image, reputation, financial condition and results of operations. We have not experienced breaches of our information security measures in the past. We cannot assure you that such events will not occur in the future. If we give third parties greater access to our technology platform in the future, it may become more challenging for us to ensure the security of our systems. Any compromise of our information security or the information security measures of third-party online payment service providers or other business partners could have a material and adverse effect on our reputation, business, prospects, financial condition and results of operations. Practices regarding the collection, use, storage, transmission and security of personal information by companies operating over the internet and mobile platforms are under increased public scrutiny.

We expect that data security and data protection compliance will receive greater attention and focus from regulators, as well as attract continued or greater public scrutiny and attention going forward, which could increase our compliance costs and subject us to heightened risks and challenges associated with data security and protection. If we are unable to manage these risks, we could become subject to penalties, including fines, suspension of business and revocation of required licenses, and our reputation and results of operations could be materially and adversely affected.

The PRC regulatory and enforcement regime with regard to data security and data protection is evolving and may be subject to different interpretations or significant changes. Moreover, different PRC regulatory bodies, including the Standing Committee of the National People’s Congress, the Ministry of Industry and Information Technology, the Cyberspace Administration of China, the Ministry of Public Security, and the State Administration for Market Regulation have enforced data privacy and protections laws and regulations with varying standards and applications. See “Item 4. Information on the Company-B. Business Overview-Government Regulations-Regulations on Internet Information Security and Privacy Protection.” The following are examples of certain PRC regulatory activities in this area:

Data Security

In November 2016, the Standing Committee of the National People’s Congress promulgated the PRC Cybersecurity Law, which requires, among others, that network operators take security measures to protect the network from unauthorized interference, damage and unauthorized access and prevent data from being divulged, stolen or tampered with. Network operators are also required to collect and use personal information in compliance with the principles of legitimacy, properness and necessity, and strictly within the scope of authorization by the subject of personal information unless otherwise prescribed by laws or regulations. Significant capital, managerial and human resources are required to comply with legal requirements, enhance information security and to address any issues caused by security failures.

In June 2021, the Standing Committee of the National People’s Congress promulgated the Data Security Law, which took effect in September 2021. The Data Security Law, among other things, provides for security review procedures for data-related activities that may affect national security. In December 2021, the Cyberspace Administration of China, together with other authorities, jointly promulgated the Cybersecurity Review Measures, which became effective on February 15, 2022 and replaces its predecessor regulation. Pursuant to the Cybersecurity Review Measures, critical information infrastructure operators that procure internet products and services must be subject to the cybersecurity review if their activities affect or may affect national security. The Cybersecurity Review Measures further stipulates that critical information infrastructure operators or network platform operators that hold personal information of over one million users shall apply with the Cybersecurity Review Office for a cybersecurity review before any initial public offering at a foreign stock exchange. On July 30, 2021, the State Council promulgated the Regulations on Protection of Critical Information Infrastructure, which became effective on September 1, 2021. Pursuant to the Regulations on Protection of Critical Information Infrastructure, critical information infrastructure shall mean any important network facilities or information systems of the important industry or field such as public communication and information service, energy, transportation, water conservation, finance, public services, e-government affairs and national defense science, which may endanger national security, people’s livelihood and public interest in case of damage, function loss or data leakage. In addition, the administration departments of each critical industry and sector shall be responsible to formulate eligibility criteria and determine the critical information infrastructure operator in the respective industry or sector. The operators shall be informed about the final determination as to whether they are categorized as critical information infrastructure operators. As of the date of this annual report, no detailed rules or implementation rules have been issued by any authority and we have not been informed that we are a critical information infrastructure operator by any government authorities. Furthermore, the exact scope of “critical information infrastructure operators” under the current regulatory regime remains unclear, and the PRC government authorities may have wide discretion in the interpretation and enforcement of the applicable laws. Therefore, it is uncertain whether we would be deemed to be a critical information infrastructure operator under laws of mainland China. If we are deemed to be a critical information infrastructure operator under the cybersecurity laws and regulations of mainland China, we may be subject to obligations in addition to what we have fulfilled under the cybersecurity laws and regulations of mainland China, and we may be subject to cybersecurity review when purchasing internet products and services or engaging in data processing activities.

Network Data Regulations were promulgated by the State Council on September 24, 2024, and became effective as of January 1, 2025. The Network Data Regulations restates and further specifies the legal requirements for personal information, important data, cross-border data transfer, network platform services, and data security. Among others, network data handlers engaging in data processing activities that affect or may affect national security must be subject to network data security review by the relevant cyberspace administration of the PRC. Any failure to comply with such requirements may subject us to, among others, suspension of services, fines, revoking relevant business permits or business licenses and penalties.

Personal Information and Privacy

The Civil Code promulgated in 2020 provides specific provisions regarding the protection of personal information. The Anti-monopoly Guidelines for the Platform Economy Sector published by the Anti-monopoly Committee of the State Council, effective on February 7, 2021, prohibits collection of user information through coercive means by online platforms operators.

In August 2021, the Standing Committee of the National People’s Congress promulgated the Personal Information Protection Law, which integrates the scattered rules with respect to personal information rights and privacy protection and took effect on November 1, 2021. We update our privacy policies from time to time to meet the latest regulatory requirements of PRC government authorities and adopt technical measures to protect data and ensure cybersecurity in a systematic way. Nonetheless, the Personal Information Protection Law elevates the protection requirements for personal information processing, and many specific requirements of this law remain to be clarified by the Cyberspace Administration of China, other regulatory authorities, and courts in practice. We may be required to make further adjustments to our business practices to comply with the personal information protection laws and regulations.

On July 7, 2022, the CAC promulgated the Security Assessment Measures which took effect on September 1, 2022. Pursuant to the Security Assessment Measures, a data processor shall apply to competent authorities for security assessment prior to transferring any data abroad if the transfer involves (i) important data; (ii) personal information transferred overseas by a critical information infrastructure operator and a data processor that has processed personal information of more than one million individuals; (iii) personal information transferred overseas by a data processor who has already provided personal information of 100,000 persons or sensitive personal information of 10,000 persons overseas since January 1 of the previous year; or (iv) other circumstances as requested by the CAC.

On March 22, 2024, CAC published the Provisions on Promoting and Regulating Cross-border Data Flows, which took effective on the same date. The provisions provide several exemptions from undergoing data security assessment, obtaining personal information protection certification or entering into standard contract for outbound transfer of personal information for businesses. These exemptions include, among others, the scenario where a data processor, other than a CIIO, has cumulatively transferred overseas personal information, excluding sensitive personal information, of fewer than 100,000 individuals since January 1 of the current year. A data processor intending to implement outbound data transfer under the following circumstances should apply for security assessment to the CAC: (i) a CIIO intending to provide personal information or important data abroad; or (ii) a data processor that is not a CIIO intending to provide important data abroad, or has since January 1 of the current year cumulatively provided personal information (excluding sensitive personal information) of over one million individuals, or sensitive personal information of over 10,000 individuals, abroad. The provisions also explicitly state that data processors are not required to conduct data security assessment for cross-border transfer of important data if the data has not been notified or published as important data by relevant departments or regions. In addition, for any data processors other than the CIIOs who have since January 1 of the current year cumulatively provided personal information (excluding sensitive personal information) of over 100,000 and less than one million individuals, or sensitive personal information of less than 10,000 individuals abroad, should execute a standard contract for outbound transfer of personal information with the recipient abroad or pass the certification for personal information protection.

Furthermore, on March 22, 2024, the CAC promulgated the Guide to Applications for Security Assessment of Outbound Data Transfers (Second Edition), which provides that any of the following circumstances is deemed as the act of outbound data transfers: (i) a data processor transfers abroad the data collected and generated from its operation within the territory of China; (ii) the data collected and generated by the data processor is stored within the territory of China, allowing inquiry, retrieval, download and export by overseas agencies, organizations or individuals; and (iii) other data handling activities such as handling of the personal information of domestic natural persons abroad under the circumstances specified in Paragraph 2 of Article 3 of the Personal Information Protection Law.

On 12 February 2025, the CAC promulgated the Administrative Measures for Personal Information Protection Compliance Audits, or the Audits Administrative Measures, which will become effective on May 1, 2025. The Audits Administrative Measures provided that any personal information handler handling the personal information of more than 10 million people shall carry out the personal information protection compliance audits at least once every two years. For a personal information handler who falls under any of the following circumstances, the cyberspace administration of China and other authorities performing responsibilities of personal information protection (hereinafter collectively referred to as the “protection authorities” in short) may require the personal information handler to entrust a specialized agency with the compliance audit of its personal information handling activities: (i) Where its personal information handling activities involve relatively large risks such as serious impact on personal rights and interests or serious lack of security measures; (ii) Where its personal information handling activities may infringe upon the rights and interests of many people; or (iii) Where a personal information security incident occurs, resulting in the divulgence, tampering with, loss or damage of the personal information of more than one million people or the sensitive personal information of more than 100,000 people. For the same personal information security incident or risk, it is not allowed to repeatedly require the personal information handler concerned to entrust a specialized agency with the personal information protection compliance audits.

In general, compliance with the existing laws and regulations of mainland China, as well as additional laws and regulations that PRC regulatory bodies may enact in the future, related to data security and personal information protection, may be costly and result in additional expenses to us, and subject us to negative publicity, which could harm our reputation and business operations. It may place restrictions on the conduct of our business and the manner in which we interact with our students and/or their parents. Any failure to comply with applicable regulations could also result in regulatory enforcement actions against us, and misuse of or failure to secure personal information could also result in violation of data privacy laws and regulations, proceedings against us by governmental authorities or other authorities or damage to our reputation and credibility and could have a negative impact on revenues and profits. Significant capital and other resources may be required to protect against information security breaches or to alleviate problems caused by such breaches or to comply with our privacy policies or privacy-related legal obligations. The resources required may increase over time as the methods used by hackers and others engaged in online criminal activities are increasingly sophisticated and constantly evolving. Any failure or perceived failure by us to prevent information security breaches or to comply with privacy policies or privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of personally identifiable information or other data, could cause our students and/or their parents to lose trust in us and could expose us to legal claims. There are also uncertainties with respect to how such laws and regulations will be implemented and interpreted in practice.

Our strategy of investments and acquiring complementary businesses and assets may fail.

As part of our business strategy, we have pursued, and may continue to pursue, selective strategic investments and acquisitions of businesses and assets that complement our existing business. Investments and acquisitions involve uncertainties and risks, including:

Any failure to address these risks successfully may have a material and adverse effect on our financial condition and results of operations. Investments and acquisitions may require a significant amount of capital investment, which would decrease the amount of cash available for working capital or capital expenditures. In addition, if we use our equity securities to pay for investments and acquisitions, we may dilute the value of our ADSs and the underlying ordinary shares. If we borrow funds to finance investments and acquisitions, such debt instruments may contain restrictive covenants that could, among other things, restrict us from distributing dividends. Moreover, acquisitions may also generate significant amortization expenses related to intangible assets. We may also incur impairment charges to earnings for investments and acquired businesses and assets which are determined to be impaired, and recognize the proportional share of the net losses of the investees to the extent of the amount of the investments for the equity method investments.

Our historical financial and operating results may not be indicative of future performance.

Although we commenced operations in 2002, our significant business growth and expansion began in 2009. Our previous focus had been providing professional education services since the inception of our business. In 2015, we launched STEM education courses targeting young children aged between three and eighteen to supplement our offerings. In December 2023, we entered into an equity transfer agreement to dispose of our professional education business. The Divestiture 2024 had been closed in 2024. In 2025, we completed the Disposition 2025 and ended our STEM education services. See “Item 4. Information on the Company-A. History and Development of the Company” for more details.

Our business and our prospects must be evaluated in light of the risks and uncertainties encountered by companies at a comparable stage of development. Furthermore, our results of operations may vary from period to period in response to a variety of other factors, including general economic conditions and regulations, government actions pertaining to our business sector in China, our ability to control cost of revenues and operating expenses and non-recurring charges incurred in connection with acquisitions, divestitures or other extraordinary transactions or under unexpected circumstances. Due to the above factors, some of which are beyond our control, our historical financial and operating results may not be indicative of our future performance, and you should not rely on our past results or our historic growth rates as indicators of our future performance.

We have limited insurance coverage for our operations in China.

Insurance companies in China currently do not offer as extensive an array of insurance products as insurance companies do in more developed economies. We have determined that the risks of disruption or liability from our business, the loss or damage to our fixed assets, including our equipment and office furniture, the cost of insuring for these risks, and the difficulties associated with acquiring such insurance on commercially reasonable terms render it commercially impractical for us to have such insurance. We do not have any business interruption, litigation or property insurance coverage for our operations in mainland China. Any uninsured occurrence of personal injury, loss or damage to fixed assets, or litigation or business disruption may result in the incurrence of substantial costs and the diversion of resources, which could have an adverse effect on our operating results.

We have granted share-based awards and may grant more share-based awards in the future, which may reduce our net income.

In February 2014, we adopted a 2014 share incentive plan with a term of ten years. In February 2024, we adopted a 2024 share incentive plan, or the 2024 Plan. Pursuant to the share incentive plans, we issued, and may continue to issue, options, restricted shares and restricted share units to our qualified employees, directors and consultants on a regular basis. The maximum aggregate number of shares which may be issued pursuant to all awards under the 2024 Plan, or the Award Pool, is 3,500,000, provided that the shares reserved in the Award Pool shall be increased on the first day of each calendar year, commencing on January 1, 2025, if the unissued shares reserved in the Award Pool on such day account for less than 2% of the total number of shares issued and outstanding on a fully diluted basis on December 31 of the immediately preceding calendar year, as a result of which increase the shares unissued and reserved in the Award Pool immediately after each such increase shall equal 2% of the total number of shares issued and outstanding on a fully diluted basis on December 31 of the immediately preceding calendar year. As a result of grants and potential future grants under the share incentive plans, we have incurred and will continue to incur share-based compensation expenses. As of December 31, 2025, the unrecognized compensation cost related to unvested options and non-vested shares amounted to RMB nil million (US$ nil million), respectively, which will be recognized over a weighted average period of nil year, respectively. Expenses associated with share-based compensation awards granted under our share plan may reduce our future net income. However, if we limit the size of grants under our share plan to minimize share-based compensation expenses, we may not be able to attract or retain key personnel.

Risks Related to Our Corporate Structure

We may rely on dividends and other distributions on equity paid by our subsidiaries in mainland China to fund any cash and financing requirements we may have. To the extent cash or assets in the business is in mainland China or Hong Kong or a mainland China or Hong Kong entity, the funds or assets may not be available to fund operations or for other use outside of mainland China or Hong Kong as we, our subsidiaries are subject to certain restrictions with respect to paying dividends or otherwise transferring any of their cash or assets offshore, and any such restriction could have a material and adverse effect on our ability to conduct our business

We are a holding company, and we may rely on dividends and other distributions on equity paid by our subsidiaries in mainland China for our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders and service any debt we may incur. If these subsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other distributions to us. In addition, to the extent cash or assets in the business is in mainland China or Hong Kong or a mainland China or Hong Kong entity, the funds or assets may not be available to fund operations or for other use outside of mainland China or Hong Kong as we, our subsidiaries are subject to certain restrictions with respect to paying dividends or otherwise transferring any of their cash or assets offshore, and there is no assurance the PRC government will not intervene in or impose restrictions on the ability of us, our subsidiaries. Also see “Item 5. Operating and Financial Review and Prospects-B. Liquidity and Capital Resources- Holding Company Structure.”

Under laws and regulations of mainland China, our wholly foreign-owned subsidiaries in mainland China may pay dividends only out of their respective accumulated profits as determined in accordance with accounting standards and regulations of mainland China. In addition, a mainland China enterprise is required to set aside at least 10% of its accumulated after-tax profits each year, if any, to fund certain statutory reserve funds, until the aggregate amount of such fund reaches 50% of its registered capital.

Any limitation on the ability of our subsidiaries in mainland China 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. See also “-Risks Related to Doing Business in China-We are affected by the PRC Enterprise Income Tax Law, and we may be classified as a mainland China ‘resident enterprise’ for mainland China enterprise income tax purposes. Such classification would likely result in unfavorable tax consequences to us and our non-mainland China shareholders and have a material adverse effect on our results of operations and the value of your investment.”

Risks Related to Doing Business in China

Uncertainties in the interpretation and enforcement of laws and regulations of mainland China could limit the legal protections available to you and us.

The legal system of mainland China is based on written statutes. Unlike common law systems, it is a system in which legal cases have limited value as precedents. In the late 1970s, the government of mainland China began to promulgate a comprehensive system of laws and regulations governing economic matters. The overall effect of legislation over the past three decades has significantly increased the protections afforded to various forms of foreign or private-sector investment in mainland China. Our subsidiary in mainland China are subject to various laws and regulations of mainland China generally applicable to companies in mainland China. However, since these laws and regulations are relatively new and the legal system of mainland China continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involve uncertainties.

From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. However, since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory 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. Furthermore, the legal system of mainland China is based in part on government policies and internal rules (some of which are not published in a timely manner or at all) some of which may have retroactive effect. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation. Such uncertainties, including uncertainty over the scope and effect of our contractual, property (including intellectual property) and procedural rights, and any failure to respond to changes in the regulatory environment in mainland China could materially and adversely affect our business and impede our ability to continue our operations.

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

Substantially all of our business operations are conducted in mainland 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 and by continued economic growth in China as a whole.

China’s 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 government of mainland China has implemented measures since the late 1970s 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 mainland China is still owned by the government. In addition, the government of mainland China continues to play a significant role in regulating industry development by imposing industrial policies, and has significant authority to exert influence on the ability of a China-based company, such as us, to conduct its business. Therefore, investors of our company and our business face potential uncertainty from China. The government of mainland China 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 China’s 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. Some of the government 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. Any stimulus measures designed to boost the Chinese economy may contribute to higher inflation, which could adversely affect our results of operations and financial condition.

COVID-19 had a severe and negative impact on the Chinese and the global economy from 2020 through 2022, and the global macroeconomic environment still faces numerous challenges. The growth rate of the Chinese economy has been slowing since 2010 and the Chinese population began to decline in 2022. The Federal Reserve and other central banks outside of China have raised interest rates. The Russia-Ukraine conflict, the Hamas-Israel conflict and the attacks on shipping in the Red Sea have heightened geopolitical tensions across the world. The impact of the Russia-Ukraine conflict on Ukraine food exports has contributed to increases in food prices and thus to inflation more generally. There have also been concerns about the relationship between China and other countries which may potentially have economic effects. In particular, there is significant uncertainty about the future relationship between the United States and China with respect to a wide range of issues including trade policies, treaties, government regulations and tariffs. Economic conditions in China are sensitive to global economic conditions, as well as changes in domestic economic and political policies and the expected or perceived overall economic growth rate in China. It is unclear whether these challenges and uncertainties will be contained or resolved and what effects they may have on the global political and economic conditions in the long term. A decline in the economic prospects of IT and other professionals could alter the spending priorities of the parents of our current and prospective students. We cannot assure you that if the macroeconomic environment deteriorates, parents will continue to spend on STEM education for their children. Therefore, a slowdown in China’s economy or the global economy may lead to a reduction in demand for our education services, which could materially and adversely affect our financial condition and results of operations.

The legal system in China embodies uncertainties which could limit the legal protections available to us or impose additional requirements and obligations on our business, and PRC laws, rules, and regulations can evolve quickly, which may materially and adversely affect our business, financial condition, and results of operations.

We conduct our business primarily through our PRC subsidiary. Our operations in China are governed by PRC laws and regulations. The legal system in China is a civil law system based on statutes. Unlike common law systems, it is a system in which decided legal cases may be of reference value but have less precedential value. The legal system in China evolves rapidly with little advance notice, and the interpretations of laws, regulations, and rules may contain uncertainties. These uncertainties could limit the legal protections available to us. In addition, we cannot predict the effect of future developments in the PRC legal system, changes to existing laws or the interpretation or enforcement thereof, or the preemption of local regulations by national laws. Such unpredictability towards our contractual, property (including intellectual property) and procedural rights could adversely affect our business and impede our ability to continue our operations. Furthermore, any litigation may be protracted and result in substantial costs and diversion of resources and management attention.

In addition, new laws and regulations may be enacted from time to time, and PRC laws, rules, and regulations can evolve quickly with little advance notice. Uncertainties exist regarding the interpretation and implementation of current and any future PRC laws and regulations applicable to our businesses. In particular, the PRC government authorities may continue to promulgate new laws, regulations, rules and guidelines with respect to a wide range of issues, such as anti-unfair competition and antitrust, privacy and data protection, intellectual property, and other matters, which may result in additional obligations imposed on us. Compliance with these laws, regulations, rules, guidelines, and implementations may be costly, and any incompliance or associated inquiries, investigations, and other governmental actions may divert significant management time and attention and our financial resources, bring negative publicity, subject us to liabilities or administrative penalties, or materially and adversely affect our business, financial condition, and results of operations.

The PRC government’s significant oversight and discretion over our business operation could result in a material adverse change in our operations and the value of our ADSs. In addition, any actions by the Chinese 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 securities to investors and cause the value of such securities to significantly decline or be worthless.

We conduct our business primarily in mainland China. Our operations in mainland China are governed by laws and regulations of mainland China. The PRC government has significant oversight and discretion over the conduct of our business, and may intervene or influence our operations. The PRC government has published new policies that significantly affected certain industries and we cannot rule out the possibility that it will in the future release regulations or policies that directly or indirectly affect our industry or require us to seek additional permission to continue our operations, In addition, the PRC government may intervene or influence our operations at any time by adopting new laws and regulations, which could result in a material adverse change in our operation, and our ordinary shares and ADSs may decline in value or become worthless.

