What changed in MicroAlgo Inc.'s 20-F — 2022 vs 2023

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE 1 ITEM 3. KEY INFORMATION 1 ITEM 4. INFORMATION ON THE COMPANY 45 ITEM 4A. UNRESOLVED STAFF COMMENTS 77 ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS 78 ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES 91 ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS 97 ITEM 8. FINANCIAL INFORMATION 98 ITEM 9.

THE OFFER AND LISTING 99 ITEM 10. ADDITIONAL INFORMATION 99 ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 109 ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES 110 PART II 111

ITEM 3. KEY INFORMATION Our Holding Company Structure MicroAlgo Inc. (“MicroAlgo” or the “Company”) (f/k/a Venus Acquisition Corporation (“Venus”)), a Cayman Islands exempted company, entered into the Merger Agreement dated June 10, 2021 (as amended on January 24, 2022, August 2, 2022, August 3, 2022 and August 10, 2022, the “Merger Agreement”), by and among WiMi Hologram Cloud Inc.

(“WiMi” or the “Majority Shareholder”), Venus, Venus Merger Sub Corporation (“Venus Merger Sub”), a Cayman Islands exempted company incorporated for the purpose of effectuating the Business Combination (as defined herein), and VIYI Algorithm Inc. (“VIYI”), a Cayman Islands exempted company.

Pursuant to the terms of the Merger Agreement, the Company effected a business combination with VIYI through the merger of Merger Sub with and into VIYI, with VIYI surviving as the surviving company and as our wholly-owned subsidiary. On December 12, 2022, the closing of the Business Combination (the “Closing”) occurred.

Upon the closing of the Business Combination, the Company changed its name to MicroAlgo Inc. Our ordinary shares and Public Warrants are listed on the Nasdaq Stock Market LLC (“NASDAQ”) and Over-The-Counter Market (“OTC”) under the trading symbols “MLGO” and “VENAF” respectively. MicroAlgo is not an operating company, but a holding company incorporated in the Cayman Islands.

MicroAlgo operates its business through its subsidiaries in the PRC in which it owns equity interests.

The following diagram illustrates our corporate structure, including our principal subsidiaries, as of the date of this annual report. 1 Table of Contents The Holding Foreign Companies Accountable Act Our ordinary shares may be prohibited from trading on a national exchange or over-the-counter under the Holding Foreign Companies Accountable Act (“HFCA Act”) if the Public Company Accounting Oversight Board (United States) (the “PCAOB”) is unable to inspect our auditor for two consecutive years.

Our current auditor, Onestop Assurance PAC (“Onestop”), and our prior auditor for 2021 annual reports, Marcum LLP, the independent registered public accounting firms that issue the financial reports included elsewhere in this report or our most recent annual report on Form 10-K, are registered with the PCAOB.

The PCAOB conducts regular inspections to assess their compliance with the applicable professional standards. Onestop and Marcum LLP are headquartered in Singapore and New York, respectively.

On December 16, 2021, the PCAOB issued a report notifying the SEC of its determinations (the “PCAOB Determinations”) that they are unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong.

The report sets forth lists identifying the registered public accounting firms headquartered in mainland China and Hong Kong, respectively, that the PCAOB is unable to inspect or investigate completely, and as of the date of this report, Onestop and Marcum LLP are not included in the list of PCAOB Identified Firms in the PCAOB Determinations issued on December 16, 2021.

On August 26, 2022, the China Securities Regulatory Commission (the “CSRC”), the Ministry of Finance of the PRC (the “MOF”), and the PCAOB signed a Statement of Protocol (the “Protocol”), governing inspections and investigations of audit firms based in China and Hong Kong.

Pursuant to the Protocol, the PCAOB shall have independent discretion to select any issuer audits for inspection or investigation and has the unfettered ability to transfer information to the U.S. Securities and Exchange Commission.

On December 15, 2022, the PCAOB announced that it was able to secure complete access to inspect and investigate completely registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate its previous determinations issued in December 2021.

On December 29, 2022, the Accelerating Holding Foreign Companies Accountable Act was enacted, which amended the Holding Foreign Companies Accountable Act, by requiring the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three.

As such, we do not expect to be identified as a “Commission-Identified Issuer” under the HFCA Act for the fiscal year ended December 31, 2023 .

Notwithstanding the foregoing, in the event it is later determined that the PCAOB is unable to inspect or investigate completely our auditor, then such lack of inspection could cause our securities to be delisted from Nasdaq Stock Market.

In addition, whether the PCAOB will continue be able to conduct inspections and investigations completely to its satisfaction of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong is subject to uncertainty and depends on a number of factors out of our, and our auditor’s, control, including positions taken by authorities of the PRC.

The PCAOB is expected to continue to demand complete access to inspections and investigations against accounting firms headquartered in mainland China and Hong Kong in the future and states that it has already made plans to resume regular inspections in early 2023 and beyond.

The PCAOB is required under the HFCA Act to make its determination on an annual basis with regards to its ability to inspect and investigate completely accounting firms based in the mainland China and Hong Kong. The possibility of being a “Commission-Identified Issuer” and risk of delisting could continue to adversely affect the trading price of our securities.

See “Risk Factors—Risks Related to Doing Business in China—If the PCAOB is unable to inspect our auditors as required under the Holding Foreign Companies Accountable Act, the SEC will prohibit the trading of our shares. A trading prohibition for our shares, or the threat of a trading prohibition, may materially and adversely affect the value of your investment.

Additionally, the inability of the PCAOB to conduct inspections of our auditors, if any, would deprive our investors of the benefits of such inspections.” Permission Required from the PRC Authorities for Our Operations We conduct our business primarily through our subsidiaries in China. Our operations in China are governed by PRC laws and regulations.

As of the date of this annual report, our consolidated affiliated Chinese entities have obtained the requisite licenses and permits from the PRC government authorities that are material for the business operations of our holding company, our subsidiaries in China.

However, given the uncertainties of interpretation and implementation of relevant laws and regulations and the enforcement practice by government authorities, we cannot assure you that we have obtained all the permits or licenses required for conducting our business in China. We may be required to obtain additional licenses, permits, filings or approvals for our functions and services in the future.

For more detailed information, see “Item 3. Key Information — D.

Risk Factors — Risks Relating to Our Business and Industry — We may be materially and adversely affected by the complexity, uncertainties and changes in PRC regulation of the Internet industry and companies.” 2 Table of Contents In connection with our previous issuance of securities to foreign investors, under current PRC laws, regulations and regulatory rules, as of the date of this annual report, we, our PRC subsidiaries, (i) are not required to obtain permissions from the CSRC, (ii) are not required to go through cybersecurity review by the Cyberspace Administration of China, or the CAC, and (iii) have not received or were denied such requisite permissions by any PRC authority.

However, the PRC government has recently indicated an intent to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers.

On February 17, 2023, the CSRC released the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies and five supporting guidelines, or, collectively, the Trial Measures, which came into effect on March 31, 2023.

According to the Trial Measures, domestic companies in the Chinese mainland that directly or indirectly offer or list their securities in an overseas market are required to file with the CSRC.

In addition, an overseas-listed company must also submit the filing with respect to its follow-on offerings, issuance of convertible corporate bonds and exchangeable bonds, and other equivalent offering activities, within a specific time frame requested under the Trial Measures.

Therefore, we will be required to file with the CSRC for our overseas offering of equity and equity linked securities in the future within the applicable scope of the Trial Measures. For more detailed information, see “Item 3. Key Information — D.

Risk Factors — Risks Relating to Doing Business in China — We are subject to extensive and evolving legal system in the PRC, non-compliance with which, or changes in which, may materially and adversely affect our business and prospects, and may result in a material change in our operations and/or the value of our securities or could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of our securities to significantly decline or be worthless.” Cash and Asset Flows through Our Organization The Company is a holding company with no material operations of its own.

