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What changed in Lichen International Ltd's 20-F — 2022 vs 2023

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Paragraph-level year-over-year comparison of Lichen International Ltd's 2022 and 2023 20-F annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+351 added−278 removedSource: 20-F (2024-04-04) vs 20-F (2023-05-01)

Top changes in Lichen International Ltd's 2023 20-F

351 paragraphs added · 278 removed · 213 edited across 6 sections

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeRisk Factors — Risks Relating to our Corporate Structure – We rely on dividends and other distributions on equity paid by the Operating Subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of the Operating Subsidiaries to make payments to us could have a material adverse effect on our ability to conduct our business ”.
Biggest changeRisk Factors — Risks Relating to our Corporate Structure – We rely on dividends and other distributions on equity paid by the Operating Subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of the Operating Subsidiaries to make payments to us could have a material adverse effect on our ability to conduct our business ”. 3 Permissions and Licenses for Our Operations in PRC We conduct substantially all of our business operations in China, and a majority of our directors and senior management are based in China.
Item 2. Offer Statistics and Expected Timetable Not applicable for annual reports on Form 20-F. Item 3. Key Information OVERVIEW Corporate Structure The following diagram illustrates the corporate structure of Lichen China Limited and its subsidiaries as of the date of this annual report.
Item 2. Offer Statistics and Expected Timetable Not applicable for annual reports on Form 20-F. Item 3. Key Information OVERVIEW Corporate Structure The following diagram illustrates the corporate structure of Lichen China Limited and its significant subsidiaries as of the date of this annual report.
As of the date of this annual report, the authorized share capital of the Company is US$50,000 divided into 1,000,000,000 Class A Ordinary Shares and 250,000,000 Class B Ordinary Shares, of which 17,500,000 Class A Ordinary Shares and 9,000,000 Class B Ordinary Shares are issued and outstanding.
As of the date of this annual report, the authorized share capital of the Company is US$50,000 divided into 1,000,000,000 Class A Ordinary Shares and 250,000,000 Class B Ordinary Shares, of which 18,370,000 Class A Ordinary Shares and 9,000,000 Class B Ordinary Shares are issued and outstanding.
Implication of the Holding Foreign Companies Accountable Act (the “HFCAA”) U.S. laws and regulations, including the Holding Foreign Companies Accountable Act, or HFCAA, may restrict or eliminate our ability to complete a business combination with certain companies, particularly those acquisition candidates with substantial operations in China.
Risk Factors - Risks Relating to Doing Business in China.” Implication of the Holding Foreign Companies Accountable Act (the “HFCAA”) U.S. laws and regulations, including the Holding Foreign Companies Accountable Act, or HFCAA, may restrict or eliminate our ability to complete a business combination with certain companies, particularly those acquisition candidates with substantial operations in China.
As of the date of the annual report, TPS Thayer, our auditor for the fiscal year ended December 31, 2022 and 2021, headquartered in Sugar Land, Texas, 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.
TPS Thayer, our previous auditor for the fiscal years ended December 31, 2022 and 2021, headquartered in Sugar Land, Texas, 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.
The Company made no such dividend, distribution or transfer during the fiscal year ended December 31, 2022 and 2021. As of the date of this report, the Company or its subsidiaries have made no other transfers, dividends, or distributions to investors and no investors have made transfers, dividends, or distributions to the Company or its subsidiaries.
As of the date of this report, the Company or its subsidiaries have made no other transfers, dividends, or distributions to investors and no investors have made transfers, dividends, or distributions to the Company or its subsidiaries.
On February 10, 2023, Lichen China Limited made payments of $6 million to its subsidiary Legend Consulting BVI for investment. As of the date of this report, no other dividends, distributions or transfers has been made between Lichen China Limited and any of its subsidiaries.
As of the date of this report, other than the above stated, no dividends, distributions or transfers has been made between Lichen China Limited and any of its subsidiaries.
However, our operations and business, including investment and/or acquisitions by our subsidiaries within China, will not be affected as long as the capital is not transferred in or out of the PRC. 3 During the fiscal years ended December 31, 2020, Lichen Zixun made dividend payments of RMB30 million (approximately $4.3 million) to the then eventual shareholders of Lichen Zixun, who are PRC individuals.
However, our operations and business, including investment and/or acquisitions by our subsidiaries within China, will not be affected as long as the capital is not transferred in or out of the PRC.
TPS Thayer’s registration with the PCAOB took effect in September 2020 and it is currently subject to PCAOB inspections. As of the date of the annual report, B&V, our auditor for the fiscal year ended December 31, 2020, withdrew its registration from the PCAOB in January 2022.
TPS Thayer’s registration with the PCAOB took effect in September 2020 and it is currently subject to PCAOB inspections.
Added
During the fiscal years ended December 31, 2020, Lichen Zixun made dividend payments of RMB30 million (approximately $4.3 million) to the then eventual shareholders of Lichen Zixun, who are PRC individuals. On February 10, 2023, Lichen China Limited made payments of $6 million to its subsidiary Legend Consulting BVI for investment.
Added
As such, our operations in China are governed by PRC laws and regulations. As of the date of this annual report, our subsidiaries have obtained the material/requisite licenses and permits from the PRC government authorities that are material for our operations in compliance with the relevant PRC laws and regulations.
Added
Our Subsidiaries currently have, including the business license and agency bookkeeping license. The business license is a permit issued by China’s State Administration for Market Regulation that allows the company to conduct specific business within the government’s geographical jurisdiction. The agency bookkeeping license is issued by the financial department to enterprises, allowing enterprises to accept entrusted bookkeeping business.
Added
The business license and agency bookkeeping license are the only two permissions and approvals that our PRC subsidiaries are required to obtain to conduct our business in China.
Added
In addition, Lichen China Limited, Legend Consulting BVI and Legend Consulting HK are not required to obtain any permissions or approvals from any Chinese authorities to operate our business as of the date of this annual report.
Added
In connection with our previous issuance of securities to foreign investors, as advised by our PRC counsel, Tianyuan Law Firm, under current PRC laws, regulations and regulatory rules, as of the date of this annual report, (i) although we are required to complete the filing procedure in connection with our offerings under the Trial Measures, no relevant PRC laws or regulations in effect require that we obtain permission from any PRC authorities to issue securities to foreign investors, and we have not received any inquiry, notice, warning, sanction, or any regulatory objection to this offering from the China Securities Regulatory Commission (“CSRC”), the Cyberspace Administration of China ("CAC”), or any other PRC authorities that have jurisdiction over our operations; (ii) we are not required to obtain permissions from the CSRC; (iii) we are not required to file for a cybersecurity review with the CAC; and finally (iv) we have not received or were denied such requisite permissions by any other PRC authority.
Added
Nonetheless, applicable laws and regulations may be tightened, and new laws or regulations may be introduced to impose additional government approval, license, and permit requirements.
Added
If we or our Subsidiaries inadvertently conclude that such permissions and approvals relating to the operations of our business are not required, fail to obtain and maintain such approvals, licenses or permits required for our business, or fail to respond to changes in the applicable laws, regulations, interpretations and regulatory environment, we or our subsidiaries could be subject to liabilities, monetary penalties and even operational disruption, which may materially and adversely affect our business, operating results, financial condition and the value of our Class A Ordinary Shares, significantly limit or completely hinder our ability to offer or continue to offer securities to investors, or cause such securities to significantly decline in value or become worthless.
Added
For more detailed information, see “Item 3. Key Information - D.
Added
As of the date of the annual report, Enrome LLP, our auditor for the fiscal year ended December 31, 2023, headquartered in Singapore, 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.
Added
Enrome LLP’s registration with the PCAOB took effect in March 2022 and it is currently subject to PCAOB inspections.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeIf we fail to establish and maintain proper internal financial reporting controls, our ability to produce accurate financial statements or comply with applicable regulations could be impaired Prior to our initial public offering, we were a private company with limited accounting personnel and other resources with which to address our internal controls and procedures.
Biggest changeIf we fail to establish and maintain proper internal financial reporting controls, our ability to produce accurate financial statements or comply with applicable regulations could be impaired Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, companies are required to file a report of management on its internal control over financial reporting, which includes a statement of management acknowledging its responsibility for establishing and maintaining adequate internal control over financial reporting; an assessment by management of the effectiveness of the company’s internal control over financial reporting; a statement identifying the framework used by the management to evaluate the effectiveness of the company’s internal control over financial reporting; and an attestation report on internal control over financial reporting issued by our independent registered public accounting firm.
Senate passed the Accelerating Holding Foreign Companies Accountable Act, which was signed into law on December 29, 2022, amending the HFCAA and requiring the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchange if its auditor is not subject to PCAOB inspections for two consecutive years instead of three consecutive years.
Senate passed the Accelerating Holding Foreign Companies Accountable Act, which was signed into law on December 29, 2022, amending the HFCAA and requiring the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchange if its auditor is not subject to PCAOB inspections for two consecutive years instead of three consecutive years.
As a relatively small-capitalization company with relatively small public float, we may experience greater stock price volatility, extreme price run-ups, lower trading volume and less liquidity than large-capitalization companies. In particular, our Class A Ordinary Shares may be subject to rapid and substantial price volatility, low volumes of trades and large spreads in bid and ask prices.
Furthermore, as a relatively small-capitalization company with relatively small public float, we may experience greater stock price volatility, extreme price run-ups, lower trading volume and less liquidity than large-capitalization companies. In particular, our Class A Ordinary Shares may be subject to rapid and substantial price volatility, low volumes of trades and large spreads in bid and ask prices.
If we fail to develop and enhance our teaching and learning materials provided to the Partnered Institutions so as to keep up with and reflect the latest financial and taxation developments in the PRC, or to introduce updated versions of our existing self-developed software or introduce new software, our brand reputation and relationship among our customers and with the Partnered Institutions may be materially affected, thus our results of operations, financial condition and prospects may be materially and adversely affected. 35 We may not be able to enforce the restrictive covenants of the employment contracts against our employees, confidentiality and non-compete agreements against our senior management, and Expert Cooperation Agreements against the external experts, to prevent them from directly competing with us within the restraint period Generally, our employees and our senior management enter into employment contracts and separate confidentiality and non-compete agreements with us, respectively.
If we fail to develop and enhance our teaching and learning materials provided to the Partnered Institutions so as to keep up with and reflect the latest financial and taxation developments in the PRC, or to introduce updated versions of our existing self-developed software or introduce new software, our brand reputation and relationship among our customers and with the Partnered Institutions may be materially affected, thus our results of operations, financial condition and prospects may be materially and adversely affected. 39 We may not be able to enforce the restrictive covenants of the employment contracts against our employees, confidentiality and non-compete agreements against our senior management, and Expert Cooperation Agreements against the external experts, to prevent them from directly competing with us within the restraint period Generally, our employees and our senior management enter into employment contracts and separate confidentiality and non-compete agreements with us, respectively.
Taxation—United States Federal Income Tax Considerations—Passive Foreign Investment Company Rules.” Risks Relating to our Business Our business, financial condition and results of operations may be affected due to the COVID-19 pandemic and other diseases or epidemic Any occurrence of disease or epidemic may cause material disruptions to our business operations.
Taxation—United States Federal Income Tax Considerations—Passive Foreign Investment Company Rules.” Risks Relating to our Business Our business, financial condition and results of operations may be continued to be affected due to the COVID-19 pandemic and other diseases or epidemic Any occurrence of disease or epidemic may cause material disruptions to our business operations.
In some cases, we will need to disclose material agreements or results of financial operations that we would not be required to disclose if we were a private company. Our competitors may have access to this information, which would otherwise be confidential. This may give them advantages in competing with our company.
In some cases, we need to disclose material agreements or results of financial operations that we would not be required to disclose if we were a private company. Our competitors may have access to this information, which would otherwise be confidential. This may give them advantages in competing with our company.
Accordingly, the number and scale of agreements and the amount of revenue we are able to secure may vary significantly from year to year, and it may be difficult to accurately forecast the volume and size and scale of future business. 34 In the event that we are unable to maintain our business with our recurring customers or to expand and diversify our customer base by sourcing new customers at desired levels or at all, or to develop and expand our service diversity, or to meet the requirements of our customers regarding service quality and delivery or any other requirements of our customers at reasonable or affordable costs, our relationship with our customers, our business, financial condition and results of operations could be materially and adversely affected.
Accordingly, the number and scale of agreements and the amount of revenue we are able to secure may vary significantly from year to year, and it may be difficult to accurately forecast the volume and size and scale of future business. 38 In the event that we are unable to maintain our business with our recurring customers or to expand and diversify our customer base by sourcing new customers at desired levels or at all, or to develop and expand our service diversity, or to meet the requirements of our customers regarding service quality and delivery or any other requirements of our customers at reasonable or affordable costs, our relationship with our customers, our business, financial condition and results of operations could be materially and adversely affected.
Any damage to our assets or properties due to natural disasters or accidents and any business disruption could result in our incurring substantial costs and diversion of resources, which would have an adverse effect on our business and results of operations. 38 Risks Relating to Our Industry The financial and taxation solution service, education support service and software and maintenance service industries rely on manpower and the increase in our staff costs may materially and adversely affect our operations, profitability and financial condition The operations of our Subsidiaries are labor-intensive and our Subsidiaries relies on a stable supply of financial and taxation personnel and practitioners and R&D personnel in the PRC, in particular, our internal consultants and software R&D staff.
Any damage to our assets or properties due to natural disasters or accidents and any business disruption could result in our incurring substantial costs and diversion of resources, which would have an adverse effect on our business and results of operations. 42 Risks Relating to Our Industry The financial and taxation solution service, education support service and software and maintenance service industries rely on manpower and the increase in our staff costs may materially and adversely affect our operations, profitability and financial condition The operations of our Subsidiaries are labor-intensive and our Subsidiaries relies on a stable supply of financial and taxation personnel and practitioners and R&D personnel in the PRC, in particular, our internal consultants and software R&D staff.
As the new Cybersecurity Review Measures took effect on February 15, 2022, we believe we are not subject to the cybersecurity review by the CAC for the initial public offering, given that: (i) we are not a network platform operator holding more than one million users’ individual information; and (ii) data processed in our business does not have a bearing on national security and thus may not be classified as core or important data by the authorities and we will not be required to obtain any permission from the CAC.
As the new Cybersecurity Review Measures took effect on February 15, 2022, we believe we are not subject to the cybersecurity review by the CAC for our initial public offering and subsequent offerings, given that: (i) we are not a network platform operator holding more than one million users’ individual information; and (ii) data processed in our business does not have a bearing on national security and thus may not be classified as core or important data by the authorities and we will not be required to obtain any permission from the CAC.
GAAP accounting and financial reporting training programs for our accounting and financial reporting personnel; (iii) setting up an internal audit function as well as engaging an external consulting firm to assist us with assessment of Sarbanes-Oxley compliance requirements and improvement of overall internal control; and (iv) appointing independent directors, establishing an audit committee, and strengthening corporate governance. 31 The implementation of these measures may not fully address the material weaknesses in our internal control over financial reporting, and we cannot conclude that they have been fully remedied.
GAAP accounting and financial reporting training programs for our accounting and financial reporting personnel; (iii) setting up an internal audit function as well as engaging an external consulting firm to assist us with assessment of Sarbanes-Oxley compliance requirements and improvement of overall internal control; and (iv) appointing independent directors, establishing an audit committee, and strengthening corporate governance. 35 The implementation of these measures may not fully address the material weaknesses in our internal control over financial reporting, and we cannot conclude that they have been fully remedied.
See “ Risk Factors – Risks Relating to Our Business and Operations – Protection of intellectual property rights may not prevent third parties and/or our competitors’ infringement on our teaching and learning materials or self-developed software, which could weaken our competitive position and harm our business and results of operations ” on page 38. 11 Risks Relating to Our Industry ● The financial and taxation solution service, education support service and software and maintenance service industries rely on manpower and the increase in our staff costs may materially and adversely affect our operations, profitability and financial condition.
See “ Risk Factors – Risks Relating to Our Business and Operations – Protection of intellectual property rights may not prevent third parties and/or our competitors’ infringement on our teaching and learning materials or self-developed software, which could weaken our competitive position and harm our business and results of operations ” on page 42. 11 Risks Relating to Our Industry ● The financial and taxation solution service, education support service and software and maintenance service industries rely on manpower and the increase in our staff costs may materially and adversely affect our operations, profitability and financial condition.
See “ Risk Factors – Risks Relating to Our Class A Ordinary Shares – We are an “emerging growth company,” and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our Class A Ordinary Shares less attractive to investors ” on page 28. ● Because we are a foreign private issuer and are exempt from certain Nasdaq corporate governance standards applicable to U.S. issuers, you will have less protection than you would have if we were a domestic issuer.
See “ Risk Factors – Risks Relating to Our Class A Ordinary Shares – We are an “emerging growth company,” and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our Class A Ordinary Shares less attractive to investors ” on page 32. ● Because we are a foreign private issuer and are exempt from certain Nasdaq corporate governance standards applicable to U.S. issuers, you will have less protection than you would have if we were a domestic issuer.
Any slowdown of the enterprises’ growth and development in the PRC or demands for financial and taxation solution services, education support services or software and maintenance services could have a material adverse effect on our business, financial condition and results of operations ” on page 39. ● We face significant competition in various geographical locations where we offer our financial and taxation solution services, and if we fail to compete effectively, we may lose market share and our profitability could be adversely affected.
Any slowdown of the enterprises’ growth and development in the PRC or demands for financial and taxation solution services, education support services or software and maintenance services could have a material adverse effect on our business, financial condition and results of operations ” on page 43. ● We face significant competition in various geographical locations where we offer our financial and taxation solution services, and if we fail to compete effectively, we may lose market share and our profitability could be adversely affected.
However, we may consider following home country practice in lieu of the requirements under Nasdaq Listing Rules with respect to certain corporate governance standards which may afford less protection to investors. 28 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.
However, we may consider following home country practice in lieu of the requirements under Nasdaq Listing Rules with respect to certain corporate governance standards which may afford less protection to investors. 32 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.
See “ Risk Factors – Risks Relating to Our Business and Operations – Our revenue was mainly derived from financial and taxation solution services projects, which are not recurring in nature and there is no assurance that our customers will provide us with new business ” on page 34. ● Failure to maintain our relationship with our external experts could materially and adversely affect our business, financial condition and results of operations.
See “ Risk Factors – Risks Relating to Our Business and Operations – Our revenue was mainly derived from financial and taxation solution services projects, which are not recurring in nature and there is no assurance that our customers will provide us with new business ” on page 38. ● Failure to maintain our relationship with our external experts could materially and adversely affect our business, financial condition and results of operations.