Also, the PRC government has indicated an intent to exert more oversight and control over securities offerings that are conducted overseas and/or foreign investment in China-based issuers. For example, on July 6, 2021, the PRC government authorities made public the Opinions on Strictly Scrutinizing Illegal Securities Activities in Accordance with the Law. These opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based companies and proposed to take effective measures, such as promoting the construction of regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies. On December 28, 2021, the NDRC, the MIIT, and several other administrations jointly published the Cybersecurity Review Measures, effective on February 15, 2022, which required that, among others, operators of “critical information infrastructure” purchasing network products and services or network platform operators carrying out data processing activities, that affect or may affect national security, shall apply with the Cybersecurity Review Office for a cybersecurity review. In addition, a network platform operator holding over one million users’ personal information shall apply with the Cybersecurity Review Office for a cybersecurity review before any public offering at a foreign stock exchange. Network Data Regulations were promulgated by the State Council on September 24, 2024, and became effective as of January 1, 2025. The Network Data Regulations restates and further specifies the legal requirements for personal information, important data, cross-border data transfer, network platform services, and data security. Among others, network data handlers engaging in data processing activities that affect or may affect national security must be subject to network data security review by the relevant cyberspace administration of the PRC. Any failure to comply with such requirements may subject us to, among others, suspension of services, fines, revoking relevant business permits or business licenses and penalties. On February 17, 2023, the CSRC released the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies and five supporting guidelines, or, collectively, the Filing Rules, which took effect on March 31, 2023. According to the Filing Rules, domestic companies in mainland China that directly or indirectly offer or list their securities in an overseas market are required to file with the CSRC. In addition, an overseas listed company must also submit the filing with respect to its follow-on offerings, issuance of convertible corporate bonds and exchangeable bonds, and other equivalent offering activities, within a specific time frame requested under the Filing Rules. On February 17, 2023, the CSRC also held a press conference for the release of the Filing Rules, which, among others, clarified that the companies in mainland China that have been listed overseas before March 31, 2023 are not required to file with the CSRC immediately, but these companies should complete filing with the CSRC for their future equity and equity-linked securities financing activities in accordance with the Filing Rules. Based on the foregoing, we are not required to complete filing with the CSRC for our prior offshore offerings and listing at this stage, but we will be subject to the filing requirements for our future equity and equity-linked securities offerings, if any, under the Filing Rules. However, as the Filing Rules was recently promulgated, it remains uncertain as to its interpretation, implementation and enforcement. If the CSRC, CAC or other regulatory agencies later promulgate new rules or explanations requiring that we obtain their approvals for our future offshore securities offerings, we may be unable to obtain such approvals in a timely manner, or at all, and such approvals may be rescinded even if obtained. Any such circumstance could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.

Our ADSs will be prohibited from trading in the United States under the Holding Foreign Companies Accountable Act, or the HFCA Act, in the future if the PCAOB is unable to inspect or investigate completely our auditors. The delisting of our ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment.

Pursuant to the Holding Foreign Companies Accountable Act, if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspections by the PCAOB for two consecutive years, the SEC will prohibit our shares or the ADSs from being traded on a national securities exchange or in the over-the-counter trading market in the United States. On December 16, 2021, the PCAOB issued a report to notify the SEC of its determination that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong. On December 15, 2022, the PCAOB removed mainland China and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered public accounting firms.

Our current auditor, Assentsure PAC, the independent registered public accounting firm that issues the audit report included elsewhere in this annual report, as an auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. Assentsure PAC, whose audit report is included in this annual report on Form 20-F, is headquartered in New York, New York, and was not included in the list of PCAOB Identified Firms in the PCAOB Determination Report issued in December 2021.

Our ability to retain an auditor subject to PCAOB inspection and investigation, including but not limited to inspection of the audit working papers related to us, may depend on the relevant positions of U.S. and Chinese regulators. Assentsure PAC’s audit working papers related to us are located in mainland China. With respect to audits of companies with operations in mainland China, such as us, there are uncertainties about the ability of our auditor to fully cooperate with a request by the PCAOB for audit working papers in mainland China without the approval of Chinese authorities. Each year, the PCAOB will determine whether it can inspect and investigate completely audit firms in mainland China and Hong Kong, among other jurisdictions. Whether the PCAOB will be able to conduct inspections of our auditor, including but not limited to inspection of the audit working papers related to us, in the future is subject to substantial uncertainty and depends on a number of factors out of our, and our auditor’s, control. If the PCAOB determines in the future that it no longer has full access to inspect and investigate completely the auditors we retain to issue an audit report on our financial statements filed with the Securities and Exchange Commission, we would be identified as a Commission-Identified Issuer following the filing of the annual report on Form 20-F for the relevant fiscal year. In accordance with the HFCAA, our securities would be prohibited from being traded on a national securities exchange or in the over-the-counter trading market in the United States if we are identified as a Commission-Identified Issuer for two consecutive years in the future. If our shares and ADSs are prohibited from trading in the United States, there is no certainty that we will be able to list on a non-U.S. exchange or that a market for our shares will develop outside of the United States. A prohibition of being able to trade in the United States would substantially impair your ability to sell or purchase our ADSs when you wish to do so, and the risk and uncertainty associated with delisting would have a negative impact on the price of our ADSs. 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.

We are affected by the PRC Enterprise Income Tax Law, and we may be classified as a mainland China “resident enterprise” for mainland China enterprise income tax purposes. Such classification would likely result in unfavorable tax consequences to us and our non-mainland China shareholders and have a material adverse effect on our results of operations and the value of your investment.

Under the PRC Enterprise Income Tax Law, or the EIT Law, that became effective on January 1, 2008, as amended on February 24, 2017 and December 29, 2018, an enterprise established outside mainland China with “de facto management bodies” within mainland China is considered a mainland China “resident enterprise” for mainland China enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income. Under the Implementation Rules to the EIT Law, a “de facto management body” is defined as a body that has material and overall management and control over the manufacturing and business operations, personnel and human resources, finances and properties of an enterprise. In addition, a circular, known as Circular 82, issued in April 2009, as amended in January 2014 and December 2017, by the State Administration of Taxation, or the SAT, specifies that certain offshore incorporated enterprises controlled by mainland China enterprises or mainland China enterprise groups will be classified as mainland China resident enterprises if the following are located or resident in mainland China: senior management personnel and departments that are responsible for daily production, operation and management; financial and personnel decision making bodies; key properties, accounting books, company seals, and minutes of board meetings and shareholders’ meetings; and half or more of the senior management or directors having voting rights. Circular 82 also clarified that dividends and other income paid by such “resident enterprises” will be considered to be mainland China source income, subject to mainland China withholding tax, currently at a rate of 10%, when recognized by shareholders that are non-mainland China resident enterprises. Further to Circular 82, the State Administration of Taxation issued a bulletin, known as Bulletin 45, which took effect on September 1, 2011, to provide more guidance on the implementation of Circular 82 and clarify the reporting and filing obligations of such “Chinese-controlled offshore-incorporated resident enterprises.” Bulletin 45 provides procedures and administrative details for the determination of mainland China resident enterprise status and administration on post-determination matters. Although both Circular 82 and Bulletin 45 only apply to offshore enterprises controlled by mainland China enterprises and there are currently no further rules or precedents governing the procedures and specific criteria for determining the “de facto management body” for a company like ours, or controlled by mainland China enterprise groups, not those controlled by mainland China individuals or foreign individuals like us, the determining criteria set forth in Circular 82 and Bulletin 45 may reflect the general position of State Administration of Taxation on how the “de facto management body” test should be applied in determining the tax resident enterprise status of offshore enterprises, regardless of whether they are controlled by mainland China enterprises, mainland China enterprise groups or by mainland China or foreign individuals.

We do not believe that TCTM meets all of the conditions above and thus we do not believe that TCTM a mainland China resident enterprise, despite the fact that all of the members of our management team as well as the management team of our offshore holding company are located in mainland China. However, if the PRC tax authorities determine that VisionSys AI Inc (formerly known as TCTM Kids IT Education Inc. and Tarena International, Inc.) is a mainland China resident enterprise for mainland China enterprise income tax purposes, a number of unfavorable mainland China tax consequences could follow. First, we will be subject to the uniform 25% enterprise income tax on our worldwide income, which could materially reduce our net income. In addition, we will also be subject to mainland China enterprise income tax reporting obligations. Second, although dividends paid by one mainland China tax resident to another mainland China tax resident should qualify as “tax-exempt income” under the EIT Law, we cannot assure you that such dividends will not be subject to a 10% withholding tax, as the PRC foreign exchange control authorities, which enforce the withholding tax on dividends, and the PRC tax authorities, have not yet issued guidance with respect to the processing of outbound remittances to entities that are not controlled by any mainland China enterprise or enterprise group and treated as resident enterprises for mainland China enterprise income tax purposes.

Finally, dividends we pay to our non-mainland China enterprise shareholders and gains derived by our non-mainland China shareholders from the sale of our shares may become subject to a 10% mainland China withholding tax. In addition, future guidance may extend the withholding tax to dividends we pay to our non-mainland China individual shareholders and gains derived by such shareholders from transferring our shares. In addition to the uncertainty in how the new “resident enterprise” classification could apply, it is also possible that the rules may change in the future, possibly with retroactive effect. If mainland China income tax were imposed on gains realized through the transfer of our ADSs or ordinary shares or on dividends paid to our non-resident investors, the value of the investment in our ADSs or ordinary shares may be materially and adversely affected. Furthermore, our ADS holders whose jurisdictions of residence have tax treaties or arrangements with mainland China may not qualify for benefits under such tax treaties

We face uncertainty regarding the mainland China tax reporting obligations and consequences for certain indirect transfers of our operating company’s equity interests. Enhanced scrutiny over acquisition transactions by the PRC tax authorities may have a negative impact on potential acquisitions we may pursue in the future.

In connection with the EIT Law, the Ministry of Finance and the State Administration of Taxation jointly issued Circular 59 in April 2009, which became effective retroactively on January 1, 2008. On February 3, 2015, the State Administration of Taxation issued Public Notice 2015 No.7, or Public Notice 7. Under Public Notice 7, where a non-resident enterprise conducts an “indirect transfer” by transferring the equity interests in a mainland China “resident enterprise” or other taxable assets indirectly by disposing of the equity interests in an overseas holding company, the non-resident enterprise, being the transferor, may be subject to mainland China enterprise income tax, if the indirect transfer is considered to be an abusive use of company structure without reasonable commercial purposes. In addition, Public Notice 7 provides clear criteria on how to assess reasonable commercial purposes and 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 make a self-assessment as to whether the transaction should be subject to mainland China taxes and to file or withhold the mainland China taxes accordingly. Where 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 become at risk of being taxed under Public Notice 7 and may be required to expend valuable resources to comply with Public Notice 7 or to establish that we should not be taxed under Public Notice 7, which may have a material adverse effect on our financial condition and results of operations or the non-resident investors’ investments in us.

In October 2017, the State Administration of Taxation promulgated the Announcement of the State Administration of Taxation on Matters Concerning Withholding of Income Tax of Non-resident Enterprises at Source, or Circular 37, which provides certain changes to the current withholding regime, amends certain provisions in Public Notice 7. For example, Circular 37 requires that the transferor shall declare to the competent tax authority for payment of tax within seven (7) days after the tax payment obligation comes into being if the withholding agent fails to withhold the tax due or withhold the tax due in full. However, according to Circular 37, if the withholding agent fails to withhold and remit the income tax payable, or is unable to perform its obligation in this regard, as long as the non-resident enterprise that earns the income 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.

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 mainland China resident enterprise by a non-resident enterprise. The PRC tax authorities have the discretion under Circular 59, Public Notice 7 and Circular 37 to make adjustments to the taxable capital gains based on the difference between the fair value of the equity interests transferred and the cost of investment. We may pursue acquisitions in the future that may involve complex corporate structures. If we are considered a non-resident enterprise under the EIT Law and if the PRC tax authorities make adjustments under Circular 59, Public Notice 7 or Circular 37, our income tax costs associated with such potential acquisitions will be increased, which may have an adverse effect on our financial condition and results of operations.

In addition, the State Administration of Taxation promulgated Administrative Measures on the General Anti-Avoidance Rule (Trial) on December 12, 2014, which shows the authority’s intention to fight against any tax avoidance scheme that is adopted to obtain unwarranted tax benefit without reasonable commercial purpose. A press release, made by the State Administration of Taxation to clarify certain issues relating to the application of this set of measures, stated that the measures may be applicable if any general tax-avoidance scheme exists in the offshore indirect transfer of equity interests. Since it is unclear how this set of measures, and any future implementation rules thereof, will be interpreted, amended and implemented by the governmental authorities, we cannot predict how these regulations will affect our business operations, future acquisitions or strategy.

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

The Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies in 2006 and amended in 2009, require an overseas special purpose vehicle formed for listing purposes through acquisitions of mainland China domestic companies and controlled by mainland China persons or entities 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. The interpretation and application of the regulations remain unclear, and our offshore 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 offshore 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 mainland China, restrictions or limitations on our ability to pay dividends outside mainland China, and other forms of sanctions that may materially and adversely affect our business, financial condition, and results of operations.

On July 6, 2021, the PRC government authorities issued Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with the Law. These opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based companies and proposed to take effective measures, such as promoting the construction of relevant regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies. As a follow-up, on February 17, 2023, CSRC released the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies, or the Overseas Listing Regulations, and five relevant guidelines, which became effective on March 31, 2023.

Pursuant to the Overseas Listing Regulations, companies in mainland China that directly or indirectly offer or list their securities in an overseas market must file with the CSRC within three business days after submitting their listing application documents to the regulator in the place of the intended listing. The Overseas Listing Regulations also provides that a company in mainland China must file with the CSRC within three business days after completion of its follow-on offering of securities after it is listed in an overseas market. If the company fails to complete the filing procedure or conceals any material fact or falsifies any major content in its filing documents, it 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. According to the Notice on Administration of the Filing of Overseas Offering and Listing by Domestic Companies issued by the CSRC on February 17, 2023, the companies in mainland China that have been listed overseas before March 31, 2023 are not required to file with the CSRC in connection with the historical offerings, but these companies are required to fulfill filing obligations with the CSRC in connection with their additional capital raising activities in accordance with the Overseas Listing Regulations. Based on the foregoing, we are not required to complete filing with the CSRC for our historical offerings, but may be subject to the filing requirements for our future capital raising activities, if any, under the Overseas Listing Regulations. As the Overseas Listing Regulations was newly promulgated, the interpretation, application and enforcement of the Overseas Listing Regulations remain uncertain. There remain substantial uncertainties with respect to how the CSRC filing procedures under the Overseas Listing Regulations would be applied to, and implicate, the procedures, timetables and outcomes of our future offerings or other capital raising activities. For more details of the Overseas Listing Regulations, please refer to “Item 4. Information on the Company- B. Business Overview- Government Regulations-Regulations Relating to Overseas Listing and M&A.”

On February 24, 2023, the CSRC, jointly with some other governmental authorities, published the Provisions on Strengthening Confidentiality and Archives Management of Overseas Securities Issuance and Listing by Domestic Enterprises, which became effective on March 31, 2023. Pursuant to the provisions, China-based companies that offer and list securities in overseas markets shall establish a confidentiality and archives system. These China-based companies shall obtain approval from the authorities and file with the confidential administration authorities, either by itself or its offshore listing entity, when providing or publicly filing documents and materials related to state secrets or secrets of the governmental authorities to the relevant securities companies, securities service institutions or offshore regulatory authorities. In addition, these companies shall complete relevant procedures if the documents or materials filed may adversely affect national security or public interests once publicly disclosed, or if these companies provide accounting files or copies to relevant securities companies, securities service institutions, overseas regulators and individuals.

Pursuant to the 2024 Negative List, if a domestic company engaging in the prohibited business stipulated in the 2024 Negative List seeks an overseas offering and listing, it shall obtain the approval from the competent governmental authorities. Moreover, the foreign investors of the company shall not be involved in the company’s operation and management, and their shareholding percentage shall be subject, mutatis mutandis, to the regulations on the domestic securities investments by foreign investors. There remain substantial uncertainties as to the interpretation and implementation of these new requirements, and it is unclear as to whether and to what extent listed companies like us will be subject to these new requirements. If we are required to comply with these requirements and fail to do so on a timely basis, if at all, our business operations, financial condition and business prospects may be adversely and materially affected.

In addition, 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, including the cybersecurity review under the Cybersecurity Review Measures is required for our offshore 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 offshore 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 authorization for our offshore offerings. These regulatory authorities may impose fines and penalties on our operations in mainland China, limit our ability to pay dividends outside mainland China, limit our operating privileges in mainland China, delay or restrict the repatriation of the proceeds from our offshore offerings into mainland 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 securities. The CSRC or other PRC regulatory authorities may also take actions requiring us, or making it advisable for us, to halt our offshore offerings before settlement and delivery of the shares offered. Consequently, if investors engage in market trading or other activities in anticipation of and prior to settlement and delivery, they do so at the risk that settlement and delivery may not occur. In addition, if the CSRC or other regulatory authorities later promulgate new rules or explanations requiring that we obtain their approvals or accomplish the required filing or other regulatory procedures for our prior offshore offerings, we may be unable to obtain a waiver of such approval requirements, if and when procedures are established to obtain such a waiver. Any uncertainties or negative publicity regarding such approval requirement could materially and adversely affect our business, prospects, financial condition, reputation, and the trading price of our listed securities.

Regulations relating to offshore investment activities by mainland China residents may limit our mainland China subsidiary’s ability to increase their registered capital or distribute profits to us, limit our ability to inject capital into our mainland China subsidiary, or otherwise expose us to liability and penalties under laws of mainland China.

The PRC State Administration of Foreign Exchange, or the SAFE, has promulgated regulations, including the Notice on Relevant Issues Relating to Domestic Residents’ Investment and Financing and Round-Trip Investment through Special Purpose Vehicles, or SAFE Circular No. 37, effective on July 4, 2014, and its appendixes, that require mainland China residents, including mainland China institutions and individuals, to register with the local branch of the SAFE in connection with their direct establishment or indirect control of an offshore entity, for the purpose of overseas investment and financing, with such mainland China residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests, referred to in SAFE Circular No. 37 as a “special purpose vehicle.” SAFE Circular No. 37 further requires an amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as an increase or decrease of capital contributed by mainland China individuals, share transfer or exchange, merger, division or other material events. In the event that a mainland China shareholder holding interests in a special purpose vehicle fails to fulfill the required SAFE registration, the mainland China subsidiary of that special purpose vehicle may be prohibited from making profit distributions to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be restricted in its ability to contribute additional capital into its mainland China subsidiary. Further, failure to comply with the various SAFE registration requirements described above could result in liability under laws of mainland China for foreign exchange evasion, including (i) the requirement by the SAFE to return the foreign exchange remitted overseas within a period specified by the SAFE, with a fine of up to 30% of the total amount of foreign exchange remitted overseas and deemed to have been evasive and (ii) in circumstances involving serious violations, a fine of no less than 30% of and up to the total amount of remitted foreign exchange deemed evasive. Furthermore, the persons-in-charge and other persons at our mainland China subsidiary who are held directly liable for the violations may be subject to criminal sanctions. On February 28, 2015, SAFE promulgated the Notice on Further Simplifying and Improving Foreign Exchange Administration Policy on Direct Investment, or SAFE Notice 13, which became effective on June 1, 2015. In accordance with SAFE Notice 13, entities and individuals are required to apply for foreign exchange registration of foreign direct investment and overseas direct investment, including those required under SAFE Circular No. 37, with qualified banks, instead of the SAFE. The qualified banks, under the supervision of the SAFE, directly examine the applications and conduct the registration.

These regulations apply to our direct and indirect shareholders who are mainland China residents and may apply to any offshore acquisitions or share transfers that we make in the future if our shares are issued to mainland China residents. We have requested mainland China residents who we know currently hold direct or indirect interests in our company to make the necessary applications, filings and amendments as required under SAFE Circular No. 37 and other related rules.

We have used our best efforts to notify all of our shareholders who are mainland China citizens and hold interests in us to register with the local SAFE branch and/or qualified banks as required under SAFE Circular No. 37 and SAFE Notice 13. However, in practice, different local SAFE branches and/or qualified banks may have different views and procedures on the application and implementation of SAFE regulations. Therefore, we cannot assure you that they can successfully amend their foreign exchange registrations with the local SAFE branch and/or qualified banks in full compliance with applicable laws. In addition, we may not be informed of the identities of all the mainland China residents holding direct or indirect interests in our company, and we cannot provide any assurances that these mainland China residents will comply with our request to make or obtain any applicable registrations or comply with other requirements required by SAFE Circular No. 37, SAFE Notice 13 or other related rules. A failure by any of our current or future shareholders or beneficial owners who are mainland China residents to comply with the SAFE regulations may subject us to fines or other legal sanctions, restrict our cross-border investment activities, limit our mainland China subsidiary’s ability to make distributions or pay dividends or affect our ownership structure, which could adversely affect our business and prospects.

Furthermore, it is unclear how these regulations, and any future regulation concerning offshore or cross-border transactions, will be interpreted, amended and implemented by the government authorities. We cannot predict how these regulations will affect our business operations or future strategy. For example, we may be subject to a more stringent review and approval process with respect to our foreign exchange activities, such as remittance of dividends and foreign-currency-denominated borrowings, which may adversely affect our financial condition and results of operations. In addition, if we decide to acquire a mainland China domestic company, either we or the owners of such company, as the case may be, may not be able to obtain the necessary approvals or complete the necessary filings and registrations required by the foreign exchange regulations. This may restrict our ability to implement our acquisition strategy and could adversely affect our business and prospects.

Failure to comply with regulations of mainland China regarding the registration requirements for employee share ownership plans or share option plans may subject the mainland China 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 Companies, or the Stock Option Rules. Under the Stock Option Rules and other rules and regulations, mainland China residents who participate in a stock incentive plan in an overseas publicly listed company are required to register with the SAFE or its local branch and complete certain other procedures. Participants of a stock incentive plan who are mainland China residents must retain a qualified mainland China agent, which could be a mainland China subsidiary of the overseas publicly listed company or another qualified institution selected by the mainland China subsidiary, to conduct the SAFE registration and other procedures with respect to the stock incentive plan on behalf of its participants. The participants must also retain an overseas entrusted institution to handle matters in connection with their exercise of stock options, the purchase and sale of corresponding stocks or interests and fund transfers. In addition, the mainland China 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 mainland China agent or the overseas entrusted institution or other material changes. See “Item 4. Information on the Company-B. Business Overview-Government Regulations-Regulations on Stock Incentive Plans.” We and our mainland China employees who have been granted share options and restricted share units are subject to these regulations and we have completed the registrations of our stock incentive plans with the local SAFE as required by laws of mainland China. Failure of our mainland China share option holders or restricted shareholders to complete their SAFE registrations may subject these mainland China residents to fines and legal sanctions and may also limit our ability to contribute additional capital into our subsidiaries in mainland China, limit our mainland China subsidiary’s ability to distribute dividends to us, or otherwise materially and adversely affect our business.