We conduct our operations primarily through our subsidiaries in China. As a result, the Company’s ability to pay dividends depends upon dividends paid by our subsidiaries in China.

If our existing PRC subsidiaries or any newly formed ones incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us.

We are permitted under PRC laws and regulations as an offshore holding company to provide fundings to our wholly foreign-owned subsidiary in China only through loans or capital contributions, subject to the record-filing and registration with government authorities and limit on the amount of loans.

Subject to satisfaction of the applicable government registration requirements, we may extend inter-company loans to our wholly foreign-owned subsidiaries in China or make additional capital contributions to the wholly foreign-owned subsidiaries to fund their capital expenditures or working capital.

If we provide fundings to our wholly foreign-owned subsidiaries through loans, the total amount of such loans may not exceed the difference between the entity’s total investment as registered with the foreign investment authorities and our registered capital. Such loans must also be registered with SAFE (as defined herein) or their local branches.

For more detailed information and risks associated with a transfer of funds by the Company to our PRC subsidiaries in the form of a loan or capital injection, please see “Item 3.D.Risk Factors — Risk Factors 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 we receive from offshore financing activities to make loans to or make additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand business.” A. [Reserved] B.

CAPITALIZATION AND INDEBTEDNESS Not applicable. C. REASONS FOR THE OFFER AND USE OF PROCEEDS Not applicable. 3 Table of Contents D. RISK FACTORS Summary of Risk Factors Investment in our ordinary shares involves significant risks. Below is a summary of material risks we face, organized under relevant headings. These risks are discussed more fully in “Item 3. Key Information—D.

Risk Factors.” Risk Factors Relating to our Business and Industry ● We operate in a relatively new and rapidly evolving market. ● Our competitive position and results of operations could be harmed if we do not compete effectively. ● We have a limited operating history, and it may not be able to sustain rapid growth, effectively manage growth or implement business strategies. ● Recent acquisitions could prove difficult to integrate, disrupt the business, dilute shareholder value and strain the resources. ● Failure to maintain adequate financial, information technology and management processes and controls could result in material weaknesses which could lead to errors in our financial reporting, which could adversely affect our business. ● If we fail to keep up with industry trends or technological developments, or develop, acquire, market and offer new products and services, our business, results of operations and financial condition may be materially and adversely affected. ● Our results of operations could materially suffer in the event of insufficient pricing to enable us to meet profitability expectations. ● We make significant investments in research and development of new products and services that may not achieve expected returns. ● We require a significant amount of capital to fund our research and development investments.

If we cannot obtain sufficient capital on favorable terms or at all, our business, financial condition and prospects may be materially and adversely affected. ● Our success depends on our ability to attract, hire, retain and motivate key management personnel and highly skilled employees. ● Our business depends substantially on the market recognition of our brand and negative media coverage could adversely affect our business. ● Our failure to protect intellectual property rights may undermine our competitive position. ● Our services or solutions could infringe upon the intellectual property rights of others, or we might lose our ability to utilize the intellectual property of others. ● We may not be able to protect our source code from copying if there is an unauthorized disclosure. ● Third parties may register trademarks or domain names or purchase internet search engine keywords that are similar to our trademarks, brand or websites, or misappropriate our data and copy our platform, all of which could cause confusion to our users, divert online customers away from our products and services or harm our reputation. 4 Table of Contents ● Our business is highly dependent on the proper functioning and improvement of our information technology systems and infrastructure.

Our business and operating results may be harmed by service disruptions, or by our failure to timely and effectively scale up and adjust our existing technology and infrastructure. ● Our operations depend on the performance of the Internet infrastructure and fixed telecommunications networks in China, which may experience unexpected system failure, interruption, inadequacy or security breaches. ● We use third-party services and technologies in connection with our business, and any disruption to the provision of these services and technologies to us could result in adverse publicity and a slowdown in the growth of our users, which could materially and adversely affect our business, financial condition and results of operations. ● Our insurance policies may not provide adequate coverage for all claims associate with our business operations. ● We may be subject to claims, disputes or legal proceedings in the ordinary course of our business.

If the outcome of these proceedings is unfavorable to us, then our business, results of operations and financial condition could be adversely affected. ● We may need additional capital to support or expand our business, and we may be unable to obtain such capital in a timely manner or on acceptable terms, if at all. ● We are a “controlled company” within the meaning of the applicable Nasdaq listing rules and, as a result, will qualify for exemptions from certain corporate governance requirements.

If we rely on these exemptions, you will not have the same protections afforded to shareholders of companies that are subjected to such requirements. ● Our business may be materially and adversely affected by the effects of natural disasters, health epidemics or similar situation. ● We may be materially and adversely affected by the complexity, uncertainties and changes in PRC regulation of the Internet industry and companies. ● Our business generates and processes a large amount of data, and we are required to comply with PRC laws and regulations relating to cyber security.

These laws and regulations could create unexpected costs, subject us to enforcement actions for compliance failures, or restrict portions of our business or cause us to change our data practices or business model. ● We may be liable for improper use or appropriation of personal information provided directly or indirectly by our customers or end users. ● We and our subsidiaries have a limited customer base and depend on a small number of customers for a significant portion of revenues which may result in heightened concentration risk. ● We and our subsidiaries depend on a limited number of vendors for a significant portion of our purchase which may result in heightened concentration risk. 5 Table of Contents Risk Factors Relating to Doing Business in China ● Substantial uncertainties exist with respect to the enactment timetable, interpretation and implementation of PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations. ● If the chops of our PRC subsidiaries and their respective subsidiaries, are not kept safely, are stolen or are used by unauthorized persons or for unauthorized purposes, the corporate governance of these entities could be severely and adversely compromised. ● The PRC government exerts substantial influence over the manner in which we, our subsidiaries must conduct our business activities.

We are currently not required to obtain approval from Chinese authorities to list on U.S. exchanges, however, if we are required to obtain approval in the future and was denied permission from Chinese authorities to list on U.S. exchanges, we will not be able to continue listing on U.S. exchange, which would materially affect the interest of the investors. ● We are or may be required to obtain certain permissions from Chinese authorities to issue securities to foreign investors. ● Adverse changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business, financial condition and results of operations. ● A severe or prolonged downturn in the PRC or global economy and political tensions between the United States and China could materially and adversely affect our business and our financial condition. ● 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, including companies based in China, upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB. ● Uncertainties in the promulgation, interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us. ● We are subject to extensive and evolving legal system in the PRC, non-compliance with which, or changes in which, may materially and adversely affect our business and prospects, and may result in a material change in our operations and/or the value of our ordinary shares or could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of our securities to significantly decline or be worthless. ● Under the PRC enterprise income tax law, we may be classified as a “PRC resident enterprise”, which could result in unfavorable tax consequences to us and our shareholders and have a material adverse effect on our results of operations and the value of your investment. ● We may not be able to obtain certain benefits under relevant tax treaties on dividends paid by our PRC subsidiaries to us through our Hong Kong subsidiaries. ● We face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies. 6 Table of Contents ● Certain judgments obtained against us by our shareholders may not be enforceable. ● The enforcement of the PRC Labor Contract Law and other labor-related regulations in the PRC may adversely affect our business and results of operations. ● The M&A Rules and certain other PRC regulations may make it more difficult for us to pursue growth through acquisitions. ● PRC regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiaries’ ability to increase their registered capital or distribute profits to us or otherwise expose us to liability and penalties under PRC law. ● 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 we receive from offshore financing activities to make loans to or make additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand business. ● Our PRC subsidiaries are subject to restrictions on paying dividends or making other payments to us, which may restrict our ability to satisfy liquidity requirements, conduct business and pay dividends to holders of our ordinary shares. ● Fluctuations in exchange rates could have a material adverse effect on our results of operations and the value of your investment. ● Governmental control of currency conversion may limit our ability to utilize our revenues effectively and affect the value of your investment. ● Failure to comply with PRC regulations regarding the registration requirements for employee stock ownership plans or share option plans may subject the PRC plan participants or we to fines and other legal or administrative sanctions. ● Our leased property interests may be defective and our right to lease the properties affected by such defects may be challenged, which could adversely affect our business. ● If we are classified as a PRC resident enterprise for PRC enterprise income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders 7 Table of Contents Risk Factors Relating to an Investment in our Ordinary Shares ● Certain judgments obtained against us by our shareholders may not be enforceable. ● The market price for our ordinary shares have fluctuated and may be volatile. ● Our Key Projected Financial Metrics are subject to significant risks, assumptions, estimates and uncertainties, including assumptions regarding future market and changes in regulations.