Based upon our current and expected income and assets, as well as projections as to the market price of our Class A Ordinary Shares, we do not presently expect to be classified as a PFIC for the current taxable year or the foreseeable future. 32 While we do not expect to be a PFIC, because the value of our assets, for purposes of the asset test, may be determined by reference to the market price of our Class A Ordinary Shares, fluctuations in the market price of our Class A Ordinary Shares may cause us to become a PFIC classification for the current or subsequent taxable years.
Based upon our current and expected income and assets, as well as projections as to the market price of our Class A Ordinary Shares, we do not presently expect to be classified as a PFIC for the current taxable year or the foreseeable future. 36 While we do not expect to be a PFIC, because the value of our assets, for purposes of the asset test, may be determined by reference to the market price of our Class A Ordinary Shares, fluctuations in the market price of our Class A Ordinary Shares may cause us to become a PFIC classification for the current or subsequent taxable years.
Our status as a controlled company could cause our Class A Ordinary Share to look less attractive to certain investors or otherwise harm our trading price. 27 We are an “emerging growth company,” and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our Class A Ordinary Shares less attractive to investors We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act.
Our status as a controlled company could cause our Class A Ordinary Share to look less attractive to certain investors or otherwise harm our trading price. 31 We are an “emerging growth company,” and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our Class A Ordinary Shares less attractive to investors We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act.
See “ Risk Factors – Risks Relating to Our Business and Operations – We have limited insurance coverage to protect us against all risks associated with our business operations ” on page 38. ● Protection of intellectual property rights may not prevent third parties and/or our competitors’ infringement on our teaching and learning materials or self-developed software, which could weaken our competitive position and harm our business and results of operations.
See “ Risk Factors – Risks Relating to Our Business and Operations – We have limited insurance coverage to protect us against all risks associated with our business operations ” on page 42. ● Protection of intellectual property rights may not prevent third parties and/or our competitors’ infringement on our teaching and learning materials or self-developed software, which could weaken our competitive position and harm our business and results of operations.
The HFCAA states if the SEC determines that a company has filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the PCAOB for three consecutive years beginning in 2021, the SEC shall prohibit such shares from being traded on a national securities exchange or in the over-the-counter trading market in the U.S.
Under the HFCAA, if the SEC determines that a company has filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the PCAOB for three consecutive years beginning in 2021, the SEC shall prohibit such shares from being traded on a national securities exchange or in the over-the-counter trading market in the U.S.
Our business, financial condition and results of operations may be materially and adversely affected if our business objectives are not achieved. 37 Protection of intellectual property rights may not prevent third parties and/or our competitors’ infringement on our teaching and learning materials or self-developed software, which could weaken our competitive position and harm our business and results of operations Our success depends upon, among other things, the protection of copyrights of our teaching and learning materials or self-developed software and other intellectual property rights.
Our business, financial condition and results of operations may be materially and adversely affected if our business objectives are not achieved. 41 Protection of intellectual property rights may not prevent third parties and/or our competitors’ infringement on our teaching and learning materials or self-developed software, which could weaken our competitive position and harm our business and results of operations Our success depends upon, among other things, the protection of copyrights of our teaching and learning materials or self-developed software and other intellectual property rights.
See “ Risk Factors – Risks Relating to Our Business and Operations – Our business depends on the market recognition of our “Lichen” brand name ” on page 34. ● Our revenue was mainly derived from financial and taxation solution services projects, which are not recurring in nature and there is no assurance that our customers will provide us with new business.
See “ Risk Factors – Risks Relating to Our Business and Operations – Our business depends on the market recognition of our “Lichen” brand name ” on page 38. ● Our revenue was mainly derived from financial and taxation solution services projects, which are not recurring in nature and there is no assurance that our customers will provide us with new business.
See “ Risk Factors – Risks Relating to Our Industry – The financial and taxation solution service, education support service and software and maintenance service industries rely on manpower and the increase in our staff costs may materially and adversely affect our operations, profitability and financial condition ” on page 39. ● Our customer base is primarily concentrated on business enterprises and Partnered Institutions in the PRC.
See “ Risk Factors – Risks Relating to Our Industry – The financial and taxation solution service, education support service and software and maintenance service industries rely on manpower and the increase in our staff costs may materially and adversely affect our operations, profitability and financial condition ” on page 43. ● Our customer base is primarily concentrated on business enterprises and Partnered Institutions in the PRC.
See “ Risk Factors – Risks Relating to Our Class A Ordinary Shares – There can be no assurance that we will not be a passive foreign investment company, or PFIC, for United States federal income tax purposes for any taxable year, which could subject United States investors in our Class A Ordinary Shares to significant adverse United States income tax consequences.” on page 32. 10 Risks Relating to Our Business ● Our business, financial condition and results of operations may be affected due to the COVID-19 pandemic and other diseases or epidemic.
See “ Risk Factors – Risks Relating to Our Class A Ordinary Shares – There can be no assurance that we will not be a passive foreign investment company, or PFIC, for United States federal income tax purposes for any taxable year, which could subject United States investors in our Class A Ordinary Shares to significant adverse United States income tax consequences.” on page 36. 10 Risks Relating to Our Business ● Our business, financial condition and results of operations may be continued to be affected due to the COVID-19 pandemic and other diseases or epidemic.
See “ Risk Factors – Risks Relating to Our Business and Operations – We may not be able to successfully implement our strategies, or achieve our business objectives and our business, operating results and financial position may be materially and adversely affected ” on page 37. ● We have limited insurance coverage to protect us against all risks associated with our business operations.
See “ Risk Factors – Risks Relating to Our Business and Operations – We may not be able to successfully implement our strategies, or achieve our business objectives and our business, operating results and financial position may be materially and adversely affected ” on page 41. ● We have limited insurance coverage to protect us against all risks associated with our business operations.
In addition, the composition of our income and assets will also be affected by how, and how quickly, we use our liquid assets and the cash raised in the initial public offering. If we determine not to deploy significant amounts of cash for active purposes, our risk of being a PFIC may substantially increase.
In addition, the composition of our income and assets will also be affected by how, and how quickly, we use our liquid assets and the cash raised in the initial public offering and subsequent offerings. If we determine not to deploy significant amounts of cash for active purposes, our risk of being a PFIC may substantially increase.
See “ Risk Factors – Risks Relating to Our Business and Operations – Our business, financial condition and results of operations may be affected due to the COVID-19 pandemic and other diseases or epidemic ” on page 33. ● We may incur impairment losses for intangible assets, which may adversely affect our results of operations.
See “ Risk Factors – Risks Relating to Our Business and Operations – Our business, financial condition and results of operations may be affected due to the COVID-19 pandemic and other diseases or epidemic ” on page 37. ● We may incur impairment losses for intangible assets, which may adversely affect our results of operations.
See “ Risk Factors – Risks Relating to Our Industry – We face significant competition in various geographical locations where we offer our financial and taxation solution services, and if we fail to compete effectively, we may lose market share and our profitability could be adversely affected ” on page 39.
See “ Risk Factors – Risks Relating to Our Industry – We face significant competition in various geographical locations where we offer our financial and taxation solution services, and if we fail to compete effectively, we may lose market share and our profitability could be adversely affected ” on page 43.
Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, will require that we include a report from management on our internal control over financial reporting in our annual report on Form 20-F beginning with our annual report for the fiscal year ending December 31, 2022.
Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, will require that we include a report from management on our internal control over financial reporting in our annual report on Form 20-F beginning with our annual report for the fiscal year ending December 31, 2023.
Should we fail to receive progress payments from our customers for our work performed under the financial and taxation solution projects, our business, financial condition and results of operations may be materially and adversely affected. 36 Our financial and taxation solution services may attract liability Our financial and taxation solution services normally involve providing advice to our customers.
Should we fail to receive progress payments from our customers for our work performed under the financial and taxation solution projects, our business, financial condition and results of operations may be materially and adversely affected. 40 Our financial and taxation solution services may attract liability Our financial and taxation solution services normally involve providing advice to our customers.
See “ Risk Factors – Risks Relating to Our Business and Operations – We may incur impairment losses for intangible assets, which may adversely affect our results of operations ” on page 34. ● Our results of operations may be adversely affected by credit risk associated with our financial assets through profit and loss.
See “ Risk Factors – Risks Relating to Our Business and Operations – We may incur impairment losses for intangible assets, which may adversely affect our results of operations ” on page 38. ● Our results of operations may be adversely affected by credit risk associated with our financial assets through profit and loss.
See “Risk Factors – Risks Relating to Our Business and Operations – Our results of operations may be adversely affected by credit risk associated with our financial assets through profit and loss ” on page 34. ● Our business depends on the market recognition of our “Lichen” brand name.
See “Risk Factors – Risks Relating to Our Business and Operations – Our results of operations may be adversely affected by credit risk associated with our financial assets through profit and loss ” on page 38. ● Our business depends on the market recognition of our “Lichen” brand name.
See “ Risk Factors – Risks Relating to Our Business and Operations – Our financial and taxation solution services may attract liability ” on page 37. ● We may not be able to successfully implement our strategies, or achieve our business objectives and our business, operating results and financial position may be materially and adversely affected.
See “ Risk Factors – Risks Relating to Our Business and Operations – Our financial and taxation solution services may attract liability ” on page 41. ● We may not be able to successfully implement our strategies, or achieve our business objectives and our business, operating results and financial position may be materially and adversely affected.
Such volatility, including any stock-run up, may be unrelated to our actual or expected operating performance and financial condition or prospects, making it difficult for prospective investors to assess the rapidly changing value of our Class A Ordinary Shares.
Such volatility, including any stock-run up, may be unrelated to our actual or expected operating performance and financial condition or prospects, making it difficult for other investors to assess the rapidly changing value of our Class A Ordinary Shares.
If CSRC approval is required in the future, it is uncertain whether it would be possible for us to obtain the approval, and any failure to obtain or delay in obtaining CSRC approval for the initial public offering would subject us to sanctions imposed by the CSRC and other PRC regulatory agencies.
If CSRC approval is required in the future, it is uncertain whether it would be possible for us to obtain the approval, and any failure to obtain or delay in obtaining CSRC approval for the initial public offering or subsequent offerings would subject us to sanctions imposed by the CSRC and other PRC regulatory agencies.
See “ Risk Factors – Risks Relating to Our Business and Operations – Failure to maintain our relationship with our external experts could materially and adversely affect our business, financial condition and results of operations ” on page 35. ● Our financial and taxation solution services may attract liability.
See “ Risk Factors – Risks Relating to Our Business and Operations – Failure to maintain our relationship with our external experts could materially and adversely affect our business, financial condition and results of operations ” on page 39. ● Our financial and taxation solution services may attract liability.
The market price of our Class A Ordinary Shares may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the public offering price The market price of our Class A Ordinary Shares may fluctuate significantly in response to numerous factors, many of which are beyond our control, including: ● actual or anticipated fluctuations in our revenue and other operating results; ● the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections; ● actions of securities analysts who initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; ● announcements by us or our competitors of significant services or features, technical innovations, acquisitions, strategic partnerships, joint ventures, or capital commitments; ● price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole; ● lawsuits threatened or filed against us; and ● other events or factors, including those resulting from war or incidents of terrorism, or responses to these events. 30 In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies.
The market price of our Class A Ordinary Shares may be volatile or may decline regardless of our operating performance, and you may not be able to sell your shares at attractive prices The market price of our Class A Ordinary Shares may fluctuate significantly in response to numerous factors, many of which are beyond our control, including: ● actual or anticipated fluctuations in our revenue and other operating results; ● the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections; ● actions of securities analysts who initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; ● announcements by us or our competitors of significant services or features, technical innovations, acquisitions, strategic partnerships, joint ventures, or capital commitments; ● price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole; ● lawsuits threatened or filed against us; and ● other events or factors, including those resulting from war or incidents of terrorism, or responses to these events. 34 In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies.
See “ Risk Factors – Risks Relating to Doing Business in China – PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds of the initial public offering to make loans or additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand our business ” on page 14. ● Uncertainties with respect to the PRC legal system, including uncertainties regarding the enforcement of laws, and sudden or unexpected changes in laws and regulations in China with little advance notice could adversely affect us and limit the legal protections available to you and us.
See “ Risk Factors – Risks Relating to Doing Business in China – PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds of future offerings to make loans or additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand our business ” on page 14. ● Uncertainties with respect to the PRC legal system, including uncertainties regarding the enforcement of laws, and sudden or unexpected changes in laws and regulations in China with little advance notice could adversely affect us and limit the legal protections available to you and us.
Any slowdown of the enterprises’ growth and development in the PRC or demands for financial and taxation solution services, education support services or software and maintenance services could have a material adverse effect on our business, financial condition and results of operations All of our revenue during the years ended December 31, 20212 and 2021 was generated in the PRC.
Any slowdown of the enterprises’ growth and development in the PRC or demands for financial and taxation solution services, education support services or software and maintenance services could have a material adverse effect on our business, financial condition and results of operations All of our revenue during the years ended December 31, 2023, 2022, and 2021 was generated in the PRC.
See “ Risk Factors – Risks Relating to Doing Business in China – Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and results of operations ” on page 13. ● PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds of the initial public offering to make loans or additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand our business.
See “ Risk Factors – Risks Relating to Doing Business in China – Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and results of operations ” on page 13. ● PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds of future offerings to make loans or additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand our business.
As of the date of the annual report, Lichen Zixun has registered four trademarks in Hong Kong and the PRC and Lichen Education has registered eight copyrights for our financia l and taxation training software and financial and taxation analysis software in the PRC.
As of the date of the annual report, Lichen Zixun has registered four trademarks in Hong Kong and the PRC and Lichen Education has registered eight copyrights for our financial and taxation training software and financial and taxation analysis software in the PRC.
In addition, if the trading volumes of our Class A Ordinary Shares are low, persons buying or selling in relatively small quantities may easily influence prices of our Class A Ordinary Shares.
In addition, if the trading volumes of our Class A Ordinary Shares are low, investors buying or selling in relatively small quantities may easily influence prices of our Class A Ordinary Shares.
If we are unable to maintain our competitive position or otherwise respond to market competition effectively, we may lose our market share and our profitability could be adversely affected. 39
If we are unable to maintain our competitive position or otherwise respond to market competition effectively, we may lose our market share and our profitability could be adversely affected. 43
For the years ended December 31, 2022 and 2021, our average trade receivables turnover days were approximately 40.4 days and 33.8 days, respectively, which were largely in line with our general credit period of 30 days. There can be no assurance that progress payments will be timely paid to us and in full in accordance with the progress payment schedules.
For the years ended December 31, 2023 and 2022, our average trade receivables turnover days were approximately 36.8 days and 40.4 days, respectively, which were largely in line with our general credit period of 30 days. There can be no assurance that progress payments will be timely paid to us and in full in accordance with the progress payment schedules.
We intend to allocate our net proceeds from the initial public offering to establish representative offices in Beijing City and Chengdu City, recruit additional staff to support our business expansion, acquire other companies engaging in provision of financial and taxation solution services in the PRC, strengthen our R&D capabilities and expand the self-developed software offered by our Subsidiaries, and further improve our “Lichen” brand recognition through multi-channel marketing.
We intend to allocate our net proceeds from our future offerings to establish representative offices in Beijing City and Chengdu City, recruit additional staff to support our business expansion, acquire other companies engaging in provision of financial and taxation solution services in the PRC, strengthen our R&D capabilities and expand the self-developed software offered by our Subsidiaries, and further improve our “Lichen” brand recognition through multi-channel marketing.
In addition, the above rules and amendments and any additional actions, proceedings, or new rules resulting from these efforts to increase U.S. regulatory access to audit information could create some uncertainty for investors, the market price of our Class A Ordinary Shares could be adversely affected, and we could be delisted if we and our auditor are unable to meet the PCAOB inspection requirement or being required to engage a new audit firm, which would require significant expense and management time.
In addition, the above rules and amendments and any additional actions, proceedings, or new rules resulting from these efforts to increase U.S. regulatory access to audit information could create some uncertainty for investors, the market price of our Class A Ordinary Shares could be adversely affected, and we could be delisted if we and our auditor are unable to meet the PCAOB inspection requirement or being required to engage a new audit firm, which would require significant expense and management time. 25 We are not currently required to obtain any approval from the CAC.
PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds of the initial public offering to make loans or additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand our business We are an offshore holding company conducting our operations in China through our PRC subsidiaries.
PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds of future offerings to make loans or additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand our business We are an offshore holding company conducting our operations in China through our PRC subsidiaries.
The obligation to disclose information publicly may put us at a disadvantage to competitors that are private companies Upon completion of our initial public offering, we become a publicly listed company in the United States. As a publicly listed company, we will be required to file annual reports with the Securities and Exchange Commission.
The obligation to disclose information publicly may put us at a disadvantage to competitors that are private companies Upon completion of our initial public offering, we became a publicly listed company in the United States. As a publicly listed company, we are required to file annual reports with the Securities and Exchange Commission.
If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds we expect to receive from our initial public offering to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund and expand our business.
If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds we expect to receive from our offerings to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund and expand our business.
As of the date of this annual report, we have not experienced any shortage of staff in the PRC. For the years ended December 31, 2022, 2021, and 2020, the staff costs under cost of revenues were approximately $10.52 million, $11.08 million, and $9.10 million, respectively.
As of the date of this annual report, we have not experienced any shortage of staff in the PRC. For the years ended December 31, 2023, 2022, and 2021, the staff costs under cost of revenues were approximately $11.41million, $10.52 million, and $11.08 million, respectively.
See “ Risk Factors – Risks Relating to Our Class A Ordinary Shares – Because we are a foreign private issuer and are exempt from certain Nasdaq corporate governance standards applicable to U.S. issuers, you will have less protection than you would have if we were a domestic issuer ” on page 28. ● The market price of our Class A Ordinary Shares may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the public offering price.
See “ Risk Factors – Risks Relating to Our Class A Ordinary Shares – Because we are a foreign private issuer and are exempt from certain Nasdaq corporate governance standards applicable to U.S. issuers, you will have less protection than you would have if we were a domestic issuer ” on page 32. ● The market price of our Class A Ordinary Shares may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at attractive prices.
See “ Risk Factors – Risks Relating to Doing Business in China – Governmental control of currency conversion may limit our ability to utilize our net revenues effectively and affect the value of your investment ” on page 20. ● We must remit the offering proceeds to PRC before they may be used to benefit our business in the PRC, and this process may take a number of months.
See “ Risk Factors – Risks Relating to Doing Business in China – Governmental control of currency conversion may limit our ability to utilize our net revenues effectively and affect the value of your investment ” on page 20. ● We must remit the proceeds from future offerings to PRC before they may be used to benefit the business and operation of our subsidiaries in the PRC, and this process may take a number of months.