Regulation of direct investment and loans by offshore holding companies to mainland China entities and governmental control of currency conversion may delay or limit us from using the proceeds of offshore offerings to make loans to our subsidiary in mainland China, or making additional capital contributions to our mainland China subsidiary, which could adversely affect our ability to fund and expand our business.

VSA is our offshore holding company conducting operations in mainland China through our mainland China subsidiary. Under laws and regulations of mainland China, we are permitted to utilize the proceeds from offshore offerings to make loans to our mainland China subsidiary, or to make additional capital contributions to our mainland China subsidiary, subject to applicable government registration and approval requirements. None of our loans to any subsidiary in mainland China can exceed the difference between its total amount of investment and its registered capital approved under the laws of mainland China or three times of the net assets provided in the latest audited financial report of such subsidiary in mainland China, as applicable, and the loans must be registered with the local branch of SAFE. Our capital contributions to our subsidiaries in mainland China or establishment of new subsidiaries in mainland China shall be recorded with the Ministry of Commerce or its local counterpart.

In May 2014, SAFE promulgated the Provisions on the Foreign Exchange Administration Rules on Cross-border Guarantee, which, along with the PRC Foreign Currency Administration Rules, provides that failure to register a cross-border guarantee may subject the violator to order to rectify, warning and a fine no more than RMB300,000. In June 2016, SAFE promulgated SAFE Circular No. 16, which removed certain restrictions previously provided under several SAFE circulars in respect of conversion by a foreign-invested enterprise of foreign currency registered capital into RMB and use of such RMB capital. However, SAFE Circular No. 16 continues to prohibit foreign-invested enterprises from, among other things, using RMB fund converted from its foreign exchange capitals for expenditure beyond its business scope, and providing loans to non-affiliated enterprises except as permitted in the business scope. On October 23, 2019, the SAFE issued the Circular on Further Promoting Cross-border Trade and Investment Facilitation, or SAFE Circular 28. Among others, SAFE Circular 28 relaxes prior restrictions and allows foreign-invested enterprises that do not have equity investments in their approved business scope to use their capital obtained from foreign exchange settlement to make domestic equity investments as long as the investments are real and in compliance with the foreign investment-related laws and regulations.

In light of the various requirements imposed by the regulations of mainland China on loans to and direct investment in entities in mainland China by offshore holding companies, including the SAFE rules and circulars referred to above, we cannot assure you that we will be able to complete the necessary government registrations or filings on a timely basis, if at all, with respect to existing and future loans by us to our mainland China subsidiary or additional capital contributions by us to our mainland China subsidiary, and conversion of such loans or capital contributions into RMB. If we fail to complete such registrations or filings, our ability to capitalize or otherwise fund our operations in mainland China may be negatively affected, which could adversely affect our ability to fund and expand our business.

Our subsidiary in mainland China are subject to restrictions on paying dividends or making other payments to our holding company, which may restrict our ability to satisfy our liquidity requirements.

We are a holding company incorporated in the Cayman Islands. As a result of the holding company structure, it currently relies on dividend payments from our subsidiaries in mainland China. However, the regulations of mainland China currently permit payment of dividends only out of accumulated profits, as determined in accordance with PRC accounting standards and regulations. Our subsidiary in mainland China are also required to set aside a portion of their after-tax profits according to PRC accounting standards and regulations to fund certain reserve funds. The PRC government also imposes controls on the conversion of RMB into foreign currencies and the remittance of foreign currencies out of mainland China. We may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency. See “-Governmental control of currency conversion may affect the value of your investment.” Furthermore, if our subsidiary in mainland China incur debt on their own in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments. If our subsidiary in mainland China are unable to pay dividends or make other payments to us, we may be unable to pay dividends on our ordinary shares and ADSs.

In addition, the EIT 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-mainland China-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-mainland China-resident enterprises are incorporated.

Governmental control of currency conversion may affect the value of your investment.

The PRC government imposes controls on the convertibility of RMB into foreign currencies and, in certain cases, the remittance of foreign currency out of mainland China. We receive most of our revenues in RMB. Under our current structure, our income at the Cayman Islands holding company level will primarily be derived from dividend payments from our mainland China subsidiary. Shortages in the availability of foreign currency may restrict the ability of our mainland subsidiary to remit sufficient foreign currency to pay dividends or other payments to us, or otherwise satisfy their foreign currency denominated obligations. Under existing foreign exchange regulations of mainland China, 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 the SAFE by complying with certain procedural requirements. However, approval from appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of mainland China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currency to satisfy our currency demands, we may not be able to pay dividends in foreign currencies to our shareholders or ADS holders.

We may not be able to obtain certain treaty benefits on dividends paid to us by our subsidiaries in mainland China through our subsidiaries in Hong Kong.

Under the EIT Law and its implementation rules, dividends generated from retained earnings from a mainland China company and distributed to a foreign parent company are subject to a withholding tax rate of 10% unless the foreign parent’s jurisdiction of incorporation has a tax treaty with mainland China that provides for a preferential withholding arrangement. Pursuant to the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income, or the Hong Kong Tax Treaty, which became effective on December 8, 2006, a company incorporated in Hong Kong, such as Tarena HK and Kids IT Education (HK) Limited, will be subject to withholding income tax at a rate of 5% on dividends it receives from its subsidiary in mainland China if it holds a 25% or more interest in that particular subsidiary in mainland China, or 10% if it holds less than a 25% interest in that subsidiary. Pursuant to the Notice of the State Administration of Taxation on the Issues concerning the Application of the Dividend Clauses of Tax Agreements, or Circular 81, the 5% withholding tax rate does not automatically apply and certain requirements must be satisfied, including, without limitation, that (a) the Hong Kong enterprise must be the beneficial owner of the relevant dividends; and (b) the Hong Kong enterprise must directly hold at least a 25% share ownership in the mainland China enterprise during the 12 consecutive months preceding its receipt of the dividends. However, a transaction or an arrangement entered into for the primary purpose of enjoying a preferential tax treatment should not be a reason for the application of the preferential tax treatment under the Hong Kong Tax Treaty. If a taxpayer inappropriately is entitled to such preferential tax treatment, the competent tax authority has the power to make appropriate adjustments. According to the Circular on Several Issues Regarding the “Beneficial Owner” in Tax Treaties, which was issued on February 3, 2018, by the State Administration of Taxation and took effect from April 1, 2018, or Circular 9, when determining the applicant’s status of the “beneficial owner” regarding tax treatments in connection with dividends, interests or royalties in the tax treaties, several factors, including, without limitation, 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, whether the business operated by the applicant constitutes the actual business activities, and whether the counterparty country or region to the tax treaties levies any tax or grants a tax exemption on relevant incomes or levies tax at an extremely low rate, will be taken into account, and such determination will be analyzed according to the actual circumstances of the specific cases. Circular 9 further provides that an applicant who intends to prove his or her status as the “beneficial owner” shall submit relevant documents to the tax authority according to the Administrative Measures for Tax Convention Treatment for Non-resident Taxpayers, or Circular 60, which was replaced and repealed by Administrative Measures for Non-Resident Taxpayers to Enjoy Treatments under Tax Treaties, or Circular 35. Circular 35, which was issued in October 2019 by the State Administration of Taxation and became effective on January 1, 2020, sets forth that non-resident enterprises and their withholding agents shall enjoy treaty benefits by means of “self-judgment of eligibility, declaration of entitlement, and retention of relevant materials for future reference.” However, if a competent tax authority finds out that it is necessary to apply the general anti-tax avoidance rules, it may start general investigation procedures for anti-tax avoidance and adopt corresponding measures for subsequent administration. Moreover, according to Circular 81 and Circular 35, if the tax authorities consider the transactions or arrangements we have are for the primary purpose of enjoying a preferential tax treatment, the tax authorities may adjust the preferential withholding tax in the future.

It may be difficult for overseas regulators to conduct an investigation or collect evidence within China.

Shareholder claims or regulatory investigations that are common in jurisdictions outside mainland China are difficult to pursue as a matter of law or practicality in mainland China. For example, in mainland China, there are significant legal and other obstacles to providing information needed for regulatory investigations or litigation initiated outside mainland China. Although the authorities in mainland China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such cooperation with the securities regulatory authorities in the United States or other jurisdictions may not be efficient in the absence of a mutual and practical cooperation mechanism. Furthermore, according to Article 177 of the PRC Securities Law which became effective in March 2020, no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the territory of mainland China, and without the consent of the Chinese securities regulatory authorities and the other competent governmental agencies, no entity or individual may provide documents or materials related to securities business to any foreign party. While detailed interpretation of or implementation rules under the article have yet to be promulgated, the inability of an overseas securities regulator to directly conduct investigation or evidence collection activities within mainland China and the potential obstacles for information provision may further increase difficulties you face in protecting your interests. See also “Item 3. Key Information-D. Risk Factors-Risks Related to Our ADSs -You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law.”

Fluctuations in exchange rates could have a material 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 and by the Board of Governors of the Federal Reserve System. 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. The RMB has fluctuated against the U.S. dollar, at times significantly and unpredictably. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the RMB and the U.S. dollar in the future.

Significant revaluation of the RMB may have a material and adverse effect on your investment. For example, to the extent that we need to convert U.S. dollars into RMB for capital expenditures and working capital and other business purposes, appreciation of the RMB against the U.S. dollar would have an adverse effect on the RMB amount we would receive from the conversion. Conversely, if we decide to convert our RMB into U.S. dollars for the purpose of making payments for dividends on our ordinary shares or ADSs or for other business purposes, appreciation of the U.S. dollar against the RMB would have a negative effect on the U.S. dollar amount available to us. In addition, appreciation or depreciation in the value of the RMB relative to U.S. dollars would affect the U.S. dollar equivalent of our earnings, regardless of any underlying change in our business or results of operations.

We have not entered into any foreign currency forward contract since 2017. Due to the fluctuation in the exchange rate between U.S. dollars and RMB, we may decide to enter into additional foreign currency contracts 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 exchange control regulations of mainland China that restrict our ability to convert Renminbi into foreign currency. As a result, fluctuations in exchange rates may have a material adverse effect on your investment.

Uncertainties exist with respect to the interpretation and implementation of the PRC Foreign Investment Law and its implementation regulations and how it may impact the viability of our current corporate structure, corporate governance and business operations.

On January 1, 2020, the PRC Foreign Investment Law and the Regulations for Implementation of the PRC Foreign Investment Law came into effect and replaced the trio of prior laws regulating foreign investment in mainland China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary regulations. The PRC Foreign Investment Law and its implementation regulations embody an expected regulatory trend of mainland China to rationalize its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments. However, there are still uncertainties in relation to the interpretation and implementation of the PRC Foreign Investment Law and its implementation regulations. For instance, under the PRC Foreign Investment Law, “foreign investment” refers to the investment activities directly or indirectly conducted in mainland China by foreign individuals, enterprises or other entities. Though it does not explicitly classify contractual arrangements as a form of foreign investment, there is no assurance that foreign investment via contractual arrangement would not be interpreted as a type of indirect foreign investment activities under the definition in the future. In addition, the definition contains a catch-all provision which includes investments made by foreign investors through means stipulated in laws or administrative regulations or other methods prescribed by the State Council. Therefore, it still leaves leeway for future laws, administrative regulations or provisions promulgated by the State Council to provide for contractual arrangements as a form of foreign investment. In any of these cases, it will be uncertain whether our contractual arrangements will be deemed to be in violation of the market access requirements for foreign investment under the laws and regulations of mainland China. Furthermore, if future laws, administrative regulations or provisions prescribed by the State Council mandate further actions to be taken by companies with respect to existing contractual arrangements, we may face substantial uncertainties as to whether we can complete such actions in a timely manner, or at all.

If any of the PRC subsidiary were deemed as foreign invested enterprise under any such future laws, administrative regulations or provisions and any of our business were included in any negative list or other form of restrictions on foreign investment, we may need to take further actions to comply with such future laws, administrative regulations or provisions. Such actions may have a material and adverse impact on our business, financial condition, result of operations and prospects. If we or any of the PRC subsidiary is found to be in violation of any existing or future laws, administrative regulations or provisions of mainland China, or fail to obtain or maintain any of the required permits or approvals, the PRC regulatory authorities would have broad discretion to take corresponding action regarding such violations or failures to such entities, such as:

Any of the above penalties may result in a material and adverse effect on our business operation. In addition, if the PRC regulatory authorities were to find our legal structure and contractual arrangements to be in violation of any laws, administrative regulations or provisions of mainland China, we are uncertain what impact of above PRC regulatory authorities’ actions would have on us. Any of the above results, or any other significant unfavorable actions that might be imposed on us in this event, would have an adverse effect on our business, financial condition, results of operations and prospects. Failure to take timely and appropriate measures to cope with any of these or similar regulatory compliance challenges could materially and adversely affect our current corporate structure, corporate governance and business operations.

The tension in international trade and rising political tension, particularly between the U.S. and China, may adversely impact our business, financial condition, and results of operations.

There have been heightened tensions in international economic relations, such as in the relations between the United States and China. The U.S. government has imposed, and has proposed to impose additional, new, or higher tariffs on certain products imported from China to penalize China for what it characterizes as unfair trade practices. China has responded by imposing, and proposing to impose additional, new, or higher tariffs on certain products imported from the United States. It remains unclear what additional actions, if any, will be taken by the U.S. or other governments with respect to international trade agreements, the imposition of tariffs on goods imported into the United States, tax policy related to international commerce, or other trade matters. While cross-border business may not be an area of focus for us, any unfavorable government policies on international trade, such as capital controls or tariffs, may affect the demand for our services, impact the competitive position of our services or prevent us from expanding internationally. If any new tariffs, legislation and/or regulations are implemented, or if existing trade agreements are renegotiated or, in particular, if the U.S. government takes retaliatory trade actions due to ongoing U.S.-China trade tensions, such changes could have an adverse effect on our business, financial condition and results of operations.

The situation is further complicated by the political tensions between the United States and China that escalated during the COVID-19 pandemic and in the wake of the PRC National People’s Congress’ decision on Hong Kong national security legislation, sanctions imposed by the U.S. Department of Treasury on certain officials of the Hong Kong Special Administrative Region and the central government of the PRC and the executive orders issued by the U.S. President in August 2020 that prohibit certain transactions with certain China-based companies and their respective subsidiaries. Against this backdrop, China has implemented, and may further implement, measures in response to the changing trade policies, treaties, tariffs and sanctions and restrictions against Chinese companies initiated by the U.S. government. The United States and various foreign governments have imposed controls, license requirements and restrictions on the import or export of technologies and products (or voiced the intention to do so). For instance, in October 2022, the U.S. government imposed a set of export control measures with respect to China. On October 17, 2023, the U.S. government announced additional semiconductor regulations expanding and enhancing export controls under these export control measures.

On August 9, 2023, the Biden administration released an executive order directing the Treasury Department to create an outbound foreign direct investment review program that will require reporting on or (in more narrow circumstances) will prohibit investments by U.S. persons involving “covered national security technologies and products,” which is defined to include “sensitive technologies and products in the semiconductors and microelectronics, quantum information technologies, and AI sectors that are critical for the military, intelligence, surveillance, or cyber-enabled capabilities” of China (to include Hong Kong and Macau). On the same day, the Treasury Department issued an advance notice of proposed rulemaking, which provides a conceptual framework for outbound investment controls focused on China. As of the date of this annual report, the final rules implementing the executive order has not become effective yet, and the scope of the outbound foreign direct investment review program may be materially different from what is currently contemplated. In addition, the United States is in the process of developing new export controls with respect to “emerging and foundational” technologies, which may include certain AI and semiconductor technologies. The U.S. government also reportedly is considering imposing new restrictions on the ability of U.S. persons to make investments in or engage in transactions with certain Chinese companies. The United States has also restricted U.S. persons from investing in publicly-traded securities of “Chinese Military-Industrial Complex” companies identified by the Treasury Department. Measures such as these could deter suppliers in the United States and/or other countries that impose export controls and other restrictions from providing technologies and products to, making investments in, or otherwise engaging in transactions with Chinese companies.

As a result, Chinese companies would have to identify and secure alterative supplies or sources of financing, while they may not be able to do so in a timely manner and at commercially acceptable terms, or at all. In addition, Chinese companies may have to limit and reduce their research and development and other business activities, or cease conducting transactions with parties, in the United States and other countries that impose export controls or other restrictions. Rising trade and political tensions could reduce levels of trade, investments, technological exchanges and other economic activities between China and other countries, which would have an adverse effect on global economic conditions, the stability of global financial markets, and international trade policies.

Although the direct impact of the current international trade and political tension, and any escalation of such tension, on the education industry in China is uncertain, the negative impact on general, economic, political and social conditions may adversely impact our business, financial condition and results of operations.

Risks Related to Our ADSs

The trading prices of our ADSs have fluctuated and may be volatile, which could result in substantial losses to investors.

The trading prices of our ADSs have fluctuated since we first listed our ADSs. The trading prices of our ADSs may continue to fluctuate and be volatile due to factors beyond our control. This may happen because of broad market and industry factors, such as the performance and fluctuation of the market prices of other companies with business operations located mainly in mainland China that have listed their securities in the United States. In recent years, the widespread negative publicity of alleged fraudulent accounting practices and poor corporate governance of certain U.S. public companies with operations in mainland China were believed to have negatively affected investors’ perception and sentiment towards companies with a connection with China, which significantly and negatively affected the trading prices of some companies’ securities listed in the U.S. Any similar negative publicity or sentiment may affect the performances of our ADSs. A number of mainland China companies have listed or are in the process of listing their securities on U.S. stock markets. The securities of some of these companies have experienced significant volatility, including price declines in connection with their initial public offerings. The trading performances of these mainland China companies’ securities after their offerings may affect the attitudes of investors toward mainland China companies listed in the United States in general and consequently may impact the trading performance of our ADSs, regardless of our actual operating performance. Furthermore, the stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies like us. These broad market and industry factors may materially reduce the market price of our ADSs, regardless of our operating performance.

In addition to market and industry factors, the price and trading volume for our ADSs may be highly volatile for factors specific to our own operations, including the following:

Any of these factors may result in large and sudden changes in the volume and price at which our ADSs will trade.

If we fail to meet Nasdaq’s minimum bid price or minimum market value of publicly held shares requirements, our ADSs could be subject to delisting, which may significantly reduce the liquidity of our ADSs and cause further declines to the market price of our ADSs.

Our ADSs were previously listed on the Nasdaq Global Select Market and we transferred the listing of our ADSs from the Nasdaq Global Select Market to Nasdaq Capital Market in November 2023. The Nasdaq Listing Rules have minimum requirements that a company must meet for continued listing on Nasdaq Global Select Market and Nasdaq Capital Market.

The requirements for continued listing when our ADSs were listed on the Nasdaq Global Select Market include maintaining a minimum closing bid price of US$1.00 per ADS and a minimum Market Value of Publicly Held Shares, or MVPHS, of US$15 million for a period of 30 consecutive trading days. On December 10, 2021 and January 20, 2022, we received written notifications from Nasdaq advising us that (i) our ADS had been trading at a price that would subject our ADSs to delisting if we fail to regain compliance with the Nasdaq minimum bid price requirement by June 8, 2022 and that (ii) we no longer meet the minimum MVPHS requirement for the Nasdaq Global Select Market and were granted a grace period of 180 calendar days, expiring on July 19, 2022, to regain compliance, respectively. We regained compliance with (i) the Nasdaq minimum bid price requirement by changing the ratio of our ADS to our Class A ordinary shares since January 6, 2022, and (ii) the minimum MVPHS requirement for Nasdaq Global Select Market since June 1, 2022. On July 28, 2023, we received a further notice from Nasdaq indicating that we no longer meet the minimum MVPHS requirement for the Nasdaq Global Select Market and were granted a grace period of 180 calendar days, expiring on January 24, 2024, to regain compliance. As a result, in November 2023 we applied to Nasdaq and Nasdaq approved for transferring the listing of our ADSs from the Nasdaq Global Select Market to the Nasdaq Capital Market, effective on November 17, 2023. As of the date of this annual report, we have met all of the continued listing requirements for the Nasdaq Capital Market, including the requirement on minimum MVPHS as set forth in Nasdaq Listing Rule 5550(a)(5) upon the transfer. However, there can be no assurance that we will meet all of the requirements for continued listing in the future.

There can be no assurance that we will stay compliant with the requirements for continued listing at all times going forward. The delisting of our ADSs or transfer of listing may significantly reduce the liquidity of our ADSs, cause further declines to the market price of our ADSs, and make it more difficult for us to obtain adequate financing to support our continued operation.

If securities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations regarding our ADSs, the market price for our ADSs and trading volume could decline.

The trading market for our ADSs is influenced by research or reports that industry or securities analysts publish about our business. If one or more analysts who cover us downgrade our ADSs or publish unfavorable research about us, the market price for our ADSs would likely decline. If one or more of these analysts cease to cover us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the market price or trading volume for our ADSs to decline.

We cannot guarantee that any share repurchase program will be fully consummated or that any share repurchases will enhance long-term shareholder value, and share repurchases could increase the volatility of the price of our Class A ordinary shares and/or ADSs and could diminish our cash reserves.

Our board of director have authorized a few share repurchase programs in recent years, some of which were not fully consummated:

From January 1, 2022 to November 28, 2023, we repurchased approximately 781,064 ADSs at a weighted average price of US$3.48 per ADS pursuant to our share repurchase program. In addition, we also repurchased 5,119,698 of the Company’s class A ordinary shares beneficially owned by Talent Fortune Investment Limited, an affiliate of KKR & Co. Inc., at a repurchase price of $0.2 per share in January 2024.

Our board of directors also has the discretion to authorize additional share repurchase programs or share repurchase transactions in the future. The share repurchase programs do not obligate us to repurchase any specific dollar amount or to acquire any specific number of ADSs and/or shares. We cannot guarantee that any share repurchase activity will enhance long-term shareholder value. The share repurchase activities could affect the price of our listed securities and increase volatility and may be suspended or terminated at any time, which may result in a decrease in the trading price of our ADSs. Furthermore, share repurchases could increase the volatility of the price of our ADSs and could diminish our cash reserves.