As a result, our projected revenues, market share, expenses and profitability may differ materially from our expectations. ● We may be unable to obtain additional financing to fund our operations or growth. ● Our share price may be volatile and could decline substantially. ● We do not intend to pay cash dividends for the foreseeable future. ● We may be subject to securities litigation, which is expensive and could divert management attention. ● The sale or availability for sale of substantial amounts of our ordinary shares could adversely affect their market price. ● If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about us or our business, our ordinary shares price and trading volume could decline. ● We may redeem your unexpired warrants prior to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless. ● If we cannot satisfy, or continue to satisfy, the initial listing requirements and other rules of Nasdaq, 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. ● 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. ● You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in China against us or our management named in the report based on foreign laws. ● Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect our business, investments and results of operations. ● Future changes to tax laws could adversely affect us. ● We are an emerging growth company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to emerging growth companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies. ● We became a PFIC, which could result in adverse U.S. federal income tax consequences to U.S.

Holders. 8 Table of Contents Risk Factors Relating to our Business and Industry We operate in a relatively new and rapidly evolving market.

We provide customers with comprehensive solutions integrating central processing algorithms with software or hardware to streamline their digital services to end users, thereby helping our customers to improve end user satisfaction, achieve direct cost savings, and reduce power consumption. Our services include algorithm optimization, accelerating computing power without the need for hardware upgrades, lightweight data processing and data intelligence services.

Our business and prospects mainly depend on the continuous development and growth of the central processing algorithm service industry in the PRC. The development of this industry is affected by numerous factors, including but not limited to technological innovation, user experience, the development of the Internet and Internet-based services, regulatory environment, and macro-economic environment.

The markets for our products and services are relatively new and rapidly developing and are subject to significant challenges.

In addition, our continued growth depends, in part, on our ability to respond to changes in the central processing algorithm service industry, including rapid technological evolution, continued shifts in customer demands, introductions of new products and services and emergence of new industry standards and practices.

Developing and integrating new solutions, products, services or infrastructure could be expensive and time-consuming, and these efforts may not yield the benefits we expect to achieve. In addition, as the central processing algorithm service industry in China is relatively young, there are few proven methods of projecting customer demand or available industry standards on which we can rely.

Some of our current monetization methods are also in a relatively preliminary stage. We cannot assure you that our attempts to monetize current applications will continue to be successful, profitable or accepted, and therefore the profit potential of our business is difficult to gauge.

Our growth prospects should be considered in light of the risks and uncertainties that fast-growing early-stage companies with limited operating history in an evolving industry may encounter, including, among others, risks and uncertainties regarding our ability to: ● continue to develop new software and related solutions that are appealing to customers; ● maintain stable relationships with other key participants in the value chain; ● expand products and services into more scenarios and customer bases; and ● expand into new geographic markets with high growth potential.

Addressing these risks and uncertainties will require significant capital expenditures and allocation of valuable management and employee resources. We cannot assure you that it will succeed in any of these aspects or that the central processing algorithm service industry in the PRC will continue to grow at a rapid pace.

If we fail to successfully address any of the above risks and uncertainties, then the size of our customer base, our revenue and profits may decline. Our competitive position and results of operations could be harmed if we do not compete effectively.

The markets for our products and services are characterized by intense competition, new industry standards, limited barriers to entry, disruptive technology developments, short product life cycles, customer price sensitivity and frequent product introductions (including alternatives with limited functionality available at lower costs or free of charge).

Any of these factors could create downward pressure on pricing and profitability and could adversely affect our ability to retain current customers or attract new customers.

Our future success will depend on a continued ability to enhance and integrate our existing products and services, introduce new products and services in a timely and cost-effective manner, meet changing customer expectations and needs, extend our core technology into new applications, and anticipate emerging standards, business models, software delivery methods and other technological developments.

Furthermore, some of our current and potential competitors enjoy competitive advantages such as greater financial, technical, sales, marketing and other resources, broader brand awareness, and access to larger customer bases.

As a result of these advantages, potential and current customers might select the products and services of our competitors, causing a loss of market share to us. 9 Table of Contents We have a limited operating history, and it may not be able to sustain rapid growth, effectively manage growth or implement business strategies. We have a limited operating history.

Although we have experienced significant growth since launching our business, our historical performance results and growth rate may not be indicative of our future performance. We may not be able to achieve similar results or grow at the same rate as it has in the past.

To keep pace with the development of the central processing algorithm service industry in the PRC, we may need to adjust and upgrade our product and service offerings or modify our business model. These adjustments may not achieve expected results and may have a material and adverse impact on our financial conditions and results of operations.

In addition, our rapid growth and expansion have placed, and is expected to continue to place, a significant strain on our management and resources. There is no assurance that the future growth of us will be sustained at a similar rate or at all.

We believe that our revenue, expenses and operating results may vary from period to period in response to a variety of factors beyond our control, which primarily include general economic conditions, emergencies and changes in policies, laws and regulations that may affect our business operations and our ability to monitor costs.

In addition, our ability to develop new sources of revenues, diversify monetization methods, attract and retain customers, continue developing innovative technologies, increase brand awareness, expand into new market segments, and adjust to the rapidly changing regulatory environment in the PRC, will also affect our future growth to a great extent.

Therefore, you should not rely on our historical results in predict our future financial performance. Recent acquisitions could prove difficult to integrate, disrupt the business, dilute shareholder value and strain the resources.

Integrating the operations of acquired businesses successfully or otherwise realizing any of the anticipated benefits of acquisitions, including anticipated cost savings and additional revenue opportunities, involves a number of potential challenges. The failure to meet these integration challenges could seriously harm the financial condition and results of operations of us.

Realizing the benefits of acquisitions depends in part on the integration of operations and personnel.

These integration activities are complex and time-consuming, and we may encounter unexpected difficulties or incur unexpected costs, including: ● the inability to achieve the operating synergies anticipated in the acquisitions; ● diversion of management attention from ongoing business concerns to integration matters; ● consolidating and rationalizing information technology platforms and administrative infrastructures; ● complexities associated with managing the geographic separation of the combined businesses and consolidating multiple physical locations; ● retaining professionals and other key employees and achieving minimal unplanned attrition; ● integrating personnel from different corporate cultures while maintaining focus on providing consistent and high quality service; ● demonstrating to the clients and to clients of acquired businesses that the acquisition will not result in adverse changes in client service standards or business focus; ● possible cash flow interruption or loss of revenue as a result of transitional matters; and ● inability to generate sufficient revenue to offset acquisition costs. 10 Table of Contents Acquired businesses may have liabilities or adverse operating issues that we failed to discover through due diligence prior to the acquisition.