If the PCAOB is unable to inspect the company’s auditors for three consecutive years, the issuer’s securities are prohibited to trade on a national securities exchange or in the over-the-counter trading market in the U.S. On December 2, 2020, the U.S. House of Representatives approved the HFCAA. On December 18, 2020, the HFCAA was signed into law.
If the PCAOB is unable to inspect the company’s auditors for three consecutive years, the issuer’s securities are prohibited to trade on a national securities exchange or in the over-the-counter trading market in the U.S. On December 2, 2020, the U.S. House of Representatives approved the HFCAA.
With respect to our self-developed software, the introduction of new technology and emergence of new industry standards may render our self-developed software obsolete and uncompetitive. For the years ended December 31, 2022, 2021, and 2020, we incurred R&D expenses of approximately $1.06 million, $1.08 million, and $0.93 million, respectively.
With respect to our self-developed software, the introduction of new technology and emergence of new industry standards may render our self-developed software obsolete and uncompetitive. For the years ended December 31, 2023, 2022, and 2021, we incurred R&D expenses of approximately $1.19 million, $1.06 million, and $1.08 million, respectively.
These capital contributions must be reported to the Ministry of Commerce, or MOFCOM, or its local counterpart. We believe the offering proceeds would be available for investments in our PRC operation after completing the registration.
These capital contributions must be reported to the Ministry of Commerce, or MOFCOM, or its local counterpart. We believe the proceeds from our future offerings would be available for investments in our PRC operation after completing the registration.
See “ Risk Factors – Risks Relating to Doing Business in China – We must remit the offering proceeds to PRC before they may be used to benefit our business in the PRC, and this process may take a number of months ” on page 20. 9 ● Our Class A Ordinary Shares may be delisted under the Holding Foreign Companies Accountable Act if the PCAOB is unable to inspect our auditors.
See “ Risk Factors – Risks Relating to Doing Business in China – We must remit the proceeds from future offerings to PRC before they may be used to benefit the business and operation of our subsidiaries in the PRC, and this process may take a number of months ” on page 20. ● Our Class A Ordinary Shares may be delisted under the Holding Foreign Companies Accountable Act if the PCAOB is unable to inspect our auditors.
We may be unable to use these proceeds to grow our business until we receive such proceeds in the PRC. In order to remit the offering proceeds to the PRC, we will have to take the following actions: First , we will open a special foreign exchange account for capital account transactions.
We may be unable to use these proceeds to grow our business in a timely manner until our PRC subsidiaries receive such proceeds in the PRC. In order to remit the offering proceeds to the PRC, we will have to take the following actions: (1) we will open a special foreign exchange account for capital account transactions.
Any occurrence of disease or epidemic in the future could have a material and adverse effect on our business, financial condition and results of operations. 33 We may incur impairment losses for intangible assets, which may adversely affect our results of operations As reported in our consolidated financial statements for the years ended December 31, 2022 and 2021, our intangible assets amounted to approximately $4.52 million and $3.87 million as of December 31, 2022 and 2021, respectively.
Any occurrence of disease or epidemic in the future could have a material and adverse effect on our business, financial condition and results of operations. 37 We may incur impairment losses for intangible assets, which may adversely affect our results of operations As reported in our consolidated financial statements for the years ended December 31, 2023 and 2022, our intangible assets amounted to approximately $6.03 million and $4.52 million as of December 31, 2023 and 2022, respectively.
Ordinarily, the process takes several months to complete but is required by law to be accomplished within 180 days of application. The proceeds of the initial public offering will be maintained in an interest-bearing account maintained by us in the United States, until the abovementioned approvals have been provided.
Ordinarily, the process takes several months to complete but is required by law to be accomplished within 180 days of application. The proceeds of our future offerings will be maintained in an interest-bearing account maintained by us in the United States, until the abovementioned approvals have been provided.
To open this account, we must submit to SAFE certain application forms, identity documents, transaction documents, form of foreign exchange registration of overseas investments by domestic residents, and foreign exchange registration certificate of the invested company. Second , we will remit the offering proceeds into this special foreign exchange account.
To open this account, we must submit to SAFE certain application forms, identity documents, transaction documents, form of foreign exchange registration of overseas investments by domestic residents, and foreign exchange registration certificate of the invested company. (2) we will remit the offering proceeds into this special foreign exchange account. (3) we will apply for settlement of the foreign exchange.
As of the date of this annual report, our management has assessed the effectiveness of our internal control over financial reporting. The material weaknesses relate to that the Company does not have in-house accounting personnel with sufficient knowledge of US GAAP and SEC reporting experiences.
The material weaknesses relate to that the Company does not have in-house accounting personnel with sufficient knowledge of US GAAP and SEC reporting experiences. Management concluded that as of the date of this annual report, our internal control over financial reporting was ineffective.
For the years ended December 31, 2022, 2021, and 2020, revenue generated from our financial and taxation solution services amounted to approximately $26.28 million, $26.49 million, and $23.34 million, representing approximately 77.73%, 77.24%, and 76.10% of our total revenue, respectively. Our customers are not obliged to renew such agreements with us should their business no longer requires our services.
For the years ended December 31, 2023, 2022, and 2021, revenue generated from our financial and taxation solution services amounted to approximately $31.77 million, $26.28 million, $26.49 million, representing approximately 79.91%, 77.73%, and 77.24% of our total revenue, respectively. Our customers are not obliged to renew such agreements with us should their business no longer requires our services.
Third , we will apply for settlement of the foreign exchange. In order to do so, we must submit to SAFE certain application forms, identity documents, payment order to a designated person, and a tax certificate. The timing of the process is difficult to estimate because the efficiencies of different SAFE branches can vary materially.
In order to do so, we must submit to SAFE certain application forms, identity documents, payment order to a designated person, and a tax certificate. The timing of the process is difficult to estimate because the efficiencies of different SAFE branches can vary materially.
We must remit the offering proceeds to PRC before they may be used to benefit our business in the PRC, and this process may take a number of months The proceeds of the initial public offering must be sent back to the PRC, and the process for sending such proceeds back to the PRC may take several months after the closing of the initial public offering.
We must remit the proceeds from future offerings to PRC before they may be used to benefit the business and operation of our subsidiaries in the PRC, and this process may take a number of months The proceeds of our future offering must be sent back to the PRC, and the process for sending such proceeds back to the PRC may take several months after the closing of such offering.
These developments could add uncertainties to our offering ” on page 24. Risks Relating to our Class A Ordinary Shares ● We are an “emerging growth company,” and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our Class A Ordinary Shares less attractive to investors.
Risks Relating to our Class A Ordinary Shares ● We are an “emerging growth company,” and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our Class A Ordinary Shares less attractive to investors.
Accordingly, without the consent of the competent PRC securities regulators or other relevant authorities, no entity or individual may provide any documents and materials relating to securities business activities to foreign entities or government agencies.
Accordingly, without the consent of the competent PRC securities regulators and relevant authorities, no organization or individual may provide the documents and materials relating to securities business activities to foreign securities regulators.
See “ Risk Factors – Risks Relating to Our Class A Ordinary Shares – The price of our Class A Ordinary Shares could be subject to rapid and substantial volatility.” on page 31. ● There can be no assurance that we will not be a passive foreign investment company, or PFIC, for United States federal income tax purposes for any taxable year, which could subject United States investors in our Class A Ordinary Shares to significant adverse United States income tax consequences.
See “ Risk Factors – Risks Relating to Our Class A Ordinary Shares – The market price of our Class A Ordinary Shares may be volatile or may decline regardless of our operating performance, and you may not be able to sell your shares at attractive prices ” on page 34. ● There can be no assurance that we will not be a passive foreign investment company, or PFIC, for United States federal income tax purposes for any taxable year, which could subject United States investors in our Class A Ordinary Shares to significant adverse United States income tax consequences.
Although our independent registered public accounting firm is not required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act until the date we are no longer an emerging growth company, our management will be required to report on our internal controls over financial reporting under Section 404.
However, while we remain an emerging growth company, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm, until the date we are no longer an emerging growth company. our management are required to report on our internal controls over financial reporting under Section 404.
Our auditors, B&V for the fiscal year ended December 31, 2020 and TPS Thayer for the fiscal year ended December 31, 2021, are both based in the U.S. B&V withdrew its registration from the PCAOB in January 2022. TPS Thayer are registered with PCAOB and subject to PCAOB inspections.
Our auditors, Enrome LLP for the fiscal year ended December 31, 2023 and TPS Thayer for the fiscal years ended December 31, 2022 and 2021, are based in Singapore and the U.S. respectively. Enrome LLP and TPS Thayer are both registered with PCAOB and subject to PCAOB inspections.
These developments could add uncertainties to our offering On April 21, 2020, SEC Chairman Jay Clayton and PCAOB Chairman William D. Duhnke III, along with other senior SEC staff, released a joint statement highlighting the risks associated with investing in companies based in or have substantial operations in emerging markets including China.
Duhnke III, along with other senior SEC staff, released a joint statement highlighting the risks associated with investing in companies based in or have substantial operations in emerging markets including China.
Nasdaq might apply the additional and more stringent criteria for our initial and continued listing, which might cause delay or even denial of our listing application. 29 If we cannot satisfy, or continue to satisfy, the continued listing requirements and other rules of Nasdaq Capital Market, although we exempt from certain corporate governance standards applicable to US issuers as a Foreign Private Issuer, our securities may not be listed or may be delisted, which could negatively impact the price of our securities and your ability to sell them We are listed on the Nasdaq Capital Market.
Accordingly, without the consent of the competent PRC securities regulators or other relevant authorities, no entity or individual may provide any documents and materials relating to securities business activities to foreign entities or government agencies. 33 If we cannot satisfy, or continue to satisfy, the continued listing requirements and other rules of Nasdaq Capital Market, although we exempt from certain corporate governance standards applicable to US issuers as a Foreign Private Issuer, our securities may not be listed or may be delisted, which could negatively impact the price of our securities and your ability to sell them We are listed on the Nasdaq Capital Market.
If we are considered a non-resident enterprise under the PRC Enterprise Income Tax Law and if the PRC tax authorities make adjustments to the taxable income of the transactions under Circular 59 and Circular 7, 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. 23 The recent joint statement by the SEC and PCAOB, proposed rule changes submitted by Nasdaq, and the Holding Foreign Companies Accountable Act all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB.
If we are considered a non-resident enterprise under the PRC Enterprise Income Tax Law and if the PRC tax authorities make adjustments to the taxable income of the transactions under Circular 59 and Circular 7, 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. 23 The U.S.
B&V withdrew its registration from the PCAOB in January 2022. TPS Thayer is headquartered in Sugar Land, Texas, and its registration with the PCAOB took effect in September 2020 and it is currently subject to PCAOB inspections.
TPS Thayer’s registration with the PCAOB took effect in September 2020 and it is currently subject to PCAOB inspections.
Given such uncertainty, we may be further required to suspend our relevant business, shut down our website, or face other penalties, which could materially and adversely affect our business, financial condition, and results of operations. 26 Risks Relating to our Class A Ordinary Shares Our CEO has control over key decision making as a result of his control of a majority of our voting shares Our authorized and issued ordinary shares are divided into Class A Ordinary Shares and Class B Ordinary Shares.
Given such uncertainty, we may be further required to suspend our relevant business, shut down our website, or face other penalties, which could materially and adversely affect our business, financial condition, and results of operations.
The PCAOB has also indicated that it will act immediately to consider the need to issue new determinations with the HFCAA if needed. Our auditors, B&V for the fiscal year ended December 31, 2020 and TPS Thayer for the fiscal year ended December 31, 2021, are both based in the U.S.
The PCAOB has also indicated that it will act immediately to consider the need to issue new determinations with the HFCAA if needed.
We will be in a continuing process of developing, establishing, and maintaining internal controls and procedures that will allow our management to report on, and our independent registered public accounting firm to attest to, our internal controls over financial reporting if and when required to do so under Section 404 of the Sarbanes-Oxley Act of 2002.
We are in a continuing process of developing, establishing, and maintaining internal controls and procedures that allows our management to report on our internal controls over financial reporting. As of the date of this annual report, our management has assessed the effectiveness of our internal control over financial reporting.
Our total revenue for the six months ended June 30, 2022 has decreased by 4.93% to approximately $16.15 million compared to the total revenue of $16.99 million for the six months ended June 30,2021. We do not believe that the pandemic had overall material adverse effect on our business, financial condition and results of operations.
The areas where our Partnered Institutions located were not greatly affected by the pandemic and the total number of Partnered Institutions remained stable. We do not believe that the pandemic had overall material adverse effect on our business, financial condition and results of operations.
Removed
See “ Risk Factors – Risks Relating to Our Class A Ordinary Shares – The market price of our Class A Ordinary Shares may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the public offering price ” on page 30. ● The trading of our Class A Ordinary Shares could experience extreme stock price run-ups followed by rapid price declines and strong stock price volatility as experienced in recent initial public offerings.
Added
These developments could add uncertainties to our offering ” on page 24. 9 ● Any actions by the Chinese government to exert more oversight and control over offerings that are conducted overseas and foreign investment in China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer our ordinary shares to investors and cause the value of our ordinary shares to significantly decline or be worthless.
Removed
Trading in our securities may be prohibited under the HFCAA and as a result an exchange may determine to delist our securities if it is later determined that the PCAOB is unable to inspect or investigate completely our auditor because of a position taken by an authority in a foreign jurisdiction The HFCAA, was enacted on December 18, 2020.
Added
The M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China.

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Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

47 edited+15 added−1 removed254 unchanged
Biggest changeWe identify weaknesses in our customers’ financial and taxation related management and provide advice and internal trainings to enhance the enterprise’s overall financial and taxation related management capabilities. 49 The areas, contents and intended benefits of our financial and taxation related management consultation services are set out below: Area of Services Contents of Services Intended benefits for customers Cost management ● — — — — Formulation of: Procurement policy (including procurement procedures, suppliers management and contract management) Payment policy (including credit assessment and credit policy) Inventory management policy (including inventory accounting and optimal inventory management) Production management (including control on raw materials, direct labor cost management and manufacturing expense management) Assist our customers in improving workflow and systems to provide practical cost control solutions to achieve cost savings and improve profits Financial risks management ● ● ● Formulation of financial risk management procedures (including risk identification, risk measurement and risk control) Assist customers in setting out a financial budget and formulating a capital plan Setting up financial risk warning system and crisis management system Assist our customers in identifying financial risks involved in business operation, provide practical solutions to rationalize customers’ financial conditions to analyze current financial risks and avoid future financial risks Computerized financial information system ● ● ● ● ● Selection of financial management software and servers Design of integration of business and financial processes Formulation of system standardization and financial accounting standardization Initial design of computerization works Operational tracking and improvement of computerization Assist our customers in transforming their manual financial information management system to a computerized system, to reduce human resource costs, increase data timeliness and accuracy and improve financial management efficiency and effectiveness Financial management system optimization ● ● ● ● ● Formulation of cash budgets and plans Establishment of comprehensive budget management Improvement of internal control system Development of finance team Formulation of financial analysis and financial evaluation system Assist clients in strengthening financial management concepts and financial management methods, developing financial analysis tools and evaluation systems to standardize financial management objectives, thereby improving corporate management efficiency and supporting corporate development strategies 50 2.
Biggest changeWe identify weaknesses in our customers’ financial and taxation related management and provide advice and internal trainings to enhance the enterprise’s overall financial and taxation related management capabilities. 53 The areas, contents and intended benefits of our financial and taxation related management consultation services are set out below: Area of Services Contents of Services Intended benefits for customers Cost management ● Formulation of: Assist our customers in improving workflow and systems to provide practical cost control solutions to achieve cost savings and improve profits — Procurement policy (including procurement procedures, suppliers management and contract management) — Payment policy (including credit assessment and credit policy) — Inventory management policy (including inventory accounting and optimal inventory management) — Production management (including control on raw materials, direct labor cost management and manufacturing expense management) Financial risks management ● Formulation of financial risk management procedures (including risk identification, risk measurement and risk control) Assist our customers in identifying financial risks involved in business operation, provide practical solutions to rationalize customers’ financial conditions to analyze current financial risks and avoid future financial risks ● Assist customers in setting out a financial budget and formulating a capital plan ● Setting up financial risk warning system and crisis management system Computerized financial information system ● Selection of financial management software and servers Assist our customers in transforming their manual financial information management system to a computerized system, to reduce human resource costs, increase data timeliness and accuracy and improve financial management efficiency and effectiveness ● Design of integration of business and financial processes ● Formulation of system standardization and financial accounting standardization ● Initial design of computerization works ● Operational tracking and improvement of computerization Financial management system optimization ● Formulation of cash budgets and plans Assist clients in strengthening financial management concepts and financial management methods, developing financial analysis tools and evaluation systems to standardize financial management objectives, thereby improving corporate management efficiency and supporting corporate development strategies ● Establishment of comprehensive budget management ● Improvement of internal control system ● Development of finance team ● Formulation of financial analysis and financial evaluation system 54 2.
According to the Overseas Listing Trial Measures, PRC domestic companies that seek to offer and list securities in overseas markets, either in direct or indirect means, are required to fulfill the filing procedure with the CSRC and report relevant information.
According to the Overseas Listing Trial Measures, PRC domestic companies that seek to offer and list securities in overseas markets, either in direct or indirect means, are required to fulfill the filing procedure with the CSRC and report relevant information.
The areas, contents and intended benefits of our internal control management consultation services are set forth below: Area of Services Contents of Services Intended benefits for customers Establishment of an internal control management system ● ● ● ● Improvement of internal control environment Establishment of internal control system and process Optimization and improvement of control procedures Formulation of internal control manual Assist our customers in establishing or enhancing internal control management systems to monitor procedures, improve business efficiency, increase financial reliability and integrity and ensure compliance with relevant rules and regulations Establishment of an internal audit system ● ● ● ● ● Adjustment of the organizational structure and enhancement of the authority of the internal audit unit Improvement of the independence of internal audit unit and internal auditors Building up of the internal audit unit and team Improvement of internal audit system through information technology tools Establishment of internal audit system Assist our customers in establishing or enhancing an internal audit system to identify and rectify operational or financial weaknesses and improve overall business efficiency and performance, in order to achieve effective control of risks through internal audit Establishment of accounting system ● ● ● Establishment of organizational structure and division of work responsibilities Standardization of business process Standardization of accounting process Assist our customers in establishing or enhancing the accounting systems to sort out and systemize accounting policies and procedures, strengthening the effectiveness and accuracy of accounting and practicality of financial reports and analysis 51 3.