Our dual class share structure with different voting rights will limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of our Class A ordinary shares and ADSs may view as beneficial.

Our ordinary shares are divided into Class A ordinary shares and Class B ordinary shares. Holders of Class A ordinary shares are entitled to one vote per share, while holders of Class B ordinary shares are entitled to one hundred votes per share, with Class A and Class B ordinary shares voting together as one class on all matters subject to a shareholders’ vote. As of April 22, 2026, our Class B ordinary shares represent 0.5% of our total issued and outstanding ordinary shares on an as-converted basis and entitle their holders to 32.0% of our total voting power.

As a result of the dual class share structure and the concentration of ownership, holders of our Class B ordinary shares have substantial influence over our business, including decisions regarding mergers, consolidations and the sale of all or substantially all of our assets, election of directors and other significant corporate actions. They may take actions that are not in the best interest of us or our other shareholders. This concentration of ownership may discourage, delay or prevent a change in control of our company, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of our company and may reduce the price of our ADSs. This concentrated control will limit your ability to influence corporate matters and could discourage others from pursuing any potential merger, takeover or other change of control transactions that holders of Class A ordinary shares and ADSs may view as beneficial. For more information regarding our principal shareholders and their affiliated entities, see “Item 7. Major Shareholders and Related Party Transactions.”

The sale or availability for sale of substantial amounts of our ADSs could adversely affect their market price.

Sales of substantial amounts of our ADSs in the public market, or the perception that these sales could occur, could adversely affect the market price of our ADSs and could materially impair our ability to raise capital through equity offerings in the future. We cannot predict what effect, if any, market sales of securities held by our significant shareholders or any other shareholder or the availability of these securities for future sale will have on the market price of our ADSs.

We may be classified as a passive foreign investment company, or PFIC, which could result in adverse U.S. federal income tax consequences to U.S. Holders of our ADSs or Class A ordinary shares.

A non-U.S. corporation, such as our company, will be classified as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for any taxable year, if either (i) 75% or more of its gross income for such year consists of certain types of “passive” income, or (ii) 50% or more of the value of its assets (generally based on an average of the quarterly values of the assets) during such year is attributable to assets that produce passive income or are held for the production of passive income, or the asset test. A separate determination must be made after the close of each taxable year as to whether a non-U.S. corporation is a PFIC for that year. Passive income generally includes dividends, interest, royalties, rents, annuities, net gains from the sale or exchange of property producing such income and net foreign currency gains. For this purpose, cash and assets readily convertible into cash are categorized as passive assets and our unbooked intangibles associated with active business activity are taken into account as non-passive assets.

In addition, a non-U.S. corporation will be treated as owning a proportionate share of the assets and earning a proportionate share of the income of any other corporation in which we own, directly or indirectly, 25% or more (by value) of the stock.

Based on the market price of our ADSs and outstanding Class A ordinary shares, the value of our assets and the composition of our assets and income, we do not believe that we were a PFIC for our taxable year ended December 31, 2025. No assurances can be given with regard to our PFIC status for the current taxable year or the foreseeable future because the determination of whether we will be or become a PFIC is a factual determination made annually that will depend, in part, upon the characterization and composition of our income, assets and liabilities. It is possible that the IRS may challenge our classification of certain items of income, assets and liabilities, which may result in our company being or becoming a PFIC.

Because the value of our assets for purposes of the asset test will generally be determined by reference to the market price of our ADSs or Class A ordinary shares, fluctuations in the market price of our ADSs or Class A ordinary shares may cause us to be or become a PFIC for the current or subsequent taxable years. In particular, recent declines in the market price of our ADSs significantly increased our risk of being or becoming a PFIC. The market price of our ADSs may continue to fluctuate considerably and, consequently, we cannot assure you of our PFIC status for any taxable year. The determination of whether we will be or become a PFIC will also depend, in part, on the composition of our income and assets, which will be affected by how, and how quickly, we use our liquid assets. Under circumstances where we determine not to deploy significant amounts of cash for active purposes, our risk of being classified as a PFIC may substantially increase.

If we were treated as a PFIC for any taxable year during which a U.S. Holder (defined below) held an ADS or a Class A ordinary share, certain adverse U.S. federal income tax consequences could apply to the U.S. Holder. See “Item 10. Additional Information-E. Taxation-United States Federal Income Taxation-Passive Foreign Investment Company Considerations.”

You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law.

We are an exempted company incorporated under the laws of the Cayman Islands. Our corporate affairs are governed by our fifth amended and restated memorandum and articles of association, the Companies Act, Cap 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands, and the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from the common law of England, the decisions of whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws than the United States. Some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman Islands companies may not have the standing to initiate a shareholder derivative action in a federal court of the United States.

The Cayman Islands courts are also unlikely:

There is no statutory recognition in the Cayman Islands of judgments obtained in the United States, although the courts of the Cayman Islands will in certain circumstances recognize and enforce a non-penal judgment of a foreign court of competent jurisdiction without retrial on the merits.

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 company incorporated in the United States.

Judgments obtained against us by our shareholders may not be enforceable.

We are a Cayman Islands company and almost all of our assets are located outside the United States. Substantially all of our current operations are conducted in mainland China. In addition, most of our current directors and executive officers are nationals and residents of countries other than the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the United States in the event that you believe that your rights have been infringed under the United States federal securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of China may render you unable to enforce a judgment against our assets or the assets of our directors and officers.

The voting rights of holders of ADSs are limited by the terms of the deposit agreement, and you may not be able to exercise your right to vote your Class A ordinary shares.

As a holder of our ADSs, you will only be able to exercise the voting rights with respect to the underlying Class A ordinary shares in accordance with the provisions of the deposit agreement. Under the deposit agreement, you must vote by giving voting instructions to the depositary. Upon receipt of your voting instructions, the depositary will vote the underlying Class A ordinary shares in accordance with these instructions. You will not be able to directly exercise your right to vote with respect to the underlying shares unless you withdraw the shares. Under our fifth amended and restated memorandum and articles of association, the minimum notice period required for convening a general meeting is ten calendar days. When a general meeting is convened, you may not receive sufficient advance notice to withdraw the shares underlying your ADSs to allow you to vote with respect to any specific matter. If we ask for your instructions, the depositary will notify you of the upcoming vote and will arrange to deliver our voting materials to you. We cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote your shares. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for their manner of carrying out your voting instructions. This means that you may not be able to exercise your right to vote and you may have no legal remedy if the shares underlying your ADSs are not voted as you requested.

We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to United States domestic public companies.

Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including:

The information we are required to file with or furnish to the SEC are less extensive and less timely as compared to that required to be filed with the SEC by United States domestic issuers. As a Cayman Islands company listed on Nasdaq, we are subject to the Nasdaq corporate governance listing standards. However, Nasdaq rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in the Cayman Islands, which is our home country, may differ significantly from the Nasdaq corporate governance listing standards.

We relied on the exemption available to foreign private issuers for the requirement that it hold an annual general meeting of shareholders no later than December 31, 2025, in 2025. In this respect, we elected to follow home country practice and did not hold an annual general meeting of shareholders in 2025. In addition, in lieu of the requirements of Rule 5635(c) of the Nasdaq Rules that shareholder approval be required prior to the issuance of securities when a stock option or purchase plan is to be established or materially amended or other equity compensation arrangement made or materially amended, pursuant to which stock may be acquired by officers, directors, employees, or consultants, we elected to follow our home country practices with respect to the adoption of the 2024 Plan. We may also continue to rely on this and other exemptions available to foreign private issuers in the future, and to the extent that we choose to do so in the future, our shareholders may be afforded less protection than they otherwise would under the Nasdaq corporate governance listing standards applicable to U.S. domestic issuers. As a result, you may not be afforded the same protections or information which would be made available to you if you were investing in a United States domestic issuer.

You may not receive dividends or other distributions on our Class A ordinary shares and you may not receive any value for them, if it is illegal or impractical to make them available to you.

The depositary of our ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on Class A ordinary shares or other deposited securities underlying our ADSs, after deducting its fees and expenses. You will receive these distributions in proportion to the number of Class A ordinary shares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holders of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act but that are not properly registered or distributed under an applicable exemption from registration. The depositary may also determine that it is not feasible to distribute certain property through the mail. Additionally, the value of certain distributions may be less than the cost of mailing them. In these cases, the depositary may determine not to distribute such property. We have no obligation to register under U.S. securities laws any ADSs, ordinary shares, rights or other securities received through such distributions. We also have no obligation to take any other action to permit the distribution of ADSs, ordinary shares, rights or anything else to holders of ADSs. This means that you may not receive distributions we make on our ordinary shares or any value for them if it is illegal or impractical for us to make them available to you. These restrictions may cause a material decline in the value of our ADSs.

You may not be able to participate in our rights offerings and may experience dilution of your holdings.

We may, from time to time, distribute rights to our shareholders, including rights to acquire securities. Under the deposit agreement, the depositary will not distribute rights to holders of ADSs unless the distribution and sale of rights and the securities to which these rights relate are either exempt from registration under the Securities Act with respect to all holders of ADSs, or are registered under the provisions of the Securities Act. The depositary may, but is not required to, attempt to sell these undistributed rights to third parties, and may allow the rights to lapse. We may be unable to establish an exemption from registration under the Securities Act, and we are under no obligation to file a registration statement with respect to these rights or underlying securities or to endeavor to have a registration statement declared effective. Accordingly, holders of ADSs may be unable to participate in our rights offerings and may experience dilution of their holdings as a result.

You may be subject to limitations on transfer of your ADSs.

Your ADSs are transferable on the books of the depositary. However, the depositary may close its books at any time or from time to time when it deems expedient in connection with the performance of its duties. The depositary may close its books from time to time for a number of reasons, including in connection with corporate events, such as a rights offering, during which time the depositary needs to maintain an exact number of ADS holders on its books for a specified period. The depositary may also close its books in emergencies, and on weekends and public holidays. The depositary may refuse to deliver, transfer or register transfers of our ADSs generally when our share register or the books of the depositary are closed, or at any time if we or the depositary thinks it is advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason.

We incur increased costs as a result of being a public company, and we cannot predict or estimate the amount of additional future costs we may incur or the timing of such costs.

As a public company, we incur significant legal, accounting and other expenses that we did not incur as a private company, including additional costs associated with our public company reporting obligations. The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC and Nasdaq, impose various requirements on the corporate governance practices of public companies. Compliance with such rules and regulations have increased, and we expect such compliance to continue to increase our legal and financial compliance costs and to make certain corporate activities more time-consuming and costly.

In the past, shareholders of a public company often brought securities class action suits against the company following periods of instability in the market price of that company’s securities. We have been investigated by several law firms in the U.S. for potential securities claims in the past. VisionSys AI Inc (formerly known as TCTM Kids IT Education Inc. and Tarena International, Inc.) and certain of its current and former officers and directors have been named as defendants in a putative securities class action captioned Yili Qiu v. Tarena International, Inc. et al., (Case No. 1:21-cv-03502) filed on June 22, 2021, in the U.S. District Court for the Eastern District of New York. The complaint asserts that defendants made false or misleading statements in certain SEC filings between August 16, 2016, and November 1, 2019, related to the company’s business and operating results in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. On September 1, 2021, the court entered an order appointing lead plaintiff in this action. On September 14, 2021, the parties filed a joint status report and proposed scheduling stipulation, pursuant to which, the lead plaintiff filed an amended complaint on November 1, 2021. On January 18, 2022, VisionSys AI Inc (formerly known as TCTM Kids IT Education Inc. and Tarena International, Inc.) moved to dismiss the complaint. On April 4, 2022, lead plaintiff served its opposition to the motion. Briefing was completed on May 19, 2022. While the motion to dismiss was pending, the plaintiffs and the company reached an agreement in principle to settle all claims. On July 13, 2022, the plaintiff filed a letter informing the court of the settlement in principle. On August 31, 2022, the parties filed a motion for preliminary approval of the proposed settlement agreement. Preliminary approval hearing took place on November 8, 2022, and the court reserved judgment on the motion pending submission of additional information. In December 2022, the parties submitted revised settlement materials to the court. On August 3, 2023, the court ordered additional revisions to the settlement papers, which the parties submitted on August 18, 2023. On September 5, 2023, the court granted preliminary approval for the settlement agreement with us. On September 9, 2024, the court granted final approval of the settlement. We cannot ascertain the final result of the class action, and our involvement in the class actions, whatever the final result may be, could divert a significant amount of our management’s attention and other resources from our business and operations, which could harm our results of operations and require us to incur significant expenses to defend the suit. Any such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition and results of operations.

ITEM 4. INFORMATION ON THE COMPANY

We began our operations in Beijing in September 2002 through Beijing Tarena Technology Co., Ltd. In November 2012, we changed the name of Beijing Tarena Technology Co., Ltd. to Tarena Technologies Inc., or Tarena Tech. Tarena International, Inc., an exempted company with limited liability, was incorporated in the Cayman Islands in October 2003 and became our ultimate holding company. On April 3, 2014, our American depositary shares, or ADSs, began trading on Nasdaq under the ticker symbol “TEDU” in connection with our initial public offering. 

We historically focused on the provision of IT and STEM education services before Divestiture 2024 and Deposition 2025. In recent years, we undertook a series of strategic transactions to streamline our operations and reposition our business. After the Divestiture 2024, our professional education business was discontinued, and our remaining operations were reclassified as continuing operations. 

On January 10, 2024, we changed our ticker symbol from “TEDU” to “TCTM.” On February 21, 2024, we changed our corporate name to “TCTM Kids IT Education Inc.” 

In 2024 and 2025, we further implemented strategic initiatives and corporate restructuring transactions to transition our business away from STEM education. We have transitioned away from our historical STEM education business and are currently focused on the development and commercialization of brain-computer interface technologies.

On April 1, 2025, we entered into share purchase agreements with certain investors, under which we sold and issued an aggregate of 25,000,000 Class A ordinary shares for a total purchase price of US$2.0 million. On the same day, we entered into an intangible asset purchase agreement with Jeethen International Co., Limited to acquire core algorithms and related software and hardware systems for brain-computer interfaces in consideration for the issuance of 135,625,000 Class A ordinary shares.

On April 3, 2025, we changed our ticker symbol from “TCTM” to “VSA”.

On July 22, 2025, we entered into a share sales and purchase agreement with First Winner Management Limited, a British Virgin Islands company (the “Buyer”), for the sale of all of our equity interests in our wholly owned subsidiaries, Kids IT Education Inc. and Tarena Hong Kong Limited (collectively, the “Targets”), to the Buyer. Pursuant to the Agreement, the Buyer agreed to acquire the Targets in exchange for nominal cash consideration of US$1.The Disposition 2025 was approved by our shareholders at an extraordinary general meeting held on August 25, 2025 and our STEM education business was divested after Disposition 2025.

On July 25, 2025, we entered into securities purchase agreements with certain purchasers, pursuant to which we agreed to sell up to an aggregate of 7,874,015 units, each unit consisting of one Class A ordinary share and one warrant to purchase one Class A ordinary share with an initial exercise price of $0.60 per share, at a price of $0.254 per unit for an aggregate purchase price of approximately $2 million. The warrants are exercisable immediately upon issuance and expire five years from the date of issuance.

On October 21, 2025, we engaged certain strategic advisors to support our business transition and development in artificial intelligence and blockchain-related areas.

On November 11, 2025, we entered into securities purchase agreements with certain purchasers, pursuant to which we agreed to sell 9,230,750 ADSs and accompanying Series A warrants to purchase up to 9,230,750 ADSs in a registered direct offering. The combined effective offering price for each ADS and the accompanying Series A Warrant was $1.30. The gross proceeds from the registered direct offering were approximately $12.0 million before deducting the placement agent’s fees and other estimated offering expenses. Each Series A Warrant is immediately exercisable, expires five years from the initial exercise date, and has an exercise price of $1.30 per ADS, subject to adjustment. The offering closed on November 13, 2025. Maxim Group LLC acted as the sole lead/exclusive placement agent in connection with the offering. 

On November 13, 2025, we held an extraordinary general meeting of shareholders at which shareholders approved, and we subsequently implemented, among other matters, (i) a share consolidation pursuant to which every 50 issued and unissued Class A and Class B ordinary shares of a par value of US$0.00002 each would be consolidated into one share of the same class with a par value of US$0.001, (ii) an increase in our authorized share capital to US$10,000,000, and (iii) amendments to our dual-class share structure, including granting Class B ordinary shares 100 votes per share and providing for the conversion of Class A ordinary shares into Class B ordinary shares, and related amendments to our amended and restated articles of association.

On March 27, 2026, we entered into securities purchase agreements with certain non-affiliated institutional investors pursuant to which we agreed to sell 250,000 ADSs and 2,750,000 ADSs underlying pre-funded warrants in a registered direct offering. The combined effective offering price for each ADS and the accompanying Pre-Funded Warrant was $1.00. The gross proceeds from the offering were approximately $3.0 million before deducting placement agent’s fees and other estimated offering expenses. The Pre-Funded Warrants are exercisable immediately and may be exercised at any time until exercised in full, subject to customary beneficial ownership limitations. The offering closed partially on March 31, 2026 and the remaining on April 1, 2026. Univest Securities, LLC acted as the sole exclusive placement agent in connection with the offering.

On April 15, 2026, certain investors exercised their rights under the March 27, 2026 securities purchase agreement to purchase additional securities pursuant to an Additional Allocation provision. The Additional Allocation closed on April 16, 2026. In connection with the Additional Allocation, we agreed to issue an aggregate of 946,150 ADSs at a purchase price of $1.00 per ADS, resulting in gross proceeds of approximately $0.946 million, before deducting placement agent fees and other offering expenses.

Our headquarters is located in China. Our principal executive offices are located at Room 1501, 15F, Building A2, Yanjing Headquarters Base Yanjiao, Sanhe City, Langfang, Hebei 065201 The People’s Republic of China. Our telephone number at this address is +86(0316)83318177. Our registered office in the Cayman Islands is located at the offices of Conyers Trust Company (Cayman) Limited, Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman KY1-1111, Cayman Islands. SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC on www.sec.gov. You can also find information on our website https://www.visysai.com The information contained on our website is not a part of this annual report. 

We are in the process of repositioning our operations toward BCI technologies and related artificial intelligence-enabled healthcare, general wellness, rehabilitation, and biotechnology solutions.

Disposition of Prior Professional Education and STEM Education Businesses

Following the completion of Divestiture 2024 and Disposition 2025, we have fully divested our prior professional education and STEM education businesses and ceased all operations related thereto. As a result, the Company has undergone a strategic business transformation and is now focused exclusively on the development of brain-computer interface, or BCI, technologies and related businesses as described herein.

Brain-Computer Interface (BCI) Business

Our BCI business is expected to be centered on the development and application of core algorithms, as well as related software and hardware systems for brain-computer interaction. Through these capabilities, we intend to develop, procure, sell, and distribute BCI-enabled or BCI-adjacent products and solutions, and to provide related technical services.

Our Mission

Our mission is to use intelligent systems to connect technological innovation with practical applications and to provide individuals, institutions, and commercial organizations with technology-enabled solutions in healthcare, rehabilitation, general wellness management, and related fields. We believe that BCI technology may become an important interface between biological signals, artificial intelligence, software systems, hardware devices, and external control applications. However, our BCI business is still at an early stage, and the commercialization of BCI technologies remains subject to substantial uncertainty, including technological, regulatory, clinical, market acceptance, supply chain, intellectual property, capital, and execution risks.

BCI Technology Overview

BCI technology is generally intended to establish direct or indirect communication channels between the brain or nervous system and external devices. Depending on the technical design, application environment, and degree of invasiveness, BCI systems may be used to collect, process, decode, and translate neural or physiological signals into machine-readable commands or analytical outputs.

Potential applications of BCI technologies may include medical rehabilitation, mobility assistance, communication assistance, neurological monitoring, sensory support, sleep support, attention monitoring, stress relief, meditation, smart device control, human-machine interaction, neuroscience research, assisted living, and other consumer, medical, research, industrial, and professional scenarios. At present, commercial opportunities in the BCI sector are primarily concentrated in medical and healthcare-related applications. These may include, among other areas, functional rehabilitation, communication support, neurological disease-related monitoring and intervention, sensory assistance, and general wellness management. In the medical and rehabilitation field, BCI technologies may potentially support patients with functional impairments, neurological injuries, paralysis, speech impairment, or sensory impairment. In general wellness and wellness scenarios, non-invasive BCI-related or Electroencephalography-based devices (“EEG-based devices”) may be used in sleep support, attention enhancement, meditation, relaxation, stress management, wellness monitoring, and related applications. In industrial and professional scenarios, BCI-related systems may be used for brain state monitoring, fatigue monitoring, human-computer interaction, research testing, and data-driven technical services.

Our Business Strategy and Development Plan

In the near term, we intend to focus primarily on non-invasive BCI-related products and services with comparatively lower regulatory and technical barriers, including general wellness management, sleep support, attention monitoring, meditation devices, rehabilitation support products, EEG acquisition devices, and customized BCI-related technical services. In the medium to longer term, subject to technological progress, clinical validation, regulatory approvals, market acceptance, and availability of capital, we may explore more specialized medical and rehabilitation applications, including products and solutions related to functional rehabilitation, assistive devices, neurological monitoring, and other healthcare applications. We may also explore selected consumer, industrial, research, and overseas market opportunities where commercially feasible.

We are a holding company with no material operations of our own. We expect to conduct our BCI-related operations primarily through our subsidiaries, operating entities, and business teams. As our new business develops, we may establish or restructure subsidiaries, regional offices, technical teams, sales teams, supplier relationships, and cooperation arrangements to support our product development, procurement, marketing, technical service delivery, and regulatory compliance activities. Our BCI-related operations remain at an early stage, and revenue generated from such business has been limited to date.

Recent Business Development

On April 1, 2025, we entered into an intangible asset purchase agreement with Jennthen International Co., Limited, pursuant to which we agreed to acquire certain core algorithms and related software and hardware systems for brain-computer interfaces, which we refer to as the System. The System is designed to collect brainwaves, facial expressions, and head movements in real time and decode such signals through artificial intelligence algorithms to control external devices. Potential products and applications derived from the System may include active rehabilitation products, vision testing tools, brain state monitoring devices, electronic meditation devices, and other BCI-related products and solutions, with possible future applications in medical rehabilitation, assisted living, neuroscience, general wellness management, and related fields.