In particular, to the extent that prior owners of any acquired businesses or properties failed to comply with or otherwise violated applicable laws or regulations, or failed to fulfill their contractual obligations to clients, us, as the successor owner, may be financially responsible for these violations and failures and may suffer financial or reputational harm or otherwise be adversely affected.

Similarly, the acquisition targets may not have as robust internal controls over financial reporting as would be expected of a public company. Acquisitions also frequently result in the recording of goodwill and other intangible assets which are subject to potential impairment in the future that could harm our financial results.

We may also become subject to new regulations as a result of an acquisition, including if we acquire a business serving clients in a regulated industry or acquires a business with clients or operations in a country in which we do not already operate.

In addition, if we finance acquisitions by issuing equity securities, the interests of existing shareholders may be diluted, which could affect the market price of the shares of us.

As a result, if we fail to evaluate properly acquisitions or investments, we may not achieve the anticipated benefits of any such acquisitions, and we may incur costs in excess of what we anticipate. Acquisitions frequently involve benefits related to the integration of operations of the acquired business.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS The following discussion and analysis should be read in conjunction with our consolidated financial statements, which have been prepared in accordance with GAAP, included elsewhere in this Annual Report. This discussion contains forward-looking statement that involves risks and uncertainties.

Our actual results and timing of events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Item 3.D. Risk Factors” and elsewhere in this annual report. A. Operating Results Overview We are dedicated to the development and application of bespoke central processing algorithms.

We provide comprehensive solutions to customers by integrating central processing algorithms with software or hardware, or both, to streamline their digital services for end-users or technological development purposes, thereby helping them increase the number of customers, improve end-user satisfaction, achieve direct cost savings, reduce power consumption, and achieve technical goals.

The range of our services include algorithm optimization, accelerating computing power without the need for hardware upgrades, lightweight data processing, and data intelligence services. Our ability to efficiently deliver software and hardware optimization to our customers through bespoke central processing algorithms serves as a driving force for our long-term development.

Currently, our technology and solutions are mainly in the field of internet multimedia video advertising, internet gaming entertainment, where we have historically been successful in providing advertising distribution solutions, online game agent solutions, software services, and comprehensive solutions for enterprise customers and intelligent chips solutions as we believe that the demand for algorithms in the semiconductor sector is growing rapidly, representing huge market potentials.

In the mid-to-long term, we will continue to adhere to its strategic mindset.

By improving upon each iteration of our one-stop intelligent data management solutions made possible by our proprietary central processing algorithm services, we can help customers to enhance their service efficiency and make model innovations in business, and actively enhance the industry value of the central processing algorithm services in the general field of data intelligent processing industry.

We derive our revenue primarily from (i) central processing algorithms services for the internet advertisement and internet gaming industries (“CPA”) and (ii) intelligent chips and services, including software development. Our total revenues were RMB 529.3 million, RMB 586.1 million and RMB 580.0 million (USD 81.9 million) for the year ended December 31,2021, 2022 and 2023, respectively.

We recorded a net income of RMB 54.7 million, net loss of RMB 46.5 million and net loss of RMB 266.2 million (USD 37.6 million) for the years ended December 31, 2021, 2022 and 2023 respectively. 78 Table of Contents Key Factors Affecting Results of Operations Our results of operations are affected by the factors discussed below.

Our ability to increase the number of customers and average revenue for central processing algorithm services Approximately 51.6%, 76.4% and 98.3% of our revenues were generated from our central processing algorithm services for the years ended December 31, 2021, 2022 and 2023 respectively.

Our ability to increase our revenues and enhance our profitability will depend on our ability to continue to increase our customer base and revenue per customer for our central processing algorithm services. To achieve this, we strive to increase our marketing efforts and to enhance the quality and capabilities of our technologies.

Investment in technology and talent We expend considerable capital and efforts in the research and development of algorithmic use cases and product solutions to maintain our competitiveness in the computer and internet industries.

In light of the rapid growth of data volume, data processing capabilities are the key to enterprise development, which requires the advancement of technology related to central processing algorithms, new services, products, and capabilities to newer stages of development.

To retain existing customers and attract potential customers, we must continue to innovate to keep pace with the growth of the industry and our business to bring forward new cutting-edge technologies. Our current research and development efforts primarily focus on enhancing its artificial intelligence technology, image processing technology, intelligent chips, and application solutions to create novel service and product offerings.

We spent approximately RMB 93.7 million and RMB 161.2 million ($22.8 million) on research and development for the years ended December 31, 2022 and 2023, respectively.

China’s increased demand for central processing algorithm services in internet advertisement and the online game industry Effective central processing algorithm solutions can empower downstream industries experiencing high demand for data analysis and computing power optimization, which applies to internet advertising, internet game applications, finance, retail, logistics, and other industries.

Because of huge downstream demands, the overall market of central processing algorithm services is enormous. Our ability to pursue strategic opportunities for growth We intend to continually pursue strategic acquisitions and investments in selective technologies and businesses in the central processing algorithm and semiconductor industries to enhance our technology capabilities.

We believe that a solid acquisition and investment strategy may be critical for us to accelerate our growth and strengthen its competitive position in the future. our ability to identify and execute strategic acquisitions and investments will likely affect our operating results over time.

Our ability to expand its application fields and to diversify its customer base Currently, the primary source of our revenue is derived from providing central processing algorithm solutions to businesses in the entertainment and internet advertisement industries.

With increasing awareness and acceptance of this technology, we expect that more applications will be identified to magnify the value of this technology, such as the industry of the Internet, finance, local government, and manufacturing industries that have strong demand for data empowerment. Expand the scenario application of central processing algorithm services.

Our ability to expand its application fields and diversify its customer base may affect our operating results in the future. 79 Table of Contents Key Components of Our Results of Operations We currently operate in two segments and generates revenue by providing (i) central processing algorithm services and (ii) intelligent chips and services.

Please see our consolidated financial statements included elsewhere in this annual report. Revenues Our revenues consist of (i) providing central processing algorithm solutions, including internet advertising solutions, internet games services, and (ii) intelligent chips and services revenues.

Our breakdown of revenues for the years ended December 31, 2021, 2022 and 2023, respectively, is summarized below: For the Years Ended December 31, 2021 2022 2023 2023 RMB RMB RMB USD Revenues Central processing algorithm services 273,040,158 447,812,310 569,906,586 80,464,595 Intelligent chips and services 256,210,506 138,247,782 10,109,828 1,427,397 Total revenue 529,250,664 586,060,092 580,016,414 81,891,992 Cost of Revenues Cost of revenue for our central processing algorithm solutions for the internet advertisement algorithm services, internet games services comprised of (i) costs paid to channel providers and shared costs with content providers based on the profit-sharing arrangements, (ii) third party consulting services expenses and (iii) compensation expenses for the Our professionals.

Cost of revenue for our intelligent chip and services consists primarily of the costs of products sold and third-party software development costs.

Our breakdown of cost of revenues for the years ended December 31, 2021, 2022 and 2023, respectively, is summarized below: For the Years Ended December 31, 2021 2022 2023 2023 RMB RMB RMB USD Cost of revenues Central processing algorithm services 96,882,046 324,243,973 395,959,074 55,905,103 Intelligent chips and services 218,715,087 134,343,805 10,067,646 1,421,442 Total cost of revenues 315,597,133 458,587,778 406,026,720 57,326,545 Selling expenses Our selling expenses consist primarily of (i) compensation for selling personnel and (ii) travel expenses for its sales representatives. 80 Table of Contents General and administrative expenses.

Our general and administrative expenses consist primarily of (i) compensation for its management and administrative personnel, (ii) expenses in connection with its operation supporting functions such as legal, accounting, consulting and other professional service fees, and (iii) office rental, depreciation, and other administrative related expenses.

Research and Development Expenses Our research and development expenses include salaries and other compensation-related expenses to our research and product development personnel, outsourced subcontractors, as well as office rental, depreciation, and related expenses for our research and product development team.

Results of Operations Our consolidated results of operations for the years ended December 31, 2021, 2022 and 2023 are summarized below: For the Years Ended December 31, 2021 2022 2023 2023 RMB RMB RMB USD Revenues 529,250,664 586,060,092 580,016,414 81,891,992 Cost of revenues (315,597,133 ) (458,587,778 ) (406,026,720 ) (57,326,545 ) Gross profit 213,653,531 127,472,314 173,989,694 24,565,447 Selling expenses (5,419,964 ) (3,769,663 ) (2,760,388 ) (389,737 ) General and administrative expenses (34,049,653 ) (34,516,321 ) (24,916,851 ) (3,517,987 ) Research and development expenses (107,035,272 ) (93,684,006 ) (161,191,572 ) (22,758,492 ) Stock compensation expense - - (117,415,639 ) (16,577,808 ) Goodwill impairment loss (18,457,742 ) (35,493,300 ) (106,274,006 ) (15,004,731 ) Impairment loss for long-lived assets - (13,713,233 ) (6,602,198 ) (932,158 ) Change in fair value of business acquisition payable 3,239,892 - - - Change in fair value of warrant liability - 832,355 - - OPERATING EXPENSES (161,722,739 ) (180,344,168 ) (419,160,654 ) (59,180,913 ) Income (Loss) from operations 51,930,792 (52,871,854 ) (245,170,960 ) (34,615,466 ) Other income (expense), net 3,354,208 2,528,434 (23,528,714 ) (3,321,999 ) Income (Loss) before income taxes 55,285,000 (50,343,420 ) (268,699,674 ) (37,937,465 ) (Provision for) Benefit of income taxes (547,209 ) 3,798,854 2,500,434 353,034 Net Income (loss) 54,737,791 (46,544,566 ) (266,199,240 ) (37,584,431 ) Other comprehensive loss (455,030 ) (30,643,029 ) (57,547,208 ) (8,125,038 ) COMPREHENSIVE INCOME (LOSS) 54,282,761 (77,187,595 ) (323,746,448 ) (45,709,469 ) 81 Table of Contents Year Ended December 31, 2023 Compared to Years Ended December 31, 2022 and 2021 Revenues We generate revenue primarily from Central processing algorithm services and Intelligent chips and services.

For the years ended December 31, 2021, 2022 and 2023, our revenues were RMB 529.3 million, RMB 586.1 million and RMB 580.0 million (USD 81.9 million), respectively.

Our total revenues increased by approximately RMB 56.8 million, or 10.7%, from the year ended December 31, 2021 to 2022, due to an increase of approximately RMB 174.8 million in central processing algorithm service revenue, and a decrease of approximately RMB 118.0 million in intelligent chips and services revenue.

Our total revenues decreased by approximately RMB 6.0 million, or 1.0%, from the year ended December 31, 2022 to 2023, due to an increase of approximately RMB 122.1 million in central processing algorithm service revenue, and a decrease of approximately RMB 128.1 million in intelligent chips and services revenue.

We generate revenues from advertising display services when we complete its performance obligation to deliver related advertising services based on the specific terms of the contract, which are commonly based on a specific action, e.g., cost per impression (“CPM”) for online display. Revenue from performance based advertising services is generated when traffic users completed a transaction as specified in contracts.

Revenues generated from mobile games include royalty payments from licensee operators of our mobile games and fees collected from game developers for using our game portal.

Our central processing algorithm services revenue increased by approximately RMB 122.1 million, or 27.3%, from approximately RMB 447.8 million for the year ended December 31, 2022, to approximately RMB 570.0 million (USD 80.5 million) for the year ended December 31, 2023. This increase was primarily attributable to the overall market demand for internet advertising.

Intelligent chips and services revenues include revenues generated from the resale of intelligent chips. We generate revenues when the control of products is transferred to customers, as evidenced by customers’ signed acceptances. We also generate revenues from software development.

The revenue of our Intelligent chips and services, which decreased by approximately RMB 128.1 million, or 92.7 %, from approximately RMB 138.2 million for the year ended December 31, 2022, compared to approximately RMB 10.1million (USD 1.4 million) for the year ended December 31, 2023.

The decline is due to the disposal of Fe-da Electronics and its subsidiaries in the current fiscal year. As our revenue from Intelligent chips and services is mainly from Fe-da Electronics.

Cost of Revenues For our central processing algorithm services, the cost of revenues consists of the costs paid to (i) channel providers and shared costs with content providers based on the profit-sharing arrangements, (ii) third-party consulting services expenses, and (iii) compensation expenses for our professionals.

For intelligent chips and services, the cost of revenue consists primarily of the costs of products sold and third-party software development costs. 82 Table of Contents Our total cost of revenues increased by approximately RMB143.0 million, or 45.3%, from approximately RMB 315.6 million the year ended December 31, 2021, to approximately RMB 458.6 million for the year ended December 31, 2022.

Our total cost of revenues decreased by approximately RMB 52.6 million, or 11.5%, from the year ended December 31, 2022, to approximately RMB 406.0 million (USD 57.3 million) for the year ended December 31, 2023.

Our cost of revenues for central processing algorithm services increased by approximately RMB 227.4 million, or 234.7%, from approximately RMB 96.9 million for the year ended December 31, 2021, to approximately RMB 324.2 million for the year ended December 31, 2022.

The increase in the cost of revenues was mainly due to channel costs, which the Company has incurred channel costs with major internet advertising outlets such as internal portal, platform or applications to secure advertising space.

Our cost of revenues for central processing algorithm services increased by approximately RMB 71.7 million, or 22.1%, from the year ended December 31, 2022, to approximately RMB 396.0 million (USD 56.0 million) for the year ended December 31, 2023. The increase in the cost of revenues was mainly due to the increase in Central processing algorithm services revenue.

Our cost of revenues for intelligent chips and services decreased by approximately RMB 84.4 million or 38.5%, from approximately RMB 218.7 million for the year ended December 31, 2021, to approximately RMB 134.3 million for the year ended December 31, 2022.

The decrease in the cost of revenues was mainly due to the decrease in revenues for intelligent chips and services. Our cost of revenues for intelligent chips and services decreased by approximately RMB 124.3 million or 92.5%, from the year ended December 31, 2022, to approximately RMB 10.1 million (USD 1.4 million) for the year ended December 31, 2023.

The decrease in the cost of revenues was mainly due to the disposal of Fe-da Electronics and its subsidiaries in the current fiscal year.

Gross Profit Our gross profit increased by approximately RMB 46.5 million, from approximately RMB 127.5 million for the year ended December 31, 2022 to approximately RMB 174.0 million (USD 25.0 million) for the year ended December 31, 2023.

Operating Expenses Operating Expenses were RMB 161.7 million, RMB 180.3 million and RMB 419.2 million (USD 59.3 million) for the years ended December 31, 2021, 2022 and 2023, respectively.

The increase of approximately RMB 18.6 million, or 11.5% in 2022 was due to increases in impairment loss for goodwill and intangible assets as a result of impact of COVID-19 in 2022.

The increase of approximately RMB 238.8 million, or 132.4% in 2023 was due to the disposal of Fe-da Electronics, fully goodwill impairment for Shenzhen Yitian and Shanghai Guoyu and loss for intangible assets of Guoyu, and stock compensation expenses. 83 Table of Contents Selling expenses were RMB 5.4 million, RMB 3.8 million and RMB 2.8 million (USD 0.4 million) for the years ended December 31, 2021, 2022 and 2023, respectively.