The areas, contents and intended benefits of our internal control management consultation services are set forth below: Area of Services Contents of Services Intended benefits for customers Establishment of an internal control management system ● Improvement of internal control environment Assist our customers in establishing or enhancing internal control management systems to monitor procedures, improve business efficiency, increase financial reliability and integrity and ensure compliance with relevant rules and regulations ● Establishment of internal control system and process ● Optimization and improvement of control procedures ● Formulation of internal control manual Establishment of an internal audit system ● Adjustment of the organizational structure and enhancement of the authority of the internal audit unit Assist our customers in establishing or enhancing an internal audit system to identify and rectify operational or financial weaknesses and improve overall business efficiency and performance, in order to achieve effective control of risks through internal audit ● Improvement of the independence of internal audit unit and internal auditors ● Building up of the internal audit unit and team ● Improvement of internal audit system through information technology tools ● Establishment of internal audit system Establishment of accounting system ● Establishment of organizational structure and division of work responsibilities Assist our customers in establishing or enhancing the accounting systems to sort out and systemize accounting policies and procedures, strengthening the effectiveness and accuracy of accounting and practicality of financial reports and analysis ● Standardization of business process ● Standardization of accounting process 55 3.
At the same time, it shall collect and retain relevant information for reference in accordance with Circular 35, and accept the follow-up management of the tax authorities. 59 Regulations on Enterprise Income Tax According to the Enterprise Income Tax Law which was issued by the National People’s Congress on March 16, 2007 and last revised and came into effect on December 29, 2018, and the Implementation Rules to the Enterprise Income Tax Law issued by the State Council on December 6, 2007 and effective on January 1, 2008 and was revised on April 23, 2019, both domestic and foreign-invested enterprises established under the laws of foreign countries or regions whose “de facto management bodies” are located in the PRC are considered resident enterprises, and will generally be subject to EIT at the rate of 25% of their global income.
At the same time, it shall collect and retain relevant information for reference in accordance with Circular 35, and accept the follow-up management of the tax authorities. 63 Regulations on Enterprise Income Tax According to the Enterprise Income Tax Law which was issued by the National People’s Congress on March 16, 2007 and last revised and came into effect on December 29, 2018, and the Implementation Rules to the Enterprise Income Tax Law issued by the State Council on December 6, 2007 and effective on January 1, 2008 and was revised on April 23, 2019, both domestic and foreign-invested enterprises established under the laws of foreign countries or regions whose “de facto management bodies” are located in the PRC are considered resident enterprises, and will generally be subject to EIT at the rate of 25% of their global income.
Registration Date Lichen Education Enterprise Financial Intelligence Analysis System V1.0 2020SR0515804 May 26, 2020 Lichen Education Lichen Education Land Tax Declaration Simulation System V1.0 2015SR250983 December 9, 2015 Lichen Education Lichen Education Government Tax Declaration Simulation System V1.0 2015SR251364 December 9, 2015 Lichen Education Lichen Education Value-added Tax Billing Simulation System V1.0 2015SR250218 December 8, 2015 Lichen Education Lichen Education Examination Simulation System V1.0 2015SR250978 December 9, 2015 Lichen Education Lichen Education Accounting Practice System V1.0 2015SR252772 December 10, 2015 Lichen Education Lichen Education Internet School System V1.0 2015SR250018 December 8, 2015 Lichen Education Lichen Education Academic Affairs Management System V1.0 2016SR086921 April 26, 2016 65 Domains Registrant Domain name Expiration Date Lichen Education xmqcw.com.cn May 16, 2023 Lichen Education lichenjy.com October 18, 2023 Lichen Education lichenkj.com January 14, 2024 Lichen Education lichenzx.com October 24, 2023 Lichen Education lichenjyfz.com January 4, 2024 Lichen Education kj2008.com September 2, 2023 The software copyrights we owned have the effective protection period of 50 years from the registration date for each registered copyright according to the Copyright Law in China.
Registration Date Lichen Education Enterprise Financial Intelligence Analysis System V1.0 2020SR0515804 May 26, 2020 Lichen Education Lichen Education Land Tax Declaration Simulation System V1.0 2015SR250983 December 9, 2015 Lichen Education Lichen Education Government Tax Declaration Simulation System V1.0 2015SR251364 December 9, 2015 Lichen Education Lichen Education Value-added Tax Billing Simulation System V1.0 2015SR250218 December 8, 2015 Lichen Education Lichen Education Examination Simulation System V1.0 2015SR250978 December 9, 2015 Lichen Education Lichen Education Accounting Practice System V1.0 2015SR252772 December 10, 2015 Lichen Education Lichen Education Internet School System V1.0 2015SR250018 December 8, 2015 Lichen Education Lichen Education Academic Affairs Management System V1.0 2016SR086921 April 26, 2016 69 Domains Registrant Domain name Expiration Date Lichen Education xmqcw.com.cn May 16, 2023 Lichen Education lichenjy.com October 18, 2023 Lichen Education lichenkj.com January 14, 2024 Lichen Education lichenzx.com October 24, 2023 Lichen Education lichenjyfz.com January 4, 2024 Lichen Education kj2008.com September 2, 2023 The software copyrights we owned have the effective protection period of 50 years from the registration date for each registered copyright according to the Copyright Law in China.
In addition, as of June, 2022, over 80.0% of our external experts were registered certified public accountants or registered certified tax agents, and over 85.0% of our external experts possessed a master’s degree or doctoral degree, with a number of them recognized as leading individuals in the financial and taxation field, who have served as lecturers in major universities in the PRC, published teaching materials, books and case studies on a wide range of taxation, risk management and corporate governance related subjects and have been granted awards or subsidies from the governmental bodies, including the State Council of the PRC. 47 We have established and implemented stringent policy for selection of our external experts and recruitment of our internal consultants.
In addition, as of June, 2022, over 80.0% of our external experts were registered certified public accountants or registered certified tax agents, and over 85.0% of our external experts possessed a master’s degree or doctoral degree, with a number of them recognized as leading individuals in the financial and taxation field, who have served as lecturers in major universities in the PRC, published teaching materials, books and case studies on a wide range of taxation, risk management and corporate governance related subjects and have been granted awards or subsidies from the governmental bodies, including the State Council of the PRC. 51 We have established and implemented stringent policy for selection of our external experts and recruitment of our internal consultants.
See “Risk Factors - Risks Related to Doing Business in China - To the extent cash or assets in the business is in the PRC or Hong Kong or a PRC or Hong Kong entity, the funds or assets may not be available to fund operations or for other use outside of the PRC or Hong Kong due to interventions in or the imposition of restrictions and limitations on the ability of us or our subsidiaries by the PRC government to transfer cash or assets,” “Risk Factors - Risks Related to Doing Business in China - We rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material adverse effect on our ability to conduct our business,” and “Risk Factors - Risks Related to Doing Business in China - Our PRC subsidiaries are subject to restrictions on paying dividends or making other payments to us, which may have a material adverse effect on our ability to conduct our business.” 40 As a holding company, we may rely on dividends and other distributions on equity paid by our subsidiaries, including those based in the PRC, for our cash and financing requirements.
See “Risk Factors - Risks Related to Doing Business in China - To the extent cash or assets in the business is in the PRC or Hong Kong or a PRC or Hong Kong entity, the funds or assets may not be available to fund operations or for other use outside of the PRC or Hong Kong due to interventions in or the imposition of restrictions and limitations on the ability of us or our subsidiaries by the PRC government to transfer cash or assets,” “Risk Factors - Risks Related to Doing Business in China - We rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material adverse effect on our ability to conduct our business,” and “Risk Factors - Risks Related to Doing Business in China - Our PRC subsidiaries are subject to restrictions on paying dividends or making other payments to us, which may have a material adverse effect on our ability to conduct our business.” 44 As a holding company, we may rely on dividends and other distributions on equity paid by our subsidiaries, including those based in the PRC, for our cash and financing requirements.
To highlight our efforts, we have co-hosted the 2018 China Management Consulting Innovation Forum with the China Enterprise Confederation Management Advisory Committee and hosted the 2019 Excellent Financial Manager Summit Forum in Xiamen, both of which were well attended by business leaders, senior government officials, university professors and financial and taxation executives. 55 We also promote our brand to a wide audience nationwide by multi-marketing strategies, which comprise (i) production and broadcasting of financial and taxation videos and programs, (ii) internet and conventional advertisement placing, and (iii) organizing and sponsoring marketing events and activities.
To highlight our efforts, we have co-hosted the 2018 China Management Consulting Innovation Forum with the China Enterprise Confederation Management Advisory Committee and hosted the 2019 Excellent Financial Manager Summit Forum in Xiamen, both of which were well attended by business leaders, senior government officials, university professors and financial and taxation executives. 59 We also promote our brand to a wide audience nationwide by multi-marketing strategies, which comprise (i) production and broadcasting of financial and taxation videos and programs, (ii) internet and conventional advertisement placing, and (iii) organizing and sponsoring marketing events and activities.
See “Risk Factors — Risks Relating to Doing Business in the People’s Republic of China —The filing, approval or other administration requirements of the CSRC or other PRC government authorities may be required in connection with our future offshore offering under PRC law, and, if required, we cannot predict whether or for how long we will be able to complete the filing procedure with the CSRC and obtain such approval or complete such filing, as applicable.” As of the date of this annual report, our operations are run in compliance with the all PRC regulations disclosed above. 62 C.
See “Risk Factors — Risks Relating to Doing Business in the People’s Republic of China —The filing, approval or other administration requirements of the CSRC or other PRC government authorities may be required in connection with our future offshore offering under PRC law, and, if required, we cannot predict whether or for how long we will be able to complete the filing procedure with the CSRC and obtain such approval or complete such filing, as applicable.” As of the date of this annual report, our operations are run in compliance with the all PRC regulations disclosed above. 66 C.
The Overseas Listing Trial Measures also requires subsequent reports to be filed with the CSRC on material events, such as change of control or voluntary or forced delisting of the issuer(s) who have completed overseas offerings and listings. 44 At a press conference held for these new regulations (“Press Conference”), officials from the CSRC clarified that the domestic companies that have already been listed overseas on or before March 31, 2023 shall be deemed as existing issuers (the “Existing Issuers”).
The Overseas Listing Trial Measures also requires subsequent reports to be filed with the CSRC on material events, such as change of control or voluntary or forced delisting of the issuer(s) who have completed overseas offerings and listings. 48 At a press conference held for these new regulations (“Press Conference”), officials from the CSRC clarified that the domestic companies that have already been listed overseas on or before March 31, 2023 shall be deemed as existing issuers (the “Existing Issuers”).
On December 16, 2021, the PCAOB issued a report on its determinations that it is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong, because of positions taken by PRC authorities in those jurisdictions, which determinations were vacated on December 15, 2022. 42 On August 26, 2022, the PCAOB announced that it had signed a Statement of Protocol (the “SOP”) with the China Securities Regulatory Commission and the Ministry of Finance of China.
On December 16, 2021, the PCAOB issued a report on its determinations that it is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong, because of positions taken by PRC authorities in those jurisdictions, which determinations were vacated on December 15, 2022. 46 On August 26, 2022, the PCAOB announced that it had signed a Statement of Protocol (the “SOP”) with the China Securities Regulatory Commission and the Ministry of Finance of China.
Our PRC resident beneficial owners subject to these registration requirements have registered with the Jinjiang SAFE branch and/or qualified banks to reflect the recent changes to our corporate structure. 61 Regulations on Dividend Distribution Under our current corporate structure, the Company may rely on dividend payments from Lichen Education and Lichen Zixun, which are wholly foreign-owned enterprises incorporated in China, to fund any cash and financing requirements we may have.
Our PRC resident beneficial owners subject to these registration requirements have registered with the Jinjiang SAFE branch and/or qualified banks to reflect the recent changes to our corporate structure. 65 Regulations on Dividend Distribution Under our current corporate structure, the Company may rely on dividend payments from Lichen Education and Lichen Zixun, which are wholly foreign-owned enterprises incorporated in China, to fund any cash and financing requirements we may have.
As such, we believe that our internal consultants have ample experience in the financial and/or taxation sectors to execute our financial and taxation solution projects. 48 Our work cycle typically spans a period of 10 to 16 weeks, with approximately two to four weeks allocated to planning and designing the diagnosis report, seven to nine weeks allocated to implementing the consultation plan and providing guidance to our customers and one to three weeks allocated to assessment.
As such, we believe that our internal consultants have ample experience in the financial and/or taxation sectors to execute our financial and taxation solution projects. 52 Our work cycle typically spans a period of 10 to 16 weeks, with approximately two to four weeks allocated to planning and designing the diagnosis report, seven to nine weeks allocated to implementing the consultation plan and providing guidance to our customers and one to three weeks allocated to assessment.
Where our Subsidiaries is in breach of the terms and conditions of the Partnership Agreement, our Subsidiaries will return the remaining portion of the fees paid which is proportionate to the remaining contract period under the Partnership Agreement to the Partnered Institutions. 54 Software and Maintenance Services Lichen Zixun has been providing a financial and taxation training software and academic affairs management system to our Partnered Institutions as part of our services under the Partnership Agreements.
Where our Subsidiaries is in breach of the terms and conditions of the Partnership Agreement, our Subsidiaries will return the remaining portion of the fees paid which is proportionate to the remaining contract period under the Partnership Agreement to the Partnered Institutions. 58 Software and Maintenance Services Lichen Zixun has been providing a financial and taxation training software and academic affairs management system to our Partnered Institutions as part of our services under the Partnership Agreements.
Trademark registrations are effective for a renewable ten-year period, unless otherwise revoked. 58 Domain Names . Domain name registrations are handled through domain name service agencies established under the relevant regulations, and applicants become domain name holders upon successful registration. We have adopted necessary mechanisms to register, maintain and enforce intellectual property rights in the PRC.
Trademark registrations are effective for a renewable ten-year period, unless otherwise revoked. 62 Domain Names . Domain name registrations are handled through domain name service agencies established under the relevant regulations, and applicants become domain name holders upon successful registration. We have adopted necessary mechanisms to register, maintain and enforce intellectual property rights in the PRC.
The Offering closed on February 8, 2023 and the Class A Ordinary Shares began trading on February 6, 2023 on the Nasdaq Capital Market under the ticker symbol “LICN.” 46 Our Revenues Model and Core Services We primarily provide (i) financial and taxation solution services; (ii) education support services; and (iii) software and maintenance services in the PRC.
The Offering closed on February 8, 2023 and the Class A Ordinary Shares began trading on February 6, 2023 on the Nasdaq Capital Market under the ticker symbol “LICN.” 50 Our Revenues Model and Core Services We primarily provide (i) financial and taxation solution services; (ii) education support services; and (iii) software and maintenance services in the PRC.
From the personal and business networks of our management, as well as our marketing initiatives (being our talks, seminars hosted by the Partnered Institutions and the website shared by the Partnered Institutions), potential customers who wish to set up education institutions may approach us and initiate discussions with us, with an aim to becoming our Partnered Institutions. 52 Scope of our education support services 1.
From the personal and business networks of our management, as well as our marketing initiatives (being our talks, seminars hosted by the Partnered Institutions and the website shared by the Partnered Institutions), potential customers who wish to set up education institutions may approach us and initiate discussions with us, with an aim to becoming our Partnered Institutions. 56 Scope of our education support services 1.
Cooperation with our Partnered Institutions We believe that by leveraging the business relationships with our Partnered Institutions in the past six years, as well as the expertise and experience that we have established in the financial and taxation solution services market over the years, we have built a unique business model and have generated synergies amongst the services that we provide as evidenced by the growth of our business.
Cooperation with our Partnered Institutions We believe that by leveraging the business relationships with our Partnered Institutions in the past eight years, as well as the expertise and experience that we have established in the financial and taxation solution services market over the years, we have built a unique business model and have generated synergies amongst the services that we provide as evidenced by the growth of our business.
As of the date of this annual report, we have no customer that accounts for more than 10% of our revenue. 56 Suppliers Our suppliers primarily consist of the external experts, education and office materials providers, including education materials and textbooks, software developers and technology vendors, and a media company in the PRC.
As of the date of this annual report, we have no customer that accounts for more than 10% of our revenue. 60 Suppliers Our suppliers primarily consist of the external experts, education and office materials providers, including education materials and textbooks, software developers and technology vendors, and a media company in the PRC.
However, substantial uncertainty remains regarding the scope and applicability of the M&A Rules to offshore special purpose vehicles. 43 On July 6, 2021, the relevant PRC government authorities issued Opinions on Strictly Cracking Down Illegal Securities Activities in accordance with the Law.
However, substantial uncertainty remains regarding the scope and applicability of the M&A Rules to offshore special purpose vehicles. 47 On July 6, 2021, the relevant PRC government authorities issued Opinions on Strictly Cracking Down Illegal Securities Activities in accordance with the Law.
Our Partnered Institutions, located in 10 provinces or municipalities and 20 cities in the PRC, are education services providers which mainly engage in the organization of various seminars, talks and training courses to entrepreneurs, senior executives, as well as financial and taxation executives.
Our Partnered Institutions, located in 11 provinces or municipalities and 20 cities in the PRC, are education services providers which mainly engage in the organization of various seminars, talks and training courses to entrepreneurs, senior executives, as well as financial and taxation executives.
The qualified banks, under the supervision of SAFE, may directly review the applications and conduct the registration. 60 On March 30, 2015, SAFE promulgated Circular 19, which expands a pilot reform of the administration of the settlement of the foreign exchange capitals of foreign-invested enterprises nationwide.
The qualified banks, under the supervision of SAFE, may directly review the applications and conduct the registration. 64 On March 30, 2015, SAFE promulgated Circular 19, which expands a pilot reform of the administration of the settlement of the foreign exchange capitals of foreign-invested enterprises nationwide.
See “Risk Factors – We have limited insurance coverage to protect us against all risks associated with our business operations.” 57 Regulation Our operation in China is subject to a number of PRC laws and regulations.
See “Risk Factors – We have limited insurance coverage to protect us against all risks associated with our business operations.” 61 Regulation Our operation in China is subject to a number of PRC laws and regulations.
Lichen Zixun may renew the lease with two-month’s written notice prior to the end of the lease. We intend to renew as of the date of this annual report. 64 Intellectual Property Our “Lichen” brand is an important element of our business.
Lichen Zixun may renew the lease with two-month’s written notice prior to the end of the lease. We intend to renew as of the date of this annual report. 68 Intellectual Property Our “Lichen” brand is an important element of our business.
Organizational structure. The following is a list of our subsidiaries as of the date of this annual report.
Organizational structure. The following is a list of all of our subsidiaries as of the date of this annual report.
Upon expiration of the Partnership Agreement, we will conduct another internal assessment of the performance and future prospects of the Partnered Institution, to determine whether the Partnership Agreement should be renewed. 53 As of the date of this annual report, we have agreements with 22 Partnered Institutions, including Jinjiang Xingminqi Accounting Vocational Training School and Quanzhou City Lichen Accounting Vocational Training School, which are controlled by Ya Li, our CEO, and the rest of them are unrelated third parties.