Following the acquisition of the System, we began preparing and launching service-based and product-based business activities leveraging the acquired technology. Our current business development activities include evaluating product-market fit, identifying application scenarios, communicating with potential clients and suppliers, exploring technical service contracts, assessing device procurement and sales opportunities, and developing internal business, technical, and market capabilities. Although we remain in the process of product research, development, testing, and commercialization, we have generated limited revenue from the provision of technical services. 

BCI technology is currently developing rapidly and is characterized by high technical barriers, complex software-hardware integration requirements, evolving regulatory frameworks, and uncertain market adoption. We expect that our revenue may initially be generated from technical service contracts, sales of BCI-related devices, distribution of non-invasive BCI-related or EEG-based devices, and related technical support services. There can be no assurance that we will be able to generate substantial revenue, achieve profitability, obtain required regulatory approvals, or develop commercially successful BCI-related products or services.

According to market information included in our business planning materials, the global BCI market has been projected to grow over the coming years. However, market projections are inherently uncertain and should not be interpreted as an indication of our future performance. Our ability to benefit from any industry growth will depend on our technical capabilities, regulatory compliance, commercial execution, supplier relationships, customer acceptance, access to capital, competitive positioning, and ability to develop scalable business models.

Our BCI Technology and System

Our BCI-related business is based on the acquisition and intended application of core algorithms and related software and hardware systems. The System is designed to collect multimodal signals, including brainwave signals, facial expression signals, and head movement signals. Through AI-enabled algorithms, the System is intended to decode such signals and convert them into commands, outputs, or analytical information that may be used in connection with external devices or application systems.

The technical functions of the System may support the following areas: signal acquisition, signal processing, signal decoding, software-hardware coordination, user interaction, device control, system testing, system optimization, and related technical services. Depending on the application scenario, the System may be used to support rehabilitation assistance, general wellness monitoring, brain state monitoring, vision testing, electronic meditation, neuroscience research, or other human-machine interaction applications.

The development and commercialization of our BCI-related products and services will require continued technical testing, user testing, algorithm optimization, device adaptation, software development, hardware integration, supplier selection, customer validation, safety review, and compliance assessment. In certain medical or rehabilitation applications, additional clinical validation, product registration, medical device approval, institutional cooperation, or regulatory clearance may be required. The development cycle may be lengthy, and the actual performance, usability, safety, and market acceptance of our products and services may differ materially from our expectations.

We intend to continue improving the System and related applications through internal development, external cooperation, supplier partnerships, technical service projects, customer feedback, and potential research collaborations. Our ability to develop and commercialize BCI-related technology will depend on our ability to attract technical personnel, obtain sufficient financial resources, protect intellectual property, establish reliable supply chains, and respond to rapidly changing market and regulatory conditions.

Our Services and Business Model

Our BCI business is expected to include both a service-based business model and a product-based business model. At the current stage, our operations are still in the early phase, and our business model may continue to evolve as we test market demand, develop customer relationships, and expand our technical and commercial capabilities.

Service-Based Business Model

Under our service-based business model, we provide or intend to provide multimodal BCI signal decoding services and related technical services based on the technical specifications and application requirements of our clients. The scope of such services may include system development, testing, optimization, technical implementation, system maintenance, device adaptation, software-hardware integration, technical consulting, and other customized technical support services.

The objective of this service-based model is to help clients achieve stable BCI system operation tailored to their specific application scenarios. Potential clients may include internet technology companies, artificial intelligence startups, e-commerce platforms, medical institutions, rehabilitation institutions, research institutions, general wellness companies, smart device companies, and other technology-oriented enterprises in Asia and potentially other markets.

We expect to generate revenue from technical service contracts, customization projects, development services, system integration services, and maintenance or support services. Service fees may be determined based on project scope, technical complexity, development timeline, client requirements, resource allocation, and contractual arrangements. Because our service-based business remains in an early stage, our ability to generate recurring revenue, retain clients, and scale technical services remains uncertain.

Product-Based Business Model

Under our product-based business model, we intend to produce, procure, sell, distribute, or provide technical support for BCI-related or BCI-adjacent devices. These products may include EEG acquisition devices, smart bionic hands, sleep support devices, attention monitoring headbands, meditation devices, rehabilitation support devices, brain state monitoring devices, vision testing devices, and other non-invasive BCI-enabled or general wellness-related products.

At the current stage, we may purchase certain products, components, devices, or technical solutions from upstream suppliers based on market demand and then sell or distribute such products to business customers or end users. Our business personnel may identify customer needs, source relevant medical, general wellness, or BCI-related products from suppliers, and sell such products to business customers or other customers to generate revenue. We may also provide related technical support, maintenance, system adaptation, or customized services.

As our business scale expands, we may consider original design manufacturers (“ODMs”), original equipment manufacturers (“OEMs”), co-development, licensing, distribution, or other cooperation models. Such models may allow us to access product supply, manufacturing capacity, technical resources, brand cooperation opportunities, or market channels. However, these models may also expose us to risks relating to product quality, supplier dependence, manufacturing control, regulatory compliance, intellectual property ownership, warranties, after-sales obligations, and customer complaints.

Development Path of Our Business Model

At the current stage, we intend to focus on general wellness management products and services that can be commercialized more quickly than highly regulated invasive medical applications. These may include non-invasive products used for sleep support, attention monitoring, stress relief, meditation, rehabilitation training, wellness management, and related consumer or business applications. We believe such applications may allow us to test market demand, generate initial revenue, develop customer relationships, and build our internal business capabilities.

In the next stage, we may deepen our focus on medical and rehabilitation-related applications. This may include more specialized products and services targeting functional impairments, neurological disease-related rehabilitation, mobility support, vision-related testing, rehabilitation assistance, or assistive technology. These applications may require higher technical standards, medical cooperation, clinical testing, regulatory review, product registration, and post-market compliance. The development and commercialization of such products may require substantial time and capital.

In the longer term, if our technical capabilities, intellectual property portfolio, regulatory compliance capacity, and financial resources permit, we may explore more advanced applications, including BCI-related medical devices, assisted living systems, neuroscience applications, education-related products, gaming applications, smart home control, fatigue monitoring, and overseas market expansion. We may consider opportunities in Asia, Southeast Asia, the Middle East, Eastern Europe, or other emerging markets where our products or services may have commercial potential. Our long-term plans remain subject to substantial uncertainty, and there can be no assurance that any such initiatives will be successfully implemented.

Potential Application Scenarios

We believe BCI-related technologies may have a range of potential application scenarios. The following discussion describes areas that we may explore, but it should not be interpreted as confirmation that we currently offer all such products or services, that such products or services have received regulatory approval, or that such products or services will be successfully commercialized.

Medical Rehabilitation and Functional Assistance

BCI technology may potentially support medical rehabilitation and functional assistance by helping users interact with external devices, rehabilitation systems, assistive equipment, or monitoring tools. Potential applications may include mobility assistance, rehabilitation training, upper-limb or lower-limb functional support, smart bionic hands, exoskeleton control, and rehabilitation-related data monitoring. These applications may be relevant to patients with paralysis, limb impairment, neurological injury, stroke-related impairment, or other functional limitations.

At present, we are not a mature medical device company, and our medical rehabilitation-related business remains at an early stage. Any products or services that are classified as medical devices or used for medical diagnosis, treatment, rehabilitation, or clinical intervention may require registration, approval, clinical evaluation, or other regulatory procedures. We cannot assure investors that we will successfully develop, obtain approval for, or commercialize such products.

Communication Assistance

BCI technologies may potentially be used to assist individuals with speech or communication impairments by translating brain signals or other physiological signals into text, speech, commands, or other forms of communication output. Such applications may be relevant to patients with severe neurological diseases or loss of speech function. However, these applications are technically complex and may require substantial research, validation, device accuracy, user training, clinical support, and regulatory approval.

We may explore communication assistance-related applications in the future, but we have not yet established a mature commercial business in this area. There can be no assurance that we will be able to develop or commercialize communication assistance products or services.

Neurological Disease-Related Applications

BCI technologies may potentially be applied to monitoring, rehabilitation support, or intervention-related scenarios for neurological conditions, such as Parkinson’s disease, epilepsy, depression, Alzheimer’s disease, or other neurological or neuropsychiatric conditions. Such applications may involve brain signal acquisition, brain state monitoring, stimulation-related technologies, rehabilitation support, or data analysis.

These applications are subject to high technical, clinical, ethical, and regulatory requirements. If we seek to enter these areas, we may need to cooperate with medical institutions, research organizations, regulatory experts, and clinical professionals. We may also need to conduct clinical validation and obtain applicable approvals. We cannot assure investors that we will be able to enter or succeed in these areas.

Sensory Support and Testing

BCI-related or neurotechnology-related systems may potentially be used in sensory assistance, vision-related testing, auditory support, or other sensory-related applications. Some neurotechnology applications, such as cochlear implants, are already used in certain medical fields, while other applications, such as artificial vision or advanced visual assistance systems, remain technically challenging and subject to substantial development and regulatory requirements.

The acquired System may have potential applications in vision testing and related areas. However, our ability to commercialize such applications will depend on product development, technical validation, regulatory requirements, customer demand, and commercial partnerships.

General Wellness

In the near term, we expect to place greater emphasis on general wellness applications. These may include EEG-based sleep support devices, meditation devices, attention monitoring headbands, stress relief devices, wellness management devices, relaxation products, and general wellness products. Such products may target customers seeking self-improvement, wellness support, entertainment experience, preventive health management, or personal health-related monitoring.

general wellness products may have a shorter commercialization cycle than invasive or highly regulated medical devices, but they remain subject to product quality requirements, consumer protection laws, advertising restrictions, data privacy requirements, product safety standards, and other applicable regulations. We must ensure that any product claims are accurate, substantiated, and compliant with applicable laws. Failure to do so may expose us to customer complaints, regulatory scrutiny, product liability, reputational harm, or other adverse consequences.

Education, Entertainment, Gaming, and Smart Device Control

In the longer term, BCI-related technologies may have potential applications in education, entertainment, gaming, smart home control, and human-computer interaction. These applications may include attention training tools, memory enhancement training systems, mind-controlled toys, game controllers, smart device interaction systems, fatigue monitoring tools, or other user interaction devices.

These markets may offer broader consumer application opportunities, but they are also uncertain and competitive. Adoption may depend on product usability, affordability, user experience, content ecosystem, compatibility with external devices, privacy protection, and consumer trust. We cannot assure investors that these applications will become commercially viable for us.

Our Customers

We expect our potential customers may be classified into three principal categories: medical and rehabilitation customers, general health and wellness customers, and industrial or professional customers.

Medical and Rehabilitation Customers

Medical and rehabilitation customers may include hospitals, rehabilitation centers, medical technology companies, assistive device providers, research institutions, healthcare service providers, and other organizations focused on functional recovery, rehabilitation assistance, neurological monitoring, or assistive technologies. These customers may have strong demand for products and solutions that address functional loss, neurological impairment, mobility limitations, communication difficulties, or rehabilitation needs.

This customer group generally requires high product reliability, safety, technical accuracy, clinical relevance, regulatory compliance, after-sales support, and professional service capability. In addition, procurement processes may be longer and more complex than consumer markets. Where government procurement, insurance payment, medical reimbursement, or institutional approval is involved, commercialization may be affected by policy changes, budget constraints, reimbursement standards, hospital procurement rules, and regulatory approval procedures.

General Health and Wellness Customers

General Health and Wellness Customers may include individual consumers, wellness institutions, sleep management providers, meditation or stress relief service providers, education-related customers, smart device users, and other customers seeking self-improvement, entertainment experience, or preventive health management. These customers may be interested in non-invasive products with perceived benefits in sleep support, attention monitoring, stress relief, meditation, relaxation, wellness management, or personal health-related monitoring.

Products for this customer category may include EEG sleep support devices, mindfulness and stress relief headbands, meditation devices, attention improvement headbands, memory training systems, and other non-invasive devices. These products may be sold directly to consumers, through business-to-business channels, through distributors, or as part of general wellness or technology solutions. Consumer acceptance may depend on product safety, convenience, pricing, user experience, perceived effectiveness, brand credibility, and after-sales support.

Industrial and Professional Customers

Industrial and professional customers may include internet technology companies, artificial intelligence startups, e-commerce platforms, smart device companies, research institutions, industrial monitoring companies, professional training organizations, and other commercial partners requiring BCI-related signal acquisition, data decoding, human-machine interaction, or system integration services.

These customers may require customized technical services based on their own application scenarios. Their procurement decisions may depend on system stability, signal decoding performance, compatibility, scalability, data security, customization capability, service quality, and pricing. We intend to develop tailored BCI services for such customers, but our ability to attract and retain them remains uncertain.

Suppliers and Supply Chain

We expect our BCI business’ upstream supply chain to primarily include suppliers of signal acquisition hardware, sensors, software algorithms, device components and related technical services. These suppliers may support the procurement, development, integration and maintenance of our BCI-related products and services.

Core hardware components, including chips, electrodes, sensors, and signal acquisition modules, are important to product quality, signal accuracy, reliability, and user experience. These components may carry high technical barriers and may account for a significant portion of the value chain in certain BCI products. Software and algorithm suppliers are also important, as signal decoding efficiency, accuracy, responsiveness, and adaptability may determine whether BCI-related products and services can meet customer requirements. In more advanced medical or invasive scenarios, specialized manufacturing equipment, medical-grade materials, precision instruments, surgical support equipment, or clinical testing resources may also be required.

We are actively seeking to establish and maintain relationships with qualified suppliers. At the current stage, we may rely on third-party suppliers for certain products, components, devices, manufacturing support, or technical solutions. As our business develops, we may seek to strengthen our control over key technologies and supply chain resources, including through technology acquisition, internal development, supplier cooperation, ODM or OEM arrangements, strategic partnerships, or other commercial arrangements.

The BCI supply chain is evolving toward increasing domestic substitution, integrated software-hardware solutions, and system-level product offerings. Some suppliers may provide integrated solutions combining chips, algorithms, devices, and software systems. We may benefit from such industry trends if we can establish reliable supplier relationships and integrate external products or technologies into commercially viable solutions. However, our business may be adversely affected by supplier concentration, component shortages, price fluctuations, supplier delays, product defects, quality control failures, intellectual property disputes, regulatory non-compliance, or inability to replace suppliers on commercially reasonable terms.

Sales, Marketing, and Distribution

Our sales and marketing capabilities for the BCI business remain at an early stage. As our business develops, we intend to strengthen our business development, market expansion, technical support, customer service, and distribution capabilities. We may market our products and services to business customers, medical and rehabilitation institutions, research institutions, technology companies, general wellness channels, distributors, and selected end-user segments.

In the near term, we expect to focus on business-to-business opportunities, technical service contracts, supplier-based product sales, and selected general wellness or rehabilitation support products. We may use direct sales, distributor relationships, cooperation with suppliers, technology service partnerships, institutional cooperation, online channels, and other market development methods. In the future, if we develop or distribute consumer products, we may also explore e-commerce, offline channels, wellness institutions, rehabilitation service providers, or other sales channels.

If we choose to build an internal sales and marketing team, we may incur significant expenses and management costs. We may need to recruit personnel with technical, medical, regulatory, and commercial expertise. If we rely on third-party distributors, co-promoters, channel partners, or suppliers, our results may depend on their sales capability, customer relationships, compliance standards, and willingness to cooperate with us. There can be no assurance that we will establish effective sales, marketing, and distribution channels on commercially acceptable terms.

Research and Development

Research and development are expected to be important to the development of our BCI-related business. Our current and future research and development activities may include algorithm optimization, software development, hardware adaptation, system integration, product testing, user experience improvement, signal acquisition enhancement, device compatibility testing, data processing, technical service development, and application scenario exploration.

Because BCI technologies involve complex interactions among biology, software, hardware, artificial intelligence, signal processing, and user behavior, development work may be technically challenging and time-consuming. We may need to conduct repeated testing, iteration, and optimization before products or services can achieve stable performance. Development timelines and costs may exceed our expectations. Technical performance may not meet customer requirements or regulatory standards. Products may require redesign, additional testing, or further investment before commercialization.

We may also cooperate with external parties, including suppliers, research institutions, medical institutions, universities, commercial partners, technical consultants, and service providers. Such cooperation may help us access external expertise and resources, but it may also create risks relating to intellectual property ownership, confidentiality, development delays, quality control, compliance responsibilities, and dependence on third parties.

Our Competitive Strengths

We believe the following factors may support the development of our BCI-related business. However, these factors should be understood in light of the early-stage nature of our business and the significant uncertainties associated with the BCI industry.

Core Technology Assets. We have acquired core algorithms and related software and hardware systems for brain-computer interfaces. These assets provide a foundation for our initial entry into the BCI sector and may support the development of technical services, device-related applications, and future products. The System is designed to collect and decode brainwaves, facial expressions, and head movements using AI algorithms, which may support multiple application scenarios.

Policy Support. The BCI industry is supported by increasing policy attention, technological development, and market interest in China and other jurisdictions. Government policies in China have identified BCI and related technologies as areas of strategic scientific and technological development. Policy support may include funding, industrial guidance, research support, regulatory facilitation, and market development initiatives. However, policy direction may change, implementation may vary across regions, and policy support may not directly benefit us.

Market Potential. China and other Asian markets may provide a large potential application base for BCI-related rehabilitation, general wellness, elderly care, neurological disease-related support, and assistive technology products. Demand for rehabilitation assistance, health management, sleep support, stress relief, attention monitoring, and assistive devices may create potential commercialization opportunities. However, demand may not translate into customer adoption, revenue, or profitability for us.

Staged Commercialization Strategy. We intend to pursue a staged commercialization strategy. In the near term, we plan to focus on non-invasive general wellness and rehabilitation support products and services that may be more feasible for early commercialization. In the medium and longer term, we may explore specialized medical and rehabilitation applications that may have higher technical barriers but also higher regulatory and capital requirements. This staged approach may allow us to generate initial business experience while evaluating more advanced opportunities.

Supplier Ecosystem. We may benefit from the development of supplier ecosystems, including suppliers of sensors, electrodes, chips, EEG devices, software algorithms, and integrated BCI-related systems. As industry participants increasingly provide integrated software-hardware solutions, we may be able to cooperate with suppliers and partners to reduce development time and enter selected application scenarios. However, our dependence on suppliers may also create operational risks.

Listed Company Status. our status as a listed company may provide us with access to capital markets, visibility, and potential strategic cooperation opportunities. Subject to market conditions and regulatory requirements, we may seek financing, partnerships, acquisitions, licensing arrangements, or other strategic transactions to support our BCI business. There can be no assurance that we will be able to obtain sufficient capital or complete any strategic transaction on favorable terms.

Growth Strategies

Our growth strategy is expected to proceed through short-term, medium-term, and long-term stages.

Short-Term Strategy: General Wellness Management

In the short term, we intend to focus on non-invasive general wellness management products and services. These may include sleep support devices, attention monitoring headbands, meditation devices, stress relief devices, rehabilitation training devices, EEG acquisition devices, and other general wellness or BCI-adjacent products. We believe non-invasive products may have lower safety risks and shorter commercialization cycles than invasive medical applications, although they remain subject to product safety, data protection, advertising, consumer protection, and other compliance requirements.

Our short-term objectives are to test market demand, identify commercially viable products, establish supplier relationships, build sales channels, develop technical service capability, generate initial revenue, and strengthen market awareness. We may initially rely on procurement from suppliers, product distribution, technical service contracts, and business-to-business sales. As our scale increases, we may evaluate ODM, OEM, co-development, or licensing arrangements.

Medium-Term Strategy: Medical and Rehabilitation Applications

In the medium term, we intend to explore medical and rehabilitation-related applications with more specific functional needs. These may include rehabilitation assistance, mobility support, functional recovery, brain state monitoring, assistive devices, and other healthcare-related solutions. Target users may include patients with paralysis, limb impairment, visual impairment, neurological disease-related symptoms, or other functional limitations.

Medical and rehabilitation applications may offer meaningful commercial opportunities, but they also involve higher regulatory, technical, clinical, and capital requirements. Products classified as medical devices may require registration, testing, clinical validation, regulatory approval, quality management systems, and post-market compliance. We may need to work with medical institutions, rehabilitation centers, research organizations, suppliers, and regulatory consultants. We cannot assure investors that we will be able to develop, obtain approval for, or commercialize any medical products.

Long-Term Strategy: Broader BCI Ecosystem and International Expansion

In the longer term, subject to our technical progress, market acceptance, regulatory approvals, and financial resources, we may seek to develop a broader BCI ecosystem. This may include medical rehabilitation, assisted living, neuroscience applications, education, gaming, smart home control, fatigue monitoring, consumer electronics, and professional or industrial monitoring.

We may also explore selected overseas markets, including Asia and other emerging markets. In markets where regulatory barriers, patent restrictions, pricing pressure, or competitive conditions are more favorable, we may seek to introduce cost-effective rehabilitation devices, general wellness products, technical services, or education-related products. Any international expansion would require compliance with local product, medical device, data protection, consumer protection, advertising, import/export, tax, and other laws and regulations. We may face additional risks relating to foreign regulatory approvals, cultural differences, distribution channels, tariffs, intellectual property enforcement, currency fluctuations, and geopolitical factors.

Facilities

Our BCI business remains at an early stage and has not yet required substantial investment in large-scale manufacturing facilities. Our current operations are primarily focused on business development, technology evaluation, product research and development, supplier communication, technical services, and market development.

Our headquarters is located in Yanjiao, Hebei Province, China, where our management, technical, marketing, and administrative personnel are primarily based. As our business expands, we may establish regional subsidiaries, business teams, or offices in selected cities, including Beijing, Shenzhen, and Changsha. These planned regional structures may support market expansion, supplier management, technical cooperation, customer service, and business development. The establishment and timing of such regional operations will depend on business needs, regulatory requirements, capital availability, and management decisions.