The decrease of approximately RMB 1.7 million, or 30.4% in 2022 was due to the decreased marketing activities during 2022 due to the impact of COVID-19 which caused closures of public areas in several cities in China.

The decrease of approximately RMB 1.0 million, or 26.8% in 2023 was due to the disposal of Fe-da Electronics reduced the number of sales personnel. General and administrative expenses were RMB 34.1 million, RMB 34.5 million and RMB 24.9 million (USD 3.5 million) for the years ended December 31, 2021, 2022 and 2023, respectively.

The increase of approximately RMB 0.5 million, or 1.4% in 2022. The decrease of approximately RMB 9.6 million, or 27.8% in 2023 was mainly due to the disposal of Fe-da Electronics. Research and development expenses were RMB 107.0 million, RMB 93.7 million and RMB 161.2 million (USD 22.8 million) for the years ended December 31, 2021, 2022 and 2023, respectively.

The decrease of approximately RMB 13.4 million, or 12.5% in 2022 was mainly due to the slowdown in the progress of outsourced technical development services as a result of impact from COVID-19.

The increase of approximately RMB 67.5 million, or 72.1% in 2023 was attributable to the increase in outsourced technical development service of approximately RMB 45.5 million focused on the research and development of the applications of Central processing algorithm technologies in order to maintain our competitive advantage in the algorithm industry.

Stock compensation expense was RMB 117.4 million (USD 16.6 million) for the year ended December 31, 2023. The increase was due to our 2023 Equity Incentive Plan, we have granted an aggregate of 7,750,000 ordinary shares to our employees and advisors.

Goodwill impairment loss were RMB 18.5 million, RMB 35.5 million and RMB 106.3 million (USD 15.0 million) for the years ended December 31, 2021, 2022 and 2023, respectively. These impairment charges were driven by the disposal of Fe-da Electronics and the decline in forecasted profit from Shenzhen Yitian and Shanghai Guoyu.

Change in fair value of business acquisition payable amounted to RMB 3.2 million, nil and nil for the years ended December 31, 2021, 2022 and 2023. The Company is contractually obligated to pay contingent consideration to the sellers of Fe-da Electronics in the event that certain net income targets are achieved during the three years following acquisition.

The net income target was not met for the years ended December 31, 2021, 2022 and 2023.

Our management, with the assistance of third party appraiser determined the fair value of contingent consideration was nil for the year ended December 31, 2023 based on a probability weighted discounted cash flow analysis with significant fair value input being the financial performance of Fe-da Electronics.

Change in fair value of warrant liability amounted to approximately RMB 0.8 million for the year ended December 31, 2022 due to change in share price of the Company between December 9, 2022 where the Company completed its merger and December 31, 2022.

The change in fair value of warrant liability between January 1, 2021 to December 9, 2022 was approximately $0.3 million which was included in Venus ’ s historical retained earnings (accumulated deficit). The fair value of the warrants on December 31, 2022 and 2023 were nil.

Other income (expenses), net Total other income, net were RMB 3.4 million and RMB 2.5 million for the years ended December 31, 2021, 2022 respectively. The total other loss, net was RMB 23.5 million (USD 3.3 million) for the years ended December 31 2023.

The total other income decrease of approximately RMB 0.8 million, or 24.6% in 2022 was due to we have less investment and interest income because we incurred investment loss offset by the decrease in amortization of investment payable discount because it was ended during the year ended December 31, 2021.

The total other loss increase of approximately RMB 26.1 million, or 1030.6% in 2023 was due to the impairment of long-term investments as the result of the disposal of Fe-da Electronics and Korgas 233.

Benefit of (Provision for) income taxes Benefit of income taxes was RMB 0.6 million for the year ended December 31, 2021, Provision for income taxes were RMB 3.8 million and RMB 2.5 million (USD 0.4 million) for the years ended December 31, 2022 and 2023, respectively.

The increase in provision for income taxes of approximately RMB 4.3 million, or 794.2% in 2022 was due to the increase in deferred tax benefit as a result of intangible assets amortization and impairment.

The increase in provision for income taxes of approximately RMB 1.3 million, or 34.2% in 2023 was due to the intangible assets amortization and impairment and provision for bad debts. 84 Table of Contents Net income (loss) As a result of the combination of factors discussed above, our net income decreased from approximately RMB 54.7 million for the year ended December 31, 2021, to approximately RMB 46.5 million of net loss for the year ended December 31, 2022.

Our net loss increased from the year ended December 31, 2022, to approximately RMB 266.2 million (USD 37.6 million) of net loss for the year ended December 31, 2023.

After the deduction of non-controlling interest, net income attributable to us was approximately RMB 55.3 million for the year ended December 31, 2021, compared to approximately RMB 46.8 million net loss attributable to us for the same period in 2022, compared to approximately RMB 268.2 million (USD 37.9 million) net loss attributable to us for the same period in 2023.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES A. DIRECTORS AND SENIOR MANAGEMENT The following table sets forth certain information concerning our directors and executive officers as of the date of this annual report.

Name Age Position Served From Jie Zhao 47 Chairman of the Board of Directors December 2022 Min Shu 48 Director, Chief Executive Officer December 2022 Shan Cui 51 Independent Director December 2022 Haixia Zhao 58 Independent Director December 2022 Wengang Kang 35 Independent Director December 2022 Li He 38 Chief Financial Officer December 2022 Jie Zhao has been serving as our chairman of the board of directors since December 2022.

Mr. Zhao joined the WiMi group of companies in August 2015 as the chairman of Yitian Internet. He was appointed as the director and chairman of the board in November 2020 and re-designated as a non-executive director. He also served as the chairman of the company’s nomination committee. Prior to joining the WiMi group of companies, Mr.

Zhao served as a software developer for AsiaInfo Beijing Co., Ltd., a company specializing in computer systems in China from 2002 to 2004. From December 2004 to December 2012, he served as director of Shenzhen WeiXun YiTong Technology Co., Ltd., a mobile internet company in China.

From February 2008 to May 2015, he served as a director of Xiamen Xiangtong Animation Co., Ltd., a mobile animation company in China. Mr. Zhao graduated from Wuhan University of Technology with a bachelor’s degree in robotics design and manufacturing in 1999 and obtained his master’s degree in software engineering from Tsinghua University in 2006.

Min Shu has been serving as our executive director, chief executive officer since December 2022. Mr. Shu joined the WiMi group of companies in June 2018 as the deputy general manager of technology.

Prior to joining the WiMi group of companies, he served as a software development engineer at Shenzhen Integvol Information Technology Co., Ltd. from 2001 to 2006, where he was responsible for software development and system architecture, and the development and design of a mobile application platform.

From 2006 to 2012, he served as a senior software technical engineer at Shanghai Motegor Technology Co., Ltd., where he was responsible for the management of software development and system architecture. From June 2012 to April 2018, he served as the chief technical officer at Shanghai BlueSky Information Technology Co.,Ltd.

Where he was responsible for the management of technology development and system architecture. Mr. Shu graduated from Huazhong University of Science and Technology with a bachelor’s degree in electrical engineering and automation in July 1999 and obtained his master’s degree in communication engineering from Huazhong University of Science and Technology in 2001.

Shan Cui has been serving as our Independent Director since December 2022. Prior to the closing of our business combination, she served as an Independent Director of Venus since the closing of Venus’ IPO on February 11, 2021. Ms.

Cui has been an independent director and chair of the audit committee and compensation committee of Fuqin Fintech Limited, an online lending information intermediary platform, since August 28, 2018. She has been the Executive Director of First Capital International Limited since 2010 and provided consulting services for private equity companies and venture capital companies.

She was the CFO of Lizhan Environmental Corporation, a then Nasdaq-listed company engaged in the business of green leather material manufacturing, from 2011 to 2013. From 2009 to 2010, she was the Manager of Planning and Analysis for Greene, Tweed & Company, a manufacturer of high-performance engineering parts and products serving aerospace, oilfield, and semi-conductor industries. Prior to that, Ms.

Cui was the Senior Finance Manager at Ikon Office Solutions from 2005 to 2008, the CFO for Invista from 2003 to 2004, the Senior Financial Consultant for the Peachtree Companies from 2001 to 2003, the Manager of Strategic Planning and Analysis for General Time Corporation from 1998 to 2001, and the Senior Vice President for Seaboard Corporation from 1996 to 1998.

Ms. Cui obtained her MBA degree in Business Administration from Georgia State University and her Bachelor’s degree in International Business English from Ocean University of China. 91 Table of Contents Haixia Zhao has been serving as our Independent Director since December 2022. Ms.

Zhao had over 15 years of management experience in the energy industry, where she gained substantial skills and knowledge in energy sector. From June 2019, she served as the independent director and chair of the risk committee at Sterlite Power Transmission Limited. From January 2010 to December 2018, she was the president of BP Singapore Pte.

Ltd. where she was responsible for downstream and marketing in the eastern hemisphere in October 1996. From January 2010 to December 2016, she served as a director at Guangdong Dapeng LNG Company Ltd. where she served on the investment committee.

From January 1993 to June 2010, she worked at the AES Corporation, a company listed on the New York Stock Exchange (stock code: AES) in Singapore and her last position was the general manager where she was responsible for the growth strategy in Asia and Middle East region. She was appointed as a director of AES Transpower Private Ltd.

From July 1987 to December 1991, she was an Assistant Manager at China Construction Bank, where she was responsible for client development. Ms.

Zhao graduated with a bachelor’s degree majoring in Civil Engineering and a bachelor’s degree majoring in physics from Zhejiang University in the PRC in 1987, and a master’s degree in construction management from University of Maryland in the United States in 1993. Wengang Kang has been serving as our Independent Director since December 2022. Mr.

Kang has over four years of experience in the legal industry, where he gained substantial skills and knowledge in legal industry. From July 2017 to June 2018, Mr. Kang was an associate at Shanghai Ximu Law Firm. From June 2018 to January 2020, Mr.

Kang was an associate at Beijing Zhongyin (Shanghai) Law Firm, where he advised on corporate legal matters. Since 2020, he has been a partner of Shanghai Yingdong Law Firm. Mr. Kang graduated with a degree in law at the Gansu Institute of Political Science and Law in the PRC in July 2013.

Li He has been serving as our chief financial officer since December 2022. Mr. He joined the WiMi group in October 2020 as the financial controller of Yitian Internet and was appointed as chief financial officer in October 2020.

Prior to joining, he served as a relationship manager at Royal Bank of Scotland (China) Limited Shenzhen Branch between 2007 and 2010. From June 2010 to July 2015, he served as an investment director at JPMorgan Asset Management, where he was responsible for investments in China.

From August 2015 to February 2019, He was appointed as the vice president of the investment division at Yingxin Investment Group Co., Ltd., where he was in charge of managing the company’s investment. Mr. He graduated with a degree in international economics and trade at Shenzhen University in the PRC in July 2007. B.

COMPENSATION Compensation In 2023, we paid an aggregate cash compensation of approximately RMB 580,997 (USD 82,450) to our directors and executive officers. We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our directors and executive officers.

Our PRC subsidiaries are required by law to make contributions equal to certain percentages of each employee’s salary for his or her pension insurance, medical insurance, unemployment insurance and other statutory benefits and a housing provident fund. Employment Agreements We have entered into employment agreements with each of our executive officers.

Each of our executive officers is employed for an unspecified time period, which can be terminated upon both parties’ agreement or by law. We may terminate an executive officer’s employment for cause at any time without advance notice in certain events. We may terminate an executive officer’s employment by giving a prior written notice or by paying certain compensation.

An executive officer may terminate his or her employment at any time by giving a prior written notice.

Each executive officer has agreed to hold, unless expressly consented to by us, at all times during and within one year after the termination of his or her employment agreement, in strict confidence and not to use, any of our confidential information or the confidential information of our customers and suppliers. 92 Table of Contents C.

BOARD PRACTICES Our board of directors consists of five directors, including three independent directors, Shan Cui, Haixia Zhao, Wengang Kang. A director is not required to hold any shares in our company to qualify to serve as a director.

The Corporate Governance Rules of the Nasdaq generally require that a majority of an issuer’s board of directors must consist of independent directors.

A director who is in any way, whether directly or indirectly, interested in a contract or transaction or proposed contract or transaction with our company is required to declare the nature of his or her interest at a meeting of our directors.

A general notice given to the directors by any director to the effect that he or she is a member of any specified company or firm and is to be regarded as interested in any contract or transaction which may thereafter be made with that company or firm shall be deemed a sufficient declaration of interest in regard to any contract so made or transaction so consummated.

Subject to the Nasdaq rules and disqualification by the chairman of the relevant board meeting, a director may vote in respect of any contract or proposed contract or arrangement notwithstanding that he/she may be interested therein and if he/she does so, his/her vote shall be counted and he/she may be counted in the quorum at any meeting of the directors at which any such contract or proposed contract or arrangement is considered.

Our board of directors may exercise all of the powers of our company to borrow money, to mortgage or charge its undertaking, property and uncalled capital, or any part thereof, and to issue debentures, debenture stock or other securities whenever money is borrowed or as security for any debt, liability or obligation of our company or of any third party.

Committees of the Board of Directors Our board of directors has established an audit committee. The composition and its responsibilities are described below. Members serve on the committee until their resignation or until otherwise determined by our board of directors. Our board of directors may have or establish other committees as it deems necessary or appropriate from time to time.

Audit Committee Our audit committee consists of 3 Independent Directors, chaired by Shan Cui. We have determined that each of them satisfies the “independence” requirements of Rule 5605(c)(2) of the Listing Rules of the Nasdaq and meet the independence standards under Rule 10A-3 under the Exchange Act, as amended. We have determined that Ms.

Cui qualifies as an “audit committee financial expert.” The audit committee oversees our accounting and financial reporting processes and the audits of its financial statements.

The audit committee is responsible for, among other things: ● establishing clear hiring policies for employees or former employees of the independent auditors; ● reviewing and recommending to our Board of Directors for approval, the appointment, re-appointment or removal of the independent auditor, after considering its annual performance evaluation of the independent auditor; ● approving the remuneration and terms of engagement of the independent auditor and pre-approving all auditing and non-auditing services permitted to be performed by our independent auditors at least annually; ● obtaining a written report from our independent auditor describing matters relating to its independence and quality control procedures; ● reviewing with the independent registered public accounting firm any audit problems or difficulties and management’s response; ● discussing with our independent auditor, among other things, the audits of the financial statements, including whether any material information should be disclosed, issues regarding accounting and auditing principles and practices; 93 Table of Contents ● reviewing and approving all proposed related party transactions, as defined in Item 404 of Regulation S-K under the Securities Act; ● reviewing and recommending the financial statements for inclusion within our quarterly earnings releases and to its Board of Directors for inclusion in its annual reports; ● discussing the annual audited financial statements with management and the independent registered public accounting firm; ● reviewing policies with respect to risk assessment and risk management; ● reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any special steps taken to monitor and control major financial risk exposures; ● periodically reviewing and reassessing the adequacy of the committee charter; ● approving annual audit plans, and undertaking an annual performance evaluation of the internal audit function; ● establishing and overseeing procedures for the handling of complaints and whistleblowing; ● meeting separately and periodically with management, the internal auditors and the independent registered public accounting firm; ● monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of its procedures to ensure proper compliance; ● reporting periodically to our Board of Directors; and ● such other matters that are specifically delegated to our audit committee by our Board of Directors from time to time.

Duties and Functions of Directors Under Cayman Islands law, our directors owe fiduciary duties to our company, including a duty of loyalty, a duty to act honestly and a duty to act in what they consider in good faith to be in our best interests. Our directors must also exercise their powers only for a proper purpose.

Our directors also owe to our company a duty to exercise the skill they actually possess and such care and diligence that a reasonable prudent person would exercise in comparable circumstances.

It was previously considered that a director need not exhibit in the performance of his duties a greater degree of skill than may reasonably be expected from a person of his knowledge and experience.

However, English and Commonwealth courts have moved towards an objective standard with regard to the required skill and care and these authorities are likely to be followed in the Cayman Islands. In fulfilling their duty of care to us, our directors must ensure compliance with our memorandum and articles of association, as amended and restated from time to time.

Our company has the right to seek damages if a duty owed by our directors is breached. In limited exceptional circumstances, a shareholder may have the right to seek damages in our name if a duty owed by our directors is breached.

In accordance with our second amended and restated articles of association, the functions and powers of our board of directors include, among others, (i) convening shareholders’ annual general meetings and reporting its work to shareholders at such meetings, (ii) declaring dividends, (iii) appointing officers and determining their terms of offices and responsibilities, and (iv) approving the transfer of shares of our company, including the registering of such shares in our share register.

In addition, in the event of an equality of votes, the chairman of our board of directors has a second or casting vote. 94 Table of Contents Terms of Directors and Officers Our officers are appointed by and serve at the discretion of the board of directors and may be removed by our board of directors.

Our directors may be appointed by a resolution of our board of directors, or by an ordinary resolution of our shareholders. Our directors are not subject to a term of office and hold office until such time as they are removed from office by ordinary resolution of the shareholders.

A director will be removed from office automatically if, among other things, the director (i) becomes bankrupt or makes any arrangement or composition with his creditors; (ii) dies or is found by our company to be of unsound mind; (iii) resigns by notice in writing to our company; (iv) without special leave of absence from our board of directors, is absent from three consecutive meetings of the board and the board resolves that his office be vacated; or (v) is removed from office pursuant to any other provisions of our post offering amended and restated memorandum and articles of association.

Share Incentive Plan 2023 EQUITY INCENTIVE PLAN Our 2023 Equity Incentive Plan (“2023 Plan”) was adopted to attract and retain the best available personnel for positions of substantial responsibility, provide additional incentive to employees, directors, officers and consultants and promote the success of our business.

The equity incentive plan provides for the grant of an option, restricted shares, restricted share units and local awards. In September 2023, we issued 7,750,000 ordinary shares pursuant to our 2023 Plan. As of December 31, 2023, we have granted an aggregate of 7,750,000 ordinary shares to our employees and advisors.

The following paragraphs describe the principal terms of the 2023 Plan: Purposes of this Plan.

The purposes of this Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to Employees, Officers, Directors and Consultants (each a “Service Provider” and, together, the “Service Providers”) and to promote the success of the Company’s business.

This Plan permits the grant of an Option, Restricted Shares, Restricted Share Units and Local Awards. Shares Subject to this Plan. Subject to the provisions of Section 13 of this Plan, the maximum aggregate number of Shares that may be issued for all purposes under the Plan shall be 7,750,000 (the “Plan Limit”).

Shares to be issued under the Plan may be authorized and unissued Shares, issued Shares that have been reacquired by the Company and that are being held in treasury, or a combination thereof. Administration.

Other than as provided in the remainder of this Section 4(a), the Plan will be administered by (i) the Board or (ii) a Committee, which Committee will be constituted to satisfy Applicable Laws. Eligibility. Awards may be granted to Service Providers.

Neither the Plan nor any Award shall confer upon a Participant any right with respect to continuing his or her relationship as a Service Provider, nor shall they interfere in any way with the right of the Participant or the right of the Company or its Parent or Subsidiaries to terminate such relationship at any time, with or without cause.

Issuance of Shares. Notwithstanding anything herein to the contrary, upon the exercise of an Option, the Administrator shall have to discretion to provide for payment in cash or property of equivalent value in lieu of the Shares that otherwise would be issued. Issue and Allotment of Restricted Shares.

Subject to the terms and provisions of the Plan, the Administrator, at any time and from time to time, may issue and allot Restricted Shares to Service Providers in such amounts as the Administrator will determine.

Notwithstanding anything herein to the contrary, the Administrator may place restrictions on the issuance and allotment of Restricted Shares and until the PRC Plan Registration is complete or as otherwise required in accordance with Applicable Laws.

For the year ended December 31, 2023, we did not grant any share incentive awards to our directors and executive officers under the 2023 Plan. 95 Table of Contents D. EMPLOYEES See “Item 4. INFORMATION ON THE COMPANY—B. Business Overview—Employees.” E.

SHARE OWNERSHIP The table below sets forth information, as of December 31, 2023, with respect to the beneficial ownership of our ordinary shares by: (a) each named executive officer, each of our directors, and our directors and executive officers as a group; and (b) each person or entity known by us to own beneficially more than 5% of our ordinary shares (by number and by voting power).

The calculations in the table below are based on 5,160,671 ordinary shares issued and outstanding as of December 31, 2023, as retroactively adjusted to reflect the 10-to-1 Share Consolidation effected on March 22, 2024.

Ordinary Shares Voting Name and Address of Beneficial Owner (1) Number % Power (%) Executive Officers and Directors Jie Zhao (2) 1,858,970 36.0 % 36.0 % Shan Cui Haixia Zhao Wengang Kang Li He Min Shu All Executive Officers and Directors as a group 1,858,970 36.0 % 36.0 % MAJOR SHAREHOLDERS WiMi Hologram Cloud Inc. 2,891,089 56.0 % 56.0 % (1) The business address of our directors and executive officers is Unit 507, Building C, Taoyuan Street Long Jing High and New Technology Jingu Pioneer Park Nanshan District, Shenzhen, 518052 People’s Republic of China.

(2) The reported securities are held by WiMi, a company in which Jie Zhao controls 64.3% of the voting power through holding 100% of all WiMi’s issued and outstanding Class A ordinary shares and 23.6% of all WiMi’s issued and outstanding Class B ordinary shares. 96 Table of Contents

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS A. MAJOR SHAREHOLDERS Please see “Item 6. Directors, Senior Management and Employees — E. Share Ownership.” B.

RELATED PARTY TRANSACTIONS Transactions with Related Parties Name of Related Parties Relationship Nature December 31, 2022 December 31, 2023 December 31, 2023 RMB RMB USD WIMI the Parent company Due to Parent - 17,379,014 2,453,727 Joyous JD a non controlling shareholder of MicroAlgo other payables. 1,067,903 1,086,012 153,333 Total 1,067,903 18,465,025 2,607,060 WIMI the Parent company Due from Parent 39,987,762 - - 39,987,762 - - Joyous JD is a non controlling shareholder of MicroAlgo.

This amount represents advance to Venus Acquisition Corp prior to the merger. The amount was non interest bearing and due on demand. Contractual Arrangements Not applicable. Employment Agreements See “Item 6. Directors, Senior Management and Employees — B. Compensation — Employment Agreements.” C. INTERESTS OF EXPERTS AND COUNSEL Not applicable. 97 Table of Contents