Upon expiration of the Partnership Agreement, we will conduct another internal assessment of the performance and future prospects of the Partnered Institution, to determine whether the Partnership Agreement should be renewed. 57 As of the date of this annual report, we have agreements with 23 Partnered Institutions, including Jinjiang Xingminqi Accounting Vocational Training School and Quanzhou City Lichen Accounting Vocational Training School, which are controlled by Ya Li, our CEO, and the rest of them are unrelated third parties.
Office 1,156.29 Leased property Lichen Zixun leased the following property in the PRC: Location Term Use of property Rent Termination Broadcasting studio in Beijing (LG1, Left Bank Community, 68 North Fourth Ring West Road, Haidian District, Beijing City, PRC) April 1, 2022 to March 31, 2025 Broadcasting studio RMB $650,000 per year Either party may terminate this Agreement with thirty days prior written notice to the other party.
Office 120.44 Leased property Lichen Zixun leased the following property in the PRC: Location Term Use of property Rent Termination Broadcasting studio in Beijing (LG1, Left Bank Community, 68 North Fourth Ring West Road, Haidian District, Beijing City, PRC) April 1, 2022 to March 31, 2025 Broadcasting studio RMB $650,000 per year Either party may terminate this Agreement with thirty days prior written notice to the other party.
As of the date of this annual report, we collaborate with 22 Partnered Institutions in 10 provinces or municipalities and 20 cities in the PRC. The Partnered Institutions are education services providers which mainly engage in organization of various seminars, talks and training courses to entrepreneurs, senior executives, and financial and taxation executives, etc.
As of the date of this annual report, we collaborate with 23 Partnered Institutions in 11 provinces or municipalities and 20 cities in the PRC. The Partnered Institutions are education services providers which mainly engage in organization of various seminars, talks and training courses to entrepreneurs, senior executives, and financial and taxation executives, etc.
As of the date of this annual report, we had 15 software technicians, with an average working experience of more than 15 years. All of them possessed a bachelor’s degree or master’s degree.
As of the date of this annual report, we had 18 software technicians, with an average working experience of more than 16 years. All of them possessed a bachelor’s degree or master’s degree.
Besides spreading across different industry sectors, we also enjoy a customer base with broad geographical locations in the PRC. For the years ended December 31, 2022, 2021, and 2020, sales to our five largest customers amounted to approximately $2.05 million, $2.03 million, and $1.3 million, representing approximately 6.07%, 5.90%, and 4.22%, respectively, of our total revenue.
Besides spreading across different industry sectors, we also enjoy a customer base with broad geographical locations in the PRC. For the years ended December 31, 2023, 2022, and 2021, sales to our five largest customers amounted to approximately $1.81 million, $2.05 million, and $2.03 million, representing approximately 4.56%, 6.07%, and 5.90%, respectively, of our total revenue.
For the years ended December 31, 2022, 2021, and 2020, we incurred R&D expenses of approximately $1.06 million, $1.08 million, and $0.93 million, respectively. Our R&D department is responsible for the development of teaching and learning materials on new topics for our Partnered Institutions, financial and taxation training software, and financial and taxation analysis software.
For the years ended December 31, 2023, 2022, and 2021, we incurred R&D expenses of approximately $1.19 million, $1.06 million, and $1.08 million, respectively. Our R&D department is responsible for the development of teaching and learning materials on new topics for our Partnered Institutions, financial and taxation training software, and financial and taxation analysis software.
As of the date of this annual report, the authorized share capital of the Company is US$50,000 divided into 1,000,000,000 Class A Ordinary Shares and 250,000,000 Class B Ordinary Shares, of which 17,500,000 Class A Ordinary Shares and 9,000,000 Class B Ordinary Shares are issued and outstanding.
As of the date of this annual report, the authorized share capital of the Company is US$50,000 divided into 1,000,000,000 Class A Ordinary Shares and 250,000,000 Class B Ordinary Shares, of which 18,370,000 Class A Ordinary Shares and 9,000,000 Class B Ordinary Shares are issued and outstanding.
From 2012 to 2021, we were recognized as one of the Top 50 Providers of Management Consulting Services in China for ten consecutive years by the China Enterprise Confederation Management Advisory Committee.
From 2012 to 2023, we were recognized as one of the Top 50 Providers of Management Consulting Services in China for twelve consecutive years by the China Enterprise Confederation Management Advisory Committee.
Implication of the Holding Foreign Companies Accountable Act (the “HFCAA”) U.S. laws and regulations, including the Holding Foreign Companies Accountable Act, or HFCAA, may restrict or eliminate our ability to complete a business combination with certain companies, particularly those acquisition candidates with substantial operations in China.
Risk Factors - Risks Relating to Doing Business in China.” Implication of the Holding Foreign Companies Accountable Act (the “HFCAA”) U.S. laws and regulations, including the Holding Foreign Companies Accountable Act, or HFCAA, may restrict or eliminate our ability to complete a business combination with certain companies, particularly those acquisition candidates with substantial operations in China.
For the years ended December 31, 2022, 2021, and 2020, purchases from our five largest suppliers amounted to approximately $1.92 million, $2.07 million, and $1.84 million, which accounted for approximately 76.59%, 84.30% and 68.39%, respectively, of our total purchases. Research and Development We place strong emphasis on the R&D of our services.
For the years ended December 31, 2023, 2022, and 2021, purchases from our five largest suppliers amounted to approximately $2.09 million, $1.92 million, and $2.07 million, which accounted for approximately 89.5%, 76.59%, and 84.30%, respectively, of our total purchases. Research and Development We place strong emphasis on the R&D of our services.
For the years ended December 31, 2022, 2021, and 2020, 154, 155, and 176 financial and taxation solution projects, respectively, were obtained from the referrals made by our Partnered Institutions, representing approximately 38.79%, 38.60%, and 41.22%, respectively, of the total number of financial and taxation solution projects and approximately 50.67%, 48.60% and 58.41%, respectively, of the revenue of financial and taxation solution services during the same periods.
For the years ended December 31, 2023, 2022, and 2021, 167, 154, and 155 financial and taxation solution projects, respectively, were obtained from the referrals made by our Partnered Institutions, representing approximately 38.22%, 38.79%, and 38.60%, respectively, of the total number of financial and taxation solution projects and approximately 53.82%, 50.67%, and 48.60%, respectively, of the revenue of financial and taxation solution services during the same periods.
As of the date of the annual report, TPS Thayer, our auditor for the fiscal year ended December 31, 2022 and 2021, headquartered in Sugar Land, Texas, 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.
TPS Thayer, our previous auditor for the fiscal years ended December 31, 2022 and 2021, headquartered in Sugar Land, Texas, 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.
For the years ended December 31, 2022, 2021, and 2020, the total revenue from our education support services was approximately $4.41 million, $4.64 million, and $4.56 million, representing approximately 13.04%, 13.52%, and 14.86%, respectively, of our total revenues for the same periods.
For the years ended December 31, 2023, 2022, and 2021, the total revenue from our education support services was approximately $3.73 million, $4.41 million, and $4.64 million, representing approximately 9.38%, 13.04%, and 13.52%, respectively, of our total revenues for the same periods.
The incurrence of debt, specifically the instruments governing such debt, may restrict a subsidiary’s ability to pay shareholder dividends or make other cash distributions. 41 If, for the reasons noted above, our subsidiaries are unable to pay shareholder dividends and/or make other cash payments to the Company when needed, the Company’s ability to conduct operations, make investments, engage in acquisitions, or undertake other activities requiring working capital may be materially and adversely affected.
If, for the reasons noted above, our subsidiaries are unable to pay shareholder dividends and/or make other cash payments to the Company when needed, the Company’s ability to conduct operations, make investments, engage in acquisitions, or undertake other activities requiring working capital may be materially and adversely affected.
As of the date of this report, no other dividends, distributions or transfers has been made between Lichen China Limited and any of its subsidiaries. For the foreseeable future, the Company intends to use the earnings for research and development, to develop new products and to expand its production capacity.
As of the date of this report, the Company or its subsidiaries have made no other transfers, dividends, or distributions to investors and no investors have made transfers, dividends, or distributions to the Company or its subsidiaries. 45 For the foreseeable future, the Company intends to use the earnings for research and development, to develop new products and to expand its production capacity.
Subsidiaries Place of Incorporation Incorporation Time Legend Consulting Limited (BVI) British Virgin Islands December 20, 2013 Legend Consulting Limited (HK) Hong Kong SAR January 8, 2014 Fujian Lichen Management Consulting Limited (PRC) People’s Republic of China April 14, 2004 Xiamen Lichen Education Service Limited (PRC) People’s Republic of China July 30, 2014 The following diagram illustrates the corporate structure of Lichen China Limited and its subsidiaries as of the date of this annual report: 63 D.
Subsidiaries Place of Incorporation Incorporation Time Legend Consulting Limited (BVI) British Virgin Islands December 20, 2013 Legend Consulting Limited (HK) Hong Kong SAR January 8, 2014 Fujian Lichen Management Consulting Limited (PRC) People’s Republic of China April 14, 2004 Xiamen Lichen Education Service Limited (PRC) People’s Republic of China July 30, 2014 Lichen Holding Singapore Pte. Ltd.
Property, Plant and Equipment Facilities Real property There is no private land and property ownership in China. The right to possess the property is held by the government and the right to use the property has been transferred to our operating subsidiaries in PRC.
The right to possess the property is held by the government and the right to use the property has been transferred to our operating subsidiaries in PRC.
Office 1,715.87 Office Premises in Jinjiang (Unit B2306, Block B, Tower 3, Jinjiang Wanda Plaza Commercial Complex, 888 Century Avenue, Meiling Street, Jinjiang City, Fujian Province, PRC) N/A Office 344.5 Office Premises in Shanghai (Level 28 of Zhongyi Building No. 1040 Caoyang Road Putuo District Shanghai City, PRC) The property is subject to a right to use the land for a maximum term of 50 years for composite purpose.
Office 1,715.87 Office Premises in Shanghai (Level 28 of Zhongyi Building No. 1040 Caoyang Road Putuo District Shanghai City, PRC) The property is subject to a right to use the land for a maximum term of 50 years for composite purpose.
During the fiscal years ended December 31, 2020, Lichen Zixun made dividend payments of RMB30 million (approximately $4.3 million) to the then eventual shareholders of Lichen Zixun, who are PRC individuals. The Company made no such dividend, distribution or transfer during the fiscal year ended December 31, 2022 and 2021.
During the fiscal years ended December 31, 2020, Lichen Zixun made dividend payments of RMB30 million (approximately $4.3 million) to the then eventual shareholders of Lichen Zixun, who are PRC individuals. On February 10, 2023, Lichen China Limited made payments of $6 million to its subsidiary Legend Consulting BVI for investment.
For more details, see “ Item 3. Key Information — 3.D. Risk Factors – Risks Related to Doing Business in China.” 45 Corporate Information Our principal executive office is located B2306, Block B Tower 3, Jinjiang Wanda Plaza Commercial Complex 888 Century Avenue Meiling Street, Jinjiang City Fujian, PRC. The telephone number of our principal executive offices is +86-595-85633335.
For more details, see “ Item 3. Key Information — 3.D. Risk Factors – Risks Related to Doing Business in China.” 49 Corporate Information Our principal executive office is located 15th Floor, Xingang Square, Hubin North Road, Siming District, Xiamen City, Fujian Province, China, 361013. The telephone number of our principal executive offices is +86-592-5586999.
TPS Thayer’s registration with the PCAOB took effect in September 2020 and it is currently subject to PCAOB inspections. As of the date of the annual report, B&V, our auditor for the fiscal year ended December 31, 2020, withdrew its registration from the PCAOB in January 2022.
TPS Thayer’s registration with the PCAOB took effect in September 2020 and it is currently subject to PCAOB inspections.
As of the date of this report, the Company or its subsidiaries have made no other transfers, dividends, or distributions to investors and no investors have made transfers, dividends, or distributions to the Company or its subsidiaries. On February 10, 2023, Lichen China Limited made payments of $6 million to its subsidiary Legend Consulting BVI for investment.
As of the date of this report, other than the above stated, no dividends, distributions or transfers has been made between Lichen China Limited and any of its subsidiaries.
Removed
As of December 31, 2021, and June 30, 2022, the statutory reserves fund of Lichen Zixun has reached 50% of the registered capital of the enterprise. As of December 31, 2020 and June 30, 2021, the statutory reserves fund of Lichen Education is nil as it has not made any profit after tax.
Added
The incurrence of debt, specifically the instruments governing such debt, may restrict a subsidiary’s ability to pay shareholder dividends or make other cash distributions.
Added
Permissions and Licenses for Our Operations in PRC We conduct substantially all of our business operations in China, and a majority of our directors and senior management are based in China. As such, our operations in China are governed by PRC laws and regulations.
Added
As of the date of this annual report, our subsidiaries have obtained the material/requisite licenses and permits from the PRC government authorities that are material for our operations in compliance with the relevant PRC laws and regulations. Our Subsidiaries currently have, including the business license and agency bookkeeping license.
Added
The business license is a permit issued by China’s State Administration for Market Regulation that allows the company to conduct specific business within the government’s geographical jurisdiction. The agency bookkeeping license is issued by the financial department to enterprises, allowing enterprises to accept entrusted bookkeeping business.
Added
The business license and agency bookkeeping license are the only two permissions and approvals that our PRC subsidiaries are required to obtain to conduct our business in China.
Added
In addition, Lichen China Limited, Legend Consulting BVI and Legend Consulting HK are not required to obtain any permissions or approvals from any Chinese authorities to operate our business as of the date of this annual report.
Added
In connection with our previous issuance of securities to foreign investors, as advised by our PRC counsel, Tianyuan Law Firm, under current PRC laws, regulations and regulatory rules, as of the date of this annual report, (i) although we are required to complete the filing procedure in connection with our offerings under the Trial Measures, no relevant PRC laws or regulations in effect require that we obtain permission from any PRC authorities to issue securities to foreign investors, and we have not received any inquiry, notice, warning, sanction, or any regulatory objection to this offering from the China Securities Regulatory Commission (“CSRC”), the Cyberspace Administration of China ("CAC”), or any other PRC authorities that have jurisdiction over our operations; (ii) we are not required to obtain permissions from the CSRC; (iii) we are not required to file for a cybersecurity review with the CAC; and finally (iv) we have not received or were denied such requisite permissions by any other PRC authority.
Added
Nonetheless, applicable laws and regulations may be tightened, and new laws or regulations may be introduced to impose additional government approval, license, and permit requirements.
Added
If we or our Subsidiaries inadvertently conclude that such permissions and approvals relating to the operations of our business are not required, fail to obtain and maintain such approvals, licenses or permits required for our business, or fail to respond to changes in the applicable laws, regulations, interpretations and regulatory environment, we or our subsidiaries could be subject to liabilities, monetary penalties and even operational disruption, which may materially and adversely affect our business, operating results, financial condition and the value of our Class A Ordinary Shares, significantly limit or completely hinder our ability to offer or continue to offer securities to investors, or cause such securities to significantly decline in value or become worthless.
Added
For more detailed information, see “Item 3. Key Information - D.
Added
As of the date of the annual report, Enrome LLP, our auditor for the fiscal year ended December 31, 2023, headquartered in Singapore, 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.
Added
Enrome LLP’s registration with the PCAOB took effect in March 2022 and it is currently subject to PCAOB inspections.
Added
Appropriations to the discretionary surplus reserve are made at the discretion of the Board of Directors and there is no discretionary surplus reserve as of December 31, 2023 and 2022. The reserved amounts as determined pursuant to PRC statutory laws totaled $1.74 million and $0.79 million as of December 31, 2023 and 2022.
Added
Singapore December 28, 2023 The following diagram illustrates the corporate structure of Lichen China Limited and its significant subsidiaries as of the date of this annual report: 67 D. Property, Plant and Equipment Facilities Real property There is no private land and property ownership in China.
Added
Office 1,156.29 Office Premises in Xiamen (Room 202, Taishan Pavilion, Wuyi Garden, No.2 Yundang Road, Siming District) The property is subject to a right to use the land for a term until March 1, 2065 for office purposes.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

56 edited+19 added−45 removed36 unchanged
Biggest change(All amounts, other than percentages, in thousands of U.S. dollars) December 31, 2022 December 31, 2021 Statement of Operations Data: Amount As % of Revenues Amount As % of Revenues Amount Increase (Decrease) Percentage Increase (Decrease) Revenue $ 33,805 100.00 % $ 34,295 100.00 % $ (490 ) (1.43 )% Cost of revenues (13,613 ) (40.27 )% (13,820 ) (40.30 )% 207 (1.50 )% Gross profit 20,192 59.73 % 20,475 59.70 % (283 ) (1.38 )% Operating expenses Selling and marketing (2,111 ) (6.24 )% (2,009 ) (5.86 )% (102 ) 5.08 % General and administrative (7,433 ) (21.99 )% (7,168 ) (20.90 )% (265 ) 3.70 % Total operating expenses (9,544 ) (28.23 )% (9,177 ) (26.76 )% (367 ) 4.00 % Income from operations 10,648 31.50 % 11,298 32.94 % (650 ) (5.75 )% Other income (expenses) Interest income (expense) 60 0.18 % 28 0.08 % 32 114.29 % Other income, net 34 0.10 % 188 0.55 % (154 ) (81.91 )% Income before income taxes 10,742 31.78 % 11,514 33.57 % (772 ) (6.70 )% Provision for income taxes (2,924 ) (8.65 )% (3,052 ) (8.90 )% 128 (4.19 )% Net income $ 7,818 23.13 % $ 8,462 24.67 % $ (644 ) (7.61 )% Revenues We generate revenue from the provision of financial and taxation solution services, education support services and software and maintenance services.
Biggest change(All amounts, other than percentages, in thousands of U.S. dollars) December 31, 2023 December 31, 2022 Statement of Operations Data: Amount As % of Revenues Amount As % of Revenues Amount Increase (Decrease) Percentage Increase (Decrease) Revenue $ 39,759 100.00 % $ 33,805 100.00 % $ 5,954 17.61 % Cost of revenues (15,439 ) (38.83 )% (13,613 ) (40.27 )% (1,826 ) 13.41 % Gross profit 24,320 61.17 % 20,192 59.73 % 4,128 20.44 % Operating expenses Selling and marketing (3,124 ) (7.86 )% (2,111 ) (6.24 )% (1,013 ) 47.99 % General and administrative (8,937 ) (22.48 )% (7,433 ) (21.99 )% (1,504 ) 20.23 % Total operating expenses (12,061 ) (30.34 )% (9,544 ) (28.23 )% (2,517 ) 26.37 % Income from operations 12,259 30.83 % 10,648 31.50 % 1,611 15.13 % Other (expenses) income Interest income 38 0.10 % 60 0.18 % (22 ) (36.67 )% Other (expense) income, net (709 ) (1.78 )% 34 0.10 % (743 ) (2,185.29 )% Income before income taxes 11,588 29.15 % 10,742 31.78 % 846 7.88 % Provision for income taxes (3,250 ) (8.17 )% (2,924 ) (8.65 )% (326 ) 11.15 % Net income $ 8,338 20.97 % $ 7,818 23.13 % $ 520 6.65 % Revenues We generate revenue from the provision of financial and taxation solution services, education support services and software and maintenance services.