Because our current product-based model may involve procurement, distribution, ODM, OEM, or supplier cooperation, we may not initially need to own or operate large manufacturing facilities. If we develop proprietary products or pursue medical device-related commercialization, we may need additional facilities, quality management systems, warehousing capacity, testing resources, or manufacturing arrangements. Such expansion may require additional capital expenditures and regulatory compliance.

Employees

We had a total of 7,024, 4,142, and 17 employees as of December 31, 2023, 2024, and 2025, respectively. As of the date of the report, we had 17 employees, including 3 employees in our information technology department and 14 employees in general and administration. We had 17 employees associated with our BCI-related operations as of the date of the report.

The following table sets forth the number of our employees by function as of the date of the report:

At the current stage, our employees primarily include management, technical, administrative, and business personnel. As our BCI business develops, we intend to recruit additional personnel in market development, sales, medical technology, hardware engineering, chip engineering, sensor engineering, algorithm development, AI engineering, software development, product management, regulatory compliance, supplier management, and general management. In particular, we expect that core research and development personnel, including hardware engineers, algorithm engineers, AI engineers, and medical technology specialists, will be important to our future development.

Our ability to attract, train, and retain qualified personnel will be critical to the development of our BCI business. The market for qualified technical personnel in AI, medical devices, signal processing, hardware development, software engineering, and biotechnology is competitive. We may not be able to recruit sufficient personnel on commercially reasonable terms, and any failure to do so may limit our ability to develop products, deliver services, manage suppliers, or expand our business.

As required by regulations in mainland China, we participate in various employee social security plans organized by municipal and provincial governments, including pension, unemployment insurance, maternity insurance, work-related injury insurance, medical insurance, and housing fund plans. We are required under applicable laws to make contributions from time to time to employee benefit plans at specified percentages of the salaries, bonuses, and certain allowances of our employees, up to a maximum amount specified by the local government. 

Our employees are not covered by any collective bargaining agreement. We believe that we maintain a good working relationship with our employees, and we have not experienced any significant labor disputes.

Intellectual Property

Intellectual property is important to the development and commercialization of our BCI-related business.

As of the date of this report, we do not hold any registered patents, trademarks, or other registered intellectual property rights. However, we intend to pursue intellectual property protection, including patent applications, trademark registrations, and software copyright registrations, as our BCI-related business develops and as commercially appropriate. 

Our management recognizes that our current intellectual property portfolio in the BCI sector may be limited compared with larger technology, biotechnology, medical device, or AI companies. Our future development may be constrained if we cannot develop, acquire, license, protect, or enforce sufficient intellectual property rights. We may increase investment in intellectual property development and protection, including patent applications, software copyright registration, trademark registration, confidentiality measures, and internal intellectual property management systems. There can be no assurance that our intellectual property rights will be sufficient to protect our technologies or business model. Third parties may challenge our intellectual property rights, claim that our products or services infringe their rights, independently develop similar technologies, or use our confidential information without authorization. Litigation or disputes relating to intellectual property may be costly, time-consuming, and disruptive to our business. If we are unable to protect our intellectual property and trade secrets, our competitive position, revenue, and business prospects may be materially and adversely affected.

Technology Infrastructure, Data, and Cybersecurity

Our BCI-related business may involve the collection, processing, storage, transmission, and analysis of technical data, device data, physiological signals, user interaction data, and other information. Depending on the nature of the product or service, such data may include sensitive personal information, health-related information, biometric or physiological information, or confidential business information. As a result, reliable technology infrastructure, data protection, cybersecurity, and information management systems are important to our business.

We may rely on a combination of internally developed systems, acquired technologies, third-party software, cloud infrastructure, data hosting providers, technical service providers, and supplier systems to support our operations. We may also outsource certain aspects of our online presence, server requirements, technology development, data management, and system maintenance to third-party providers. The uninterrupted operation of these systems may depend on stable internet infrastructure, reliable third-party service providers, adequate cybersecurity controls, and effective internal management.

Computer system failures, software defects, server breakdowns, telecommunications failures, data loss, cyberattacks, malware, denial-of-service attacks, unauthorized access, human error, supplier failures, or natural disasters could disrupt our operations, damage our reputation, expose us to liability, or reduce customer trust. As we expand our BCI business, we may need to strengthen our data governance, cybersecurity, privacy compliance, technical infrastructure, system backup, access control, and incident response procedures.

Because AI and BCI-related products may involve sensitive data and evolving regulatory requirements, we may be subject to privacy, data protection, cybersecurity, information security, medical data, and AI-related laws and regulations in the jurisdictions where we operate. Failure or perceived failure to comply with such laws and regulations could result in regulatory investigations, fines, penalties, litigation, customer complaints, reputational harm, or changes to our business practices.

Government Regulation and Compliance

Our BCI-related business may be subject to complex and evolving laws and regulations in the jurisdictions where we operate or plan to operate. These may include laws and regulations relating to medical devices, consumer products, product safety, advertising, healthcare services, rehabilitation devices, AI, software, cybersecurity, data protection, personal information protection, biometric information, intellectual property, import and export, e-commerce, product labeling, consumer protection, and unfair competition.

Medical and rehabilitation-related products may be subject to medical device registration, product testing, quality management, clinical evaluation, manufacturing controls, distribution requirements, post-market surveillance, and adverse event reporting. The regulatory classification of a product may depend on its intended use, technical functions, product claims, risk level, and local regulatory interpretation. If any of our products or services are deemed to be medical devices or medical services, we may be required to obtain approvals, licenses, registrations, or certifications before commercialization.

general wellness products may be subject to less stringent regulatory requirements than medical devices, but they remain subject to product quality, safety, advertising, consumer protection, data privacy, and other compliance obligations. We must ensure that marketing claims for such products are accurate, substantiated, and not misleading. Any failure to comply with applicable requirements may result in product recalls, administrative penalties, customer claims, litigation, or reputational damage.

AI-related technologies are subject to increasing regulatory attention. Our BCI System utilizes AI algorithms to decode signals and support external device control or analytical outputs. AI algorithms may be flawed, biased, inaccurate, or incomplete. The use of AI in products and services may raise ethical, privacy, safety, intellectual property, and liability concerns. Regulatory frameworks governing AI technologies are evolving, and new laws, regulations, or industry standards may restrict or impose additional requirements on the development, deployment, or commercialization of AI-enabled BCI products and services.

We may also be subject to cybersecurity and data protection regulations if our systems collect, process, or transmit user information, physiological signals, health-related information, or other sensitive data. These laws may require us to obtain user consent, implement security measures, conduct data protection assessments, restrict cross-border data transfers, respond to user rights requests, or report security incidents. Compliance with these requirements may increase our operating costs and affect our product design, data practices, and commercial arrangements.

Because the regulatory environment for BCI, AI-enabled healthcare, and neurotechnology remains evolving, we cannot predict how current or future laws and regulations will be interpreted, implemented, or enforced. Changes in regulatory policy may increase our compliance costs, delay product development or commercialization, limit our product claims, restrict sales channels, require additional approvals, or prevent us from entering certain markets.

Competition

The BCI industry is emerging, technology-intensive, and highly competitive. We may face competition from global technology companies, biotechnology companies, medical device companies, AI companies, consumer electronics companies, rehabilitation technology providers, neuroscience startups, universities, research institutions, government-supported laboratories, and private research organizations. Some of our current or future competitors may have longer operating histories, greater brand recognition, stronger research and development capabilities, larger intellectual property portfolios, more established supplier relationships, deeper medical or regulatory experience, broader sales channels, stronger customer relationships, and greater financial, technical, and marketing resources than we do.

Competition may occur in several areas, including BCI signal acquisition, AI signal decoding, sensor technology, EEG devices, rehabilitation devices, general wellness devices, software platforms, medical device development, system integration, technical services, data analysis, and customer applications. Competitors may develop products or services that are more effective, reliable, affordable, user-friendly, or commercially accepted than ours. Competitors may also obtain key patents, regulatory approvals, supplier relationships, institutional partnerships, or sales channels before we do.

We believe the principal competitive factors in our target markets may include the following:

If we fail to compete effectively, our business, financial condition, results of operations, and growth prospects may be materially and adversely affected.

Seasonality

Because our BCI-related business remains at an early stage, we do not yet have sufficient operating history to determine whether our new business is subject to material seasonality. Sales of general wellness products, rehabilitation devices, technical services, or BCI-related products may be affected by procurement cycles, customer budgeting periods, product launch timing, regulatory approval timelines, distributor sales cycles, holidays, e-commerce promotional periods, healthcare institution purchasing schedules, and general market conditions. As our business develops, our quarterly results may fluctuate due to the timing of service contracts, product deliveries, supplier shipments, customer acceptance, regulatory approvals, marketing campaigns, and other factors. Investors should not rely on results from any particular period as an indication of future performance.

Insurance

Our BCI-related operations remain at an early stage, and our insurance coverage may not be sufficient to cover all risks associated with our current or future business. As of the date of this report, we have not obtained any insurance coverage specifically related to our BCI business operations. We may not maintain insurance policies that fully cover product liability, professional liability, cybersecurity incidents, business interruption, intellectual property disputes, regulatory proceedings, property damage, employee injury, customer claims, data breaches, clinical testing risks, or other operational risks.

As we expand into BCI-related products and services, particularly healthcare-related, rehabilitation-related, device-related, or general wellness-related applications, we may need to obtain additional insurance coverage. Such insurance may not be available on commercially reasonable terms, may contain exclusions or limitations, or may be insufficient to cover all potential losses. Any uninsured or underinsured loss, claim, litigation, regulatory action, product liability issue, service failure, cybersecurity incident, or damage to our systems or facilities could materially and adversely affect our business, financial condition, results of operations, and reputation.

Legal Proceedings

As of the date of this annual report, we are not aware of any material legal proceedings relating to our BCI business. From time to time, we may become involved in legal, administrative, regulatory, or other proceedings arising in the ordinary course of business, including disputes relating to contracts, suppliers, customers, products, services, employees, intellectual property, data protection, regulatory compliance, product quality, advertising claims, or other matters. Any such proceedings, if resolved adversely, may result in monetary damages, injunctions, penalties, product recalls, regulatory restrictions, reputational harm, increased compliance costs, or changes to our business practices. Even if we prevail, legal proceedings may be costly, time-consuming, and disruptive to management and operations.

Risk-Related Business Considerations

The development of our BCI business is highly speculative and subject to numerous risks and uncertainties, many of which are beyond our control. Although this Item 4 primarily describes our business, investors should also carefully review “Item 3. Key Information—D. Risk Factors” for a detailed discussion of the risks relating to our BCI business, AI technologies, product development, commercialization, intellectual property, data protection, cybersecurity, suppliers, customers, competition, and regulatory compliance.

Our actual commercialization progress may fall short of expectations, and market acceptance of our services or products may be limited. Despite our research and development efforts, we may encounter technical challenges, regulatory hurdles, supplier delays, insufficient customer demand, capital constraints, or implementation difficulties. BCI-based products and services remain nascent and unproven at scale. If users, developers, commercial partners, medical institutions, or consumers do not adopt our solutions as anticipated, our business prospects, financial performance, and competitive position could be adversely affected.

Implementation challenges may arise due to the need to integrate complex software and hardware systems, conduct user testing, optimize algorithms, adapt devices, and validate system performance. This process may lead to prolonged development cycles, higher costs, and deviations from our forecast assumptions. Delays or performance issues may affect our ability to achieve commercialization milestones.

We may be unable to develop a partner ecosystem, sales channels, marketing capabilities, or distribution relationships on acceptable terms. Our current sales and marketing capabilities remain limited. If we are unable to build internal sales capabilities or cooperate effectively with third-party distributors, suppliers, medical institutions, technology partners, or channel partners, we may be unable to generate expected revenue.

We depend on vendors and suppliers for products, components, systems, and technical resources. If our suppliers fail to meet timelines, quality standards, contractual obligations, or regulatory requirements, or if they refuse to continue doing business with us, our operations and financial results may be adversely affected. We may not be able to replace suppliers on commercially reasonable terms or in a timely manner.

Our ability to develop differentiated BCI services and products will affect our future growth. If we are unable to incorporate new technological developments, meet customer specifications, adapt to evolving industry standards, or commercialize new products and services with sufficient speed and scale, our growth, productivity objectives, and profit margins may be adversely affected.

Our investment costs incurred in developing our BCI system may not yield the intended results. Research and development investment, technology acquisition, patent development, software development, and product testing are important to our strategy, but customer adoption may not occur as expected. If our investments do not lead to sustained customer demand or revenue growth, our results of operations may be adversely affected.

AI technologies incorporated into our BCI-related products and processes may present business, legal, ethical, and reputational risks. AI algorithms may be flawed, incomplete, biased, inaccurate, or misinterpreted. Data used for AI systems may be incomplete, inappropriate, or subject to legal restrictions. AI-related products may raise privacy, safety, human rights, intellectual property, or ethical concerns. Evolving laws and regulations may impose additional compliance obligations or restrict certain uses of AI technologies.

Cybersecurity and data protection risks may also affect our business. We may process sensitive business information, personal information, physiological signals, or other data. Unauthorized access, cyberattacks, system failures, data breaches, or misuse of information may expose us to liability, regulatory action, customer claims, reputational harm, and increased compliance costs.

Conclusion of Business Overview

Our BCI-related business represents a significant strategic transition from our prior operations. The business is based on core algorithms and related software and hardware systems for brain-computer interfaces and is intended to support service-based and product-based commercialization opportunities in general wellness, rehabilitation support, medical technology, AI-enabled signal decoding, EEG devices, and related application scenarios. We intend to pursue a staged development strategy, beginning with non-invasive general wellness and technical service opportunities and potentially expanding into more specialized medical, rehabilitation, and international applications over time.

However, our BCI business remains at an early stage. We have limited operating history in this sector, limited current revenue, and significant execution risks. Our future performance will depend on our ability to develop and commercialize products and services, establish supplier and customer relationships, attract technical personnel, protect intellectual property, comply with evolving regulations, obtain necessary approvals, manage cybersecurity and data protection risks, build sales and distribution channels, and compete effectively in a rapidly developing and highly competitive industry.

PRC Regulations

Company Law

The formation, operation, and management of corporate entities in China are governed by the PRC Company Law, which was promulgated by the Standing Committee of the National People’s Congress (SCNPC) on December 29, 1993 and became effective on July 1, 1994. The latest amendment of the PRC Company Law is dated December 29, 2023 (“Company Law (2023)”), which became effective on July 1, 2024. The PRC Company Law defines a “company” as a limited liability company or a joint stock limited company, both of which have the status of an enterprise legal person, and the liability of shareholders of a limited liability company or a joint stock limited company is limited to the amount of their capital contributions or shareholdings.

Company Law (2023) further governs the formation, dissolution, organizational structure, capitalization, and social responsibility of a company, as well as the duties of officers and shareholders. Pursuant to Company Law (2023), all registered capital of a PRC limited liability company subscribed to by a shareholder must be fully paid for by such shareholder within five years from the date of the formation of the limited liability company, unless otherwise provided by applicable laws.

Regulations on Healthcare Services and Clinical Application of Medical Technologies

On December 28, 2019, the SCNPC promulgated the Basic Medical Healthcare and Health Promotion Law of the PRC, or the Basic Healthcare Law, which became effective on June 1, 2020.

Article 44 of the Basic Healthcare Law provides that the State implements classified administration over the clinical application of medical and healthcare technologies. Medical and healthcare technologies that involve high technical difficulty, high medical risks, and higher requirements for service capability and professional technical competence are subject to strict administration. Medical and healthcare institutions that conduct clinical applications of medical and healthcare technologies must ensure that such applications are compatible with their functions and responsibilities, and must follow the principles of science, safety, standardization, effectiveness, economy and ethics.

Brain-computer interface technologies, particularly invasive brain-computer interface technologies, such as implantable neural electrodes and deep brain stimulation devices, may fall within the category of medical and healthcare technologies involving high technical difficulty and high medical risks. Clinical applications of such technologies are therefore expected to be subject to strict state administration. Institutions conducting clinical applications of such technologies must be qualified medical and healthcare institutions and must complete independent ethical review procedures. Commercial companies, if not qualified as medical institutions, may not directly provide brain-computer interface-based clinical treatment services. Violation of the foregoing requirements may result in administrative penalties, including orders to cease relevant activities, confiscation of illegal gains and fines.

Regulations on Biosecurity and Biotechnology Activities

On October 17, 2020, the SCNPC promulgated the Biosecurity Law of the PRC, or the Biosecurity Law, which became effective on April 15, 2021.

Article 34 of the Biosecurity Law provides that the State strengthens safety administration over biotechnology research, development and application activities, and prohibits biotechnology research, development and application activities that endanger public health, damage biological resources, destroy ecosystems or biodiversity, or otherwise harm biosecurity. Biotechnology research, development and application activities must comply with ethical principles.

Brain-computer interface technologies involve the collection, decoding and potential intervention of neural signals and may constitute applications of biotechnology involving the human nervous system. Any brain-computer interface research or application that may cause damage to brain function, infringe human dignity, or endanger public health may fall within the scope of activities prohibited under the Biosecurity Law. Enhancement-oriented invasive brain-computer interface devices, such as devices designed to improve cognitive capabilities of healthy individuals, may be regarded as posing biosecurity risks if they are developed or applied without sufficient safety assessment and ethical review. Organizations engaging in brain-computer interface research should establish internal biosecurity and ethical review mechanisms.

Regulations on Medical Devices and Medical Device Distribution

On December 21, 2020, the 119th executive meeting of the State Council adopted the revised Regulations on the Supervision and Administration of Medical Devices, or the Medical Device Regulations, which became effective on June 1, 2021. The Medical Device Regulations were originally promulgated on January 4, 2000. Earlier versions of the Medical Device Regulations were amended in 2014 and 2017, and the 2020 revision constituted a comprehensive revision.

Article 6 of the Medical Device Regulations provides that the State implements classified administration over medical devices according to their risk levels. Class I medical devices refer to medical devices with low risk, whose safety and effectiveness can be ensured through routine administration, and are subject to product filing administration. Class II medical devices refer to medical devices with moderate risk, which require strict control and administration to ensure their safety and effectiveness, and are subject to product registration administration. Class III medical devices refer to medical devices with relatively high risk, which require special measures for strict control and administration to ensure their safety and effectiveness, and are subject to product registration administration. In evaluating the risk level of a medical device, factors such as intended purpose, structural characteristics and method of use must be considered.

Article 13 of the Medical Device Regulations provides that Class I medical devices are subject to product filing administration, while Class II and Class III medical devices are subject to product registration administration. Medical device registrants and filing applicants must strengthen whole-life-cycle quality management of medical devices and are legally responsible for the safety and effectiveness of medical devices during research and development, production, operation and use.

Article 45 of the Medical Device Regulations provides that medical device operation enterprises and users must purchase medical devices from medical device registrants, filing applicants, manufacturers or distributors with lawful qualifications. When purchasing medical devices, such enterprises and users must verify the qualifications of suppliers and the conformity certification documents of the medical devices, and establish purchase inspection record systems. Enterprises engaging in the wholesale of Class II and Class III medical devices and the retail sale of Class III medical devices must also establish sales record systems. Purchase inspection records and sales records must be true, accurate, complete and traceable, and must be retained for the period prescribed by the drug regulatory authority under the State Council.

The specific regulatory classification of brain-computer interface devices depends on their intended use and risk level. Brain-computer interface products used for non-medical purposes, such as general health management, entertainment or relaxation, and which do not claim any medical effect, may not be classified as medical devices. However, such products must not imply or advertise any medical effect. If product promotion includes statements such as “treatment,” “rehabilitation,” “symptom improvement” or similar medical claims, the products may be regarded as medical devices and may be required to complete medical device registration.

Non-invasive brain-computer interface devices used for assisted diagnosis, treatment or rehabilitation may generally be classified as Class II medical devices due to their moderate risk level, and product registration must be submitted to the provincial-level drug regulatory authority. Enterprises distributing such devices must complete relevant operation filing procedures. Invasive brain-computer interface devices, such as implantable neural stimulation chips and deep brain electrode systems, directly contact the central nervous system and involve higher risks. They are generally classified as Class III medical devices, and product registration must be submitted to the National Medical Products Administration. Enterprises distributing such devices must obtain a Medical Device Operation License.

Enterprises that produce or operate medical devices without obtaining the required registration certificates or operation licenses may be subject to penalties under the Medical Device Regulations, including confiscation of illegal gains, fines ranging from 15 times to 30 times the value of the products, and, in serious cases, revocation of licenses. Enterprises purchasing brain-computer interface devices must verify suppliers’ medical device production or operation licenses and product registration certificates and must retain relevant records.

On March 10, 2022, SAMR issued the revised Measures for the Supervision and Administration of Medical Device Operation, or the Medical Device Operation Measures, which became effective on May 1, 2022 and replaced the previous version issued by the former China Food and Drug Administration in 2014.

The Medical Device Operation Measures provide that classified administration applies to the operation of medical devices according to their risk levels. Operation of Class I medical devices does not require licensing or filing. Operation of Class II medical devices is subject to filing administration. Operation of Class III medical devices is subject to licensing administration. Enterprises engaging in the operation of Class II medical devices must file with the drug regulatory authority of the city divided into districts where they are located. Enterprises engaging in the operation of Class III medical devices must apply to the drug regulatory authority of the city divided into districts where they are located for a medical device operation license.

The Medical Device Operation Measures also require medical device operation enterprises to establish quality management systems and quality control measures covering the entire process of procurement, acceptance inspection, storage, sales, transportation and after-sales services, and to maintain relevant records. Such records must be true, accurate, complete and traceable. Enterprises engaging in the wholesale of Class II and Class III medical devices and the retail sale of Class III medical devices must also establish sales record systems.

Regulations on Science and Technology Ethics and Human Subject Research

On September 7, 2023, the Ministry of Science and Technology, the Ministry of Education, the Ministry of Industry and Information Technology and seven other authorities jointly issued the Measures for Ethical Review of Science and Technology Activities (for Trial Implementation), or the Ethical Review Measures, which became effective on December 1, 2023.

Article 2 of the Ethical Review Measures provides that ethical review must be conducted in accordance with the measures for the following science and technology activities: science and technology activities involving human research participants, including activities that use human beings as subjects of testing, investigation, observation or other research activities, as well as activities using human biological samples, personal information or data; science and technology activities involving experimental animals; science and technology activities that do not directly involve humans or experimental animals but may present ethical risks and challenges in areas such as life and health, the ecological environment, public order or sustainable development; and other science and technology activities that require ethical review under laws, administrative regulations or relevant state provisions.