For the year ended December 31, 2022, net cash provided by operating activities was mainly resulted from the net income of $7.82 million, and the depreciation of property and equipment and the amortization of intangible, right-of-use and other assets in the amount of approximately $2.73 million, the due to the related parties in the amount of approximately $1.02 million, the deferred IPO costs in the amount of approximately $0.10 million and the prepayments and other current assets in the amount of approximately $0.71 million.
For the year ended December 31, 2022, net cash provided by operating activities was mainly resulted from the net income of $7.82 million, and the depreciation of property and equipment and the amortization of intangible, right-of-use and other assets in the amount of approximately $2.73 million and the due to the related parties in the amount of approximately $1.02 million, offset by the deferred IPO costs in the amount of approximately $1.10 million and the prepayments and other current assets in the amount of approximately $0.71 million.
In case there is an update of the standard software, end customers or distributors are required to pay additional consideration to buy upgraded version. Revenues from maintenance services is recognized over time within the service period. 75 Unearned revenues Unearned revenue is recorded when a payment is received from a customer before the Company transfers the related services.
In case there is an update of the standard software, end customers or distributors are required to pay additional consideration to buy upgraded version. Revenues from maintenance services is recognized over time within the service period. Unearned revenues Unearned revenue is recorded when a payment is received from a customer before the Company transfers the related services.
All of the VAT returns filed by the Company’s subsidiaries in PRC remain subject to examination by the tax authorities for five years from the date of filing. 76 Income tax expenses The Company follows the liability method of accounting for income taxes in accordance with ASC 740 (“ASC 740”), Income Taxes.
All of the VAT returns filed by the Company’s subsidiaries in PRC remain subject to examination by the tax authorities for five years from the date of filing. Income tax expenses The Company follows the liability method of accounting for income taxes in accordance with ASC 740 (“ASC 740”), Income Taxes.
When reviewing our financial statements, you should consider (i) our selection of critical accounting policies, (ii) the judgments and other uncertainties affecting the application of such policies and (iii) the sensitivity of reported results to changes in conditions and assumptions. 74 Revenue recognition The Company adopted ASC Topic 606, Revenue from Contracts with Customers, effective as of January 1, 2019.
When reviewing our financial statements, you should consider (i) our selection of critical accounting policies, (ii) the judgments and other uncertainties affecting the application of such policies and (iii) the sensitivity of reported results to changes in conditions and assumptions. 75 Revenue recognition The Company adopted ASC Topic 606, Revenue from Contracts with Customers, effective as of January 1, 2019.
Education support services - Provision of marketing, operation and technical support services Revenues from provision of marketing, operation and technical support services from the partnered institutions is recognized on a straight-line basis over the term of the partnership agreement.
Education support services - Provision of marketing, operation and technical support services Revenues from provision of marketing, operation and technical support services from the partnered institutions is recognized on a straight-line basis over the term of the agreement.
We focus on providing (i) financial and taxation solution services; (ii) education support services; and (iii) software and maintenance services in the PRC under our “Lichen” brand. With over 18 years of operation history, we have gained substantial experience and established a solid reputation with our proven track record in the PRC.
We focus on providing (i) financial and taxation solution services; (ii) education support services; and (iii) software and maintenance services in the PRC under our “Lichen” brand. With over 19 years of operation history, we have gained substantial experience and established a solid reputation with our proven track record in the PRC.
For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. For the years ended December 31, 2022, 2021 and 2020, no uncertain tax position is recognized. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred.
For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. For the years ended December 31, 2023, 2022 and 2021, no uncertain tax position is recognized. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred.
No significant penalties or interest relating to income taxes have been incurred during the years ended December 31, 2022, 2021 and 2020. All of the tax returns of the Company’s subsidiaries in PRC remain subject to examination by the tax authorities for five years from the date of filing.
No significant penalties or interest relating to income taxes have been incurred during the years ended December 31, 2023, 2022 and 2021. All of the tax returns of the Company’s subsidiaries in PRC remain subject to examination by the tax authorities for five years from the date of filing.
Overview We are a leading financial and taxation service provider in China, in terms of revenue, according to the industry report of Frost & Sullivan. We have operated as a dedicated financial and taxation solution service specialist of professional and high-quality services in China for over 18 years.
Overview We are a leading financial and taxation service provider in China, in terms of revenue, according to the industry report of Frost & Sullivan. We have operated as a dedicated financial and taxation solution service specialist of professional and high-quality services in China for over 19 years.
In recognition of our expertise and experience earned from over 18 years in the financial and taxation solution services industry, we have built up our reputation as a dedicated financial and taxation solution services provider of professional and high-quality services in the PRC.
In recognition of our expertise and experience earned from over 19 years in the financial and taxation solution services industry, we have built up our reputation as a dedicated financial and taxation solution services provider of professional and high-quality services in the PRC.
Under the Jumpstart Our Business Startups Act of 2012, as amended (“the JOBS Act”), the Company meets the definition of an emerging growth company, or EGC, and has elected the extended transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards until they would apply to private companies.
Under the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), the Company meets the definition of an emerging growth company, or EGC, and has elected the extended transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards until they would apply to private companies.
Accordingly, the consolidated financial statements for the years ended December 31, 2022, 2021 and 2020 are presented under ASC 606.
Accordingly, the consolidated financial statements for the years ended December 31, 2023, 2022 and 2021 are presented under ASC 606.
General and administrative expenses Our general and administrative expenses consist primarily of compensation for management, social security payment, depreciation of property and equipment, amortization of intangible assets and IPO related expense.
General and administrative expenses Our general and administrative expenses consist primarily of compensation for management, social security payment, depreciation of property and equipment and amortization of intangible assets.
Net cash provided in investing activities for the year ended December 31, 2022 was mainly resulted from the purchases of property plant and equipment in the amount of approximately $1.95 million and purchase of intangible assets in the amount of approximately $0.89 million, while net cash used in investing activities for the year ended December 31, 2021 was mainly resulted from the purchases of property and equipment in the amount of approximately $0.03 million and disposal of property and equipment in the amount of approximately $0.59 million.
Net cash provided in investing activities for the year ended December 31, 2022 was mainly resulted from the purchases of property and equipment, net in the amount of approximately $1.95 million and purchase of intangible assets in the amount of approximately $0.89 million.
Such increase was primarily due to the strengthened online promotion of the company. As a percentage of revenue, selling and marketing expenses increased to 6.24% for the year ended December 31, 2022, from 5.86% for the year ended December 31, 2021.
Such increase was primarily due to the strengthened multi-channel promotion of the company. As a percentage of revenue, selling and marketing expenses increased to 7.86% for the year ended December 31, 2023, from 6.24% for the year ended December 31, 2022.
Total other income (expenses) for the year ended December 31, 2021 consisted of other income, net, in the amount of approximately $0.19 million and interest income in the amount of approximately $0.03 million.
Total other income (expenses) for the year ended December 31, 2023 consisted of other expense, net, in the amount of approximately $0.71 million and interest income in the amount of approximately $0.03 million.
The Company recognizes revenues over time only if it can reasonably measure its progress toward complete satisfaction of the performance obligation. The Company normally requires the customers to pay a deposit upon entering into the service contracts. Progress payments are normally billed with the final payment received upon completion of the contract.
The Company recognizes revenues over time only if it can reasonably measure its progress toward complete satisfaction of the performance obligation. The Company normally requires the customers to pay a deposit upon entering into the service contracts.
As a percentage of revenue, general and administrative expenses increased to 21.99% for the year ended December 31, 2022, from 20.90% for the year ended December 31, 2021.
As a percentage of revenue, general and administrative expenses increased to 22.48% for the year ended December 31, 2023, from 21.99% for the year ended December 31, 2022.
Value added tax (“VAT”) Revenue represents the invoiced value of goods and service, net of VAT. The VAT is based on gross sales price and VAT rates range up to 17%, depending on the type of products sold or service provided.
Hence, the Group has only one reportable segment Value added tax (“VAT”) Revenue represents the invoiced value of goods and service, net of VAT. The VAT is based on gross sales price and VAT rates range up to 13%, depending on the type of products sold or service provided.
Investing Activities Net cash used in investing activities was approximately $2.84 million for the year ended December 31, 2022, as compared to approximately $0.56 million in net cash provided in investing activities for the year ended December 2021.
Investing Activities Net cash used in investing activities was approximately $9.87 million for the year ended December 31, 2023, as compared to approximately $2.84 million in net cash used in investing activities for the year ended December 2022.
Net income As a result of the cumulative effect of the factors described above, our net income decreased by approximately $0.64 million, or 7.61%, to approximately $7.82 million for the year ended December 31, 2022, from approximately $8.46 million for the year ended December 31, 2021. 5.B. Liquidity and Capital Resources .
Net income As a result of the cumulative effect of the factors described above, our net income increased by approximately $0.52 million, or 6.65%, to approximately $8.34 million for the year ended December 31, 2023, from approximately $7.82 million for the year ended December 31, 2022. 73 5.B. Liquidity and Capital Resources .
Selling and marketing expenses Our selling and marketing expenses consist primarily of online and offline promotion, video broadcast promotion and self-media promotion. Our selling and marketing expenses increased by $0.10 million, or 5.08%, to approximately $2.11 million for the year ended December 31, 2022, from approximately $2.01 million for the year ended December 31, 2021.
Selling and marketing expenses Our selling and marketing expenses consist primarily of online and offline promotion, video broadcast promotion and self-media promotion. Our selling and marketing expenses increased by $1.01 million, or 47.99%, to approximately $3.12 million for the year ended December 31, 2023, from approximately $2.11 million for the year ended December 31, 2022.
Except for the above-mentioned pronouncements, there are no new recent issued accounting standards that will have a material impact on the consolidated financial position, statements of operations and cash flows. Holding Company Structure LICN is a holding company incorporated in the Cayman Islands with no material operations of its own.
The Company is in the process of evaluating the impact of the new guidance on its consolidated financial statements. 78 Except for the above-mentioned pronouncements, there are no new recent issued accounting standards that will have a material impact on the consolidated financial position, statements of operations and cash flows.
We review on a periodic basis for doubtful accounts for the outstanding trade receivable balances based on historical collection trends, aging of receivables and other information available.
Accounts receivable is stated at the historical carrying amount, net of an estimated allowance for uncollectible accounts. We review on a periodic basis for doubtful accounts for the outstanding trade receivable balances based on historical collection trends, aging of receivables and other information available.
Revenue from financial and taxation solution services amounted to approximately RMB 176.65 million for the year ended December 31, 2022, increased by RMB 5.84 million, or 3.42% from approximately RMB 170.91 million for the year ended December 31, 2021. Such increase was mainly due to continuous expansion of the branding and business that brought new clients and orders.
Revenue from financial and taxation solution services amounted to approximately $31.77 million, or 79.91% of total revenue, for the year ended December 31, 2023, increased by $5.49 million, or 20.91%, from approximately $26.28 million for the year ended December 31, 2022. Such increase was mainly due to continuous expansion of the branding and business that brought new clients and orders.
Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Our management continues to evaluate the reasonableness of the valuation allowance policy and update it if necessary. There was no allowance for accounts receivable set up by us as of December 31, 2022 and 2021, respectively.
Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Our management continues to evaluate the reasonableness of the valuation allowance policy and update it if necessary.
Cash Flow Summary (All amounts in thousands of USD, except for share and per share data, unless otherwise noted) Year Ended December 31, 2022 2021 Net cash provided by operating activities $ 10,766 $ 7,304 Net cash used in investing activities (2,842 ) 561 Net cash used in financing activities (327 ) - Effects of exchange rate changes on cash and cash equivalents (1,843 ) 315 Net increase (decrease) in cash 5,754 8,180 Cash, beginning of period 16,845 8,665 Cash, end of period $ 22,599 $ 16,845 72 Operating Activities: Net cash provided by operating activities was approximately $10.77 million for the year ended December 31, 2022, as compared to approximately $7.30 million for the year ended December 31, 2021.
Cash Flow Summary (All amounts in thousands of USD, except for share and per share data, unless otherwise noted) Years Ended December 31, 2023 2022 Net cash provided by operating activities $ 557 $ 10,766 Net cash used in investing activities (9,865 ) (2,842 ) Net cash provided by (used in) financing activities 14,098 (327 ) Effects of exchange rate changes on cash (1,533 ) (1,843 ) Net increase in cash 3,257 5,754 Cash, beginning of year 22,599 16,845 Cash, end of year $ 25,856 $ 22,599 Operating Activities: Net cash provided by operating activities was approximately $0.56 million for the year ended December 31, 2023, as compared to approximately $10.77 million for the year ended December 31, 2022.
Provision for income tax We recorded income tax expenses of approximately $2.92 million for the year ended December 31, 2022, as compared to approximately $3.05 million for the year ended December 31, 2021; a decrease of approximately $0.13 million, or 4.19%. The decrease in the income tax expense mainly resulted from the decrease in our revenue.
Provision for income tax We recorded income tax expenses of approximately $3.25 million for the year ended December 31, 2023, as compared to approximately $2.92 million for the year ended December 31, 2022; an increase of approximately $0.33 million, or 11.15%. The increase in the income tax expense mainly resulted from the increase in our revenue.
The fair value of the Company’s financial instruments, including cash, accounts receivable, other receivables – related party, accounts payable, accrued expenses and other current liabilities, due to the related parties, and short-term bank loans, approximate their recorded values due to their short-term maturities as of December 31, 2022 and 2021.
The fair value of the Company’s financial instruments, including cash, accounts receivable, accounts payable, accrued expenses and other current liabilities and due to the related parties, approximate their recorded values due to their short-term maturities as of December 31, 2023 and 2022. Recent Accounting Pronouncements The Company considers the applicability and impact of all accounting standards updates (“ASUs”).
Our cost of revenue decreased by $0.21 million, or 1.50%, to approximately $13.61 million for the year ended December 31, 2022, from approximately $13.82 million for the year ended December 31, 2021. Such decrease was in line with our decreased revenue.
Our cost of revenue increased by $1.83 million, or 13.41%, to approximately $15.44 million for the year ended December 31, 2023, from approximately $13.61 million for the year ended December 31, 2022. Such increase was in line with our increased revenue.
We do not have acquisition targets now and the proceeds from this offering will not be used for acquisitions. ● Changes to Government Policies China has highly complicated taxation regulations and the fast-changing business environment we operate in is constantly adapting to these policy changes. ● Our Ability to Broaden Service Offerings and Diversify Our Customer Base Service offerings dictate our added value to our customers and the profitability of the Company; and the diversification of our customer base in turn dictates the range of services we offer. 67 Impact of COVID-19 on our business Following the global outbreak of COVID-19 in early 2020, our business operations and service provision to our customers in the PRC were temporarily disrupted since the Chinese New Year holidays of 2020, due to temporary suspension of operation of our offices, the Partnered Institutions and our enterprise customers in response to the respective local government’s policies.
We do not have acquisition targets now and the proceeds from this offering will not be used for acquisitions. 71 ● Changes to Government Policies China has highly complicated taxation regulations and the fast-changing business environment we operate in is constantly adapting to these policy changes. ● Our Ability to Broaden Service Offerings and Diversify Our Customer Base Service offerings dictate our added value to our customers and the profitability of the Company; and the diversification of our customer base in turn dictates the range of services we offer.
These reserves can only be used for specific purposes and are not transferable to the Company in form of loans, advances, or cash dividends. There is no such regulation of providing statutory reserve in Hong Kong. None of the statutory surplus reserves were recognized for the years ended December 31, 2022, 2021 and 2020.
These reserves can only be used for specific purposes and are not transferable to the Company in form of loans, advances, or cash dividends. There is no such regulation of providing statutory reserve in Hong Kong. Advertising expenses Advertising expenditures are expensed as incurred and such expenses were included as part of selling and marketing expenses.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value.
Fair value of financial instruments ASC 825-10 requires certain disclosures regarding the fair value of financial instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
We conduct our operations primarily in the PRC through our subsidiaries in PRC. As a result, LICN’s ability to pay dividends may depend upon dividends paid by our PRC subsidiaries.
Holding Company Structure LICN is a holding company incorporated in the Cayman Islands with no material operations of its own. We conduct our operations primarily in the PRC through our subsidiaries in PRC. As a result, LICN’s ability to pay dividends may depend upon dividends paid by our PRC subsidiaries.
Advertising expenses Advertising expenditures are expensed as incurred and such expenses were included as part of selling and marketing expenses. For the years ended December 2022, 2021 and 2020, the advertising expenses amounted to approximately $1.43 million, $1.35 million and $1.1 million, respectively. Comprehensive income Comprehensive income consists of two components, net income and other comprehensive income.
For the years ended December 2023, 2022 and 2021, the advertising expenses amounted to approximately $2.37 million, $1.43 million and $1.35 million, respectively. 77 Comprehensive income Comprehensive income consists of two components, net income and other comprehensive income.
The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs.
A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs.
Our general and administrative expenses increased by $0.27 million, or 3.70%, to approximately $7.43 million for the year ended December 31, 2022, from approximately $7.17 million for the year ended December 31, 2021.
Our general and administrative expenses increased by $1.50 million, or 20.23%, to approximately $8.94 million for the year ended December 31, 2023, from approximately $7.43 million for the year ended December 31, 2022.
We plan to continue to make capital expenditures to meet the needs that result from the expected growth of our business. 73 Dividend The holders of our ordinary shares are entitled to such dividends as may be declared by our Board of Directors subject to the Cayman Islands Companies Act.
Dividend The holders of our ordinary shares are entitled to such dividends as may be declared by our Board of Directors subject to the Cayman Islands Companies Act.
Such decrease was due to an approximately $0.21 million decrease in revenue from financial and taxation solution services, an approximately $0.23 million decrease in revenue from our education support services, and an approximately $0.05 million decrease in revenue from our software and maintenance services, which we began providing in the year ended December 31, 2019. 70 Revenue from financial and taxation solution services amounted to approximately $26.28 million, or 77.73% of total revenue, for the year ended December 31, 2022, decreased by $0.21 million, or 0.80%, from approximately $26.49 million for the year ended December 31, 2021.
Such increase was due to an approximately $5.49 million increase in revenue from financial and taxation solution services, an approximately $0.68 million decrease in revenue from our education support services, and an approximately $1.14 million increase in revenue from our software and maintenance services, which we began providing in the year ended December 31, 2019.
Income from operations As a result of the foregoing, we recorded income from operations of approximately $10.65 million for year ended December 31, 2022, compared $11.30 million for the year ended December 31, 2021. 71 Total other income (expense) We had approximately $0.09 million in total other income (expense) for the year ended December 31, 2022, as compared to approximately $0.22 million in total other income for the year ended December 31, 2021.
Income from operations As a result of the foregoing, we recorded income from operations of approximately $12.26 million for year ended December 31, 2023, compared $10.65 million for the year ended December 31, 2022.
Off-Balance Sheet Commitments and Arrangements We did not have any off-balance sheet commitments or arrangements as of December 31, 2022. 5.C. Research and Development, Patent and Licenses, etc. Please refer to “Item 4. Information on the Company – D. Property, Plant and Equipment – Intellectual Property.” 5.D. Trend Information.
Research and Development, Patent and Licenses, etc. Please refer to “Item 4. Information on the Company – D. Property, Plant and Equipment – Intellectual Property.” 5.D. Trend Information.
For the year ended December 31, 2021, net cash provided by operating activities was mainly resulted from the net income of $8.46 million, the unearned revenues in the amount of approximately $0.14 million, and the depreciation of property and equipment and the amortization of intangible and other assets in the amount of approximately $2.54 million, the accounts receivable in the amount of approximately $1.45 million and the prepayments and other current assets in the amount of approximately $2.37 million.
For the year ended December 31, 2023, net cash provided by operating activities was mainly resulted from the net income of $8.34 million, and the depreciation of property and equipment and the amortization of intangible, right-of-use and other assets in the amount of approximately $3.00 million and the deferred IPO costs in the amount of approximately $1.10 million offset by the accounts receivable in the amount of $0.98 million, prepayments and other current assets in the amount of $9.70 million and the due to the related parties in the amount of approximately $1.07 million.
The aging of all accounts receivable balance is within one year as of December 31, 2022. Unbilled receivable represents the Company’s right to consideration in exchange for goods and service, which is the percentage of completion of revenue recognized in excess of accounts receivable.
Unbilled receivable represents the Company’s right to consideration in exchange for goods and service, which is the percentage of completion of revenue recognized in excess of accounts receivable. Capital Expenditures We made capital expenditures of approximately $9.87 million and approximately $2.84 million for the years ended December 31, 2023 and 2022, respectively.
Potential Ordinary Shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. 77 Fair value of financial instruments ASC 825-10 requires certain disclosures regarding the fair value of financial instruments.
Potential Ordinary Shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. There were no dilutive or anti-dilutive potential Ordinary Shares or effect for the years ended 2023, 2022 and 2021.
Since the pandemic has been downgraded and the social order and economy is recovering, we believe that the demand in our financial and taxation solution services should continue to pre-pandemic levels. 69 Key Components of Results of Operations Comparison of Years Ended December 31, 2022 and 2021 The following table summarizes the consolidated results of our operations for the years ended December 31, 2022 and 2021, respectively, and provides information regarding the dollar and percentage increase or (decrease) during such periods.
Key Components of Results of Operations Comparison of Years Ended December 31, 2023 and 2022 The following table summarizes the consolidated results of our operations for the years ended December 31, 2023 and 2022, respectively, and provides information regarding the dollar and percentage increase or (decrease) during such periods.
Financing Activities: Net cash used in financing activities was approximately $0.33 million for the year ended December 31, 2022 consisted entirely of repayments on short-term loans in the amount of approximately $0.33 million. The company has no net cash used in financing activities for the year ended December 31, 2021.
Net cash used in financing activities was approximately $0.33 million for the year ended December 31, 2022 consisted entirely of repayments on short-term loans in the amount of approximately $0.33 million. Accounts Receivable and Unbilled receivable Accounts receivable represents our right to consideration in exchange for goods and services that we have transferred to the customers before payment is due.
Our total revenue was approximately $33.81 million for the year ended December 31, 2022, compared to approximately $34.30 million for the year ended December 31, 2021, a decrease of approximately $0.49 million, or 1.43%.
Our total revenue was approximately $39.76 million for the year ended December 31, 2023, compared to approximately $33.81 million for the year ended December 31, 2022, an increase of approximately $5.95 million, or 17.61%.
Disaggregated information of revenues by services: For the years ended December 31, 2022 2021 2020 Financial and taxation solution services $ 26,278 $ 26,491 $ 23,338 Education support services 4,409 4,635 4,558 Software and maintenance services 3,118 3,169 2,771 Revenue $ 33,805 $ 34,295 $ 30,667 Segment reporting The Company’s Chief Executive Officer, Mr.Ya Li, has been identified as the chief operating decision-maker (“CODM”), who is responsible for overall performance of all the service lines and reviews of the consolidated results when making decisions about allocating resources and assessing the performance of the Company as a whole.
Unearned revenue is recognized as revenue when the Company performs the services under the contract. 76 Disaggregated information of revenues by services: For the years ended December 31, 2023 2022 2021 Financial and taxation solution services $ 31,772 $ 26,278 $ 26,491 Education support services 3,730 4,409 4,635 Software and maintenance services 4,257 3,118 3,169 Revenue $ 39,759 $ 33,805 $ 34,295 Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker.
Our operations for software and maintenance services began in March 2019. Revenue from this business amounted to approximately $3.12 million, or 9.22% of total revenue, for the year ended December 31, 2022, decreased by $0.05 million, or 1.61%, from approximately $3.17 million for the year ended December 31, 2021.
Revenue from this business amounted to approximately $4.26 million, or 10.71% of total revenue, for the year ended December 31, 2023, increased by $1.14 million, or 36.53%, from approximately $3.12 million for the year ended December 31, 2022.
Capital Expenditures We made capital expenditures of approximately $2.84 million and approximately $0.03 million for the years ended December 31, 2022 and 2021, respectively. In these periods, our capital expenditures were mainly used for purchasing the office located in Shanghai for our operation and the development for our software.
In these periods, our capital expenditures were mainly used for purchasing the office located in Shanghai for our operation and the development for our software. We plan to continue to make capital expenditures to meet the needs that result from the expected growth of our business.
The main reason is due to the depreciation of RMB by 9.24% in fiscal year 2022 from December 31, 2021 to December 31, 2022. Cost of revenue Our cost of revenue includes employee salaries, registration fees paid to our Partner Institutions and amortization of software in software sales.
The main reason is because we have a good reputation in the software market and has developed its promotion of software sales business, which resulted in an increase in customer base and software sales revenue. Cost of revenue Our cost of revenue includes employee salaries, registration fees paid to our Partner Institutions and amortization of software in software sales.
Revenue from education support services decreased by $0.23 million, or 4.88%, from approximately $4.64 million or 13.52% of total revenue, for the year ended December 31, 2021, to approximately $4.41 million, or 13.04 % of total revenue for the year ended December 31, 2022. Such decrease was primarily due to the impact of the COVID-19 pandemic.
Since the Company has listed in February 2023, the quantity of the customers increased by 30 from 397, or 7.56% for the year ended December 31, 2022 to 427 for the year ended December 31, 2023. 72 Revenue from education support services decreased by $0.68 million, or 15.40%, from approximately $4.41 million or 13.04% of total revenue, for the year ended December 31, 2022, to approximately $3.73 million, or 9.38 % of total revenue for the year ended December 31, 2023.
Recent Accounting Pronouncements New Accounting Pronouncements Not Yet Adopted The Company considers the applicability and impact of all ASUs. Management periodically reviews new accounting standards that are issued.
Management periodically reviews new accounting standards that are issued.
The Company does not distinguish between markets or segments for the purpose of internal reporting. The Company’s long-lived assets are all located in the PRC and substantially all of the Company’s revenues are derived from the PRC. Therefore, no geographical segments are presented in these financial statements.
The Group does not distinguish between markets or segments for the purpose of internal reports. The Group does not distinguish revenues, costs and expenses between segments in its internal reporting, and reports costs and expenses by nature as a whole.
From 2012 to 2021, we had been recognized as one of the Top 50 Providers of Management Consulting Services in China for ten consecutive years by the China Enterprise Confederation Management Advisory Committee. 66 In order to curtail the COVID-19 pandemic, the Chinese government has established a series of restrictions, including some lockdown rules, and during this period, we provided our consulting services to our clients online and postponed or reduced part of the on-site procedures.
From 2012 to 2023, we had been recognized as one of the Top 50 Providers of Management Consulting Services in China for twelve consecutive years by the China Enterprise Confederation Management Advisory Committee. Recent Developments On February 8, 2023, the Company completed its initial public offering on the National Association of Securities Dealers Automated Quotations (“NASDAQ”).
Removed
Due to the impact of the COVID-19 pandemic, we had a 4.93% decrease in revenue for the six months ended June 30, 2022 compared to the six months ended June 30, 2021.
Added
Such decrease was primarily due to its strategic focus on financial and taxation solution business shifted from education support this year. Our operations for software and maintenance services began in March 2019.
Removed
At the same time, our cost of revenues increased by 1.27% due to the extended project period and the increase in personnel cost, and our net income decreased to approximately $4.33 million for the six months ended June 30, 2022, from approximately $4.87 million for the six months ended June 30, 2021, a decrease of 11.14%.
Added
Total other income (expense) We had approximately $0.67 million in total other expense for the year ended December 31, 2023, as compared to approximately $0.09 million in total other income for the year ended December 31, 2022.
Removed
Although, the effects of the COVID-19 pandemic on our financial results were limited, we expect to continue our new business model that combines remote and on-site consultation services after the COVID-19 pandemic subsides. Recent Developments On February 8, 2023, the Company completed its initial public offering on the National Association of Securities Dealers Automated Quotations (“NASDAQ”).
Added
Net cash provided by operating activities was approximately $10.77 million for the year ended December 31, 2022, as compared to approximately $7.30 million for the year ended December 31, 2021.
Removed
We have resumed operation in full since February 10, 2020. We had been closely monitoring and evaluating the effect of the COVID-19 pandemic on our services, especially financial and taxation solution services provided to our enterprise customers and education support services provided to our Partnered Institutions.
Added
Net cash provided in investing activities for the year ended December 31, 2023 was mainly resulted from the purchases of property and equipment, net in the amount of approximately $2.06 million, purchase of intangible assets in the amount of approximately $3.20 million and the deposit of Haicang property in the amount of $4.60 million, while net cash used in investing activities was approximately $2.84 million for the year ended December 31, 2022, as compared to approximately $0.56 million in net cash provided by investing activities for the year ended December 2021.
Removed
Meanwhile, considering that the PRC government has gradually relaxed the lockdown measures or travel restrictions and allowed resumption of business, the reported number of new cases had dropped from the height of the crisis and the slowdown in the decrease in revenue and gross profit of our Lichen Group as illustrated below, we believe that the adverse effect on, and business interruption to, us as a result of the of COVID-19 pandemic is only temporary in nature.
Added
Financing Activities: Net cash provided by financing activities was approximately $14.10 million for the year ended December 31, 2023 consisted entirely of the proceeds of IPO in the amount of approximately $14.10 million.
Removed
Due to the impact of the COVID-19 pandemic, as compared to the year ended December 31, 2019, the total revenue of our Group for the year ended December 31, 2020 decreased by approximately $0.93 million, which was attributable to the decrease in revenue generated from financial and taxation solution services by approximately $1.68 million, but offset by the increase in revenue generated from education support services and software and maintenance services by approximately $0.05 million and $0.70 million, respectively.
Added
There was no allowance for accounts receivable set up by us as of December 31, 2023 and 2022, respectively. 74 The aging of all accounts receivable balance is within one year as of December 31, 2023.
Removed
There is no further impact for the year ended December 31, 2021 as the total revenue of our Group for the year ended December 31, 2021 increased by approximately $3.63 million to approximately $34.30 million from approximately $30.67 million for the year ended December 31, 2020.
Added
Off-Balance Sheet Commitments and Arrangements On March 12, 2024, the Company issued an aggregate of 870,000 Class A ordinary shares of the Company to certain employees and consultant for their services with par value of $0.00004 per share. We did not have any other off-balance sheet commitments or arrangements as of December 31, 2023. 5.C.
Removed
The increase was primary due to the resumption of our business and operations and the increase in the number of our consulting services orders. During March and April 2022, many cities in China have been affected by COVID-19, especially the southeast coastal city. Our business has been affected as well.
Added
The chief operating decision-maker has been identified as the Chief Executive Officer who allocates resources to and assesses the performance of the operating segments of an entity.
Removed
The total revenue of our Group for the six months ended June 30, 2022 decreased by approximately $0.84 million, or 4.93%, to approximately $16.15 million from approximately $16.99 million for the six months ended June 30, 2022.
Added
The Group’s reporting segments are decided based on its operating segments while taking full consideration of various factors such as products and services, geographic location and regulatory environment related to administration of the management. Operating segments meeting the same qualifications are allocated as one reporting segment, providing independent disclosures.
Removed
The total revenue of our Group for the year ended December 31, 2022 decreased by approximately $0.49 million to approximately $33.81 million from approximately $34.30 million for the year ended December 31, 2021. There is no further impact for the year ended December 31, 2022.
Added
In October 2021, the FASB issued ASU No. 2021-08, “‘Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” (“ASU 2021-08”). This ASU requires entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination.
Removed
As a whole, our business and services were subject to different degree of delays, due to temporary suspension of business operations, lockdown measures and travel restrictions.
Added
The amendments improve comparability after the business combination by providing consistent recognition and measurement guidance for revenue contracts with customers acquired in a business combination and revenue contracts with customers not acquired in a business combination.
Removed
In particular, our internal consultants and external experts have not been able to provide certain on-site consultation or meet face-to-face with our enterprise customers or deliver in-person seminars or talks at premises of our Partnered Institutions.
Added
The amendments are effective for the Company beginning after December 15, 2023, and are applied prospectively to business combinations that occur after the effective date. The Company does not expect the adoption of ASU 2021-04 will have a material effect on the consolidated financial statements.

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Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

24 edited+14 added−2 removed46 unchanged
Biggest changeExecutive Officers and Directors Amount of Beneficial Ownership of Class A Ordinary Shares (1) Percentage Ownership of Class A Ordinary Shares (2) Amount of Beneficial Ownership of Class B Ordinary Shares Percentage Ownership of Class B Ordinary Shares Combined Voting Power of Class A and Class B Ordinary Shares (2) Directors and Named Executive Officers: Ya Li (4) - - 9,000,000 100 % 83.72 % Zhixiang Fang - - - - - Yi Deng - - - - - Zhihuang Deng - - - - - Lourdes Felix - - - - - Kipton Cariaga - - - - - All executive officers and directors as a group (6 persons) - - 9,000,000 100 % 83.72 % 5% or Greater Shareholders Silver Sky Investment Limited (3) - - 9,000,000 100 % 83.72 % Sensation Corporate Service Co., Limited (4) 2,250,000 12.5 % - - 2.09 % China EC Investment (Hong Kong) Limited (5) 1,125,000 6.25 % - - 1.05 % Dong Chang Ventures Limited (6) 1,125,000 6.25 % - - 1.05 % Suqin Deng 1,012,500 5.63 % - - * Chunyan Wei 1,012,500 5.63 % - - * Shengbi Chen 900,000 5.00 % - - * Meizhen Li 900,000 5.00 % - - * Hongyu Wang 900,000 5.00 % - - * Zhen Wang 900,000 5.00 % - - * Shishan Wu 900,000 5.00 % - - * Peng Ye 675,000 3.75 % - - * * (1) Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the Class A Ordinary Shares and Class B Ordinary Shares.
Biggest changeExecutive Officers and Directors Amount of Beneficial Ownership of Class A Ordinary Shares (1) Percentage Ownership of Class A Ordinary Shares (2) Amount of Beneficial Ownership of Class B Ordinary Shares Percentage Ownership of Class B Ordinary Shares Combined Voting Power of Class A and Class B Ordinary Shares (2) Directors and Named Executive Officers: Ya Li (3) 100,000 * 9,000,000 100 % 83.14 % Zhixiang Fang 100,000 * - - - Yi Deng 100,000 * - - - Zhihuang Deng 5,000 * - - - Lourdes Felix 2,500 * - - - Kipton Cariaga 2,500 * - - - Robert Bodenstein - - - - - All executive officers and directors as a group (7 persons) 310,000 1.69 % 9,000,000 100 % 83.34 % 5% or Greater Shareholders Silver Sky Investment Limited (3) - - 9,000,000 100 % 83.05 % Sensation Corporate Service Co., Limited (4) 1,350,000 7.35 % - - 1.25 % China EC Investment (Hong Kong) Limited (5) 1,125,000 6.12 % - - 1.04 % Dong Chang Ventures Limited (6) 1,125,000 6.12 % - - 1.04 % Chunyan Wei 1,012,500 5.51 % - - 0.93 % * (1) Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the Class A Ordinary Shares and Class B Ordinary Shares.
Board Diversity Board Diversity Matrix (As of the date of this annual report) Country of Principal Executive Offices: PRC Foreign Private Issuer Yes Disclosure Prohibited Under Home Country Law No Total Number of Directors 5 Female Male Non-Binary Did Not Disclose Gender Part I: Gender Identity Directors 1 4 0 0 Part II: Demographic Background Underrepresented Individual in Home Country Jurisdiction — LGBTQ+ — 83 6.D.
Board Diversity Board Diversity Matrix (As of the date of this annual report) Country of Principal Executive Offices: PRC Foreign Private Issuer Yes Disclosure Prohibited Under Home Country Law No Total Number of Directors 6 Female Male Non-Binary Did Not Disclose Gender Part I: Gender Identity Directors 1 5 0 0 Part II: Demographic Background Underrepresented Individual in Home Country Jurisdiction — LGBTQ+ — 83 6.D.
He later completed a part-time top-up course in accountancy at Hefei University of Technology in January 2008. In December 2009, Mr. Fang became a member of the Chinese Institute of Certified Public Accountants. In May 1999, Mr. Fang was qualified as a Medium Level Accountant in the PRC. Yi Deng, Director Mr.
He later completed a part-time top-up course in accountancy at Hefei University of Technology in January 2008. In December 2009, Mr. Fang became a member of the Chinese Institute of Certified Public Accountants. In May 1999, Mr. Fang was qualified as a Medium Level Accountant in the PRC. 79 Yi Deng, Director Mr.
Li obtained his bachelor’s degree of management, majoring in accountancy from a program jointly organized by China Central Radio and TV University (currently known as The Open University of China) and Beijing Technology and Business University in April 2010. 79 Zhixiang Fang, Chief Financial Officer Mr.
Li obtained his bachelor’s degree of management, majoring in accountancy from a program jointly organized by China Central Radio and TV University (currently known as The Open University of China) and Beijing Technology and Business University in April 2010. Zhixiang Fang, Chief Financial Officer Mr.
Directors and Senior Management The following table provides information regarding our executive officers and directors as of the date hereof: Name Age Position(s) Ya Li 44 Chief Executive Officer, Chairman of the Board, and Director Zhixiang Fang 51 Chief Financial Officer Yi Deng 43 Director Zhihuang Deng (1)(2)(3) 54 Independent Director Lourdes Felix (1)(2)(3) 56 Independent Director Kipton Cariaga (1)(2)(3) 36 Independent Director (1) Member of the Audit Committee (2) Member of the Compensation Committee (3) Member of the Nominating Committee Ya Li, Chief Executive Officer, Chairman of the Board and Director Mr.
Directors and Senior Management The following table provides information regarding our executive officers and directors as of the date hereof: Name Age Position(s) Ya Li 44 Chief Executive Officer, Chairman of the Board, and Director Zhixiang Fang 51 Chief Financial Officer Yi Deng 43 Director Zhihuang Deng (1)(2)(3) 54 Independent Director Lourdes Felix (1)(2)(3) 56 Independent Director Kipton Cariaga (1)(2)(3) 36 Independent Director Robert Bodenstein (1)(2)(3) 61 Independent Director (1) Member of the Audit Committee (2) Member of the Compensation Committee (3) Member of the Nominating Committee Ya Li, Chief Executive Officer, Chairman of the Board and Director Mr.
Ya Li has the sole voting and dispositive power of all the shares held by Silver Sky Investment Limited. (4) Wenjuan Chen is deemed to beneficially own 2,250,000 Class A Ordinary Shares through Sensation Corporate Service Co., Limited, a Hong Kong company holding 2,250,000 shares of our Class A Ordinary Shares.
Ya Li has the sole voting and dispositive power of all the shares held by Silver Sky Investment Limited. (4) Wenjuan Chen is deemed to beneficially own 1,350,000 Class A Ordinary Shares through Sensation Corporate Service Co., Limited, a Hong Kong company holding 1,350,000 shares of our Class A Ordinary Shares.
Compensation of Directors and Executive Officers For the fiscal year ended December 31, 2022, we paid an aggregate of RMB 2,786,641 (approximately US$414,304), which is the total amount of base salary plus bonus, in cash to our executive officers and employee directors.
For the fiscal year ended December 31, 2022, we paid an aggregate of RMB2,786,641 (approximately US$414,304), which is the total amount of base salary plus bonus, in cash to our executive officers and employee directors.
Compensation Committee . Our compensation committee consists of Mr. Zhihuang Deng, Ms. Lourdes Felix, and Mr. Kipton Cariaga. Mr. Zhihuang Deng serves as the chairperson of our compensation committee.
Compensation Committee . Our compensation committee consists of Mr. Zhihuang Deng, Ms. Lourdes Felix, Mr. Robert Bodenstein, and Mr. Kipton Cariaga. Mr. Zhihuang Deng serves as the chairperson of our compensation committee.
Our nominating committee consists of Mr. Zhihuang Deng, Ms. Lourdes Felix, and Mr. Kipton Cariaga. Mr. Kipton Cariaga serves as the chairperson of our nominating committee.
Our nominating committee consists of Mr. Zhihuang Deng, Ms. Lourdes Felix, Mr. Robert Bodenstein, and Mr. Kipton Cariaga. Mr. Kipton Cariaga serves as the chairperson of our nominating committee.
The calculations in the table below are based on 17,500,000 Class A Ordinary Shares and 9,000,000 Class B Ordinary Shares issued and outstanding as of the date of this annual report. Holders of Class A Ordinary Shares will be entitled to one (1) vote per share.
The calculations in the table below are based on 18,370,000 Class A Ordinary Shares and 9,000,000 Class B Ordinary Shares issued and outstanding as of the date of this annual report. Holders of Class A Ordinary Shares will be entitled to one (1) vote per share.
All shares represent only Class A Ordinary Shares and Class B Ordinary Shares held by shareholders as no options are issued or outstanding. (2) Calculation based on 17,500,000 Class A Ordinary Shares and 9,000,000 Class B Ordinary Shares issued and outstanding. Holders of Class A Ordinary Share are entitled to one (1) vote per share.
All shares represent only Class A Ordinary Shares and Class B Ordinary Shares held by shareholders as no options are issued or outstanding. (2) Calculation based on 18,370,000 Class A Ordinary Shares and 9,000,000 Class B Ordinary Shares issued and outstanding. Holders of Class A Ordinary Share are entitled to one (1) vote per share.
Cariaga studied finance at California State University from 2006 to 2011 and in 2009, during his college days he worked for JPMorgan Chase and became a licensed investment professional holding a FINRA Series 6, and 63 license as well as a California Life-Only insurance license from 2010 to 2014.
Cariaga studied finance at California State University from 2006 to 2011 and in 2009, during his college days he worked for JPMorgan Chase and became a licensed investment professional holding a FINRA Series 6, and 63 license as well as a California Life-Only insurance license from 2010 to 2014. Robert Bodenstein, Independent Director Mr.
Employees As of the date of this annual report, we have 399 employees. All of our employees are located in the PRC.
Employees As of the date of this annual report, we have 406 employees. All of our employees are located in the PRC.
Family Relationships None of the directors or executive officers has a family relationship as defined in Item 401 of Regulation S-K. 6.B. Compensation Employment Agreements We have entered into an employment agreement with each of our executive officers and employee directors. Each of them is employed for a specified time period.
He is a Certified Management Consultant (CMC). 80 Family Relationships None of the directors or executive officers has a family relationship as defined in Item 401 of Regulation S-K. 6.B. Compensation Employment Agreements We have entered into an employment agreement with each of our executive officers and employee directors. Each of them is employed for a specified time period.
The following table sets out the number of our employees, excluding external experts, categorized by functions as of the date of this annual report: Function Number of Employees Management 12 Finance 9 Research and Development 45 Human Resource Administration 7 Operating Center 58 Quality Control Center 14 Consultation Service Center 254 Total 399 We strive to maintain a high-quality work force with specialized financial and taxation industry expertise.
The following table sets out the number of our employees, excluding external experts, categorized by functions as of the date of this annual report: Function Number of Employees Management 11 Finance 9 Research and Development 49 Human Resource Administration 7 Operating Center 62 Quality Control Center 14 Consultation Service Center 254 Total 406 We strive to maintain a high-quality work force with specialized financial and taxation industry expertise.
Our Audit Committee consists of Mr. Zhihuang Deng, Ms. Lourdes Felix, and Mr. Kipton Cariaga. Ms. Lourdes Felix serves as the chair of our audit committee. We have determined that these three individuals satisfy the “independence” requirements of Nasdaq Rule 5605 and Rule 10A-3 under the Securities Exchange Act of 1934. Our Board of Directors has determined that Ms.
Our Audit Committee consists of Mr. Zhihuang Deng, Ms. Lourdes Felix, Mr. Robert Bodenstein, and Mr. Kipton Cariaga. Ms. Lourdes Felix serves as the chair of our audit committee. We have determined that these four individuals satisfy the “independence” requirements of Nasdaq Rule 5605 and Rule 10A-3 under the Securities Exchange Act of 1934.
Lourdes Felix qualifies as an audit committee financial expert and has the accounting or financial management expertise as required under Item 407(d)(5)(ii) and (iii) of Regulation S-K of the SEC.
Our Board of Directors has determined that Ms. Lourdes Felix qualifies as an audit committee financial expert and has the accounting or financial management expertise as required under Item 407(d)(5)(ii) and (iii) of Regulation S-K of the SEC.
She presently serves as Chief Executive Officer, Chief Financial Officer and Director of BioCorRx Inc. (OTCQB: BICX), a leader in addiction treatment solutions and related disorders. She has been with BioCorRx since October 2012. Ms. Felix is one of the founders of BioCorRx Pharmaceuticals Inc., a majority owned subsidiary of BioCorRx Inc.
(OTCQB: BICX), a leader in addiction treatment solutions and related disorders. She has been with BioCorRx since October 2012. Ms. Felix is one of the founders of BioCorRx Pharmaceuticals Inc., a majority owned subsidiary of BioCorRx Inc.
For the fiscal year ended December 31, 2020, we paid an aggregate of RMB2,788,601 (approximately US$404,286), which is the total amount of base salary plus bonus, in cash to our executive officers and employee directors.
Compensation of Directors and Executive Officers For the fiscal year ended December 31, 2023, we paid an aggregate of RMB4,946,072 (approximately US$701,895), which is the total amount of base salary plus bonus, in cash to our executive officers and employee directors.
Deng was a prosecutor of Fujian Province Fuzhou City People’s Procuratorate. Mr. Deng obtained his bachelor’s degree in law from Fujian Normal University in June 1992. After graduation, Mr.
Deng was a prosecutor of Fujian Province Fuzhou City People’s Procuratorate. Mr. Deng obtained his bachelor’s degree in law from Fujian Normal University in June 1992. After graduation, Mr. Deng became a lecturer at Fujian Mechanical and Electrical School (currently known as Fujian University of Technology) from August 1992 to April 1995.
Board Practices Board of Directors Our Board of Directors consists of five (5) directors, a majority of whom are independent as such term is defined by the Nasdaq Capital Market.
A copy of the Clawback Policy has been filed herewith as Exhibit 97.1. 6.C. Board Practices Board of Directors Our Board of Directors consists of six (6) directors, a majority of whom are independent as such term is defined by the Nasdaq Capital Market.
Deng became a lecturer at Fujian Mechanical and Electrical School (currently known as Fujian University of Technology) from August 1992 to April 1995. 80 Lourdes Felix, Independent Director and Chair of Audit Committee Ms. Felix is a female Hispanic entrepreneur and corporate finance executive with 30 years of combined experience in capital markets, public accounting and in the private sector.
Lourdes Felix, Independent Director and Chair of Audit Committee Ms. Felix is a female Hispanic entrepreneur and corporate finance executive with 30 years of combined experience in capital markets, public accounting and in the private sector. She presently serves as Chief Executive Officer, Chief Financial Officer and Director of BioCorRx Inc.
These shares, however, are not included in the computation of the percentage ownership of any other person. Unless otherwise indicated in the footnotes, the address for each principal shareholder is in the care of our Company at B2306, Block B Tower 3, Jinjiang Wanda Plaza Commercial Complex 888 Century Avenue Meiling Street, Jinjiang City Fujian Province People’s Republic of China.
These shares, however, are not included in the computation of the percentage ownership of any other person. Unless otherwise indicated in the footnotes, the address for each principal shareholder is in the care of our Company at 15th Floor, Xingang Square, Hubin North Road, Siming District, Xiamen City, Fujian Province, China, 361013.
Weinan Shi has the sole voting and dispositive power of all the shares held by Dong Chang Ventures Limited. 85
Weinan Shi has the sole voting and dispositive power of all the shares held by Dong Chang Ventures Limited. 85 6.F. Disclosure of Action to Recover Erroneously Awarded Compensation There was no erroneously awarded compensation that was required to be recovered pursuant to the Company’s Executive Compensation Recovery Policy during the fiscal year ended December 31, 2023.
Removed
Due to the impact of the COVID-19 pandemic, the total revenue in 2020 has decreased, and thus we did not pay bonus to our Chief Executive Officer for the fiscal year ended December 31, 2020. We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our executive officers and directors. 81 6.C.
Added
Robert Bodenstein has over 40 years of experience in business consulting and marketing consulting, specializing in providing management consulting services, developing business development strategies, business evaluation, and information technology (IT) and strategic management of sustainability. He was the co-founder in two IT start-ups and has served as a member of the board in various funding organizations.
Removed
As of the date hereof, we have 15 shareholders of record.
Added
Besides, he has delivered projects in Europe, Middle East, and Asia. He has previously worked with clients in different industries such as tourism, trade, and IT, and international companies of different sizes. Mr. Bodenstein received his MBA Degree in General Management from the Joseph-Schumpeter Institut Wels, School of Applied Studies.
Added
Share Incentive Plan In September 2023, the Company adopted the 2023 Equity Incentive Plan (the “2023 Incentive Plan”), for the purpose of granting share-based compensation awards to employees, directors and consultants to incentivize their performance and align their interests with ours. Under the 2023 Incentive Plan, we are authorized to issue an aggregate of 3,000,000 Class A ordinary shares.
Added
As of the date of this annual report, 870,000 Class A ordinary shares have been granted and outstanding, of which 310,000 shares are granted to certain of our management members and directors. The following paragraphs summarize the terms of the 2023 Incentive Plan. Types of Awards.
Added
The 2023 Incentive Plan permits the awards of options, stock appreciation rights, restricted stock, restricted stock units, stock bonus awards and/or performance compensation awards. Plan Administration . The 2023 Incentive Plan is administered by the Compensation Committee of the Board or any other committee appointed by the Board to administer this Plan (or if no Committee is appointed, the Board).
Added
The plan administrator is entitled to determine the participants who are to receive awards, the number of awards to be granted, and the terms and conditions of each award grant. Eligibility . Employees, directors and officers and the consultants of our company are eligible to participate pursuant to the terms of the 2023 Incentive Plan. Conditions of Award .
Added
The plan administrator shall determine the participants, types of awards, numbers of shares to be covered by awards, terms and conditions of each award, and provisions with respect to the vesting schedule, settlement, exercise, repurchase, cancellation, forfeiture, restrictions, limitations or suspension of awards. Term of Award .
Added
The term of each award shall be fixed by the administrator and is stated in the award agreement between recipient of an award and us. No award shall be granted under the 2023 Incentive Plan after ten years from the date the 2023 Incentive Plan was approved by the board. Vesting Schedule .
Added
In general, the plan administrator determines the vesting schedule, which is set forth in the award agreement. Transfer Restrictions .
Added
Unless otherwise determined by the administrator of the 2023 Incentive Plan, no award and no right under any such award shall be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent and distribution or pursuant to a qualified domestic relations order, and shall not be subject to execution, attachment, or similar process.
Added
The following table summarizes, as of the date of this annual report, the number of outstanding awards granted under the 2023 Incentive Plan to our directors and executive officers.
Added
Name Number of Shares Granted Date of Grant Ya Li, Chief Executive Officer, Chairman of the Board, and Director 100,000 * March 12, 2024 Zhixiang Fang, Chief Financial Officer 100,000 * March 12, 2024 Yi Deng, Director 100,000 * March 12, 2024 Zhihuang Deng, Independent Director 5,000 * March 12, 2024 Lourdes Felix, Independent Director 2,500 * March 12, 2024 Kipton Cariaga, Independent Director 2,500 * March 12, 2024 Note: * Less than 1% of our total outstanding shares. 81 Clawback Policy adopted by the Board On November 30, 2023, the Board adopted an Executive Compensation Recovery Policy (the “Clawback Policy”) providing for the recovery of certain incentive-based compensation from current and former executive officers of the Company in the event the Company is required to restate any of its financial statements filed with the SEC under the Exchange Act in order to correct an error that is material to the previously-issued financial statements, or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period.
Added
Adoption of the Clawback Policy was mandated by new Nasdaq listing standards introduced pursuant to Exchange Act Rule 10D-1.
Added
The Clawback Policy is in addition to Section 304 of the Sarbanes-Oxley Act of 2002 which permits the SEC to order the disgorgement of bonuses and incentive-based compensation earned by a registrant issuer’s chief executive officer and chief financial officer in the year following the filing of any financial statement that the issuer is required to restate because of misconduct, and the reimbursement of those funds to the issuer.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

1 edited+2 added−1 removed1 unchanged
Biggest changeCompensation—Employment Agreements.” Other Related Party Transactions The table below sets forth the major related parties and their relationships with the Company as of December 31, 2022 and 2021: Name of related parties Relationship with the Company Jinjiang Xingminqi Accounting Vocational Training School (“Jinjiang School”) A company controlled by the Company’s controlling shareholder Quanzhou City Lichen Accounting Vocational Training School (“Quanzhou School”) A company controlled by the Company’s controlling shareholder i) Significant transactions with related parties were as follows: For the years ended December 31, 2022 2021 2020 Provision of marketing, operation and technical support services to Jinjiang School $ 67 $ 70 $ 70 Provision of marketing, operation and technical support services to Quanzhou School 126 132 130 Processing of academic education applications to Jinjiang School 183 90 176 Processing of academic education applications to Quanzhou School 234 113 229 Sales of teaching and learning materials to Jinjiang School 71 70 80 Sales of teaching and learning materials to Quanzhou School 62 66 77 Online training to Jinjiang School 37 24 7 Online training to Quanzhou School 35 23 7 Total revenues – related parities $ 815 $ 588 $ 776 ii) Significant balances with related parties were as follows: As of December 31, 2022 As of December 31, 2021 In thousands of USD Other receivable – related party Ya Li $ - $ 419 Due to the related parties Quanzhou School $ 97 $ 105 Ya Li 981 Jinjiang School - 1 Total $ 1078 $ 106 Balances due to Ya Li and Quanzhou School are the result of the normal business transactions stated above.
Biggest changeYa Li Chief Executive Officer, Chairman of the Board i) Significant transactions with related parties were as follows: 2023 2022 2021 Provision of marketing, operation and technical support services to Jinjiang School $ 48 $ 67 $ 70 Provision of marketing, operation and technical support services to Quanzhou School 60 126 132 Processing of academic education applications to Jinjiang School 101 183 90 Processing of academic education applications to Quanzhou School 107 234 113 Sales of teaching and learning materials to Jinjiang School 74 71 70 Sales of teaching and learning materials to Quanzhou School 49 62 66 Online training to Jinjiang School 28 37 24 Online training to Quanzhou School 16 35 23 Total revenues – related parties $ 483 $ 815 $ 588 86 ii) Significant balances with related parties were as follows: 2023 2022 In thousands of USD Due to the related parties Quanzhou School $ - $ 97 Ya Li - 981 Total $ - $ 1,078 Balances due to Quanzhou school and Ya Li are the result of the normal business transactions stated above.
Removed
The balance due to Ya Li comprise mainly payments made on behalf such as deferred IPO costs, whereas the balance due to Quanzhou represents amounts received in advance for services to be performed. The balances were all unsecured, non-interest bearing and payable on demand. 86
Added
Compensation—Employment Agreements.” Other Related Party Transactions The table below sets forth the major related parties and their relationships with the Company as of December 31, 2023, 2022 and 2021: Name of related parties Relationship with the Company Jinjiang Xingminqi Accounting Vocational Training School (“Jinjiang School”) A company controlled by the Company’s controlling shareholder Quanzhou City Lichen Accounting Vocational Training School (“Quanzhou School”) A company controlled by the Company’s controlling shareholder Mr.
Added
The balances were all unsecured, non-interest bearing and payable on demand