The appendix to the Ethical Review Measures, namely the List of Science and Technology Activities Requiring Ethical Review Re-Examination, expressly provides that clinical research involving invasive brain-computer interface technologies for neurological and psychiatric diseases must undergo ethical review and ethical review re-examination.

Accordingly, any brain-computer interface research involving human testing or neural data collection, including testing of the effects of non-invasive devices where EEG data is collected, must be reviewed by an ethics review committee before commencement and must be subject to ongoing follow-up review during the research process. Clinical research involving invasive brain-computer interface technologies must undergo stricter ethical review re-examination procedures in addition to routine ethical review. If brain-computer interface-related human research is conducted without ethical review or after failing to pass ethical review, competent authorities may order cessation of the activities, issue public criticism, confiscate illegal gains and, in serious cases, pursue legal liability in accordance with applicable laws.

On February 18, 2023, the Ministry of Education, the Ministry of Science and Technology, the National Health Commission and another authority jointly issued the Measures for Ethical Review of Life Science and Medical Research Involving Human Beings, or the Human Research Ethical Review Measures, which became effective on February 18, 2023.

The Human Research Ethical Review Measures apply to ethical review of life science and medical research involving human beings conducted within mainland China. Such research includes activities using methods in physics, chemistry, biology and informatics to study human genes, tissues, organs, cells or individuals, as well as activities using epidemiology, sociology, psychology and other methods to collect, record, use, report or store materials relating to life science and medical research involving human beings. The measures require institutions conducting life science and medical research involving human beings to establish ethics review committees and set out detailed requirements relating to the duties, composition, review procedures and informed consent requirements of such committees.

Any brain-computer interface research involving human testing or human data collection must comply with the Human Research Ethical Review Measures.

Regulations on Brain-Computer Interface Research Ethics

In December 2023, the Artificial Intelligence Ethics Subcommittee of the National Science and Technology Ethics Committee formulated and released the Ethical Guidelines for Brain-Computer Interface Research, or the BCI Ethical Guidelines, for reference by relevant research institutions and researchers. Although the BCI Ethical Guidelines are not administrative regulations, they are authoritative guidance documents issued by the National Science and Technology Ethics Committee and may be used by ethics review committees and regulatory authorities as an important basis for review and supervision.

The BCI Ethical Guidelines define brain-computer interface technology as a new interdisciplinary technology that creates a direct information interaction channel between the human brain and external devices. The guidelines distinguish among non-invasive, invasive and interventional brain-computer interface technologies, and define key concepts such as restorative brain-computer interface technology, which is intended to help patients restore lost functions, and enhancement brain-computer interface technology, which is intended to enhance perception, cognition or motor capabilities of healthy individuals.

The BCI Ethical Guidelines establish six basic principles: protecting health and promoting well-being; respecting research subjects and ensuring appropriate application; upholding justice and fairness; managing risks and ensuring safety; ensuring information disclosure and informed consent; and supporting innovation while maintaining strict regulation.

The BCI Ethical Guidelines provide that brain-computer interface research must comply with applicable laws and regulations and must not disseminate false advertising or information inconsistent with the actual effects of brain-computer interface technologies. Research should primarily focus on restorative brain-computer interface technologies. Enhancement brain-computer interface technologies should be explored only on a limited basis, under strict regulation and where benefits are clear. Written informed consent must be obtained from research subjects or their guardians, and research subjects must be allowed to withdraw unconditionally at any stage. Private data such as EEG signals must be strictly protected in accordance with the Personal Information Protection Law and the Data Security Law.

For invasive brain-computer interface research, the BCI Ethical Guidelines require participation by clinical physicians, professional certification of devices, and sufficient safety and effectiveness verification in accordance with guidelines and standards applicable to surgical implants, active implants and related products. Such verification may include biocompatibility test reports, type testing reports, and large-animal safety and effectiveness reports. The guidelines expressly distinguish restorative brain-computer interface technologies from enhancement brain-computer interface technologies. Regulators take a prudent approach toward enhancement brain-computer interface technologies and require that such technologies not be applied hastily before relevant risks are properly addressed.

Regulations on Internet Information Security, Data Security and Privacy Protection

On August 20, 2021, the SCNPC promulgated the Personal Information Protection Law of the PRC, or the Personal Information Protection Law, which became effective on November 1, 2021.

Article 28 of the Personal Information Protection Law provides that sensitive personal information refers to personal information that, once leaked or illegally used, may easily result in harm to the dignity of natural persons or harm to personal or property safety. Sensitive personal information includes biometric information, religious belief, specific identity information, medical and health information, financial accounts, individual location tracking information, and personal information of minors under the age of 14. A personal information processor may process sensitive personal information only where there is a specific purpose and sufficient necessity, and where strict protective measures are adopted.

Article 29 of the Personal Information Protection Law provides that the processing of sensitive personal information must be based on separate consent from the individual. Where laws or administrative regulations require written consent for the processing of sensitive personal information, such requirements must be followed.

Article 30 of the Personal Information Protection Law provides that where a personal information processor processes sensitive personal information, it must, in addition to general notification requirements, inform the individual of the necessity of processing such sensitive personal information and the impact on the individual’ s rights and interests.

Brain signals collected during the operation of brain-computer interface devices, such as electroencephalography, or EEG, signals, intracranial neural signals and local field potentials, may directly or indirectly identify natural persons and reflect their mental state, emotional changes and potential health status. Such information may therefore constitute typical biometric information and medical and health information, and thus sensitive personal information. Accordingly, any collection, storage, use, processing, transmission, provision or disclosure of neural data relating to brain-computer interface products or services must be conducted only after obtaining separate consent from the data subject. General authorization, default authorization or bundled authorization should not be used as a substitute for separate consent. Where medical use is involved, written consent may also be required.

In addition, individuals must be clearly informed of the necessity, method and scope of processing sensitive personal information, as well as the impact of such processing on their rights and interests. Strict protection measures must be adopted, including encryption, de-identification, access control and security audits. Where neural data of minors under the age of 14 is processed, separate consent must be obtained from their guardians, and the requirements under the Provisions on the Cyber Protection of Children’ s Personal Information must be followed. Serious violations of the foregoing requirements may result in fines of up to RMB 50 million or 5% of the previous year’ s turnover, and regulators may order suspension of relevant business, business rectification or revocation of relevant business licenses.

On June 10, 2021, the SCNPC promulgated the Data Security Law of the PRC, or the Data Security Law, which became effective on September 1, 2021.

The Data Security Law establishes a classified and graded data protection system. Data must be protected according to its importance to economic and social development and the degree of harm that may be caused to national security, public interest or the lawful rights and interests of individuals and organizations if such data is tampered with, destroyed, leaked, illegally obtained or illegally used. Processors of important data must designate data security officers and management departments, conduct regular risk assessments of their data processing activities, and submit risk assessment reports to relevant competent authorities. In addition, without approval from competent PRC authorities, no domestic organization or individual may provide data stored within mainland China to foreign judicial or law enforcement authorities.

Large volumes of neural data, health data and user behavior data generated in brain-computer interface business operations may be classified as important data or core data, particularly where the data is large in scale or may involve national security or public interest. Data processors should establish data classification and grading systems and identify whether important data is involved. Where important data is involved, data security officers must be appointed, regular risk assessments must be conducted, and requirements relating to local data storage and cross-border data transfer controls must be strictly complied with. Any cross-border transfer of neural data must be handled in accordance with applicable requirements, including security assessment filings under the Measures for Security Assessment of Data Export or standard contract filing procedures. Data must not be transferred overseas without required approval or completion of applicable procedures.

On November 7, 2016, the SCNPC promulgated the Cybersecurity Law of the PRC, or the Cybersecurity Law, which became effective on June 1, 2017.

The Cybersecurity Law provides that network operators collecting and using personal information must follow the principles of legality, justification and necessity, disclose their rules for collection and use, clearly indicate the purpose, method and scope of collection and use, and obtain consent from the persons whose information is collected. Network operators must not collect personal information unrelated to the services they provide, must not collect or use personal information in violation of laws, administrative regulations or agreements with users, and must process personal information stored by them in accordance with laws, administrative regulations and agreements with users. Network operators must not leak, tamper with or destroy personal information collected by them. Without consent from the persons whose information is collected, network operators must not provide such personal information to others, except where the information has been processed in a manner that prevents identification of specific individuals and cannot be restored.

If brain-computer interface products are sold through internet platforms or if supporting software services are provided online, operators must comply with the Cybersecurity Law, establish cybersecurity protection systems, adopt technical measures to prevent cybersecurity risks, and must not illegally collect or leak users’ personal information.

Regulations on Cross-Border Data Transfers

On July 7, 2022, the Cyberspace Administration of China (CAC) issued the Measures for Security Assessment of Data Export, or the Data Export Measures, which became effective on September 1, 2022.

The Data Export Measures provide that where a data processor provides important data or personal information collected and generated during operations within mainland China to overseas recipients, the data processor must apply for a data export security assessment through the provincial-level cyberspace administration to the national cyberspace administration under any of the following circumstances: the data processor provides important data overseas; a critical information infrastructure operator or a data processor that processes personal information of more than one million individuals provides personal information overseas; a data processor that has cumulatively provided personal information of more than 100,000 individuals or sensitive personal information of more than 10,000 individuals overseas since January 1 of the preceding year provides personal information overseas; or other circumstances requiring security assessment as prescribed by the national cyberspace administration.

On March 22, 2024, the CAC issued the Provisions on Promoting and Regulating Cross-Border Data Flows, which further clarified specific requirements and exemption scenarios for cross-border data transfer administration. Neural data involved in brain-computer interface business constitutes sensitive personal information. If such data is transferred overseas, the data processor must apply for data export security assessment or complete standard contract filing procedures in accordance with applicable requirements, and such data must not be transferred overseas without required approval or completion of applicable procedures.

Regulations on Advertising and Commercial Promotion

On October 27, 1994, the SCNPC promulgated the Advertising Law of the PRC, or the Advertising Law, which became effective on February 1, 1995 and was amended in 2015, 2018 and 2021.

Article 4 of the Advertising Law provides that advertisements must not contain false or misleading content and must not deceive or mislead consumers. Advertisers are responsible for the truthfulness of advertising content and must not conduct false or misleading commercial promotion.

Article 16 of the Advertising Law provides that advertisements for medical services, pharmaceuticals and medical devices must not contain any assertion or guarantee of efficacy or safety; any statement of cure rate or effectiveness rate; any comparison with other pharmaceuticals, medical devices or medical institutions in terms of efficacy or safety; any recommendation or endorsement by advertising spokespersons; or any other content prohibited by laws or administrative regulations.

Article 46 of the Advertising Law provides that advertisements for medical services, pharmaceuticals, medical devices, pesticides, veterinary drugs and health food, as well as other advertisements that are required to be reviewed under laws and administrative regulations, must be reviewed by relevant authorities before publication. Such advertisements may not be published without review.

Brain-computer interface products that have not obtained medical device registration certificates must not advertise any medical effect. For registered medical devices, advertising content must be strictly consistent with the scope of application approved under the registration certificate. If products that have not obtained medical device registration certificates advertise medical effects, such advertisements may be deemed false advertising. Under Article 55 of the Advertising Law, penalties may include fines of three to five times the advertising expenses, or fines ranging from RMB200,000 to RMB1,000,000. In serious cases, the business license may be revoked.

On September 2, 1993, the SCNPC promulgated the Anti-Unfair Competition Law of the PRC, or the Anti-Unfair Competition Law, which became effective on December 1, 1993 and was amended in 2017, 2019 and 2025.

Article 9 of the Anti-Unfair Competition Law provides that business operators must not conduct false or misleading commercial promotion regarding the performance, functions, quality, sales status, user reviews, honors received or other aspects of their goods, in order to deceive or mislead consumers. Business operators must not assist other business operators in conducting false or misleading commercial promotion by organizing false transactions or other means.

Article 25 of the Anti-Unfair Competition Law provides that where a business operator violates Article 9 by conducting false or misleading commercial promotion regarding its goods, the supervision and inspection department may order the business operator to cease the illegal conduct and impose a fine of no more than RMB1,000,000. In serious cases, a fine ranging from RMB1,000,000 to RMB2,000,000 may be imposed, and the business license may be revoked.

If brain-computer interface products are sold or promoted with false or misleading statements regarding their performance or functions, such as exaggerating their effect on diseases or health conditions, such conduct may constitute both false advertising and false commercial promotion and may expose the business operator to administrative penalties, including revocation of its business license.

Regulations on Product Quality, Product Liability and Consumer Protection

On February 22, 1993, the SCNPC promulgated the Product Quality Law of the PRC, or the Product Quality Law, which became effective on September 1, 1993 and was amended in 2000, 2009 and 2018.

Article 4 of the Product Quality Law provides that producers and sellers are liable for product quality in accordance with the law.

Article 26 of the Product Quality Law provides that Producers are responsible for the quality of the products they produce. Products must not contain unreasonable dangers that threaten personal safety or the safety of another person’ s property. Products must possess the required performance for their intended use and must conform to the product standards indicated on the product or its packaging, as well as the quality conditions represented through product descriptions, physical samples or other means. Where a defective product causes personal injury or damage to property other than the defective product itself, the producer must bear compensation liability.

Article 33 of the Product Quality Law provides that sellers must implement purchase inspection and acceptance systems, verify product conformity certificates and other product marks, and take measures to maintain the quality of products sold. Sellers must not sell products that have been expressly eliminated and prohibited from sale by the State, or products that have expired or deteriorated. Where a product defect is caused by the fault of the seller and causes personal injury or property damage to another person, the seller must bear compensation liability.

Brain-computer interface products are electronic and electrical products, and both producers and sellers of such products must strictly comply with the Product Quality Law. When purchasing brain-computer interface devices, business operators must implement purchase inspection and acceptance systems and verify product conformity certificates and other product marks. If product quality defects cause personal injury to users, consumers may seek compensation from the seller or producer under the Product Quality Law. After compensating consumers, the seller may seek recovery from the producer or other suppliers if the defect is attributable to the producer or such other suppliers.

On October 31, 1993, the SCNPC promulgated the Consumer Rights and Interests Protection Law of the PRC, or the Consumer Protection Law, which became effective on January 1, 1994 and was amended in 2009 and 2013.

The Consumer Protection Law provides that consumers have nine basic rights, including the right to safety, the right to know, the right to choose, the right to fair trade and the right to seek compensation in accordance with the law. Business operators that provide goods or services to consumers must observe social morality, operate in good faith, protect the lawful rights and interests of consumers, and must not make false or misleading publicity. Business operators must ensure that the goods or services they provide meet requirements for the protection of personal and property safety. For goods or services that may endanger personal or property safety, business operators must provide truthful explanations and clear warnings to consumers and must explain and indicate the proper method of using the goods or receiving the services, as well as methods for preventing harm.

If brain-computer interface products contain quality defects or insufficient instructions for use and cause personal injury or property damage to consumers, consumers may require sellers or producers to bear compensation liability. When selling brain-computer interface products, business operators must provide truthful and accurate product information, must not conceal potential risks that may endanger personal safety, and must provide after-sales services and complaint handling channels in accordance with applicable requirements.

On May 28, 2020, the SCNPC promulgated the Civil Code of the PRC, or the Civil Code, which became effective on January 1, 2021. Chapter IV of Book VII, Tort Liability, sets out the civil liability system for damages caused by defective products.

Article 1202 of the Civil Code provides that where a defective product causes damage to another person, the producer must bear tort liability. Article 1203 provides that where a defective product causes damage to another person, the injured person may claim compensation from the producer of the product or from the seller of the product. Where the defect is caused by the producer, the seller has the right to seek recovery from the producer after paying compensation. Where the defect is caused by the fault of the seller, the producer has the right to seek recovery from the seller after paying compensation. Article 1207 provides that where a person knowingly produces or sells a defective product, or fails to take effective remedial measures in accordance with the preceding article, thereby causing death or serious damage to health, the injured person has the right to claim corresponding punitive damages.

If brain-computer interface devices contain design defects, manufacturing defects or inadequate warnings or instructions, and users suffer personal injury or property loss during use, the seller may be required to bear tort compensation liability in accordance with the law. After compensating the injured person, the seller may seek recovery from the producer if the defect is attributable to the producer.

Regulations on E-Commerce

On August 31, 2018, the SCNPC promulgated the E-Commerce Law of the PRC, or the E-Commerce Law, which became effective on January 1, 2019.

The E-Commerce Law applies to business activities involving the sale of goods or provision of services through information networks such as the Internet. E-commerce operators must complete market entity registration in accordance with the law, perform tax payment obligations in accordance with the law, and obtain administrative licenses where required by law. E-commerce operators must disclose information relating to goods or services in a comprehensive, truthful, accurate and timely manner, and must protect consumers’ rights to know and to choose. E-commerce operators must not engage in false or misleading commercial promotion by fabricating transactions, creating false user reviews or other means to deceive or mislead consumers.

If brain-computer interface products are sold through e-commerce platforms, including self-operated websites or third-party platforms, the operators must complete market entity registration in accordance with the law and continuously display their business license information and administrative license information relating to their business, if applicable, in a prominent position on the homepage. Operators within e-commerce platforms must also comply with platform rules and accept platform verification of their operating qualifications and products.

Regulations Relating to Intellectual Property

Copyright

China has adopted comprehensive legislation governing intellectual property rights, including trademarks and copyrights. China is a signatory to the primary international conventions on intellectual property rights and has been a member of the Agreement on Trade Related Aspects of Intellectual Property Rights since its accession to the WTO in December 2001.

In September 1990, the SCNPC promulgated the PRC Copyright Law, effective in June 1991 and amended in 2001, 2010 and 2020 respectively. The amended Copyright Law extends copyright protection to internet activities, products disseminated over the internet and software products. In addition, there is a voluntary registration system administered by the Copyright Protection Centre of China.

In order to further implement the Computer Software Protection Regulations, promulgated by the State Council in December 2001 and amended in 2011 and 2013 respectively, the National Copyright Administration issued Computer Software Copyright Registration Procedures in February 2002, which specify detailed procedures and requirements with respect to the registration of software copyrights.

Trademarks

Trademarks are protected by the PRC Trademark Law, which was adopted in 1982 and subsequently amended in 1993, 2001, 2013 and 2019, as well as the Implementation Regulation of the PRC Trademark Law most recently adopted by the State Council in 2014. The China National Intellectual Property Administration under the State Administration for Market Regulation handles trademark registrations and grants a term of ten years to registered trademarks, which may be renewed for consecutive ten-year periods upon request by the trademark owner. Trademark license agreements must be filed with the Trademark Office for record. The PRC Trademark Law has adopted a “first-to-file” principle with respect to trademark registration. Where a trademark for which a registration has been made is identical or similar to another trademark that has already been registered or been subject to a preliminary examination and approval for use on the same kind of or similar commodities or services, the application for registration of such trademark may be rejected. Any person applying for the registration of a trademark may not prejudice the existing right first obtained by others, nor may any person register in advance a trademark that has already been used by another party and has already gained a “sufficient degree of reputation” through such party’s use.

Patent

According to the PRC Patent Law promulgated by the SCNPC in 1984 and amended in 1992, 2000, 2008 and 2020, respectively, a patentable invention or a utility model must meet three criteria: novelty, inventiveness and practicability. A patent is valid for a twenty-year term for an invention and a ten-year term for a utility model or design, starting from the application date.

Regulations on Foreign Currency Exchange

The principal regulations governing foreign currency exchange in mainland China are the Foreign Exchange Administration Regulations, or the Foreign Exchange Regulations, as amended on August 5, 2008. Under the Foreign Exchange Regulations, Renminbi is freely convertible for current account items, including the distribution of dividends, interest payments, trade and service-related foreign exchange transactions, but not for capital account items, such as direct investments, loans, repatriation of investments and investments in securities outside mainland China, unless the prior approval of the SAFE is obtained and prior registration with the SAFE is made. Though there are restrictions on the convertibility of Renminbi for capital account transactions, which principally include investments and loans, we generally follow the regulations and apply to obtain the approval of the SAFE and other PRC governmental authorities.

In May 2014, SAFE promulgated the Provisions on the Foreign Exchange Administration Rules on Cross-border Guarantee, which, along with the PRC Foreign Currency Administration Rules, provides that failure to register a cross-border guarantee may subject the violator to an order to rectify, a warning and a fine of no more than RMB300,000. In June 2016, SAFE promulgated SAFE Circular No. 16, which removed certain restrictions previously provided under several SAFE circulars in respect of conversion by a foreign-invested enterprise of foreign currency registered capital into RMB and use of such RMB capital. However, SAFE Circular No. 16 continues to prohibit foreign-invested enterprises from, among other things, using RMB funds converted from their foreign exchange capital for expenditure beyond their business scope, and providing loans to non-affiliated enterprises except as permitted in the business scope. On October 23, 2019, SAFE issued the Circular on Further Promoting Cross-border Trade and Investment Facilitation, or SAFE Circular 28. Among other things, SAFE Circular 28 relaxes prior restrictions and allows foreign-invested enterprises that do not have equity investments in their approved business scope to use their capital obtained from foreign exchange settlement to make domestic equity investments as long as the investments are genuine and in compliance with the foreign investment-related laws and regulations.

These circulars may delay or limit us from using the proceeds of offshore offerings to make additional capital contributions or loans to our subsidiaries in mainland China, and violations of these circulars could result in severe monetary or other penalties. See also “Item 3. Key Information-D. Risk Factors-Risks Related to Doing Business in China - Regulation of direct investment and loans by offshore holding companies to mainland China entities and governmental control of currency conversion may delay or limit us from using the proceeds of offshore offerings to make loans to our subsidiary in mainland China, or making additional capital contributions to our mainland China subsidiary, which could adversely affect our ability to fund and expand our business.”

Regulations on Dividend Distribution

Under our current corporate structure, our Cayman Islands holding company primarily relies on dividend payments from Beijing Wangwen, which is a wholly foreign-owned enterprise incorporated in mainland China, to fund any cash and financing requirements we may have. The principal regulations governing the distribution of dividends of foreign-invested enterprises include the Company Law, as amended respectively in 2004, 2005, 2013, 2018 and 2023, and the PRC Foreign Investment Law, which came into effect on January 1, 2020.

Under these laws and regulations, wholly foreign-owned enterprises in mainland China may pay dividends only out of their accumulated after-tax profits, if any, determined in accordance with accounting standards and regulations of mainland China. In addition, wholly foreign-owned enterprises in mainland China are required to allocate at least 10% of their respective accumulated profits each year, if any, to fund certain reserve funds until these reserves have reached 50% of the registered capital of the enterprises. Wholly foreign-owned companies may, at their discretion, allocate a portion of their after-tax profits based on accounting standards of mainland China to staff welfare and bonus funds.

Regulations on Foreign Exchange Registration of Overseas Investment by Mainland China Residents

Pursuant to SAFE’s Notice on Relevant Issues Relating to Domestic Residents’ Investment and Financing and Round-Trip Investment through Special Purpose Vehicles, or SAFE Circular No. 37, issued and effective on July 4, 2014, and its appendices, mainland China residents, including mainland China institutions and individuals, must register with the local branch of SAFE in connection with their direct establishment or indirect control of an offshore entity, for the purpose of overseas investment and financing, with such mainland China residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests, referred to in SAFE Circular No. 37 as a “special purpose vehicle.” SAFE Circular No. 37 further requires an amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as an increase or decrease of capital contributed by mainland China individuals, share transfer or exchange, merger, division or other material events.

On February 13, 2015, SAFE promulgated a Notice on Further Simplifying and Improving Foreign Exchange Administration Policy on Direct Investment, or SAFE Notice 13, which became effective on June 1, 2015. In accordance with SAFE Notice 13, entities and individuals are required to apply for foreign exchange registration of foreign direct investment and overseas direct investment, including those required under the SAFE Circular No. 37, with qualified banks, instead of SAFE. The qualified banks, under the supervision of SAFE, directly examine the applications and conduct the registration.

In the event that a mainland China shareholder holding interests in a special purpose vehicle fails to fulfill the required SAFE registration, the subsidiaries in mainland China of that special purpose vehicle may be prohibited from making distributions of profit to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be restricted in its ability to contribute additional capital into its subsidiaries in mainland China. Furthermore, failure to comply with the various SAFE registration requirements described above could result in liability under laws of mainland China for foreign exchange evasion. These regulations apply to our direct and indirect shareholders who are mainland China residents, and may apply to any offshore acquisitions and share transfers that we make in the future if our shares are issued to mainland China residents. We have requested mainland China residents currently holding direct or indirect interests in our company, to our knowledge, to make the necessary applications, filings and amendments as required under SAFE Circular No. 37 and other related rules. We have used our best efforts to notify all of our shareholders who are mainland China citizens and hold interests in us to register with the local SAFE branch and/or qualified banks as required under SAFE Circular No. 37 and SAFE Notice 13. See “Item 3. Key Information-D. Risk Factors-Risks Related to Doing Business in China - Regulations relating to offshore investment activities by mainland China residents may limit our mainland China subsidiary’s ability to increase their registered capital or distribute profits to us, limit our ability to inject capital into our mainland China subsidiary, or otherwise expose us to liability and penalties under laws of mainland China.”

Regulations Relating to Overseas Listing and M&A

On August 8, 2006, six PRC governmental and regulatory agencies, including the Ministry of Commerce and the CSRC, jointly promulgated the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, a regulation with respect to the mergers and acquisitions of domestic enterprises by foreign investors that became effective on September 8, 2006 and was revised on June 22, 2009. Foreign investors shall comply with the M&A Rules when they purchase equity interests of a domestic company or subscribe for the increased capital of a domestic company, thus changing the nature of the domestic company into a foreign-invested enterprise; or when the foreign investors establish a foreign-invested enterprise in mainland China for the purpose of purchasing the assets of a domestic company and operating such assets; or when the foreign investors purchase the assets of a domestic company, establish a foreign-invested enterprise by injecting such assets and operate the assets. The M&A Rules, among other things, purport to require that an offshore special vehicle, or a special purpose vehicle, formed for listing purposes and controlled directly or indirectly by mainland China companies or individuals, shall obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle’ s securities on an overseas stock exchange.

On July 6, 2021, the PRC government authorities issued Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with the Law. These opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based companies and proposed to take effective measures, such as promoting the construction of relevant regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies.

On September 6, 2024, the NDRC and the Ministry of Commerce jointly issued the Special Administrative Measures (Negative List) for Foreign Investment Access (2024 Version), or the 2024 Negative List, which became effective on November 1, 2024. Pursuant to the measures, if a domestic company engaging in the prohibited business stipulated in the 2024 Negative List seeks an overseas offering and listing, it shall obtain approval from the competent governmental authorities. In addition, the foreign investors of the company shall not be involved in the company’ s operation and management, and their shareholding percentage shall be subject, mutatis mutandis, to the regulations on domestic securities investments by foreign investors.

On February 17, 2023, the CSRC issued the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies, or the Overseas Listing Regulations, and five supporting guidelines, which became effective on March 31, 2023. Pursuant to the Overseas Listing Regulations, companies in mainland China that directly or indirectly offer or list their securities in an overseas market, including a company in mainland China limited by shares and an offshore company whose main business operations are in mainland China and that intends to offer shares or be listed in an overseas market based on its equities, assets or similar interests in mainland China, are required to file with the CSRC within three business days after submitting their listing application documents to the regulator in the place of intended listing. If the company fails to complete the filing procedure or conceals any material fact or falsifies any major content in its filing documents, it may be subject to administrative penalties, such as an order to rectify, warnings and 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. The Overseas Listing Regulations also provide that a company in mainland China must file with the CSRC within three business days for its follow-on offering of securities after it is listed in an overseas market. On February 17, 2023, the CSRC also issued the Notice on Administration of the Filing of Overseas Offering and Listing by Domestic Companies and held a press conference for the release of the Overseas Listing Regulations, which, among other things, clarified that companies in mainland China that have been listed overseas before March 31, 2023 are not required to file with the CSRC immediately, but these companies should complete filing with the CSRC for their refinancing activities in accordance with the Overseas Listing Regulations. Based on the foregoing, we are not required to complete filing with the CSRC for our prior offshore offerings at this stage, but we may be subject to the filing requirements for our refinancing activities under the Overseas Listing Regulations.

On February 24, 2023, the CSRC, jointly with other governmental authorities, published the Provisions on Strengthening Confidentiality and Archives Management of Overseas Securities Issuance and Listing by Domestic Enterprises, which became effective on March 31, 2023. Pursuant to the provisions, China-based companies that offer and list securities in overseas markets shall establish confidentiality and archives systems. The “China-based companies” refer to companies in mainland China limited by shares that are directly listed on a foreign stock exchange and the domestic operating entities of an offshore company being indirectly listed on a foreign stock exchange. These China-based companies shall obtain approvals from the authorities and file with the competent confidential administration authorities when providing or publicly filing documents and materials related to state secrets or secrets of the government authorities to the relevant securities companies, securities service agencies or the offshore regulatory authorities, or providing or publicly filing such documents and materials through their offshore listing entities. In addition, the China-based companies shall complete corresponding procedures when (i) providing or publicly filing documents and materials that may adversely affect national security and public interests to the relevant securities companies, securities service agencies or the offshore regulatory authorities, (ii) providing or publicly filing such documents and materials through their offshore listing entities, or (iii) providing accounting files or copies to relevant securities companies, securities service institutions, overseas regulators and individuals. These China-based companies are also required to provide written statements as to whether they have completed the approval or filing procedures as above when providing documents and materials to securities companies and securities service providers, and the securities companies and securities service providers should properly retain such written statements for inspection. If a China-based company finds that the documents and materials related to state secrets or secrets of the government authorities or other materials that may adversely affect national security and public interests have been leaked or have leakage risks, it should take remedial measures immediately and report to the authorities.

Regulations on Stock Incentive Plans

In February 2012, SAFE promulgated the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plans of Overseas Publicly-Listed Companies, or the Stock Option Rules. Under the Stock Option Rules and other rules and regulations, mainland China residents who participate in a stock incentive plan in an overseas publicly listed company are required to register with SAFE or its local branch and complete certain other procedures. Participants of a stock incentive plan who are mainland China residents must retain a qualified mainland China agent, which could be a subsidiary in mainland China of the overseas publicly listed company or another qualified institution selected by the subsidiary in mainland China, to conduct the SAFE registration and other procedures with respect to the stock incentive plan on behalf of the participants. The participants must also retain an overseas entrusted institution to handle matters in connection with their exercise of stock options, the purchase and sale of corresponding stocks or interests, and fund transfers. In addition, the mainland China 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 mainland China agent or the overseas entrusted institution, or any other material change. The mainland China agents must, on behalf of the mainland China residents who have the right to exercise the employee share options, apply to SAFE or its local branch for an annual quota for the payment of foreign currencies in connection with the mainland China residents’ exercise of the employee share options. The foreign exchange proceeds received by the mainland China 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 mainland China opened by the mainland China agents before distribution to such mainland China residents.

We adopted three share incentive plans, namely, the 2008 Plan, the 2014 Plan and the 2024 Plan. Pursuant to the plans, we may issue options, restricted shares (or share appreciation rights or other similar awards) and rights to purchase restricted shares to our qualified employees, directors and consultants on a regular basis. We have advised our employees and directors participating in the employee stock option plan to handle foreign exchange matters in accordance with the Stock Option Rules, and we have completed the registrations of our stock incentive plans with the local SAFE as required by the laws of mainland China.

In addition, the State Administration for Taxation has issued circulars concerning employee share options, under which our employees working in mainland China who exercise share options will be subject to mainland China individual income tax. Our subsidiary in mainland China have obligations to file documents related to employee share options with the 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 the laws and regulations, we may face sanctions imposed by the PRC tax authorities or other PRC government authorities.

PRC Enterprise Income Tax Law

On March 16, 2007, the National People’s Congress enacted the EIT Law, which was amended on February 24, 2017 and on December 29, 2018. Under the EIT Law and its Implementing Rules, enacted on December 6, 2007 by the State Council and amended on April 23, 2019, enterprises are classified as mainland China resident enterprises and non-mainland China resident enterprises. Mainland China resident enterprises typically pay an enterprise income tax at the rate of 25%. An enterprise established outside mainland China with its “de facto management bodies” located within mainland China is considered a mainland China “resident enterprise,” meaning that it shall be treated in a manner similar to a mainland China resident enterprise for enterprise income tax purposes. The Implementing Rules to the EIT Law define “de facto management body” as a managing body that in practice exercises “substantial and overall management and control over the production and operations, personnel, accounting, and properties” of an enterprise.

The State Administration of Taxation issued Circular 82 on April 22, 2009, as amended in December 2017. Circular 82 provides certain specific criteria for determining whether the “de facto management body” of a mainland China-controlled and offshore-incorporated enterprise is located in mainland China, including: (a) the location where senior management members responsible for an enterprise’ s daily operations discharge their duties, (b) the location where financial and human resource decisions are made or approved by organizations or persons, (c) the location where the major assets and corporate documents are kept, and (d) the location where more than half (inclusive) of all directors with voting rights or senior management have their habitual residence. In addition, the State Administration of Taxation issued a bulletin on July 27, 2011, effective from September 1, 2011, and amended respectively in 2015, 2016 and 2018, or Bulletin 45, providing more guidance on the implementation of Circular 82. Bulletin 45 clarifies certain matters, including the mainland China resident enterprise status determination, post-determination administration, and competent tax authorities. Although both Circular 82 and Bulletin 45 only apply to offshore enterprises controlled by mainland China enterprises or mainland China enterprise groups, not those controlled by mainland China individuals or foreign individuals like us, the determining criteria set forth in Circular 82 and Bulletin 45 may reflect the general position of the State Administration of Taxation on how the “de facto management body” test should be applied in determining the mainland China tax resident enterprise status of offshore enterprises, regardless of whether they are controlled by mainland China enterprises, mainland China enterprise groups, or mainland China or foreign individuals.

We do not believe that VisionSys AI Inc meets all of the conditions above, and thus we do not believe that VisionSys AI Inc is a mainland China resident enterprise despite the fact that all members of our management team as well as the management team of our offshore holding company are located in mainland China. However, if the PRC tax authorities determine that VisionSys AI Inc is a mainland China resident enterprise for mainland China enterprise income tax purposes, a number of unfavorable mainland China tax consequences could follow. See “Item 3. Key Information-D. Risk Factors-Risks Related to Doing Business in China - We are affected by the PRC Enterprise Income Tax Law, and we may be classified as a mainland China ‘resident enterprise’ for mainland China enterprise income tax purposes. Such classification would likely result in unfavorable tax consequences to us and our non-mainland China shareholders and have a material adverse effect on our results of operations and the value of your investment.”

Pursuant to the Hong Kong Tax Treaty and other applicable regulations of mainland China, if a Hong Kong resident enterprise is determined by the competent PRC tax authority to have satisfied the conditions and requirements under such Hong Kong Tax Treaty and other applicable regulations, the 10% withholding tax on the dividends the Hong Kong resident enterprise receives from a mainland China resident enterprise may be reduced to 5% upon receiving approval from the in-charge tax authority. However, based on Circular 81, the 5% withholding tax rate does not automatically apply, and certain requirements must be satisfied, including without limitation that (a) the Hong Kong enterprise must be the beneficial owner of the dividends, and (b) the Hong Kong enterprise must directly hold at least 25% share ownership in the mainland China enterprise during the 12 consecutive months preceding its receipt of the dividends. However, a transaction or arrangement entered into for the primary purpose of enjoying preferential tax treatment should not be a reason for the application of the preferential tax treatment under the Hong Kong Tax Treaty. If a taxpayer is inappropriately entitled to such preferential tax treatment, the competent tax authority has the power to make appropriate adjustments. According to Circular 9, effective from April 1, 2018, when determining the applicant’s status as the “beneficial owner” regarding tax treatments in connection with dividends, interests or royalties in the tax treaties, several factors will be taken into account, including without limitation whether the applicant is obligated to pay more than 50% of his or her income in twelve months to residents in a third country or region, whether the business operated by the applicant constitutes actual business activities, and whether the counterparty country or region to the tax treaties levies any tax or grants tax exemption on relevant incomes or levies tax at an extremely low rate. Such determination will be analyzed according to the actual circumstances of the specific cases. On October 14, 2019, the State Administration of Taxation promulgated the Administrative Measures for Non-Resident Taxpayers to Enjoy Treaty Benefits, or Circular 35, which became effective on January 1, 2020. Circular 35 sets forth that non-resident enterprises and their withholding agents shall enjoy treaty benefits by means of “self-judgment of eligibility, declaration of entitlement, and retention of relevant materials for future reference.” However, if a competent tax authority finds that it is necessary to apply the general anti-tax avoidance rules, it may start general investigation procedures for anti-tax avoidance and adopt corresponding measures for subsequent administration. See “Item 3. Key Information-D. Risk Factors-Risks Related to Doing Business in China - We may not be able to obtain certain treaty benefits on dividends paid to us by our subsidiary in mainland China through our Hong Kong Subsidiary.”

On February 3, 2015, the State Administration of Taxation issued Public Notice 2015 No. 7, or Public Notice 7. Under Public Notice 7, where a non-resident enterprise conducts an “indirect transfer” by transferring the equity interests in a mainland China “resident enterprise” or other taxable assets indirectly by disposing of the equity interests in an overseas holding company, the non-resident enterprise, being the transferor, may be subject to mainland China enterprise income tax if the indirect transfer is considered to be an abusive use of company structure without reasonable commercial purposes. In addition, Public Notice 7 provides clear criteria on how to assess reasonable commercial purposes and 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 make a self-assessment on whether the transaction should be subject to mainland China tax and to file or withhold the mainland China tax accordingly. Circular 37 provides certain changes to the current withholding regime and amends certain provisions in Public Notice 7. There is little guidance and practical experience as to the application of Public Notice 7 or Circular 37. Where 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 become at risk of being taxed under Public Notice 7 and may be required to expend valuable resources to comply with Public Notice 7 or Circular 37 or to establish that we should not be taxed under Public Notice 7 or Circular 37. The PRC tax authorities have the discretion under Circular 59, Public Notice 7 or Circular 37 to make adjustments to the taxable capital gains based on the difference between the fair value of the equity interests transferred and the cost of investment.

The State Administration of Taxation promulgated the Administrative Measures on the General Anti-Avoidance Rule (Trial), or GAAR Measures, on December 2, 2014, which shows the authority’ s intention to fight against tax avoidance schemes adopted to obtain unwarranted tax benefits without reasonable commercial purpose. A press release made by the State Administration of Taxation to clarify certain issues relating to the application of the GAAR Measures stated that the GAAR Measures may be applicable if any general tax-avoidance scheme exists in the offshore indirect transfer of equity interests. Since it is unclear how this set of measures, and any future implementation rules thereof, will be interpreted, amended and implemented by the governmental authorities, we cannot predict how these regulations will affect our business operations, future acquisitions or strategy.

In addition, the EIT Law and its implementation rules permit certain “high and new technology enterprises strongly supported by the state” that hold independent ownership of core intellectual property and simultaneously meet a list of other criteria, financial or nonfinancial, as stipulated in the implementation rules and other regulations, to enjoy a reduced 15% enterprise income tax rate. Upon the consummation of the Divestiture, none of our subsidiaries or consolidated entities was eligible for enjoying a reduced 15% enterprise income tax rate as a “high and new technology” enterprise.

Employment Laws and Social Insurance

We are subject to laws and regulations governing our relationship with our employees, including wage and hour requirements, working and safety conditions, social insurance, housing funds and other welfare.

The PRC Labor Contract Law, which became effective in January 2008 and was last amended in December 2012, and its implementation rules, impose more restrictions on employers and have been deemed to increase labor costs for employers, compared to the PRC Labor Law, which became effective in January 1995. For example, pursuant to the Labor Contract Law, an employer is obliged to sign a labor contract with an unlimited term with an employee if the employer continues to hire the employee after the expiration of two consecutive fixed-term labor contracts. The employer must compensate the employee upon the expiration of a fixed-term labor contract, unless the employee refuses to renew such contract on terms the same as or more favorable to the employee than those contained in the expired contract. The employer must also indemnify an employee if the employer terminates a labor contract without a cause permitted by law. In addition, under the Regulations on Paid Annual Leave for Employees, which became effective in January 2008, employees who have served more than one year with an employer are entitled to paid vacation ranging from 5 to 15 days per year, depending on their length of service. Employees who waive such vacation time at the request of employers must be compensated at three times their regular salaries for each waived vacation day.

In addition, according to the PRC Social Insurance Law and the Regulations on the Administration of Housing Provident Funds, employers in mainland China must provide employees with welfare schemes covering pension insurance, unemployment insurance, maternity insurance, work-related injury insurance, medical insurance and housing provident funds.

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

Our headquarters is located in Room 1501, 15F, Building A2, Yanjing Headquarters Base Yanjiao, Sanhe City, Langfang, Hebei 065201 The People’s Republic of China. We lease our offices from independent third parties 

We believe that the facilities that we currently own or lease are adequate to meet our needs for the foreseeable future, and we believe that we will be able to obtain adequate facilities, principally through leasing of additional properties, to accommodate our future expansion plans.

ITEM 4. A. UNRESOLVED STAFF COMMENTS

Not Applicable.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion of our financial condition and results of operations is based upon and should be read in conjunction with our consolidated financial statements and their related notes included in this annual report on Form 20-F. This report contains forward-looking statements. See “Forward-Looking Information.” In evaluating our business, you should carefully consider the information provided under the caption “Item 3. Key Information-D. Risk Factors” in this annual report on Form 20-F. We caution you that our businesses and financial performance are subject to substantial risks and uncertainties.

Financial Impact of the Divestiture 2025

On July 22, 2025, we entered into an agreement with First Winner Management Limited (“the Buyer”, a British Virgin Islands company) to sell 100% equity interests in its wholly-owned subsidiaries, Kids IT Education Inc. and Tarena Hong Kong Limited, for US$1. The transaction was approved at the Extraordinary General Meeting of Shareholders on August 4, 2025. The Divestiture 2025 was consummated at the end of October 2025. Upon consummation of the divestiture of the STEM education business, the Company has no ownership interest in STEM education business. The Company deconsolidated the financial statements of STEM education business from its consolidated financial statements since October 31, 2025.

The Divestiture 2025 represented a strategic shift and has had a major impact on the Company’s result of operations. Accordingly, assets, liabilities, results of operations, and cash flows related to STEM education business have been reflected in the accompanying consolidated financial statements as discontinued operations for all periods presented. The consolidated balance sheets as of December 31, 2024 and 2025, consolidated statements of operations and comprehensive (loss) income and consolidated statements of cash flows for the years ended December 31, 2023, 2024 and 2025 have been adjusted to reflect this change. See Note 3 to our audited consolidated financial statements included in this annual report for additional information regarding the financial impact by the Divestiture 2025.

Key Components of Results of Operations for our Continuing Operations

Net Revenues

Currently, the Company conducts its continuing operations through its PRC subsidiary, primarily focusing on the BCI business. This business is operated by Beijing Wangwen.

The following table sets forth the breakdown of our revenue for the years ended December 31, 2025, 2024 and 2023, respectively:

For the years ended December 31, 2025 and 2024, revenue from Brain-Computer Interface (BCI) was RMB 1,039 (US$ 149) and nil, respectively. Net revenues increased significantly for the year ended 2025 compared to the prior year, primarily due to the disposal of our professional education business in March 2024, which historically contributed substantially all of our revenues. Following such disposal, our remaining operations are focused on the development of brain-computer interface technologies, which are currently in the early stage and have not yet generated significant revenues.

Cost of Revenues

Our cost of revenues from continuing operations primarily consists of procurement costs of brain-computer interface (“BCI”) equipment and related hardware components used in the delivery of our BCI products and solutions. To a lesser extent, our cost of revenues includes other direct costs associated with the deployment and delivery of such products. The following table sets forth a breakdown of our cost of revenues from continuing operations in absolute amounts and as percentages of net revenues from continuing operations for the periods indicated:

Operating Expenses

Our operating expenses consist primarily of general and administrative expenses. The following table sets forth our operating expenses related to continuing operations in absolute amounts and as percentages of net revenues from continuing operations for the periods indicated: