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CLPS Incorporation

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FY2020 Annual Report · CLPS Incorporation
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 20-F

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

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

OR

For the fiscal year ended June 30, 2020

OR

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

OR

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

for the transition period from ____________to ____________

Commission file number 001-38505

CLPS Incorporation
(Exact name of the Registrant as specified in its charter)

Cayman Islands
(Jurisdiction of incorporation or organization)

c/o Unit 702, 7th Floor, Millennium City II
378 Kwun Tong Road, Kwun Tong, Kowloon
Hong Kong SAR
Tel: (852) 37073600
(Address of principal executive office)

Raymond Ming Hui Lin, Chief Executive Officer
c/o Unit 702, 7th Floor, Millennium City II
378 Kwun Tong Road, Kwun Tong, Kowloon
Hong Kong SAR
Tel: (852) 37073600 
(Name, Telephone, E-mail and/or Facsimile Number and Address of Company Contact Person)

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

Title of each class
Common Shares, par value $0.0001

Trading Symbol(s)
CLPS

Name of each exchange on which registered
The NASDAQ Stock Market LLC

Securities registered or to be registered pursuant to Section 12(g) of the Act: None.

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None.

On October 15, 2020, the issuer had 16,093,248 shares outstanding.

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

Yes ☐    No ☒

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

Yes ☐    No ☒

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

Yes ☒    No ☐

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

Yes ☒    No ☐

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

☐ Large Accelerated filer

☐ Accelerated filer

☒ Non-accelerated filer

Emerging growth company ☒

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

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

☒ US GAAP

☐

International Financial Reporting Standards as issued by the International Accounting
Standards Board

☐ Other

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

☐ Item 17   ☐ Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐    No ☒

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PART I

ITEM 1.
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 4A.
ITEM 5.
ITEM 6.
ITEM 7.
ITEM 8.
ITEM 9.
ITEM 10.
ITEM 11.
ITEM 12.

PART II

ITEM 13.
ITEM 14.
ITEM 15.
ITEM 16.
ITEM 16A.
ITEM 16B.
ITEM 16C.
ITEM 16D.
ITEM 16E.
ITEM 16F.
ITEM 16G.

PART III

ITEM 17.
ITEM 18.
ITEM 19.

TABLE OF CONTENTS

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
OFFER STATISTICS AND EXPECTED TIMETABLE
KEY INFORMATION
INFORMATION ON THE COMPANY
UNRESOLVED STAFF COMMENTS
OPERATING AND FINANCIAL REVIEW AND PROSPECT
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
FINANCIAL INFORMATION
THE OFFER AND LISTING
ADDITIONAL INFORMATION
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
CONTROLS AND PROCEDURES
RESERVED
AUDIT COMMITTEE FINANCIAL EXPERT.
CODE OF ETHICS.
PRINCIPAL ACCOUNTANT FEES AND SERVICES.
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.
CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT.
CORPORATE GOVERNANCE

FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
EXHIBITS

i

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1
1
1
29
54
54
75
88
90
91
91
98
98

99
99
99
101
101
101
101
101
102
102
102

103
103
105

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CERTAIN INFORMATION

Unless otherwise indicated, numerical figures included in this Annual Report on Form 20-F (the “Annual Report”) have been subject to rounding

adjustments. Accordingly, numerical figures shown as totals in various tables may not be arithmetic aggregations of the figures that precede them.

For the sake of clarity, this Annual Report follows the English naming convention of first name followed by last name, regardless of whether an
individual’s name is Chinese or English. Certain market data and other statistical information contained in this Annual Report are based on information from
independent industry organizations, publications, surveys and forecasts. Some market data and statistical information contained in this Annual Report are
also based on management’s estimates and calculations, which are derived from our review and interpretation of the independent sources listed above, our
internal research and our knowledge of the PRC information technology industry. While we believe such information is reliable, we have not independently
verified any third-party information and our internal data has not been verified by any independent source.

Except where the context otherwise requires and for purposes of this Annual Report only:

● Depending on the context, the terms “we,” “us,” “our company,” and “our” refer to CLPS Incorporation, a Cayman Islands company, and its

subsidiary and affiliated companies:

● “Qinheng” refers to Qinheng Co., Limited, a Hong Kong company;

● “Qiner” refers to Qiner Co., Limited, a Hong Kong company;

● “CLIVST” refers to CLIVST Ltd., a British Virgin Islands company;

● “FDT-CL” refers to FDT-CL Financial Technology Services Limited, a Hong Kong company;

● “JQ” refers to JQ Technology Co., Limited, a Hong Kong company;

● “JL” refers to JIALIN Technology Limited, a Taiwan company;

● “CLPS QC (WOFE)” refers to Shanghai Qincheng Information Technology Co., Ltd., a PRC company;

● “CLPS Shanghai” refers to ChinaLink Professional Services Co., Ltd., a PRC company;

● “CLPS Dalian” refers to CLPS Dalian Co., Ltd., a PRC company;

● “CLPS RC” refers to CLPS Ruicheng Co., Ltd., a PRC company;

● “CLPS Beijing” refers to CLPS Beijing Hengtong Co., Ltd., a PRC company;

● “Judge China” refers to Judge (Shanghai) Co., Ltd., a PRC company;

● “Judge HR” refers to Judge (Shanghai) Human Resource Co., Ltd., a PRC company;

● “CLPS-Ridik AU” refers to CLPS-Ridik Technology (Australia) Pty. Ltd., an Australian company;

● “CLPS SG” refers to CLPS Technology (Singapore) Pte. Ltd., a Singaporean company;

● “CLPS Hong Kong” refers to CLPS Technology (HK) Co., Limited, a Hong Kong company;

● “CLPS Shenzhen” refers to CLPS Shenzhen Co., Ltd., a PRC company;

● “Huanyu” refers to Tianjin Huanyu Qinshang Network Technology Co., Ltd., a PRC company

● “CLPS Guangzhou” refers to CLPS Guangzhou Co., Ltd., a PRC company.

● “CLPS US” refers to CLPS Technology (US) Ltd., a Delaware company.

● “CLPS California” refers to CLPS Technology (California) Inc., a California company.

ii

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
● “CLPS  Lihong”  refers  to  CLPS  Lihong  Financial  Information  Services  Co.,  Ltd.,  formerly  Lihong  Financial  Information  Services  Co.,  Ltd.

before the investment, a PRC company.

● “Infogain” refers to Infogain Solutions PTE. Ltd., a Singaporean company.

● “EMIT” refers to Economic Modeling Information Technology Co., Ltd., a PRC company.

● “CLPS Hangzhou” refers to CLPS Hangzhou Co. Ltd., a PRC company.

● “CLPS Guangdong Zhichuang” refers to CLPS Guangdong Zhichuang Software Technology Co., Ltd. a PRC company.

● “CLPS Shenzhen Robotics” refers to CLPS Shenzhen Robotics Co. Ltd., a PRC company.

● “Ridik Pte.” refers to Ridik Pte. Ltd., a Singaporean company.

● “Ridik Consulting” refers to Ridik Consulting Private Limited, an Indian company.

● “Ridik Sdn.” refers to Ridik Sdn. Bhd., a Malaysian company.

● “Ridik Software Pte.” refers to Ridik Software Solutions Pte. Ltd., a Singaporean company.

● “Ridik Software” refers to Ridik Software Solutions Ltd., a UK company.

● “Suzhou Ridik” refers to Suzhou Ridik Information Technology Co., Ltd., a PRC company.

● “CLPS Japan” refers to CLPS Technology Japan, a Japanese company.

● “Qinson” refers to Qinson Credit Card Services Limited, a Hong Kong company.

● “Shares” and “Common Shares” refer to our shares, $0.0001 par value per share;

● “China” and “PRC” refer to the People’s Republic of China, excluding, for the purposes of this Annual Report only, Macau, Taiwan and Hong

Kong; and

● all references to “RMB,” “yuan” and “Renminbi” are to the legal currency of China, and all references to “USD,” and “U.S. dollars” are to the

legal currency of the United States.

Unless otherwise noted, all currency figures in this filing are in U.S. dollars. Any discrepancies in any table between the amounts identified as total
amounts and the sum of the amounts listed therein are due to rounding. Our reporting currency is U.S. dollar and our functional currency is Renminbi. This
Annual Report contains translations of certain foreign currency amounts into U.S. dollars for the convenience of the reader. Other than in accordance with
relevant accounting rules and as otherwise stated, all translations of Renminbi into U.S. dollars in this Annual Report were made at the rate of RMB 7.0651
to USD1.00, the noon buying rate on June 30, 2020, as set forth in the H.10 statistical release of the U.S. Federal Reserve Board. Where we make period-on-
period comparisons of operational metrics, such calculations are based on the Renminbi amount and not the translated U.S. dollar equivalent. We make no
representation  that  the  Renminbi  or  U.S.  dollar  amounts  referred  to  in  this  Annual  Report  could  have  been  or  could  be  converted  into  U.S.  dollars  or
Renminbi, as the case may be, at any particular rate or at all.

iii

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FORWARD-LOOKING STATEMENTS

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

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

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

This Annual Report should be read in conjunction with our audited financial statements and the accompanying notes thereto, which are included in

Item 18 of this Annual Report.

iv

 
 
 
 
 
 
 
ITEM 1.

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not required.

ITEM 2.

OFFER STATISTICS AND EXPECTED TIMETABLE

PART I

Not required.

ITEM 3.

KEY INFORMATION

A.

Selected financial data

The following selected consolidated financial data as of and for the years ended June 30, 2020, 2019 and 2018 have been derived from the audited
consolidated financial statements of the Company included in this Annual Report. This information is only a summary and should be read together with the
consolidated  financial  statements,  the  related  notes,  the  section  entitled  “Management’s  Discussion  and  Analysis  of  Financial  Condition  and  Results  of
Operations”  and  other  financial  information  included  in  this  Annual  Report.  The  Company’s  results  of  operations  in  any  period  may  not  necessarily  be
indicative of the results that may be expected for any future period. See “Risk Factors” included elsewhere in this Annual Report.

The following table presents our summary consolidated statements of comprehensive (loss) income for the fiscal years ended June 30, 2020,

2019 and 2018, respectively.

Selected Consolidated Statement of Comprehensive (Loss) Income

Revenues
Less: Cost of revenues
Gross profit

Operating expenses:

Selling and marketing expenses
Research and development expenses
General and administrative expenses

Total operating expenses
Income (loss) from operation
Subsidies and other income, net
Other expenses

Income (loss) before income tax and share of loss in equity investees

Provision (benefits) for income taxes
Income (loss) before share of income (loss) in equity investees
Share of income (loss) in equity investees, net of tax
Net income (loss)

Less: Net income (loss) attributable to non-controlling interests
Net income (loss) attributable to CLPS Incorporation’s shareholders

Other comprehensive income (loss)

Foreign currency translation (loss) gain
Less: foreign currency translation (loss) gain attributable to non-controlling interest
Other comprehensive (loss) gain attributable to CLPS Incorporation’s shareholders

Comprehensive income (loss) attributable to

CLPS Incorporation shareholders

Non-controlling interests

Basic earnings (loss) per common share*

Weighted average number of share outstanding – basic

Diluted earnings (loss) per common share*

Weighted average number of share outstanding – diluted

Supplemental information:

Non-GAAP income before income tax

Non-GAAP net income

Non-GAAP net income attributable to CLPS Incorporation’s shareholders

Non-GAAP basic earnings per common share
Weighted average number of share outstanding – basic

Non-GAAP diluted earnings per common share

Weighted average number of share outstanding – diluted

For the years ended June 30,
2019

2020

2018

  $

89,415,798    $
(58,296,097)    
31,119,701     

64,932,937    $
(41,178,356)    
23,754,581     

48,938,593 
(31,277,255)
17,661,338 

3,059,877     
10,436,975     
16,343,936     
29,840,788     
1,278,913     
2,535,868     
(107,322)    

3,707,459     
835,444     
2,872,015     
207,363     
3,079,378     
141,139     
2,938,239    $

2,179,029     
7,978,883     
17,384,393     
27,542,305     
(3,787,724)    
779,508     
(92,429)    

(3,100,645)    
186,615     
(3,287,260)    
(145,329)    
(3,432,589)    
(162,813)    
(3,269,776)   $

2,225,702 
7,837,873 
5,871,622 
15,935,197 
1,726,141 
960,784 
(84,155)

2,602,770 
(112,128)
2,714,898 
- 
2,714,898 
280,435 
2,434,463 

(571,943)   $
(22,928)    
(549,015)   $

(429,348)   $
(17,375)    
(411,973)   $

55,793 
10,200 
45,593 

2,389,224    $
118,211     
2,507,435    $

(3,681,749)   $
(180,188)    
(3,861,937)   $

0.20     
14,689,224     
0.20     
14,692,299     

(0.24)    
13,843,764     
(0.24)    
13,843,764     

7,711,539     
7,083,458     
6,942,319     
0.47     
14,689,224     
0.47     
14,692,299     

3,915,444     
3,583,500     
3,746,313     
0.27     
13,843,764     
0.27     
13,969,436     

2,480,056 
290,635 
2,770,691 

0.21 
11,517,123 
0.21 
11,636,367 

2,602,770 
2,714,898 
2,434,463 
0.21 
11,517,123 
0.21 
11,636,367 

  $

  $

  $

  $

  $

*

The shares and per share data are presented on a retroactive basis to reflect the nominal share issuance.

1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
 
 
 
 
  
 
 
  
 
 
  
   
   
 
 
 
  
 
 
  
 
 
  
   
      
      
  
   
   
   
   
   
   
   
 
 
 
  
 
 
  
 
 
  
   
   
   
   
   
   
 
 
 
  
 
 
  
 
 
  
   
      
      
  
   
 
 
 
  
 
 
  
 
 
  
   
      
      
  
   
 
 
 
 
  
 
 
  
 
 
  
   
   
   
   
 
 
 
  
 
 
  
 
 
  
   
      
      
  
   
   
   
   
   
   
   
 
The following table presents our summary consolidated balance sheet data as of June 30, 2020 and 2019, respectively.

Cash and cash equivalents
Short-term investments
Accounts receivable, net
Escrow receivable
Prepayments, deposits and other assets, net
Prepaid income tax
Amounts due from related parties
Total Current Assets
Property and equipment, net
Intangible assets, net
Goodwill
Long-term investments
Prepayments, deposits and other assets, net
Deferred tax assets, net
Total Assets
Short-term bank loans
Accounts payable and other current liabilities
Tax payables
Deferred subsidies
Deferred revenues
Contract liabilities
Salaries and benefits payable
Long-term bank loans
Deferred tax liabilities
Unrecognized tax benefits
Total Liabilities
Total CLPS Incorporation’s Shareholders’ Equity
Non-controlling Interests
Total Shareholders’ Equity
Total Liabilities and Shareholders’ Equity

As of June 30,

2020
12,652,120    $
636,934    $
25,753,856    $
-    $
1,280,967    $
15,780    $
169,185    $
40,508,842    $
452,472    $
1,144,579    $
2,118,700    $
680,131    $
244,387    $
203,247    $
45,352,358    $
2,161,239    $
489,043    $
1,426,614    $
-    $
-    $
755,178     
11,522,268    $
22,554     
163,163     
194,939     
16,734,998    $
27,348,644    $
1,268,716    $
28,617,360    $
45,352,358    $

2019
6,601,335 
1,791,697 
19,263,584 
200,000 
1,028,154 
630,790 
230,540 
29,746,100 
566,591 
427,769 
447,790 
914,006 
222,507 
338,221 
32,662,984 
2,184,996 
196,832 
915,629 
109,250 
124,192 
- 
7,735,487 
- 
- 
- 
11,266,386 
20,788,436 
608,162 
21,396,598 
32,662,984 

  $
  $
  $
  $
  $
  $
  $
  $
  $
  $
  $
  $
  $
  $
  $
  $
  $
  $
  $
  $
  $
  $
  $
  $
  $
  $
  $
  $
  $
  $

The following table sets forth information concerning exchange rates between the RMB and the U.S. dollar for the periods indicated. On September

30, 2020, the buying rate announced by the Federal Reserve Statistical Release was RMB 6.7896 to $1.00.

Period
2018
2019
2020

January
February
March
April
May
June
July
August
September

Period
Ended

Spot Exchange Rate

Average
(1)
(RMB per US$1.00)

Low

6.8755     
6.9618     

6.9161     
6.9906     
7.0808     
7.0622     
7.1348     
7.0651     
6.9744     
6.8474     
6.7896     

6.6090     
6.9081     

6.9184     
6.9967     
7.0205     
7.0708     
7.1016     
7.0816     
7.0041     
6.9301     
6.8106     

6.2649     
6.6822     

6.8589     
6.9650     
6.9244     
7.0341     
7.0622     
7.0575     
6.9744     
6.8474     
6.7529     

High

6.9737 
7.1786 

6.9749 
7.0286 
7.1099 
7.0989 
7.1681 
7.0575 
7.0703 
6.9799 
6.8474 

Source: https://www.federalreserve.gov/releases/h10/hist/default.htm.

(1)

Annual averages, lows, and highs are calculated from month-end rates. Monthly averages, lows, and highs are calculated using the average of the
daily rates during the relevant period.

B.

Capitalization and Indebtedness

Not required.

2

 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
   
   
   
 
 
 
   
   
   
      
      
      
  
   
   
   
   
   
   
   
   
   
  
 
 
 
 
 
C.

Reasons for the Offer and Use of Proceeds

Not required.

D.

Risk factors

You should carefully consider the following risk factors, together with all of the other information included in this Annual Report. Investment in our
securities involves a high degree of risk. You should carefully consider the risks described below together with all of the other information included in this
Annual Report before making an investment decision. The risks and uncertainties described below represent our known material risks to our business. If any
of the following risks actually occurs, our business, financial condition or results of operations could suffer. In that case, you may lose all or part of your
investment.

Risks Related to Our Business

We  may  be  unable  to  effectively  manage  our  rapid  growth,  which  could  place  significant  strain  on  our  management  personnel,  systems  and

resources. We may not be able to achieve anticipated growth, which could materially and adversely affect our business and prospects.

We have significantly grown and expanded our business recently. Our revenues grew from $48.9 million in fiscal 2018 to $64.9 million in fiscal
2019  and  to  $89.4  million  in  fiscal  2020.  We  maintain  18  delivery  and/or  R&D  centers,  of  which  ten  are  located  in  Mainland  China  (Shanghai,  Beijing,
Dalian,  Tianjin,  Baoding  Chengdu,  Guangzhou,  Shenzhen,  Hangzhou,  and  Suzhou)  and  eight  are  located  globally  (Hong  Kong  SAR,  USA,  UK,  Japan,
Singapore, Malaysia, Australia, and India, to serve different customers in various geographic locations. The number of our total employees grew from 1,655
in fiscal 2018 to 2,085 in fiscal 2019. As of June 30, 2020 we had 2,746 full-time employees. We are actively looking for additional locations to establish
new offices and expand our current offices and sales and delivery centers. We intend to continue our expansion in the foreseeable future to pursue existing
and  potential  market  opportunities.  Our  growth  has  placed  and  will  continue  to  place  significant  demands  on  our  management  and  our  administrative,
operational and financial infrastructure. Continued expansion increases the challenges we face in:

● recruiting, training, developing and retaining sufficient IT talent and management personnel;

● creating and capitalizing upon economies of scale;

● managing a larger number of clients in a greater number of industries and locations;

● maintaining effective oversight of personnel and offices;

● coordinating work among offices and project teams and maintaining high resource utilization rates;

● integrating new management personnel and expanded operations while preserving our culture and core values;

● developing and improving our internal administrative infrastructure, particularly our financial, operational, human resources, communications

and other internal systems, procedures and controls; and

● adhering to and further improving our high quality and process execution standards and maintaining high levels of client satisfaction.

Moreover, as we introduce new services or enter into new markets, we may face new market, technological and operational risks and challenges
with which we are unfamiliar, and it may require substantial management efforts and skills to mitigate these risks and challenges. As a result of any of these
challenges associated with expansion, our business, results of operations and financial condition could be materially and adversely affected. Furthermore, we
may not be able to achieve anticipated growth, which could materially and adversely affect our business and prospects.

3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adverse changes in the economic environment, either in China or globally, could reduce our clients’ purchases from us and increase pricing pressure,
which could materially and adversely affect our revenues and results of operations.

The IT services industry is particularly sensitive to the economic environment, whether in China or globally, and tends to decline during general
economic  downturns.  Accordingly,  our  results  of  operations,  financial  condition  and  prospects  are  subject  to  a  significant  degree  to  the  economic
environment,  especially  for  regions  in  which  we  and  our  clients  operate.  During  an  economic  downturn,  our  clients  may  cancel,  reduce  or  delay  their  IT
spending  or  change  their  IT  outsourcing  strategy,  and  reduce  their  purchases  from  us.  The  recent  global  economic  slowdown  and  any  future  economic
slowdown, and the resulting reduction in IT spending, could also lead to increased pricing pressure from our clients. The occurrence of any of these events
could materially and adversely affect our revenues and results of operations.

We face intense competition from onshore and offshore IT services companies, and, if we are unable to compete effectively, we may lose clients, and our
revenues may decline.

The  market  for  IT  services  is  highly  competitive,  and  we  expect  competition  to  persist  and  intensify.  We  believe  that  the  principal  competitive
factors in our markets are industry expertise, breadth and depth of service offerings, quality of the services offered, reputation and track record, marketing
and selling skills, scalability of infrastructure and price. In addition, the trend towards offshore outsourcing, international expansion by foreign and domestic
competitors and continuing technological changes will result in new and different competitors entering our markets. In the IT outsourcing market, clients
tend  to  engage  multiple  outsourcing  service  providers  instead  of  using  an  exclusive  service  provider,  which  could  reduce  our  revenues  to  the  extent  that
clients obtain services from other competing providers. Clients may prefer service providers that have facilities located globally or that are based in countries
more cost-competitive than in China. Our ability to compete also depends in part on a number of factors beyond our control, including the ability of our
competitors  to  recruit,  train,  develop  and  retain  highly  skilled  professionals,  the  price  at  which  our  competitors  offer  comparable  services  and  our
competitors’  responsiveness  to  client  needs.  Therefore,  we  cannot  assure  you  that  we  will  be  able  to  retain  our  clients  while  competing  against  such
competitors.  Increased  competition,  our  inability  to  compete  successfully  against  competitors,  pricing  pressures  or  loss  of  market  share  could  harm  our
business, financial condition and results of operations.

Due to intense competition for highly skilled personnel, we may fail to attract and retain enough sufficiently trained personnel to support our operations;
as a result, our ability to bid for and obtain new projects may be negatively affected and our revenues could decline.

The IT services industry relies on skilled personnel, and our success depends to a significant extent on our ability to recruit, train, develop and retain
qualified  personnel,  especially  experienced  middle  and  senior  level  management.  The  IT  services  industry  in  China  has  experienced  significant  levels  of
employee attrition. Our attrition rates were 16% per annum in 2018 and 2019, respectively; in 2020, this rate was 16.6%. We may encounter higher attrition
rates  in  the  future,  particularly  if  China  continues  to  experience  strong  economic  growth.  There  is  significant  competition  in  China  for  skilled  personnel,
especially experienced middle and senior level management, with the skills necessary to perform the services we offer to our clients. Increased competition
for these personnel, in the IT industry or otherwise, could have an adverse effect on us. Spearheaded by the institution that provides continuing education to
all  CLPS  staff  and  develop  new  talents  from  partner  universities  to  further  drive  the  Company’s  growth  (“CLPS  Academy”),  we  have  established  Talent
Creation Program (“TCP”) and Talent Development Program (“TDP”) programs to increase our human capital and employee loyalty, however, a significant
increase in our attrition rate could decrease our operating efficiency and productivity and could lead to a decline in demand for our services. Additionally,
failure to recruit, train, develop and retain personnel with the qualifications necessary to fulfill the needs of our existing and future clients or to assimilate
new  personnel  successfully  could  have  a  material  adverse  effect  on  our  business,  financial  condition  and  results  of  operations.  Failure  to  retain  our  key
personnel on client projects or find suitable replacements for key personnel upon their departure may lead to termination of some of our client contracts or
cancellation of some of our projects, which could materially and adversely affect our business.

4

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

Our  future  success  heavily  depends  upon  the  continued  services  of  our  senior  executives  and  other  key  employees.  In  particular,  we  rely  on  the
expertise,  experience,  client  relationships  and  reputation  of  Xiao  Feng  Yang,  our  Chairman  of  the  Board.  We  currently  do  not  maintain  key-man  life
insurance  for  any  of  the  senior  members  of  our  management  team  or  other  key  personnel.  If  one  or  more  of  our  senior  executives  or  key  employees  are
unable or unwilling to continue in their present positions, it could disrupt our business operations, and we may not be able to replace them easily or at all. In
addition,  competition  for  senior  executives  and  key  personnel  in  our  industry  is  intense,  and  we  may  be  unable  to  retain  our  senior  executives  and  key
personnel or attract and retain new senior executive and key personnel in the future, in which case our business may be severely disrupted, and our financial
condition and results of operations may be materially and adversely affected. If any of our senior executives or key personnel joins a competitor or forms a
competing company, we may lose clients, suppliers, know-how and key professionals and staff members to them. Also, if any of our business development
managers, who generally keep a close relationship with our clients, joins a competitor or forms a competing company, we may lose clients, and our revenues
may be materially and adversely affected. Additionally, there could be unauthorized disclosure or use of our technical knowledge, practices or procedures by
such personnel. Most of our executives and key personnel have entered into employment agreements with us that contain non-competition provisions, non-
solicitation  and  nondisclosure  covenants.  However,  if  any  dispute  arises  between  our  executive  officers  and  key  personnel  and  us,  such  non-competition,
non-solicitation and nondisclosure provisions might not provide effective protection to us, especially in China in light of the uncertainties with China’s legal
system.

We generate a significant portion of our revenues from a relatively small number of major clients and loss of business from these clients could reduce
our revenues and significantly harm our business.

We believe that in the foreseeable future we will continue to derive a significant portion of our revenues from a small number of major clients. For
the  years  ended  June  30,  2020,  2019  and  2018,  Citibank  and  its  affiliates  accounted  for  21.5%,  25.7%  and  30.8%  of  the  Company’s  total  revenues,
respectively. For fiscal 2019 and 2018, substantially all the service provided by the Company to Citibank was IT consulting services and billed through time-
and-expense contracts. The Company has not entered into any material long term contracts with Citibank. Our ability to maintain close relationships with
these and other major clients is essential to the growth and profitability of our business. However, the volume of work performed for a specific client is likely
to vary from year to year, especially since we are generally not our clients’ exclusive IT services provider, and we do not have long-term commitments from
any of our clients to purchase our services. The typical term for our service agreements is between 1 and 3 years. A major client in one year may not provide
the same level of revenues for us in any subsequent year. The IT services we provide to our clients, and the revenues and income from those services, may
decline or vary as the type and quantity of IT services we provide change over time. In addition, our reliance on any individual client for a significant portion
of our revenues may give that client a certain degree of pricing leverage against us when negotiating contracts and terms of service. In addition, a number of
factors other than our performance could cause the loss of or reduction in business or revenues from a client, and these factors are not predictable. These
factors may include corporate restructuring, pricing pressure, changes to its outsourcing strategy, switching to another services provider or returning work in-
house. In the future, a small number of customers may continue to represent a significant portion of our total revenues in any given period. The loss of any of
our major clients could adversely affect our financial condition and results of operations.

If we are unable to collect our receivables from our clients, our results of operations and cash flows could be adversely affected.

Our business depends on our ability to successfully obtain payment from our clients of the amounts they owe us for work performed. As of June 30,
2020 and 2019, our accounts receivable balance, net of allowance, amounted to approximately $25.8 million and $19.3 million, respectively. As of the years
ended June 30, 2020 and 2019, Citibank accounted for 30.1% and 30.0% of the Company’s total accounts receivable balance. Since we generally do not
require collateral or other security from our clients, we establish an allowance for doubtful accounts based upon estimates, historical experience and other
factors surrounding the credit risk of specific clients. However, actual losses on client receivables balance could differ from those that we anticipate and as a
result  we  might  need  to  adjust  our  allowance.  There  is  no  guarantee  that  we  will  accurately  assess  the  creditworthiness  of  our  clients.  Macroeconomic
conditions, including related turmoil in the global financial system, could also result in financial difficulties for our clients, including limited access to the
credit markets, insolvency or bankruptcy, and as a result could cause clients to delay payments to us, request modifications to their payment arrangements
that could increase our receivables balance, or default on their payment obligations to us. As a result, an extended delay or default in payment relating to a
significant account will have a material and adverse effect on the aging schedule and turnover days of our accounts receivable. If we are unable to collect our
receivables from our clients in accordance with the contracts with our clients, our results of operations and cash flows could be adversely affected.

5

 
 
 
 
 
 
 
 
The growth and success of our business depends on our ability to anticipate and develop new services and enhance existing services in order to keep pace
with rapid changes in technology and in the industries we focus on.

The  market  for  our  services  is  characterized  by  rapid  technological  changes,  evolving  industry  standards,  changing  client  preferences  and  new
product and service introductions. Our future growth and success depend significantly on our ability to anticipate developments in IT services, develop and
offer new product and service lines to meet our clients’ evolving needs. We may not be successful in anticipating or responding to these developments in a
timely  manner,  or  if  we  do  respond,  the  services  or  technologies  we  develop  may  not  be  successful  in  the  marketplace.  The  development  of  some  of  the
services and technologies may involve significant upfront investments, and the failure of these services and technologies may result in our being unable to
recover these investments, in part or in full. Further, services or technologies that are developed by our competitors may render our services uncompetitive or
obsolete.  In  addition,  new  technologies  may  be  developed  that  allow  our  clients  to  more  cost-effectively  perform  the  services  that  we  provide,  thereby
reducing demand for our services. Should we fail to adapt to the rapidly changing IT services market, or if we fail to develop suitable services to meet the
evolving  and  increasingly  sophisticated  requirements  of  our  clients  in  a  timely  manner,  our  business  and  results  of  operations  could  be  materially  and
adversely affected.

We may be unsuccessful in entering into strategic alliances or identifying and acquiring suitable acquisition candidates, which could impede our growth
and negatively affect our revenues and net income.

We  have  pursued  and  may  continue  to  pursue  strategic  alliances  and  strategic  acquisition  opportunities  to  increase  our  scale  and  geographic
presence, expand our service offerings and capabilities and enhance our industry and technical expertise. However, it is possible that in the future we may not
succeed  in  identifying  suitable  alliances  or  acquisition  candidates.  Even  if  we  identify  suitable  candidates,  we  may  not  be  able  to  consummate  these
arrangements on terms commercially acceptable to us or to obtain necessary regulatory approvals in the case of acquisitions. Many of our competitors are
likely to be seeking to enter into similar arrangements or acquire the same targets that we are looking to enter into or acquire. Such competitors may have
substantially greater financial resources than we do and may be more attractive to our strategic partners or be able to outbid us for the targets. In addition, we
may also be unable to timely deploy our existing cash balances to effect a potential acquisition, as use of cash balances located onshore in China may require
specific  governmental  approvals  or  result  in  withholding  and  other  tax  payments.  If  we  are  unable  to  enter  into  suitable  strategic  alliances  or  complete
suitable acquisitions, our growth strategy may be impeded, and our revenues and net income could be negatively affected.

If we fail to integrate or manage acquired companies efficiently, or if the acquired companies do not perform to our expectations, we may not be able to
realize the benefits envisioned for such acquisitions, and our overall profitability and growth plans may be adversely affected.

Historically, we have expanded our service capabilities and gained new clients through selective acquisitions. Our ability to successfully integrate an
acquired  entity  and  realize  the  benefits  of  any  acquisition  requires,  among  other  things,  successful  integration  of  technologies,  operations  and  personnel.
Challenges we face in the acquisition and integration process include:

● integrating operations, services and personnel in a timely and efficient manner;

6

 
 
 
 
 
 
 
 
 
 
● unforeseen or undisclosed liabilities;

● generating sufficient revenue and net income to offset acquisition costs;

● potential loss of, or harm to, employee or client relationships;

● properly  structuring  our  acquisition  consideration  and  any  related  post-acquisition  earn-outs  and  successfully  monitoring  any  earn-out

calculations and payments;

● retaining key senior management and key sales and marketing and research and development personnel;

● potential incompatibility of solutions, services and technology or corporate cultures;

● consolidating and rationalizing corporate, information technology and administrative infrastructures;

● integrating and documenting processes and controls;

● entry into unfamiliar markets; and

● increased complexity from potentially operating additional geographically dispersed sites, particularly if we acquire a company or business with

facilities or operations outside of China.

In  addition,  the  primary  value  of  many  potential  targets  in  the  outsourcing  industry  lies  in  their  skilled  professionals  and  established  client
relationships.  Transitioning  these  types  of  assets  to  our  business  can  be  particularly  difficult  due  to  different  corporate  cultures  and  values,  geographic
distance and other intangible factors. For example, some newly acquired employees may decide not to work with us or to leave shortly after their move to our
company and some acquired clients may decide to discontinue their commercial relationships with us. These challenges could disrupt our ongoing business,
distract our management and employees and increase our expenses, including causing us to incur significant one-time expenses and write-offs, and make it
more difficult and complex for our management to effectively manage our operations. If we are not able to successfully integrate an acquired entity and its
operations and to realize the benefits envisioned for such acquisition, our overall growth and profitability plans may be adversely affected.

If we do not succeed in attracting new clients for our services and or growing revenues from existing clients, we may not achieve our revenue growth
goals.

We plan to significantly expand the number of clients we serve to diversify our client base and grow our revenues. Revenues from a new client often
rise quickly over the first several years following our initial engagement as we expand the services we provide to that client. Therefore, obtaining new clients
is important for us to achieve rapid revenue growth. We also plan to grow revenues from our existing clients by identifying and selling additional services to
them. Our ability to attract new clients, as well as our ability to grow revenues from existing clients, depends on a number of factors, including our ability to
offer high quality services at competitive prices, the strength of our competitors and the capabilities of our sales and marketing teams. If we are not able to
continue  to  attract  new  clients  or  to  grow  revenues  from  our  existing  clients  in  the  future,  we  may  not  be  able  to  grow  our  revenues  as  quickly  as  we
anticipate or at all.

As a result of our significant recent growth, evaluating our business and prospects may be difficult and our past results may not be indicative of our
future performance.

Our future success depends on our ability to significantly increase revenue and maintain profitability from our operations. Our business has grown
and evolved significantly in recent years. Our growth in recent years makes it difficult to evaluate our historical performance and makes a period-to-period
comparison of our historical operating results less meaningful. We may not be able to achieve a similar growth rate or maintain profitability in future periods.
Therefore, you should not rely on our past results or our historic rate of growth as an indication of our future performance. You should consider our future
prospects in light of the risks and challenges encountered by a company seeking to grow and expand in a competitive industry that is characterized by rapid
technological  change,  evolving  industry  standards,  changing  client  preferences  and  new  product  and  service  introductions.  These  risks  and  challenges
include, among others:

● the uncertainties associated with our ability to continue our growth and maintain profitability;

7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
● preserving our competitive position in the IT services industry in China;

● offering consistent and high-quality services to retain and attract clients;

● implementing our strategy and modifying it from time to time to respond effectively to competition and changes in client preferences;

● managing our expanding operations and successfully expanding our solution and service offerings;

● responding in a timely manner to technological or other changes in the IT services industry;

● managing risks associated with intellectual property; and

● recruiting, training, developing and retaining qualified managerial and other personnel.

If we are unsuccessful in addressing any of these risks or challenges, our business may be materially and adversely affected.

We face risks associated with having a long selling and implementation cycle for our services that require us to make significant resource commitments
prior to realizing revenues for those services.

We have a long selling cycle for our technology services, which requires significant investment of capital, human resources and time by both our
clients and us. In our consulting service request, we collect service fees on monthly and quarterly basis; in our solution services segment – by performance
obligation  fulfillment.  Before  committing  to  use  our  services,  potential  clients  require  us  to  expend  substantial  time  and  resources  educating  them  on  the
value of our services and our ability to meet their requirements. Therefore, our selling cycle is subject to many risks and delays over which we have little or
no control, including our clients’ decision to choose alternatives to our services (such as other providers or in-house resources) and the timing of our clients’
budget cycles and approval processes. Implementing our services also involves a significant commitment of resources over an extended period of time from
both our clients and us. Our clients may experience delays in obtaining internal approvals or delays associated with technology, thereby further delaying the
implementation process. Our current and future clients may not be willing or able to invest the time and resources necessary to implement our services, and
we may fail to close sales with potential clients to which we have devoted significant time and resources, which could have a material adverse effect on our
business, results of operations, financial condition and cash flows.

Our profitability will suffer if we are not able to maintain our resource utilization levels and continue to improve our productivity levels.

Our  gross  margin  and  profitability  are  significantly  impacted  by  our  utilization  levels  of  human  resources  as  well  as  other  resources,  such  as
computers, IT infrastructure and office space, and our ability to increase our productivity levels. We have expanded our operations significantly in recent
years through organic growth and external acquisitions, which has resulted in a significant increase in our headcount and fixed overhead costs. We may face
difficulties  maintaining  high  levels  of  utilization,  especially  for  our  newly  established  or  newly  acquired  businesses  and  resources.  The  master  service
agreements with our clients typically do not impose a minimum or maximum purchase amount and allow our clients to place service orders from time to time
at  their  discretion.  Client  demand  may  fall  to  zero  or  surge  to  a  level  that  we  cannot  cost-effectively  satisfy.  Although  we  try  to  use  all  commercially
reasonable efforts to accurately estimate service orders and resource requirements from our clients, we may overestimate or underestimate, which may result
in  unexpected  cost  and  strain  or  redundancy  of  our  human  capital  and  adversely  impact  our  utilization  levels.  In  addition,  some  of  our  professionals  are
specially trained to work for specific clients or on specific projects, and some of our sales and delivery center facilities are dedicated to specific clients or
specific  projects.  Our  ability  to  continually  increase  our  productivity  levels  depends  significantly  on  our  ability  to  recruit,  train,  develop  and  retain  high-
performing professionals, staff projects appropriately and optimize our mix of services and delivery methods. If we experience a slowdown or stoppage of
work for any client or on any project for which we have dedicated professionals or facilities, we may not be able to efficiently reallocate these professionals
and facilities to other clients and projects to keep their utilization and productivity levels high. If we are not able to maintain high resource utilization levels
without corresponding cost reductions or price increases, our profitability will suffer.

8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
A significant portion of our income is generated, and will in the future continue to be generated, on a project basis with a fixed price; we may not be able
to accurately estimate costs and determine resource requirements in relation to our projects, which would reduce our margins and profitability.

A significant portion of our income is generated, and will in the future continue to be generated, from fees we receive for our projects with a fixed
price. Our projects often involve complex technologies, entail the coordination of operations and workforces in multiple locations, utilizing workforces with
different skill sets and competencies and geographically distributed service centers, and must be completed within compressed timeframes and meet client
requirements  that  are  subject  to  change  and  increasingly  stringent.  In  addition,  some  of  our  fixed-price  projects  are  multi-year  projects  that  require  us  to
undertake  significant  projections  and  planning  related  to  resource  utilization  and  costs.  If  we  fail  to  accurately  assess  the  time  and  resources  required  for
completing projects and to price our projects profitably, our business, results of operations and financial condition could be adversely affected.

Increases in wages for professionals in China could prevent us from sustaining our competitive advantage and could reduce our profit margins.

Our most significant costs are the salaries and other compensation expenses for our professionals and other employees. Wage costs for professionals
in  China  are  lower  than  those  in  more  developed  countries  and  India.  However,  because  of  rapid  economic  growth,  increased  productivity  levels,  and
increased  competition  for  skilled  employees  in  China,  wages  for  highly  skilled  employees  in  China,  in  particular  middle-  and  senior-level  managers,  are
increasing at a faster rate than in the past. We may need to increase the levels of employee compensation more rapidly than in the past to remain competitive
in  attracting  and  retaining  the  quality  and  number  of  employees  that  our  business  requires.  Increases  in  the  wages  and  other  compensation  we  pay  our
employees in China could reduce our competitive advantage unless we are able to increase the efficiency and productivity of our professionals as well as the
prices we can charge for our services. In addition, any appreciation in the value of the Renminbi relative to U.S. dollar and other foreign currencies will cause
an increase in the relative wage levels in China, which could further reduce our competitive advantage and adversely impact our profit margin.

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

We  conduct  our  business  throughout  the  world  in  multiple  locations.  As  a  result,  we  are  exposed  to  risks  typically  associated  with  conducting

business internationally, many of which are beyond our control. These risks include:

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

● legal uncertainty owing to the overlap and inconsistencies of different legal regimes, problems in asserting contractual or other rights across

international borders and the burden and expense of complying with the laws and regulations of various jurisdictions;

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

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

● unexpected changes in regulatory requirements; and

● terrorist attacks and other acts of violence or war.

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

9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Our net revenues and results of operations are affected by seasonal trends.

Our business is affected by seasonal trends. In particular, our net revenues are typically progressively higher in the second, third and fourth quarters
of each year compared to the first quarter of each year due to seasonal trends, such as: (i) a general slowdown in business activities and a reduced number of
working days for our professionals during the first quarter of each year as a result of the Chinese New Year holiday period, and (ii) our customers in general
tend to spend their IT budgets in the second half of the year and in particular the fourth quarter. Other factors that may cause our quarterly operating results to
fluctuate include, among others, changes in general economic conditions in China and the impact of unforeseen events. We believe that our net revenues will
continue to be affected in the future by seasonal trends. As a result, you may not be able to rely on period to period comparisons of our operating results as an
indication of our future performance, and we believe it is more meaningful to evaluate our business on an annual basis.

We may be forced to reduce the prices of our services due to increased competition and reduced bargaining power with our clients, which could lead to
reduced revenues and profitability.

The services outsourcing industry in China is developing rapidly, and related technology trends are constantly evolving. This results in the frequent
introduction of new services and significant price competition from our competitors. We may be unable to offset the effect of declining average sales prices
through increased sales volumes and/or reductions in our costs. Furthermore, we may be forced to reduce the prices of our services in response to offerings
made by our competitors. Finally, we may not have the same level of bargaining power we have enjoyed in the past when it comes to negotiating the prices of
our services.

If we cause disruptions to our clients’ businesses or provide inadequate service, our clients may have claims for substantial damages against us, and as a
result our profits may be substantially reduced.

If our professionals make errors in the course of delivering services to our clients or fail to consistently meet service requirements of a client, these
errors or failures could disrupt the client’s business, which could result in a reduction in our net revenues or a claim for substantial damages against us. In
addition, a failure or inability to meet a contractual requirement could seriously damage our reputation and affect our ability to attract new business. The
services we provide are often critical to our clients’ businesses. We generally provide customer support from three months to one year after our customized
application is delivered. Certain of our client contracts require us to comply with security obligations including maintaining network security and back-up
data, ensuring our network is virus-free, maintaining business continuity planning procedures, and verifying the integrity of employees that work with our
clients by conducting background checks. Any failure in a client’s system or breach of security relating to the services we provide to the client could damage
our reputation or result in a claim for substantial damages against us. Any significant failure of our equipment or systems, or any major disruption to basic
infrastructure like power and telecommunications in the locations in which we operate, could impede our ability to provide services to our clients, have a
negative impact on our reputation, cause us to lose clients, reduce our revenues and harm our business. Under our contracts with our clients, our liability for
breach  of  our  obligations  is  in  some  cases  limited  to  a  certain  percentage  of  contract  price.  Such  limitations  may  be  unenforceable  or  otherwise  may  not
protect us from liability for damages. In addition, certain liabilities, such as claims of third parties for which we may be required to indemnify our clients, are
generally not limited under our contracts. We currently do not have commercial general or public liability insurance. The successful assertion of one or more
large claims against us could have a material adverse effect on our business, reputation, results of operations, financial condition and cash flows. Even if such
assertions against us are unsuccessful, we may incur reputational harm and substantial legal fees.

We may be liable to our clients for damages caused by unauthorized disclosure of sensitive and confidential information, whether through our employees
or otherwise.

We are typically required to manage, utilize and store sensitive or confidential client data in connection with the services we provide. Under the
terms of our client contracts, we are required to keep such information strictly confidential. We use network security technologies, surveillance equipment
and other methods to protect sensitive and confidential client data. We also require our employees and subcontractors to enter into confidentiality agreements
to limit access to and distribution of our clients’ sensitive and confidential information as well as our own trade secrets. We can give no assurance that the
steps taken by us in this regard will be adequate to protect our clients’ confidential information. If our clients’ proprietary rights are misappropriated by our
employees or our subcontractors or their employees, in violation of any applicable confidentiality agreements or otherwise, our clients may consider us liable
for those acts and seek damages and compensation from us. Any such acts could cause us to lose existing and future business and damage our reputation in
the market. In addition, we currently do not have any insurance coverage for mismanagement or misappropriation of such information by our subcontractors
or employees. Any litigation with respect to unauthorized disclosure of sensitive and confidential information might result in substantial costs and diversion
of resources and management attention.

10

 
 
 
 
 
 
 
 
 
 
We  may  not  be  able  to  prevent  others  from  unauthorized  use  of  intellectual  property  of  our  clients,  which  could  harm  our  business  and  competitive
position.

We rely on software licenses from our clients with respect to certain projects. To protect proprietary information and other intellectual property of
our  clients,  we  require  our  employees,  subcontractors,  consultants,  advisors  and  collaborators  to  enter  into  confidentiality  agreements  with  us.  These
agreements  may  not  provide  effective  protection  for  trade  secrets,  know-how  or  other  proprietary  information  in  the  event  of  any  unauthorized  use,
misappropriation  or  disclosure  of  such  trade  secrets,  know-how  or  other  proprietary  information.  Implementation  of  intellectual  property-related  laws  in
China has historically been lacking, primarily because of ambiguities in the PRC laws and difficulties in enforcement. Accordingly, protection of intellectual
property rights and confidentiality in China may not be as effective as that in the United States or other developed countries. Policing unauthorized use of
proprietary technology is difficult and expensive. The steps we have taken may be inadequate to prevent the misappropriation of proprietary technology of
our  clients.  Reverse  engineering,  unauthorized  copying  or  other  misappropriation  of  proprietary  technologies  of  our  clients  could  enable  third  parties  to
benefit from our or our clients’ technologies without paying us and our clients for doing so, and our clients may hold us liable for that act and seek damages
and compensation from us, which could harm our business and competitive position.

We may not be able to prevent others from unauthorized use of our intellectual property, which could cause a loss of clients, reduce our revenues and
harm our competitive position.

We  rely  on  a  combination  of  copyright,  trademark,  software  registration,  anti-unfair  competition  and  trade  secret  laws,  as  well  as  confidentiality
agreements and other methods to protect our intellectual property rights. To protect our trade secrets and other proprietary information, employees, clients,
subcontractors, consultants, advisors and collaborators are required to enter into confidentiality agreements. These agreements might not provide effective
protection for the trade secrets, know-how or other proprietary information in the event of any unauthorized use, misappropriation or disclosure of such trade
secrets, know-how or other proprietary information. Implementation of intellectual property-related laws in China has historically been lacking, primarily
because of ambiguities in the PRC laws and difficulties in enforcement. Accordingly, intellectual property rights and confidentiality protections in China may
not be as effective as those in the United States or other developed countries, and infringement of intellectual property rights continues to pose a serious risk
of doing business in China. Policing unauthorized use of proprietary technology is difficult and expensive. The steps we have taken may be inadequate to
prevent the misappropriation of our proprietary technology. Reverse engineering, unauthorized copying, other misappropriation, or negligent or accidental
leakage of our proprietary technologies could enable third parties to benefit from our technologies without obtaining our consent or paying us for doing so,
which could harm our business and competitive position. Though we are not currently involved in any litigation with respect to intellectual property, we may
need to enforce our intellectual property rights through litigation. Litigation relating to our intellectual property may not prove successful and might result in
substantial costs and diversion of resources and management attention.

11

 
 
 
 
 
 
We may face intellectual property infringement claims that could be time-consuming and costly to defend. If we fail to defend ourselves against such
claims, we may lose significant intellectual property rights and may be unable to continue providing our existing services.

Our success largely depends on our ability to use and develop our technology and services without infringing the intellectual property rights of third
parties, including copyrights, trade secrets and trademarks. We may be subject to litigation involving claims of violation of other intellectual property rights
of  third  parties.  We  typically  indemnify  clients  who  purchase  our  services  and  solutions  against  potential  infringement  of  intellectual  property  rights
underlying our services and solutions, which subjects us to the risk of indemnification claims. The holders of other intellectual property rights potentially
relevant to our service offerings may make it difficult for us to acquire a license on commercially acceptable terms. Also, we may be unaware of intellectual
property registrations or applications relating to our services that may give rise to potential infringement claims against us. There may also be technologies
licensed to and relied on by us that are subject to infringement or other corresponding allegations or claims by third parties which may damage our ability to
rely on such technologies. We are subject to additional risks as a result of our recent and proposed acquisitions and the hiring of new employees who may
misappropriate intellectual property from their former employers. Parties making infringement claims may be able to obtain an injunction to prevent us from
delivering  our  services  or  using  technology  involving  the  allegedly  infringing  intellectual  property.  Intellectual  property  litigation  is  expensive  and  time-
consuming and could divert management’s attention from our business. A successful infringement claim against us, whether with or without merit, could,
among  others  things,  require  us  to  pay  substantial  damages,  develop  non-infringing  technology,  or  re-brand  our  name  or  enter  into  royalty  or  license
agreements  that  may  not  be  available  on  acceptable  terms,  if  at  all,  and  cease  making,  licensing  or  using  products  that  have  infringed  a  third  party’s
intellectual property rights. Protracted litigation could also result in existing or potential clients deferring or limiting their purchase or use of our products
until  resolution  of  such  litigation,  or  could  require  us  to  indemnify  our  clients  against  infringement  claims  in  certain  instances.  Any  intellectual  property
claim or litigation in this area, whether we ultimately win or lose, could damage our reputation and have a material adverse effect on our business, results of
operations or financial condition.

We may need additional capital and any failure by us to raise additional capital on terms favorable to us, or at all, could limit our ability to grow our
business and develop or enhance our service offerings to respond to market demand or competitive challenges.

We believe that our current cash, cash flow from operations and the available lines of credit from financial institutions should be sufficient to meet
our anticipated cash needs for at least the next 12 months. We may, however, require additional cash resources due to changed business conditions or other
future developments, including any investments or acquisitions we may decide to pursue. If these resources are insufficient to satisfy our cash requirements,
we  may  seek  to  sell  additional  equity  or  debt  securities  or  obtain  a  credit  facility.  The  sale  of  additional  equity  securities  could  result  in  dilution  to  our
shareholders.  The  incurrence  of  indebtedness  would  result  in  increased  debt  service  obligations  and  could  require  us  to  agree  to  operating  and  financing
covenants that would restrict our operations. Our ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties, including:

● investors’ perception of, and demand for, securities of technology services outsourcing companies;

● conditions of the U.S. and other capital markets in which we may seek to raise funds;

● our future results of operations and financial condition;

● PRC government regulation of foreign investment in China;

● economic, political and other conditions in China; and

● PRC government policies relating to the borrowing and remittance outside China of foreign currency.

Financing may not be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favorable to us,
or at all, could limit our ability to grow our business and develop or enhance our product and service offerings to respond to market demand or competitive
challenges.

Failure  to  adhere  to  regulations  that  govern  our  clients’  businesses  could  result  in  breaches  of  contracts  with  our  clients.  Failure  to  adhere  to  the
regulations that govern our business could result in our being unable to effectively perform our services.

Our clients’ business operations are subject to certain rules and regulations in China or elsewhere. Our clients may contractually require that we
perform our services in a manner that would enable them to comply with such rules and regulations. Failure to perform our services in such a manner could
result in breaches of contract with our clients and, in some limited circumstances, civil fines and criminal penalties for us. In addition, we are required under
various  Chinese  laws  to  obtain  and  maintain  permits  and  licenses  to  conduct  our  business.  If  we  do  not  maintain  our  licenses  or  other  qualifications  to
provide our services, we may not be able to provide services to existing clients or be able to attract new clients and could lose revenues, which could have a
material adverse effect on our business and results of operations.

12

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
We  may  incur  losses  resulting  from  business  interruptions  resulting  from  occurrence  of  natural  disasters,  health  epidemics  and  other  outbreaks  or
events.

Our operational facilities may be damaged in natural disasters such as earthquakes, floods, heavy rains, and storms, tsunamis and cyclones, or other
events  such  as  fires.  Such  natural  disasters  or  other  events  may  lead  to  disruption  of  information  systems  and  telephone  service  for  sustained  periods.
Damage  or  destruction  that  interrupts  our  provision  of  outsourcing  services  could  damage  our  relationships  with  our  clients  and  may  cause  us  to  incur
substantial additional expenses to repair or replace damaged equipment or facilities. We may also be liable to our clients for disruption in service resulting
from such damage or destruction. Prolonged disruption of our services as a result of natural disasters or other events may also entitle our clients to terminate
their contracts with us. We currently do not have insurance against business interruptions.

Our results of operations may be negatively impacted by the COVID-19 outbreak.

In  December  2019,  the  2019  novel  coronavirus  (COVID-19)  surfaced  in  Wuhan,  China.  The  World  Health  Organization  declared  a  global
emergency on January 30, 2020 with respect to the outbreak then characterized it as a pandemic on March 11, 2020. The outbreak has spread throughout
Europe and the Middle East, and there have been many cases of COVID-19 in Canada and the United States, causing companies and various international
jurisdictions to impose restrictions, such as quarantines, closures, cancellations and travel restrictions. While these effects are expected to be temporary, the
duration of the business disruptions internationally and related financial impact cannot be reasonably estimated at this time. Similarly, we cannot estimate
whether or to what extent this outbreak and potential financial impact may extend to countries outside of those currently impacted. At this point, the extent to
which the coronavirus may impact our results is uncertain; however, it is possible that our consolidated results in 2020 may be negatively impacted by this
event. The impacts of the outbreak are unknown and rapidly evolving.

Fluctuation in the value of the Renminbi and other currencies may have a material adverse effect on the value of your investment.

Our financial statements are expressed in U.S. dollars. However, a majority of our revenues and expenses are denominated in Renminbi (RMB). Our
exposure  to  foreign  exchange  risk  primarily  relates  to  the  limited  cash  denominated  in  currencies  other  than  the  functional  currencies  of  each  entity  and
limited revenue contracts dominated in Singapore dollar, Hong Kong dollar and Indian rupee in certain of our operating subsidiaries. We do not believe that
we  currently  have  any  significant  direct  foreign  exchange  risk  and  have  not  hedged  exposures  denominated  in  foreign  currencies  or  any  other  derivative
financial instruments. However, the value of your investment in our common shares will be affected by the foreign exchange rate between U.S. dollars and
RMB because the primary value of our business is effectively denominated in RMB, while the common shares will be traded in U.S. dollars. The value of the
RMB  against  the  U.S.  dollar  and  other  currencies  is  affected  by,  among  other  things,  changes  in  China’s  political  and  economic  conditions  and  China’s
foreign exchange policies. The People’s Bank of China regularly intervenes in the foreign exchange market to limit fluctuations in RMB exchange rate and
achieve certain exchange rate targets, and through such intervention kept the U.S. dollar-RMB exchange rate relatively stable.

As we may rely on dividends paid to us by our PRC subsidiaries, any significant revaluation of the RMB may have a material adverse effect on our
revenues and financial condition, and the value of any dividends payable on our common shares in foreign currency terms. For example, to the extent that we
need to convert U.S. dollars we maintain into RMB, appreciation of the RMB against the U.S. dollar would have an adverse effect on the RMB amount we
receive  from  the  conversion.  Conversely,  if  we  decide  to  convert  our  RMB  into  U.S.  dollars  for  the  purpose  of  making  payments  for  dividends  on  our
common  shares  or  for  other  business  purposes,  appreciation  of  the  U.S.  dollar  against  the  RMB  would  have  a  negative  effect  on  the  U.S.  dollar  amount
available to us. Furthermore, appreciation or depreciation in the value of the RMB relative to the U.S. dollar would affect our financial results reported in
U.S. dollar terms without giving effect to any underlying change in our business or results of operations. We cannot predict the impact of future exchange
rate fluctuations on our results of operations and may incur net foreign exchange losses in the future. In addition, our foreign currency exchange losses may
be magnified by PRC exchange control regulations that restrict our ability to convert into foreign currencies.

13

 
 
 
 
 
 
 
 
 
Fluctuations in exchange rates could adversely affect our business and the value of our securities.

Changes in the value of the RMB against the U.S. dollar, euro and other foreign currencies are affected by, among other things, changes in China’s
political and economic conditions. Any significant revaluation of the RMB may have a material adverse effect on our revenues and financial condition, and
the value of, and any dividends payable on our shares in U.S. dollar terms. Conversely, if we decide to convert our RMB into U.S. dollar for the purpose of
paying dividends on our common stock or for other business purposes, appreciation of the U.S. dollar against the RMB would have a negative effect on the
U.S.  dollar  amount  available  to  us.  Since  July  2005,  the  RMB  is  no  longer  pegged  to  the  U.S.  dollar,  although  the  People’s  Bank  of  China  regularly
intervenes  in  the  foreign  exchange  market  to  prevent  significant  short-term  fluctuations  in  the  exchange  rate,  the  RMB  may  appreciate  or  depreciate
significantly  in  value  against  the  U.S.  dollar  in  the  medium  to  long  term.  Moreover,  it  is  possible  that  in  future,  PRC  authorities  may  lift  restrictions  on
fluctuations in the RMB exchange rate and lessen intervention in the foreign exchange market. Very limited hedging transactions are available in China to
reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions. While we may enter into hedging transactions
in the future, the availability and effectiveness of these transactions may be limited, and we may not be able to successfully hedge our exposure at all. In
addition, our foreign currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert RMB into foreign
currencies.

Legislation in certain countries in which we have clients may restrict companies in those countries from outsourcing work to us.

Offshore outsourcing is a politically sensitive issue in the United States. For example, many organizations and public figures in the United States
have publicly expressed concern about a perceived association between offshore outsourcing providers and the loss of jobs in their home countries. A number
of U.S. states have passed legislation that restricts state government entities from outsourcing certain work to offshore service providers. Other U.S. federal
and state legislation has been proposed that, if enacted, would provide tax disincentives for offshore outsourcing or require disclosure of jobs outsourced
abroad. Similar legislation could be enacted in other countries in which we have clients. Any expansion of existing laws or the enactment of new legislation
restricting or discouraging offshore outsourcing by companies in the United States, or other countries in which we have clients could adversely impact our
business  operations  and  financial  results.  In  addition,  from  time  to  time  there  has  been  publicity  about  negative  experiences  associated  with  offshore
outsourcing,  such  as  theft  and  misappropriation  of  sensitive  client  data.  As  a  result,  current  or  prospective  clients  may  elect  to  perform  such  services
themselves or may be discouraged from transferring these services from onshore to offshore providers. Any slowdown or reversal of existing industry trends
towards  offshore  outsourcing  in  response  to  political  pressure  or  negative  publicity  would  harm  our  ability  to  compete  effectively  with  competitors  that
operate out of onshore facilities and adversely affect our business and financial results.

Disruptions  in  telecommunications  or  significant  failure  in  our  IT  systems  could  harm  our  service  model,  which  could  result  in  a  reduction  of  our
revenue.

A significant element of our business strategy is to continue to leverage and expand our sales and delivery centers strategically located in China. We
believe that the use of a strategically located network of sales and delivery centers will provide us with cost advantages, the ability to attract highly skilled
personnel in various regions of the country and the world, and the ability to service clients on a regional and global basis. Part of our service model is to
maintain active voice and data communications, financial control, accounting, customer service and other data processing systems between our main offices
in Shanghai, our clients’ offices, and our other deliveries centers and support facilities. Our business activities may be materially disrupted in the event of a
partial or complete failure of any of these IT or communication systems, which could be caused by, among other things, software malfunction, computer
virus attacks, conversion errors due to system upgrading, damage from fire, earthquake, power loss, telecommunications failure, unauthorized entry or other
events beyond our control. Loss of all or part of the systems for a period of time could hinder our performance or our ability to complete client projects on
time which, in turn, could lead to a reduction of our revenue or otherwise have a material adverse effect on our business and business reputation. We may
also be liable to our clients for breach of contract for interruptions in service.

Our computer networks may be vulnerable to security risks that could disrupt our services and adversely affect our results of operations.

Our  computer  networks  may  be  vulnerable  to  unauthorized  access,  computer  hackers,  computer  viruses  and  other  security  problems  caused  by
unauthorized  access  to,  or  improper  use  of,  systems  by  third  parties  or  employees.  A  hacker  who  circumvents  security  measures  could  misappropriate
proprietary information or cause interruptions or malfunctions in our operations. Although we intend to continue to implement security measures, computer
attacks or disruptions may jeopardize the security of information stored in and transmitted through our computer systems. Actual or perceived concerns that
our systems may be vulnerable to such attacks or disruptions may deter our clients from using our solutions or services. As a result, we may be required to
expend significant resources to protect against the threat of these security breaches or to alleviate problems caused by these breaches. Data networks are also
vulnerable  to  attacks,  unauthorized  access  and  disruptions.  For  example,  in  a  number  of  public  networks,  hackers  have  bypassed  firewalls  and
misappropriated  confidential  information.  It  is  possible  that,  despite  existing  safeguards,  an  employee  could  misappropriate  our  clients’  proprietary
information or data, exposing us to a risk of loss or litigation and possible liability. Losses or liabilities that are incurred as a result of any of the foregoing
could have a material adverse effect on our business.

14

 
 
 
 
 
 
 
 
 
 
If we fail to implement and maintain an effective system of internal controls, we may be unable to accurately report our results of operations, meet our
reporting obligations on a timely basis, or prevent fraud, and investor confidence and the market price of our shares may be materially and adversely
affected. 

We  are  required  to  evaluate  the  effectiveness  of  disclosure  controls  and  procedures  and  internal  control  over  financial  reporting.  As  defined  in
standards  established  by  the  United  States  Public  Company  Accounting  Oversight  Board,  or  the  PCAOB,  a  “material  weakness”  is  a  deficiency,  or  a
combination  of  deficiencies,  in  internal  control  over  financial  reporting,  such  that  there  is  a  reasonable  possibility  that  a  material  misstatement  of  the
company’s annual or interim financial statements will not be prevented or detected on a timely basis. In the course of auditing our consolidated financial
statements  as  of  June  30,  2019  and  for  the  year  ended  June  30,  2019,  we  and  our  independent  registered  public  accounting  firm  identified  one  material
weakness in our internal control over financial reporting as well as other control deficiencies. The material weakness identified is the Company’s lack of
sufficient financial accounting and reporting personnel with requisite knowledge and experience in the application of the United States generally accepted
accounting  principles  (“U.S.  GAAP”)  and  Securities  and  Exchange  Commission  (“SEC”)  rules  and  lack  of  sufficient  controls  and  procedures  that  are
commensurate with U.S. GAAP and SEC reporting requirements.

We have implemented a number of measures to improve our internal control over financial reporting to address the material weakness that have
been identified. For details about remediation, refer to “Item 15. Controls and Procedures.” As of June 30, 2020, based on an assessment performed by our
management on the performance of the remediation measures, we determined that the material weakness previously identified in our internal control over
financial reporting had been remediated.

Our independent registered public accounting firm has not conducted an audit of our internal control over financial reporting. It is possible that, had
our  independent  registered  public  accounting  firm  conducted  an  audit  of  our  internal  control  over  financial  reporting,  such  firm  might  have  identified
additional material weaknesses and deficiencies.

We are a public company in the United States subject to the Sarbanes Oxley Act of 2002. Section 404 of the Sarbanes Oxley Act, or Section 404,
requires us to include a report from management on the effectiveness of our internal control over financial reporting in our annual report on Form 20-F. Our
management  concluded  that  our  internal  control  over  financial  reporting  is  effective  as  of  June  30,  2020.  In  addition,  once  we  cease  to  be  an  “emerging
growth company” as such term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness of
our internal control over financial reporting. Even if our management concludes that our internal control over financial reporting is effective in the future, our
independent  registered  public  accounting  firm,  after  conducting  its  own  independent  testing,  may  issue  an  adverse  opinion  if  it  is  not  satisfied  with  our
internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently
from us. In addition, our reporting obligations may place a significant strain on our management, operational and financial resources and systems for the
foreseeable future. We may be unable to timely complete our evaluation testing and any required remediation.

During the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404, we may identify
other weaknesses and deficiencies in our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control over
financial reporting, as these standards are modified, supplemented or amended from time to time, we may not be able to conclude on an ongoing basis that
we have effective internal control over financial reporting in accordance with Section 404. Moreover, our internal control over financial reporting may not
prevent or detect all errors and fraud. A control system, no matter how well it is designed and operated, cannot provide absolute assurance that misstatements
due to error or fraud will not occur or that all control issues and instances of fraud will be detected.

If we fail to achieve and maintain an effective internal control environment, we could suffer material misstatements in our financial statements and
fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could in turn limit our
access to capital markets, harm our results of operations, and lead to a decline in the market price of our common shares. Additionally, ineffective internal
control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock
exchange on which we list, regulatory investigations and civil or criminal sanctions. We may also be required to restate our financial statements from prior
periods.

Our insurance coverage may be inadequate to protect us against losses.

Although  we  maintain  property  insurance  coverage  for  certain  of  our  facilities  and  equipment,  we  do  not  have  any  loss  of  data  or  business
interruption insurance coverage for our operations. If any claims for damage are brought against us, or if we experience any business disruption, litigation or
natural disaster, we might incur substantial costs and diversion of resources.

We will likely not pay dividends in the foreseeable future.

Risks Relating to Our Corporate Structure

Dividend policy is subject to the discretion of our Board of Directors and will depend on, among other things, our earnings, financial condition,
capital requirements and other factors. There is no assurance that our Board of Directors will declare dividends even if we are profitable. The payment of
dividends by entities organized in China is subject to limitations as described herein. Under Cayman Islands law, we may only pay dividends from profits of
the Company, or credits standing in the Company’s share premium account, and we must be solvent before and after the dividend payment in the sense that
we will be able to satisfy our liabilities as they become due in the ordinary course of business; and the realizable value of assets of our Company will not be
less  than  the  sum  of  our  total  liabilities,  other  than  deferred  taxes  as  shown  on  our  books  of  account,  and  our  capital.  Pursuant  to  the  Chinese  enterprise
income tax law, dividends payable by a foreign investment entity to its foreign investors are subject to a withholding tax of 10%. Similarly, dividends payable
by a foreign investment entity to its Hong Kong investor who owns 25% or more of the equity of the foreign investment entity is subject to a withholding tax
of 5%. The payment of dividends by entities organized in China is subject to limitations, procedures and formalities. Regulations in China currently permit
payment of dividends only out of accumulated profits as determined in accordance with accounting standards and regulations in China. The transfer to this
reserve must be made before distribution of any dividend to shareholders.

15

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Our  business  may  be  materially  and  adversely  affected  if  any  of  our  Chinese  subsidiaries  declare  bankruptcy  or  become  subject  to  a  dissolution  or
liquidation proceeding.

The Enterprise Bankruptcy Law of China provides that an enterprise may be liquidated if the enterprise fails to settle its debts as and when they fall
due and if the enterprise’s assets are, or are demonstrably, insufficient to clear such debts. Our Chinese subsidiaries hold certain assets that are important to
our business operations. If any of our Chinese subsidiaries undergoes a voluntary or involuntary liquidation proceeding, unrelated third-party creditors may
claim rights to some or all of these assets, thereby hindering our ability to operate our business, which could materially and adversely affect our business,
financial condition and results of operations.

Our WOFE is required to allocate a portion of its after-tax profits to the statutory reserve fund, and as determined by its board of directors, to the staff
welfare and bonus funds, which may not be distributed to equity owners.

Pursuant to Company Law of P.R. China (2018 Revision), Foreign Investment Law of the People’s Republic of China (2020) and Implementing
Regulations of the Foreign Investment Law of the People’s Republic of China (2020) Wholly Foreign-Owned Enterprise (“WOFE”) Law of the P.R. China
(2016 Revision) and Implementing Rules for the Law of the People’s Republic of China on Wholly Foreign Owned Enterprises (2014 Revision), our WOFE
entity is required to allocate a portion of its after-tax profits, to the statutory reserve fund, and in its discretion, to the staff welfare and bonus funds. No lower
than 10% of an enterprise’s after tax-profits should be allocated to the statutory reserve fund. When the statutory reserve fund account balance is equal to or
greater  than  50%  of  the  WOFE’s  registered  capital,  no  further  allocation  to  the  statutory  reserve  fund  account  is  required.  WOFE  determines,  in  its  own
discretion, the amount contributed to the staff welfare and bonus funds. These reserves represent appropriations of retained earnings determined according to
Chinese law.

Our failure to obtain prior approval of the China Securities Regulatory Commission (“CSRC”) for the listing and trading of our common shares on a
foreign stock exchange could have a material adverse effect upon our business, operating results, reputation and trading price of our common shares.

On August 8, 2006, six Chinese regulatory agencies, including the Ministry of Commerce of the People’s Republic of China (“MOFCOM”), jointly
issued the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, which was amended on June 22, 2009 (the “M&A Rule”).
The  M&A  Rule  contains  provisions  that  require  that  an  offshore  special  purpose  vehicle  (“SPV”)  formed  for  listing  purposes  and  controlled  directly  or
indirectly by Chinese companies or individuals shall obtain the approval of the CSRC prior to the listing and trading of such SPV’s securities on an overseas
stock  exchange.  On  September  21,  2006,  the  CSRC  published  procedures  specifying  documents  and  materials  required  to  be  submitted  to  it  by  an  SPV
seeking CSRC approval of overseas listings. However, the application of the M&A Rule remains unclear with no consensus currently existing among leading
Chinese  law  firms  regarding  the  scope  and  applicability  of  the  CSRC  approval  requirement.  The  CSRC  has  not  issued  any  such  definitive  rule  or
interpretation, and we have not chosen to voluntarily request approval under the M&A Rule. We may face regulatory actions or other sanctions from the
CSRC or other Chinese regulatory authorities. These authorities may impose fines and penalties upon our operations in China, limit our operating privileges
in China, delay or restrict the repatriation of the IPO proceeds into China, or take other actions that could have a material adverse effect upon our business,
financial condition, results of operations, reputation and prospects, as well as the trading price of our common shares.

If the chops of our PRC companies and 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.

In China, a company chop or seal serves as the legal representation of the company towards third parties even when unaccompanied by a signature.
Each  legally  registered  company  in  China  is  required  to  maintain  a  company  chop,  which  must  be  registered  with  the  local  Public  Security  Bureau.  In
addition  to  this  mandatory  company  chop,  companies  may  have  several  other  chops  which  can  be  used  for  specific  purposes.  The  chops  of  our  PRC
subsidiaries are generally held securely by personnel designated or approved by us in accordance with our internal control procedures. To the extent those
chops are not kept 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  and  those  corporate  entities  may  be  bound  to  abide  by  the  terms  of  any  documents  so  chopped,  even  if  they  were
chopped by an individual who lacked the requisite power and authority to do so. In addition, if the chops are misused by unauthorized persons, we could
experience disruption to our normal business operations. We may have to take corporate or legal action, which could involve significant time and resources to
resolve while distracting management from our operations.

16

 
 
 
 
 
 
 
 
 
 
If we fail to maintain continuing compliance with the PRC state regulatory rules, policies and procedures applicable to our industry, we may risk losing
certain  preferential  tax  and  other  treatments  which  may  adversely  affect  the  viability  of  our  current  corporate  structure,  corporate  governance  and
business operations.

According to the Guidelines on Foreign Investment issued by the State Council in 2002 and the Catalogue of Industries for Encouraging Foreign
Investment  (2019)  issued  by  the  National  Development  and  Reform  Commission  and  the  Ministry  of  Commerce,  IT  services  fall  into  the  category  of
industries  in  which  foreign  investment  is  encouraged.  The  State  Council  has  promulgated  several  notices  since  2000  to  launch  favorable  policies  for  IT
services,  such  as  preferential  tax  treatments  and  credit  support.  Under  rules  and  regulations  promulgated  by  various  Chinese  government  agencies,
enterprises  that  have  met  specified  criteria  and  are  recognized  as  software  enterprises  by  the  relevant  government  authorities  in  China  are  entitled  to
preferential  treatment,  including  financing  support,  preferential  tax  rates,  export  incentives,  discretion  and  flexibility  in  determining  employees’  welfare
benefits  and  remuneration.  Software  enterprise  qualifications  are  subject  to  annual  examination.  Enterprises  that  fail  to  meet  the  annual  examination
standards will lose the favorable enterprise income tax treatment. Enterprises exporting software or producing software products that are registered with the
relevant government authorities are also entitled to preferential treatment including governmental financial support, preferential import, export policies and
preferential tax rates. If and to the extent we fail to maintain compliance with such applicable rules and regulations, our operations and financial results may
be adversely affected.

Risks Related to Doing Business in China

Adverse  changes  in  political,  economic  and  other  policies  of  the  Chinese  government  could  have  a  material  adverse  effect  on  the  overall  economic
growth of China, which could materially and adversely affect the growth of our business and our competitive position.

The majority of our business operations are conducted in China. Accordingly, our business, financial condition, results of operations and prospects
are  affected  significantly  by  economic,  political  and  legal  developments  in  China.  Although  the  PRC  economy  has  been  transitioning  from  a  planned
economy  to  a  more  market-oriented  economy  since  the  late  1970s,  the  PRC  government  continues  to  exercise  significant  control  over  China’s  economic
growth through direct allocation of resources, monetary and tax policies, and a host of other government policies such as those that encourage or restrict
investment  in  certain  industries  by  foreign  investors,  control  the  exchange  between  the  Renminbi  and  foreign  currencies,  and  regulate  the  growth  of  the
general or specific market. While the Chinese economy has experienced significant growth in the past 30 years, growth has been uneven, both geographically
and among various sectors of the economy. Furthermore, the current global economic crisis is adversely affecting economies throughout the world. As the
PRC economy has become increasingly linked to the global economy, China is affected in various respects by downturns and recessions of major economies
around the world. The various economic and policy measures enacted by the PRC government to forestall economic downturns or bolster China’s economic
growth could materially affect our business. Any adverse change in the economic conditions in China, in policies of the PRC government or in laws and
regulations in China could have a material adverse effect on the overall economic growth of China and market demand for our outsourcing services. Such
developments could adversely affect our businesses, lead to reduction in demand for our services and adversely affect our competitive position.

17

 
 
 
 
 
 
 
Uncertainties with respect to the PRC legal system could have a material adverse effect on us.

The PRC legal system is based on written statutes. Prior court decisions may be cited for reference but have limited precedential value. Since the
late  1970s,  the  PRC  government  has  been  building  a  comprehensive  system  of  laws  and  regulations  governing  economic  matters  in  general. The  overall
effect has been to significantly enhance the protections afforded to various forms of foreign investments in China. We conduct our business primarily through
our subsidiaries established in China. These subsidiaries are generally subject to laws and regulations applicable to foreign investment in China. However,
since these laws and regulations are relatively new and the PRC legal system continues to rapidly evolve, the interpretations of many laws, regulations and
rules are not always uniform and enforcement of these laws, regulations and rules involves uncertainties, which may limit legal protections available to us. In
addition,  some  regulatory  requirements  issued  by  certain  PRC  government  authorities  may  not  be  consistently  applied  by  other  government  authorities
(including local government authorities), thus making strict compliance with all regulatory requirements impractical, or in some circumstances impossible.
For example, we may have to resort to administrative and court proceedings to enforce the legal protection that we enjoy either by law or contract. However,
since PRC administrative and court authorities have discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to
predict  the  outcome  of  administrative  and  court  proceedings  and  the  level  of  legal  protection  we  enjoy  than  in  more  developed  legal  systems.  These
uncertainties  may  impede  our  ability  to  enforce  the  contracts  we  have  entered  into  with  our  business  partners,  clients  and  suppliers.  In  addition,  such
uncertainties,  including  any  inability  to  enforce  our  contracts,  together  with  any  development  or  interpretation  of  PRC  law  that  is  adverse  to  us,  could
materially and adversely affect our business and operations. Furthermore, intellectual property rights and confidentiality protections in China may not be as
effective as in the United States or other more developed countries. We cannot predict the effect of future developments in the PRC legal system, including
the promulgation of new laws, changes to existing laws or the interpretation or enforcement thereof, or the preemption of local regulations by national laws.
These uncertainties could limit the legal protections available to us and other foreign investors, including you. In addition, any litigation in China may be
protracted and result in substantial costs and diversion of our resources and management attention.

U.S. regulators’ ability to conduct investigations or enforce rules in China is limited.

The majority of our operations are conducted outside of the U.S. As a result, it may not be possible for the U.S. regulators to conduct investigations
or inspections, or to effect service of process within the U.S. or elsewhere outside China on us, our subsidiaries, officers, directors and shareholders, and
others, including with respect to matters arising under U.S. federal or state securities laws. China does not have treaties providing for reciprocal recognition
and enforcement of judgments of courts with the U.S. and many other countries. As a result, recognition and enforcement in China of these judgments in
relation to any matter, including U.S. securities laws and the laws of the Cayman Islands, may be difficult or impossible.

We face uncertainty regarding the PRC tax reporting obligations and consequences for certain indirect transfers of the stock of our operating company.

Pursuant to the Announcement of the State Administration of Taxation on Several Issues Concerning the Enterprise Income Tax on Indirect Property
Transfer by Non-Resident Enterprises, which became effective in February 2015, or Circular 7, Announcement of the State Administration of Taxation on
Issues Concerning the Withholding of Non-resident Enterprise Income Tax at Source, which became effective in December 2017, or Circular 37, Law of the
People’s  Republic  of  China  on  Enterprise  Income  Tax  on  December  29,  2018  and  Regulations  on  the  Implementation  of  Enterprise  Income  Tax  Law  on
January 1, 2008, where a non-resident enterprise indirectly transfers properties such as equity in Chinese resident enterprises without any justifiable business
purposes with the aim of avoiding to pay enterprise income tax, such indirect transfer shall be reclassified as a direct transfer of equity in Chinese resident
enterprise in accordance with Article 47 of the Enterprise Income Tax Law. The PRC tax authority will examine the true nature of such transfer, and the gains
derived from such transfer may be subject to PRC withholding tax at the rate of up to 10%. In addition, the PRC resident enterprise is supposed to provide
necessary assistance to support the enforcement of the Laws and Circulars. The PRC tax authorities may make claims against our PRC subsidiary as being
indirectly liable for unpaid taxes, if any, arising from Indirect Transfers by shareholders who did not obtain their shares in the public offering of our shares.

18

 
 
 
 
 
 
 
 
PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident shareholders to
personal  liability  and  limit  our  ability  to  acquire  PRC  companies  or  to  inject  capital  into  our  PRC  subsidiaries,  limit  our  PRC  subsidiaries’  ability  to
distribute profits to us, or otherwise materially and adversely affect us.

The PRC State Administration of Foreign Exchange, or SAFE, issued a public notice in 2014 known as Circular 37 that requires PRC residents,
including both legal persons and natural persons, to register with an appropriate local SAFE branch before establishing or controlling any company outside of
China, referred to as an offshore special purpose company, for the purpose of acquiring any assets of or equity interest in PRC companies and raising funds
from  overseas.  When  a  PRC  resident  contributes  the  assets  or  equity  interests  it  holds  in  a  PRC  company  into  the  offshore  special  purpose  company,  or
engages in overseas financing after contributing such assets or equity interests into the offshore special purpose company, such PRC resident must modify its
SAFE registration in light of its interest in the offshore special purpose company and any change thereof. Moreover, failure to comply with the above SAFE
registration requirements could result in liabilities under PRC laws for evasion of foreign exchange restrictions.

We are committed to complying with the Circular 37 requirements and to ensuring that our shareholders who are PRC citizens or residents comply
with them. We believe that all of our current PRC citizen or resident shareholders and beneficial owners have completed their required registrations with
SAFE. However, we may not at all times be fully aware or informed of the identities of all our beneficial owners who are PRC citizens or residents, and we
may  not  always  be  able  to  compel  our  beneficial  owners  to  comply  with  the  Circular  37  requirements.  As  a  result,  we  cannot  assure  you  that  all  of  our
shareholders or beneficial owners who are PRC citizens or residents will at all times comply with, or in the future make or obtain any applicable registrations
or approvals required by, Circular 37 or other related regulations. Failure by any such shareholders or beneficial owners to comply with Circular 37 could
subject us to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit our PRC subsidiaries’ ability to make distributions or
pay dividends or affect our ownership structure, which could adversely affect our business and prospects.

In  addition,  the  PRC  National  Development  and  Reform  Commission  promulgated  a  rule  in  2017  requiring  its  approval  for  overseas  investment
projects  made  by  PRC  entities.  However,  there  exist  extensive  uncertainties  as  to  the  interpretation  of  this  rule  with  respect  to  its  application  to  a  PRC
individual’s overseas investment and, in practice, we are not aware of any precedents that a PRC individual’s overseas investment has been either approved
by the National Development and Reform Commission or challenged by the National Development and Reform Commission based on the absence of its
approval. Our current beneficial owners who are PRC individuals did not apply for the approval of the National Development and Reform Commission for
their investment in us. We cannot predict how and to what extent this will affect our business operations or future strategy.

19

 
 
 
 
 
 
PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from making loans or additional
capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

We may make loans to our PRC subsidiaries and controlled PRC affiliate, or we may make additional capital contributions to our PRC subsidiaries.
Any loans to our PRC subsidiaries or controlled PRC affiliate are subject to PRC regulations and approvals. For example, loans by us to our PRC subsidiaries
in China, each of which is a foreign-invested enterprise, to finance their activities cannot exceed statutory limits and must be registered with SAFE or its
local counterpart.

We may also decide to finance our PRC subsidiaries through capital contributions. These capital contributions must be approved by the Ministry of
Commerce in China or its local counterpart. We cannot assure you that we will be able to obtain these government registrations or approvals on a timely
basis, if at all, with respect to future loans by us to our PRC subsidiaries or controlled PRC affiliate or capital contributions by us to our subsidiaries or any of
their respective subsidiaries. If we fail to receive such registrations or approvals, our ability to capitalize our PRC operations may be negatively affected,
which could adversely and materially affect our liquidity and our ability to fund and expand our business.

In 2015, SAFE promulgated Circular 19, a notice regulating the conversion by a foreign-invested enterprise of foreign currency into Renminbi by
restricting  how  the  converted  Renminbi  may  be  used.  Circular  19  requires  that  Renminbi  converted  from  the  foreign  currency-denominated  capital  of  a
foreign-invested enterprise shall be truthfully used for the enterprise’s own operational purposes within the scope of business and only the foreign-invested
enterprise  whose  main  business  is  investment  (including  a  foreign-invested  investment  company,  foreign-invested  venture  capital  enterprise  or  foreign-
invested  equity  investment  enterprise)  is  allowed  to  directly  settle  its  foreign  exchange  capital  or  transfer  the  RMB  funds  under  its  Account  for  Foreign
Exchange  Settlement  Pending  Payment  to  the  account  of  an  invested  enterprise  according  to  the  actual  amount  of  investment,  provided  that  the  relevant
domestic investment project is real and compliant.

We cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a
timely basis, if at all, with respect to future loans by us to our PRC subsidiaries or controlled PRC affiliate or with respect to future capital contributions by
us to our PRC subsidiaries. If we fail to complete such registrations or obtain such approvals, our ability to capitalize or otherwise fund our PRC operations
may be negatively affected, which could adversely and materially affect our liquidity and our ability to fund and expand our business.

Governmental  control  of  currency  conversion  may  limit  our  ability  to  use  our  revenues  effectively  and  the  ability  of  our  PRC  subsidiaries  to  obtain
financing.

The PRC government imposes control on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance of currency out
of  China.  We  receive  a  majority  of  our  revenues  in  Renminbi,  which  currently  is  not  a  freely  convertible  currency.  Restrictions  on  currency  conversion
imposed by the PRC government may limit our ability to use revenues generated in Renminbi to fund our expenditures denominated in foreign currencies or
our  business  activities  outside  China.  Under  China’s  existing  foreign  exchange  regulations,  Renminbi  may  be  freely  converted  into  foreign  currency  for
payments relating to current account transactions, which include among other things dividend payments and payments for the import of goods and services,
by complying with certain procedural requirements. Our PRC subsidiaries are able to pay dividends in foreign currencies to us without prior approval from
SAFE, by complying with certain procedural requirements. Our PRC subsidiaries may also retain foreign currency in their respective current account bank
accounts for use in payment of international current account transactions. However, we cannot assure you that the PRC government will not take measures in
the future to restrict access to foreign currencies for current account transactions. Conversion of Renminbi into foreign currencies, and of foreign currencies
into Renminbi, for payments relating to capital account transactions, which principally includes investments and loans, generally requires the approval of
SAFE and other relevant PRC governmental authorities. Restrictions on the convertibility of the Renminbi for capital account transactions could affect the
ability of our PRC subsidiaries to make investments overseas or to obtain foreign currency through debt or equity financing, including by means of loans or
capital contributions from us. We cannot assure you that the registration process will not delay or prevent our conversion of Renminbi for use outside of
China.

20

 
 
 
 
 
 
 
 
 
We may be classified as a “resident enterprise” for PRC enterprise income tax purposes; such classification could result in unfavorable tax consequences
to us and our non-PRC shareholders.

The Enterprise Income Tax Law provides that enterprises established outside of China whose “de facto management bodies” are located in China
are  considered  PRC  tax  resident  enterprises  and  will  generally  be  subject  to  the  uniform  25%  PRC  enterprise  income  tax  rate  on  their  global  income.  In
addition, a tax circular issued by the State Administration of Taxation on April 22, 2009 regarding the standards used to classify certain Chinese-invested
enterprises established outside of China as resident enterprises clarified that dividends and other income paid by such resident enterprises will be considered
to be PRC source income, subject to PRC withholding tax, currently at a rate of 10%, when recognized by non-PRC enterprise shareholders. This recent
circular  also  subjects  such  resident  enterprises  to  various  reporting  requirements  with  the  PRC  tax  authorities.  Under  the  implementation  rules  to  the
Enterprise Income Tax Law, a de facto management body is defined as a body that has material and overall management and control over the manufacturing
and business operations, personnel and human resources, finances and other assets of an enterprise. In addition, the tax circular mentioned above details that
certain Chinese-invested enterprises will be classified as resident enterprises if the following are located or resident in China: senior management personnel
and  departments  that  are  responsible  for  daily  production,  operation  and  management;  financial  and  personnel  decision  making  bodies;  key  properties,
accounting books, company seal, and minutes of board meetings and shareholders’ meetings; and half or more of the senior management or directors having
voting rights.

Currently,  there  are  no  detailed  rules  or  precedents  governing  the  procedures  and  specific  criteria  for  determining  de  facto  management  bodies
which  are  applicable  to  our  company  or  our  overseas  subsidiary.  If  our  company  or  any  of  our  overseas  subsidiaries  is  considered  a  PRC  tax  resident
enterprise  for  PRC  enterprise  income  tax  purposes,  a  number  of  unfavorable  PRC  tax  consequences  could  follow.  First,  our  company  or  our  overseas
subsidiary will be subject to the uniform 25% enterprise income tax rate as to our global income as well as PRC enterprise income tax reporting obligations.
Second, although under the Enterprise Income Tax Law and its implementing rules dividends paid to us from our PRC subsidiaries would qualify as tax-
exempted income, we cannot assure you that such dividends will not be subject to a 10% withholding tax, as the PRC foreign exchange control authorities,
which enforce the withholding tax, have not yet issued guidance with respect to the processing of outbound remittances to entities that are treated as resident
enterprises for PRC enterprise income tax purposes. Finally, dividends payable by us to our investors and gain on the sale of our shares may become subject
to PRC withholding tax. It is possible that future guidance issued with respect to the new resident enterprise classification could result in a situation in which
a withholding tax of 10% for our non-PRC enterprise investors or a potential withholding tax of 20% for individual investors is imposed on dividends we pay
to them and with respect to gains derived by such investors from transferring our shares. In addition to the uncertainty in how the new resident enterprise
classification could apply, it is also possible that the rules may change in the future, possibly with retroactive effect. If we are required under the Enterprise
Income Tax law to withhold PRC income tax on our dividends payable to our foreign shareholders, or if you are required to pay PRC income tax on the
transfer  of  our  shares  under  the  circumstances  mentioned  above,  the  value  of  your  investment  in  our  shares  or  ADSs  may  be  materially  and  adversely
affected. It is unclear whether, if we are considered a PRC resident enterprise, holders of our shares would be able to claim the benefit of income tax treaties
or agreements entered into between China and other countries or areas.

21

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

The Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory
agencies  in  August  2006  and  amended  in  2009,  requires  an  overseas  special  purpose  vehicle  formed  for  listing  purposes  through  acquisitions  of  PRC
domestic companies and controlled by PRC companies or individuals to obtain the approval of the China Securities Regulatory Commission, or the CSRC,
prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange. In September 2006, the CSRC published a notice
on its official website specifying documents and materials required to be submitted to it by a special purpose vehicle seeking CSRC approval of its overseas
listings. The application of the M&A Rules remains unclear. These M&A Rules and some other regulations and rules concerning mergers and acquisitions
established  additional  procedures  and  requirements  that  could  make  merger  and  acquisition  activities  by  foreign  investors  more  time  consuming  and
complex, including requirements in some instances that the MOC be notified in advance of any change-of-control transaction in which a foreign investor
takes control of a PRC domestic enterprise. Moreover, the Anti-Monopoly Law requires that the MOC shall be notified in advance of any concentration of
undertaking if certain thresholds are triggered. In addition, the security review rules issued by the MOC that became effective in September 2011 specify that
mergers  and  acquisitions  by  foreign  investors  that  raise  “national  defense  and  security”  concerns  and  mergers  and  acquisitions  through  which  foreign
investors may acquire de facto control over domestic enterprises that raise “national security” concerns are subject to strict review by the MOC, and the rules
prohibit any activities attempting to bypass a security review, including by structuring the transaction through a proxy or contractual control arrangement. In
the future, we may grow our business by acquiring complementary businesses. Complying with the requirements of the above-mentioned regulations and
other  relevant  rules  to  complete  such  transactions  could  be  time  consuming,  and  any  required  approval  processes,  including  obtaining  approval  from  the
MOC  or  its  local  counterparts  may  delay  or  inhibit  our  ability  to  complete  such  transactions,  which  could  affect  our  ability  to  expand  our  business  or
maintain our market share.

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

In  February  2012,  SAFE  promulgated  the  Notices  on  Issues  Concerning  the  Foreign  Exchange  Administration  for  Domestic  Individuals
Participating in Stock Incentive Plans of Overseas Publicly-Listed Companies, replacing earlier rules promulgated in March 2007. Pursuant to these rules,
PRC citizens and non-PRC citizens who reside in China for a continuous period of not less than one year who participate in any stock incentive plan of an
overseas publicly listed company, subject to a few exceptions, are required to register with SAFE through a domestic qualified agent, which could be the
PRC subsidiary of such overseas listed company, and complete certain other procedures. In addition, an overseas entrusted institution must be retained to
handle matters in connection with the exercise or sale of stock options and the purchase or sale of shares and interests. We and our executive officers and
other employees who are PRC citizens or who have resided in the PRC for a continuous period of not less than one year and who are granted options or other
awards under the equity incentive plan will be subject to these regulations as an overseas listed company. Failure to complete the SAFE registrations may
subject them to fines and legal sanctions and may also limit our ability to contribute additional capital into our PRC subsidiary and limit our PRC subsidiary’
ability to distribute dividends to us. We also face regulatory uncertainties that could restrict our ability to adopt additional incentive plans for our directors,
executive officers and employees under PRC law.

Enhanced scrutiny over acquisition transactions by the PRC tax authorities may have a negative impact on potential acquisitions we may pursue in the
future.

The PRC tax authorities have enhanced their scrutiny over the direct or indirect transfer of certain taxable assets, including, in particular, equity
interests  in  a  PRC  resident  enterprise,  by  a  non-resident  enterprise  by  promulgating  and  implementing  SAT  Circular  59,  Announcement  of  the  State
Administration  of  Taxation  on  Several  Issues  Concerning  the  Enterprise  Income  Tax  on  Indirect  Property  Transfer  by  Non-Resident  Enterprises,  which
became effective in February 2015, or Circular 7 and Announcement of the State Administration of Taxation on Issues Concerning the Withholding of Non-
resident Enterprise Income Tax at Source, which became effective in December 2017, or Circular 37.

Under the Enterprise Income Tax Law, Regulations on the Implementation of Enterprise Income Tax Law, Circular 7 and Circular 37, where a non-
resident  enterprise  indirectly  transfers  properties  such  as  equity  in  Chinese  resident  enterprises  without  any  justifiable  business  purposes  with  the  aim  of
avoiding to pay enterprise income tax, such indirect transfer shall be reclassified as a direct transfer of equity in Chinese resident enterprise in accordance
with Article 47 of the Enterprise Income Tax Law. The non-resident enterprise, being the transferor, may be subject to PRC enterprise income tax, if the
indirect  transfer  is  considered  to  be  an  abusive  use  of  company  structure  without  reasonable  commercial  purposes.  As  a  result,  gains  derived  from  such
indirect transfer may be subject to PRC tax at a rate of up to 10%.

22

 
 
 
 
 
 
 
 
 
In February 2015, the SAT issued Circular 7 to replace the rules relating to indirect transfers in Circular 698. Circular 7 has introduced a new tax
regime that is significantly different from that under Circular 698. Circular 7 extends its tax jurisdiction to not only indirect transfers set forth under Circular
698  but  also  transactions  involving  transfer  of  other  taxable  assets,  through  the  offshore  transfer  of  a  foreign  intermediate  holding  company.  In  addition,
Circular 7 provides clearer criteria than Circular 698 on how to assess reasonable commercial purposes and has introduced safe harbors for internal group
restructurings  and  the  purchase  and  sale  of  equity  through  a  public  securities  market.  Circular  7  also  brings  challenges  to  both  the  foreign  transferor  and
transferee (or other person who is obligated to pay for the transfer) of the taxable assets. Where a non-resident enterprise conducts an “indirect transfer” by
transferring the taxable assets indirectly by disposing of the equity interests of an overseas holding company, the non-resident enterprise being the transferor,
or the transferee, or the PRC entity which directly owned the taxable assets may report to the relevant tax authority such indirect transfer. Using a “substance
over form” principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and
was established for the purpose of reducing, avoiding or deferring PRC tax. As a result, gains derived from such indirect transfer may be subject to PRC
enterprise income tax, and the transferee or other person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a
rate of 10% for the transfer of equity interests in a PRC resident enterprise.

We  face  uncertainties  on  the  reporting  and  consequences  on  future  private  equity  financing  transactions,  share  exchange  or  other  transactions
involving the transfer of shares in our company by investors that are non-PRC resident enterprises. The PRC tax authorities may pursue such non-resident
enterprises with respect to a filing or the transferees with respect to withholding obligation, and request our PRC subsidiaries to assist in the filing. As a
result, we and non-resident enterprises in such transactions may become at risk of being subject to filing obligations or being taxed, under Circular 59 and
Circular  7,  and  may  be  required  to  expend  valuable  resources  to  comply  with  Circular  59  and  Circular  7  or  to  establish  that  we  and  our  non-resident
enterprises should not be taxed under these circulars, which may have a material adverse effect on our financial condition and results of operations.

The PRC tax authorities have the discretion under SAT Circular 59, and Circular 7 to make adjustments to the taxable capital gains based on the
difference between the fair value of the taxable assets transferred and the cost of investment. Although we currently have no plans to pursue any acquisitions
in China or elsewhere in the world, we may pursue acquisitions in the future that may involve complex corporate structures. 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 SAT Circular 59 or 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.

We may rely on dividends paid by our subsidiaries for our cash needs, and any limitation on the ability of our subsidiaries to make payments to us could
have a material adverse effect on our ability to conduct our business.

As a holding company, we conduct substantially all of our business through our consolidated subsidiaries incorporated in China. We may rely on
dividends  paid  by  these  PRC  subsidiaries  for  our  cash  needs,  including  the  funds  necessary  to  pay  any  dividends  and  other  cash  distributions  to  our
shareholders, to service any debt we may incur and to pay our operating expenses. The payment of dividends by entities established in China is subject to
limitations.  Regulations  in  China  currently  permit  payment  of  dividends  only  out  of  accumulated  profits  as  determined  in  accordance  with  accounting
standards  and  regulations  in  China.  Each  of  our  PRC  subsidiaries  is  required  to  set  aside  at  least  10%  of  its  after-tax  profit  based  on  PRC  accounting
standards  each  year  to  its  general  reserves  or  statutory  capital  reserve  fund  until  the  aggregate  amount  of  such  reserves  reaches  50%  of  its  respective
registered capital. As a result, our PRC subsidiaries are restricted in their ability to transfer a portion of their net assets to us in the form of dividends. In
addition, if any of our PRC subsidiaries incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends
or make other distributions to us. Any limitations on the ability of our PRC subsidiaries to transfer funds to us could materially and adversely limit our ability
to grow, make investments or acquisitions that could be beneficial to our business, pay dividends and otherwise fund and conduct our business.

Our current employment practices may be restricted under the PRC Labor Contract Law and our labor costs may increase as a result.

The  PRC  Labor  Contract  Law  and  its  implementing  rules  impose  requirements  concerning  contracts  entered  into  between  an  employer  and  its
employees and establishes time limits for probationary periods and for how long an employee can be placed in a fixed-term labor contract. Because the Labor
Contract  Law  and  its  implementing  rules  have  not  been  in  effect  very  long  and  because  there  is  lack  of  clarity  with  respect  to  their  implementation  and
potential penalties and fines, it is uncertain how it will impact our current employment policies and practices. We cannot assure you that our employment
policies and practices do not, or will not, violate the Labor Contract Law or its implementing rules and that we will not be subject to related penalties, fines
or legal fees. If we are subject to large penalties or fees related to the Labor Contract Law or its implementing rules, our business, financial condition and
results of operations may be materially and adversely affected. In addition, according to the Labor Contract Law and its implementing rules, if we intend to
enforce the non-compete provision with an employee in a labor contract or non-competition agreement, we have to compensate the employee on a monthly
basis during the term of the restriction period after the termination or ending of the labor contract, which may cause extra expenses to us. Furthermore, the
Labor Contract Law and its implementation rules require certain terminations to be based upon seniority rather than merit, which significantly affects the cost
of reducing workforce for employers. In the event we decide to significantly change or decrease our workforce in the PRC, the Labor Contract Law could
adversely affect our ability to enact such changes in a manner that is most advantageous to our circumstances or in a timely and cost effective manner, thus
our results of operations could be adversely affected.

23

 
 
 
 
 
 
 
 
 
The audit report included in this annual report is prepared by an auditor who is not inspected by the Public Company Accounting Oversight Board, and
as such, you are deprived of the benefits of such inspection. 

Our independent registered public accounting firm that issues the audit report included in this annual report, as auditors of companies that are traded
publicly in the United States and a firm registered with the Public Company Accounting Oversight Board, or the PCAOB, is required by the laws of the
United States to undergo regular inspections by the PCAOB to assess its compliance with the laws of the United States and professional standards. Since our
auditors are located in China, a jurisdiction where the PCAOB is currently unable to conduct inspections without the approval of the Chinese authorities, our
auditors  are  not  currently  inspected  by  the  PCAOB.  On  December  7,  2018,  the  SEC  and  the  PCAOB  issued  a  joint  statement  highlighting  continued
challenges faced by the U.S. regulators in their oversight of financial statement audits of U.S.-listed companies with significant operations in China. The joint
statement reflects a heightened interest in an issue that has vexed U.S. regulators in recent years. However, it remains unclear what further actions the SEC
and PCAOB will take to address the problem.

Inspections of other firms that the PCAOB has conducted outside of China have identified deficiencies in those firms’ audit procedures and quality
control  procedures,  which  may  be  addressed  as  part  of  the  inspection  process  to  improve  future  audit  quality.  This  lack  of  PCAOB  inspections  in  China
prevents the PCAOB from regularly evaluating our auditor’s audits and its quality control procedures. As a result, investors may be deprived of the benefits
of PCAOB inspections.

The inability of the PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of our auditor’s audit
procedures or quality control procedures as compared to auditors outside of China that are subject to PCAOB inspections. Investors may lose confidence in
our reported financial information and procedures and the quality of our financial statements.

As part of a continued regulatory focus in the United States on access to audit and other information currently restricted by China’s own law, in June
2019 a bipartisan group of lawmakers introduced bills in both houses of the U.S. Congress, which if passed, would require the SEC to maintain a list of
issuers for which PCAOB is not able to inspect or investigate an auditor report issued by a foreign public accounting firm. The proposed Ensuring Quality
Information  and  Transparency  for  Abroad-Based  Listings  on  our  Exchanges  (EQUITABLE)  Act  prescribes  increased  disclosure  requirements  for  these
issuers  and,  beginning  in  2025,  the  delisting  from  U.S.  national  securities  exchanges  such  as  the  NYSE  of  issuers  included  on  the  SEC’s  list  for  three
consecutive years. Enactment of this legislation or other efforts to increase U.S. regulatory access to audit information could cause investor uncertainty for
affected  issuers,  including  us,  and  the  market  price  of  our  shares  could  be  adversely  affected.  It  is  unclear  if  this  proposed  legislation  would  be  enacted.
Furthermore,  there  has  been  recent  media  reports  on  deliberations  within  the  U.S.  government  regarding  potentially  limiting  or  restricting  China-based
companies from accessing U.S. capital markets. If any such deliberations should materialize, the resulting legislation may have material and adverse impact
on the stock performance of China-based issuers listed in the United States including us.

On April 21, 2020, the SEC and the PCAOB issued another joint statement reiterating the greater risk that disclosures will be insufficient in many
emerging markets, including China, compared to those made by U.S. domestic companies. In discussing the specific issues related to the greater risk, the
statement again highlights the PCAOB’s inability to inspect audit work and practices of accounting firms in China with respect to their audit work of U.S.
reporting companies. Inspections of other accounting firms that the PCAOB has conducted have identified deficiencies in those firms’ audit procedures and
quality control procedures, which may be addressed as part of the inspection process to improve future audit quality. The lack of PCAOB inspections of audit
work undertaken in China prevents the PCAOB from regularly evaluating our auditor’s audits and its quality control procedures. As a result, investors of our
ordinary  shares  do  not  derive  the  benefits  of  PCAOB  inspections,  and  may  lose  confidence  in  our  reported  financial  information  and  procedures  and  the
quality of our financial statements.

If additional remedial measures are imposed on the Big Four PRC-based accounting firms, including our independent registered public accounting firm,
in administrative proceedings brought by the SEC alleging the firms’ failure to meet specific criteria set by the SEC, we could be unable to timely file
future financial statements in compliance with the requirements of the Exchange Act.

Ernst & Young Hua Ming LLP, our auditor, is required under U.S. law to undergo regular inspections by the PCAOB. However, without approval
from the Chinese government authorities, the PCAOB is currently unable to conduct inspections of the audit work and practices of PCAOB-registered audit
firms within the PRC on a basis comparable to other non-U.S. jurisdictions. Since we have substantial operations in the PRC, our auditor and its audit work
are currently not fully inspected by the PCAOB.

Inspections of other auditors conducted by the PCAOB outside of China have at times identified deficiencies in those auditors’ audit procedures and
quality control procedures, which may be addressed as part of the inspection process to improve future audit quality. The inability of the PCAOB to conduct
full inspections of auditors in China makes it more difficult to evaluate the effectiveness of our auditor’s audit procedures or quality control procedures as
compared to auditors outside of China that are subject to PCAOB inspections.

The  SEC  previously  instituted  proceedings  against  mainland  Chinese  affiliates  of  the  “big  four”  accounting  firms,  including  the  affiliate  of  our
auditor, for failing to produce audit work papers under Section 106 of the Sarbanes-Oxley Act because of restrictions under PRC law. Each of the “big four”
accounting firms in mainland China agreed to a censure and to pay a fine to the SEC to settle the dispute and stay the proceedings for four years, until the
proceedings  were  deemed  dismissed  with  prejudice  on  February  6,  2019.  It  remains  unclear  whether  the  SEC  will  commence  a  new  administrative
proceeding against the four mainland China-based accounting firms. Any such new proceedings or similar action against our audit firm for failure to provide
access  to  audit  work  papers  could  result  in  the  imposition  of  penalties,  such  as  suspension  of  our  auditor’s  ability  to  practice  before  the  SEC.  If  our
independent registered public accounting firm, or its affiliate, was denied, even temporarily, the ability to practice before the SEC, and it was determined that
our financial statements or audit reports were not in compliance with the requirements of the U.S. Exchange Act, we could be at risk of delisting or become
subject to other penalties that would adversely affect our ability to remain listed on the Nasdaq.

24

 
 
 
 
 
 
 
 
 
 
 
 
In recent years, U.S. regulators have continued to express their concerns about challenges in their oversight of financial statement audits of U.S.-
listed companies with significant operations in China. More recently, as part of increased regulatory focus in the U.S. on access to audit information, on May
20, 2020, the U.S. Senate passed the Holding Foreign Companies Accountable Act, or the HFCA Act, which includes requirements for the SEC to identify
issuers whose audit reports are prepared by auditors that the PCAOB is unable to inspect or investigate completely because of a restriction imposed by a non-
U.S. authority in the auditor’s local jurisdiction. If the HFCA Act or any similar legislation were enacted into law, our securities may be prohibited from
trading on the Nasdaq or other U.S. stock exchanges if our auditor is not inspected by the PCAOB for three consecutive years, and this ultimately could
result in our ordinary shares being delisted. Delisting of our ordinary shares would force our U.S.-based shareholders to sell their shares. The market prices of
our ordinary shares could be adversely affected as a result of anticipated negative impacts of the HFCA Act upon, as well as negative investor sentiment
towards,  China-based  companies  listed  in  the  United  States,  regardless  of  whether  the  HFCA  Act  is  enacted  and  regardless  of  our  actual  operating
performance.

Furthermore, on June 4, 2020, the U.S. President issued a memorandum ordering the President’s Working Group on Financial Markets (“PWG”) to
submit a report to the President within 60 days of the memorandum that includes recommendations for actions that can be taken by the executive branch, the
SEC, the PCAOB or other federal agencies and departments with respect to Chinese companies listed on U.S. stock exchanges and their audit firms, in an
effort to protect investors in the United States. On August 6, 2020, PWG released its Report on Protecting United States Investors from Significant Risks
from Chinese Companies (“PWG Report”). The PWG Report includes five recommendations for the Securities and Exchange Commission. In particular, to
address  companies  from  jurisdictions,  such  as  China,  that  do  not  provide  the  PCAOB  with  sufficient  access  to  fulfill  its  statutory  mandate,  the  PWG
recommends enhanced listing standards on U.S. exchanges. This would require, as a condition to initial and continued exchange listing, PCAOB access to
work papers of the principal audit firm for the audit of the listed company. Companies unable to satisfy this standard as a result of governmental restrictions
on access to audit work papers and practices in these countries may satisfy this requirement by providing a co-audit from an audit firm with comparable
resources and experience where the PCAOB determines it has sufficient access to audit work papers and practices to conduct an appropriate inspection of the
co-audit  firm.  The  PWG  Report  permits  the  new  listing  standards  to  provide  for  a  transition  period  until  January  1,  2022  for  listed  companies.  The
recommendations are to include actions that could be taken under current laws and rules as well as possible new rulemaking recommendations. Any resulting
actions,  proceedings  or  new  rules  could  adversely  affect  the  listing  and  compliance  status  of  China-based  issuers  listed  in  the  United  States,  such  as  our
company, and may have a material and adverse impact on the trading prices of the securities of such issuers, including our ordinary shares, and substantially
reduce or effectively terminate the trading of our ordinary shares in the United States.

We may not meet continued listing standards on the NASDAQ Global Market. 

If our shares are delisted from the NASDAQ Global Market at some later date, our shareholders could find it difficult to sell our shares. In addition,
if  our  common  shares  are  delisted  from  the  NASDAQ  Global  Market  at  some  later  date,  we  may  apply  to  have  our  common  shares  quoted  in  the  OTC
Markets, otherwise they would automatically begin Quotation or in the “pink sheets” maintained by the National Quotation Bureau, Inc. The OTC Markets
and the “pink sheets” are less efficient markets than the NASDAQ Global Market. In addition, if our common shares are delisted at some later date, our
common shares may be subject to the “penny stock” regulations. These rules impose additional sales practice requirements on broker-dealers that sell low-
priced securities to persons other than established customers and institutional accredited investors and require the delivery of a disclosure schedule explaining
the nature and risks of the penny stock market. As a result, the ability or willingness of broker-dealers to sell or make a market in our common shares might
decline. If our common shares are delisted from the NASDAQ Global Market at some later date or become subject to the penny stock regulations, it is likely
that the price of our shares would decline and that our shareholders would find it difficult to sell their shares. 

The market price for our shares may be volatile. 

The trading prices of our common shares are likely to be volatile and could fluctuate widely due to factors beyond our control. This may happen
because of broad market and industry factors, like the performance and fluctuation in the market prices or the underperformance or deteriorating financial
results of internet or other companies based in China that have listed their securities in the United States in recent years. The securities of some of these
companies have experienced significant volatility since their initial public offerings, including, in some cases, substantial decline in their trading prices. The
trading performances of other Chinese companies’ securities after their offerings may affect the attitudes of investors toward Chinese companies listed in the
United States, which consequently may impact the trading performance of our common shares, regardless of our actual operating performance. In addition,
any  negative  news  or  perceptions  about  inadequate  corporate  governance  practices  or  fraudulent  accounting,  corporate  structure  or  other  matters  of  other
Chinese companies may also negatively affect the attitudes of investors towards Chinese companies in general, including us, regardless of whether we have
conducted any inappropriate activities. In addition, securities markets may from time to time experience significant price and volume fluctuations that are not
related to our operating performance, which may have a material adverse effect on the market price of our shares. In addition to the above factors, the price
and trading volume of our common shares may be highly volatile due to multiple factors, including the following: 

● regulatory developments affecting us, our users, or our industry;

● regulatory uncertainties with regard to our variable interest entity arrangements;

● announcements of studies and reports relating to our service offerings or those of our competitors;

● actual or anticipated fluctuations in our quarterly results of operations and changes or revisions of our expected results;

● changes in financial estimates by securities research analysts;

● announcements by  us  or  our  competitors  of  new  product  and  service  offerings,  acquisitions,  strategic  relationships,  joint  ventures  or  capital

commitments;

● additions to or departures of our senior management;

● detrimental negative publicity about us, our management or our industry;

25

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
● fluctuations of exchange rates between the RMB and the U.S. dollar;

● release or expiry of lock-up or other transfer restrictions on our outstanding common shares; and

● sales or perceived potential sales of additional common shares.

We are a “foreign private issuer,” and our disclosure obligations differ from those of U.S. domestic reporting companies. As a result, we may not provide
you the same information as U.S. domestic reporting companies or we may provide information at different times, which may make it more difficult for
you to evaluate our performance and prospects. 

We are a foreign private issuer and, as a result, we are not subject to the same requirements as U.S. domestic issuers. Under the Exchange Act, we
will be subject to reporting obligations that, to some extent, are more lenient and less frequent than those of U.S. domestic reporting companies. For example,
we  will  not  be  required  to  issue  quarterly  reports  or  proxy  statements.  We  will  not  be  required  to  disclose  detailed  individual  executive  compensation
information. Furthermore, our directors and executive officers will not be required to report equity holdings under Section 16 of the Exchange Act and will
not be subject to the insider short-swing profit disclosure and recovery regime. As a foreign private issuer, we will also be exempt from the requirements of
Regulation FD (Fair Disclosure) which, generally, are meant to ensure that select groups of investors are not privy to specific information about an issuer
before other investors. However, we will still be subject to the anti-fraud and anti-manipulation rules of the SEC, such as Rule 10b-5 under the Exchange
Act. Since many of the disclosure obligations imposed on us as a foreign private issuer differ from those imposed on U.S. domestic reporting companies, you
should not expect to receive the same information about us and at the same time as the information provided by U.S. domestic reporting companies. 

We are a Cayman Islands company and, because judicial precedent regarding the rights of shareholders is more limited under Cayman Islands law than
under U.S. law, you may have less protection for your shareholder rights than you would under U.S. law.

Our  corporate  affairs  are  governed  by  our  Memorandum  and  Articles  of  Association,  the  Cayman  Islands  Companies  Law  (Revised)  (the
“Companies  Law”)  and  the  common  law  of  the  Cayman  Islands.  The  rights  of  shareholders  to  take  action  against  the  directors,  actions  by  minority
shareholders and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common law of the
Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as
that from English common law, which has persuasive, but not binding, authority on a court in the Cayman Islands. The rights of our shareholders and the
fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in
some jurisdictions in the United States. In particular, the Cayman Islands has a different body of securities laws than the United States. In addition, some U.S.
states,  such  as  Delaware,  have  more  fully  developed  and  judicially  interpreted  bodies  of  corporate  law  than  the  Cayman  Islands.  There  is  no  statutory
recognition  in  the  Cayman  Islands  of  judgments  obtained  in  the  United  States,  although  the  courts  of  the  Cayman  Islands  will  in  certain  circumstances
recognize and enforce a non-penal judgment of a foreign court of competent jurisdiction without retrial on the merits. As a result of all of the above, public
shareholders  may  have  more  difficulty  in  protecting  their  interests  in  the  face  of  actions  taken  by  management,  members  of  the  board  of  directors  or
controlling shareholders than they would as shareholders of a U.S. public company.

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

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

We are a foreign private issuer and, as a result, will not be subject to U.S. proxy rules and will be subject to more lenient and less frequent Exchange Act
reporting obligations than a U.S. issuer.

We report under the Securities Exchange Act as a foreign private issuer. Because we qualify as a foreign private issuer under the Exchange Act, we

will be exempt from certain provisions of the Exchange Act that are applicable to U.S. public companies, including:

● the sections of the Exchange Act that regulate the solicitation of proxies, consents or authorizations in respect of a security registered under the

Exchange Act;

● the sections of the Exchange Act that require insiders to file public reports of their stock ownership and trading activities and impose liability on

insiders who profit from trades made in a short period of time; and

● the rules under the Exchange Act that require the filing of quarterly reports on Form 10-Q containing unaudited financial and other specified

information and current reports on Form 8-K upon the occurrence of specified significant events.

26

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
In addition, foreign private issuers are not required to file their annual report on Form 20-F until 120 days after the end of each fiscal year, while
U.S. domestic issuers that are not large accelerated filers or accelerated filers are required to file their annual report on Form 10-K within 90 days after the
end  of  each  fiscal  year.  Foreign  private  issuers  are  also  exempt  from  Regulation  FD,  aimed  at  preventing  issuers  from  making  selective  disclosures  of
material  information.  There  is  no  formal  requirement  under  the  Company’s  memorandum  and  articles  of  association  mandating  that  we  hold  an  annual
meeting of our shareholders. However, notwithstanding the foregoing, we intend to hold such meetings on our annual meeting to, among other things, elect
our directors. As a result, you may not have the same protections afforded to stockholders of companies that are not foreign private issuers.

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

The determination of our status as a foreign private issuer is made annually on the last business day of our most recently completed second fiscal
quarter and, accordingly, the next determination will be made with respect to us on or after December 31, 2019. We would lose our foreign private issuer
status if (1) a majority of our outstanding voting securities are directly or indirectly held of record by U.S. residents, and (2) a majority of our shareholders or
a  majority  of  our  directors  or  management  are  U.S.  citizens  or  residents,  a  majority  of  our  assets  are  located  in  the  United  States,  or  our  business  is
administered  principally  in  the  United  States.  If  we  were  to  lose  our  foreign  private  issuer  status,  the  regulatory  and  compliance  costs  to  us  under  U.S.
securities laws as a U.S. domestic issuer may be significantly higher. We may also be required to modify certain of our policies to comply with corporate
governance practices associated with U.S. domestic issuers, which would involve additional costs.

We will incur increased costs as a publicly-traded company.

As a company with publicly-traded securities, we will incur additional legal, accounting and other expenses not presently incurred. In addition, the
Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as well as rules promulgated by the SEC and the
national  securities  exchange  on  which  we  list,  requires  us  to  adopt  corporate  governance  practices  applicable  to  U.S.  public  companies.  These  rules  and
regulations will increase our legal and financial compliance costs.

We may be exposed to risks relating to evaluations of controls required by Sarbanes-Oxley Act of 2002. 

Pursuant to Sarbanes-Oxley Act of 2002, our management is required to report on, and our independent registered public accounting firm may in the
future be required to attest to, the effectiveness of our internal control over financial reporting. Our internal accounting controls may not meet all standards
applicable to companies with publicly traded securities. If we fail to implement any required improvements to our disclosure controls and procedures, we
may be obligated to report control deficiencies and, if required, our independent registered public accounting firm may not be able to certify the effectiveness
of  our  internal  controls  over  financial  reporting.  In  either  case,  we  could  become  subject  to  regulatory  sanction  or  investigation.  Further,  these  outcomes
could damage investor confidence in the accuracy and reliability of our financial statements.

As an “emerging growth company” under the Jumpstart Our Business Startups Act, or JOBS Act, we are permitted to, and intend to, rely on exemptions
from certain disclosure requirements.

As  an  “emerging  growth  company”  under  the  JOBS  Act,  we  are  permitted  to,  and  intend  to,  rely  on  exemptions  from  certain  disclosure

requirements. We are an emerging growth company until the earliest of:

● the last day of the fiscal year during which we have total annual gross revenues of $1.07 billion or more;

● the last day of the fiscal year following the fifth anniversary of our IPO;

● the date on which we have, during the previous 3-year period, issued more than $1 billion in non-convertible debt; or

● the date on which we are deemed a “large accelerated issuer” as defined under the federal securities laws.

For so long as we remain an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are
applicable  to  public  companies  that  are  not  “emerging  growth  companies”  including,  but  not  limited  to,  not  being  required  to  comply  with  the  auditor
attestation requirements of section 404 of the Sarbanes-Oxley Act for up to five fiscal years after the date of the IPO. We cannot predict if investors will find
our common shares less attractive because we may rely on these exemptions. If some investors find our common shares less attractive as a result, there may
be a less active trading market for our common shares and the trading price of our common shares may be more volatile. In addition, our costs of operating as
a public company may increase when we cease to be an emerging growth company.

We may be classified as a passive foreign investment company, which could result in adverse U.S. federal income tax consequences to U.S. holders of our
common shares.

Based  on  the  historical  market  price  of  our  common  shares  since  the  IPO,  and  the  composition  of  our  income,  assets  and  operations,  we  do  not
expect to be treated as a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes for the current taxable year or in the foreseeable
future. However, the application of the PFIC rules is subject to uncertainty in several respects, and we cannot assure you the U.S. Internal Revenue Service
will not take a contrary position. Furthermore, this is a factual determination that must be made annually after the close of each taxable year. If we are a PFIC
for any taxable year during which a U.S. holder holds our common shares, certain adverse U.S. federal income tax consequences could apply to such U.S.
Holder.

27

 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
  
 
 
 
 
 
If  securities  or  industry  analysts  do  not  publish  research  or  publish  inaccurate  or  unfavorable  research  about  our  business,  the  market  price  for  our
common shares and trading volume could decline.

The trading market for our common shares will depend in part on the research and reports that securities or industry analysts publish about us or our
business.  If  research  analysts  do  not  establish  and  maintain  adequate  research  coverage  or  if  one  or  more  of  the  analysts  who  cover  us  downgrade  our
common shares or publish inaccurate or unfavorable research about our business, the market price for our common shares would likely decline. If one or
more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which, in
turn, could cause the market price or trading volume for our common shares to decline.

Our corporate structure, together with applicable law, may impede shareholders from asserting claims against us and our principals.

All of our operations and records, and all of our senior management are located in the PRC. Shareholders of companies such as ours have limited
ability  to  assert  and  collect  on  claims  in  litigation  against  such  companies  and  their  principals.  In  addition,  China  has  very  restrictive  secrecy  laws  that
prohibit the delivery of many of the financial records maintained by a business located in China to third parties absent Chinese government approval. Since
discovery is an important part of proving a claim in litigation, and since most if not all of our records are in China, Chinese secrecy laws could frustrate
efforts to prove a claim against us or our management. In addition, in order to commence litigation in the United States against an individual such as an
officer or director, that individual must be served. Generally, service requires the cooperation of the country in which a defendant resides. China has a history
of failing to cooperate in efforts to affect such service upon Chinese citizens in China.

If we become directly subject to the recent scrutiny involving U.S.-listed Chinese companies, we may have to expend significant resources to investigate
and or defend the matter, which could harm our business operations, stock price and reputation and could result in a complete loss of your investment in
us.

Recently,  U.S.  public  companies  that  have  substantially  all  of  their  operations  in  China  have  been  the  subject  of  intense  scrutiny  by  investors,
financial  commentators  and  regulatory  agencies.  Much  of  the  scrutiny  has  centered  around  financial  and  accounting  irregularities  and  mistakes,  a  lack  of
effective internal controls over financial reporting and, in many cases, allegations of fraud. As a result of the scrutiny, the publicly traded stock of many U.S.
listed  China-based  companies  that  have  been  the  subject  of  such  scrutiny  has  sharply  decreased  in  value.  Many  of  these  companies  are  now  subject  to
shareholder lawsuits and or SEC enforcement actions that are conducting internal and or external investigations into the allegations. If we become the subject
of any such scrutiny, whether any allegations are true or not, we may have to expend significant resources to investigate such allegations and or defend our
company. Such investigations or allegations will be costly and time-consuming and distract our management from our business plan and could result in our
reputation being harmed and our stock price could decline as a result of such allegations, regardless of the truthfulness of the allegations.

Changes  in  general  economic  conditions,  geopolitical  conditions,  U.S.-China  trade  relations  and  other  factors  beyond  the  Company’s  control  may
adversely impact our business and operating results.

The Company’s operations and performance depend significantly on global and regional economic and geopolitical conditions. Changes in U.S.-
China  trade  policies,  and  a  number  of  other  economic  and  geopolitical  factors  both  in  China  and  abroad  could  have  a  material  adverse  effect  on  the
Company’s business, financial condition, results of operations or cash flows. Such factors may include, without limitation:

● instability  in  political  or  economic  conditions,  including  but  not  limited  to  inflation,  recession,  foreign  currency  exchange  restrictions  and
devaluations, restrictive governmental controls on the movement and repatriation of earnings and capital, and actual or anticipated military or
political conflicts, particularly in emerging markets;

● intergovernmental conflicts or actions, including but not limited to armed conflict, trade wars, retaliatory tariffs, and acts of terrorism or war;

and

● interruptions to the Company’s business with its largest customers, distributors and suppliers resulting from but not limited to, strikes, financial
instabilities,  computer  malfunctions  or  cybersecurity  incidents,  inventory  excesses,  natural  disasters  or  other  disasters  such  as  fires,  floods,
earthquakes, hurricanes or explosions.

Any of the foregoing or similar factors could result in reduced demand for our services which, in turn, could have material adverse effects on our

business and results of operations.

28

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ITEM 4.

INFORMATION ON THE COMPANY

A.

History and Development of the Company

We  are  a  global  information  technology  (“IT”),  consulting  and  solutions  service  provider  focused  on  delivering  services  to  global  institutions  in
banking,  insurance  and  financial  sectors,  both  in  China  and  globally.  For  more  than  ten  years,  we  have  served  as  an  IT  solutions  provider  to  a  growing
network of clients in the global financial industry, including large financial institutions in the US, Europe, Australia, Southeast Asia, and Hong Kong and
their PRC-based IT centers.

Since our inception, we have aimed to build one of the largest sales and service delivery platforms for IT services and solutions in China. The nature
of our services is such that we provide a majority of services to our banking and credit card clients in order to build new or modify existing clients’ own
proprietary systems. We are fully committed of providing digital transformation services with focused on financial and technology in the banking, wealth
management,  e-commerce,  and  automotive  industries,  among  others,  through  the  utilization  of  innovative  technology  to  achieve  our  client’s  goals.  We
maintain 18 delivery and/or R&D centers, of which ten are located in Mainland China (Shanghai, Beijing, Dalian, Tianjin, Baoding Chengdu, Guangzhou,
Shenzhen,  Hangzhou,  and  Suzhou)  and  eight  are  located  globally  (Hong  Kong  SAR,  USA,  UK,  Japan,  Singapore,  Malaysia,  Australia,  and  India.  By
combining  onsite  (when  we  send  our  team  to  our  client)  or  onshore  (when  we  send  our  team  to  client’s  overseas  location)  support  and  consulting  with
scalable and high-efficiency offsite (when we send our team to a location other than client’s location) or offshore (when we send our team to a location that is
other than a client’s location overseas) services and processing, we are able to meet client demands in a cost-effective manner while retaining significant
operational flexibility. By serving both Chinese and global clients on a common platform, we are able to leverage the shared resources, management, industry
expertise and technological know-how to attract new business and remain cost competitive.

Corporate History and Background

CLPS Incorporation was incorporated under the laws of the Cayman Islands on May 11, 2017. Our share capital is US$10,000, which is divided into
100,000,000 common shares authorized, or US$0.0001 par value per share. On December 7, 2017, the Board of Directors approved a nominal issuance of the
following  shares  to  the  existing  shareholders:  5,000,000  shares  to  Qinrui  Ltd.,  5,000,000  shares  to  Qinhui  Ltd.,  430,823  shares  to  Qinlian  Ltd.,  430,804
shares to Qinmeng Ltd. and 428,373 shares to Qinyao Ltd. All of the five shareholders are incorporated in the British Virgin Islands.

The Company owns all of the outstanding capital stock of both Qinheng (incorporated on June 9, 2017) and Qiner (incorporated on April 21, 2017).
Qinheng owns all of the outstanding capital stock of CLPS QC (WOFE) (incorporated on August 4, 2017). CLPS QC (WOFE) and Qiner respectively own
55.30% and 44.70% of the outstanding capital stock of CLPS Shanghai, the Company’s operating subsidiary based in Pudong New District, Shanghai, China,
originally incorporated on August 30, 2005.

On August  30,  2005,  CLPS  Shanghai  was  established  by  Jingsu  Pan  and  Xiaochun  Deng  as  a  PRC  limited  liability  company.  Jingsu  Pan  and
Xiaochun Deng each actually paid RMB250,000 (approximately US$30,881) in cash for 50% of equity interest in CLPS Shanghai, and the total registered
capital of CLPS Shanghai was RMB500,000 (approximately US$61,763).

On December 23, 2005, CLPS Shanghai increased its registered capital to RMB1,000,000 (approximately US$123,671). Jingsu Pan and Xiaochun

Deng respectively made full payment for their subscribed capital to RMB500,000 (approximately US$61,835) on December 21, 2005.

On March 29, 2010, Yan Pan entered into a Share Purchase Agreement with Jingsu Pan to purchase all of Jingsu Pan’s shares in CLPS Shanghai.
Pursuant  to  the  Share  Purchase  Agreement,  Yan  Pan  paid  RMB500,000  (approximately  US$61,835)  for  50%  shares  of  CLPS  Shanghai.  After  this  share
transfer, Yan Pan and Xiaochun Deng respectively held 50% shares of CLPS Shanghai.

On October 19, 2010, Raymond Ming Hui Lin entered into a Share Purchase Agreement with Xiaochun Deng to purchase all of Xiaochun Deng’s
shares  in  CLPS  Shanghai.  Pursuant  to  the  Share  Purchase  Agreement,  Raymond  Ming  Hui  Lin  paid  RMB500,000  (approximately  US$61,835)  for  50%
shares of CLPS Shanghai. After this share transfer, Yan Pan and Raymond Ming Hui Lin respectively held 50% shares of CLPS Shanghai. Since Raymond
Ming Hui Lin is a Hong Kong resident, CLPS Shanghai changed its form in a Sino-foreign equity joint venture.

On October 31, 2012, CLPS Shanghai increased its registered capital to RMB5,000,000 (approximately US$799,987). Yan Pan and Raymond Ming
Hui  Lin  each  increased  their  subscribed  capital  to  RMB2,500,000  (approximately  US$399,993).  Yan  Pan  actually  paid  RMB1,000,000  (approximately
US$159,997) and Raymond Ming Hui Lin actually paid RMB1,008,120 (approximately US$161,296) for the capital contributions on October 18, 2012.

On  October  30,  2013,  Xiao  Feng  Yang  entered  into  a  Share  Purchase  Agreement  with  Yan  Pan  to  purchase  all  of  Yan  Pan’s  shares  in  CLPS
Shanghai. Pursuant to the Share Purchase Agreement, Xiao Feng Yang paid RMB2,500,000 (approximately US$399,993) for 50% shares of CLPS Shanghai.
After this share transfer, Xiao Feng Yang and Raymond Ming Hui Lin respectively held 50% shares of CLPS Shanghai.

29

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
On  June  24,  2014,  CLPS  Shanghai  increased  its  registered  capital  to  RMB30,000,000  (approximately  US$4,759,004).  Xiao  Feng  Yang  and

Raymond Ming Hui Lin respectively increased their subscribed capital to RMB15,000,000 (approximately US$2,379,502).

On April 23, 2015, Raymond Ming Hui Lin paid RMB6,163,560 (approximately US$994,523) for the capital contribution that he has made.

On May 27, 2015, Raymond Ming Hui Lin paid RMB3,391,883 (approximately US$546,980) for the capital contribution that he has made.

On May 29, 2015, Xiao Feng Yang paid RMB4,400,000 (approximately US$709,906), plus with his cash dividends for the capital contribution that

he has made.

On August 5, 2015, Raymond Ming Hui Lin paid RMB3,894,060 (approximately US$627,103) for the capital contribution that he has made.

On August 27, 2015, Raymond Ming Hui Lin paid RMB42,377 (approximately US$6,615) for the capital contribution that he has made.

On July 21, 2015, Xiao Feng Yang paid RMB1,100,000 (approximately US$177,147) for the capital contribution that he has made.

On August 14, 2015, Xiao Feng Yang paid RMB8,000,000 (approximately US$1,251,799), plus with his cash dividends for the capital contribution

that he has made.

On  December  15,  2015,  CLPS  Shanghai  changed  its  form  into  a  PRC  joint  stock  limited  company.  The  share  capital  of  CLPS  Shanghai  was

RMB30,000,000, which was divided into 30,000,000 shares of RMB1.00 per share.

On May 26, 2016, three limited partnerships subscribed new shares issued by CLPS Shanghai and became shareholders of CLPS Shanghai. These
three  limited  partnerships  were:  Shanghai  Qinyao  Investment  Partnership  (LLP),  Shanghai  Qinzhi  Investment  Partnership  (LLP)  and  Shanghai  Qinshang
Software Technology Counsel Partnership (LLP). After the above-mentioned subscription, the shareholding structure of CLPS Shanghai was as follows:

INVESTORS
Xiao Feng Yang
Raymond Ming Hui Lin
Shanghai Qinyao Investment Partnership (LLP)
Shanghai Qinzhi Investment Partnership (LLP)
Shanghai Qinshang Software Technology Counsel Partnership (LLP)
Total:

PLACE OF REGISTRATION

  PRC
  Hong Kong
  PRC
  PRC
  PRC

SHARES  
    15,000,000 
    15,000,000 
1,700,000 
1,270,000 
900,000 
    33,870,000 

On June 5, 2017, Qinheng was established by CLPS Incorporation in Hong Kong. The total amount of share capital of Qinheng to be subscribed by

CLPS Incorporation was HKD 10,000.00 and CLPS Incorporation held 100% of equity interest in Qinheng.

In July 2017, three of the abovementioned limited partnerships transferred all of their equity interest in CLPS Shanghai to their individual partners

according to the proportion of each partner’s capital contribution. A total of 47 individuals became shareholders of CLPS Shanghai.

In August 2017, Qiner entered into three Share Purchase Agreements with three non-Chinese individual shareholders of CLPS Shanghai. The three
non-Chinese individual shareholders are Raymond Ming Hui Lin (Hong Kong), Limpiada Zosimo (Philippines) and Lin James De-Mou (Taiwan). Including,
Raymond Ming Hui Lin sold 15,000,000 shares, Limpiada Zosimo sold 71,229 shares and Lin James De-Mou sold 67,510 shares. The aforementioned share
transfer was part of reorganization of the group. 

30

 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
   
   
 
 
 
 
On August 4, 2017, CLPS QC (WOFE) received a business license from China (Shanghai) Pilot Free Trade Zone Administration for Industry and
Commerce and was established by Qinheng as a PRC limited liability company. Qinheng subscribed USD 200,000 and held 100% of equity interest in CLPS
QC (WOFE).

On October 31, 2017, CLPS Incorporation entered into a SOLD NOTE with Raymond Lin Ming Hui to purchase all of Raymond Lin Ming Hui’s

shares in Qiner. After this transfer, CLPS Incorporation held 100% shares of Qiner. Qiner has become CLPS Incorporation’s wholly-owned subsidiary.

In  October  2017,  all  Chinese  individual  shareholders  of  CLPS  Shanghai  completed  the  procedures  for  foreign  exchange  registration  of  overseas
investments in accordance with the Circular of the State Administration of Foreign Exchange on Issues concerning Foreign Exchange Administration over
the Overseas Investment and Financing and Round-trip Investment by Domestic Residents via Special Purpose Vehicles (SAFE 2014 No. 37). After these
registrations, CLPS QC (WOFE) entered into 46 Share Purchase Agreements with all 46 Chinese individual shareholders of which the 46 Chinese individual
shareholders in total held 18,731,261 shares of CLPS Shanghai. The aforementioned share transfer was part of a reorganization of the group.

On  November  2,  2017,  the  transfer  between  the  46  Chinese  individual  shareholders  and  CLPS  QC  (WOFE)  has  completed  the  record-filing  of

changes of Foreign-invested Company and got the record receipt.

On  September  15,  2020,  Shanghai  Qincheng  Information  Technology  Co.,  Ltd.  and  Qiner  Co.,  Limited  subscribed  new  shares  issued  by  CLPS

Shanghai. After the above-mentioned subscription, the shareholding structure of CLPS Shanghai was as follows

INVESTORS
Shanghai Qincheng Information Technology Co., Ltd.
Qiner Co., Limited
Total:

  PRC
  Hong Kong

PLACE OF REGISTRATION

SHARES

27,651,699 
22,348,301 
50,000,000 

As of the date of this Annual Report, CLPS Shanghai has three wholly-owned subsidiaries: CLPS RC, CLPS Huanyu, and CLPS Hangzhou Co.,

Ltd., Besides the three wholly-owned subsidiaries, CLPS Shanghai participated in the following investments:

● CLPS Beijing — CLPS Shanghai holds 49% of equity interest in CLPS Beijing, a PRC limited liability company

● Judge China — CLPS Shanghai holds a 60% of equity interest in Judge China, a PRC limited liability company

● CLPS Shenzhen — CLPS Shanghai holds 70% of equity interest in CLPS Shenzhen, a PRC limited liability company.

● CLPS Guangzhou — CLPS Shanghai holds 51% of equity interest in CLPS Guangzhou, a PRC limited liability company.

● CLPS Dalian — CLPS Shanghai holds 49% of equity interest in CLPS Dalian, a PRC limited liability company.

● CLPS Lihong — CLPS Shanghai holds 7% of equity interest in CLPS Lihong, a PRC limited liability company.

● CLPS  Guangdong  Zhichuang  —  CLPS  Shanghai  holds  10%  of  equity  interest  in  CLPS  Guangdong  Zhichuang,  a  PRC  limited  liability

company.

● CLPS Shenzhen Robotics — CLPS Shanghai holds 10% of equity interest in CLPS Shenzhen Robotics, a PRC limited liability company.

IT consulting services primarily includes application development services for banks and institutions in the financial industry and which are billed
for on a time-and-expense basis. Customized IT solutions services primarily includes customized solution development and maintenance service for general
enterprises and which are billed for on a fixed-price basis. The following entities provide either consulting or solution services or both, depending on where
our clients are based. The entities are currently servicing one of the services might expand to both services if our clients’ needs arise:

●  CLPS Dalian provides both consulting and solution services. CLPS Dalian services clients in China’s north east region, including Dalian.

● CLPS RC provides consulting services. CLPS RC focuses on small and medium domestic financial institutions.

● CLPS Beijing provides both consulting and solution services. CLPS Beijing services clients in China’s central east region, including Beijing

and Tianjin.

31

 
 
 
 
 
 
 
 
 
 
   
   
   
   
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
● CLPS-Ridik AU currently only provides consulting services. CLPS-Ridik AU services clients in Australia.

● CLPS SG currently only provides consulting services. CLPS SG services clients in South East Asia region, including Singapore.

● Infogain currently only provides consulting services. Infogain services clients in South East Asia region, including Singapore.

● Judge China is a joint venture with The Judge Group in the US. Judge China continues to service The Judge Group’s clients in China. Judge

China focuses on expanding its client bases with collaboration efforts with The Judge Group.

● CLPS Hong Kong currently only provides consulting services. CLPS Hong Kong services clients in East Asia region, including Hong Kong.

● CLPS Shenzhen currently only provides consulting services. CLPS Shenzhen services clients in Shenzhen.

● CLPS Guangzhou currently only provides consulting services. CLPS Guangzhou services clients in Guangzhou.

● Ridik Pte currently only provides consulting services. Ridik Pte services in South East Asia region, including Singapore.

● Ridik Software Pte currently only provides consulting services. Ridik Software Pte services in South East Asia region, including Singapore.

● Ridik Sdn currently only provides consulting services. Ridik Sdn services in South East Asia region, including Malaysia.

● CLPS Shanghai  holds  100%  of  equity  interest  in  Huanyu  which  was  incorporated  in  September  2017  for  the  purposes  of  providing  Internet
technology services and products to clients. CLPS Shanghai, CLPS Dalian, CLPS RC, CLPS Beijing and Judge China all contribute material
amounts of the Company’s total revenues.

Corporate Information

On May 2020, we relocated our principal executive office to Unit 702, 7th Floor, Millennium City II, 378 Kwun Tong Road, Kwun Tong, Kowloon,
Hong Kong SAR from 2nd Floor, Building 18, Shanghai Pudong Software Park, 498 Guoshoujing Road, Pudong District, Shanghai, PRC. Our telephone
number is (852)3707-3600. Our website is as follows www.clpsglobal.com. The information on our website is not part of this Annual Report.

The following diagram illustrates our corporate structure:

32

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The Initial Public Offering

On May 24, 2018, the Company completed its initial public offering of 2,000,000 common shares, $0.0001 par value per share. The common shares
were sold at an offering price of $5.25 per share, generating gross proceeds of approximately $10.5 million, and net proceeds of approximately $9.5 million.
The registration statement relating to this IPO also covered the underwriters’ common stock purchase warrants and the common shares issuable upon the
exercise thereof in the total amount of 83,162 common shares. Each five-year warrant entitles the warrant holder to purchase the Company’s shares at the
exercise price of $6.30 per share and is not be transferable for a period of 180 days from May 23, 2018. On June 8, 2018, the Company closed on the exercise
in full of the over-allotment option to purchase an additional 300,000 common shares of the Company by The Benchmark Company, LLC, the representative
of the underwriters in connection with and the book running manager of the Company’s IPO, at the IPO price of $5.25 per share. As a result, the Company
raised gross proceeds of approximately $1.58 million, in addition to the IPO gross proceeds of approximately $10.5 million, or combined gross IPO proceeds
of approximately $12.08 million, before underwriting discounts and commissions and offering expenses. Our common shares began trading on the NASDAQ
Capital Market on May 24, 2018 under the ticker symbol “CLPS”.

We have earmarked and have been using the proceeds of the initial public offering as follows: approximately $4.41 million for global expansion,
i.e., to expand our existing locations to develop new clients by hiring more qualified personnel, system integration and marketing effort; approximately $3.31
million for working capital and general corporate purposes; approximately $2.21 million for R&D; and approximately $1.09 million for talent development.

B.

Business Overview

Overview

We  are  a  global  information  technology  (“IT”),  consulting  and  solutions  service  provider  focused  on  delivering  services  to  global  institutions  in
banking,  insurance  and  financial  sectors,  both  in  China  and  globally.  For  more  than  ten  years,  we  have  served  as  an  IT  solutions  provider  to  a  growing
network of clients in the global financial industry, including large financial institutions from the US, Europe, Australia, Southeast Asia and Hong Kong, and
their PRC-based IT centers. We have created and developed a particular market niche by providing turn-key financial solution. Since our inception, we have
aimed to build one of the largest sales and service delivery platforms for IT services and solutions in China. We are fully committed of providing digital
transformation services with focused on financial and technology in the banking, wealth management, e-commerce, and automotive industries, among others,
through  the  utilization  of  innovative  technology  to  achieve  our  client’s  goals.  We  maintain  18  delivery  and/or  R&D  centers,  of  which  ten  are  located  in
Mainland China (Shanghai, Beijing, Dalian, Tianjin, Baoding Chengdu, Guangzhou, Shenzhen, Hangzhou, and Suzhou) and eight are located globally (Hong
Kong  SAR,  USA,  UK,  Japan,  Singapore,  Malaysia, Australia,  and  India.  By  combining  onsite  or  onshore  support  and  consulting  with  scalable  and  high-
efficiency offsite or offshore services and processing, we are able to meet client demands in a cost-effective manner while retaining significant operational
flexibility. We believe that maintaining our Company as a proven, reliable partner to our financial industry clients both in China and globally positions us
well to capture greater opportunities in the rapidly evolving global market for IT consulting and solutions.

Industry and Market Background

China’s Banking Industry

According to the 2019 annual report of China Banking and Insurance Regulatory Commission (CBIRC), China’s banking financial institutions had
total assets of RMB 282.5 trillion (USD 40.6 trillion) at the end of 2019, a year-on-year increase of RMB 14.3 trillion (USD 2.1 trillion), or 8.1%. Total
liabilities equalled to RMB 258.2 trillion (USD 37.1 trillion), a year-on-year increase of RMB 11.6 trillion (USD 1.7 trillion), or 7.6%. The total assets of
banking financial institutions were RMB 27.6 trillion (USD 4.0 trillion) in 2003. Over the past 10 years, total assets of China’s banking financial institutions
grew  at  a  compound  annual  growth  rate  of  nearly  20%.  However,  the  banking  industry  is  facing  many  challenges,  such  as  the  competition  with  private
capital,  the  participation  of  technological  enterprises,  changes  in  the  financial  market,  the  tightening  of  regulatory  policies,  and  more  diversified  deposit
substitute products, among others. Following the 2006 repeal of geographical and customer restrictions on foreign banks, the CBIRC continued the policies
to open China’s banking industry for entry by foreign competitors to promote healthy competition in the industry. By May 2020, 217 foreign banks in 54
countries and regions are now presents in China, with headquarters, branches, sub-branches and a complete service network with certain coverage and market
depth, with more than 993 outlets.

33

 
 
 
 
 
 
 
 
 
 
 
  
Software and Information Technology Service Industry in China

According to the 2019 Economic Performance of the Software Industry report of Ministry of Industry and Information Technology (MIIT), China’s
software and information technology service industry shows a steady development trend, with rapid growth in income and profits and steady increase in the
number of employees. Information technology services accelerate the development of cloud, software application servitization, platform trend is obvious;
The software industry in the central region grows rapidly, while the eastern region maintains a concentrated and leading development trend.

China’s  software  and  information  technology  services  industry  has  developed  and  grown  rapidly  in  recent  years.  The  MIIT  data  shows  that  the
industry’s revenue reached RMB 7.2 trillion (USD 1.03 trillion) in 2019, an increase of 15.4% compared to 2018, with the same growth rate. Industry profits
grew steadily. In 2019, the industry achieved a total profit of RMB 936 billion (USD 134.4 billion), an increase of 9.9% over the previous year.

Data Source: The Ministry of Industry and Information Technology, National Bureau of Statistics of China.

The development of China’s software and IT service industry is generally characterized by:

● Information  technology  services  —Stayed  ahead  and  continued  to  evolve  towards  cloud  computing.  In  2019,  the  industry’s  revenue  from
information technology services reached RMB 4.3 trillion (USD 617 billion), an increase of 18.4% over the previous year. The growth rate was
3% higher than the industry’s average, accounting for 59.3% of the industry’s revenue. Among them, e-commerce platform technical services
revenues reached RMB 0.8 trillion (USD 114 billion), an increase of 28.1% over the previous year.

● Software products —In 2019, the industry’s revenue from software products reached RMB 2.01 trillion (USD 288 billion), an increase of 12.5%
over the previous year, accounting for 28.0% of the industry’s revenue. Among them, the revenues from industrial software products are RMB
172.0 billion (USD 24.7 billion), an increase of 14.6%. playing an important role in supporting the independent and controllable development
of the industrial sector.

● Embedded system software –The revenue of embedded system software reached RMB 782.0 billion (USD 112.3 billion), an increase of 7.8%
over the previous year, accounting for 10.9% of the industry’s revenue. Embedded system software has become a key driving technology for
digital transformation of products and equipment and intelligent value-added in various fields.

● Development  on  regional  level  —The  eastern  region  has  developed  steadily,  and  the  software  industry  in  the  central  and  western  regions
increased. In 2019, revenue from software business completed in eastern regions reached RMB 5.7 trillion (USD 818 billion), with a growth
rate of 15.0% year-on-year, accounting for 79.6% of the national software industry. Revenue from software business completed in central and
western  regions  was  RMB  365.5  billion  (USD  52.5  billion)  and  RMB  860.7  billion  (USD  123.6  billion),  with  a  growth  rate  of  22.2%  and
18.1%, accounting for 5.1% and 12.0 % of the national software industry, respectively, an increase of 0.1% and 0.6% from the previous year.
Software  business  revenue  in  northeast  China  reached  RMB  235.0  billion  (USD  33.8  billion),  accounting  for  3.3%  of  the  national  software
industry, an increase of 5.5% year-on-year.

34

 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial institutions/banking IT solutions refer to the software or IT related services provided by professional IT service providers who use their
own experience and technology to meet each bank’s needs in business development, strategic development, and management efficiency. The market share of
China’s Banking IT Solution Industry from 2010 are shown as below:

Data Source: IDC data

According to IDC’s 2019 China Banking IT Solution Market Share report, the year-on-year growth rate of China’s banking IT solution market has
increased with stable and healthy development. The operating environment of China’s banking industry has undergone extensive transformation. Banks are in
different  stages  of  architectural  transformation  and  upgrade.  Although  the  demand  for  software  and  information  technology  services  remains  strong,  the
demand of various banks depends on their IT solution needs.

* The People’s Bank of China established the financial science and technology commission in 2017, after that, issued “FinTech Development Plan
(2019-2021)” on August 22, 2019, fully highlighted the positive attention and support in the field of financial technology in China. For the financial industry,
it is a powerful drive to accelerate the applications of technologies. With the highest informationization level of financial sector, banking is affected by the
Plan.

*  Under  the  trend  of  deepening  the  application  of  financial  technology,  the  practice  cases  of  distributed,  cloud  computing,  big  data,  artificial
intelligence,  blockchain  and  other  emerging  technologies  in  the  banking  industry  are  increasingly  rich,  especially  the  wave  of  distributed  architecture
transformation,  leading  a  new  round  of  IT  construction  business  cycle  in  the  banking  industry.  On  the  one  hand,  the  traditional  centralized  core  business
system is facing the dual pressure of cost and performance, institutions need to evaluate their own business needs and selectively transform and replace the
core system; on the other hand, the core system connects with many types of peripheral systems, such as credit system, payment system, channel system,
management system, etc., under the influence of core system reformation, banks will release a large number of demands in transforming peripheral system.

In 2019, the overall market size of China’s banking IT solution market reached RMB 42.58 billion (USD 6.1 billion), an increase of 23.9% over
2018. In this annual report, IDC made an overall adjustment to historical data based on changes in statistical caliber, which brought the overall market size of
China’s banking IT solution market to RMB 34.37 billion (USD 4.9 billion) in 2018. IDC predicts that by 2024, the scale of China’s banking IT solution
market will reach RMB 127.35 billion (USD 18.3 billion).

With  the  introduction  of  “FinTech  Development  Plan”,  the  commercialization  practice  of  emerging  technologies  has  become  more  and  more
abundant.  In  the  environment  of  comprehensive  promotion  of  digital  transformation,  banks  need  to  support  business  innovation  transformation  through
technical route transformation, and the investment determination and strength in IT construction and transformation have been significantly improved. The
banking industry is accelerating the exploration of distributed innovation, and most manufacturers have launched a new generation of solutions that support
both  centralized  and  distributed  applications.  The  overall  competitive  ecology  of  supply  and  demand  sides  of  the  industry  is  reshaping,  and  the  future
incremental market of banking IT solutions is expected.

35

 
 
 
 
 
 
 
 
 
Our primary focus is in the following key operational areas:

Banking

Providing professional IT consulting and solutions for the banking industry is one of the traditional competitive advantages of CLPS. With more
than  15  years  of  experience  in  helping  leading  global  banks  to  implement  banking  systems,  CLPS  is  committed  to  innovating  and  optimizing  traditional
banking system by utilizing cutting-edge fintech technology to enable institutions embrace banking.

CLPS has formed strategic partnerships with several global financial MNCs to provide banking IT services, help leading global banks to implement
banking system and to enable them to test and enhance multiple functions such as loans, saving, deposit, general ledger, account management, anti-money-
laundering, risk control and credit card system. Whether traditional or online banking, CLPS has a wide array of business modules at its disposal.

CLPS  has  a  deep  understanding  of  the  market  supply  and  demand  buoyed  by  its  more  than  a  decade  experience  in  traditional  banking  business.
CLPS provides IT services in the banking industry, including but not limited to bank channel services such as mobile banking and online banking; business
services  such  as  marketing  and  risk  control,  among  others;  management  services  such  as  customer  relationship  management,  business  intelligence,  and
information security management, to name a few.

By integrating its internal resources, CLPS has been able to continue to invest and develop series of R&D products, including credit card system,
integrated transaction acquiring platform, reward points terminal, and virtual bank training platform, among others. These products have achieved positive
feedback from the market.

For the year ended June 30, 2020, revenues from our banking area were approximately $44.5 million compared to $33.1 million for the year ended

June 30,2019. Revenues from our banking area accounted for 49.8% and 51.2% of our total revenues in fiscal 2020 and 2019 respectively.

Significant portion of our services caters the banking clients.

Credit Card Area

Most  of  the  global  credit  card  issuers  maintain  branches  and  supporting  technical  infrastructure  in  China.  The  development,  testing,  support  and
maintenance of these platforms require in-depth understanding and knowledge of business processes supported by IT. There is a significant demand for such
IT consulting services among large-scale credit card platforms because many of such institutions experience shortage of qualified personnel and resources.
We offer more than ten years of experience in IT consulting services across key credit card business areas, including credit card applications, account setup,
authorization and activation, settlement, collection, promotion, point system, anti-fraud, statement, reporting and risk management. In the past years, we have
successfully helped our China and global clients manage their credit card IT systems such as VisionPLUS. We offer expertise in customizing these credit card
tools and platforms to suit a variety of business models. Our highly experienced team possesses the requisite expertise in providing service in the credit card
area.  The  IT  consulting  professional  teams  provides  service  in  the  credit  card  area  from  Shanghai,  Dalian  and  Hong  Kong.  We  offer  this  experience  and
expertise in various currencies, across different geographical regions, including, but not limited to China, Singapore, UK, Philippines, Indonesia, and Latin
America. In addition, we have developed a series of credit card solutions in order to meet the needs of our clients better.

For the year ended June 30, 2020, revenues from our credit card area were approximately $9.5 million compared to $3.5 million for the year ended

June 30,2019. Revenues from our credit card area accounted for 21.3% and 10.4% of our banking revenues in fiscal 2020 and 2019 respectively.

Core Banking Area

We are one of China’s largest core banking system services providers for global banks. Most global banks establish their IT development centers
and  gradually  expand  their  business  in  China.  Those  banks  require  significant  core  banking  IT  services.  We  offer  more  than  ten  years  of  experience  in
providing leading global banks with the support and expertise needed to implement their core banking system, including business analysis, system design,
development,  testing  services,  system  maintenance,  and  global  operation  support.  We  provide  services  across  multiple  functions  including  loans,  deposit,
general  ledger,  wealth  management,  debit  card,  anti-money-laundering,  statement  and  reporting,  and  risk  management.  We  also  provide  architecture
consulting services for core banking systems and online and mobile banking. We successfully transformed the centralized core banking system for one of our
US-based clients to a service-oriented architecture and integrated it into a global unified version, which successfully satisfied its business needs in various
markets. In addition, we engage the cloud-native solution of core banking system with micro services architecture, which can serve both Chinese and global
banks to meet the ever-changing demands of the market with high flexibility, high scalability, high reliability and multichannel connectivity.

For the year ended June 30, 2020, revenues from our core banking area were approximately $35.0 million compared to $29.7 million for the year

ended June 30,2019.

Wealth Management

In  this  annual  report,  “wealth  management”  refers  to  the  segments  of  financial  industry  except  banking,  including  but  not  limited  to  investment
banking,  funds,  insurance,  securities,  futures,  clearing,  consumer  financing,  online  financing,  and  supply  chain  financing.  CLPS  has  in-depth  industry
knowledge and solutions in the field of wealth management, and constantly develops and innovates according to the needs of clients.

36

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
In the past years, we have successfully developed and managed a variety of IT systems for Chinese and global clients, including the development of
asset  management  system,  core  insurance  system,  pension  system  for  well-known  international  investment  bank,  large  international  insurance  group,  and
leading asset management corporation. We also provided development, operation, and maintenance for data analysis and business management systems of
China’s national financial information platform, China’s national clearing house, stock exchange, and several large security institutions in China. In addition,
we have developed mobile terminal for multiple comprehensive financial service providers and consumer finance platforms both in China and globally.

For the year ended June 30, 2020, revenues from our wealth management area were approximately $19.2 million compared to $14.5 million for the
year  ended  June  30,2019.  Revenues  from  our  wealth  management  area  accounted  for  21.5%  and  22.4%  of  our  total  revenues  in  fiscal  2020  and  2019
respectively.

E-Commerce

By  constantly  improving  our  capabilities,  we  have  gradually  extended  our  main  service  offerings  from  banking  and  financial  institutions  to  e-
Commerce  industry.  We  have  rapidly  developed  and  accumulated  certain  skills  in  online  platforms,  cross-border  e-commerce,  logistics,  and  back-end
technology such as big data analysis, and intelligent decision-making among others. In the past years, we have successfully provided IT system development
delivery for domestic and international clients, including a global online trading project for a top US e-Commerce company. We have also developed the
global  terminal,  payment,  and  risk  control  system  for  a  well-known  online  ticketing  website.  In  addition,  CLPS  has  developed  the  website  and  product
market  data  analysis  for  a  leading  and  international  travel  e-commerce  platform,  and  the  e-Commerce  platform  for  a  large  investment  holding  group  in
China.

For the year ended June 30, 2020, revenues from our e-Commerce area were approximately $11.1 million compared to $8.7 million for the year

ended June 30,2019. Revenues from our e-Commerce area accounted for 12.4% and 13.4% of our total revenues in fiscal 2020 and 2019, respectively.

Automotive

With the extensive experience of CLPS in the IT services application in the financial and e-commerce industries, and its innovative implementation
of  cutting-edge  technology  such  as  big  data,  artificial  intelligence  and  robotic  process  automation  (RPA),  it  has  also  extended  its  business  to  automotive
industry.

There is a high demand of intelligent technology application in automobile industry in the recent years. Aside from providing internal management
system  development  for  several  international  automobile  enterprises,  we  also  get  deeply  involved  in  the  development  of  autonomous  driving,  automatic
control, and other AI-driven technology projects with several major clients. This includes the development of a new-energy vehicle intelligent platform for a
large  automotive  group  company  in  China  and  a  car’s  multimedia  software  for  a  Chinese  automotive  information  system  company.  Moreover,  we  also
provide development of internet auto finance platform for several Chinese enterprises.

For the year ended June 30, 2020, revenues from our automotive area were approximately $3.6 million compared to $2.0 million for the year ended

June 30,2019. Revenues from our automotive area accounted for 4.1% and 3.2% of our total revenues in fiscal 2020 and 2019 respectively.

Our business scope in terms of services:

Consulting Services

Revenues  from  consulting  services  are  recognized  from  time-and-expense  basis  contracts  as  the  related  services  are  rendered  assuming  all  other
basic  revenue  recognition  criteria  are  met.  Under  time-and-expense  basis  contracts,  the  Company  is  reimbursed  for  actual  hours  incurred  at  pre-agreed
negotiated hourly billing rates. Clients may terminate the contracts at any time before the work is completed but are obligated to pay the actual service hours
incurred through the termination date at the contract billing rate.

We provide consulting services to our clients in the banking, wealth management, e-commerce, and automotive industries, among others.

For the years ended June 30, 2020 and 2019, revenues from our IT consulting services were approximately USD 87.1 million and USD 61.8 million,

respectively. Revenues from our IT consulting services accounted for 97.5% and 95.1% of our total revenues in fiscal 2020 and 2019, respectively.

37

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Solution Services

Revenues  from  fixed-price  customized  solution  contracts  require  the  Company  to  perform  services  for  systems  design,  planning  and  integrating
based on customers’ specific needs which requires significant production and customization. The required customization work period is generally less than
one year. Upon delivery of the services, customer acceptance is generally required. In the same contract, the Company is generally required to provide post-
contract  customer  support  (“PCS’)  for  a  period  from  three  months  to  one  year  (“PCS  period”)  after  the  customized  application  is  delivered.  The  type  of
service for PCS clause is generally not specified in the contract or stand-ready service on when-and-if-available basis.

CLPS  provides  customized  solution  services  to  our  clients  in  the  banking,  wealth  management,  e-commerce,  and  automotive  industries,  among

others.

We are also an IT solution services provider in China and globally. We offer our clients over a decade of experience providing Chinese and global
financial institutions with business and technological know-how including cloud computing and big data. We have accumulated an in-depth knowledge base
that enables us to provide end-to-end customized solutions for our clients. The performance from our R&D center supports our ability to offer our clients
creative solution design, especially in the areas of new information technology such as blockchain.

We  offer  software  project  development,  maintenance  and  testing  solution  services,  including  COBOL,  Java,  .NET,  Mobile  and  other  technology
applications. Specifically, we assist our clients in three aspects: (i) adopting and applying the most suitable technologies to ensure that software solutions are
designed  with  information  security  and  intellectual  property  rights  protection  in  mind,  (ii)  building  and  managing  a  dedicated  or  leveraged  software
development,  maintenance  and  testing  quality,  and  efficiency  testing,  and  (iii)  providing  onshore  and  offshore  IT  solution  services  to  ensure  turn-key
delivery.

We  have  been  working  with  a  number  of  Chinese  domestic  banks  to  assist  them  in  leveraging  blockchain  technology.  Using  this  technology,  a
loyalty  reward  solution  for  the  bank’s  customers  was  developed  allowing  domestic  banks  to  track  and  trace  transactions  in  real-time.  It  was  recently
implemented in Jiangnan Rural Commercial Bank. Also, the pilot phase of this solution was completed for Taicang Rural Commercial Bank.

We have also signed a blockchain-related contract with a leading university of finance and economics in Shanghai. The project utilizes blockchain
technology  in  the  university’s  online  technical  training  platform  for  finance  majors.  In  addition,  this  project  also  applies  blockchain  technology  to  the
teaching management system for students. The management system offers an incentive mechanism that motivates students towards better study habits. This
concept is similar to the loyalty reward programs offered in the financial industry. The project passed the testing conducted by the university on December
18, 2018.

The solution sets up a consortium chain platform using blockchain technology. When a bank or a merchant joins the consortium, it becomes a node
of the consortium chain. This allows the bank’s customers to manage and use their rewards among different banks and merchants, as well as share rewards
among different customers. There are four layers in the overall architecture in this solution which includes the blockchain core layer, the blockchain SDK
layer, the application system layer and the front-end layer. The consensus mechanism, P2P protocol, distributed ledger and storage mechanism of core layer
are used to record transactions and prevent fraud. We will continue to develop our new IT solutions to meet the evolving needs of our Chinese and global
financial institutional clientele drawing upon the forward-looking research of our R&D center.

For the years ended June 30, 2020 and 2019, revenues from our customized IT solution services were approximately USD 1.8 million and USD3.0
million, respectively. Revenues from our customized IT solution services accounted for 2.1% and 4.7% of our total revenues in fiscal years 2020 and 2019,
respectively.

38

 
 
 
 
 
 
 
 
 
 
 
Other Services

CLPS Virtual Banking Platform (CLB)

CLB is a unique and successful training platform for IT talents owned by CLPS. For more than ten years, we have been focusing on recruiting,
training, developing and retaining human capital and talents. We have been developing and continuously upgrading our CLB to train specialized financial IT
personnel in order to differentiate ourselves from general IT developers. CLB is one of the crucial components of our TCP. It contains a full set of banking
application modules covering areas such as core banking, credit cards, and wealth management, incorporated with cutting-edge technologies, such as JAVA,
Android & iOS, HTML, blockchain, cloud computing and big data.

Recruitment and Headhunting

As per client’s request, we are capable of providing the most suitable person for a position. The Company maintains more than 100 talent acquisition
staff with rich industry background and knowledge. Our recruitment centers are well equipped of advanced technology, such as cloud platforms, big data, and
robotic process automation (RPA), to accelerate the talent acquisition process. As a result, CLPS obtains qualified talent, reduce talent acquisition costs, meet
the growing demands of talent from its existing and potential clients, and achieve meaningful growth.

Fee-For-Service Training

Under the fee-for-service training, we incur charges for clients based on their training needs. Generally, it includes domain knowledge, technology
skills, data security and management compliance training, soft skills for personnel; and English language skills including verbal and business correspondence
for all level, especially for those who need to communicate with global customers directly on a daily basis. However, the training content and approach can
be customized based on the client’s training needs.

Our Strategies

We have developed and intend to implement the following strategies to expand and grow the revenue, the number of employees, and the number of

service locations of our Company:

● Grow revenue with existing and new clients — We intend to pursue additional revenue opportunities from existing Chinese and global clients,
which  include  many  of  the  leading  companies  in  our  financial  industry.  We  will  focus  on  continuing  to  deliver  high  quality  services  and
solutions and identifying additional opportunities with existing clients as they will continue to constitute a significant portion of our revenues
and medium-term growth. We will also continue to target certain new Chinese and global clients, using our comprehensive service and solution
offerings, combined with increasingly deep domain expertise in finance industry. Furthermore, we will continue to invest in a delivery platform
that benefits both Chinese and global clients, capturing synergies between the China and global markets to benefit both groups of clients.

● Continue to invest in research and development, deepen domain expertise and develop specific solutions for target industry verticals — We will
continue  to  enhance  our  domain  knowledge  in  the  financial  industry  and  relevant  business-specific  processes.  As  we  grow  our  industry  and
service  area  expertise,  we  intend  to  leverage  the  domain  knowledge  accumulated  in  our  work  with  our  Chinese  and  global  clients  to  more
effectively  address  their  business-specific  needs.  In  addition,  we  plan  to  continue  investing  in  R&D,  focusing  on  developing  solutions  that
leverage our industry experience and R&D capabilities, to combine proprietary applications with our services to best address client needs.

● Continue to  invest  in  training  and  development  of  our  world-class  human  capital  base  —  We  place  a  high  priority  on  attracting,  training,
developing and retaining our human capital base to be increasingly competitive. Spearheaded by the CLPS Academy, we will continue to build
our professional talent pool through our TCP and TDP” to ensure the sustainable supply of financial IT talent resources. These programs are the
result  of  our  collaboration  with  Shanda  University  and  utilization  of  a  technical  curriculum  and  professional  certifications  developed  and
maintained by our Company. We will continue to develop our scalable human capital platform by implementing resource planning and staffing
systems and by attracting, training and developing high-quality professionals to form CLPS’s large talent pool in order to meet ever-changing
clients’ needs. We will build on and leverage existing training programs and leverage the CLPS Academy, which we intend to expand to other
key cities and other industries, such as the insurance sector, to tap deeper into CLPS’s talent pool. In addition to our dedicated training centers,
we expect to open additional training centers overseas as we anticipate increasing demand for our services and solutions. We will continue to
strengthen our collaboration with leading domestic universities to improve our on-campus recruiting results and help to better prepare graduates
for work in our industry. Spearheaded by the CLPS Academy, the strength of our TCP/TDP program adds to our recognition in the industry by
competitors and customers alike.

● Drive efficiencies through ongoing improvements in operational excellence — We strive to gain significant operating efficiencies by leveraging
historical  and  ongoing  investments  in  infrastructure,  research  and  development  and  human  capital.  We  operate  our  business  on  a  single,
integrated platform, with centralized functions which provide significant economies of scale across our business both domestically and globally,
as well as cross service offerings. We also expect to continue investing in our own IT infrastructure and more advanced technologies, such as
cloud computing, to allow us to enhance our scalability and continue to grow in a more cost-effective fashion. As part of expanding our scale,
we  intend  to  continue  building  up  training  centers  tailored  to  our  human  capital  needs  to  deploy  human  capital  more  efficiently,  thereby
improving overall resource utilization and productivity.

39

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
● Capture  new  growth  opportunities  through  strategic  alliances  and  acquisitions  —  We  will  continue  to  pursue  selective  alliances  and
acquisitions  in  order  to  enhance  our  industry-specific  technology  and  service  delivery  capabilities  by  building  on  our  track  record  of
successfully acquiring and integrating targeted companies. We will continue to identify and assess opportunities to enhance our abilities to serve
our  clients.  We  will  focus  on  enhancing  our  technology  capabilities,  deepening  our  penetration  into  key  clients,  expanding  our  portfolio  of
service offerings and expanding our operations geographically.

● Continue to implement our global expansion strategy — We remain focused on investing in our long-term sustainable growth and delivering on
our dual-engine strategy of horizontal and vertical expansion. We will continue to pursue growth in our global footprint and market share as
well as in technological and talent development. By delivering on our strategy, we expect to drive shareholder value.

Our Competitive Strengths

We believe that the principal competitive factors in our markets are industry expertise, breadth and depth of service offerings, quality of the services

offered, strategic engagement with blue-chip clients, reputation and track record, marketing and selling skills, scalability of infrastructure and price.

We believe that there are several key strengths that differentiate us from our competitors and will continue to contribute to our growth and success.

1. Breadth and depth of digital transformation service offerings

CLPS provides staffing-based consulting services, turn-key financial solutions, and implementation of advanced technologies, enabling clients to
build new or enhance their existing systems. We are fully committed of providing digital transformation services with focused on financial and technology in
the  banking,  wealth  management,  e-commerce,  and  automotive  industries,  among  others,  through  the  utilization  of  innovative  technology  to  achieve  our
client’s goals.

We are dedicated to providing a full range of services and solutions across technology needs in finance. We are able to provide both development
and  implementation  of  core  banking,  credit  card,  online  and  e-commerce  systems,  as  well  as  expertise  across  technology  stacks.  More  recently,  we  have
tested  and  piloted  leading  edge  technologies  including  cloud  transitions,  robotic  process  automation,  big  data  and  blockchain.  We  are  also  exploring
applications in artificial intelligence.

2. Talent Creation Program and Talent Development Program

Spearheaded by the CLPS Academy, we have established employee loyalty through the core engine of TCP and TDP programs both are integral
parts  of  our  supply  chain  which  supports  our  service  lines.  Since  2008,  our  talent  training  services  have  offered  training  courses  in  five  areas,  including
domain  knowledge,  technology  skills,  data  security  and  management  compliance  training,  soft  skills  for  personnel;  and  English  language  skills  including
verbal and business correspondence for all level, especially for those who need to communicate with global customers directly on a daily basis. We believe
that the depth and comprehensive nature of our talent training services are key features that distinguish us from our competitions. For more than ten years, the
Company  has  been  recruiting,  training,  developing  and  retaining  human  capital  and  talents.  We  have  been  developing  and  upgrading  our  CLPS  Virtual
Banking Platform (CLB) to train specialized financial IT professionals. CLB is one of the crucial components which enables our Talent Creation Program. It
contains a full set of banking application modules covering areas such as core banking, credit cards and wealth management incorporated with cutting-edge
technologies, such as JAVA, Android & iOS, HTML and big data. We select more than 200 students each year to participate in our training program. During
their junior and senior years, the students learn to implement the concepts covered by our TCP platform along with their other computer science theory and
coursework.  Thereafter,  the  students  join  us  as  interns  to  continue  improving  their  software  development  skills  and  will  eventually  become  part  of  our
development teams. As a result, graduates have an equivalent of nine months’ worth of “on the job” training and experience. In 2017, we collaborated with
Global  Business  College  of  Australia  (GCBA)  to  set  up  a  Financial  Innovation  Center  (FIC)  on  its  campus  to  offer  our  TCP  training  program  to  GCBA
students with a specific interest in banking industry.

40

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Our  TDP  program  is  a  continuous  internal  training  program  for  our  skilled-professionals  in  order  to  serve  our  clients  better.  The  TDP  program
increases  our  professionals’  skillsets  and  business  knowledge  in  their  respective  domain  and  technical  fields.  Our  joint  effort  with  Fudan  University  has
established support to our senior staff to earn a financial-IT oriented master’s degree in Software Engineering (MSE). Since 2005, through our TCP and TDP
programs, we have trained and retained a large pool of specialized personnel skilled in serving financial-related industry clients.

As a result of our employee loyalty programs, we have established an ecosystem of loyal client relationships. Employee satisfaction and enhanced
career development have resulted in better service to our clients. Client satisfaction in return motivates our employees to continue to provide excellent service
to our clients. In addition to the above-mentioned benefits, our Company’s strengths include the following:

● core competency particularly in banking and insurance industry;

● deep domain knowledge and solutions in financial industry verticals;

● strategic engagements with financial blue-chip clients most of whom have been with us since our inception;

● comprehensive service offerings including financial IT solutions & consulting as well as other services;

● experienced senior management team with proven track record of success.

3. Leading provider of human capital in the financial and technology industry

CLPS  is  a  leading  provider  of  IT  professionals  in  the  financial  and  technology  industry,  such  in  banking,  wealth  management,  e-commerce,
automotive, and others. We create, develop, and maintain a large pool of qualified and rich experienced talents, with bilingual or multilingual capability so
support the client’s communication need, which is vital for a business’ success.

Our greatest edge in terms of human capital is our employees’ English communication skills capability and are familiar with international financial
business environment. In terms of our overall IT skills, we maintain even distribution and relatively adequate resources of talent pool with capabilities in
Java, Cobol, quality control, and other cutting-edge technology such as data analysis.

Customers

Our clients include large corporations headquartered in China and globally which include, among others:

● Banking or their China-based IT centers — Citibank, Standard Chartered Bank (China) Ltd., ANZ Bank, and Bank of Communications.

● Wealth Management — AIA, China Life Insurance, First Data, Haitong Securities, and Orient Securities.

● E-Commerce — eBay and PayPal.

● Automotive and Technology — SAIC Motors, Sony, Cisco, CRIF Information Technology, Experian, AGFA Healthcare, Neusoft, and Kodak.

By serving both Chinese and global clients on a common platform, we are able to leverage the shared resources, management, industry expertise and

technology know-how to attract new business and remain cost competitive.

41

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Sales and Marketing

We have invested in building a broad sales force and marketing team. As of June 30, 2020, our business development teams consisted of 28 full-
time sales and marketing personnel, including 22 sales managers, each of whom is responsible for a designated sales region or client account. We plan to
enhance our sales efforts by recruiting more sales personnel both domestically and overseas.

Competition

The market for IT services is highly competitive and we expect competition to intensify. We believe that the principal competitive factors in our
markets are industry expertise, breadth and depth of service offerings, quality of the services offered, reputation and track record, marketing skills and price.
Domestically, we face competition from the following major competitors: Shenzhen Forms Syntron Information Co., Ltd., Sunline Tech, Amarsoft and CSII.
These competitors are all domestic listed companies and possess a considerable market share in IT services industry. Shenzhen Forms Syntron Information
Co., Ltd. is committed to provide professional IT service outsourcing and consulting for large domestic commercial banks. Sunline Tech, Amarsoft and CSII
have the similar business model who are engaged in providing IT solutions and services mainly for domestic banks and other financial institutions. While
compared with above competitors, as an IT solution and consulting services provider, we’ve been specializing in industry demands analysis and focusing on
delivering services to global institutions in banking, insurance and financial sectors, both in China and globally. As one of the earliest companies engaging in
Banking IT services in China, we have accumulated rich industrial experience and successful cases during more than 10 years of business development and
our market share is gradually increased. With the interest marketization and rise of Internet Finance, banking industry market grows more competitive. Since
Core  Banking  Business  is  occupying  a  key  position  in  the  overall  banking  IT  services  market,  we  will  enhance  our  core  market  competence  by  taking
advantage of our current technology; internationally, our competitors include Wipro, TCS Consultancy, and Infosys Limited. To date, we do not typically
compete  directly  with  the  larger  global  consulting  and  outsourcing  firms,  such  as  Accenture,  Capgemini,  Hewlett-Packard  and  IBM,  who  are  typically
engaged in conjunction with large global projects. However, we may compete with these firms if they seek smaller engagements, particularly in conjunction
with a strategy to enter the domestic Chinese market. In addition, the trend towards offshore outsourcing, international expansion by foreign and domestic
competitors  and  continuing  technological  innovation  will  result  in  new  and  different  competitors  entering  our  markets.  We  believe  that  our  delivery
capabilities are competitive with companies such as these, and that our domestic China market experience and know-how provides us with a competitive
advantage in serving our clients.

Research and Development

Officially named the CLPS Innovation Lab (“CLPS i-Lab)”, our R&D is an integral part of our continued growth. In order to serve our Chinese and
global clients’ needs better, we are fully committed on researching and developing cutting-edge technology including distributed application systems, cloud
computing, micro services, open API, robotic process automation (RPA), blockchain, and big data, among other technologies, with a focus on continuous
scientific and technological innovation to provide clients with more comprehensive and efficient IT services.

For instance, we applied the DevOps methodology and tools in our project delivery process and platform. This methodology has greatly enhanced
the development, operational efficiency and project quality. We focus on blockchain, big data and cloud native applications. We have developed a loyalty
reward solution based on a blockchain platform and implemented this solution with several China-based banks. With micro services architecture, we engage
the cloud-native solution of core banking system, and have developed the first pilot business module to be tested on the client side. By utilizing big data
technology, we research, develop and apply new features to existing credit scoring and anti-fraud solutions. We have invested a significant amount of capital
in technology research and solution development. As a result, we have expanded our technological capabilities, improved efficiency of project delivery, and
enhanced our solution offerings by improving existing solutions and inventing new solutions, which drive new revenue opportunities and improve our core
competencies.

We upgraded our credit card system product, and it is currently in its final phase of testing. Through the joint effort of CLPS Innovation Lab and
Credit Card Service teams, the essential parts of the system will be migrated to the cloud platform. After the upgrade, the new product platform will leverage
the advantages of cloud computing. Combined with the micro-service application, it paves the way to achieve dynamic horizontal and vertical expansions,
resulting in improved performance, reliability, utilization of resources, and significantly reduced infrastructure costs. It also improves the display interface,
gated  launch  and  other  features  that  enhance  the  user  experience.  In  addition,  the  new  product  platform  adopts  the  Open-API,  or  Application  Program
Interface, concept to provide ample APIs to facilitate the connection between channels, merchants and enterprises. The upgrade also includes an integrated
monitoring platform that covers comprehensive monitoring and an early warning signal of basic settings and business transactions which allow clients to
quickly locate and solve problems.

We  ran  a  successful  internal  pilot  test  of  Robotic  Process  Automation  (RPA),  aiming  to  automate  the  in-house  human  resources  department’s
business  processes,  which  cover  more  than  2,000  employees.  Instead  of  manual  work,  the  RPA  mimics  human  activity  that  streamlines  the  internal
management system and improve efficiency.

We integrated the Company’s successful applications of advanced technologies, such as cloud platforms, big data, and robotic process automation
(RPA),  to  our  recruitment  centers,  which  enables  the  acceleration  of  talent  acquisition  process.  As  a  result,  CLPS  will  be  able  to  obtain  qualified  talent,
reduce talent acquisition costs, meet the growing demands of talent from its existing and potential clients, and achieve meaningful growth.

CLPS i-Lab adheres to our strategy of promoting our products and solutions based on new technology and new research, application innovations,
and  our  leading  talent  pool,  while  improving  our  technological  innovation  capability  and  market  competitiveness.  As  the  center  of  our  research  and
development efforts, it will continue to be one of the most important drivers of CLPS’s growth.

42

 
 
 
 
 
 
 
 
 
 
 
 
 
Employees

We  believe  resource  management  and  planning  is  critically  important  to  supporting  our  growth,  and  we  are  committed  to  effectively  recruiting,
training, developing and retaining our human capital. Our total number of employees has grown from 2,085 employees in fiscal 2019 to 2,746 employees as
of June 30, 2020. Approximately 66.5% of our personnel are dedicated to serving our foreign financial institution clients. Such personnel maintain up to date
financial domain knowledge, technical development and testing skills in Java, .Net, C, C++, testing tools, android or IOS app, blockchain, big data, cloud
computing and mainframe COBOL. None of our employees are represented by a labor union or collective bargaining agreements. We consider our employee
relations to be good. We believe that attracting and retaining highly experienced associates and sales and marketing personnel is a key to our success. In
addition, we believe that we maintain a good working relationship with our employees and we have not experienced any significant labor disputes or any
difficulty in recruiting staff for our operations.

Intellectual Property Rights

The PRC has domestic laws for the protection of rights in copyrights, trademarks and trade secrets. The PRC is also a signatory to all of the world’s

major intellectual property conventions, including:

● Convention establishing the World Intellectual Property Organization (June 3, 1980);

● Paris Convention for the Protection of Industrial Property (March 19, 1985);

● Patent Cooperation Treaty (January 1, 1994); and

● Agreement on Trade-Related Aspects of Intellectual Property Rights (November 11, 2001).

The PRC Trademark Law, adopted in 1982 and revised in 2019, protects registered trademark. The Trademark Office of the State Administration of

Industry and Commerce of the PRC, handles trademark registrations and grants trademark registrations for a term of ten years.

Our intellectual property rights are important to our business. We rely on a combination of trade secrets, confidentiality procedures and contractual
provisions to protect our intellectual property. We also rely on and protect unpatented proprietary expertise, recipes and formulations, continuing innovation
and  other  trade  secrets  to  develop  and  maintain  our  competitive  position.  We  enter  into  confidentiality  agreements  with  most  of  our  employees  and
consultants, and control access to and distribution of our documentation and other licensed information. Despite these precautions, it may be possible for a
third party to copy or otherwise obtain and use our technology without authorization, or to develop similar technology independently. Since the Chinese legal
system in general, and the intellectual property regime in particular, is relatively weak, it is often difficult to enforce intellectual property rights in China.
Policing  unauthorized  use  of  our  technology  is  difficult  and  the  steps  we  take  may  not  prevent  misappropriation  or  infringement  of  our  proprietary
technology. In addition, litigation may be necessary in the future to enforce our intellectual property rights, to protect our trade secrets or to determine the
validity and scope of the proprietary rights of others, which could result in substantial costs and diversion of our resources and could have a material adverse
effect on our business, results of operations and financial condition. We require our employees to enter into non-disclosure agreements to limit access to and
distribution of our proprietary and confidential information. These agreements generally provide that any confidential or proprietary information developed
by us or on our behalf must be kept confidential. These agreements also provide that any confidential or proprietary information disclosed to third parties in
the course of our business must be kept confidential by such third parties. In the event of trademark infringement, the State Administration for Industry and
Commerce has the authority to fine the infringer and to confiscate or destroy the infringing products.

Our primary trademark portfolio consists of nine trademarks, five of which are registered and four of which are pending review. Our trademarks are
valuable assets that reinforce the brand and our consumers’ favorable perception of our products. The current registrations of these trademarks are effective
for varying periods of time and may be renewed periodically, provided that we, as the registered owner, comply with all applicable renewal requirements
including,  where  necessary,  the  continued  use  of  the  trademarks  in  connection  with  similar  goods.  In  addition  to  trademark  protection,  we  own  3  URL
designations and domain names, including clps.com.cn, clpsglobal.com, and clpsgroup.com.cn.

43

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
We have registered for the following trademarks:

Mark

Country of
Registration  
China

Application
Number
19288958

China

19289112

China

19289503

China

19289341

China

19289214

Current Owner
ChinaLink
Professional Services
Co., Ltd.

Status
Registered

ChinaLink
Professional Services
Co., Ltd.

Registered

ChinaLink
Professional Services
Co., Ltd.

Registered

ChinaLink
Professional Services
Co., Ltd.

Registered

ChinaLink
Professional Services
Co., Ltd.

Registered

Class/Description

  Class 9: Recorded computer programs (programs);
Recorded computer operating programs Computer
peripherals; Computer software (recorded); Connector
(data processing equipment); Monitor program (computer
program); Electronic publications (downloadable);
Computer program (downloadable software);
Downloadable computer application software; Computer
hardware

  Class 38: Information transmission; Computer terminal
communication; Computer-aided information and image
transmission; Information transmission equipment rental;
Provide telecommunications link services to connect with
the global computer network; Telecommunications
routing and junction services; Provide access service for
global computer network users; Provide database access
service; Digital file transfer Teleconference call service

  Class 9: Recorded computer programs (programs);
Recorded computer operating programs; Computer
peripherals; Computer software (recorded); Connector
(data processing equipment); Monitor program (computer
program); Electronic publications (downloadable);
Computer program (downloadable software);
Downloadable computer application software; Computer
hardware

  Class 42: Technical research; Research or develop new
products for others; Computer programming; Computer
software design; Computer hardware design and
development consulting; Computer software rental;
Computer software maintenance; Computer system
analysis; Computer software installation; Computer
software consulting

  Class 41: Teaching; Education; Training; Practical
training (demonstration); Employment guidance
(education or training consultants); Arrange and organize
academic seminars; Arrange and organize meetings;
Arrange and organize general meeting; Arrange and
organize symposium; Arrange and organize training
classes

44

 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
   
   
 
 
 
 
 
 
 
   
   
   
   
 
 
 
 
 
 
 
   
   
   
   
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
We have applied to register the following trademarks:

Mark

Country of
Registration  
China

Application
Number
19289066

China

19289175

China

19289492

China

19289420

Current Owner
ChinaLink
Professional Services
Co., Ltd.

Status
Pending

ChinaLink
Professional Services
Co., Ltd.

Pending

ChinaLink
Professional Services
Co., Ltd.

Pending

ChinaLink
Professional Services
Co., Ltd.

Pending

Class/Description

  Class 35: Advertising; Advertising agency Advertising

space rental; Online advertising on the computer network;
Advertisement layout design; Business management
assistance; Business inquiry; Business information
agency; Business management and organization
consulting; Business management consulting

  Class 42: Technical research; Research or develop new
products for others; Computer programming; Computer
software design; Computer hardware design and
development consulting; Computer software rental;
Computer software maintenance; Computer system
analysis; Computer software installation; Computer
software consulting

  Class 38: Information transmission; Computer terminal
communication; Computer-aided information and image
transmission; Information transmission equipment rental;
Provide telecommunications link services to connect with
the global computer network; Telecommunications
routing and junction services; Provide access service for
global computer network users; Provide database access
service; Digital file transfer; Teleconference call service

  Class 41: Teaching; Education; Training; Practical
training (demonstration); Employment guidance
(education or training consultants); Arrange and organize
academic seminars; Arrange and organize meetings;
Arrange and organize general meeting; Arrange and
organize symposium; Arrange and organize training
classes

45

 
 
 
 
 
 
 
 
 
 
 
 
   
   
   
   
 
 
 
 
 
 
 
   
   
   
   
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
The following is a list of the Company’s copyrights:

Software Name
CLPS HR Management Platform Software V1.0

Country of
Registration  
China

Registration
Number

2009SR015975  

  Current Owner   Approval Date
29th April 2009

Status
Registered

CLPS Food and Beverage Report Analysis and
Management Platform Software V1.0

China

2009SR060110  

CLPS Apparel Industry POS Management Platform
Software V1.0

China

2009SR060102  

CLPS Express Information Interactive Platform
Software V1.0

China

2009SR060112  

CLPS Chain Store Information Interactive Platform
Software V1.0

China

2009SR060108  

CLPS Project Analysis and Management Platform
Software V1.0

China

2009SR060169  

CLPS Payroll Accounting System Platform Software
V1.0

China

2010SR043564  

CLPS Fast Moving Consumer Goods Frontline Staff
Management Platform Software V1.0

China

2010SR043561  

CLPS Staff Management Platform Software V1.0

China

2010SR043562  

CLPS Coal Mining Enterprise Information System
Management Platform Software V1.0

China

2010SR045449  

CLPS Campus Expense Card Web Service System
Platform Software V1.0

China

2010SR045441  

CLPS Campus Expense Card Bathroom Management
Service Software V1.0

China

2010SR045444  

CLPS Machinery Industry ERP Management Platform
Software V1.0

China

2010SR045802  

CLPS Assignment and Task Management Platform
Software (short name: Assignment and Task
Management System) V1.0
CLPS Marketing Assistant System Platform Software
V1.0

China

2011SR076863  

China

2012SR096727  

CLPS Outsourcing Service Staff Management System
Platform Software V1.0

China

2012SR096666  

CLPS Outsourcing Service Staff System Background
Management Software V1.0

China

2012SR096731  

46

ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.

  28th December 2009 

Registered

  28th December 2009 

Registered

  28th December 2009 

Registered

  28th December 2009 

Registered

  28th December 2009 

Registered

  25th August 2010  

Registered

  25th August 2010  

Registered

  25th August 2010  

Registered

  1st September 2010  

Registered

  1st September 2010  

Registered

  1st September 2010  

Registered

  2nd September 2010 

Registered

  25th October 2011  

Registered

  15th October 2012  

Registered

  15th October 2012  

Registered

  15th October 2012  

Registered

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Software Name
CLPS Logistics Terminal Distribution Platform
Software V1.0

Country of
Registration  
China

Registration
Number

  Current Owner   Approval Date

2012SR096668  

  15th October 2012  

Status
Registered

CLPS HR Background Support Management System
V1.0

China

2012SR098440  

CLPS HR Management System Platform Software
(short name: HR Management System) V1.0

China

2012SR098429  

CLPS Outsourcing Service Staff Resume Entry System
Platform Software V1.0

China

2012SR098687  

CLPS Bank Document Business Management Software
(short name: Document Management) V1.0

China

2013SR054800  

CLPS Bank Monetary Transaction Management
Software (short name: Monetary Transaction
Management) V1.0
CLPS Bank Expense Management Software V1.0

China

2013SR054796  

China

2014SR168125  

CLPS Bank Repayment Process Software V1.0

China

2014SR168130  

CLPS Bank Point Accumulative Management Software
V1.0

China

2014SR168132  

CLPS Bank Interest Process Software V1.0

China

2014SR168136  

CLPS Bank Credit Application Software V1.0

China

2014SR168138  

CLPS Credit Card Risk Management Software V1.0

China

2015SR028695  

CLPS Credit Card Account Establishment and Card
Making Software V1.0

China

2015SR029015  

CLPS Credit Card Customer Service Management
Software V1.0

China

2015SR029012  

CLPS Credit Card Cleaning Management Software V1.0 

China

2015SR028884  

CLPS Credit Card Authorization Management Software
V1.0

China

2015SR028914  

CLPS Mortgage Loan Plan Spreadsheet Tool Software
(short name: Loan Spreadsheet) V1.0

China

2015SR198772  

CLPS Bank Product Management Software V1.0

China

2015SR198610  

47

ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.

  19th October 2012  

Registered

  19th October 2012  

Registered

  19th October 2012  

Registered

5th June 2013

Registered

5th June 2013

Registered

  4th November 2014  

Registered

  4th November 2014  

Registered

  4th November 2014  

Registered

  4th November 2014  

Registered

  4th November 2014  

Registered

  10th February 2015  

Registered

  10th February 2015  

Registered

  10th February 2015  

Registered

  10th February 2015  

Registered

  10th February 2015  

Registered

  16th October 2015  

Registered

  16th October 2015  

Registered

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Software Name
CLPS Bank Deposit and Withdrawal Services
Management Software V1.0

Country of
Registration  
China

Registration
Number

  Current Owner   Approval Date

2015SR198176  

  16th October 2015  

Status
Registered

CLPS Bank Loan Application Management Software
V1.0

China

2015SR198654  

CLPS Bank Repayment Management Software V1.0

China

2015SR198649  

CLPS Bank Exchange Rate Management Software V1.0  

China

2015SR198774  

CLPS Bank Interest Settlement Software V1.0

China

2015SR198246  

CLPS Bank Foreign Exchange Transaction Software
V1.0

China

2015SR198240  

CLPS Bank Investment Management Securities
Business Software V1.0

CLPS Bank Big Data Decision-making Platform
Customer Portrayal Software V1.0

CLPS Internet Financial Cloud Mobile Banking
Software V2.0

CLPS Wantong Calculus Mall Software V2.0

CLPS RC Rules Engine Software

CLPS Internet Financing Collection Management
Software V2.0
CLPS Points Management Platform Software

CLPS Full-web Order Receiving Unified Platform
Management Software V2.0
CLPS Quanxi Intelligent Marketing Platform Clients
Growth Center Software V2.0

China

2016SR376924  

China

2016SR382920  

China

2016SR398821  

China

China

China

China

China

China

2017SR118507  

2017SR169307   CLPS Ruicheng

Co., Ltd.

2017SR119266   CLPS Ruicheng

Co., Ltd.

2017SR119078   CLPS Ruicheng

Co., Ltd.

2017SR202535   CLPS Ruicheng

2017SR565576  

CLPS Enterprise Recruitment Intelligent Cooperation
Platform Software V2.0

China

2017SR646712  

CLPS Intelligent Online Training Test Instructional
Management Software V1.0

China

2017SR646507  

CLPS Enterprise Internet Qinqin Loan Background
Management Software V1.0

China

2017SR647634  

48

ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Ca, Ltd.
ChinaLink
Professional
Services Co., Ltd.
CLPS Beijing
Hengtong Co., Ltd.

Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.

  16th October 2015  

Registered

  16th October 2015  

Registered

  16th October 2015  

Registered

  16th October 2015  

Registered

  16th October 2015  

Registered

  16th December 2016 

Registered

  20th December 2016 

Registered

  27th December 2016 

Registered

17th April 2017

Registered

9th May 2017

Registered

17th April 2017

Registered

17th April 2017

Registered

24th May 2017

Registered

  13th October 2017  

Registered

  24th November 2017 

Registered

  24th November 2017 

Registered

  24th November 2017 

Registered

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Software Name
CLPS Blockchain Based Virtual Credits Background
Management Software V2.0

Country of
Registration  
China

Registration
Number

  Current Owner   Approval Date

2017SR645676  

  24th November 2017 

Status
Registered

CLPS Enterprise Talent Information Intelligent
Management Software V2.0

China

2017SR645650  

CLPS Credit Card Big Data Integrated Management
Background Software V2.0

China

2017SR645763  

CLPS Enterprise Recruitment Intelligent Cooperation
Platform Software V2.0

China

2017SR647190  

CLPS General Points Platform and Business Center
Software V1.0

China

2019SR0004653  

CLPS Online Financial Microloan Software V1.0

China

2019SR0004669  

CLPS Bank Customer Management Software V1.0

China

2019SR0004663  

CLPS Online Financial Management Software V1.0

China

2019SR0140935  

CLPS Talent Training One-Stop Platform Software V1.0  

China

2020SR0094641  

CLPS Project Management Software [PMS]V2.0

China

2020SR0095716  

CLPS Online Financial Management Software V2.0

China

2020SR0095716  

CLPS Online Financial Microloan Software V3.0

China

2020SR0094745  

CLPS Bank Customer Management Software V3.0

China

2020SR0095318  

CLPS Online Financial Accounting Management
Software V1.0

China

2020SR0095725  

49

ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.
ChinaLink
Professional
Services Co., Ltd.

  24th November 2017 

Registered

  24th November 2017 

Registered

  24th November 2017 

Registered

2nd January 2019  

Registered

2nd January 2019  

Registered

2nd January 2019  

Registered

  14th February 2019  

Registered

  19th January 2020  

Registered

  19th January 2020  

Registered

  19th January 2020  

Registered

  19th January 2020  

Registered

  19th January 2020  

Registered

  19th January 2020  

Registered

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Properties

On May 2020, we relocated our principal executive office to Unit 702, 7th Floor, Millennium City II, 378 Kwun Tong Road, Kwun Tong, Kowloon,
Hong  Kong  SAR  from  2nd  Floor,  Building  18,  Shanghai  Pudong  Software  Park,  498  Guoshoujing  Road,  Pudong  District,  Shanghai,  PRC.  We  lease  the
premise and the lease term expires on May 5, 2021. 

In addition, the Company manages and operates several other facilities. We rent office space in Tianjin, Shenzhen, Guangzhou, Dalian, Chengdu,
Beijing, Baoding, Australia, Singapore, and Hong Kong. Rent expenses amounted to $944,645, $827,593, and $730,705 for the years ended June 30, 2020,
2019 and 2018, respectively. We believe our facilities are adequate for our current needs.

2nd Floor, Building 18, Shanghai Pudong Software Park, 498 Guoshoujing Road, Pudong District,
Shanghai, PRC

Address

Space (m2)

1,259.94 

Facility
Shanghai Office

Shanghai Office

Shanghai Office

Dalian Office

Dalian Office

Room 302, 3rd Floor, Building 10, Shanghai Pudong Software Park, 498 Guoshoujing Road, Pudong
District, Shanghai, PRC

1st Floor, Building 18, Shanghai Pudong Software Park, 498 Guoshoujing Road, Pudong District,
Shanghai, PRC

Room 01-03, 1/F, 1 Huixian Garden, New & High-tech Industrial Park, Dalian, Liaoning Province,
PRC

Room 07-12, 7/F, 1 Huixian Garden, New & High-tech Industrial Park, Dalian, Liaoning Province,
PRC

Tianjin Office

  Room 5601-8, F6, Building No.5, Xinhuan West Road, TEDA, Tianjin, PRC

Shenzhen Office

Room 2007-2010, Anhui Building, Shennan Avenue, Futian District, Shenzhen, Guangdong Province,
PRC

Guangzhou Office

  708-709A, 242 Tianhe Road, Tianhe District, Guangzhou, Guangdong Province, PRC

Guangzhou Office

Room 4006, Central District, 298 Yanjiang Road, Yuexiu District, Guangzhou, Guangdong Province,
PRC

Chengdu Office

  Unit 10, 29/Floor, Tower 2, 88 Jitai 5th Road, Gaoxin District, Chengdu, Sichuan District, PRC

Beijing Office

Baoding Office

  Room 1329-1332, 13th Floor, Building 2, Yard 26, Chengtong Road, Shijingshan District, Beijing, PRC    

222.88 

Room 710-712, 7th Floor, Building A, Zhongguancun Innovation Center, 1799 North Chaoyang Street,
Baoding, PRC

Australia Office

  Part Tenancy 3, Part Level 9, 276 Flinders Street, Melbourne, VIC 3000, Australia

Singapore Office

  10 UBI Crescent, #03-29, UBI Techpark, Singapore, 408564

Singapore Office

  141 Cecil Street, #06-07, Tung Ann Association Building, Singapore, 069541

Hong Kong Office

  Unit 702, Level 7, Millennium City II, 378 Kwun Tong Road, Kwun Tong, Kowloon, Hong Kong

Japan Office

India Office

  Room 304 Tennsyou Ochanomizu Building, Awajityou 1-9-5, Chiyoda-ku Tokyo, Japan, 101-0063

Unit No. 222, DLF Cybercity, Idco Info Park, Technology Corridor, Chandaka Industrial Estate,
Bhubaneswar, Odisha, India, 751024

US Office

  1161 Mission Street, San Francisco, CA 94103

50

741.16 

914.62 

611.82 

917.11 

56.07 

234.16 

137 

86.34 

59.74 

243 

90.5 

84 

300 

92.53 

7.75 

170 

6 

 
 
 
 
 
 
 
 
 
   
 
   
   
  
 
   
 
   
   
  
 
   
 
   
   
  
 
   
 
   
   
  
 
   
 
   
   
  
   
 
   
   
  
 
   
 
   
   
  
   
 
   
   
  
 
   
 
   
   
  
   
 
   
   
  
 
   
   
  
 
   
 
   
   
  
   
 
   
   
  
   
 
   
   
  
   
 
   
   
  
   
 
   
   
  
   
 
   
   
  
 
   
 
   
   
  
   
 
Legal Proceedings

We are currently not involved in any legal proceedings; nor are we aware of any claims that could have a material adverse effect on our business,

financial condition, results of operations or cash flows.

Government Regulation

Regulations Relating to PRC Information Technology Service Industry

According to the Guidelines on Foreign Investment issued by the State Council in 2002 and the Catalogue of Industries for Encouraging Foreign
Investment  (2019)  issued  by  the  National  Development  and  Reform  Commission  and  the  Ministry  of  Commerce,  IT  services  fall  into  the  category  of
industries  in  which  foreign  investment  is  encouraged.  The  State  Council  has  promulgated  several  notices  since  2000  to  launch  favorable  policies  for  IT
services, such as preferential tax treatments and credit support.

Under rules and regulations promulgated by various Chinese government agencies, enterprises that have met specified criteria and are recognized as
software enterprises by the relevant government authorities in China are entitled to preferential treatment, including financing support, preferential tax rates,
export incentives, discretion and flexibility in determining employees’ welfare benefits and remuneration. Software enterprise qualifications are subject to
annual  examination.  Enterprises  that  fail  to  meet  the  annual  examination  standards  will  lose  the  favorable  enterprise  income  tax  treatment.  Enterprises
exporting  software  or  producing  software  products  that  are  registered  with  the  relevant  government  authorities  are  also  entitled  to  preferential  treatment
including governmental financial support, preferential import, export policies and preferential tax rates.

In 2009, the Ministry of Commerce and the Ministry of Industry and Information Technology jointly promulgated a rule aiming to protect a fair
competition  environment  in  the  PRC  service  outsourcing  industry.  This  rule  requires  that  each  of  the  domestic  enterprises  which  provides  IT  and
technological BPO services and each of its shareholders, directors, supervisors, managers and employees should not violate the service outsourcing contract
to  disclose,  use  or  allow  others  to  use  the  confidential  information  of  its  client.  Such  enterprises  are  also  required  to  establish  an  information  protection
system and take various measures to protect clients’ confidential information, including causing their employees and third parties who have access to clients’
confidential information to sign confidentiality agreements and or non-competition agreements.

Regulations on Intellectual Property Rights

The PRC Copyright Law, as amended, together with various regulations and rules promulgated by the State Council and the National Copyright
Administration,  protect  software  copyright  in  China.  These  laws  and  regulations  establish  a  voluntary  registration  system  for  software  copyrights
administered by the Copyright Protection Center of China. Unlike patent and trademark registration, copyrighted software does not require registration for
protection. Although such registration is not mandatory under PRC law, software copyright owners are encouraged to go through the registration process and
registered  software  may  receive  better  protection.  The  PRC  Trademark  Law,  as  amended,  together  with  its  implementation  rules,  protect  registered
trademarks. The Trademark Office of the State Administration for Industry and Commerce handles trademark registrations and grants a renewable protection
term of 10 years to registered trademarks.

51

 
 
 
 
 
 
 
 
 
 
 
Regulation of Foreign Currency Exchange and Dividend Distribution

Foreign Currency Exchange.  The principal regulations governing foreign currency exchange in China are the Foreign Exchange Administration
Regulations  (1996),  as  amended  on  August  5,  2008,  the  Administration  Rules  of  the  Settlement,  Sale  and  Payment  of  Foreign  Exchange  (1996)  and  the
Interim Measures on Administration on Foreign Debts (2003). Under these regulations, Renminbi are freely convertible for current account items, including
the distribution of dividends, interest payments, trade and service-related foreign exchange transactions, but not for most capital account items, such as direct
investment,  loans,  repatriation  of  investment  and  investment  in  securities  outside  China,  unless  the  prior  approval  of  SAFE  or  its  local  counterparts  is
obtained.  In  addition,  any  loans  to  an  operating  subsidiary  in  China  that  is  a  foreign  invested  enterprise,  cannot,  in  the  aggregate,  exceed  the  difference
between  its  respective  approved  total  investment  amount  and  its  respective  approved  registered  capital  amount.  Furthermore,  any  foreign  loan  must  be
registered with SAFE or its local counterparts for the loan to be effective. Any increase in the amount of the total investment and registered capital must be
approved by the PRC Ministry of Commerce or its local counterpart. We may not be able to obtain these government approvals or registrations on a timely
basis, if at all, which could result in a delay in the process of making these loans.

The dividends paid by the subsidiary to its shareholder are deemed shareholder income and are taxable in China. Pursuant to the Administration
Rules  of  the  Settlement,  Sale  and  Payment  of  Foreign  Exchange  (1996),  foreign-invested  enterprises  in  China  may  purchase  or  remit  foreign  exchange,
subject to a cap approved by SAFE, for settlement of current account transactions without the approval of SAFE. Foreign exchange transactions under the
capital account are still subject to limitations and require approvals from, or registration with, SAFE and other relevant PRC governmental authorities.

Dividend Distribution.  The principal regulations governing the distribution of dividends by foreign holding companies include the Company Law
of the PRC (1993), as amended in 2018, the Foreign Investment Law of the People’s Republic of China (2020), and the Implementing Regulations of the
Foreign Investment Law of the People’s Republic of China (2020).

Under  these  regulations,  wholly  foreign-owned  investment  enterprises  in  China  may  pay  dividends  only  out  of  their  retained  profits,  if  any,
determined in accordance with PRC accounting standards and regulations. In addition, wholly foreign-owned investment enterprises in China are required to
allocate  at  least  10%  of  their  respective  retained  profits  each  year,  if  any,  to  fund  certain  reserve  funds  unless  these  reserves  have  reached  50%  of  the
registered  capital  of  the  enterprises.  These  reserves  are  not  distributable  as  cash  dividends,  and  a  wholly  foreign-owned  enterprise  is  not  permitted  to
distribute any profits until losses from prior fiscal years have been offset.

Circular 37.  On July 4, 2014, SAFE issued Circular 37, which became effective as of July 4, 2014. According to Circular 37, PRC residents shall
apply to SAFE and its branches for going through the procedures for foreign exchange registration of overseas investments before contributing the domestic
assets  or  interests  to  a  SPV.  An  amendment  to  registration  or  filing  with  the  local  SAFE  branch  by  such  PRC  resident  is  also  required  if  the  registered
overseas  SPV’s  basic  information  such  as  domestic  individual  resident  shareholder,  name,  operating  period,  or  major  events  such  as  domestic  individual
resident  capital  increase,  capital  reduction,  share  transfer  or  exchange,  merger  or  division  has  changed.  Although  the  change  of  overseas  funds  raised  by
overseas SPV, overseas investment exercised by overseas SPV and non-cross-border capital flow are not included in Circular 37, we may be required to make
foreign  exchange  registration  if  required  by  SAFE  and  its  branches.  Moreover,  Circular  37  applies  retroactively.  As  a  result,  PRC  residents  who  have
contributed  domestic  assets  or  interests  to  a  SPV,  but  failed  to  complete  foreign  exchange  registration  of  overseas  investments  as  required  prior  to
implementation of Circular 37, are required to send a letter to SAFE and its branches for explanation. Under the relevant rules, failure to comply with the
registration procedures set forth in Circular 37 may result in receiving a warning from SAFE and its branches, and may result in a fine of up to RMB 300,000
for an organization or up to RMB 50,000 for an individual. In the event of failing to register, if capital outflow occurred, a fine up to 30% of the illegal
amount may be assessed. PRC residents who control our company are required to register with SAFE in connection with their investments in us. If we use
our equity interest to purchase the assets or equity interest of a PRC company owned by PRC residents in the future, such PRC residents will be subject to the
registration procedures described in Circular 37.

52

 
 
 
 
 
 
 
 
New M&A Regulations and Overseas Listings

On  August  8,  2006,  six  PRC  regulatory  agencies,  including  the  Ministry  of  Commerce,  the  State  Assets  Supervision  and  Administration
Commission, the State Administration for Taxation, the State Administration for Industry and Commerce, CSRC and SAFE, jointly issued the Regulations on
Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the New M&A Rule, which became effective on September 8, 2006 and was
amended on June 22, 2009. This New M&A Rule, among other things, includes provisions that purport to require that an offshore special purpose vehicle
formed for purposes of overseas listing of equity interests in PRC companies and controlled directly or indirectly by PRC companies or individuals obtain the
approval of CSRC prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange.

On September 21, 2006, CSRC published on its official website procedures regarding its approval of overseas listings by special purpose vehicles.
The  CSRC  approval  procedures  require  the  filing  of  a  number  of  documents  with  the  CSRC  and  it  would  take  several  months  to  complete  the  approval
process. The application of this new PRC regulation remains unclear with no consensus currently existing among leading PRC law firms regarding the scope
of the applicability of the CSRC approval requirement.

Our  PRC  counsel  has  advised  us  that,  based  on  their  understanding  of  the  current  PRC  laws  and  regulations,  that  the  corporate  structure  of  the
Group Companies shall not be deemed as “a foreign investor’s merger and acquisition of a domestic enterprise” as specified in the Article 2 of the New
M&A Rule, so the Company is not required to obtain approval from the CSRC for listing and trading of its shares. However, uncertainties still exist as to
how the New M&A Rule will be interpreted and implemented and our opinion stated above is subject to any new laws, rules and regulations or detailed
implementations and interpretations in any form relating to the New M&A Rule.

Regulations on Offshore Parent Holding Companies’ Direct Investment in and Loans to Their PRC Subsidiaries

An  offshore  company  may  invest  equity  in  a  PRC  company,  which  will  become  the  PRC  subsidiary  of  the  offshore  holding  company  after
investment.  Such  equity  investment  is  subject  to  a  series  of  laws  and  regulations  generally  applicable  to  any  foreign-invested  enterprise  in  China,  which
include the Foreign Investment Law of the People’s Republic of China (2020) all as amended from time to time, and their respective implementing rules; the
Administrative Provisions on Foreign Exchange in Domestic Direct Investment by Foreign Investors; and the Notice of the State Administration on Foreign
Exchange on Further Improving and Adjusting Foreign Exchange Administration Policies for Direct Investment. Under the aforesaid laws and regulations,
the increase of the registered capital of a foreign-invested enterprise is subject to the prior approval by the original approval authority of its establishment. In
addition, the increase of registered capital and total investment amount shall both be registered with SAIC and SAFE. Shareholder loans made by offshore
parent holding companies to their PRC subsidiaries are regarded as foreign debts in China for regulatory purpose, which is subject to a number of PRC laws
and regulations, including the PRC Foreign Exchange Administration Regulations, the Interim Measures on Administration on Foreign Debts, the Tentative
Provisions on the Statistics Monitoring of Foreign Debts and its implementation rules, and the Administration Rules on the Settlement, Sale and Payment of
Foreign Exchange. Under these regulations, the shareholder loans made by offshore parent holding companies to their PRC subsidiaries shall be registered
with SAFE. Furthermore, the total amount of foreign debts that can be borrowed by such PRC subsidiaries, including any shareholder loans, shall not exceed
the difference between the total investment amount and the registered capital amount of the PRC subsidiaries, both of which are subject to the governmental
approval.

53

 
 
 
 
 
 
 
 
ITEM 4A.

UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 5.

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Overview

We  are  a  global  information  technology  (“IT”),  consulting  and  solutions  service  provider  focused  on  delivering  services  to  global  institutions  in
banking,  insurance  and  financial  sectors,  both  in  China  and  globally.  For  more  than  ten  years,  we  have  served  as  an  IT  solutions  provider  to  a  growing
network of clients in the global financial industry, including large financial institutions from the US, Europe, Australia, Southeast Asia. and Hong Kong, and
their PRC-based IT centers. We have created and developed a particular market niche by providing turn-key financial solutions. Since our inception, we have
aimed to build one of the largest sales and service delivery platforms for IT services and solutions in China. We are fully committed of providing digital
transformation services with focused on financial and technology in the banking, wealth management, e-commerce, and automotive industries, among others,
through  the  utilization  of  innovative  technology  to  achieve  our  client’s  goals.  We  maintain  18  delivery  and/or  R&D  centers,  of  which  ten  are  located  in
Mainland China (Shanghai, Beijing, Dalian, Tianjin, Baoding Chengdu, Guangzhou, Shenzhen, Hangzhou, and Suzhou) and eight are located globally (Hong
Kong SAR, USA, UK, Japan, Singapore, Malaysia, Australia, and India. By combining onsite or onshore support and consulting with scalable and high-
efficiency offsite or offshore services and processing, we are able to meet client demands in a cost-effective manner while retaining significant operational
flexibility. We believe that maintaining our Company as a proven, reliable partner to our financial industry clients both in China and globally positions us
well to capture greater opportunities in the rapidly evolving global market for IT consulting and solutions.

Basis of Presentation

The  accompanying  consolidated  financial  statements  have  been  prepared  in  accordance  with  U.S.  generally  accepted  accounting  principles  (“US
GAAP”) and pursuant to the rules and requirements of the Securities Exchange Commission (“SEC”). The accompanying consolidated financial statements
include  the  financial  statements  of  CLPS  and  its  consolidated  subsidiaries.  All  intercompany  balances  and  transactions  have  been  eliminated  upon
consolidation.

54

 
 
 
 
 
 
 
 
 
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You  should  read  the  following  discussion  and  analysis  of  our  financial  condition  and  results  of  operations  in  conjunction  with  our  audited
consolidated financial statements and the related notes included elsewhere in this Annual Report. This discussion contains forward-looking statements that
involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking
statements as a result of various factors, including those set forth under “Risk Factors” and elsewhere in this Annual Report.

Overview of Company

CLPS Incorporation (“CLPS” or the “Company”), is a company that was established under the laws of the Cayman Islands on May 11, 2017 as a
holding  company.  The  Company,  through  its  subsidiaries,  designs,  builds,  and  delivers  IT  services,  solutions  and  other  services  to  clients  in  the  financial
services industry. The Company customizes its services to specific industries with customer service teams typically based on-site at the customer locations.
The Company’s solutions enable its clients to meet the changing demands of an increasingly global, internet-driven, and competitive marketplace. Mr. Xiao
Feng Yang, the Company’s Chairman of the Board, together with Mr. Raymond Ming Hui Lin, the Company’s Chief Executive Officer and Director are the
controlling shareholders of the Company (the “Controlling Shareholders”).

A reorganization of the Company’s legal structure was completed on November 2, 2017. The reorganization involved the incorporation of CLPS, a
Cayman Islands holding company; Qinheng Co., Limited (“Qinheng”) and Qiner Co., Limited (“Qiner”), two holding companies established in Hong Kong,
and Shanghai Qincheng Information Technology Co., Ltd. (“CLPS QC” or “WOFE”) established in the People’s Republic of China (“PRC”); and the transfer
of ChinaLink Professional Service Co., Ltd. (“CLPS Shanghai”) from the Controlling Shareholders to CLPS QC.

Prior  to  the  reorganization,  CLPS  Shanghai’s  equity  interests  were  100%  controlled  by  the  same  group  of  Controlling  Shareholders  of  CLPS.
CLIVST and FDT-CL are subsidiaries of Qinheng. JQ Technology Co., Limited (“JQ”) and JIALIN Technology Limited (“JL”) are subsidiaries of Qiner
since  October  17,  2017.  CLPS  Dalian  Co.,  Ltd.  (“CLPS  Dalian”),  CLPS  Ruicheng  Co.,  Ltd.  (“CLPS  RC”),  CLPS  Beijing  Hengtong  Co.,  Ltd.  (“CLPS
Beijing”),  CLPS  Technology  (Singapore)  Pte.  Ltd.  (“CLPS  SG”),  CLPS  Technology  (Australia)  Pty  Ltd.  (“CLPS-Ridik  AU”),  CLPS  Technology  (Hong
Kong) Co., Limited (“CLPS Hong Kong”), Judge (Shanghai) Co., Ltd. (“Judge China”), Judge (Shanghai) Human Resource Co., Ltd. (“Judge HR”), CLPS
Shenzhen Co., Ltd. (“CLPS Shenzhen”) and CLPS Guangzhou Co., Ltd. (“CLPS Guangzhou”) are all subsidiaries of CLPS Shanghai.

On July 25, 2017, the Company incorporated CLIVST, as a holding company, in BVI. On September 27, 2017 and October 24, 2017, the Company
incorporated CLPS Guangzhou in Guangzhou, PRC and FDT-CL in Hong Kong. FDT-CL was liquidated on March 15, 2019. CLIVST was liquidated on
June 20, 2019.

On September 27, 2017, the Company and a non-controlling interest shareholder of CLPS Beijing incorporated Tianjin Huanyu Qinshang Network
Technology Co., Ltd. (“Huanyu”). The Company subscribed 30% of equity interest in Huanyu for $0.15 million (RMB 1,000,000). On May 24, 2019, the
Company purchased the remaining 70% equity interest of Huanyu for consideration of $0.07 million (RMB 462,000) and waived the receivables due from
the other shareholder in the amount of $29,133 (RMB200,000). The consideration was paid on May 28, 2019. As of June 30, 2019, the Company held 100%
of Huanyu’s equity and Huanyu became our wholly-owned subsidiary since May 24, 2019.

On  October  17,  2017,  the  Company  acquired  55%  of  JQ  equity  interest  and  its  100%  owned  subsidiary  –  JL  for  a  cash  consideration  of
approximately $0.07 million to operate a software consulting business in Taiwan. In November 2018, the Company sold all the equity interest of JQ and JL
for  the  consideration  of  $0.05  million  (425,290  Hong  Kong  dollars)  to  the  non-controlling  shareholder  of  JQ  and  no  consideration  was  paid  due  to  the
Company’s waiver.

On November 2, 2017, the Controlling Shareholders transferred their 100% ownership interests in CLPS Shanghai to CLPS QC and Qiner, which
are 100% owned by Qinheng and CLPS. On October 31, 2017, the Controlling Shareholders transferred 100% of their equity interests in Qiner to CLPS.
After  the  reorganization,  CLPS  owns  100%  equity  interests  of  the  entities  mentioned  above.  On  December  7,  2017,  the  Board  of  Directors  approved  an
amendment of the Article of Association of CLPS and a nominal share issuance to the existing shareholders. As a result, the existing shareholders own the
same percentage of ownership in CLPS as their ownership interests in CLPS Shanghai prior to the reorganization. Since the Company and its subsidiaries are
controlled  by  the  same  group  of  the  shareholders  before  and  after  the  reorganization.  The  above-mentioned  transactions  were  accounted  for  as  a
recapitalization.  The  consolidation  of  the  Company  and  its  subsidiaries  has  been  accounted  for  at  historical  cost  and  prepared  on  the  basis  as  if  the
aforementioned transactions had become effective for all the periods presented in the consolidated financial statements.

55

 
  
 
 
 
 
 
 
 
 
 
 
On  June  5,  2018,  the  Company  incorporated  CLPS  US  to  develop  business  in  related  areas.  On  January  2,  2020,  CLPS  US  incorporated  CLPS

Technology (California) Inc. (“CLPS California”) to develop the business in related areas.

On June 13, 2018, the Company purchased a 2.7% equity interest in CLPS Lihong in Shanghai for consideration of $0.2 million (or approximately
RMB 1,000,000) to develop business in the related area. On January 25, 2019, the above investment agreement of CLPS Lihong was terminated. On March
1, 2019, the Company purchased a 36.84% equity interest in CLPS Lihong at a cash consideration of $0.15 (RMB 1). In May 2019, the Company made
capital contribution to CLPS Lihong of $1.01 million (RMB 7 million). In April 2020, the Company sold an 18.42% equity interest in CLPS Lihong for the
consideration of $995,605 (RMB 7 million) to the third party and the consideration has been received as of June 30, 2020. After the third party’s capital
increase in CLPS Lihong in April 2020, the Company’s remaining equity interest in CLPS Lihong was diluted to 7% as of June 30, 2020.

Prior to June 2018, the Company held a 70% equity interest of CLPS Beijing which primarily engages in software development. On June 27, 2018,
Qiner  entered  into  a  new  share  purchase  agreement  and  purchased  the  remaining  30%  equity  interest  of  CLPS  Beijing  for  consideration  of  $0.6  million,
holding 100% of CLPS Beijing’s equity interest. The consideration was paid on July 5, 2018. Prior to June 2018, the remaining 30% equity interest of CLPS
Beijing  was  recorded  as  a  non-controlling  interest  on  the  balance  sheet.  The  Company  engaged  an  independent  valuation  firm  to  assist  management  in
assessing the enterprise value of CLPS Beijing. The enterprise value of CLPS Beijing as of June 27, 2018 was $1.94 million based on the evaluation report.

On August 15, 2018, the shareholders of CLPS SG and CLPS-Ridik AU were changed to Qiner from CLPS Shanghai pursuant to the share purchase
agreements.  Qiner  purchased  the  100%  equity  interest  of  CLPS  SG  and  CLPS-Ridik  AU  from  CLPS  Shanghai  for  consideration  of  $0.6  million  (or
approximately 850,000 Singapore dollars) and $0.1 million (or approximately 200,000 Australian dollars), respectively. These transactions did not change the
holding company’s ownership of these entities.

On August 20, 2018, CLPS SG acquired an 80% interest in Infogain Solutions PTE. Ltd. (“Infogain”) located in Singapore from Sharma Devendra

Prasad and Deepak Malhotra with the final purchase price of $0.4 million (or approximately 576,000 Singapore dollars).

On April 3, 2019, Qiner purchased a 30% equity interest of Economic Modeling Information Technology Co., Ltd.(“EMIT”). The consideration is
zero amount. Qiner subsequently made a capital contribution of $0.44 million (RMB 3 million) to EMIT directly. There is remaining capital contribution of
$0.21 million not paid as of June 30, 2020.

On July 31, 2019, the Company incorporated CLPS Hangzhou Co., Ltd. (“CLPS Hangzhou”), to develop the business in related areas. 

On September 13, 2019, the Company incorporated CLPS Technology Japan (“CLPS Japan”) to develop business in related areas.

On September 26, 2019, Qiner acquired an 80% interest in Ridik Pte. Ltd. (“Ridik Pte.”) located in Singapore from Srustijeet Mishra and Routray
Sibashis with the final purchase price of $2,462,580 (3,402,304 Singapore dollars), in the form of cash of $2,026,043 (2,799,180 Singapore dollars) and the
Company’s common shares valued at $436,537 (603,123 Singapore dollars), respectively. Ridik Sdn. Bhd. (“Ridik Sdn.”), Ridik Software Solutions Pte. Ltd.
(“Ridik Software Pte.”) and Ridik Software Solutions Ltd. (“Ridik Software”) are all subsidiaries of Ridik Pte.

Prior to December 2019, CLPS Shanghai held a 70% equity interest of CLPS Shenzhen and an 80% equity interest of CLPS Hong Kong, which held
the  remaining  30%  equity  interest  of  CLPS  Shenzhen.  And  the  remaining  20%  equity  interest  of  CLPS  Hong  Kong  and  remaining  6%  equity  interest  of
CLPS  Shenzhen  were  recorded  as  non-controlling  interests  on  the  Company’s  consolidated  balance  sheet.  On  December  9,  2019,  Qiner  acquired  the
remaining 20% equity interest of CLPS Hong Kong from non-controlling shareholder with the consideration of the Company’s 100,000 common shares, and
became the sole shareholder of CLPS Hong Kong and CLPS Shenzhen.

On December 31, 2019, the Company incorporated Qinson Credit Card Services Limited (“Qinson”) to develop business in related areas.

On  January  6,  2020,  Ridik  Pte.  acquired  100%  equity  interest  in  Ridik  Consulting  Private  Limited  (“Ridik  Consulting”)  from  third-party  selling

shareholders with the final purchase price of $5,520 (396,700 Indian Rupees).

The Company is dedicated to providing a full range of services and solutions across technology needs in finance. In recent years, we have both one
of the largest IBM mainframe teams, and the largest VisionPLUS team in China, providing both development and implementation of core banking, credit
card, online and e-commerce systems, as well as expertise across technology stacks including J2EE, .Net, C, C++ and mobile. We are ISO9001:2008 and
CMMI  5  certified,  and  have  been  granted  certificates  of  recognition  by  the  Shanghai  government,  including  Enterprise  Software  Certification,  High-tech
Enterprise,  Little  Giant  Company  for  Science  and  Technology  and  Professional  Talent  Development  Training  Camp.  In  addition,  the  Company  was
recognized as one of the recipients of 2017 IDC China Top 25 FinTech Pioneers during the award ceremony spearheaded by IDC on August 25, 2017. The
Company  has  also  received  the  2018  Fintech  Brand  Leadership  Award  at  the  China  Finance  Summit  Winter  Forum  on  November  30,  2018,  in  Beijing,
China.

56

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Our operations are primarily based in China, where we derive a substantial portion of our revenues. For the years ended June 30, 2020, 2019 and
2018,  our  revenues  were  $89.4  million,  $64.9  million  and  $48.9  million,  respectively.  Revenues  generated  outside  of  China  were  approximately  $10.6
million, $4.5 million and $1.7 million for fiscal 2020, 2019 and 2018, respectively. We had a net income of $3.1 million in fiscal 2020, a net loss of $3.4
million in fiscal 2019, and a net income of $2.7 million in fiscal 2018, respectively. We had a non-GAAP net income of $7.1 million in fiscal 2020. Our total
assets as of June 30, 2020 were $45.4 million of which cash and cash equivalent amounted to $12.7 million. Our total liabilities as of June 30, 2020 were
$16.7 million.

Factors Affecting Our Results of Operations

We believe the most significant factors that affect our business and results of operations include the following:

● Our ability to obtain new clients and repeat business from existing clients. Revenues from individual clients typically grow over time as we
seek  to  increase  the  number  and  scope  of  services  provided  to  each  client,  and  as  clients  increase  the  complexity  and  scope  of  the  work
outsourced to us. Therefore, our ability to obtain new clients, as well as our ability to maintain and increase business from our existing clients,
has  a  significant  effect  on  our  results  of  operations  and  financial  condition.  During  fiscal  2020,  our  revenue  derived  from  our  IT  consulting
services increased by 41.1% or $25.3 million from fiscal 2019, mainly attributable to revenue growth from our existing clients. IT consulting
services revenue from new clients amounted to approximately $9.4 million in fiscal 2020. During fiscal 2019, our revenue derived from our IT
consulting services increased by 30.9% or $14.6 million from fiscal 2018, mainly attributable to revenue growth from our existing clients. IT
consulting services revenue from new clients amounted to approximately $4.9 million in fiscal 2019.

● Our  ability  to  expand  our  portfolio  of  service  offerings.  We  intend  to  increase  our  revenues  by  continuing  to  expand  our  service  offerings,
providing  quality  service  to  our  existing  customers  and  attracting  new  customers.  Through  research  and  development,  targeted  hiring  and
strategic acquisitions, we have proactively invested in broadening our existing service lines, including those for serving our specific industry
verticals.

● Our ability to attract, retain and motivate qualified employees. Our ability to attract, train and retain a large and cost-effective pool of qualified
professionals, including our ability to leverage and expand our proprietary database of qualified IT professionals, to develop additional joint
training programs with universities, and our employees’ job satisfaction, will affect our financial performance.

We use the following key operating metrics to oversee and manage the Company’s business: (i) developing new business, (ii) spearheaded by the
CLPS Academy, focusing on the TCP/TDP training programs to provide highly trained and qualified employees to the clients; and (iii) retaining employees
to continue to meet client ever-changing needs.

Our objective is to create value for both our customers and shareholders by enhancing our position as a leading IT services provider in the banking
industry in China. We believe our strategic initiatives will continue to generate our sales growth, allow us to focus on managing capital, leveraging costs and
driving margins to produce profitability and return on investment for our stockholders.

Acquisitions and Investments

Acquisition of Judge China

On November 9, 2016, CLPS Shanghai acquired 60% of Judge China and its 70% owned subsidiary Judge HR from Judge Company Asia Limited
(“Judge Asia”) with the final purchase price of $480,061 (RMB 3.25 million). The Company funded the acquisition with cash consideration of $454,388
(RMB 3.05 million) and a payable to Judge Asia of $128,928 (RMB 0.9 million), of which $103,255 (RMB 0.7 million) was subsequently offset with the
Company’s receivables from Judge Asia.

The  transaction  was  accounted  for  as  a  business  combination  using  the  purchase  method  of  accounting.  The  purchase  price  allocation  of  the
transaction was determined by the Company with the assistance of an independent appraisal firm based on the estimated fair value of the assets acquired and
liabilities assumed as of the acquisition date. The purchase price allocation to assets acquired and liabilities assumed as of the date of acquisition was as
follows:

Cash acquired
Accounts receivable, net
Prepayments, deposits and other assets, net
Property and equipment, net
Intangible assets, net
Salaries and benefits payable
Tax payables
Accounts payable and other current liabilities
Deferred tax liabilities
Non-controlling interests
Goodwill
Total consideration

57

Amounts

268,014 
325,888 
67,570 
1,875 
339,883 
(86,483)
(16,147)
(259,361)
(65,264)
(290,994)
195,080 
480,061 

  $

  $

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
   
   
   
   
   
   
   
   
 
The intangible assets include customer contracts of $339,883, which were acquired by Judge China in 2013 with an estimated useful life of 10 years.
The goodwill is mainly attributable to the excess of the consideration paid over the fair value of the net assets acquired that cannot be recognized separately
as identifiable assets under U.S. GAAP, and comprises (a) the assembled work force and (b) the expected but unidentifiable business growth as a result of the
synergy resulting from the acquisition.

Investment in Huanyu

On September 27, 2017, the Company made an investment of $0.15 million (RMB 1,000,000) for a 30% of equity interest in Huanyu which was
accounted for as an equity method investment. On May 24, 2019, the Company purchased the remaining 70% equity interest of Huanyu for $0.07 million
(RMB 462,000) and became the sole shareholder of Huanyu.

The transaction was accounted for as a business combination using the purchase method of accounting. As the business combination was achieved
in stages, the Company remeasured its previously held 30% of equity interest in Huanyu at its acquisition date fair value of $152,312. A loss of $19,682 was
recognized in subsidies and other income net in relation to the remeasurement. The valuation considered a discount for lack of control premium and lack of
marketability applied to the fair value of the acquired business of Huanyu, which was determined using the income approach.

The purchase price allocation of the transaction was determined by the Company with the assistance of an independent appraisal firm based on the
estimated fair value of the assets acquired and liabilities assumed as of the acquisition date. The purchase price allocation to assets acquired and liabilities
assumed as of the date of acquisition was as follows:

Cash acquired
Accounts receivable, net
Prepayments, deposits and other assets, net
Accounts payable and other current liabilities
Goodwill
Previous held equity interests
Cash consideration
Total consideration

Amounts

79,156 
87,674 
7,707 
(5,310)
50,045 
152,312 
66,960 
219,272 

  $

  $

The goodwill is mainly attributable to the excess of the consideration paid over the fair value of the net assets acquired that cannot be recognized
separately as identifiable assets under U.S. GAAP, and comprise the expected but unidentifiable business growth as a result of the synergy resulting from the
acquisition. The goodwill is not tax deductible. No intangible assets were identified from the acquisition.

For  the  period  from  July  1,  2018  to  the  acquisition  date  of  May  24,  2019  and  for  the  year  ended  June  30,  2018,  30%  of  Huanyu’s  results  of

operations was income of $35,049 (RMB 239,073) and loss of $8,684 (RMB56,461), respectively.

58

 
 
 
 
 
 
 
 
 
 
   
   
   
   
   
   
 
  
 
In November 2018, the Company sold all the equity interest of JQ and JL for the consideration of $0.05 million (425,290 Hong Kong dollars) to the

non-controlling shareholder of JQ and no consideration was paid due to the Company’s waiver. 

Acquisition of Infogain

On August 20, 2018, CLPS SG acquired an 80% equity in Infogain located in Singapore from Sharma Devendra Prasad and Deepak Malhotra with

the final purchase price of $0.4 million (or approximately 576,000 Singapore dollars).

The  transaction  was  accounted  for  as  a  business  combination  using  the  purchase  method  of  accounting.  The  purchase  price  allocation  of  the
transaction was determined by the Company with the assistance of an independent appraisal firm based on the estimated fair value of the assets acquired and
liabilities assumed as of the acquisition date. The most significant variables in the valuation are discount rate, terminal value, the number of years on which
to base the cash flow projections, as well as the assumptions and estimates used to determine the cash inflows and outflows. The purchase price allocation to
assets acquired and liabilities assumed as of the date of acquisition was as follows:

Cash acquired
Accounts receivable
Prepayment and other receivable
Property and equipment, net
Intangible assets, net
Other payable and other current liabilities
Deferred tax liabilities
Non-controlling interests
Goodwill
Total consideration

Amounts

6,843 
458,943 
14,454 
1,190 
337,685 
(504,235)
(57,406)
(64,879)
227,506 
420,101 

  $

  $

Identifiable intangible assets acquired include customer contracts, which were valued using an income approach and determined to carry estimated

remaining useful lives of approximately three years. The goodwill recognized represents the expected synergies and is not tax deductible.

Investment in CLPS Lihong

On March 1, 2019, the Company purchased a 36.84% equity interest in CLPS Lihong at a cash consideration of $0.15 (RMB 1) on the condition that
the  Company  could  inject  capital  of  $1.01  million  (RMB  7  million)  into  CLPS  Lihong.  In  May  2019,  the  Company  made  capital  contribution  to  CLPS
Lihong of $1.01 million (RMB 7 million). The Company accounts for the investment in CLPS Lihong as an equity method investment due to its significant
influence  over  the  entity.  For  the  year  ended  June  30,  2019,  the  Company’s  share  of  CLPS  Lihong’s  results  of  operations  was  loss  of  $176,148  (RMB
1,201,523).

In April 2020, the Company sold an 18.42% equity interest in CLPS Lihong to the third party for the consideration of $995,605 (RMB 7 million)
which was received as of June 30, 2020. Concurrently CLPS Lihong raised additional capital from other third party investors, and the Company’s remaining
equity interest in CLPS Lihong was diluted to 7% as of June 30, 2020. The Company recognized the remaining equity interest in CLPS Lihong as equity
investment  without  readily  determined  fair  value  since  May  2020.  For  the  period  from  July  1,  2019  to  April  30,  2020,  the  Company’s  share  of  CLPS
Lihong’s results of operations was income of $250,290 (RMB 1,759,764).

Investment in CLPS Beijing

Prior to June 2018, the Company held a 70% equity interest of CLPS Beijing which primarily engages in software development. On June 27, 2018,
Qiner entered into a new share purchase agreement and purchased the remaining 30% equity interest of CLPS Beijing for consideration of $0.6 million and
became the sole shareholder of CLPS Beijing. The consideration was paid on July 5, 2018. Prior to June 2018, the remaining 30% equity interest of CLPS
Beijing  was  recorded  as  non-controlling  interests  on  the  balance  sheet.  The  Company  engaged  an  independent  valuation  firm  to  assist  management  in
assessing  the  enterprise  value  of  CLPS  Beijing.  The  enterprise  value  of  CLPS  Beijing  as  of  June  27,  2018  was  $1.94  million  based  on  the  third-party
valuation report.

Investment in EMIT

On April 3, 2019, Qiner purchased a 30% equity interest of EMIT at nil consideration. with a committed to invest $445,454.14 (RMB 3,000,000.00)
in total within 20 years. During the years ended June 30, 2020 and 2019, the Company made capital contribution to EMIT of $143,299 (RMB 1,000,000.00)
and  $73,593  (RMB500,000.00),  respectively.  The  Company  accounts  for  the  investment  in  EMIT  as  an  equity  method  investment  due  to  its  significant
influence over the entity. For the years ended June 30, 2020 and 2019, the Company’s share of EMIT’s results of operations was a loss of $42,927 (RMB
301,878) and $4,230 (RMB 28,853), respectively. As the end of June 30, 2020 and 2019, the committed but not yet made investment in EMIT was $228,561
(RMB 1,500,000.00) and $371,860 (RMB 2,500,000.00), respectively.

59

 
 
 
 
 
 
 
 
 
   
   
   
   
   
   
   
   
 
  
 
 
 
 
 
 
 
Acquisition of Ridik Pte. and Ridik Consulting

On  September  26,  2019,  Qiner  acquired  an  80%  equity  interest  in  Ridik  Pte.  Ltd.  (“Ridik  Pte.”)  located  in  Singapore  from  third-party  selling
shareholders with the final purchase price of $2,462,580 (3,402,304 Singapore dollars), in the form of cash of $2,026,043 (2,799,180 Singapore dollars) and
the Company’s common shares valued at $436,537 (603,123 Singapore dollars), respectively. Ridik Sdn. Bhd. (“Ridik Sdn.”), Ridik Software Solutions Pte.
Ltd. (“Ridik Software Pte.”) and Ridik Software Solutions Ltd. (“Ridik Software”) are all subsidiaries of Ridik Pte.

The  transactions  were  accounted  for  as  business  combinations  using  the  purchase  method  of  accounting.  The  purchase  price  allocations  of  the
transactions were determined by the Company with the assistance of an independent appraisal firm based on the estimated fair value of the assets acquired
and liabilities assumed as of the acquisition dates. The most significant variables in the valuation are discount rates, terminal value, the number of years on
which  to  base  the  cash  flow  projections,  as  well  as  the  assumptions  and  estimates  used  to  determine  the  cash  inflows  and  outflows.  The  purchase  price
allocation to assets acquired and liabilities assumed as of the date of acquisition was as follows:

Cash acquired
Accounts receivable, net
Prepayments, deposits and other assets, net
Property and equipment, net
Customer relationship
Short-term bank loans
Accounts payable and other current liabilities
Tax payables
Salaries and benefits payable
Long-term bank loans
Deferred tax liabilities
Non-controlling interests
Goodwill

Total consideration

Amounts

474,323 
618,144 
103,697 
1,493 
904,748 
(48,103)
(128,688)
(102,978)
(431,548)
(44,201)
(162,855)
(411,351)
1,689,899 
2,462,580 

  $

  $

Identifiable  intangible  assets  acquired  included  customer  relationship,  which  was  valued  using  an  income  approach  and  determined  to  carry

estimated remaining useful life of approximately ten years.

On  January  6,  2020,  Ridik  Pte.  acquired  100%  equity  interest  in  Ridik  Consulting  Private  Limited  (“Ridik  Consulting”)  from  third-party  selling
shareholders  with  the  final  purchase  price  of  $5,520  (396,700  Indian  Rupees).  The  fair  value  of  the  net  liabilities  acquired  was  $3,839  (275,800  Indian
Rupees) and goodwill was recognized at $9,359 (672,500 Indian Rupees).

The goodwill recognized represents the expected synergies and is not tax deductible.

60

 
 
 
 
 
 
 
 
   
   
   
   
   
   
   
   
   
   
   
   
 
 
 
   
Results of Operations

Results of Operations for Continuing Operations

The following table sets forth a summary of our consolidated statements of operations for the periods indicated.

Revenues
Less: Cost of revenues
Gross profit

Operating expenses:

Selling and marketing expenses
Research and development expenses
General and administrative expenses

Total operating expenses
Income (loss) from operation
Subsidies and other income, net
Other expenses

Income (loss) before income tax and share of loss in equity investees
Provision (benefits) for income taxes
Income (loss) before share of income (loss) in equity investees
Share of income (loss) in equity investees, net of tax
Net income (loss)
Less: Net income (loss) attributable to non-controlling interests
Net income (loss) attributable to CLPS Incorporation’s shareholders

Basic earnings (loss) per common share
Weighted average number of share outstanding – basic
Diluted earnings (loss) per common shar
Weighted average number of share outstanding – diluted

Supplemental information:
Non-GAAP income before income tax
Non-GAAP net income
Non-GAAP net income attributable to CLPS Incorporation’s shareholders
Non-GAAP basic earnings per common share
Weighted average number of share outstanding – basic
Non-GAAP diluted earnings per common share
Weighted average number of share outstanding – diluted

Use of Non-GAAP Financial Measures

For the years ended June 30,
2019

2020

2018

  $

89,415,798    $
(58,296,097)    
31,119,701     

64,932,937    $
(41,178,356)    
23,754,581     

48,938,593 
(31,277,255)
17,661,338 

3,059,877     
10,436,975     
16,343,936     
29,840,788     
1,278,913     
2,535,868     
(107,322)    

2,179,029     
7,978,883     
17,384,393     
27,542,305     
(3,787,724)    
779,508     
(92,429)    

3,707,459     
835,444     
2,872,015     
207,363     
3,079,378     
141,139     
2,938,239    $

(3,100,645)    
186,615     
(3,287,260)    
(145,329)    
(3,432,589)    
(162,813)    
(3,269,776)   $

  $

2,225,702 
7,837,873 
5,871,622 
15,935,197 
1,726,141 
960,784 
(84,155)

2,602,770 
(112,128)
2,714,898 
- 
2,714,898 
280,435 
2,434,463 

0.20     
14,689,224     
0.20     
14,692,299     

(0.24)    
13,843,764     
(0.24)    
13,843,764     

0.21 
11,517,123 
0.21 
11,636,367 

7,711,539     
7,083,458     
6,942,319     
0.47     
14,689,224     
0.47     
14,692,299     

3,915,444     
3,583,500     
3,746,313     
0.27     
13,843,764     
0.27     
13,969,436     

2,602,770 
2,714,898 
2,434,463 
0.21 
11,517,123 
0.21 
11,636,367 

The  consolidated  financial  information  is  prepared  in  conformity  with  accounting  principles  generally  accepted  in  the  United  States  of  America
(“U.S. GAAP”), except that the consolidated statement of changes in shareholders’ equity, consolidated statements of cash flows, and the detailed notes have
not been presented. The Company uses non-GAAP income before income tax and share of loss of equity investees, non-GAAP net income attributable to the
Company, and basic and diluted non-GAAP net income per share, which are non-GAAP financial measures. Non-GAAP income before income tax and share
of loss of equity investees is income before income tax and share of loss of equity investees excluding share-based compensation expenses. Non-GAAP net
income attributable to the Company is net income attributable to the Company excluding share-based compensation expenses. Basic and diluted non-GAAP
net income per share is non-GAAP net income attributable to common shareholders divided by weighted average number of shares used in the calculation of
basic  and  diluted  net  income  per  share.  The  Company  believes  that  separate  analysis  and  exclusion  of  the  non-cash  impact  of  share-based  compensation
expenses  clarity  to  the  constituent  parts  of  its  performance.  The  Company  reviews  these  non-GAAP  financial  measures  together  with  GAAP  financial
measures  to  obtain  a  better  understanding  of  its  operating  performance.  It  uses  the  non-GAAP  financial  measure  for  planning,  forecasting  and  measuring
results  against  the  forecast.  The  Company  believes  that  non-GAAP  financial  measures  are  useful  supplemental  information  for  investors  and  analysts  to
assess  its  operating  performance  without  the  effect  of  non-cash  share-based  compensation  expenses,  which  have  been  and  will  continue  to  be  significant
recurring expenses in its business. However, the use of non-GAAP financial measures has material limitations as an analytical tool. One of the limitations of
using non-GAAP financial measures is that they do not include all items that impact the Company’s net income for the period. In addition, because non-
GAAP financial measures are not measured in the same manner by all companies, they may not be comparable to other similar titled measures used by other
companies. In light of the foregoing limitations, you should not consider non-GAAP financial measure in isolation from or as an alternative to the financial
measure prepared in accordance with U.S. GAAP.

61

 
 
 
 
 
 
 
 
 
 
   
   
 
 
   
   
 
   
 
 
   
   
 
   
      
      
  
   
      
      
  
   
   
   
   
   
   
   
 
   
      
      
  
   
   
   
   
   
   
 
   
      
      
  
   
   
   
   
 
   
      
      
  
   
      
      
  
   
   
   
   
   
   
   
 
 
The  presentation  of  these  non-GAAP  financial  measures  is  not  intended  to  be  considered  in  isolation  from,  or  as  a  substitute  for,  the  financial
information prepared and presented in accordance with U.S. GAAP. The following table sets forth a reconciliation of non-GAAP general and administrative
expense, non-GAAP income before income tax and share of loss of equity investees, non-GAAP net income, non-GAAP net income attributable to CLPS
Incorporation’s shareholders, and non-GAAP Basic and diluted earnings per common share for the periods indicated:

Cost of revenues
Less: share-based compensation expenses

Non-GAAP cost of revenues

Selling and marketing expenses
Less: share-based compensation expenses

Non-GAAP selling and marketing expenses

General and administrative expenses
Less: share-based compensation expenses

Non-GAAP general and administrative expenses

Income before income tax
Add: share-based compensation expenses

Non-GAAP income before income tax and share of income of equity investees

Net income
Add: share-based compensation expenses

Non-GAAP net income

Net income attributable to CLPS Incorporation’s shareholders
Add: share-based compensation expenses

Non-GAAP net income attributable to CLPS Incorporation’s shareholders

Weighted average number of share outstanding used in computing GAAP and non-GAAP basic earnings
GAAP basic earnings per common share
Add: share-based compensation expenses
Non-GAAP basic earnings per common share

Weighted average number of share outstanding used in computing GAAP diluted earnings
Add: effect of dilutive securities
Weighted average number of share outstanding used in computing non-GAAP diluted earnings

GAAP diluted earnings per common share
Add: share-based compensation expenses
Non-GAAP diluted earnings per common share

62

For the year
ended
June 30,
2020

58,296,097 
14,110 

58,281,987 

3,059,877 
211,573 

2,848,304 

16,343,936 
3,778,397 

12,565,539 

3,707,459 
4,004,080 

7,711,539 

3,079,378 
4,004,080 

7,083,458 

2,938,239 
4,004,080 

6,942,319 

14,689,224 
0.20 
0.27 
0.47 

14,692,299 
- 
14,692,299 

0.20 
0.27 
0.47 

 
 
 
 
 
 
 
   
 
   
   
 
   
  
   
 
   
  
   
   
 
   
  
   
 
   
  
   
   
 
   
  
   
 
   
  
   
   
 
   
  
   
 
   
  
   
   
 
   
  
   
 
   
  
   
   
 
   
  
   
 
   
  
   
   
   
   
 
   
  
   
   
   
 
   
  
   
   
   
 
For the Years Ended June 30, 2020 and 2019

Revenues 

We derive revenues by providing integrated IT services and solutions, including: (i) IT consulting services, which primarily includes application
development services for banks and institutions in the financial industry, which are billed on a time-and-expense basis, (ii) customized IT solutions services,
which primarily includes customized solution development and maintenance service for general enterprises with acceptance requirement, which are billed
either on a time-and-expense basis with enforceable right to payment or on a fixed-price basis, and (iii) other revenue from product and third-party software
sales, training and headhunting.

Our customer contracts may be categorized by pricing model into time-and-expense contracts and fixed-price contracts. Under time-and-expense
contracts, we are compensated for actual time incurred by our IT professionals at negotiated daily billing rates. We are also entitled to charge overtime fees in
addition to the daily billing rates under some time-and-expense contracts.  Fixed-price contracts require us to develop customized IT solutions throughout the
contractual period, and we are paid in installments upon completion of specified milestones under the contracts.

The following table presents our revenues by our service lines.

2020

For the Year ended June 30,
2019

  Revenue    

% of total
Revenue  

  Revenue    

% of total
Revenue  

  Variance    

%  

Variance

IT consulting services
Customized IT solution services
Other
Total

  $ 87,136,754     
    1,844,891     
434,153     
  $ 89,415,798     

97.5%  $ 61,755,355     
2.1%    3,041,482     
136,100     
0.5%   
100.0%  $ 64,932,937     

95.1%  $ 25,381,399     
4.7%    (1,196,591)    
298,053     
0.2%   
100.0%  $ 24,482,861     

41.1%
(39.3)%
219.0%
37.7%

63

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
    
  
 
    
  
 
    
  
   
  
Our total revenues increased by approximately $24.5 million, or 37.7%, to approximately $89.4 million for the fiscal year ended June 30, 2020 from
approximately  $64.9  million  for  the  fiscal  year  ended  June  30,  2019.  The  overall  growth  in  our  revenues  reflects  an  increase  in  revenues  from  our  IT
consulting services and derived primarily from existing customers.

For the year ended June 30, 2020, revenue derived from our IT consulting services increased by 41.1% to $87.1 million from $61.8 million in fiscal
2019, primarily reflecting the increasing demands for our IT consulting services from banks and other financial institutions. For fiscal 2020 and 2019, 40.0%
and 47.5% of our IT consulting services revenue were from international banks, respectively. In fiscal 2020, we strengthened our expertise in the financial
industry to leverage our existing industry knowledge and grew our customer base of local Chinese financial institutions.

Revenue from customized IT solution services decreased by $1.2 million, or 39.3%, to $1.8 million for the year ended June 30, 2020, from $3.0

million in the same period of the previous year. The decrease was primarily due to decreasing demand from existing clients.

Revenue from other services increased by $0.3 million, or 219.0%, to $0.4 million for the year ended June 30, 2020, from $0.1 million in the prior

year period.

The number of clients increased by 53, or 30%, to 227 for the year ended June 30, 2020 from 174 in the prior year period. Revenues from top five
clients  accounted  for  47.3%  and  50.7%  of  the  Company’s  total  revenues  for  fiscal  2020  and  2019,  respectively,  which  reflects  decreased  in  revenue
dependence from major clients.

Revenue generated outside of mainland China for the year ended June 30, 2020 accounted for 11.8% of total revenue compared to 7.0% in the prior

year period. The increase in revenue generated outside of mainland China reflects the Company’s successful and continuous global expansion strategy.

Cost of revenues

Our cost of revenues mainly consisted of compensation benefit expenses for our IT professionals, travel expenses and material costs. Our cost of
revenues increased by $17.1 million or 41.6% to approximately $58.3 million in fiscal 2020 from approximately $41.2 million in fiscal 2019 primarily as a
result of increased revenue, therefore resulting in increased headcount, expanded office facilities and increase of depreciation and amortization expenses to
enable and match the growth of our business revenue. As a percentage of revenues, our cost of revenues was 65.2% and 63.4% for fiscal 2020 and 2019,
respectively. Our total number of employees grew from 2,085 employees as of June 30, 2019 to 2,746 employees as of June 30, 2020.

Gross profit and gross margin

Our gross profit increased by $7.3 million, or 31.0%, to approximately $31.1 million in fiscal 2020 from approximately $23.8 million in fiscal 2019.
The higher gross profit in fiscal 2020 was primarily attributable to the increase in our billing rates of both IT consulting services and customized IT solution
services.  Also,  customized  IT  solution  services  contribute  favorably  to  our  client  retention  and  understanding  of  our  clients’  businesses  and  provide
opportunities to cross-sell our other services. Gross margin decreased to 34.8% in fiscal 2020 from 36.6% for the same period of last year.

Selling and marketing expenses

Selling and marketing expenses primarily consisted of salary and compensation expenses relating to our sales and marketing personnel, and also

included entertainment, travel and transportation, and other expenses relating to our marketing activities.

Selling and marketing expenses increased by $0.9 million or 40.4% from $2.2 million in fiscal 2019 to $3.1 million in fiscal 2020. Accordingly, as a
percentage of sales, our selling expenses were 3.4% of revenues in fiscal 2020 same as 3.4% in fiscal 2019. We expect our selling and marketing expenses to
increase as we continue our business expansion, we expect these expenses to remain relatively steady as a percentage of our net revenues to support our
business growth in the future.

64

 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
Research and development (“R&D”) expenses

R&D  expenses  primarily  consisted  of  compensation  and  benefit  expenses  relating  to  our  research  and  development  personnel  as  well  as  office
overhead and other expenses relating to our R&D activities. Our R&D expenses were $10.4 million in fiscal 2020, which increased by $2.4 million or 30.8%
compared to $8.0 million in fiscal 2019, representing 11.7% and 12.3% of our total revenues for fiscal 2020 and 2019, respectively. We expect to keep our
investment in research and development relatively stable to enhance our industry knowledge, improve our competitiveness and enable us to identify attractive
market opportunities for new and enhanced services and solutions.

General and administrative expenses 

General and administrative expenses primarily consisted of salary and compensation expenses relating to our finance, legal, human resources and
executive  office  personnel,  and  included  share-based  compensation  expenses,  rental  expenses,  depreciation  and  amortization  expenses,  office  overhead,
professional service fees and travel and transportation costs.

General and administrative expenses decreased by $1.1 million, or 6.0%, to $16.3 million in fiscal 2020 from $17.4 million in the prior year. After
the deduction of $3.8 million non-cash share-based compensation expenses related to the grants under the 2017 and 2019 Incentive Compensation Plan, non-
GAAP general and administrative expenses increased by $2.1 million, or 20.5%, to $12.6 million in fiscal 2020 from $10.4 million in the same period of the
previous year. The increase in non-GAAP administrative expenses was primarily due to an increase in administrative personnel and M&A related expenses
as a result of business expansion.

Subsidies and other income, net

Subsidies and other income, net primarily included government subsidies which represented amounts granted by local government authorities as a
general incentive for us to promote development of the local technology industry. The Company records government subsidies in subsidies and other income
upon  received  and  when  there  is  no  further  performance  obligation.  Total  government  subsidies  amounted  to  $1.8  million  and  $0.7  million  for  the  years
ended June 30, 2020 and 2019, respectively.

Income (loss) before income taxes and share of income (loss) in equity investees

Income (loss) before income taxes and share of income (loss) in equity investees increased by $6.8 million to a $3.7 million income in fiscal 2020
from a loss of $3.1 million in fiscal 2019. After the deduction of non-cash share-based compensation expenses, non-GAAP income before income taxes and
share of income in equity investees increased by $3.8 million, or 97%, to $7.7 million in fiscal 2020 from $3.9 million in the same period of the previous
year.

Provision (benefits) for income taxes 

Our provision for income taxes in fiscal 2020 increased by $0.6 million to $0.8 million from $0.2 million benefit for income taxes in fiscal 2019,
mainly  due  to  the  increase  of  Company’s  income  before  tax  and  the  reversal  of  the  beginning  balances  of  deferred  tax  assets  related  to  the  net  operating
losses for some of the Company’s subsidiaries.

Share of income (loss) in equity investees, net of tax

The share of income in equity investees, net of tax in fiscal 2020 was net equity investment income of Lihong and EMIT. The share of loss in equity

investees, net of tax in fiscal 2019 was equity investment loss of Huanyu, Lihong and EMIT.

Net income (loss) 

Net income increased by $6.5 million to an income of $3.1 million in fiscal 2020 from a loss of $3.4 million in fiscal 2019. After the deduction of
$4.0 million non-cash share-based compensation expenses, non-GAAP net income increased by $3.5 million, or 97.7%, to $7.1 million in fiscal 2020 from
$3.6 million in the previous year.

65

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other comprehensive income (loss)

Foreign currency translation adjustments amounted to loss of $0.5 and $0.4 million for the years ended June 30, 2020 and 2019, respectively. The
balance sheet amounts with the exception of equity as of June 30, 2020 were translated at 7.0651 RMB to 1.00 USD as compared to 6.8650 RMB to 1.00
USD as of June 30, 2019. The equity accounts were stated at their historical rate. The average translation rates applied to the income statements accounts for
the years ended June 30, 2020 and 2019 were 7.0309 RMB to 1.00 USD and 6.8211 RMB to 1.00 USD, respectively. The change in the value of the RMB
relative to the U.S. dollar may affect our financial results reported in the U.S, dollar terms without giving effect to any underlying change in our business or
results of operation.

For the Years Ended June 30, 2019 and 2018

Revenues 

We derive revenues by providing integrated IT services and solutions, including: (i) IT consulting services, which primarily includes application
development services for banks and institutions in the financial industry, which are billed on a time-and-expense basis, (ii) customized IT solutions services,
which primarily includes customized solution development and maintenance service for general enterprises, which are billed on a fixed-price basis, and (iii)
other revenue from product and third-party software sales.

Our customer contracts may be categorized by pricing model into time-and-expense contracts and fixed-price contracts. Under time-and-expense
contracts, we are compensated for actual time incurred by our IT professionals at negotiated daily billing rates. We are also entitled to charge overtime fees in
addition to the daily billing rates under some time-and-expense contracts.  Fixed-price contracts require us to develop customized IT solutions throughout the
contractual period, and we are paid in installments upon completion of specified milestones under the contracts with enforceable right to payments.

For fiscal 2019 and 2018, most of our time-and-expense contracts were generated by our IT consulting services for clients in the financial industry.

In comparison, all of our fixed-price contracts were generated by our customized IT solution business for clients in the financial industry and others.

The following table presents our revenues by our service lines.

2019

For the Year ended June 30,
2018

  Revenue    

% of total
Revenue  

  Revenue    

% of total
Revenue  

  Variance    

%  

Variance

IT consulting services
Customized IT solution services
Other
Total

  $ 61,755,355     
    3,041,482     
136,100     
  $ 64,932,937     

95.1%  $ 47,159,651     
4.7%    1,634,100     
144,842     
0.2%   
100.0%  $ 48,938,593     

96.4%  $ 14,595,704     
3.3%    1,407,382     
(8,742)    
0.3%   
100.0%  $ 15,994,344     

30.9%
86.1%
(6.0)%
32.7%

66

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
    
  
 
    
  
 
    
  
   
 
Our total revenues increased by approximately $16.0 million, or 32.7%, to approximately $64.9 million for the fiscal year ended June 30, 2019 from
approximately  $48.9  million  for  the  fiscal  year  ended  June  30,  2018.  The  overall  growth  in  our  revenues  reflects  an  increase  in  revenues  from  our  IT
consulting services and derived primarily from existing customers.

For the year ended June 30, 2019, revenue derived from our IT consulting services increased by 30.9% to $61.8 million from $47.2 million in fiscal
2018, primarily reflecting the increasing demands for our IT consulting services from banks and other financial institutions. For fiscal 2019 and 2018, 47.5%
and 46.8% of our IT consulting services revenue were from international banks. In fiscal 2019, we strengthened our expertise in the financial industry to
leverage our existing industry knowledge and grew our customer base of local Chinese financial institutions.

Cost of revenues

Our cost of revenues mainly consisted of compensation benefit expenses for our IT professionals, travel expenses and material costs. Our cost of
revenues increased by $9.9 million or 31.7% to approximately $41.2 million in fiscal 2019 from approximately $31.3 million in fiscal 2018 primarily as a
result of increased revenue, therefore resulting in increased headcount, expanded office facilities and increase of depreciation and amortization expenses to
enable and match the growth of our business revenue. As a percentage of revenues, our cost of revenues was 63.4% and 63.9% for fiscal 2019 and 2018,
respectively. Our total number of employees grew from 1,655 employees as of June 30, 2018 to 2,085 employees as of June 30, 2019.

Gross profit and gross margin

Our gross profit increased by $6.1 million, or 34.5%, to approximately $23.8 million in fiscal 2019 from approximately $17.7 million in fiscal 2018.
The higher gross profit in fiscal 2019 was primarily attributable to the increase in our billing rates of both IT consulting services and customized IT solution
services.  Also,  customized  IT  solution  services  contribute  favorably  to  our  client  retention  and  understanding  of  our  clients’  businesses  and  provide
opportunities to cross-sell our other services. Gross margin increased to 36.6% in fiscal 2019 from 36.1% for the same period of last year.

Selling and marketing expenses

Selling and marketing expenses primarily consisted of salary and compensation expenses relating to our sales and marketing personnel, and also

included entertainment, travel and transportation, and other expenses relating to our marketing activities.

Selling and marketing expenses decreased by $0.05 million or 2.1% from $2.23 million in fiscal 2018 to $2.18 million in fiscal 2019. Accordingly,
as a percentage of sales, our selling expenses were 3.4% of revenues in fiscal 2019 as compared to 4.5% in fiscal 2018. While we expect our selling and
marketing  expenses  to  increase  as  we  continue  our  business  expansion,  we  expect  these  expenses  to  remain  relatively  steady  as  a  percentage  of  our  net
revenues to support our business growth in the future.

67

 
 
 
 
 
 
 
 
 
 
 
Research and development (“R&D”) expenses

R&D  expenses  primarily  consisted  of  compensation  and  benefit  expenses  relating  to  our  research  and  development  personnel  as  well  as  office
overhead and other expenses relating to our R&D activities. Our R&D expenses were $8.0 million in fiscal 2019, which was stable compared to $7.8 million
in fiscal 2018, representing 12.3% and 16.0% of our total revenues for fiscal 2019 and 2018, respectively. We expect to increase our investment in research
and  development  to  enhance  our  industry  knowledge,  improve  our  competitiveness  and  enable  us  to  identify  attractive  market  opportunities  for  new  and
enhanced services and solutions.

General and administrative expenses 

General and administrative expenses primarily consisted of salary and compensation expenses relating to our finance, legal, human resources and
executive  office  personnel,  and  included  share-based  compensation  expenses,  rental  expenses,  depreciation  and  amortization  expenses,  office  overhead,
professional service fees and travel and transportation costs.

General and administrative expenses increased by $11.5 million, or 196.1%, to $17.4 million in fiscal 2019 from $5.9 million in the prior year. The
increase  was  primarily  due  to  an  addition  of  $7.0  million  non-cash  share-based  compensation  expenses  related  to  the  grants  under  the  2017  Incentive
Compensation Plan. After the deduction of non-cash share-based compensation expenses, non-GAAP general and administrative expenses increased by $4.5
million,  or  77.5%,  to  $10.4  million  in  fiscal  2019  from  $5.9  million  in  the  same  period  of  the  previous  year.  The  increase  in  Non-GAAP  general  and
administrative expenses was primarily due to routine expenses incurred after going public and due to a year-over-year increase in salary and compensation
expenses.

Subsidies and other income, net

Subsidies and other income, net primarily included government subsidies which represented amounts granted by local government authorities as a
general incentive for us to promote development of the local technology industry. The Company records government subsidies in subsidies and other income
upon  received  and  when  there  is  no  further  performance  obligation.  Total  government  subsidies  amounted  to  $0.7  million  and  $0.9  million  for  the  years
ended June 30, 2019 and 2018, respectively.

Income (loss) before income taxes and share of loss in equity investees

Income  (loss)  before  income  taxes  and  share  of  loss  in  equity  investees  decreased  by  $5.7  million  to  a  $3.1  million  loss  in  fiscal  2019  from  an
income  of  $2.6  million  in  fiscal  2018.  After  the  deduction  of  non-cash  share-based  compensation  expenses,  non-GAAP  income  before  income  taxes  and
share of loss in equity investees increased by $1.3 million, or 50.4%, to $3.9 million in fiscal 2019 from $2.6 million in the same period of the previous year.

Provision (benefits) for income taxes 

Our provision for income taxes in fiscal 2019 increased by $0.3 million to $0.2 million from $0.1 million benefit for income taxes in fiscal 2018,
mainly  due  to  the  Company’s  reversal  of  the  beginning  balances  of  deferred  tax  assets  related  to  the  net  operating  losses  for  some  of  the  Company’s
subsidiaries.

Share of loss in equity investees, net of tax

The share of loss in equity investees, net of tax in fiscal 2019 was equity investment loss of Huanyu, Lihong and EMIT.

Net income (loss)

Net income decreased by $6.1million to a loss of $3.4 million in fiscal 2019 from an income of $2.7 million in fiscal 2018. The decrease in net
income was due to the increase in non-cash share-based compensation expenses. After the deduction of non-cash share-based compensation expenses, non-
GAAP net income increased by $0.9 million, or 32.0%, to $3.6 million in fiscal 2019 from $2.7 million in the previous year.

68

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other comprehensive income (loss)

Foreign currency translation adjustments amounted to a loss of $0.4 million and a gain of $0.06 million for the years ended June 30, 2019 and 2018,
respectively. The balance sheet amounts with the exception of equity as of June 30, 2019 were translated at 6.8650 RMB to 1.00 USD as compared to 6.6171
RMB to 1.00 USD as of June 30, 2018. The equity accounts were stated at their historical rate. The average translation rates applied to the income statements
accounts for the years ended June 30, 2019 and 2018 were 6.8211 RMB to 1.00 USD and 6.5023 RMB to 1.00 USD, respectively. The change in the value of
the RMB relative to the U.S. dollar may affect our financial results reported in the U.S, dollar terms without giving effect to any underlying change in our
business or results of operation.

Liquidity and Capital Resources

As of June 30, 2020, we had cash and cash equivalents of approximately $12.7 million. Our current assets were approximately $40.5 million, and
our current liabilities were approximately $16.5 million. Total shareholders’ equity as of June 30, 2020 was approximately $28.6 million. We believe that we
will have sufficient working capital to operate our business for the next 12 months from the issuance date of this report.

Substantially all of our operations are conducted in China and all of our revenue, expenses, cash and cash equivalents are denominated in RMB.
RMB is subject to the exchange control regulation in China, and, as a result, we may have difficulty distributing any dividends outside of China due to PRC
exchange  control  regulations  that  restrict  our  ability  to  convert  RMB  into  U.S.  dollars.  As  of  June  30,  2020,  cash  and  cash  equivalents  of  approximately
$11,027,764,  $940,854,  $8,350,  $516,816,  $1,496,  $58,789  and  $98,051  were  held  by  the  Company  and  its  subsidiaries  in  Mainland  China,  Singapore,
Australia, Hong Kong, India, Malaysia and Japan, respectively. We would need to accrue and pay withholding taxes if we were to distribute funds from our
subsidiaries in China to our offshore subsidiaries. We do not intend to repatriate such funds in the foreseeable future, as we plan to use existing cash balance
in PRC for general corporate purposes.

In assessing our liquidity, we monitor and analyze our cash on hand, our ability to generate sufficient revenue sources in the future and our operating
and  capital  expenditure  commitments.  The  Company  plans  to  fund  working  capital  through  its  operations,  bank  borrowings  and  additional  capital
contribution from shareholders. Our operating cash flow was positive for the year ended June 30, 2020. We have historically funded our working capital
needs  primarily  from  operations,  advance  payments  from  customers  and  loans  from  shareholders.  Our  working  capital  requirements  are  affected  by  the
efficiency of our operations, the numerical volume and dollar value of our sales contracts, the progress or execution on our customer contracts, and the timing
of accounts receivable collections.

The following table sets forth summary of our cash flows for the periods indicated:

Net cash provided by (used in) operating activities
Net cash provided by (used in) investing activities
Net cash provided by financing activities
Effect of exchange rate change
Net increase (decrease) in cash
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year

Operating Activities

  $

  $

For the Years Ended June 30,
2019

2020
5,931,124    $
173,229     
125,362     
(178,930)    
6,050,785     
6,601,335     
12,652,120    $

401,107    $
(3,862,360)    
466,782     
(147,080)    
(3,141,551)    
9,742,886     
6,601,335    $

2018
(4,772,610)
(492,672)
10,103,240 
90,360 
4,928,318 
4,814,568 
9,742,886 

Net cash provided by operating activities was approximately $5.9 million in fiscal 2020, including net income of $3.1 million, adjusted for non-cash
items of $4.4 million and negative adjustments for changes in operating assets and liabilities of $1.6 million. The adjustments for changes in operating assets
and  liabilities  mainly  included  the  increase  in  accounts  receivable  of  $6.6  million  due  to  increased  sales  in  fiscal  2020.  During  fiscal  2020,  our  accounts
receivable turnover was 91 days, stable with 99 days in fiscal 2019. The adjustments for changes in operating assets and liabilities also included offset with
an increase in salaries and benefits payable of $3.6 million due to unpaid employee compensation and benefits, and an increase in accounts payable and other
payables of $0.1 million in fiscal 2020.

Net cash provided by operating activities was approximately $0.4 million in fiscal 2019, including net loss of $3.4 million, adjusted for non-cash
items of $7.6 million and negative adjustments for changes in operating assets and liabilities of $3.8 million. The adjustments for changes in operating assets
and liabilities mainly included an increase in accounts receivable of $3.1 million in fiscal 2019. During fiscal 2019, our accounts receivable turnover was 99
days, increased from 84 days in fiscal 2018 due to the longer payment approval process of the major customers compared with payment time of fiscal 2018.
The adjustments for changes in operating assets and liabilities also included offset with an increase in salaries and benefits payable of $0.6 million due to
unpaid employee compensation and benefits, and a decrease in accounts payable and other payables of $0.8 million in fiscal 2019.

Net cash used in operating activities was approximately $4.8 million in fiscal 2018, including net income of $2.7 million, adjusted for non-cash
items of $0.1 million and negative adjustments for changes in operating assets and liabilities of $7.6 million. The adjustments for changes in operating assets
and  liabilities  mainly  included  an  increase  in  accounts  receivable  of  $9.8  million  due  to  increased  sales  in  fiscal  2018.  During  fiscal  2018,  our  accounts
receivable turnover was 84 days, increased from 65 days in fiscal 2017 due to the longer payment approval process of the major customers compared with
payment  time  of  fiscal  2017.  The  adjustments  for  changes  in  operating  assets  and  liabilities  also  included  offset  with  an  increase  in  salaries  and  benefits
payable of $1.8 million due to unpaid employee compensation and benefits, an increase in prepayments and other assets of $0.6 million and an increase in tax
payable of $0.3 million due to increased revenue in fiscal 2018.

69

 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
 
   
   
   
   
   
  
 
 
 
Investing Activities

Net  cash  provided  by  investing  activities  was  approximately  $0.2  million  in  fiscal  2020,  primarily  due  to  our  purchase  of  office  equipment  and
furniture of $0.2 million, disposition of long term investment of $1.0 million, our business acquisition of $1.6 million and short-term investments of $1.1
million in fiscal 2020, to better manage opportunities and capitalize on the growth potential in the human resource related industry. In fiscal 2020, we paid
$1,844,380 (2,496,000 Singapore dollars) and the Company’s common shares valued at $461,096 (624,000 Singapore dollars) for an 80% of equity interest
in Ridik Pte. The Company also injected $0.14 million (RMB 1,000,000) in EMIT. The Company sold an 18.42% equity interest in CLPS Lihong for the
consideration of $995,605 (RMB 7 million) to the third party.

Net cash used in investing activities was approximately $3.9 million in fiscal 2019, primarily due to our purchase of office equipment and furniture
of $0.5 million, long term investment of $1.1 million, our business acquisition of $0.4 million and short-term investments of $1.8 million in fiscal 2019, to
better  manage  opportunities  and  capitalize  on  the  growth  potential  in  the  human  resource  related  industry.  In  fiscal  2019,  we  paid  $0.07  million  (RMB
462,000) for a 70% of equity interest in Huanyu, and $0.4 million (576,000 Singapore dollars) for an 80% of equity interest in Infogain, respectively. The
Company also injected $0.07 million (RMB 500,000) in EMIT and $1.0 million (RMB 7,000,000) in CLPS Lihong, respectively.

Net cash used in investing activities was approximately $0.5 million in fiscal 2018, primarily due to our purchase of office equipment and furniture
of $0.2 million, our acquisition of Judge China of $0.1 million (RMB 700,000) and our acquisition of Tianjin Huanyu Qinshang Network Technology Co.,
Ltd.  (“Huanyu”)  of  $0.15  million  (RMB  1,000,000)  in  fiscal  2018,  to  better  manage  opportunities  and  capitalize  on  the  growth  potential  in  the  human
resource related industry in China. On September 27, 2017, the Company and a non-controlling interest shareholder of CLPS Beijing incorporated Huanyu.
The Company paid $0.15 million (RMB 1,000,000) for a 30% of equity interest in Huanyu in fiscal 2018.

Financing Activities

Net cash provided by financing activities was approximately $0.1 million in fiscal 2020. During the fiscal 2020, we had bank loans of approximately

$3.8 million, repaid loans of approximately $3.9 million, and received the over-allotment proceeds of $0.2 million.

Net cash provided by financing activities was approximately $0.5 million in fiscal 2019. During the fiscal 2019, we had bank loans of approximately
$3.6 million, repaid loans of approximately $3.9 million, and received the over-allotment proceeds of $1.5 million and paid $0.6 million for purchase of non-
controlling interests in CLPS Beijing.

Net  cash  provided  by  financing  activities  was  approximately  $10.1  million  in  fiscal  2018.  During  the  fiscal  2018,  we  had  bank  loans  of
approximately $5.7 million, repaid loans of approximately $3.1 million, and paid $0.6 million of dividends to our existing shareholders. On May 24, 2018,
CLPS consummated its initial public offering, or IPO, of 2,000,000 shares, $0.0001 par value per share. The units were sold at an offering price of $5.25 per
unit, generating total gross proceeds of $10.5 million. Net proceeds from the IPO were $9.5 million. On June 8, 2018, CLPS closed on the over-allotment
option  on  the  additional  300,000  common  shares  at  the  IPO  price  of  $5.25  per  share.  As  a  result,  the  Company  raised  additional  gross  proceeds  of
approximately $1.58 million, in addition to the IPO gross proceeds of approximately $10.5 million, or combined gross proceeds in this IPO of approximately
$12.08  million,  before  underwriting  discounts  and  commissions  and  offering  expenses.  Net  proceeds  from  the  IPO  and  the  over-allotment  were
approximately $11.0 million. 

Capital Expenditures

The  Company  made  capital  expenditures  of  $0.2  million,  $0.5  million  and  $0.2  million  for  the  years  ended  June  30,  2020,  2019  and  2018,
respectively.  In  these  periods,  our  capital  expenditures  were  mainly  used  for  purchases  of  office  equipment.  The  Company  will  continue  to  make  capital
expenditures to meet the expected growth of its business.

Impact of Inflation

We do not believe the impact of inflation on our company is material. Our operations are in China and China’s inflation rates have been relatively

stable over the last two years: 2.1% in 2019 and 1.9% in 2018.

Contractual Obligations

The  Company’s  subsidiaries  lease  office  spaces  under  various  operating  leases.  Operating  lease  expense  amounted  to  $944,645,  $827,593  and
$730,705  for  the  years  ended  June  30,  2020,  2019  and  2018,  respectively.  The  following  table  sets  forth  our  contractual  obligations  and  commercial
commitments as of June 30, 2020:

Operating lease arrangements
Bank loans
Total

Payment Due by Period

Total

Less than
1 Year

1-3 Years

More than 
3 Years

  $

  $

957,245    $
2,183,793     
3,141,038    $

775,891    $
2,161,239     
2,937,130    $

181,354    $
22,554     
203,908    $

         - 
- 
- 

70

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
   
 
 
 
    
    
    
  
   
 
Subsequent Events

On  July  27,  2020,  the  Company  and  a  third-party  company  incorporated  CLPS  Guangdong  Zhichuang  Software  Technology  Co.,  Ltd.  (“CLPS
Guangdong Zhichuang”) in Shenzhen. The Company holds 10% of equity interest in CLPS Guangdong Zhichuang for $0.14 million (RMB 1,000,000). On
August 13, 2020, the Company injected $28,571 (RMB 200,000) to CLPS Guangdong Zhichuang. 

On  August  28,  2020,  the  Company,  the  Chairman  of  the  Company  and  a  third-party  incorporated  CLPS  Shenzhen  Robotics  Co.  Ltd  (“CLPS
Shenzhen  Robotics”)  in  Shenzhen.  The  Company  holds  10%  of  equity  interest  in  CLPS  Shenzhen  Robotics  for  $0.14  million  (RMB  1,000,000).  On
September 15, 2020, the Company injected $147,451 (RMB1,000,000) to CLPS Shenzhen Robotics. 

Critical Accounting Policies 

We prepare our consolidated financial statements in conformity with U.S. GAAP, which requires us to make judgments, estimates and assumptions
that affect our reported amount of assets, liabilities, revenue, costs and expenses, and any related disclosures. Although there were no material changes made
to  the  accounting  estimates  and  assumptions  in  the  past  two  years,  we  continually  evaluate  these  estimates  and  assumptions  based  on  the  most  recently
available information, our own historical experience and various other assumptions that we believe to be reasonable under the circumstances. Since the use of
estimates is an integral component of the financial reporting process, actual results could differ from our expectations as a result of changes in our estimates. 

We believe that the following accounting policies involve a higher degree of judgment and complexity in their application and require us to make
significant  accounting  estimates.  Accordingly,  these  are  the  policies  we  believe  are  the  most  critical  to  understanding  and  evaluating  our  consolidated
financial condition and results of operations. 

Revenue recognition 

Effective July 1, 2019, the Company adopted Accounting Standards Update (ASU) 2014-09, Revenue from contracts with Customers (Topic 606)
(“ASC 606”) using the modified retrospective approach, which requires the recognition of a cumulative-effect adjustment to retained earnings as of the date
of adoption and applies the adoption only to contracts not completed as of July 1, 2019. Prior periods were not retrospectively adjusted. The Company does
not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which
the Company recognizes revenue at the amount to which it has the right to invoice for services performed. 

The Company provides a comprehensive range of IT services and solutions, which primarily are on a time-and-expense basis, or fixed-price basis.
Commencing on July 1, 2019, revenue is recognized when control of promised goods or services is transferred to the Company’s customers in an amount of
consideration to which an entity expects to be entitled to in exchange for those services. 

The  cumulative  effect  of  initially  applying  the  new  revenue  standard  resulted  in  a  decrease  to  opening  retained  earnings  of  $138,644,  with  the
impact primarily related to the Company’s customized IT solution services. Under ASC 605, the IT solution services were recognized using the percentage of
completion method of accounting; while under ASC 606, the IT solution services are recognized at a point in time when the control of service is obtained by
the customer represented by the customer acceptance received by the Company. Whereas the Company has the enforceable right to payment for performance
completed to date, revenue is recognized over time, using the output method.

Time-and-expense basis contracts 

Prior to the adoption of ASC 606, revenues is considered realizable and earned in accordance with ASC 605 when all of the following criteria are
met:  persuasive  evidence  of  a  sales  arrangement  exists;  delivery  has  occurred  or  services  have  been  rendered;  the  price  is  fixed  or  determinable;  and
collectability  is  reasonably  assured.  Accordingly,  revenues  from  time-and-expense  basis  contracts  are  recognized  as  the  related  services  are  rendered
assuming all other basic revenue recognition criteria are met. The Company is reimbursed for actual hours incurred at pre-agreed negotiated hourly billing
rates. Customers may terminate the contracts at any time before the work is completed but are obligated to pay the actual service hours incurred through the
termination date at the contract billing rates. Under ASC 606, the series of IT services are substantially the same from day to day, and each day of the service
is considered to be distinct and separately identifiable as it benefits the customer daily. Further, the uncertainty related to the service consideration is resolved
on a daily basis as the Company satisfies its obligation to perform IT service daily with enforceable right to payment for performance completed to date.
Thus, revenue is recognized as service is performed and the customer simultaneously receives and consumes the benefits from the service daily.

71

 
 
 
 
Fixed-price basis contracts

Revenues  from  fixed-price  customized  solution  contracts  require  the  Company  to  perform  services  for  systems  design,  planning  and  integrating
based on customers’ specific needs which requires significant production and customization. The required customization work period is generally less than
one year. Upon delivery of the services, customer acceptance is generally required. In the same contract, the Company is generally required to provide post-
contract  customer  support  (“PCS’)  for  a  period  from  three  months  to  one  year  (“PCS  period”)  after  the  customized  application  is  delivered.  The  type  of
service for PCS clause is generally not specified in the contract or stand-ready service on when-and-if-available basis.

Prior  to  the  adoption  of  ASC  606,  the  Company  recognizes  revenue  proportionally  over  the  term  of  the  contract  in  accordance  with  ASC  605.
Revenue  is  recognized  as  the  service  is  performed  using  the  percentage  of  completion  method  of  accounting,  under  which  the  total  value  of  revenue  is
recognized  on  the  basis  of  the  percentage  that  total  labor  cost  to  date  bears  to  the  total  expected  labor  costs.  Under ASC  606,  there  are  two  performance
obligations identified in the fixed-price basis contracts: the delivery of customized IT solution service and the completion of the PCS. The transaction price is
allocated between the two performance obligations based on the relative standalone selling price, estimated using the cost plus method.

The Company recognizes revenue for the delivery of customized IT solution service at a point in time when the system is implemented and accepted
by the customer. Where the Company has enforceable right to payment for performance completed to date, revenue is recognized over time, using the output
method. Revenue for PCS is recognized ratably over time as the customer simultaneously receive and consume the benefits throughout the PCS period.

Differences between the timing of billings and the recognition of revenues are recorded as contract assets which is included in the Prepayments,
deposits and other assets, net, or contract liabilities on the consolidated balance sheets. Contract assets are classified as current assets and the full balance is
reclassified to accounts receivables when the right to payment becomes unconditional.

Costs incurred in advance of revenue recognition arising from direct and incremental staff costs in respect of services provided under the fixed fee
contracts  according  to  the  customer’s  requirements  prior  to  the  delivery  of  services  are  recorded  as  deferred  contract  costs  which  is  included  in  the
Prepayments, deposits and other assets, net on the consolidated balance sheets. Such deferred contract costs will be recognized upon the recognition of the
related revenues.

Revenue includes reimbursements of travel and out-of-pocket expense, with equivalent amounts of expense recorded in cost of revenues.

The Company is subject to value added tax (the “VAT”) that is imposed on and concurrent with the revenues earned for services provided in the

PRC. The Company’s applicable value added tax rate is 6%. VAT are recorded as reduction of revenues when incurred.

Accounts receivable and allowance for doubtful accounts

Accounts receivable are carried at net realizable value. An allowance for doubtful accounts is recorded in the period when loss is probable. The
Company determines the adequacy of a reserve for doubtful accounts based on individual account analysis and historical collection trends. The Company
establishes a provision for doubtful receivables when there is objective evidence that the Company may not be able to collect amounts due. The allowance is
based on management’s best estimates of specific losses on individual customer exposures, as well as the historical trends of collections. Delinquent account
balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable.

72

 
 
 
 
 
  
 
  
 
 
 
 
Business combination

The  Company  accounts  for  all  business  combinations  under  the  purchase  method  of  accounting  in  accordance  with  ASC  805,  Business
Combinations. The purchase method of accounting requires that the consideration transferred to be allocated to net assets including separately identifiable
assets and liabilities the Company acquired, based on their estimated fair value. The consideration transferred in an acquisition is measured as the aggregate
of the fair values at the date of exchange of the assets given, liabilities incurred, and equity instruments issued as well as the contingent considerations and all
contractual contingencies as of the acquisition date. The costs directly attributable to the acquisition are expensed as incurred. Identifiable assets, liabilities
and contingent liabilities acquired or assumed are measured separately at their fair value as of the acquisition date, irrespective of the extent of any non-
controlling interests. The excess of (i) the total of the cost of the acquisition, fair value of the non-controlling interests and acquisition date fair value of any
previously  held  equity  interest  in  the  acquiree  over  (ii)  the  fair  value  of  the  identifiable  net  assets  of  the  acquiree  is  recorded  as  goodwill.  If  the  cost  of
acquisition is less than the fair value of the identifiable net assets of the acquiree, the difference is recognized directly in earnings. The Company adopted
Accounting Standards Update (“ASU”) No. 2017-01, Business Combinations (Topic 802): Clarifying the Definition of a Business, in determining whether it
has acquired a business from July 1, 2019 on a prospective basis and there was no material impact on the consolidated financial statements.

The determination and allocation of fair values to the identifiable net assets acquired, liabilities assumed and non-controlling interest is based on
various assumptions and valuation methodologies requiring considerable judgment from management. The most significant variables in these valuations are
discount rates, terminal values, the number of years on which to base the cash flow projections, as well as the assumptions and estimates used to determine
the cash inflows and outflows. The Company determines discount rates to be used based on the risk inherent in the acquiree’s current business model and
industry comparisons. Although the Company believes that the assumptions applied in the determination are reasonable based on information available at the
date of acquisition, actual results may differ from forecasted amounts and the differences could be material.

Goodwill

Goodwill represents the excess of the consideration over the fair value of the net assets acquired at the date of acquisition. Goodwill is not amortized
but rather tested for impairment at least annually at the reporting unit level by applying a fair-value based test in accordance with accounting and disclosure
requirements for goodwill. This test is performed by management annually or more frequently if the Company believes impairment indicators are present.
The  Company  had  only  one  reporting  unit  (that  also  represented  the  Company’s  single  operating  segment)  as  of  June  30,  2020  and  2019.  Goodwill  was
allocated 100% to the single reporting unit as of June 30, 2020 and 2019. The Company has the option to assess qualitative factors first to determine whether
it is necessary to perform the two-step test in accordance with ASC 350-20, Intangibles - Goodwill and Other. If the Company believes, as a result of the
qualitative  assessment,  that  it  is  more-likely-than-not  that  the  fair  value  of  the  reporting  unit  is  less  than  its  carrying  amount,  the  two-step  quantitative
impairment test described above is required. Otherwise, no further testing is required. In the qualitative assessment, the Company considers primary factors
such as industry and market considerations, overall financial performance of the reporting unit, and other specific information related to the operations.

In performing the two-step quantitative impairment test, the first step compares the carrying amount of the reporting unit to the fair value of the
reporting  unit  based  on  estimated  fair  value  using  a  combination  of  the  income  approach  and  the  market  approach.  If  the  fair  value  of  the  reporting  unit
exceeds the carrying value of the reporting unit, goodwill is not impaired and the Company is not required to perform further testing. If the carrying value of
the reporting unit exceeds the fair value of the reporting unit, then the Company must perform the second step of the impairment test in order to determine
the implied fair value of the reporting unit’s goodwill. The fair value of the reporting unit is allocated to its assets and liabilities in a manner similar to a
purchase price allocation in order to determine the implied fair value of the reporting unit goodwill. If the carrying amount of the goodwill is greater than its
implied fair value, the excess is recognized as an impairment loss in general and administrative expenses.

No impairment loss was provided for the years ended June 30, 2020, 2019 and 2018.

Impairment of long-lived assets

The  Company  reviews  its  long-lived  assets,  other  than  goodwill  including  property  and  equipment  and  intangible  assets  with  definite  lives  for
impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable.  When these events
occur, the Company measures impairment by comparing the carrying values of the long-lived assets to the estimated undiscounted future cash flows expected
to result from the use of the assets and their eventual disposition.  If the sum of the expected undiscounted cash flows is less than the carrying amounts of the
assets, the Company would recognize an impairment loss based on the excess of the carrying value over the fair value of the assets. Fair value is generally
determined  by  discounting  the  cash  flows  expected  to  be  generated  by  the  asset,  when  the  market  prices  are  not  readily  available.  The  adjusted  carrying
amount of the asset becomes the new cost basis and depreciated over the asset’s remaining useful live. Long-lived assets are grouped with other assets and
liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities for the purpose of the
impairment testing.

No impairment loss was provided for the years ended June 30, 2020, 2019 and 2018.

73

 
 
 
 
 
 
 
 
  
 
 
 
Income taxes

The Company accounts for current income taxes in accordance with the laws of the relevant tax authorities. Deferred income taxes are recognized
when temporary differences exist between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements. Deferred
tax  assets  and  liabilities  are  measured  using  enacted  tax  rates  expected  to  apply  to  taxable  income  in  the  years  in  which  those  temporary  differences  are
expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period including the
enactment date. Valuation allowances are established, to reduce deferred tax assets to the amount expected to be realized, when it is more-likely-than-not that
some portion, or all, of the deferred tax assets will not be realized.

The Company accounts for uncertainties in income taxes in accordance with ASC 740. An uncertain tax position is recognized as a benefit only if it
is “more likely than not” that the tax position would be sustained in a tax examination. The amount recognized is the largest amount of tax benefit that is
greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Penalties
and interest incurred related to underpayment of income tax are classified as income tax expense in the consolidated statements of comprehensive income
(loss) in the period incurred. No significant penalties or interest relating to income taxes have been incurred during the years ended June 30, 2020, 2019 and
2018. All of the tax returns of the Company’s subsidiaries in China remain subject to examination by the tax authorities for five years from the date of filing
through year 2024, and the examination period was extended to 10 years for entities qualified as High and New Technology Enterprises (“HNTEs”) in 2018
and thereafter. 

Warrants

The Company issued warrants to certain consultants and underwriters in May 2018 in connection with the closing of the IPO. The warrants carry a
term of five years expiring in May 2023 and are exercisable during the five-year period. The warrants are classified as equity contracts and measured at the
grant date fair value. Subsequent changes in fair value are not recognized as long as the contract continues to be classified in equity. The Company, with the
assistance of an independent third party valuation firm, used the Black-Scholes pricing model to estimate the fair value of warrants. The determination of
estimated fair value of warrants on the grant date was mainly affected by the Company’s stock price as well as assumptions regarding a number of subjective
variables.  These  variables  include  the  Company’s  expected  stock  price  volatility  over  the  expected  term  of  the  awards,  a  risk-free  interest  rate  and  any
expected dividends.

Share-based payment

Share  awards  issued  to  employees  and  directors,  including  employee  stock  option  plans  (“ESOPs”)  and  restricted  share  units  (“RSUs”)  are
measured at fair value at the grant date. The Company, with the assistance of an independent third-party valuation firm, determined the fair value of the share
options granted to employees. The Company uses the binomial lattice model to estimate the fair value of ESOPs, and uses the closing stock price at the grant
date to measure the fair value of RSUs. The Company recognizes compensation expenses, net of forfeitures, using the accelerated method over the requisite
service periods. 

Forfeitures are estimated at the time of grant and revised in subsequent periods if actual forfeitures differ from those estimates. The Company uses
historical data to estimate pre-vesting ESOPs and RSUs’ forfeitures and records share-based compensation expense only for those awards that are expected to
vest.

A change in any of the terms or conditions of share-based payment awards is accounted for as a modification of awards. The Company measures the
incremental compensation cost of a modification as the excess of the fair value of the modified awards over the fair value of the original awards immediately
before  its  terms  are  modified,  based  on  the  share  price  and  other  pertinent  factors  at  the  modification  date.  For  vested  awards,  the  Company  recognizes
incremental compensation cost in the period the modification occurred. For unvested awards, the Company recognizes, over the remaining requisite service
period, the sum of the incremental compensation cost and the remaining unrecognized compensation cost for the original award on the modification date.

Recent Accounting Pronouncements

The Jumpstart Our Business Startups Act (“JOBS Act”) provides that an emerging growth company (“EGC”) as defined therein can take advantage
of  an  extended  transition  period  for  complying  with  new  or  revised  accounting  standards.  This  allows  an  EGC  to  delay  adoption  of  certain  accounting
standards until those standards would otherwise apply to private companies. The Company has adopted the extended transition period. 

For detailed discussion on recent accounting pronouncements, please see Note 2 to our consolidated financial statements included elsewhere in this

annual report.

74

 
 
 
 
 
 
 
 
 
  
 
 
 
 
ITEM 6.

DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.

Directors and senior management

The following table sets forth our executive officers and directors, their ages and the positions held by them, as of the date of this Annual Report:

Age
57
56
37
44
53
50
68

  Position
  Chairman of the Board
  Chief Executive Officer and Director
  Acting Chief Financial Officer
  Chief Operating Officer
  Independent Director
  Independent Director
  Independent Director

Name
Xiao Feng Yang
Raymond Ming Hui Lin
Rui Yang
Li Li
Jin He Shao(1)(4)
Zhao Hui Feng(3)
Kee Chong Seng(2)

(1) Chair of the Audit Committee.

(2) Chair of the Compensation Committee.

(3) Chair of the Nominating Committee.

(4) Audit Committee Financial Expert.

Xiao Feng Yang is the chairman of the board of the Company. Mr. Yang has over 20 years of executive management and operational experience in
the IT services business. From October 2012 to August 2020, Mr. Yang served as chairman and president of CLPS. From April 2009 to October 2012, Mr.
Yang  served  as  deputy  general  manager  of  ADP  China  managing  the  service  operations  of  HR  BPO  in  China.  Prior  to  2002,  Mr.  Yang  was  the  Human
Resource Director of Phillips. Mr. Yang graduated from Tongji University, Shanghai, China, with a Bachelor’s degree in electrical engineering. Mr. Yang
received his MBA degree both from Shanghai University of Finance and Webster University (US).

Raymond Ming Hui Lin, is the chief executive officer and director of the Company. Mr. Lin joined CLPS in February 2009 as chief executive
officer. From January 2008 to January 2009, Mr. Lin was a business consultant of VanceInfo. After VanceInfo acquired A-IT Software (Shanghai) Co. Ltd.,
Mr. Lin acted as the general manager of A-IT Software (Shanghai) Co. Ltd. from April 2002 to December 2007. Mr. Lin is an IT outsourcing service veteran
with  a  deep  understanding  of  IT  talent  acquisition,  training,  development  and  service  delivery.  He  has  developed  and  pioneered  the  first  kind  of  training
programs  for  mainframe  and  VisionPLUS  (a  credit  card  processing  solution)  in  China,  which  has  made  CLPS  as  one  of  the  largest  mainframe  resource
powerhouse and the VisionPLUS project team in Greater China. In 2015, Mr. Lin became the MSE senior advisor in Fudan University, Shanghai, China.

Rui Yang Ms. Yang has over 10 years of financial experiences in the financial and IT industry. Ms. Yang joined the Company in August 2015 as
Vice President for finance controller. From December 2014 to August 2015, Ms. Yang served as financial analyst supervisor at Shanghai Origin International
Logistics Co., Ltd. From February 2010 to July 2014, Ms. Yang served as senior financial analyst at Pactera Technology International Ltd. Ms. Yang holds a
Bachelor’s Degree in Management from Northwest Agriculture and Forestry University and a Master’s Degree in Economics from Shanghai University of
Finance and Economics. Ms. Yang holds the PRC Certified Public Accountant certificate.

Li Li is the chief operating officer of the Company. Mr. Li was appointed as the COO in June 2019. Mr. Li has 20 years of professional and IT
experience in the financial and IT industry. From June 2017 to June 2019, Mr. Li served as Director, Head of Business Analysis & Quality Engineering at a
major credit card payment processing company in China. From July 2013 to June 2017, Mr. Li served as Executive Manager, Head of Business Solution and
Quality  Assurance  at  Commonwealth  Bank  of  Australia  China.  Mr.  Li  graduated  from  Tianjin  University,  Tianjin  China,  with  a  Bachelor’s  degree  in
Computer Science. Mr. Li holds MSE degree from Fu Dan University, Shanghai China.

Jin He Shao is an independent director of the Company. From January 2002 to present, Mr. Shao has been a partner at Shanghai Huajin Accounting
& Consulting Professional Services. From August 1995 to December 2001, he served as senior tax manager at Phillips (China) Investment Co., Ltd. Mr.
Shao received a joint MBA degree from Shanghai University of Finance & Economics and The Webster University. Mr. Shao holds the PRC equivalent of
the CPA license. In addition, Mr. Shao attended Shanghai Grain College where he majored in finance and accounting, and STV University where he majored
in auditing.

75

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Zhao Hui Feng is an independent director of the Company. From March 2017 to present, Mr. Feng has been the general manager at Dalian Wanda
Commercial Properties Co., Ltd. From February 2016 to March 2017, Mr. Feng served as the founder and chief executive officer at Shanghai Gold Education
Data  System  Ltd.,  Co.  From  December  2013  to  January  2016,  Mr.  Feng  served  as  the  general  manager  and  chief  operating  officer  at  Beijing  Zhide
Chuanghui Network Technology Inc. Mr. Feng received a Master’s Degree in Computer Science from Southern Illinois University and a Bachelor’s Degree
in Computer Science and Technology from the University of Science and Technology of China.

Kee Chong Seng is an independent director of the Company. Mr. Kee spent a career in the information technology industry, most recently as an

operation manager at Citibank from 2003 until his full retirement in 2015.

None of the events listed in Item 401(f) of Regulation S-K has occurred during the past ten years that is material to the evaluation of the ability or

integrity of any of our directors, director nominees or executive officers.

Limitation on Liability and Other Indemnification Matters

The Companies Law does not limit the extent to which Memorandum and Articles of Association may provide for indemnification of officers and
directors,  except  to  the  extent  any  such  provision  may  be  held  by  the  Cayman  Islands  courts  to  be  contrary  to  public  policy,  such  as  to  provide
indemnification  against  civil  fraud  or  the  consequences  of  committing  a  crime.  Our  Memorandum  and  Articles  of  Association  permit  indemnification  of
officers and directors for losses, damages, costs and expenses incurred in their capacities as such unless such losses or damages arise from dishonesty of such
directors or officers willful default of fraud. This standard of conduct is generally the same as permitted under the Delaware General Corporation Law for a
Delaware corporation.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controlling us under
the foregoing provisions, we have been informed that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities
Act and is therefore unenforceable.

B.

Compensation

Executive Compensation

The following table shows the annual compensation paid by us for the years ended June 30, 2020, 2019, and 2018.

Name/principal position
Xiao Feng Yang, Chairman of the Board(1)

Raymond Ming Hui Lin, CEO and Director(2)

Rui Yang, Acting CFO(3)

Li Li, Chief Operating Officer(4)

  Year

Salary

Equity
Compensation    

All Other

Compensation    Total Paid  

2020   $
2019   $
2018   $

2020   $
2019   $
2018   $

2020   $
2019   $
2018   $

2020   $
2019   $
2018   $

112,762    $
102,827    $
76,338    $

112,449     
104,718    $
57,225    $

64,839    $
—    $
—    $

150,594    $
—    $
—    $

—    $
—    $
—    $

—    $
—    $
—    $

—    $
—    $
—    $

—    $
—    $
—    $

—    $
—    $
     $

—    $
—    $
     $

—    $
—    $
—    $

—    $
—    $
—    $

112,762 
102,827 
76,338 

112,449 
104,718 
57,225 

64,839 
— 
— 

150,594 
— 
— 

(1) Appointed Chairman effective as of December 9, 2017 and President effective from December 9, 2017 to August 19, 2020.

(2) Appointed Chief Executive Officer effective as of December 9, 2017.

(3) Appointed Acting Chief Financial Officer effective as of November 1, 2019.

(4) Appointed Chief Operating Officer effective as of  June 2019.

76

 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
   
      
      
      
  
 
 
 
 
 
 
 
 
   
      
      
      
  
 
 
 
 
 
 
 
 
   
      
      
      
  
 
 
 
 
 
  
 
 
 
 
Under  Chinese  law,  we  may  only  terminate  employment  agreements  without  cause  and  without  penalty  by  providing  notice  of  non-renewal  one
month prior to the date on which the employment agreement is scheduled to expire. If we fail to provide this notice or if we wish to terminate an employment
agreement in the absence of cause, then we are obligated to pay the employee one month’s salary for each year we have employed the employee. We are,
however,  permitted  to  terminate  an  employee  for  cause  without  penalty  to  our  company,  where  the  employee  has  committed  a  crime  or  the  employee’s
actions or inactions have resulted in a material adverse effect to us.

Compensation Committee Interlocks and Insider Participation

None of our officers currently serves, or has served during the last completed fiscal year, on the compensation committee or board of directors of

any other entity that has one or more officers serving as a member of our board of directors.

Outstanding Equity Incentive Awards at Fiscal Year-End

We have adopted a 2017 Equity Incentive Plan (the “2017 Plan”). The 2017 Plan is a stock-based compensation plan that provides for discretionary
grants of, among others, stock options, stock awards and stock unit awards to key employees and directors of the Company. The purpose of the 2017 Plan is
to  recognize  contributions  made  to  our  company  and  its  subsidiaries  by  such  individuals  and  to  provide  them  with  additional  incentive  to  achieve  the
objectives of our Company. The Company granted an aggregate of 671,469 restricted shares (“RSUs”) to key employees and directors under the 2017 Plan
on July 12, 2018. No grants were made in fiscal 2018. The following is a summary of the 2017 Plan and is qualified by the full text of the 2017 Plan.

Administration. The 2017 Plan will be administered by our board of directors, or, once constituted, the Compensation Committee of the board of

directors (we refer to body administering the 2017 Plan as the “Committee”).

Number of Shares of Common Shares. The number of common shares that may be issued under the 2017 Plan is 2,210,000. Shares issuable under
the 2017 Plan may be authorized but unissued shares or treasury shares. If there is a lapse, forfeiture, expiration, termination or cancellation of any award
made  under  the  2017  Plan  for  any  reason,  the  shares  subject  to  the  award  will  again  be  available  for  issuance.  Any  shares  subject  to  an  award  that  are
delivered to us by a participant, or withheld by us on behalf of a participant, as payment for an award or payment of withholding taxes due in connection with
an award will not again be available for issuance, and all such shares will count toward the number of shares issued under the 2017 Plan. The number of
common  shares  issuable  under  the  2017  Plan  is  subject  to  adjustment,  in  the  event  of  any  reorganization,  recapitalization,  stock  split,  stock  distribution,
merger, consolidation, split-up, spin-off, combination, subdivision, consolidation or exchange of shares, any change in the capital structure of the company or
any similar corporate transaction. In each case, the Committee has the discretion to make adjustments it deems necessary to preserve the intended benefits
under the Plan. No award granted under the 2017 Plan may be transferred, except by will, the laws of descent and distribution.

77

 
 
 
 
 
 
 
 
 
Eligibility. All key employees and directors of the Company are eligible to receive awards under the 2017 Plan.

Awards to Participants. The 2017 Plan provides for discretionary awards of, among others, stock options, stock awards and stock unit awards to
participants.  Each  award  made  under  the  Plan  will  be  evidenced  by  a  written  award  agreement  specifying  the  terms  and  conditions  of  the  award  as
determined by the Committee in its sole discretion, consistent with the terms of the 2017 Plan.

Stock Options. The Committee has the discretion to grant non-qualified stock options or incentive stock options to participants and to set the terms
and conditions applicable to the options, including the type of option, the number of shares subject to the option and the vesting schedule; each option will
expire ten years from the date of grant and no dividend equivalents may be paid with respect to stock options. The aggregate maximum number of shares as
to which a Key Employee may receive Stock Options and Stock Appreciation Rights in any calendar year is 100,000, except that the aggregate maximum
number of shares as to which a Key Employee may receive Stock Options and Stock Appreciation Rights in the calendar year in which such Key Employee
begins employment with the Company or its Subsidiaries is 250,000.

Stock Awards. The  Committee  has  the  discretion  to  grant  stock  awards  to  participants.  Shares  granted  under  the  2017  Plan  will  be  effective  and
exercisable as of the Company’s completion of our initial public offering of its securities and other terms, restrictions and qualifications that may be set forth
in the individual grant agreements. Stock awards will consist of common shares granted without any consideration from the participant or shares sold to the
participant  for  appropriate  consideration  as  determined  by  the  Board.  The  number  of  shares  awarded  to  each  participant,  and  the  restrictions,  terms  and
conditions of the award, will be at the discretion of the Committee. Subject to the restrictions, a participant will be a shareholder with respect to the shares
awarded to him or her and will have the rights of a shareholder with respect to the shares, including the right to vote the shares and receive dividends on the
shares; provided that dividends otherwise payable on any performance-based stock award will be held by us and will be paid to the holder of the stock award
only to the extent the restrictions on such stock award lapse, and the Committee in its discretion can accumulate and hold such amounts payable on any other
stock awards until the restrictions on the stock award lapse. The aggregate maximum number of shares that may be used for Stock Awards, Stock Bonus
Awards and or Stock Unit Awards that may be granted to any Key Employee in any calendar year is 250,000, or, in the event the award is settled in cash, an
amount equal to the fair market value of such number of shares on the date on which the award is settled.

Payment for Stock Options and Withholding Taxes. The Committee may make one or more of the following methods available for payment of any
award, including the exercise price of a stock option, and for payment of the minimum required tax obligation associated with an award: (i) cash; (ii) cash
received  from  a  broker-dealer  to  whom  the  holder  has  submitted  an  exercise  notice  together  with  irrevocable  instructions  to  deliver  promptly  to  us  the
amount  of  sales  proceeds  from  the  sale  of  the  shares  subject  to  the  award  to  pay  the  exercise  price  or  withholding  tax;  (iii)  by  directing  us  to  withhold
common shares otherwise issuable in connection with the award having a fair market value equal to the amount required to be withheld; and (iv) by delivery
of previously acquired common shares that are acceptable to the Committee and that have an aggregate fair market value on the date of exercise equal to the
exercise price or withholding tax, or certification of ownership by attestation of such previously acquired shares.

Amendment of Award Agreements; Amendment and Termination of the Plan; Term of the Plan. The Committee may amend any award agreement at
any time, provided that no amendment may adversely affect the right of any participant under any agreement in any material way without the written consent
of the participant, unless such amendment is required by applicable law, regulation or stock exchange rule. The Board may terminate, suspend or amend the
2017 Plan, in whole or in part, from time to time, without the approval of the shareholders, unless such approval is required by applicable law, regulation or
stock exchange rule, and provided that no amendment may adversely affect the right of any participant under any outstanding award in any material way
without the written consent of the participant, unless such amendment is required by applicable law, regulation or rule of any stock exchange on which the
shares are listed. Notwithstanding the foregoing, neither the Plan nor any outstanding award agreement can be amended in a way that results in the repricing
of a stock option. Repricing is broadly defined to include reducing the exercise price of a stock option or cancelling a stock option in exchange for cash, other
stock  options  with  a  lower  exercise  price  or  other  stock  awards.  No  awards  may  be  granted  under  the  2017  Plan  on  or  after  the  tenth  anniversary  of  the
effective date of the 2017 Plan.

78

 
 
 
 
 
 
 
 
On July 12, 2018, the Board of Directors approved, upon a recommendation of the Compensation Committee, several restricted stock grants to the
members  of  executive  management  and  the  Board  of  the  Company  pursuant  to  the  terms  of  the  Plan.  Specifically,  the  Company  granted  an  aggregate  of
671,469 RSUs to key employees and directors under the Plan. No grants were made in fiscal 2018. RSUs granted to key employees and directors generally
have a term of three years, but are subject to earlier termination in connection with termination of continuous service to the Company. RSUs are valid for a
period of 10 years from July 12, 2018 to July 11, 2028. RSUs vest one-third per year over a three-year period, with the first one third vesting on the grant
date. As at the grant date of July 12, 2018, the weighted-average fair value per share was $12.22 and the estimated total fair value of the restricted shares
granted was $8.2 million. Our 2017 Plan was automatically terminated upon the 2020 Plan’s taking effect.

We have adopted a 2019 Equity Incentive Plan (the “2019 Plan”). The 2019 Plan is a stock-based compensation plan that provides for discretionary
grants of, among others, stock options, stock awards and stock unit awards to key employees and directors of the Company. The purpose of the 2019 Plan is
to  recognize  contributions  made  to  our  company  and  its  subsidiaries  by  such  individuals  and  to  provide  them  with  additional  incentive  to  achieve  the
objectives of our Company. The Company has granted no shares under the 2019 Plan yet. The following is a summary of the 2019 Plan and is qualified by
the full text of the 2019 Plan.

Administration. The 2019 Plan will be administered by our board of directors, or, once constituted, the Compensation Committee of the board of

directors (we refer to body administering the Plan as the “Committee”).

Number of Shares of Common Shares. The number of common shares that may be issued under the 2019 Plan is 2,200,000. Shares issuable under
the 2019 Plan may be authorized but unissued shares or treasury shares. If there is a lapse, forfeiture, expiration, termination or cancellation of any award
made  under  the  2019  Plan  for  any  reason,  the  shares  subject  to  the  award  will  again  be  available  for  issuance.  Any  shares  subject  to  an  award  that  are
delivered to us by a participant, or withheld by us on behalf of a participant, as payment for an award or payment of withholding taxes due in connection with
an award will not again be available for issuance, and all such shares will count toward the number of shares issued under the Plan. The number of common
shares  issuable  under  the  Plan  is  subject  to  adjustment,  in  the  event  of  any  reorganization,  recapitalization,  stock  split,  stock  distribution,  merger,
consolidation, split-up, spin-off, combination, subdivision, consolidation or exchange of shares, any change in the capital structure of the company or any
similar corporate transaction. In each case, the Committee has the discretion to make adjustments it deems necessary to preserve the intended benefits under
the 2019 Plan. No award granted under the 2019 Plan may be transferred, except by will, the laws of descent and distribution.

Eligibility. Selected employees, directors, and consultants of the Company are eligible to receive awards under the 2019 Plan.

Awards to Participants. The 2019 Plan provides for discretionary awards of, among others, stock options, stock awards, stock unit awards, or SAR
to participants. Each award made under the 2019 Plan will be evidenced by a written award agreement specifying the terms and conditions of the award as
determined by the Committee in its sole discretion, consistent with the terms of the 2019 Plan.

Stock Options. The Committee has the discretion to grant non-qualified stock options or incentive stock options to participants and to set the terms
and conditions applicable to the options, including the type of option, the number of shares subject to the option and the vesting schedule; each option will
expire ten years from the date of grant and no dividend equivalents may be paid with respect to stock options. The aggregate maximum number of shares as
to which a Key Employee may receive Stock Options and Stock Appreciation Rights in any calendar year is 200,000, except that the aggregate maximum
number of shares as to which a Key Employee may receive Stock Options and Stock Appreciation Rights in the calendar year in which such Key Employee
begins employment with the Company or its Subsidiaries is 350,000.

Stock Awards. The Committee has the discretion to grant stock awards to participants. Shares granted under the 2019 Plan will be effective upon
issuance, and other terms, restrictions and qualifications that may be set forth in the individual grant agreements. Stock awards will consist of common shares
granted without any consideration from the participant or shares sold to the participant for appropriate consideration as determined by the Board. The number
of  shares  awarded  to  each  participant,  and  the  restrictions,  terms  and  conditions  of  the  award,  will  be  at  the  discretion  of  the  Committee.  Subject  to  the
restrictions, a participant will be a shareholder with respect to the shares awarded to him or her and will have the rights of a shareholder with respect to the
shares, including the right to vote the shares and receive dividends on the shares; provided that dividends otherwise payable on any performance-based stock
award will be held by us and will be paid to the holder of the stock award only to the extent the restrictions on such stock award lapse, and the Committee in
its discretion can accumulate and hold such amounts payable on any other stock awards until the restrictions on the stock award lapse.

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Stock Unit Awards. The Committee has the discretion to grant stock unit awards to participants. Each stock unit award shall entitle the participant to
receive, on the date or the occurrence of an event (including the attainment of performance goals), a share or cash equal to the fair market value of a share on
the date of such event as provided in the stock unit award agreement. The number of share unit awards awarded to each participant, and the restrictions, terms
and conditions of the award, will be at the discretion of the Committee. Unless otherwise set forth in the stock unit agreement, the participant receiving a
stock unit award shall have no rights of a shareholder of the Company, including voting or dividends or other distributions rights, with respect to any stock
units prior to the date they are settled in Shares.

SARs. The Committee may grant SARs to participants. Upon exercise, an SAR entitles the participant to receive from the Company the number of
shares having an aggregate fair market value equal to the excess of the fair market value of one share as of the date on which the SAR is exercised over the
exercise price, multiplied by the number of shares with respect to which the SAR is being exercised. The Committee, in its discretion, shall be entitled to
cause the Company to elect to settle any part or all of its obligations arising out of the exercise of an SAR by the payment of cash in lieu of all or part of the
shares it would otherwise be obligated to deliver in an amount equal to the fair market value of such shares on the date of exercise.

Payment for Stock Options and Withholding Taxes. The Committee may make one or more of the following methods available for payment of any
award, including the exercise price of a stock option, and for payment of the minimum required tax obligation associated with an award: (i) cash; (ii) cash
received  from  a  broker-dealer  to  whom  the  holder  has  submitted  an  exercise  notice  together  with  irrevocable  instructions  to  deliver  promptly  to  us  the
amount  of  sales  proceeds  from  the  sale  of  the  shares  subject  to  the  award  to  pay  the  exercise  price  or  withholding  tax;  (iii)  by  directing  us  to  withhold
common shares otherwise issuable in connection with the award having a fair market value equal to the amount required to be withheld; and (iv) by delivery
of previously acquired common shares that are acceptable to the Committee and that have an aggregate fair market value on the date of exercise equal to the
exercise price or withholding tax, or certification of ownership by attestation of such previously acquired shares.

Amendment of Award Agreements; Amendment and Termination of the Plan; Term of the Plan. The Committee may amend any award agreement at
any time, provided that no amendment may adversely affect the right of any participant under any agreement in any material way without the written consent
of the participant, unless such amendment is required by applicable law, regulation or stock exchange rule. The Board may terminate, suspend or amend the
2019 Plan, in whole or in part, from time to time, without the approval of the shareholders, unless such approval is required by applicable law, regulation or
stock exchange rule, and provided that no amendment may adversely affect the right of any participant under any outstanding award in any material way
without the written consent of the participant, unless such amendment is required by applicable law, regulation or rule of any stock exchange on which the
shares are listed. Notwithstanding the foregoing, neither the Plan nor any outstanding award agreement can be amended in a way that results in the repricing
of a stock option. Repricing is broadly defined to include reducing the exercise price of a stock option or cancelling a stock option in exchange for cash, other
stock  options  with  a  lower  exercise  price  or  other  stock  awards.  No  awards  may  be  granted  under  the  2019  Plan  on  or  after  the  tenth  anniversary  of  the
effective date of the 2019 Plan. Our 2019 Plan was automatically terminated upon the 2020 Plan’s taking effect.

On April 3, 2020, our annual meeting of shareholders approved the 2020 Equity Incentive Plan (the “2020 Plan”). All of our employees, officers,
and directors, and consultants are eligible to be granted options, restricted stock awards, stock unit awards, or stock appreciate rights (each, an “Award”)
under  the  2020  Plan.  The  2020  Plan  is  currently  administered  by  the  Board,  which  has  all  the  power  to  administer  the  2020  Plan  according  to  its  terms,
including  the  power  to  grant  Awards,  determine  who  may  be  granted  Awards  and  the  types  and  amounts  of  Awards  to  be  granted,  prescribe  Award
agreements, and establish programs for granting Awards. Awards may be made under the 2020 Plan for up to 11,011,663 of our common shares. 1,119,750
restricted shares have been granted under the 2020 Plan as of today.

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The 2020 Plan is a stock-based compensation plan that provides for discretionary grants of, among others, stock options, stock awards and stock unit
awards to employees, directors and consultants of the Company. The purpose of the 2020 Plan is to recognize contributions made to our company and its
subsidiaries by such individuals and to provide them with additional incentive to achieve the objectives of our Company. The following is a summary of the
2020 Plan and is qualified by the full text of the 2020 Plan.

Administration. The 2020 Plan will be administered by our board of directors, or, once constituted, the Compensation Committee of the board of

directors (we refer to body administering the 2020 Plan as the “Committee”).

Number of Shares of Common Shares. The number of common shares that may be issued under the 2020 Plan is 11,011,663. Shares issuable under
the 2020 Plan may be authorized but unissued shares or treasury shares. If there is a lapse, forfeiture, expiration, termination or cancellation of any award
made  under  the  2020  Plan  for  any  reason,  the  shares  subject  to  the  award  will  again  be  available  for  issuance.  Any  shares  subject  to  an  award  that  are
delivered to us by a participant, or withheld by us on behalf of a participant, as payment for an award or payment of withholding taxes due in connection with
an award will not again be available for issuance, and all such shares will count toward the number of shares issued under the 2020 Plan. The number of
common  shares  issuable  under  the  2020  Plan  is  subject  to  adjustment,  in  the  event  of  any  reorganization,  recapitalization,  stock  split,  stock  distribution,
merger, consolidation, split-up, spin-off, combination, subdivision, consolidation or exchange of shares, any change in the capital structure of the company or
any similar corporate transaction. In each case, the Committee has the discretion to make adjustments it deems necessary to preserve the intended benefits
under the 2020 Plan. No award granted under the 2020 Plan may be transferred, except by will, the laws of descent and distribution.

Eligibility. All employees, directors, and consultants of the Company are eligible to receive awards under the 2020 Plan.

Awards  to  Participants.  The  Plan  provides  for  discretionary  awards  of,  among  others,  stock  options,  stock  awards,  stock  unit  awards  and  stock
appreciation  rights  to  participants.  Each  award  made  under  the  2020  Plan  will  be  evidenced  by  a  written  award  agreement  specifying  the  terms  and
conditions of the award as determined by the Committee in its sole discretion, consistent with the terms of the 2020 Plan.

Stock Options. The Committee has the discretion to grant non-qualified stock options or incentive stock options to participants and to set the terms
and conditions applicable to the options, including the type of option, the number of shares subject to the option and the vesting schedule; each option will
expire ten years from the date of grant and no dividend equivalents may be paid with respect to stock options. The aggregate maximum number of shares as
to  which  an  Employee  may  receive  Stock  Options  and  Stock  Appreciation  Rights  in  any  calendar  year  is  800,000,  except  that  the  aggregate  maximum
number of shares as to which an Employee may receive Stock Options and Stock Appreciation Rights in the calendar year in which such Employee begins
employment with the Company or its Subsidiaries is 1,000,000.

Stock Awards. The  Committee  has  the  discretion  to  grant  stock  awards  to  participants.  Shares  granted  under  the  2020  Plan  will  be  effective  and
exercisable as of the Company’s completion of our initial public offering of its securities and other terms, restrictions and qualifications that may be set forth
in the individual grant agreements. Stock awards will consist of common shares granted without any consideration from the participant or shares sold to the
participant  for  appropriate  consideration  as  determined  by  the  Board.  The  number  of  shares  awarded  to  each  participant,  and  the  restrictions,  terms  and
conditions of the award, will be at the discretion of the Committee. Subject to the restrictions, a participant will be a shareholder with respect to the shares
awarded to him or her and will have the rights of a shareholder with respect to the shares, including the right to vote the shares and receive dividends on the
shares; provided that dividends otherwise payable on any performance-based stock award will be held by us and will be paid to the holder of the stock award
only to the extent the restrictions on such stock award lapse, and the Committee in its discretion can accumulate and hold such amounts payable on any other
stock awards until the restrictions on the stock award lapse. The aggregate maximum number of shares that may be used for Stock Awards, Stock Bonus
Awards  and  or  Stock  Unit Awards  that  may  be  granted  to  any  employee  in  any  calendar  year  is  800,000  or,  in  the  event  the  award  is  settled  in  cash,  an
amount equal to the fair market value of such number of shares on the date on which the award is settled.

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Stock Unit Awards. The  Committee  may,  in  its  discretion,  grant  stock  unit  awards  to  any  participant.  Each  stock  unit  subject  to  the  Award  shall
entitle the participant to receive, on the date or the occurrence of an event (including the attainment of performance goals) as described in the stock unit
award agreement, a Share or cash equal to the fair market value of a Share on the date of such event as provided in the stock unit award agreement.

Stock Appreciation Rights or SAR. The Committee may grant SARs to participants. Upon exercise, an SAR entitles the participant to receive from
the Company the number of Shares having an aggregate fair market value equal to the excess of the fair market value of one Share as of the date on which
the SAR is exercised over the exercise price, multiplied by the number of Shares with respect to which the SAR is being exercised. The Committee, in its
discretion, shall be entitled to cause the Company to elect to settle any part or all of its obligations arising out of the exercise of an SAR by the payment of
cash in lieu of all or part of the Shares it would otherwise be obligated to deliver in an amount equal to the fair market value of such Shares on the date of
exercise. Cash shall be delivered in lieu of any fractional Shares. The terms and conditions of any such Award shall be determined at the time of grant.

Payment for Stock Options and Withholding Taxes. The Committee may make one or more of the following methods available for payment of any
award, including the exercise price of a stock option, and for payment of the minimum required tax obligation associated with an award: (i) cash; (ii) cash
received  from  a  broker-dealer  to  whom  the  holder  has  submitted  an  exercise  notice  together  with  irrevocable  instructions  to  deliver  promptly  to  us  the
amount  of  sales  proceeds  from  the  sale  of  the  shares  subject  to  the  award  to  pay  the  exercise  price  or  withholding  tax;  (iii)  by  directing  us  to  withhold
common shares otherwise issuable in connection with the award having a fair market value equal to the amount required to be withheld; and (iv) by delivery
of previously acquired common shares that are acceptable to the Committee and that have an aggregate fair market value on the date of exercise equal to the
exercise price or withholding tax, or certification of ownership by attestation of such previously acquired shares.

Amendment of Award Agreements; Amendment and Termination of the 2020 Plan; Term of the 2020 Plan. The Committee may amend any award
agreement at any time, provided that no amendment may adversely affect the right of any participant under any agreement in any material way without the
written  consent  of  the  participant,  unless  such  amendment  is  required  by  applicable  law,  regulation  or  stock  exchange  rule.  The  Board  may  terminate,
suspend  or  amend  the  2020  Plan,  in  whole  or  in  part,  from  time  to  time,  without  the  approval  of  the  shareholders,  unless  such  approval  is  required  by
applicable law, regulation or stock exchange rule, and provided that no amendment may adversely affect the right of any participant under any outstanding
award in any material way without the written consent of the participant, unless such amendment is required by applicable law, regulation or rule of any stock
exchange on which the shares are listed. Notwithstanding the foregoing, neither the 2020 Plan nor any outstanding award agreement can be amended in a
way that results in the repricing of a stock option. Repricing is broadly defined to include reducing the exercise price of a stock option or cancelling a stock
option in exchange for cash, other stock options with a lower exercise price or other stock awards. No awards may be granted under the 2020 Plan on or after
the tenth anniversary of the effective date of the 2020 Plan.

Director Compensation

All  directors  hold  office  until  the  next  annual  meeting  of  shareholders  until  their  successors  have  been  duly  elected  and  qualified.  There  are  no
family  relationships  among  our  directors  or  executive  officers.  Officers  are  elected  by  and  serve  at  the  discretion  of  the  Board  of  Directors.  Employee
directors do not receive any compensation for their services. Non-employee directors are entitled to receive $1,500 per month for serving as directors and
may receive option grants from our company.

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Employment Agreements

Xiao Feng Yang Employment Agreement

On December 9, 2017, we entered into an employment agreement with Xiao Feng Yang pursuant to which he agreed to serve as our President. The
agreement  provides  for  an  annual  base  salary  of  RMB144,000  and  HK$566,472  (a  total  of  approximately  USD94,100)  payable  in  accordance  with  the
Company’s  ordinary  payroll  practices.  Under  the  terms  of  the  agreement,  commencing  with  the  year  ended  June  30,  2018,  Mr.  Yang  will  be  entitled  to
receive an annual cash bonus the extent and timing of which are to be determined by the Company’s Compensation Committee; Mr. Yang is also entitled to
reimbursement  of  reasonable  expenses,  and  vacation,  sick  leave,  health  and  other  benefits  customary  to  the  agreements  of  this  nature.  This  employment
agreement  was  automatically  terminated  upon  Mr.  Yang’s  resignation  in  August  2020.  The  Company  has  paid  Mr.  Yang  any  unpaid  portion  of  his  salary
through the date of his termination, and any unpaid bonus through the date of termination, as well as any unpaid or unused portions of his benefits under the
employment agreement.

Raymond Ming Hui Lin Employment Agreement

On December 9, 2017, we entered into an employment agreement with Raymond Ming Hui Lin pursuant to which he agreed to serve as our Chief
Executive Officer. The agreement provides for an annual base salary of RMB144,000 and HK$389,880 (a total of approximately USD71,400) payable in
accordance with the Company’s ordinary payroll practices. Under the terms of the agreement, commencing with the year ended June 30, 2018, Raymond
Ming  Hui  Lin  will  be  entitled  to  receive  an  annual  cash  bonus  the  extent  and  timing  of  which  are  to  be  determined  by  the  Company’s  Compensation
Committee; he is also entitled to reimbursement of reasonable expenses, and vacation, sick leave, health and other benefits customary to the agreements of
this nature. The term of the agreement shall expire on December 8, 2022, which term will automatically extend for additional 12 month periods unless a party
to the agreement terminates it upon 90 days’ notice. If the executive’s employment with the Company is terminated for any reason, the Company will pay to
such executive any unpaid portion of his salary through the date of his termination, and any unpaid bonus through the date of termination, as well as any
unpaid or unused portions of his benefits under the agreement. If his employment is terminated at our election without “cause” (as defined in the agreement),
which requires 30 days’ advanced notice, or by him for “good reason” (as defined in the agreement), Raymond Ming Hui Lin shall be entitled to receive
severance payments equal to 9 months’ of his base salary and a pro rata portion of his target annual bonus for the year when termination occurs. Raymond
Ming  Hui  Lin  has  agreed  not  to  compete  with  us  for  9  months  after  the  termination  of  his  employment;  he  also  executed  certain  non-solicitation,
confidentiality and other covenants customary for agreements of this nature.

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Rui Yang Employment Agreement

On  November  1,  2019,  we  entered  into  an  employment  agreement  with  Rui  Yang  pursuant  to  which  she  agreed  to  serve  as  our  Acting  Chief
Financial  Officer.  The  agreement  provides  for  an  annual  salary  of  RMB420,000  (a  total  of  approximately  USD60,000)  payable  in  accordance  with  the
Company’s  ordinary  payroll  practices.  Under  the  terms  of  the  agreement,  commencing  with  the  year  ended  June  30,  2020,  Ms. Yang  will  be  entitled  to
receive  an  annual  cash  bonus  the  extent  and  timing  of  which  are  to  be  determined  by  the  Company’s  Compensation  Committee;  she  is  also  entitled  to
reimbursement  of  reasonable  expenses,  and  vacation,  sick  leave,  health  and  other  benefits  customary  to  the  agreements  of  this  nature.  The  term  of  the
agreement shall expire on October 2024, which term will automatically extend for additional 12 month periods unless a party to the agreement terminates it
upon 90 days’ notice. If the executive’s employment with the Company is terminated for any reason, the Company will pay to such executive any unpaid
portion of her salary through the date of her termination, and any unpaid bonus through the date of termination, as well as any unpaid or unused portions of
her benefits under the agreement. If her employment is terminated at our election without “cause” (as defined in the agreement), which requires 30 days’
advanced notice, or by her for “good reason” (as defined in the agreement), Rui Yang shall be entitled to receive severance payments equal to 9 months’ of
her base salary and a pro rata portion of her target annual bonus for the year when termination occurs. Rui Yang has agreed not to compete with us for 9
months after the termination of her employment; she also executed certain non-solicitation, confidentiality and other covenants customary for agreements of
this nature.

Li Li Employment Agreement

On  June  2019,  we  entered  into  an  employment  agreement  with  Li  Li  pursuant  to  which  he  agreed  to  serve  as  our  Chief  Operating  Officer.  The
agreement provides an annual salary of RMB 360,000 and HK$273,600 (approximately US$85,200) and 12,000 shares of common stock to be granted in
June 2020. Under the terms of the agreement, commencing with the year ended June 30, 2019, Li Li will be entitled to receive an annual cash bonus the
extent and timing of which are to be determined by the Company’s Compensation Committee; he is also entitled to reimbursement of reasonable expenses,
and vacation, sick leave, health and other benefits customary to the agreements of this nature. The term of the agreement shall expire on June 2022; which
term  will  automatically  extend  for  additional  12  month  periods  unless  a  party  to  the  agreement  terminates  it  upon  90  days’  notice.  If  the  executive’s
employment with the Company is terminated for any reason, the Company will pay to such executive any unpaid portion of his salary through the date of his
termination,  and  any  unpaid  bonus  through  the  date  of  termination,  as  well  as  any  unpaid  or  unused  portions  of  his  benefits  under  the  agreement.  If  his
employment  is  terminated  at  our  election  without  “cause”  (as  defined  in  the  agreement),  which  requires  30  days’  advanced  notice,  or  by  him  for  “good
reason” (as defined in the agreement), Li Li shall be entitled to receive severance payments equal to 9 months’ of his base salary and a pro rata portion of his
target annual bonus for the year when termination occurs. Li Li has agreed not to compete with us for 9 months after the termination of his employment; he
also executed certain non-solicitation, confidentiality and other covenants customary for agreements of this nature.

C.

Board Practices

Composition of Board; Risk Oversight

Our Board of Directors presently consists of 5 directors. Pursuant to our Memorandum and Articles of Association, our officers will be elected by
and serve at the discretion of the board. Our directors are not subject to a term of office and hold office until such time as they resign or are removed from
office by resolution of our shareholders. A director will be removed from office automatically if, among other things, the director becomes bankrupt or makes
any arrangement or composition with his creditors, or becomes physically or mentally incapable of acting as director. Except as noted above, there are no
family relationships between any of our executive officers and directors. Officers are elected by, and serve at the discretion of, the board of directors. Our
board of directors shall hold meetings on at least a quarterly basis.

Under  the  NASDAQ  rules  we  are  only  required  to  maintain  a  board  of  directors  comprised  of  at  least  50%  independent  directors,  and  an  audit
committee of at least two members, comprised solely of independent directors who also meet the requirements of Rule 10A-3 under the Securities Exchange
Act of 1934. There are no membership qualifications for directors. Further, there are no share ownership qualifications for directors unless so fixed by us in a
general meeting. There are no other arrangements or understandings pursuant to which our directors are selected or nominated.

There is no formal requirement under the Company’s memorandum and articles of association mandating that we hold an annual meeting of our
shareholders. However, notwithstanding the foregoing, we intend to hold such annual meetings to, among other things, elect our directors. We plan to hold
our next annual shareholders meeting on the first quarter of 2021.

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While it may be deemed a “controlled company” under the NASDAQ Marketplace Rules (specifically, as defined in Rule 5615(c)), the Company
does not intend to avail itself of the corporate governance exemptions afforded to a controlled company under the NASDAQ Marketplace Rules. Similarly,
the Company intends to comply with all applicable NASDAQ corporate governance requirements irrespective of its “foreign private issuer” status.

Our board plays a significant role in our risk oversight. The board makes all relevant Company decisions. As such, it is important for us to have our
Chief Executive Officer serve on the board as he plays key roles in the risk oversight or the Company. As a company with a small board of directors, we
believe it is appropriate to have the involvement and input of all of our directors in risk oversight matters.

Director Independence 

Our  board  has  reviewed  the  independence  of  our  directors,  applying  the  NASDAQ  independence  standards.  Based  on  this  review,  the  board
determined that each of Zhao Hui Feng, Jin He Shao, and Kee Chong Seng are “independent” within the meaning of the NASDAQ rules. In making this
determination, our board considered the relationships that each of these non-employee directors has with us and all other facts and circumstances our board
deemed relevant in determining their independence. As required under applicable NASDAQ rules, we anticipate that our independent directors will meet on a
regular basis as often as necessary to fulfill their responsibilities, including at least annually in executive session without the presence of non-independent
directors and management.

Board Committees

Currently,  three  committees  have  been  established  under  the  board:  the  Audit  Committee,  the  Compensation  Committee  and  the  Nominating

Committee.

The  Audit  Committee  is  responsible  for  overseeing  the  accounting  and  financial  reporting  processes  of  our  company  and  audits  of  the  financial
statements of our company, including the appointment, compensation and oversight of the work of our independent auditors. The Compensation Committee
of  the  board  of  directors  reviews  and  makes  recommendations  to  the  board  regarding  our  compensation  policies  for  our  officers  and  all  forms  of
compensation, and also administers our incentive compensation plans and equity-based plans (but our board retains the authority to interpret those plans).
The Nominating Committee of the board is responsible for the assessment of the performance of the board, considering and making recommendations to the
board with respect to the nominations or elections of directors and other governance issues. The nominating committee considers diversity of opinion and
experience when nominating directors.

Audit Committee

The Audit Committee will be responsible for, among other matters:

● appointing, compensating, retaining, evaluating, terminating, and overseeing our independent registered public accounting firm;

● discussing with our independent registered public accounting firm the independence of its members from its management;

● reviewing with our independent registered public accounting firm the scope and results of their audit;

● approving all audit and permissible non-audit services to be performed by our independent registered public accounting firm;

● overseeing the financial reporting process and discussing with management and our independent registered public accounting firm the interim

and annual financial statements that we file with the SEC;

● reviewing  and  monitoring  our  accounting  principles,  accounting  policies,  financial  and  accounting  controls,  and  compliance  with  legal  and

regulatory requirements;

85

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
● coordinating the oversight by our board of directors of our code of business conduct and our disclosure controls and procedures

● establishing  procedures  for  the  confidential  and  or  anonymous  submission  of  concerns  regarding  accounting,  internal  controls  or  auditing

matters; and

● reviewing and approving related-party transactions.

Our Audit Committee consists of Zhao Hui Feng, Jin He Shao, and Kee Chong Seng, with Mr. Shao serving as chair of the Audit Committee. Our
board has affirmatively determined that each of the members of the Audit Committee meets the definition of “independent director” for purposes of serving
on an Audit Committee under Rule 10A-3 of the Exchange Act and NASDAQ rules. In addition, our board has determined that Mr. Shao qualifies as an
“audit committee financial expert” as such term is currently defined in Item 407(d)(5) of Regulation S-K and meets the financial sophistication requirements
of the NASDAQ rules.

Compensation Committee

The Compensation Committee will be responsible for, among other matters:

● reviewing and approving, or recommending to the board of directors to approve the compensation of our CEO and other executive officers and

directors;

● reviewing key employee compensation goals, policies, plans and programs;

● administering incentive and equity-based compensation;

● reviewing and approving employment agreements and other similar arrangements between us and our executive officers; and

● appointing and overseeing any compensation consultants or advisors.

Our Compensation Committee consists of Zhao Hui Feng, Jin He Shao, and Kee Chong Seng, with Mr. Kee serving as chair of the Compensation
Committee. Our board has affirmatively determined that each of the members of the Compensation Committee meets the definition of “independent director”
for purposes of serving on Compensation Committee under NASDAQ rules.

Nominating Committee

The Nominating Committee will be responsible for, among other matters:

● selecting or recommending for selection candidates for directorships;

● evaluating the independence of directors and director nominees;

● reviewing and making recommendations regarding the structure and composition of our board and the board committees;

● developing and recommending to the board corporate governance principles and practices;

● reviewing and monitoring the Company’s Code of Business Conduct and Ethics; and

● overseeing the evaluation of the Company’s management

Our  Nominating  Committee  consists  of  consists  of  Zhao  Hui  Feng,  Jin  He  Shao,  and  Kee  Chong  Seng,  with  Mr.  Feng  serving  as  chair  of  the
Nominating  Committee.  Our  board  has  affirmatively  determined  that  each  of  the  members  of  the  Nominating  Committee  meets  the  definition  of
“independent director” for purposes of serving on a Nominating Committee under NASDAQ rules.

86

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Duties of Directors

Under Cayman Islands law, our directors have a duty to act honestly, in good faith and with a view to our best interests. Our directors also have a
duty to exercise the care, diligence and skills that a reasonably prudent person would exercise in comparable circumstances. In fulfilling their duty of care to
us,  our  directors  must  ensure  compliance  with  our  memorandum  and  articles  of  association.  We  have  the  right  to  seek  damages  if  a  duty  owed  by  our
directors is breached. The functions and powers of our board of directors include, among others:

● appointing officers and determining the term of office of the officers;

● authorizing the payment of donations to religious, charitable, public or other bodies, clubs, funds or associations as deemed advisable;

● exercising the borrowing powers of the company and mortgaging the property of the company;

● executing checks, promissory notes and other negotiable instruments on behalf of the company; and

● maintaining or registering a register of mortgages, charges or other encumbrances of the company.

A  director  may  vote,  attend  a  board  meeting  or  sign  a  document  on  our  behalf  with  respect  to  any  contract  or  transaction  in  which  he  or  she  is
interested. A director must promptly disclose the interest to all other directors after becoming aware of the fact that he or she is interested in a transaction we
have entered into or are to enter into. A general notice or disclosure to the board or otherwise contained in the minutes of a meeting or a written resolution of
the board or any committee of the board that a director is a shareholder, director, officer or trustee of any specified firm or company and is to be regarded as
interested in any transaction with such firm or company will be sufficient disclosure, and, after such general notice, it will not be necessary to give special
notice relating to any particular transaction.

The directors may receive such remuneration as our board of directors may determine from time to time. Each director is entitled to be repaid or
prepaid  for  all  traveling,  hotel  and  incidental  expenses  reasonably  incurred  or  expected  to  be  incurred  in  attending  meetings  of  our  board  of  directors  or
committees  of  our  board  of  directors  or  shareholder  meetings  or  otherwise  in  connection  with  the  discharge  of  his  or  her  duties  as  a  director.  The
compensation  committee  will  assist  the  directors  in  reviewing  and  approving  the  compensation  structure  for  the  directors.  Our  board  of  directors  may
exercise all the powers of the company to borrow money and to mortgage or charge our undertakings and property or any part thereof, to issue debentures,
debenture stock and other securities whenever money is borrowed or as security for any debt, liability or obligation of the company or of any third party.

A director is not required to hold shares as a qualification to office.

D.

Employees

The table below provides information as to the total number of employees at the end of the last three fiscal years. We have no contracts or collective
bargaining agreements with labor unions and have never experienced work stoppages due to labor dispute. We consider our relations with our employees to
be good.

Number of Employees

E.

Share Ownership

See Item 7 below.

87

2018

2019

2020

1,655     

2,085     

2,746 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
 
   
 
 
 
 
ITEM 7.

MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A.

Major shareholders

The following table sets forth certain information regarding beneficial ownership of our shares by each person who is known by us to beneficially
own more than 5% of our shares. The table also identifies the share ownership of each of our directors, each of our named executive officers, and all directors
and officers as a group. Except as otherwise indicated, the shareholders listed in the table have sole voting and investment powers with respect to the shares
indicated. Our major shareholders do not have different voting rights than any other holder of our shares. 

We have determined beneficial ownership in accordance with the rules of the SEC. Under such rules, beneficial ownership includes any shares over
which the individual has sole or shared voting power or investment power as well as any shares that the individual has the right to subscribe for within 60
days  of  September  18,  2018  through  the  exercise  of  any  warrants  or  other  rights.  Except  as  indicated  by  the  footnotes  below,  we  believe,  based  on  the
information  furnished  to  us,  that  the  persons  and  entities  named  in  the  table  below  have  sole  voting  and  investment  power  or  the  power  to  receive  the
economic benefit with respect to all common shares that they beneficially own, subject to applicable community property laws. None of the stockholders
listed in the table are a broker-dealer or an affiliate of a broker dealer. None of the stockholders listed in the table are located in the United States and none of
the common shares held by them are located in the United States. Applicable percentage ownership is based on 16,093,248 common shares outstanding as of
October 15, 2020. Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o CLPS Incorporation, c/o Unit 702, 7th
Floor, Millennium City II, 378 Kwun Tong Road, Kwun Tong, Kowloon, Hong Kong SAR.

Name of Beneficial Owner

Xiao Feng Yang (2)(7)
Raymond Ming Hui Lin (3)(6)(7)
Rui Yang (4)(6)
Li Li(6)(8)
Jin He Shao (5)(7)

All directors and executive officers as a group (6 persons)

Qinrui Ltd. (2)
Qinhui Ltd. (3)

5% or greater beneficial owners as a group

*

Less than 1%.

Common
Shares

Ownership%
(1)

5,343,773     
5,664,595     
67,793     
136,178     
3,000     

33.21%
35.24%

* 
* 
  * 

11,215,339     

69.69%

4,976,000     
4,999,996     

30.92%
31.07%

9,975,996     

61.99%

(1) Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the common shares

or the power to receive the economic benefit of the common shares.

(2) A British Virgin Islands corporation with the mailing address of c/o Vistra Corporate Services Centre, Wickham’s Cay II, Road Town, Tortola, VG 1110,
British Virgin Islands, with Xiao Feng Yang as its sole shareholder. As such, Mr. Yang is deemed to be the owner of all shares of the Company held by
this entity. Also includes the vested portion of the restricted stock granted dated as of July 12, 2018. The total grant of 220,823 common shares vests in
three  equal  installments,  with  the  first  installment  vesting  upon  grant,  and  the  second  and  third  –  on  the  first  and  second  anniversary  of  the  grant.
Represents vested portion of the restricted stock granted dated as of May 6, 2020. The total grant of 250,000 common shares vests in whole immediately
on the grant date of award.

(3) A British Virgin Islands corporation with the mailing address of c/o Vistra Corporate Services Centre, Wickham’s Cay II, Road Town, Tortola, VG 1110,
British Virgin Islands, with Raymond Ming Hui Lin as its sole shareholder. As such, Mr. Lin is deemed to be the owner of all shares of the Company
held by this entity. Also includes the vested portion of the restricted stock granted dated as of July 12, 2018. The total grant of 220,823 common shares
vests in three equal installments, with the first installment vesting upon grant, and the second and third – on the first and second anniversary of the grant.
Represents vested portion of the restricted stock granted dated as of May 6, 2020. The total grant of 250,000 common shares vests in whole immediately
on the grant date of award.

(4) Represents 17,793 shares, which she purchased prior to the Company’s IPO, and the vested portion of the restricted stock granted dated as of May 6,

2020. The total grant of 50,000 common shares vests in whole immediately on the grant date of award.

(5) Represents  vested  portion  of  the  restricted  stock  granted  dated  as  of  July  12,  2018.  The  total  grant  of  3,000  common  shares  vests  in  three  equal

installments, with the first installment vesting upon grant, and the second and third – on the first and second anniversary of the grant.

(6) Executive officer.

(7) Director.

(8) Represents 24,178 shares of the Company’s common stock owning by his wife prior to his joining the Company and the vested portion of the restricted
stock granted dated as of June 11, 2019. The total grant of 12,000 common shares vests in one year after the date of award. Represents vested portion of
the restricted stock granted dated as of May 6, 2020. The total grant of 100,000 common shares vests in whole immediately on the grant date of award.

88

 
  
 
 
 
 
   
 
 
   
     
 
   
   
   
   
   
 
   
      
  
   
 
   
      
  
   
   
 
   
      
  
   
 
 
 
 
 
 
 
 
 
 
As  of  October  15,  2020,  there  were  12  holders  of  record  entered  in  our  share  register,  of  which  no  holders  were  U.S.  residents.  The  number  of
individual holders of record is based exclusively upon our share register and does not address whether a share or shares may be held by the holder of record
on behalf of more than one person or institution who may be deemed to be the beneficial owner of a share or shares in our company. To our knowledge, no
other shareholder beneficially owns more than 5% of our shares. Our company is not owned or controlled directly or indirectly by any government or by any
corporation or by any other natural or legal person severally or jointly. Our major shareholders do not have any special voting rights.

B.

Related Party Transactions

The following is a description of transactions since July 1, 2014, in which the amount involved in the transaction exceeded or will exceed the lesser
of $120,000 or one percent of the average of our total assets as at the year-end for the last two completed fiscal years ended June 30, 2019 and 2018, and to
which any of our directors, executive officers or beneficial holders of more than 5% of our capital stock, or any immediate family member of, or person
sharing the household with, any of these individuals, had or will have a direct or indirect material interest. 

Reorganization agreement with our shareholders 

On November 2, 2017, the controlling shareholders transferred their 100% ownership interest in CLPS Shanghai to CLPS QC and Qiner, which are
100% owned by Qinheng and CLPS. On October 31, 2017, the controlling shareholders transferred 100% of their equity interests in Qiner to CLPS. The
considerations for these transfers are at a nominal amount. 

Other related party transactions: 

(a)

Related party balances

The balances due to and due from related parties were as follows:

Due from related parties:

Judge Asia
Mr. Raymond Ming Hui Lin

Total

As of June 30,

2020

2019

  $

  $

-    $
169,185     
169,185    $

212,736 
17,804 
230,540 

Due from related parties mainly represents the expenses paid on behalf of the non-controlling interest shareholder of Judge China and advances to

the Company’s CEO. 

89

 
  
 
 
 
 
 
 
 
 
 
   
 
   
      
  
   
 
(b)

Related party transactions

a)

b)

Consulting services provided to the related parties
CareerWin Executive Search Co., Ltd (“CareerWin”)

Consulting services provided by the related parties
CareerWin
EMIT
Beijing Bright Technology Co., Ltd (“Beijing Bright”)

c)    

Purchase of software from the related parties
Beijing Bright
EMIT

d)     Loans provided to the related parties

CLPS Lihong
EMIT

e)

f)  

Repayment of loans from the related parties
CLPS Lihong
EMIT

Interest income received from the related party
CLPS Lihong

For the year ended,  
2019

2020

2018

  $

165,161    $

195,817     $
196,422     
114,052     
506,291    $

50,988     $
12,896     
63,884    $

149,341    $ 
28,446     
177,787    $

149,341     $
28,446     
177,787    $

   $

  $

   $

  $

   $

  $

   $

  $

  $

-  $

-   $
-   
-   
-  $
-   
-   $
-   
-  $

820,982   $
-   
820,982  $

820,982   $
-   
820,982  $

$2,328    $

33,096  $

    -

-
-
-
-

-
-
-
-

-
-
-

-
-
-

-

The  CEO,  the  wife  of  the  CEO,  Chairman,  and  the  wife  of  Chairman  of  the  Company  provided  joint  guarantee  to  the  revolving  credit  facility

entered by the Company with China Merchants Bank on June 22, 2018 and December 17, 2019. 

Srustijeet Mishra, the non-controlling interest shareholder of Ridik Pte provided guarantee to a credit facility up to $86,071 (SGD 120,000) entered

by the Company with Development Bank of Singapore on April 20, 2018. 

C.

Interests of Experts and Counsel

Not required.

ITEM 8.

FINANCIAL INFORMATION

A.

Consolidated Statements and Other Financial Information.

See Item 18 for our audited consolidated financial statements.

Legal Proceedings

We are currently not involved in any legal proceedings; nor are we aware of any claims that could have a material adverse effect on our business,

financial condition, results of operations or cash flows.

Dividend Policy

The holders of shares of our common shares are entitled to dividends out of funds legally available when and as declared by our board of directors.
Our board of directors has never declared a dividend and does not anticipate declaring a dividend in the foreseeable future. Should we decide in the future to
pay  dividends,  as  a  holding  company,  our  ability  to  do  so  and  meet  other  obligations  depends  upon  the  receipt  of  dividends  or  other  payments  from  our
operating  subsidiary  and  other  holdings  and  investments.  In  addition,  the  operating  companies  may,  from  time  to  time,  be  subject  to  restrictions  on  their
ability to make distributions to us, including as a result of restrictive covenants in loan agreements, restrictions on the conversion of local currency into U.S.
dollars or other hard currency and other regulatory restrictions. In the event of our liquidation, dissolution or winding up, holders of our common shares are
entitled to receive, ratably, the net assets available to shareholders after payment of all creditors.

B.

Significant Changes

Except as disclosed elsewhere in this Annual Report, we have not experienced any significant changes since the date of our audited consolidated

financial statements included in this Annual Report.

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ITEM 9.

THE OFFER AND LISTING

A.

Offer and Listing Details

The following table sets forth, for the calendar months indicated and through June 30, 2020, the monthly high and low sale prices for our shares, as

reported on NASDAQ Stock Market. The closing price for the Company’s securities on October 15, 2020 was $3.09 per share.

Monthly Highs and Lows
June 2020
July 2020
August 2020
September 2020

B.

Plan of Distribution

Not Applicable.

C.

Markets

Shares

High

Low

  $
  $
  $
  $

3.75    $
3.69    $
4.71    $
3.90    $

1.83 
2.15 
2.40 
2.54 

Our shares have been listed on the NASDAQ Stock Market under the symbol CLPS since May 24, 2018 following the completion of our initial

public offering.

D.

Selling Shareholders

Not Applicable.

E.

Dilution

Not Applicable.

F.

Expenses of the Issue

Not Applicable.

ITEM 10.

ADDITIONAL INFORMATION

A.

Share Capital

Not Applicable.

B.

Memorandum and Articles of Association

The information required by Item 10.B of Form 20-F is included in the section titled “Description of Share Capital” in our Registration Statement on
Form  F-1  initially  filed  with  the  SEC  on  March  27,  2018,  and  subsequently  updated  (File  No.:  333-223956),  which  section  is  incorporated  herein  by
reference.

C.

Material Contracts

The information required by Item 10.B of Form 20-F is included in the sections titled “Our Business,” “Directors and Executive Officers,” “Related
Party  Transactions,”  and  “Underwriting”  in  our  Registration  Statement  on  Form  F-1  initially  filed  with  the  SEC  on  March  27,  2018,  and  subsequently
updated (File No.: 333-223956), which section is incorporated herein by reference.

D.

Exchange controls

Under Cayman Islands law, there are currently no restrictions on the export or import of capital, including foreign exchange controls or restrictions

that affect the remittance of dividends, interest or other payments to non-resident holders of our shares.

91

 
  
 
 
 
 
 
 
 
 
 
   
 
 
 
    
  
 
    
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
E.

Taxation

The following summary of the material Cayman Islands, PRC and U.S. federal income tax consequences of an investment in our common shares is
based upon laws and relevant interpretations thereof in effect as of the date of this Annual Report, all of which are subject to change. This summary does not
deal with all possible tax consequences relating to an investment in our common shares, such as the tax consequences under state, local and other tax laws.

Cayman Islands Taxation

The Cayman Islands currently levy no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation
in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to the Company levied by the Government of the Cayman Islands
except for stamp duties which may be applicable on instruments executed in, or brought within the jurisdiction of the Cayman Islands. The Cayman Islands is
not party to any double tax treaties that are applicable to any payments made to or by the Company. There are no exchange control regulations or currency
restrictions in the Cayman Islands.

Material PRC Income Tax Considerations

Under the new EIT Law and the Implementing Rules, an enterprise established outside of the PRC with “de facto management bodies” within the
PRC is considered as a resident enterprise and will be subject to a PRC income tax on its global income. According to the Implementing Rules, “de facto
management bodies” refer to “establishments that carry out substantial and overall management and control over the manufacturing and business operations,
personnel, accounting, properties, etc. of an enterprise.” Accordingly, our holding company may be considered a resident enterprise and may therefore be
subject  to  a  PRC  income  tax  on  our  global  income.  The  State  Administration  of  Taxation  issued  the  Notice  Regarding  the  Determination  of  Chinese-
Controlled Offshore Incorporated Enterprises as PRC Tax Resident Enterprises on the Basis of De Facto Management Bodies, or Circular 82, on April 22,
2009. Circular 82 provides certain specific criteria for determining whether the “de facto management body” of a Chinese-controlled offshore incorporated
enterprise  is  located  in  China.  Although  Circular  82  only  applies  to  offshore  enterprises  controlled  by  PRC  enterprises  and  not  those  invested  in  by
individuals or foreign enterprises, the determining criteria set forth in Circular 82 may reflect the State Administration of Taxation’s general position on how
the  “de  facto  management  body”  test  should  be  applied  in  determining  the  tax  resident  status  of  offshore  enterprises,  regardless  of  whether  they  are
controlled by PRC enterprises or controlled by or invested in by individuals or foreign enterprises. If we are considered a resident enterprise and earn income
other than dividends from our PRC subsidiary, such PRC income tax on our global income could significantly increase our tax burden and materially and
adversely affect our cash flow and profitability.

If  the  PRC  tax  authorities  determine  that  CLPS  Incorporation  or  any  of  our  subsidiaries  outside  of  China  is  a  “resident  enterprise”  for  PRC
enterprise income tax purposes, a number of PRC tax consequences could follow. First, CLPS Incorporation or any of our subsidiaries outside of China may
be subject to enterprise income tax at a rate of 25% on our worldwide taxable income, as well as PRC enterprise income tax reporting obligations. Second,
under the EIT Law and its implementing rules, dividends paid between “qualified resident enterprises” are exempt from enterprise income tax.

If  CLPS  Incorporation  or  any  of  our  subsidiaries  outside  of  China  were  treated  as  a  PRC  “non-resident  enterprise”  under  the  EIT  Law,  then
dividends that it receives from its PRC operating subsidiary (assuming such dividends were considered sourced within the PRC) (1) may be subject to a 5%
PRC withholding tax, if the Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double
Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (the “PRC - Hong Kong Tax Treaty”) were applicable, or (2) if such treaty
does not apply (i.e., because the PRC tax authorities may deem the Hong Kong enterprise to be a conduit not entitled to treaty benefits), may be subject to a
10% PRC withholding tax. Any such taxes on dividends could materially reduce the amount of dividends, if any, we could pay to its shareholders.

Finally, the new “resident enterprise” classification could result in a situation in which a 10% PRC tax is imposed on dividends we pay to its non-
PRC shareholders that are not PRC tax “resident enterprises” and gains derived by them from transferring our common shares or warrants, if such income is
considered PRC-sourced income by the relevant PRC authorities. In such event, we may be required to withhold the 10% PRC tax on any dividends paid to
its non-PRC resident shareholders. Our non-PRC resident shareholders also may be responsible for paying PRC tax at a rate of 10% on any gain realized
from  the  sale  or  transfer  of  common  shares  or  warrants  in  certain  circumstances.  We  would  not,  however,  have  an  obligation  to  withhold  PRC  tax  with
respect to such gain. If any such PRC taxes apply, a non-PRC resident shareholder may be entitled to a reduced rate of PRC taxes under an applicable income
tax treaty and or a foreign tax credit against such shareholder’s domestic income tax liability (subject to applicable conditions and limitations). Prospective
investors should consult with their own tax advisors regarding the applicability of any such taxes, the effects of any applicable income tax treaties, and any
available foreign tax credits.

92

 
  
 
 
 
 
 
 
 
 
 
 
General

The following is a summary of the material U.S. federal income tax consequences of owning and disposing of our ordinary shares. The discussion
below  of  the  U.S.  federal  income  tax  consequences  to  “U.S.  Holders”  will  apply  to  a  beneficial  owner  of  our  shares  that  is  for  U.S.  federal  income  tax
purposes:

● an individual citizen or resident of the United States;

● a corporation (or other entity treated as a corporation) that is created or organized (or treated as created or organized) in or under the laws of the

United States, any state thereof or the District of Columbia;

● an estate whose income is includible in gross income for U.S. federal income tax purposes regardless of its source; or

● a trust if (i) a U.S. court can exercise primary supervision over the trust’s administration and one or more U.S. persons are authorized to control
all substantial decisions of the trust, or (ii) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S.
person.

If a beneficial owner of our shares is not described as a U.S. Holder in one of the four bullet points above and is not an entity treated as a partnership

or other pass-through entity for U.S. federal income tax purposes, such owner will be considered a “Non-U.S. Holder.”

This  summary  is  based  on  the  Internal  Revenue  Code  of  1986,  as  amended  (the  “Code”),  its  legislative  history,  existing  Treasury  regulations
promulgated thereunder, published rulings and court decisions, all as currently in effect. These authorities are subject to change or differing interpretations,
possibly on a retroactive basis.

This discussion does not address all aspects of U.S. federal income taxation that may be relevant to us or to any particular holder of our shares based
on such holder’s individual circumstances. In particular, this discussion considers only holders that own our shares as capital assets within the meaning of
Section  1221  of  the  Code.  This  discussion  also  does  not  address  the  potential  application  of  the  alternative  minimum  tax  or  the  U.S.  federal  income  tax
consequences to holders that are subject to special rules, including:

● financial institutions or financial services entities;

● broker-dealers;

● taxpayers who have elected mark-to-market accounting;

● tax-exempt entities;

● governments or agencies or instrumentalities thereof;

● insurance companies;

● regulated investment companies;

● real estate investment trusts;

● certain expatriates or former long-term residents of the United States;

93

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
● persons that actually or constructively own 5% or more of our voting shares;

● persons  that  acquired  our  shares  pursuant  to  the  exercise  of  employee  stock  options,  in  connection  with  employee  stock  incentive  plans  or

otherwise as compensation;

● persons that hold our shares as part of a straddle, constructive sale, hedging, conversion or other integrated transaction; or

● persons whose functional currency is not the U.S. dollar.

This discussion does not address any aspect of U.S. federal non-income tax laws, such as gift or estate tax laws, or state, local or non-U.S. tax laws.
Additionally, this discussion does not consider the tax treatment of partnerships or other pass-through entities or persons who hold our securities through such
entities. If a partnership (or other entity classified as a partnership for U.S. federal income tax purposes) is the beneficial owner of our shares, the U.S. federal
income tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership. This discussion
also  assumes  that  any  distribution  made  (or  deemed  made)  in  respect  of  our  shares  and  any  consideration  received  (or  deemed  received)  by  a  holder  in
connection with the sale or other disposition of such shares will be in U.S. dollars.

We have not sought, and will not seek, a ruling from the Internal Revenue Service (or “IRS”), or an opinion of counsel as to any U.S. federal income
tax consequence described herein. The IRS may disagree with one or more aspects of the discussion herein, and its determination may be upheld by a court.
Moreover, there can be no assurance that future legislation, regulations, administrative rulings or court decisions will not adversely affect the accuracy of the
statements in this discussion.

BECAUSE OF THE COMPLEXITY OF THE TAX LAWS AND BECAUSE THE TAX CONSEQUENCES TO ANY PARTICULAR HOLDER
OF  OUR  SECURITIES  MAY  BE  AFFECTED  BY  MATTERS  NOT  DISCUSSED  HEREIN,  EACH  HOLDER  OF  OUR  SECURITIES  IS  URGED  TO
CONSULT WITH ITS TAX ADVISOR WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE OWNERSHIP AND DISPOSITION OF
OUR  SECURITIES,  INCLUDING  THE  APPLICABILITY  AND  EFFECT  OF  STATE,  LOCAL  AND  NON-U.S.  TAX  LAWS,  AS  WELL  AS  U.S.
FEDERAL TAX LAWS AND APPLICABLE TAX TREATIES.

Tax Consequences to U.S. Holders of Common Shares

Taxation of Distributions Paid on Common Shares

Subject to the passive foreign investment company (or “PFIC”), rules discussed below, a U.S. Holder generally will be required to include in gross
income as ordinary income the amount of any cash dividend paid on our common shares. A cash distribution on such shares will be treated as a dividend for
U.S. federal income tax purposes to the extent the distribution is paid out of our current or accumulated earnings and profits (as determined for U.S. federal
income tax purposes). Any distributions in excess of such earnings and profits generally will be applied against and reduce the U.S. Holder’s basis in its
common shares and, to the extent in excess of such basis, will be treated as gain from the sale or exchange of such common shares.

With  respect  to  corporate  U.S.  Holders,  dividends  on  our  shares  will  not  be  eligible  for  the  dividends-received  deduction  generally  allowed  to
domestic  corporations  in  respect  of  dividends  received  from  other  domestic  corporations.  With  respect  to  non-corporate  U.S.  Holders,  dividends  on  our
shares may be taxed at the lower applicable long-term capital gains rate provided that (1) our common shares are readily tradable on an established securities
market in the United States or, in the event we are deemed to be a Chinese “resident enterprise” under the EIT Law, we are eligible for the benefits of the
Agreement between the Government of the United States of America and the Government of the People’s Republic of China for the Avoidance of Double
Taxation and the Prevention of Tax Evasion with Respect to Taxes on Income, or the “U.S.-PRC Tax Treaty,” (2) we are not a PFIC, as discussed below, for
either the taxable year in which the dividend was paid or the preceding taxable year, and (3) certain holding period requirements are met. Under published
IRS authority, shares are considered for purposes of clause (1) above to be readily tradable on an established securities market in the United States only if
they are listed on certain exchanges, which presently include the Nasdaq Stock Market. U.S. Holders should consult their own tax advisors regarding the tax
treatment of any dividends paid with respect to our common shares.

94

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
If PRC taxes apply to dividends paid to a U.S. Holder on our common shares, such U.S. Holder may be entitled to a reduced rate of PRC tax under
the U.S-PRC Tax Treaty. In addition, such PRC taxes may be treated as foreign taxes eligible for credit against such holder’s U.S. federal income tax liability
(subject to certain limitations). U.S. Holders should consult their own tax advisors regarding the creditability of any such PRC tax and their eligibility for the
benefits of the U.S.-PRC Tax Treaty.

Taxation on the Disposition of Common Shares

Upon  a  sale  or  other  taxable  disposition  of  our  common  shares,  and  subject  to  the  PFIC  rules  discussed  below,  a  U.S.  Holder  should  recognize
capital gain or loss in an amount equal to the difference between the amount realized and the U.S. Holder’s adjusted tax basis in the common shares. Capital
gains recognized by U.S. Holders generally are subject to U.S. federal income tax at the same rate as ordinary income, except that long-term capital gains
recognized by non-corporate U.S. Holders are generally subject to U.S. federal income tax at a maximum rate of 20%. Capital gain or loss will constitute
long-term capital gain or loss if the U.S. Holder’s holding period for the common shares exceeds one year. The deductibility of capital losses is subject to
various limitations. If PRC taxes would otherwise apply to any gain from the disposition of our common shares by a U.S. Holder, such U.S. Holder may be
entitled to a reduction in or elimination of such taxes under the U.S.-PRC Tax Treaty. Any PRC taxes that are paid by a U.S. Holder with respect to such gain
may be treated as foreign taxes eligible for credit against such holder’s U.S. federal income tax liability (subject to certain limitations that could reduce or
eliminate the available tax credit). U.S. Holders should consult their own tax advisors regarding the creditability of any such PRC tax and their eligibility for
the benefits of the U.S.-PRC Tax Treaty.

Passive Foreign Investment Company Rules

A foreign (i.e., non-U.S.) corporation will be a PFIC if at least 75% of its gross income in a taxable year of the foreign corporation, including its pro
rata share of the gross income of any corporation in which it is considered to own at least 25% of the shares by value, is passive income. Alternatively, a
foreign corporation will be a PFIC if at least 50% of its assets in a taxable year of the foreign corporation, ordinarily determined based on fair market value
and averaged quarterly over the year, including its pro rata share of the assets of any corporation in which it is considered to own at least 25% of the shares
by value, are held for the production of, or produce, passive income. Passive income generally includes dividends, interest, rents and royalties (other than
certain  rents  or  royalties  derived  from  the  active  conduct  of  a  trade  or  business)  and  gains  from  the  disposition  of  passive  assets.  Based  on  our  current
composition and assets, we do not expect to be treated as a PFIC under the current PFIC rules. Our PFIC status, however, will not be determinable until after
the end of each taxable year. Accordingly, there can be no assurance with respect to our status as a PFIC for our current taxable year or any future taxable
year. If we are determined to be a PFIC and a U.S. Holder did not make either a timely qualified electing fund (or “QEF”), election for our first taxable year
as a PFIC in which the U.S. Holder held (or was deemed to hold) common shares, or a mark-to-market election, as described below, such holder generally
will be subject to special rules with respect to:

● any gain recognized by the U.S. Holder on the sale or other disposition of its common shares; and

● any “excess distribution” made to the U.S. Holder (generally, any distributions to such U.S. Holder during a taxable year of the U.S. Holder that
are  greater  than  125%  of  the  average  annual  distributions  received  by  such  U.S.  Holder  in  respect  of  the  common  shares  during  the  three
preceding taxable years of such U.S. Holder or, if shorter, such U.S. Holder’s holding period for the common shares).

Under these rules,

● the U.S. Holder’s gain or excess distribution will be allocated ratably over the U.S. Holder’s holding period for the common shares;

95

 
 
 
 
 
 
 
 
 
 
 
 
 
 
● the amount allocated to the U.S. Holder’s taxable year in which the U.S. Holder recognized the gain or received the excess distribution, or to the
period  in  the  U.S.  Holder’s  holding  period  before  the  first  day  of  our  first  taxable  year  in  which  we  are  a  PFIC,  will  be  taxed  as  ordinary
income;

● the  amount  allocated  to  other  taxable  years  (or  portions  thereof)  of  the  U.S.  Holder  and  included  in  its  holding  period  will  be  taxed  at  the

highest tax rate in effect for that year and applicable to the U.S. Holder; and

● the interest charge generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each such year of the U.S.

Holder.

In general, a U.S. Holder may avoid the PFIC tax consequences described above in respect to our common shares by making a timely QEF election
to include in income its pro rata share of our net capital gains (as long-term capital gain) and other earnings and profits (as ordinary income), on a current
basis, in each case whether or not distributed, in the taxable year of the U.S. Holder in which or with which our taxable year ends. There can be no assurance,
however, that we will pay current dividends or make other distributions sufficient for a U.S. Holder who makes a QEF election to satisfy the tax liability
attributable to income inclusions under the QEF rules, and the U.S. Holder may have to pay the resulting tax from its other assets. A U.S. Holder may make a
separate election to defer the payment of taxes on undistributed income inclusions under the QEF rules, but if deferred, any such taxes will be subject to an
interest charge.

The QEF election is made on a shareholder-by-shareholder basis and, once made, can be revoked only with the consent of the IRS. A U.S. Holder
generally makes a QEF election by attaching a completed IRS Form 8621 (Information Return by a Shareholder of a Passive Foreign Investment Company
or Qualified Electing Fund), to a timely filed U.S. federal income tax return for the tax year to which the election relates. Retroactive QEF elections generally
may be made only by filing a protective statement with such return and if certain other conditions are met or with the consent of the IRS. In order to comply
with the requirements of a QEF election, a U.S. Holder must receive certain information from us. Upon request from a U.S. Holder, we will endeavor to
provide to the U.S. Holder no later than 90 days after the request such information as the IRS may require, including a PFIC annual information statement, in
order to enable the U.S. Holder to make and maintain a QEF election. However, there is no assurance that we will have timely knowledge of our status as a
PFIC in the future or of the required information to be provided.

If a U.S. Holder has made a QEF election with respect to our common shares, and the special tax and interest charge rules do not apply to such
shares (because of a timely QEF election for our first taxable year as a PFIC in which the U.S. Holder holds (or is deemed to hold) such shares), any gain
recognized on the appreciation of our common shares generally will be taxable as capital gain and no interest charge will be imposed. As discussed above,
U.S. Holders of a QEF are currently taxed on their pro rata shares of a PFIC’s earnings and profits, whether or not distributed. In such case, a subsequent
distribution of such earnings and profits that were previously included in income generally should not be taxable as a dividend to those U.S. Holders who
made a QEF election. The tax basis of a U.S. Holder’s shares in a QEF will be increased by amounts that are included in income, and decreased by amounts
distributed  but  not  taxed  as  dividends,  under  the  above  rules.  Similar  basis  adjustments  apply  to  property  if  by  reason  of  holding  such  property  the  U.S.
Holder is treated under the applicable attribution rules as owning shares in a QEF.

Although a determination as to our PFIC status will be made annually, an initial determination that our company is a PFIC will generally apply for
subsequent years to a U.S. Holder who held common shares while we were a PFIC, whether or not we meet the test for PFIC status in those years. A U.S.
Holder who makes the QEF election discussed above for our first taxable year as a PFIC in which the U.S. Holder holds (or is deemed to hold) our common
shares, however, will not be subject to the PFIC tax and interest charge rules discussed above in respect to such shares. In addition, such U.S. Holder will not
be subject to the QEF inclusion regime with respect to such shares for any taxable year of ours that ends within or with a taxable year of the U.S. Holder and
in which we are not a PFIC. On the other hand, if the QEF election is not effective for each of our taxable years in which we are a PFIC and the U.S. Holder
holds (or is deemed to hold) our common shares, the PFIC rules discussed above will continue to apply to such shares unless the holder makes a purging
election, and pays the tax and interest charge with respect to the gain inherent in such shares attributable to the pre-QEF election period.

96

 
  
 
 
 
 
 
 
 
 
 
 
Alternatively, if a U.S. Holder, at the close of its taxable year, owns shares in a PFIC that are treated as marketable stock, the U.S. Holder may make
a mark-to-market election with respect to such shares for such taxable year. If the U.S. Holder makes a valid mark-to-market election for the first taxable year
of the U.S. Holder in which the U.S. Holder holds (or is deemed to hold) shares in us and for which we are determined to be a PFIC, such holder generally
will not be subject to the PFIC rules described above in respect to its common shares. Instead, in general, the U.S. Holder will include as ordinary income
each year the excess, if any, of the fair market value of its common shares at the end of its taxable year over the adjusted basis in its common shares. The
U.S. Holder also will be allowed to take an ordinary loss in respect of the excess, if any, of the adjusted basis of its common shares over the fair market value
of its common shares at the end of its taxable year (but only to the extent of the net amount of previously included income as a result of the mark-to-market
election). The U.S. Holder’s basis in its common shares will be adjusted to reflect any such income or loss amounts, and any further gain recognized on a sale
or other taxable disposition of the common shares will be treated as ordinary income.

The mark-to-market election is available only for stock that is regularly traded on a national securities exchange that is registered with the SEC, or
on a foreign exchange or market that the IRS determines has rules sufficient to ensure that the market price represents a legitimate and sound fair market
value.  U.S.  Holders  should  consult  their  own  tax  advisors  regarding  the  availability  and  tax  consequences  of  a  mark-to-market  election  in  respect  to  our
common shares under their particular circumstances.

If we are a PFIC and, at any time, have a foreign subsidiary that is classified as a PFIC, U.S. Holders generally would be deemed to own a portion of
the shares of such lower-tier PFIC, and generally could incur liability for the deferred tax and interest charge described above if we receive a distribution
from, or dispose of all or part of our interest in, the lower-tier PFIC. Upon request, we will endeavor to cause any lower-tier PFIC to provide to a U.S. Holder
no later than 90 days after the request the information that may be required to make or maintain a QEF election with respect to the lower-tier PFIC. However,
there is no assurance that we will have timely knowledge of the status of any such lower-tier PFIC or will be able to cause the lower-tier PFIC to provide the
required information. U.S. Holders are urged to consult their own tax advisors regarding the tax issues raised by lower-tier PFICs. If a U.S. Holder owns (or
is deemed to own) shares during any year in a PFIC, such holder may have to file an IRS Form 8621 (whether or not a QEF election or mark-to-market
election  is  made).  The  rules  dealing  with  PFICs  and  with  the  QEF  and  mark-to-market  elections  are  very  complex  and  are  affected  by  various  factors  in
addition to those described above. Accordingly, U.S. Holders of our common shares should consult their own tax advisors concerning the application of the
PFIC rules to our common shares under their particular circumstances.

Tax Consequences to Non-U.S. Holders of Common Shares

Dividends paid to a Non-U.S. Holder in respect to its common shares generally will not be subject to U.S. federal income tax, unless the dividends
are effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax
treaty, are attributable to a permanent establishment or fixed base that such holder maintains in the United States).

In addition, a Non-U.S. Holder generally will not be subject to U.S. federal income tax on any gain attributable to a sale or other disposition of our
common  shares,  unless  such  gain  is  effectively  connected  with  its  conduct  of  a  trade  or  business  in  the  United  States  (and,  if  required  by  an  applicable
income tax treaty, is attributable to a permanent establishment or fixed base that such holder maintains in the United States) or the Non-U.S. Holder is an
individual who is present in the United States for 183 days or more in the taxable year of sale or other disposition and certain other conditions are met (in
which case, such gain from United States sources generally is subject to tax at a 30% rate or a lower applicable tax treaty rate).

Dividends and gains that are effectively connected with the Non-U.S. Holder’s conduct of a trade or business in the United States (and, if required
by an applicable income tax treaty, are attributable to a permanent establishment or fixed base in the United States) generally will be subject to tax in the
same manner as for a U.S. Holder and, in the case of a Non-U.S. Holder that is a corporation for U.S. federal income tax purposes, may also be subject to an
additional branch profits tax at a 30% rate or a lower applicable tax treaty rate.

Backup Withholding and Information Reporting

In general, information reporting for U.S. federal income tax purposes should apply to distributions made on our common shares within the United
States  to  a  non-corporate  U.S.  Holder  and  to  the  proceeds  from  sales  and  other  dispositions  of  our  common  shares  by  a  non-corporate  U.S.  Holder  to  or
through  a  U.S.  office  of  a  broker.  Payments  made  (and  sales  and  other  dispositions  effected  at  an  office)  outside  the  United  States  will  be  subject  to
information reporting in limited circumstances. In addition, backup withholding of United States federal income tax, currently at a rate of 28%, generally will
apply  to  dividends  paid  on  our  common  shares  to  a  non-corporate  U.S.  Holder  and  the  proceeds  from  sales  and  other  dispositions  of  shares  by  a  non-
corporate U.S. Holder, in each case who (a) fails to provide an accurate taxpayer identification number; (b) is notified by the IRS that backup withholding is
required;  or  (c)  in  certain  circumstances,  fails  to  comply  with  applicable  certification  requirements.  A  Non-U.S.  Holder  generally  may  eliminate  the
requirement for information reporting and backup withholding by providing certification of its foreign status, under penalties of perjury, on a duly executed
applicable IRS Form W-8 or by otherwise establishing an exemption.

97

 
  
 
 
 
 
 
 
 
 
 
Backup withholding is not an additional tax. Rather, the amount of any backup withholding will be allowed as a credit against a U.S. Holder’s or a
Non-U.S. Holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided that certain required information is timely furnished to
the  IRS.  Holders  are  urged  to  consult  their  own  tax  advisors  regarding  the  application  of  backup  withholding  and  the  availability  of  and  procedure  for
obtaining an exemption from backup withholding in their particular circumstances.

F.

Dividends and paying agents

Not required.

G.

Statement by experts

Not required.

H.

Documents on display

Documents concerning us that are referred to in this document may be inspected at c/o   Unit 702, 7th Floor, Millennium City II, 378 Kwun Tong
Road, Kwun Tong, Kowloon, Hong Kong SAR. In addition, we file annual reports and other information with the Securities and Exchange Commission. We
file  annual  reports  on  Form  20-F  and  submit  other  information  under  cover  of  Form  6-K.  As  a  foreign  private  issuer,  we  are  exempt  from  the  proxy
requirements of Section 14 of the Exchange Act and our officers, directors and principal shareholders are exempt from the insider short-swing disclosure and
profit recovery rules of Section 16 of the Exchange Act. Annual reports and other information we file with the Commission may be inspected at the public
reference facilities maintained by the Commission at Room 1024, 100 F. Street, N.E., Washington, D.C. 20549, and copies of all or any part thereof may be
obtained from such offices upon payment of the prescribed fees. You may call the Commission at 1-800-SEC-0330 for further information on the operation
of the public reference rooms and you can request copies of the documents upon payment of a duplicating fee, by writing to the Commission. In addition, the
Commission maintains a web site that contains reports and other information regarding registrants (including us) that file electronically with the Commission
which can be assessed at http://www.sec.gov.

I.

Subsidiary Information

Not required.

ITEM 11.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Interest Rate Risk

Our  exposure  to  interest  rate  risk  primarily  relates  to  interest  income  generated  by  excess  cash,  which  is  mostly  held  in  interest-bearing  bank
deposits. While interest-earning instruments carry a degree of interest rate risk, we have not been exposed, nor do we anticipate being exposed, to material
risks due to changes in market interest rates.

Foreign Currency Risk

A majority of the Company’s expense transactions are denominated in RMB and a significant portion of the Company and its subsidiaries’ assets
and liabilities are denominated in RMB. RMB is not freely convertible into foreign currencies. In the PRC, certain foreign exchange transactions are required
by law to be transacted only by authorized financial institutions at exchange rates set by the People’s Bank of China (“PBOC”). Remittances in currencies
other than RMB by the Company in China must be processed through the PBOC or other China foreign exchange regulatory bodies which require certain
supporting documentation in order to affect the remittance.

Our  functional  currency  is  the  RMB,  and  our  financial  statements  are  presented  in  U.S.  dollars.  The  RMB  appreciated  by  2.4%  in  fiscal  2018,
depreciated  by  3.7%  in  fiscal  2019  and  depreciated  by  2.9%  in  fiscal  2020,  respectively.  It  is  difficult  to  predict  how  market  forces  or  PRC  or  U.S.
government policy may impact the exchange rate between the RMB and the U.S. dollar in the future. The change in the value of the RMB relative to the U.S.
dollar  may  affect  our  financial  results  reported  in  the  U.S.  dollar  terms  without  giving  effect  to  any  underlying  changes  in  our  business  or  results  of
operations. Currently, our assets, liabilities, revenues and costs are denominated in RMB.

To the extent that the Company needs to convert U.S. dollars into RMB for capital expenditures and working capital and other business purposes,
appreciation of RMB against U.S. dollar would have an adverse effect on the RMB amount the Company would receive from the conversion. Conversely, if
the  Company  decides  to  convert  RMB  into  U.S.  dollar  for  the  purpose  of  making  payments  for  dividends,  strategic  acquisition  or  investments  or  other
business purposes, appreciation of U.S. dollar against RMB would have a negative effect on the U.S. dollar amount available to the Company.

ITEM 12.

DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not required.

98

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ITEM 13.

DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

There has been no default of any indebtedness nor is there any arrearage in the payment of dividends.

PART II

ITEM 14.

MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

None.

ITEM 15.

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our  management,  with  the  participation  of  our  Chief  Executive  Officer  and  Acting  Chief  Financial  Officer,  has  performed  an  evaluation  of  the
effectiveness of the design and operation of our “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 (“Exchange Act”)
Rules 13a-15(e) or 15d-15(e)) as of June 30, 2019 as required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15.

Based  on  that  evaluation,  management,  including  our  Chief  Executive  Officer  and  Acting  Chief  Financial  Officer,  has  concluded  as  of  June  30,
2020, our disclosure controls and procedures were effective in ensuring that the information required to be disclosed by us in the reports that we file and
furnish under the Exchange Act was recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that
the  information  required  to  be  disclosed  by  us  in  the  reports  that  we  file  or  submit  under  the  Exchange  Act  is  accumulated  and  communicated  to  our
management, including our Chief Executive Officer and Acting Chief Financial Officer, to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control over Financial Reporting

Our  management  is  responsible  for  establishing  and  maintaining  adequate  internal  control  over  financial  reporting.  Our  internal  control  over
financial  reporting  is  a  process  designed  under  the  supervision  of  our  Chief  Executive  Officer  and  Acting  Chief  Financial  Officer  to  provide  reasonable
assurance  regarding  the  reliability  of  financial  reporting  and  the  preparation  of  our  consolidated  financial  statements  for  external  reporting  purposes  in
accordance with U.S. generally accepted accounting principles.

Management assessed the effectiveness of our internal control over financial reporting as of June 30, 2020. In making this assessment, management
used  the  framework  set  forth  in  the  report  Internal  Control  -  Integrated  Framework  (2013)  issued  by  the  Committee  of  Sponsoring  Organizations  of  the
Treadway  Commission,  or  COSO.  The  COSO  framework  summarizes  each  of  the  components  of  a  company’s  internal  control  system,  including  (i)  the
control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication and (v) monitoring.

It is possible that, had we performed a formal assessment of our internal control over financial reporting or had our independent registered public
accounting firm perform an audit of our internal control over financial reporting, internal control deficiencies may have been identified. See “Item 3. Key
Information—D. Risk Factors—Risks Related to Our Business—If we fail to maintain an effective system of internal control over financial reporting, our
ability to accurately and timely report our financial results or prevent fraud may be adversely affected, and investor confidence and the market price of our
shares may be adversely impacted.”

99

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Changes in Internal Controls over Financial Reporting

During our preparation of the financial statements for the fiscal year ended June 30, 2018, we identified one material weakness in internal control
over financial reporting, which was we lacked the necessary controls and procedures that need to be in place to monitor, capture, report and disclose certain
subsequent events. In order to address the matter as it was identified, we immediately designated a “point” person within the Company’s accounting and
finance reporting structure to whom all information relating to material transactions after the balance sheet closing date was and continues to be reported to
ensure  that  such  information  is  then  properly  and  timely  disclosed  in  the  Company’s  consolidated  financial  statements.  We  concluded  that  the  material
weakness was remediated as of June 30, 2019.

During  the  year  ended  June  30,  2019,  we  identified  another  material  weakness  in  internal  control  over  financial  reporting,  which  is  that  the
Company  lacks  sufficient  financial  accounting  and  reporting  personnel  with  requisite  knowledge  and  experience  in  the  application  of  the  United  States
generally  accepted  accounting  principles  (“U.S.  GAAP”)  and  Securities  and  Exchange  Commission  (“SEC”)  rules  and  lacks  sufficient  controls  and
procedures that are commensurate with U.S. GAAP and SEC reporting requirements.

To  remediate  our  identified  material  weakness  and  improve  our  internal  control  over  financial  reporting,  we  have  implemented  a  number  of

measures to address the material weakness. These measures include the following:

● We have hired additional qualified accounting and financial reporting personal with U.S. GAAP and SEC reporting experience to strengthen our

financial reporting capability;

● We  have  sent  our  accounting  and  financial  reporting  personnel  to  continuous  training  and  education  in  the  accounting  and  reporting

requirements under U.S. GAAP, and SEC rules and regulations;

● We  have  developed,  communicated  and  implemented  an  accounting  policy  manual  for  its  accounting  and  financial  reporting  personnel  for

recurring transactions and period-end closing processes;

● We  have  established  effective  monitoring  and  oversight  controls  for  non-recurring  and  complex  transactions  to  ensure  the  accuracy  and

completeness of the Company’s consolidated financial statements and related disclosures

As of June 30, 2020, based on an assessment performed by our management on the performance of the remediation measures described above, we

determined that the material weakness previously identified in our internal control over financial reporting had been remediated.

Other than as described above, there were no changes in our internal control over financial reporting during the year ended June 30, 2020, that have

materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

100

 
 
 
 
 
 
 
 
 
 
 
 
ITEM 16.

RESERVED

ITEM 16A.

AUDIT COMMITTEE FINANCIAL EXPERT.

Our Board of Directors has determined that Jin He Shao is an audit committee financial expert as that term is defined in Item 16A(b) of Form 20-F,

and “independent” as that term is defined in the NASDAQ listing standards.

ITEM 16B.

CODE OF ETHICS.

Our Board has adopted a code of business conduct and ethics that applies to our directors, officers and employees. A copy of this code is available
on our website. We intend to disclose on our website any amendments to the Code of Business Conduct and Ethics and any waivers of the Code of Business
Conduct and Ethics that apply to our principal executive officer, principal financial officer, principal accounting officer, controller, or persons performing
similar functions.

ITEM 16C.

PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The following table represents the approximate aggregate fees for services billed by Friedman LLP for the periods indicated:

Audit Fees
Audit Related Fees
Tax Fees
All Other Fees
Total Fees

June 30,
2019
USD’000

June 30,
2018
USD’000

  $

  $

240    $
73     
-     
-     
313    $

170 
125 
- 
- 
295 

Ernst & Young Hua Ming LLP (“EY”) has been appointed as the successor auditor, effective from December 21, 2018. The appointment of EY as

the successor auditor has been approved by the chair of the Audit Committee of the Company’s Board of Directors.

The following table represents the approximate aggregate fees for services billed by Ernst & Young Hua Ming LLP for the period indicated:

Audit Fees
Audit Related Fees
Tax Fees
All Other Fees
Total Fees

June 30,
2020
USD’000

June 30,
2019
USD’000

  $

  $

341    $
5     
-     

346    $

323 
10 
- 
- 
333 

Our Audit Committee evaluated and approved in advance the scope and cost of the engagement of an auditor before the auditor rendered its audit

and non-audit services.

ITEM 16D.

EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.

None.

101

 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
   
 
   
   
   
 
 
 
 
 
   
 
 
 
   
 
   
   
   
      
 
 
 
 
ITEM 16E.

PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.

No purchase of our securities was made by us or our affiliates in 2020.

ITEM 16F.

CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT.

On December 21, 2018, Friedman LLP was dismissed as our independent registered public accounting firm (“Friedman”), effective as of the same
date. Effective from December 21, 2018, we engaged Ernst & Young Hua Ming LLP as our independent registered public accounting firm. The change of our
independent registered public accounting firm was approved by the audit committee of our board on December 10, 2018. The decision was not made due to
any disagreements between the Company and Friedman.

The reports of Friedman on the Company’s consolidated financial statements as of June 30, 2018 and for the fiscal years ended June 30, 2018, did

not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principle.

During the fiscal year ended June 30, 2018 and the subsequent interim period through December 5, 2018, there were no (i) disagreements between
us and Friedman on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements if
not resolved to the satisfaction of Friedman would have caused them to make reference thereto in their reports on the consolidated financial statements for
such years, or (ii) reportable events as defined in Form 20-F Item 16F (a)(1)(v) other than the material weakness reported in our 2018 annual report on Form
20-F filed with the U.S. Securities and Exchange of Commission on September 25, 2018. Specifically, the material weaknesses identified as of June 30, 2018
were as follows:

The material weakness related to the Company’s lack of controls and procedures in place to monitor, capture, report and disclose subsequent events
that occurred after the balance sheet date, specifically relating to certain revolving credit facilities that were put in place by the Company following such date.

We provided Friedman with a copy of the disclosures from the first paragraph to the fourth paragraph under this Item 16F and Friedman agreed with

such disclosures. 

During the year ended June 30, 2018 and the subsequent interim period through December 21, 2018, neither we nor anyone on behalf of us has
consulted with Ernst & Young Hua Ming LLP regarding (i) the application of accounting principles to a specific transaction, either completed or proposed, or
the type of audit opinion that might be rendered on our consolidated financial statements, and neither a written report nor oral advice was provided to us that
Ernst  &  Young  Hua  Ming  LLP  concluded  was  an  important  factor  considered  by  us  in  reaching  a  decision  as  to  any  accounting,  auditing,  or  financial
reporting issue, (ii) any matter that was the subject of a disagreement pursuant to Item 16F(a)(1)(iv) of the instructions to Form 20-F, or (iii) any reportable
event pursuant to Item 16F(a)(1)(v) of the instructions to Form 20-F.

ITEM 16G.

CORPORATE GOVERNANCE

None.

ITEM 16H.

MINE SAFETY DISCLOSURE

Not applicable.

102

 
  
 
 
 
 
 
 
 
  
 
 
 
 
 
ITEM 17.

FINANCIAL STATEMENTS

We have elected to provide financial statements pursuant to Item 18.

ITEM 18.

FINANCIAL STATEMENTS

PART III

The financial statements are filed as part of this Annual Report beginning on page F-1.

103

 
  
 
 
 
 
 
CLPS INCORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2020, 2019 AND 2018

104

 
 
 
 
  
  
CLPS INCORPORATION

TABLE OF CONTENTS

Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of June 30, 2020 and 2019
Consolidated Statements of Comprehensive (Loss) Income for the Years Ended June 30, 2020, 2019 and 2018
Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended June 30, 2020, 2019 and 2018
Consolidated Statements of Cash Flows for the Years Ended June 30, 2020, 2019 and 2018
Notes to Consolidated Financial Statements

F-1

Page

F-2
F-3
F-4 – F-5
F-6
F-7
F-8 – F-9
F-10 – F-48

 
 
 
 
 
 
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of CLPS Incorporation

Opinion on the Financial Statements

We  have  audited  the  accompanying  consolidated  balance  sheets  of  CLPS  Incorporation  (the  “Company”)  as  of  June  30,  2020  and  2019,  the  related
consolidated statements of comprehensive income (loss), changes in shareholders’ equity and cash flows for each of the two years in the period ended June
30,  2020,  and  the  related  notes  (collectively  referred  to  as  the  “consolidated  financial  statements”).  In  our  opinion,  the  consolidated  financial  statements
present fairly, in all material respects, the financial position of the Company at June 30, 2020 and 2019, and the results of its operations and its cash flows for
each of the two years in the period ended June 30, 2020, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These  financial  statements  are  the  responsibility  of  the  Company’s  management.  Our  responsibility  is  to  express  an  opinion  on  the  Company’s  financial
statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB)
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations
of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor
were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of
internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion.

Our  audits  included  performing  procedures  to  assess  the  risks  of  material  misstatement  of  the  financial  statements,  whether  due  to  error  or  fraud,  and
performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in
the  financial  statements.  Our  audits  also  included  evaluating  the  accounting  principles  used  and  significant  estimates  made  by  management,  as  well  as
evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young Hua Ming LLP
We have served as the Company’s auditor since 2018.
Shanghai, the People’s Republic of China
October 22, 2020

F-2

 
  
 
 
 
 
 
 
 
 
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders
CLPS Incorporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of CLPS Incorporation and Subsidiaries (collectively, the “Company”) as of June 30, 2018
and 2017, and the related consolidated statements of income and comprehensive income, changes in shareholders’ equity and cash flows for each of the years
in  the  three-year  period  ended  June  30,  2018,  and  the  related  notes  (collectively  referred  to  as  the  financial  statements).  In  our  opinion,  the  consolidated
financial statements referred to above present fairly, in all material respects, the financial position of CLPS Incorporation and Subsidiaries as of June 30,
2018 and 2017, and the results of their operations and their cash flows for each of the years in the three-year period ended June 30, 2018, in conformity with
accounting principles generally accepted in the United States of America.

Basis for Opinion

These  financial  statements  are  the  responsibility  of  the  Company’s  management.  Our  responsibility  is  to  express  an  opinion  on  the  Company’s  financial
statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB)
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations
of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor
were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of
internal  control  over  financial  reporting,  but  not  for  the  purpose  of  expressing  an  opinion  on  the  effectiveness  of  the  Company’s  internal  control  over
financial reporting. Accordingly, we express no such opinion.

Our  audits  included  performing  procedures  to  assess  the  risks  of  material  misstatement  of  the  financial  statements,  whether  due  to  error  or  fraud,  and
performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in
the  financial  statements.  Our  audits  also  included  evaluating  the  accounting  principles  used  and  significant  estimates  made  by  management,  as  well  as
evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Friedman LLP
We have served as the Company’s auditor since 2017.
New York, New York
September 25, 2018

F-3

 
  
 
 
 
 
 
 
 
 
 
 
CLPS INCORPORATION
CONSOLIDATED BALANCE SHEETS
(Amounts in U.S. dollars (“$”), except for number of shares)

ASSETS
Current assets
Cash and cash equivalents
Short-term investments
Accounts receivable, net
Escrow receivable
Prepayments, deposits and other assets, net
Prepaid income tax
Amounts due from related parties
Total Current Assets

Property and equipment, net
Intangible assets, net
Goodwill
Long-term investments
Prepayments, deposits and other assets, net
Deferred tax assets, net
Total Assets

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Short-term bank loans
Accounts payable and other current liabilities
Tax payables
Deferred subsidies
Deferred revenues
Contract liabilities
Salaries and benefits payable
Total current liabilities

Long-term bank loans
Deferred tax liabilities
Unrecognized tax benefits
Total Liabilities

As of June 30,

Note

2020

2019

4
5
6

13

7
8
9
10
6
14

11

14

12

11
14
14

  $

  $

  $

  $

  $

  $

12,652,120    $
636,934     
25,753,856     
-     
1,280,967     
15,780     
169,185     
40,508,842    $

452,472     
1,144,579     
2,118,700     
680,131     
244,387     
203,247     
45,352,358    $

6,601,335 
1,791,697 
19,263,584 
200,000 
1,028,154 
630,790 
230,540 
29,746,100 

566,591 
427,769 
447,790 
914,006 
222,507 
338,221 
32,662,984 

2,161,239    $
489,043     
1,426,614     
-     
-     
755,178     
11,522,268     
16,354,342    $

2,184,996 
196,832 
915,629 
109,250 
124,192 
- 
7,735,487 
11,266,386 

22,554     
163,163     
194,939     
16,734,998    $

- 
- 
- 
11,266,386 

The accompanying notes are an integral part of these consolidated financial statements.

F-4

 
   
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
   
  
 
 
 
    
  
 
 
 
 
   
 
   
 
   
 
   
 
 
   
 
   
 
 
 
 
 
   
      
  
 
   
 
   
 
   
 
   
 
   
 
   
 
 
 
 
 
   
      
  
 
 
   
      
  
 
 
   
      
  
 
 
 
   
 
   
 
 
   
 
 
   
 
 
   
 
   
 
 
 
 
 
   
      
  
 
   
 
   
 
   
 
 
  
 
CLPS INCORPORATION
CONSOLIDATED BALANCE SHEETS - CONTINUED
(Amounts in U.S. dollars (“$”), except for number of shares)

Commitments and Contingencies

Shareholders’ Equity
Common stock, $0.0001 par value, 100,000,000 shares authorized; 15,930,330 shares issued and

outstanding as of June 30, 2020; 13,913,201 shares issued and outstanding as of June 30, 2019*

Additional paid-in capital
Statutory reserves
Accumulated deficits
Accumulated other comprehensive loss

Total CLPS Incorporation’s Shareholders’ Equity

Non-controlling Interests

Total Shareholders’ Equity

Total Liabilities and Shareholders’ Equity

Note
15

19
19
19

As of June 30,

2020

2019

1,593     
28,586,048     
2,803,811     
(2,680,143)    
(1,362,665)    

1,391 
24,276,622 
1,833,802 
(4,509,729)
(813,650)

27,348,644     

20,788,436 

19

1,268,716     

608,162 

28,617,360     

21,396,598 

  $

45,352,358    $

32,662,984 

* The shares and per share data are presented on a retroactive basis to reflect the nominal share issuance (Note 19).

The accompanying notes are an integral part of these consolidated financial statements.

F-5

 
  
 
 
   
 
 
 
 
 
   
 
 
   
      
  
 
 
 
   
      
  
 
 
   
      
  
 
   
 
   
 
   
 
 
   
 
 
   
 
 
 
   
      
  
 
 
   
 
 
 
   
      
  
 
   
 
 
 
   
      
  
 
 
   
 
 
 
   
      
  
 
 
 
 
 
CLPS INCORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Amounts in U.S. dollars (“$”), except for number of shares)

Revenues
Less: Cost of revenues
Gross profit

Operating expenses:

Selling and marketing expenses
Research and development expenses
General and administrative expenses

Total operating expenses
Income (loss) from operations
Subsidies and other income, net
Other expenses

Income (loss) before income tax and share of income (loss) in equity investees
Provision (benefits) for income taxes
Income (loss) before share of income (loss) in equity investees
Share of income (loss) in equity investees, net of tax
Net income (loss)
Less: Net income (loss) attributable to non-controlling interest
Net income (loss) attributable to CLPS Incorporation’s shareholders

Other comprehensive (loss) income

Foreign currency translation (loss) gain
Less: foreign currency translation (loss) gain attributable to non-controlling

interests

Other comprehensive (loss) gain attributable to CLPS Incorporation’s shareholders    

Comprehensive income (loss) attributable to CLPS Incorporation shareholders

Non-controlling interests

Basic earnings (loss) per common share*

Weighted average number of share outstanding – basic

Diluted earnings (loss) per common share*

Weighted average number of share outstanding – diluted

Note

For the years ended June 30,
2019

2020

2018

  $

89,415,798    $
(58,296,097)    
31,119,701     

64,932,937    $
(41,178,356)    
23,754,581     

48,938,593 
(31,277,255)
17,661,338 

3,059,877     
10,436,975     
16,343,936     
29,840,788     
1,278,913     
2,535,868     
(107,322)    

2,179,029     
7,978,883     
17,384,393     
27,542,305     
(3,787,724)    
779,508     
(92,429)    

3,707,459     
835,444     
2,872,015     
207,363     
3,079,378     
141,139     
2,938,239    $

(3,100,645)    
186,615     
(3,287,260)    
(145,329)    
(3,432,589)    
(162,813)    
(3,269,776)   $

  $

2,225,702 
7,837,873 
5,871,622 
15,935,197 
1,726,141 
960,784 
(84,155)

2,602,770 
(112,128)
2,714,898 
- 
2,714,898 
280,435 
2,434,463 

  $

(571,943)   $

(429,348)   $

55,793 

  $

  $

  $

  $

  $

(22,928)    
(549,015)   $

(17,375)    
(411,973)   $

10,200 
45,593 

2,389,224    $
118,211     
2,507,435    $

(3,681,749)   $
(180,188)    
(3,861,937)   $

2,480,056 
290,635 
2,770,691 

0.20    $
14,689,224     
0.20    $
14,692,299     

(0.24)   $
13,843,764     
(0.24)   $
13,843,764     

0.21 
11,517,123 
0.21 
11,636,367 

14

16

16

* The shares and per share data are presented on a retroactive basis to reflect the nominal share issuance (Note 19).

The accompanying notes are an integral part of these consolidated financial statements.

F-6

 
 
 
 
   
 
 
 
 
 
   
   
 
 
 
 
   
   
 
   
 
 
 
 
 
 
   
 
 
   
 
   
   
      
      
  
   
   
      
      
  
   
   
   
   
   
   
   
   
   
   
   
   
   
   
 
   
   
      
      
  
   
   
 
   
   
   
   
   
   
   
   
   
   
 
   
   
      
      
  
   
   
      
      
  
   
   
   
 
   
   
      
      
  
   
   
   
 
   
 
   
   
      
      
  
 
 
 
   
 
 
 
   
 
 
 
CLPS INCORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE YEARS ENDED JUNE 30, 2020, 2019 AND 2018
(Amounts in U.S. dollars (“$”), except for number of shares)

    Additional      

    Accumulated      
Other

Non-

Common Share

Paid-in     Statutory     Accumulated    Comprehensive    Controlling     
Interests    

Loss

Total

  Note  

Shares*     Amount     Capital

    11,290,000     

1,129      7,120,943     

    Surplus    
680,671     

Deficits
(2,521,285)    

19     2,000,000     

200      9,549,319     

-     

19    

300,000     
-     

30      1,472,562     
(362,925)    

-     

19    
17    

connection with IPO  

17    

Balance at July 1, 2017
Net proceeds from Initial

Public Offering
(“IPO”), net of
issuance costs

Net proceeds from over-

allotment, net of
issuance costs
IPO issuance costs
Purchase of subsidiaries’

shares from non-
controlling interests
Public offering warrants  
Warrants issued in

Non-controlling interests

through an acquisition  

Net income for the year
Appropriation of

statutory reserve

Foreign currency

translation adjustments  
Balance at June 30, 2018  
Stock-based

compensation
Exercise of warrants
Non-controlling interests

Sale of subsidiaries’
shares to non-
controlling interests

Net loss for the year
Appropriation of

statutory reserve

Foreign currency

translation adjustments  

Other
Balance at June 30, 2019  
Cumulative effect of
adopting ASC 606
Purchase of subsidiaries’

-     

-     
-     

-     
-     

-     

-     
2,434,463     

-     
-     

-     
-     

-     

-     
-     

-     
-     

-     

-     
-     

-     

-     
-     

-     
(3,269,776)    

(447,270)    

477,110      5,311,298 

-     

-     
-     

-     
-     

-     

-     
-     

-     

-      9,549,519 

-      1,472,592 
(362,925)
-     

(91,533)    
-     

(585,889)
612,223 

-     

(612,223)

70     

70 
280,435      2,714,898 

-     

- 

-     
-     

-      7,016,111 
- 
-     

-     

64,879     

64,879 

-     
-     

-     

47,189     

47,189 
(162,813)     (3,432,589)

-     

- 

-     
-     

-     

-     
-     

-     

-     
-     

(494,356)    
612,223     

-     

(612,223)    

-     
-     

-     

-     
-     

-     

-     
-     

-     

437,796     

(437,796)    

-     
    13,590,000     

-     

-     
1,359      17,285,543      1,118,467     

-     

-     
(524,618)    

45,593     
(401,677)    

55,793 
10,200     
676,282      18,155,356 

18    
17    

223,821     
99,380     

22      7,016,089     
(10)    
10     

through an acquisition  

3

-     

-     

-     
-     

-     

-     
-     

-     

19    

-     

715,335     

(715,335)    

-     
-     
  13,913,201   

-     
-     

-     
-     
-     
(25,000)    
1,391    24,276,622    1,833,802   

-     
-     
(4,509,729)  

(411,973)    
-     
(813,650)  

(17,375)    
-     

(429,348)
(25,000)
608,162    21,396,598 

2 

-     

-     

-     

-     

(138,644)    

-     

-     

(138,644)

shares from non-
controlling interests
shareholders

  19 

100,000     

10     

(131,002)    

Stock-based

compensation expenses  

Exercise of share options

-     

-      4,004,080     

18     1,830,514     

183     

(183)    

-     

-     

-     

-     
-     

-     

-     

-     

-     
2,938,239     

-     

130,992     

- 

-     

-     

-     
-     

-     

-      4,004,080 

-      

-

411,351     
847,891 
141,139      3,079,378 

-     

- 

(549,015)    

(571,943)
(1,362,665)   $ 1,268,716    $ 28,617,360 

(22,928)    

86,615     
-     

-     

9     
-     

-     

436,531     
-     

-     

970,009     

(970,009)    

-     
  $ 15,930,330    $

-     

-     
1,593    $ 28,586,048    $ 2,803,811    $ (2,680,143)   $

-     

-     

  3 

and vesting of
restricted shares

Acquisition of
subsidiaries 

Net income for the year
Appropriation of

statutory reserve

Foreign currency

translation adjustments  
Balance at June 30, 2020  

* The shares and per share data are presented on a retroactive basis to reflect the nominal share issuance (Note 19).

The accompanying notes are an integral part of these consolidated financial statements. 

F-7

 
 
  
 
   
   
     
     
     
     
     
 
 
   
   
     
     
   
   
     
 
 
   
 
   
 
 
   
   
 
 
 
 
 
 
 
   
 
 
   
 
 
   
 
 
   
 
   
 
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
   
   
 
   
 
   
 
 
   
 
 
   
 
   
 
 
 
CLPS INCORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in U.S. dollars (“$”), except for number of shares)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

For the years ended June 30,
2019

2020

2018

  $

3,079,378    $

(3,432,589)   $

2,714,898 

Share-based compensation
Depreciation and amortization
Deferred tax expenses (benefits)
Remeasurement loss of the previously held equity interest
Gain on disposal of a long-term investment
Share of (income) loss in equity investees, net of tax
Gain on disposal of subsidiaries
Provision (reversal of) for doubtful accounts
Loss from disposal of property and equipment

Changes in assets and liabilities:

Accounts receivable
Prepayment, deposits and other assets
Prepaid income tax
Accounts payable and other current liabilities
Contract liabilities
Tax payables
Deferred subsidies
Deferred revenue
Salaries and benefits payable
Unrecognized tax benefits

Net cash provided by (used in) operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Acquisition of property and equipment
Acquisition of intangible assets
Payments for business acquisitions
Cash acquired from acquisitions
Acquisition of long-term investments
Disposition of a long-term investment
Disposition of subsidiaries
Maturities (purchases) of short-term investments
Repayments from a related party
Loans provided to a related party

Net cash provided by (used in) investing activities

4,004,080     
593,173     
172,740     
-     
(433,490)    
(207,363)    
-     
231,133     
633     

(6,603,589)    
206,054     
615,010     
146,362     
69,278     
408,007     
(109,250)    
-     
3,564,029     
194,939     
5,931,124     

(167,701)    
(63,855)    
(2,031,563)    
474,653     
(143,299)    
995,605     
-     
1,109,389     
177,787     
(177,787)    
173,229     

7,016,089     
403,700     
100,109     
19,682     
-     
145,329     
(57,588)    
(70,893)    
9,689     

(3,055,040)    
(37,026)    
(442,498)    
(842,910)    
-     
102,408     
(27,138)    
(69,241)    
639,024     
-     
401,107     

(499,554)    
-     
(487,061)    
85,999     
(1,093,274)    
-     
(65,242)    
(1,803,228)    
820,982     
(820,982)    
(3,862,360)    

- 
206,169 
(208,051)
- 
- 
8,684 
- 
96,904 
1,957 

(9,753,685)
(613,277)
(33,225)
592,477 
- 
251,627 
11,945 
102,077 
1,848,890 
-  
(4,772,610)

(231,226)
- 
(107,654)
- 
(153,792)
- 
- 
- 
- 
- 
(492,672)

The accompanying notes are an integral part of these consolidated financial statements.

F-8

 
 
 
 
 
 
 
 
   
   
 
   
     
   
  
   
      
      
  
   
   
   
   
   
   
   
   
   
   
      
      
  
   
   
   
   
   
   
   
   
   
   
   
 
   
      
      
  
   
      
      
  
   
   
   
   
   
   
   
   
   
   
   
 
 
CLPS INCORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Amounts in U.S. dollars (“$”), except for number of shares)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from short-term bank loans
Repayments of short-term bank loans
Capital contributions from IPO and over-allotment, net
Escrow receivable
Due from underwriters on the over-allotment
Cash paid for issuance cost of IPO
Purchase of non-controlling interests
Amounts due from related parties
Amounts due to related parties
Dividend paid

Net cash provided by financing activities

For the years ended June 30,
2019

2020

2018

3,821,602     
(3,896,240)    
-     
200,000     
-     
-     
-     
-     
-     
-     
125,362     

3,641,661     
(3,918,427)    
1,472,592     
-     
-     
-     
(582,440)    
-     
(146,604)    
-     
466,782     

5,659,536 
(3,060,456)
11,022,111 
(200,000)
(1,472,592)
(283,092)
- 
(12,941)
(936,338)
(612,988)
10,103,240 

Effect of exchange rate changes on cash

(178,930)    

(147,080)    

90,360 

Net increase (decrease) in cash
Cash and cash equivalents, at the beginning of the year

6,050,785     
6,601,335    $

(3,141,551)    
9,742,886    $

4,928,318 
4,814,568 

  $

Cash, cash equivalents at the end of the year

  $

12,652,120    $

6,601,335    $

9,742,886 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Income tax paid

Interest paid

NON-CASH TRANSACTIONS OF INVESTING AND FINANCING ACTIVITIES:
Payable for business acquisition and purchase of non-controlling interests

Payable for a long-term investment

Capital contribution from non-controlling shareholders

Prepaid for issuance costs of IPO in the previous year

  $
  $

  $
  $
  $
  $

1,169,717    $
89,503    $

768,956    $
69,602    $

325,609 
74,754 

-    $
-    $
-    $
-    $

-    $
-    $
-    $
-    $

584,040 
151,539 
70 
79,833 

The accompanying notes are an integral part of these consolidated financial statements.

F-9

 
  
 
 
 
 
 
 
   
   
 
 
    
    
  
   
   
   
   
   
   
   
   
   
   
   
 
   
      
      
  
   
 
   
      
      
  
   
 
   
      
      
  
 
   
      
      
  
   
      
      
  
 
   
      
      
  
   
      
      
  
 
  
CLPS INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollars (“$”), except for number of shares)

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

CLPS Incorporation (“CLPS” or the “Company”), is a company that was established under the laws of the Cayman Islands on May 11, 2017 as a holding
company.  The  Company,  through  its  subsidiaries,  designs,  builds,  and  delivers  IT  services,  solutions  and  product  services.  The  Company  customizes  its
services to specific industries with customer service teams typically based on-site at the customer locations. The Company’s solutions enable its clients to
meet the changing demands in an increasingly global, internet-driven, and competitive marketplace. Mr. Xiao Feng Yang, the Company’s Chairman of the
Board, together with Mr. Raymond Ming Hui Lin, the Company’s Chief Executive Officer (“CEO”) are the controlling shareholders of the Company (the
“controlling shareholder”). On June 8, 2018, the Company completed its initial public offering (“IPO”) on the Nasdaq Capital Market (Note 19).

Reorganization

A reorganization of the Company’s legal structure was completed on November 2, 2017. The reorganization involved the incorporation of CLPS, a Cayman
Islands  holding  company;  Qinheng  Co.,  Limited  (“Qinheng”)  and  Qiner  Co.,  Limited  (“Qiner”),  two  holding  companies  established  in  Hong  Kong,  and
Shanghai Qincheng Information Technology Co., Ltd. (“CLPS QC” or “WOFE”) established in the People’s Republic of China (“PRC”); and the transfer of
ChinaLink Professional Service Co., Ltd. (“CLPS Shanghai”) from the controlling shareholders to CLPS QC. After the reorganization, CLPS owns 100%
equity interests of the entities mentioned above. On December 7, 2017, the Board of Directors approved an amendment of the article association of CLPS and
a  nominal  share  issuance  to  the  existing  shareholders.  As  a  result,  the  existing  shareholders  own  the  same  percentage  of  ownership  in  CLPS  as  their
ownership interests in CLPS Shanghai prior to the reorganization.

CLIVST is a subsidiary of Qinheng. FDT-CL, a former subsidiary of Qinheng ceased operation and deregistered on March 15, 2019. JQ Technology Co.,
Limited  (“JQ”)  and  JIALIN  Technology  Limited  (“JL”)  were  subsidiaries  of  Qiner  beginning  from  October  17,  2017  and  were  sold  in  November,  2018.
CLPS Dalian Co., Ltd. (“CLPS Dalian”), CLPS Ruicheng Co., Ltd. (“CLPS RC”), CLPS Beijing Hengtong Co., Ltd. (“CLPS Beijing”), CLPS Technology
(Singapore) Pte. Ltd. (“CLPS SG”), CLPS Ridik Technology (Australia) Pty Ltd. (“CLPS Ridik AU”), CLPS Technology (Hong Kong) Co., Limited (“CLPS
Hong Kong”), Judge (Shanghai) Co., Ltd (“Judge China”), Judge (Shanghai) Human Resource Co., Ltd (“Judge HR”), CLPS Shenzhen Co., Ltd. (“CLPS
Shenzhen”) and CLPS Guangzhou Co., Ltd. (“CLPS Guangzhou”) are all subsidiaries of CLPS Shanghai.

Since the Company and its subsidiaries are controlled by the same group of shareholders before and after the reorganization, the aforementioned transactions
were accounted for as a recapitalization. The consolidation of the Company and its subsidiaries has been accounted for at historical cost and prepared on the
basis as if the aforementioned transactions had become effective as of the beginning of the first period presented in the consolidated financial statements.

F-10

 
  
 
 
 
  
  
  
 
CLPS INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollars (“$”), except for number of shares)

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS - continued

Details of the subsidiaries of the Company are set out below:

Name of Entity
Qiner Co., Limited (“Qiner”)

Qinheng Co., Limited (“Qinheng”)

CLIVST Ltd. (“CLIVST”)

Shanghai Qincheng Information Technology Co., Ltd. (“CLPS QC” or

“WOFE”)

ChinaLink Professional Service Co., Ltd. (“CLPS Shanghai”)

CLPS Dalian Co., Ltd. (“CLPS Dalian”)

CLPS Ruicheng Co., Ltd. (“CLPS RC”)

CLPS Beijing Hengtong Co., Ltd (“CLPS Beijing”)

CLPS Technology (Singapore) Pte. Ltd.

(“CLPS SG”)

CLPS-Ridik Technology (Australia) Pty Ltd. (formerly CLPS

Technology (Australia) Pty Ltd.)
(“CLPS-Ridik AU”)

CLPS Technology (Hong Kong) Co., Limited

(“CLPS Hong Kong”)

Judge (Shanghai) Co., Ltd. (“Judge China”)

Judge (Shanghai) Human Resource Co., Ltd.

(“Judge HR”)

CLPS Shenzhen Co., Ltd. (“CLPS Shenzhen”)

CLPS Guangzhou Co., Ltd. (“CLPS Guangzhou”)

CLPS Technology (US) Ltd. (“CLPS US”)

Infogain Solutions PTE. Ltd. (“Infogain”)

Tianjin Huanyu Qinshang Network Technology Co., Ltd. (“Huanyu”)

CLPS Hangzhou Co. Ltd. (“CLPS Hangzhou”)

CLPS Technology Japan (“CLPS Japan”)

Ridik Pte. Ltd. (“Ridik Pte.”)

Ridik Sdn. Bhd. (“Ridik Sdn.”)

Ridik Software Solutions Pte. Ltd. (“Ridik Software Pte.”)

Ridik Software Solutions Ltd. (“Ridik Software”)

Suzhou Ridik Information Technology Co., Ltd. (“Suzhou Ridik”)

Qinson Credit Card Services Limited (“Qinson”)

CLPS Technology (California) Inc. (“CLPS California”)

Ridik Consulting Private Limited (“Ridik Consulting”)

Date of
Incorporation/
Acquisition
Incorporated on 
April 21, 2017
Incorporated on
June 9, 2017
Incorporated on
July 25, 2017
Incorporated on 
August 4, 2017
Incorporated on
August 30, 2005
Incorporated on
May 25, 2011
Incorporated on
June 26, 2013
Incorporated on
March 30, 2015
Incorporated on
August 18, 2015
Incorporated on
November 10, 2015

Incorporated on
January 7, 2016
Acquired on 
November 9, 2016
Acquired on 
November 9, 2016
Incorporated on
April 7, 2017
Incorporated on
September 27, 2017
Incorporated on 
June 5, 2018
Acquired on
August 20, 2018
Acquired on 
May 24, 2019
Incorporated on 
July 31, 2019
Incorporated on
September 13, 2019
Acquired on
September 26, 2019
Acquired on
September 26, 2019
Acquired on
September 26, 2019
Acquired on
September 26, 2019
Incorporated on
October 18, 2019
Incorporated on
December 31, 2019
Incorporated on
January 2, 2020  
Acquired on
January 6, 2020

F-11

Place of

Incorporation  
  Hong Kong, China  

% of Equity
Ownership  
100%

Principal
Activities
  Holding Company

  Hong Kong, China  

100%

  Holding Company

British Virgin
Islands

100%

Shanghai, China  

100%

Holding
Company 
  Holding Company

Shanghai, China  

100%

Dalian, China

100%

Shanghai, China  

100%

Beijing, China

Singapore

Australia

100%

100%

100%

  Hong Kong, China  

100%

Shanghai, China  

Shanghai, China  

60%

42%

  Shenzhen, China  

100%

  Guangzhou, China  

100%

  Delaware, USA  

100%

Singapore

Tianjin, China

80%

100%

  Hangzhou, China  

100%

Japan

100%

Singapore

Malaysia

Singapore

UK

Suzhou, China

80%

80%

80%

80%

80%

  Hong Kong, China  

100%

  California, USA  

100%

India

80%

Software
development
Software
development
Software
development
Software
development
Software
development
Software
development

Software
development
Software
development
Software
development
Software
development
Software
development
Software
development
Software
development
Network
technology
Software
development
Software
development
Software
development
Software
development
Software
development
Software
development
Software
development
Software
development
Software
development
Software
development

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CLPS INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollars (“$”), except for number of shares)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation and principles of consolidation 

The  accompanying  consolidated  financial  statements  have  been  prepared  in  accordance  with  the  United  States  generally  accepted  accounting  principles
(“U.S. GAAP”).

The  accompanying  consolidated  financial  statements  include  the  financial  statements  of  CLPS  and  its  subsidiaries.  All  inter-company  balances  and
transactions have been eliminated upon consolidation. Results of subsidiaries and businesses acquired from third parties are consolidated from the date on
which control is transferred to the Company.

Use of estimates and assumptions 

In  preparing  the  consolidated  financial  statements  in  conformity  with  U.S.  GAAP,  management  makes  estimates  and  assumptions  that  affect  the  reported
amounts  of  assets  and  liabilities  and  disclosure  of  contingent  assets  and  liabilities  at  the  date  of  the  consolidated  financial  statements  and  the  reported
amounts  of  revenues  and  expenses  during  the  reporting  period.  These  estimates  are  based  on  information  as  of  the  date  of  the  consolidated  financial
statements. Significant estimates required to be made by management include, but are not limited to, valuation of accounts receivable, prepayments, deposits
and other assets, useful lives of property and equipment and intangible assets, goodwill impairment, the impairment of long-lived assets and investments,
purchase price allocation for business combination, relative standalone selling price of the performance obligations in the IT solution services, provision for
accrued expenses and other current liabilities, valuation allowance of deferred tax assets, provision for uncertain tax positions, fair value measurements of
equity investments without readily determinable fair values and valuation for warrants and share-based compensation. Actual results could differ from those
estimates.

Cash and cash equivalents

Cash and cash equivalents primarily consist of cash and bank deposits, which are unrestricted as to withdrawal and use. The Company considers all highly
liquid investment instruments with an original maturity of three months or less from the date of purchase to be cash equivalents. The Company maintains
most  of  its  bank  accounts  in  the  PRC.  Cash  balances  in  bank  accounts  in  PRC  are  not  insured  by  the  Federal  Deposit  Insurance  Corporation  or  other
programs.

F-12

 
 
 
 
 
 
  
 
 
 
 
CLPS INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollars (“$”), except for number of shares)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Short-term investments

All  highly  liquid  investments  with  original  maturities  of  greater  than  three  months,  but  less  than  twelve  months,  are  classified  as  short-term  investments.
Short-term  investments  represent  investments  in  wealth  management  products  placed  with  certain  financial  institutions.  The  principal  amounts  of  these
products are not guaranteed. The Company classifies these wealth management products as “trading”. Dividend and interest income are included in earnings.
Any  realized  gains  or  losses  on  the  sale  of  the  short-term  investments,  are  determined  on  a  specific  identification  method,  and  such  gains  and  losses  are
reflected in earnings during the period in which gains or losses are realized.

Accounts receivable and allowance for doubtful accounts

Accounts receivable are carried at net realizable value. An allowance for doubtful accounts is recorded in the period when loss is probable. The Company
determines the adequacy of a reserve for doubtful accounts based on individual account analysis and historical collection trends. The Company establishes a
provision for doubtful receivables when there is objective evidence that the Company may not be able to collect amounts due. The allowance is based on
management’s best estimates of specific losses on individual customer exposures, as well as the historical trends of collections. Delinquent account balances
are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable.

Prepayments, deposit and other assets

Prepayment, deposit and other assets primarily consists of advances and deposits to suppliers for purchasing goods or services that have not been received or
provided  and  advances  to  employees.  These  advances  are  interest  free,  unsecured  and  short-term  in  nature  and  are  reviewed  periodically  to  determine
whether their carrying value has become impaired. An allowance for doubtful accounts is recorded in the period when loss is probable.

F-13

 
 
 
  
 
 
 
 
 
   
CLPS INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollars (“$”), except for number of shares)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Long-term investments

The Company’s long-term investments consist of equity-method investments and equity investments without readily determinable fair values.

Investments in entities in which the Company can exercise significant influence but does not own a majority equity interest or control are accounted for using
the equity method of accounting in accordance with ASC Topic 323, Investments-Equity Method and Joint Ventures (“ASC 323”). The share of earnings or
losses  of  the  investee  are  recognized  in  the  consolidated  statements  of  comprehensive  income.  Equity  method  adjustments  include  the  Company’s
proportionate share of investee income or loss, adjustments to recognize certain differences between the Company’s carrying value and its equity in net assets
of the investee at the date of investment, impairments, and other adjustments required by the equity method. The Company assesses its equity investment for
other-than-temporary impairment by considering factors as well as all relevant and available information including, but not limited to, current economic and
market conditions, the operating performance of the investees including current earnings trends, the general market conditions in the investee’s industry or
geographic  area,  factors  related  to  the  investee’s  ability  to  remain  in  business,  such  as  the  investee’s  liquidity,  debt  ratios,  and  cash  burn  rate  and  other
company-specific  information.  Any  gain  or  loss  from  the  disposition  of  the  equity  method  investments  is  included  in  the  consolidated  statements  of
comprehensive income equal to difference between the proceeds the Company receives and the carrying amounts of the investment disposed.

For equity investments without readily determinable fair values, the Company elects to use the measurement alternative in accordance with ASC Topic 321,
Investments-Equity  securities  (“ASC  321”)  to  measure  such  investments  at  cost  minus  impairment  adjusted  by  observable  price  changes  in  orderly
transactions  for  the  identical  or  a  similar  investment  of  the  same  issuer  as  of  the  date  that  the  observable  transaction  occurred.  These  investments  are
measured at fair value on a nonrecurring basis when there are events or changes in circumstances that may have a significant adverse effect. An impairment
loss is recognized in the consolidated statements of comprehensive income equal to the amount by which the carrying value exceeds the fair value of the
investment. For the year ended June 30, 2020, no such investment was remeasured and accordingly no unrealized gains (losses) was recognized.

No impairment loss was recognized in any of the periods presented.

Business combination

The Company accounts for all business combinations under the purchase method of accounting in accordance with ASC 805, Business Combinations. The
purchase method of accounting requires that the consideration transferred to be allocated to net assets including separately identifiable assets and liabilities
the Company acquired, based on their estimated fair value. The consideration transferred in an acquisition is measured as the aggregate of the fair values at
the  date  of  exchange  of  the  assets  given,  liabilities  incurred,  and  equity  instruments  issued  as  well  as  the  contingent  considerations  and  all  contractual
contingencies  as  of  the  acquisition  date.  The  costs  directly  attributable  to  the  acquisition  are  expensed  as  incurred.  Identifiable  assets,  liabilities  and
contingent  liabilities  acquired  or  assumed  are  measured  separately  at  their  fair  value  as  of  the  acquisition  date,  irrespective  of  the  extent  of  any  non-
controlling interests. The excess of (i) the total of the cost of the acquisition, fair value of the non-controlling interests and acquisition date fair value of any
previously  held  equity  interest  in  the  acquiree  over  (ii)  the  fair  value  of  the  identifiable  net  assets  of  the  acquiree  is  recorded  as  goodwill.  If  the  cost  of
acquisition is less than the fair value of the identifiable net assets of the acquiree, the difference is recognized directly in earnings. The Company adopted
Accounting Standards Update (“ASU”) No. 2017-01, Business Combinations (Topic 802): Clarifying the Definition of a Business, in determining whether it
has acquired a business from July 1, 2019 on a prospective basis and there was no material impact on the consolidated financial statements.

The  determination  and  allocation  of  fair  values  to  the  identifiable  net  assets  acquired,  liabilities  assumed  and  non-controlling  interest  is  based  on  various
assumptions and valuation methodologies requiring considerable judgment from management. The most significant variables in these valuations are discount
rates, terminal values, the number of years on which to base the cash flow projections, as well as the assumptions and estimates used to determine the cash
inflows and outflows. The Company determines discount rates to be used based on the risk inherent in the acquiree’s current business model and industry
comparisons. Although the Company believes that the assumptions applied in the determination are reasonable based on information available at the date of
acquisition, actual results may differ from forecasted amounts and the differences could be material.

F-14

 
 
 
 
 
 
 
 
 
 
 
 
CLPS INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollars (“$”), except for number of shares)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Non-controlling interests

The non-controlling interests are presented in the consolidated balance sheets, separately from equity attributable to the shareholders of the Company. Non-
controlling interests in the results of the Company are presented on the face of the consolidated statement of comprehensive income (loss) as an allocation of
the total income or loss for the year between non-controlling interest holders and the shareholders of the Company.

Property and equipment, net 

Property and equipment, net, are stated at cost less accumulated depreciation. The straight-line method is used to compute depreciation over the estimated
useful lives of the assets, as follows: 

Leasehold improvements
Automobiles
Equipment and office furniture

  The shorter of lease terms or the estimated useful lives

Useful life

5 years
3-5 years

Expenditures for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for
major renewals and betterments which substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation of assets
retired or sold are removed from the respective accounts, and any gain or loss is charged to the statement of comprehensive income (loss).

Direct  costs  that  are  related  to  the  construction  of  property  and  equipment  and  incurred  in  connection  with  bringing  the  assets  to  their  intended  use  are
capitalized  as  construction  in  progress.  Construction  in  progress  is  transferred  to  specific  property  and  equipment,  and  the  depreciation  of  these  assets
commences when the assets are ready for their intended use.

Intangible assets, net

Intangible  assets,  net,  are  carried  at  cost  less  accumulated  amortization  and  any  recorded  impairment.  Intangible  assets  acquired  through  business
combinations are recognized as assets separate from goodwill if they satisfy either the “contractual-legal” or “separability” criterion, and are measured at fair
value upon acquisition.

Amortization is computed using the straight-line method over the following estimated useful lives:

Customer contracts
Customer relationship
Software

The Company does not have any indefinite-lived intangibles other than goodwill.

Useful life

3 – 10 years
3 – 10 years
5 years

F-15

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CLPS INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollars (“$”), except for number of shares)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Goodwill

Goodwill represents the excess of the consideration over the fair value of the net assets acquired at the date of acquisition. Goodwill is not amortized but
rather  tested  for  impairment  at  least  annually  at  the  reporting  unit  level  by  applying  a  fair-value  based  test  in  accordance  with  accounting  and  disclosure
requirements for goodwill. This test is performed by management annually or more frequently if the Company believes impairment indicators are present.
The  Company  had  only  one  reporting  unit  (that  also  represented  the  Company’s  single  operating  segment)  as  of  June  30,  2020  and  2019.  Goodwill  was
allocated 100% to the single reporting unit as of June 30, 2020 and 2019. The Company has the option to assess qualitative factors first to determine whether
it is necessary to perform the two-step test in accordance with ASC 350-20, Intangibles - Goodwill and Other. If the Company believes, as a result of the
qualitative  assessment,  that  it  is  more-likely-than-not  that  the  fair  value  of  the  reporting  unit  is  less  than  its  carrying  amount,  the  two-step  quantitative
impairment test described above is required. Otherwise, no further testing is required. In the qualitative assessment, the Company considers primary factors
such as industry and market considerations, overall financial performance of the reporting unit, and other specific information related to the operations.

In performing the two-step quantitative impairment test, the first step compares the carrying amount of the reporting unit to the fair value of the reporting unit
based  on  estimated  fair  value  using  a  combination  of  the  income  approach  and  the  market  approach.  If  the  fair  value  of  the  reporting  unit  exceeds  the
carrying value of the reporting unit, goodwill is not impaired and the Company is not required to perform further testing. If the carrying value of the reporting
unit exceeds the fair value of the reporting unit, then the Company must perform the second step of the impairment test in order to determine the implied fair
value  of  the  reporting  unit’s  goodwill.  The  fair  value  of  the  reporting  unit  is  allocated  to  its  assets  and  liabilities  in  a  manner  similar  to  a  purchase  price
allocation in order to determine the implied fair value of the reporting unit goodwill. If the carrying amount of the goodwill is greater than its implied fair
value, the excess is recognized as an impairment loss in general and administrative expenses.

No impairment loss was provided for the years ended June 30, 2020, 2019 and 2018. 

Impairment of long-lived assets

The Company reviews its long-lived assets, other than goodwill, including property and equipment and intangible assets with definite lives for impairment
whenever  events  or  changes  in  circumstances  indicate  that  the  carrying  amount  of  an  asset  may  no  longer  be  recoverable.  When  these  events  occur,  the
Company measures impairment by comparing the carrying values of the long-lived assets to the estimated undiscounted future cash flows expected to result
from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amounts of the assets,
the  Company  would  recognize  an  impairment  loss  based  on  the  excess  of  the  carrying  value  over  the  fair  value  of  the  assets.  Fair  value  is  generally
determined  by  discounting  the  cash  flows  expected  to  be  generated  by  the  asset,  when  the  market  prices  are  not  readily  available.  The  adjusted  carrying
amount of the asset becomes the new cost basis and depreciated over the asset’s remaining useful live. Long-lived assets are grouped with other assets and
liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities for the purpose of the
impairment testing.

No impairment loss was provided for the years ended June 30, 2020, 2019 and 2018. 

F-16

 
 
 
 
 
 
 
 
 
 
 
CLPS INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollars (“$”), except for number of shares)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Revenue recognition

Effective  July  1,  2019,  the  Company  adopted  ASU  2014-09,  Revenue  from  contracts  with  Customers  (Topic  606)  (“ASC  606”)  using  the  modified
retrospective  approach,  which  requires  the  recognition  of  a  cumulative-effect  adjustment  to  retained  earnings  as  of  the  date  of  adoption  and  applies  the
adoption only to contracts not completed as of July 1, 2019. Prior periods were not retrospectively adjusted. The Company does not disclose the value of
unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which the Company recognizes
revenue at the amount to which it has the right to invoice for services performed.

The  Company  provides  a  comprehensive  range  of  IT  services  and  solutions,  which  primarily  are  on  a  time-and-expense  basis,  or  fixed-price  basis.
Commencing on July 1, 2019, revenue is recognized when control of promised goods or services is transferred to the Company’s customers in an amount of
consideration to which an entity expects to be entitled to in exchange for those services.

The  cumulative  effect  of  initially  applying  the  new  revenue  standard  resulted  in  a  decrease  to  opening  retained  earnings  of  $138,644,  with  the  impact
primarily  related  to  the  Company’s  customized  IT  solution  services.  Under  ASC  605,  the  IT  solution  services  were  recognized  using  the  percentage  of
completion method of accounting; while under ASC 606, the IT solution services are recognized at a point in time when the control of service is obtained by
the customer represented by the customer acceptance received by the Company. Whereas the Company has the enforceable right to payment for performance
completed to date, revenue is recognized over time, using the output method.

The effect of the adoption of ASC 606 as of June 30, 2019 was as follows: 

Consolidated balance sheet
Current assets

Prepayments, deposits and other assets, net

Non-current assets

Deferred tax assets, net

Current liabilities

Deferred revenues
Contract liabilities
Shareholders’ equity

Accumulated deficits

The effect of the adoption of ASC 606 for the current year was as follows:

As
previously
reported

As of June 30, 2019
Balances
under
ASC 606

Effect of
change
higher/(lower) 

  $

  $

  $
  $

1,028,154    $

1,405,004    $

376,850 

338,221    $

384,435    $

46,214 

124,192    $
-    $

-    $
685,900    $

(124,192)
685,900 

  $

(4,509,729)   $

(4,648,373)   $

(138,644)

Year ended June 30, 2020

Consolidated statement of comprehensive income
Revenues
Cost of revenues
Income (loss) before income tax and share of income (loss) in equity investees
Provision (benefits) for income taxes
Income (loss) before share of income (loss) in equity investees
Net income (loss)
Net income (loss) attributable to CLPS Incorporation’s shareholders
Basic earnings per common share
Diluted earnings per common share

  $
  $
  $
  $
  $
  $
  $
  $
  $

F-17

Balances
under
ASC 606
(As
reported)

Balances
under
ASC 605

89,415,798    $
88,986,532    $
(58,296,097)   $ (57,937,842)   $
3,636,448    $
824,792    $
2,811,656    $
3,019,019    $
2,877,880    $
0.20    $
0.20    $

3,707,459    $
835,444    $
2,872,015    $
3,079,378    $
2,938,239    $
0.20    $
0.20    $

Effect of
change
higher/(lower) 
429,266 
(358,255)
71,011 
10,652 
60,359 
60,359 
60,359 
- 
- 

 
  
 
 
 
 
 
 
 
 
 
 
 
   
   
 
 
   
 
   
 
 
   
      
      
  
   
      
      
  
   
      
      
  
 
 
 
 
 
 
   
   
 
CLPS INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollars (“$”), except for number of shares)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Revenue recognition (continued)

Consolidated balance sheet
Current assets

Prepayments, deposits and other assets, net

Non-current Assets
Deferred tax assets

Current liabilities
Deferred revenue
Contract liabilities
Shareholders’ equity

Accumulated deficits

As of June 30, 2020

Balances 
under 
ASC 606

(As reported)    

Balances 
under 
ASC 605

Effect of 
change
higher/(lower) 

  $

  $

  $
  $

1,280,967    $

1,235,174    $

45,793 

203,247    $

167,685    $

35,562 

-    $
755,178    $

595,538    $
-    $

(595,538)
755,178 

  $

(2,680,143)   $

(2,601,858)   $

(78,285)

The Company’s revenue recognition policies effective on the adoption date of ASC 606 are as follows:

Time-and-expense basis contracts

Prior  to  the  adoption  of  ASC  606,  revenues  is  considered  realizable  and  earned  in  accordance  with  ASC  605  when  all  of  the  following  criteria  are  met:
persuasive evidence of a sales arrangement exists; delivery has occurred or services have been rendered; the price is fixed or determinable; and collectability
is reasonably assured. Accordingly, revenues from time-and-expense basis contracts are recognized as the related services are rendered assuming all other
basic revenue recognition criteria are met. The Company is reimbursed for actual hours incurred at pre-agreed negotiated hourly billing rates. Customers may
terminate the contracts at any time before the work is completed but are obligated to pay the actual service hours incurred through the termination date at the
contract billing rates. Under ASC 606, the series of IT services are substantially the same from day to day, and each day of the service is considered to be
distinct and separately identifiable as it benefits the customer daily. Further, the uncertainty related to the service consideration is resolved on a daily basis as
the  Company  satisfies  its  obligation  to  perform  IT  service  daily  with  enforceable  right  to  payment  for  performance  completed  to  date.  Thus,  revenue  is
recognized as service is performed and the customer simultaneously receives and consumes the benefits from the service daily.

Fixed-price basis contracts

Revenues from fixed-price customized solution contracts require the Company to perform services for systems design, planning and integrating based on
customers’ specific needs which requires significant production and customization. The required customization work period is generally less than one year.
Upon delivery of the services, customer acceptance is generally required. In the same contract, the Company is generally required to provide post-contract
customer support (“PCS’) for a period from three months to one year (“PCS period”) after the customized application is delivered. The type of service for
PCS clause is generally not specified in the contract or stand-ready service on when-and-if-available basis.

F-18

 
  
 
 
 
 
 
 
 
   
 
 
   
 
   
 
 
   
      
      
  
   
      
      
  
   
      
      
  
 
 
 
 
 
 
CLPS INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollars (“$”), except for number of shares)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Revenue recognition (continued)

Prior to the adoption of ASC 606, the Company recognizes revenue proportionally over the term of the contract in accordance with ASC 605. Revenue is
recognized as the service is performed using the percentage of completion method of accounting, under which the total value of revenue is recognized on the
basis of the percentage that total labor cost to date bears to the total expected labor costs. Under ASC 606, there are two performance obligations identified in
the fixed-price basis contracts: the delivery of customized IT solution service and the completion of the PCS. The transaction price is allocated between the
two performance obligations based on the relative standalone selling price, estimated using the cost plus method.

The Company recognizes revenue for the delivery of customized IT solution service at a point in time when the system is implemented and accepted by the
customer.  Where  the  Company  has  enforceable  right  to  payment  for  performance  completed  to  date,  revenue  is  recognized  over  time,  using  the  output
method. Revenue for PCS is recognized ratably over time as the customer simultaneously receive and consume the benefits throughout the PCS period.

Differences between the timing of billings and the recognition of revenues are recorded as contract assets which is included in the prepayments, deposits and
other assets, net, or contract liabilities on the consolidated balance sheets. Contract assets are classified as current assets and the full balance is reclassified to
accounts receivables when the right to payment becomes unconditional.

The opening and closing balances of contract assets arising from contracts with customers as of June 30, 2020 were nil and $233,149, respectively, and the
opening and closing balances of deferred contract costs arising from contracts with customers as of June 30, 2020 were $477,359 and $106,734. The opening
and closing balances of contract liabilities arising from contracts with customers as of June 30, 2020 were $685,900 and $755,178, respectively. Revenue
recognized in the year ended June 30, 2020 that was included in the contract liability balance at the beginning of the period was $631,851. This revenue was
driven primarily by IT solution service performance obligations being satisfied.

Costs incurred in advance of revenue recognition arising from direct and incremental staff costs in respect of services provided under the fixed fee contracts
according  to  the  customer’s  requirements  prior  to  the  delivery  of  services  are  recorded  as  deferred  contract  costs  which  is  included  in  the  prepayments,
deposits and other assets, net on the consolidated balance sheets. Such deferred contract costs are recognized upon the recognition of the related revenues.

Revenue includes reimbursements of travel and out-of-pocket expense, with equivalent amounts of expense recorded in cost of revenues.

The Company is subject to value added tax (the “VAT”) that is imposed on and concurrent with the revenues earned for services provided in the PRC. The
Company’s applicable value added tax rate is 6%. VAT are recorded as reduction of revenues when incurred.

F-19

 
  
 
 
 
 
 
 
 
 
 
 
CLPS INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollars (“$”), except for number of shares)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Cost of revenues

Cost of revenues mainly consisted of compensation expenses for the Company’s IT professionals, travel expenses and material costs.

Research and development expenses

Research  and  development  expenses  are  incurred  in  the  development  of  new  software  modules  and  products  in  conjunction  with  anticipated  customer
projects.  Technological feasibility for the Company’s software products is reached before the products are released for sale.  To date, expenditures incurred
after technological feasibility was established and prior to completion of software development have not been material, and accordingly, the Company has
expensed all costs when incurred.

Government subsidies

Government subsidies mainly represent amounts granted by local government authorities as an incentive for companies to promote development of the local
technology industry. The Company also receives government subsidies related to government sponsored projects, and records such government subsidies as a
liability when it is received. The Company records government subsidies as other income when there is no further performance obligation.

Advertising expenditures

Advertising  expenditures  are  expensed  as  incurred  and  such  expenses  were  minimal  for  all  the  periods  presented.   Advertising  expenditures  have  been
included as part of selling and marketing expenses.

Operating leases

A lease for which substantially all the benefits and risks incidental to ownership remain with the lessor is classified by the lessee as an operating lease. All
leases of the Company are currently classified as operating leases. The Company records the total expenses on a straight-line basis over the lease term.

Employee defined contribution plan

Full time employees of the Company in the PRC participate in a government mandated multi-employer defined contribution plan pursuant to which certain
pension  benefits,  medical  care,  unemployment  insurance,  employee  housing  fund  and  other  welfare  benefits  are  provided  to  employees.  Chinese  labor
regulations require that the Company make contributions to the government for these benefits based on a certain percentage of the employee’s salaries. The
Company has no legal obligation for the benefits beyond the contributions. The total amount is expensed as incurred. 

F-20

 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
CLPS INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollars (“$”), except for number of shares)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Income taxes

The  Company  accounts  for  current  income  taxes  in  accordance  with  the  laws  of  the  relevant  tax  authorities.  Deferred  income  taxes  are  recognized  when
temporary differences exist between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected
to  be  recovered  or  settled.  The  effect  on  deferred  tax  assets  and  liabilities  of  a  change  in  tax  rates  is  recognized  in  income  in  the  period  including  the
enactment date. Valuation allowances are established to reduce deferred tax assets to the amount expected to be realized, when it is more-likely-than-not that
some portion, or all, of the deferred tax assets will not be realized.

The Company accounts for uncertainties in income taxes in accordance with ASC 740. An uncertain tax position is recognized as a benefit only if it is “more
likely than not” that the tax position would be sustained in a tax examination. The amount recognized is the largest amount of tax benefit that is greater than
50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Penalties and interest
incurred related to underpayment of income tax are classified as income tax expense in the consolidated statements of comprehensive income (loss) in the
period incurred. No significant penalties or interest relating to income taxes have been incurred during the years ended June 30, 2020, 2019 and 2018. All of
the tax returns of the Company’s subsidiaries in China remain subject to examination by the tax authorities for five years from the date of filing through year
2024, and the examination period was extended to 10 years for entities qualified as High and New Technology Enterprises (“HNTEs”) in 2018 and thereafter.

Warrants

The Company issued warrants to certain consultants and underwriters in May 2018 in connection with the closing of the IPO. The warrants carry a term of
five years expiring in May 2023 and are exercisable during the five-year period. The warrants are classified as equity contracts and measured at the grant date
fair value. Subsequent changes in fair value are not recognized as long as the contract continues to be classified in equity. The Company, with the assistance
of an independent third-party valuation firm, used the Black-Scholes pricing model to estimate the fair value of warrants. The determination of estimated fair
value of warrants on the grant date was mainly affected by the Company’s stock price as well as assumptions regarding a number of subjective variables.
These  variables  include  the  Company’s  expected  stock  price  volatility  over  the  expected  term  of  the  awards,  a  risk-free  interest  rate  and  any  expected
dividends.

Share-based payment

Share awards issued to employees and directors, including employee stock option plans (“ESOPs”) and restricted share units (“RSUs”) are measured at fair
value at the grant date. The Company, with the assistance of an independent third-party valuation firm, determined the fair value of the share options granted
to employees. The Company uses the binomial lattice model to estimate the fair value of ESOPs, and uses the closing stock price at the grant date to measure
the fair value of RSUs. The Company recognizes compensation expenses, net of forfeitures, using the accelerated method over the requisite service periods.

Forfeitures are estimated at the time of grant and revised in subsequent periods if actual forfeitures differ from those estimates. The Company uses historical
data to estimate pre-vesting ESOPs and RSUs’ forfeitures and records share-based compensation expense only for those awards that are expected to vest.

A  change  in  any  of  the  terms  or  conditions  of  share-based  payment  awards  is  accounted  for  as  a  modification  of  awards.  The  Company  measures  the
incremental compensation cost of a modification as the excess of the fair value of the modified awards over the fair value of the original awards immediately
before  its  terms  are  modified,  based  on  the  share  price  and  other  pertinent  factors  at  the  modification  date.  For  vested  awards,  the  Company  recognizes
incremental compensation cost in the period the modification occurred. For unvested awards, the Company recognizes, over the remaining requisite service
period, the sum of the incremental compensation cost and the remaining unrecognized compensation cost for the original award on the modification date.

Earnings (loss) per share

Basic earnings (loss) per share is computed using the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per
share is computed using the weighted average number of common shares and potential common shares outstanding during the period, which may include
RSUs, options and warrants. The computation of diluted earnings (loss) per share does not assume conversion, exercise, or contingent issuance of securities
that would have an anti-dilutive effect (i.e. an increase in earnings per share amounts) on earnings (loss) per share.

F-21

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CLPS INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollars (“$”), except for number of shares)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Foreign currency

The functional currency of the Company is US$. The functional currencies of the Company’s subsidiaries are the local currency of the country in which the
subsidiary operates, which is determined based on ASC topic 830 (“ASC 830”), Foreign Currency Matters.

Transactions denominated in foreign currencies are re-measured into the functional currency at the exchange rates as set forth in the H.10 statistical release of
the U.S. Federal Reserve Board prevailing on the transaction dates. Monetary assets and liabilities denominated in foreign currencies are re-measured at the
exchange rates prevailing at the balance sheet dates. Non-monetary items that are measured in terms of historical costs in foreign currency are re-measured
using  the  exchange  rates  at  the  dates  of  the  initial  transactions.  Exchange  gains  and  losses  are  included  in  the  consolidated  statements  of  comprehensive
income (loss).

The  Company’s  financial  statements  are  reported  using  US$.  The  financial  statements  of  the  Company’s  subsidiaries  whose  functional  currencies  are  not
US$ are translated from the functional currency to the reporting currency. Assets and liabilities are translated at the exchange rates at the balance sheet dates,
equity  accounts  are  translated  at  historical  exchange  rates  and  revenues,  expenses,  gains  and  losses  are  translated  using  the  average  rate  for  the  year.
Translation adjustments are reported as accumulated comprehensive income (loss) and are shown as a separate component of other comprehensive income
(loss) in the consolidated statements of comprehensive income (loss).

Fair value of financial instruments 

The Company applies ASC 820, Fair Value Measurements and Disclosures. ASC 820 defines fair value, establishes a framework for measuring fair value
and expands disclosures about fair value measurements. ASC 820 requires disclosures to be provided for fair value measurements.

ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2—Includes other inputs that are directly or indirectly observable in the marketplace.
Level 3—Unobservable inputs which are supported by little or no market activity.

ASC  820  describes  three  main  approaches  to  measuring  the  fair  value  of  assets  and  liabilities:  (1)  market  approach;  (2)  income  approach;  and  (3)  cost
approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or
liabilities.  The  income  approach  uses  valuation  techniques  to  convert  future  amounts  to  a  single  present  value  amount.  The  measurement  is  based  on  the
value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to
replace an asset.

F-22

 
 
 
 
 
 
 
 
 
 
 
 
 
CLPS INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollars (“$”), except for number of shares)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Fair value of financial instruments (continued) 

Financial  instruments  of  the  Company  primarily  consist  of  cash  and  cash  equivalents,  short-term  investments,  accounts  receivable,  escrow  receivable,
amounts due from related parties, equity investments without readily determinable fair values, accounts payable and other current liabilities, short-term bank
loans and long-term bank loans. The carrying amounts of these financial instruments, except for short-term investments, equity investments without readily
determinable fair values and long-term bank loans approximate their fair values because of their generally short maturities.

The fair value of the Company’s trading securities is measured using the income approach, based on quoted market interest rates of similar instruments and
other significant inputs derived from or corroborated by observable market data.

The carrying amount of long-term bank loans approximates its fair value due to the fact that the related interest rates approximate market rates for similar
debt instruments of comparable maturities.

The  Company  measures  equity  investments  without  readily  determinable  fair  values  and  elected  to  use  the  measurement  alternative  at  fair  value  on  a
nonrecurring basis, in the cases of an impairment charge is recognized, fair value of an investment is remeasured in an acquisition/a disposal, and an orderly
transaction  for  identical  or  similar  investments  of  the  same  issuer  is  identified.  The  non-recurring  fair  value  measurements  to  the  carrying  amount  of  an
investment  usually  requires  management  to  estimate  a  price  adjustment  for  the  different  rights  and  obligations  between  a  similar  instrument  of  the  same
issuer with an observable price change in an orderly transaction and the investment held by the Company. The valuation methodologies involved require
management to use the observable transaction price at the transaction date and other unobservable inputs (level 3) such as volatility of comparable companies
and probability of exit events as it relates to liquidation and redemption preferences.

Fair value measurements
Recurring
Short-term investments
Trading securities

Fair value measurements
Recurring
Short-term investments
Trading securities

Fair Value Measurements as of 
June 30, 2020
Significant
Other
Observable
Inputs 
(Level 2)

Quoted Price in
Active Market
for Identical
Assets 
(Level 1)

Unobservable
inputs
(Level 3)

  $

    -    $

636,934    $

    - 

Fair Value Measurements as of 
June 30, 2019
Significant
Other
Observable
Inputs 
(Level 2)

Quoted Price in
Active Market
for Identical
Assets 
(Level 1)

Unobservable
inputs
(Level 3)

  $

   -    $

1,791,697    $

   - 

F-23

 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
 
 
    
    
  
 
    
    
  
   
     
     
 
 
 
 
 
 
 
   
   
 
 
    
    
  
 
    
    
  
   
     
     
 
 
CLPS INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollars (“$”), except for number of shares)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Fair value of financial instruments (continued) 

For the year ended June 30, 2020, the Company recognized nil gain or loss for the equity investments using the measurement alternative. As of June 30,
2019, the Company had no financial assets and liabilities measured and recorded at fair value on a non-recurring basis.

Comprehensive income (loss)

Comprehensive  income  (loss)  is  defined  as  the  decrease  in  equity  of  the  Company  during  a  period  from  transactions  and  other  events  and  circumstances
excluding transactions resulting from investments by owners and distributions to owners. Accumulated other comprehensive income (loss) of the Company
includes foreign currency translation adjustments related to the Company’s subsidiaries whose functional currency is not US$.

Statements of cash flows

In accordance with ASC 230, Statement of Cash Flows, cash flows from the Company’s operations are formulated based upon the local currencies. As a
result, amounts related to assets and liabilities reported on the statements of cash flows will not necessarily agree with changes in the corresponding balances
on the balance sheets.

Concentrations and risks

- Foreign currency risk

A majority of the Company’s expense transactions are denominated in Renminbi (“RMB”) and a significant portion of the Company and its subsidiaries’
assets and liabilities are denominated in RMB. RMB is not freely convertible into foreign currencies. In the PRC, certain foreign exchange transactions are
required  by  law  to  be  transacted  only  by  authorized  financial  institutions  at  exchange  rates  as  set  forth  in  the  H.10  statistical  release  of  the  U.S.  Federal
Reserve Board. Remittances in currencies other than RMB by the Company in China must be processed through the People’s Bank of China (“PBOC”) or
other China foreign exchange regulatory bodies which require certain supporting documentation in order to affect the remittance.

The functional currency for the Company’s PRC subsidiaries is the RMB, and the financial statements are presented in U.S. dollars. The RMB appreciated
by 2.4% in fiscal 2018, depreciated by 3.7% in fiscal 2019 and depreciated by 2.9% in fiscal 2020, respectively. It is difficult to predict how market forces or
PRC or U.S. government policy may impact the exchange rate between the RMB and the U.S. dollar in the future. The change in the value of the RMB
relative to the U.S. dollar may affect the Company’s financial results reported in the U.S. dollar terms without giving effect to any underlying changes in its
business or results of operations. Currently, the majority of the Company’s assets, liabilities, revenues and costs are denominated in RMB.

F-24

 
 
 
 
 
 
 
 
 
 
 
 
 
 
CLPS INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollars (“$”), except for number of shares)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Concentrations and risks (continued)

- Foreign currency risk (continued)

To  the  extent  that  the  Company  needs  to  convert  U.S.  dollars  into  RMB  for  capital  expenditures  and  working  capital  and  other  business  purposes,
appreciation of RMB against U.S. dollar would have an adverse effect on the RMB amount the Company would receive from the conversion. Conversely, if
the  Company  decides  to  convert  RMB  into  U.S.  dollar  for  the  purpose  of  making  payments  for  dividends,  strategic  acquisition  or  investments  or  other
business purposes, appreciation of U.S. dollar against RMB would have a negative effect on the U.S. dollar amount available to the Company.

- Concentration of credit risk

Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and cash equivalents, short-
term  investments,  account  receivables,  escrow  receivable,  note  receivables,  amounts  due  from  related  parties  and  equity  investments  without  readily
determined fair values. As of June 30, 2020 and 2019, $11,027,764 and $1,891,584 of the Company’s cash and cash equivalents was on deposit at financial
institutions in the PRC where there currently is no rule or regulation requiring such financial institutions to maintain insurance to cover bank deposits in the
event of bank failure. As of June 30, 2020, the Company and its subsidiaries had $11,027,764, $940,854, $8,350, $516,816, $1,496, $58,789 and $98,051 of
cash and cash equivalents on deposit at financial institutions in mainland China, Singapore, Australia, Hong Kong, India, Malaysia and Japan, respectively.
As  of  June  30,  2019,  the  Company  had  $450,388,  $25,444  and  $4,233,919  of  cash  and  cash  equivalents  on  deposit  at  financial  institutions  in  Singapore,
Australia  and  Hong  Kong,  respectively.  The  Company  continues  to  monitor  the  financial  strength  of  the  financial  institutions.  There  has  been  no  recent
history of default in relation to these financial institutions.

The Company conducts credit evaluations on its customers and generally does not require collateral or other security from such customers. The Company
periodically evaluates the creditworthiness of the existing customers in determining an allowance for doubtful accounts primarily based upon the age of the
receivables and factors surrounding the credit risk of specific customers.

- Significant customers

For the years ended June 30, 2020, 2019 and 2018, one customer with its affiliates accounted for 21.5%, 25.7% and 30.8% of the Company’s total revenues,
respectively. For the years ended June 30, 2020 and 2019, one customer and its affiliates accounted for 30.1% and 30.0% of the Company’s total accounts
receivable balance, respectively.

Risks and uncertainties

The significant operations of the Company are located in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may
be influenced by political, economic, and legal environments in the PRC, as well as by the general state of the PRC economy. The Company’s results may be
adversely affected by changes in the political, regulatory and social conditions in the PRC. Although the Company has not experienced losses from these
situations and believes that it is in compliance with existing laws and regulations including its organization and structure disclosed in Note 1, may not be
indicative of future results.

F-25

 
 
 
 
  
 
 
 
 
 
 
  
 
  
CLPS INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollars (“$”), except for number of shares)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Recent accounting pronouncements

The Jumpstart Our Business Startups Act (“JOBS Act”) provides that an emerging growth company (“EGC”) as defined therein can take advantage of an
extended transition period for complying with new or revised accounting standards. This allows an EGC to delay adoption of certain accounting standards
until those standards would otherwise apply to private companies. The Company has adopted the extended transition period.  

In February 2016, the FASB issued ASU No. 2016-02, Leases, or ASU 2016-02, which modifies lease accounting for lessees to increase transparency and
comparability  by  recording  lease  assets  and  liabilities  for  operating  leases  and  disclosing  key  information  about  leasing  arrangements.  In  July  2018,  the
FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases, or ASU 2018-10, to supersede ASU 2016-02. In addition, the FASB issued
ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, that provide entities with an additional (and optional) transition method to adopt the new
leases standard. Under this new transition method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect
adjustment to the opening balance of retained earnings in the period of adoption. Consequently, an entity’s reporting for the comparative periods presented in
the financial statements in which it adopts the new leases standard will continue to be in accordance with current GAAP (Topic ASC 840, Leases). In June
2020, the FASB issued ASU No. 2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities,
which amended the effective date of Topic 842, Leases. The updated guidance is effective for the Company’s annual reporting period ending June 30, 2022
and interim periods during the year ending June 30, 2023. The Company does not plan to early adopt the new lease standards and the Company expects that
applying  the  ASU  2016-02  would  materially  increase  its  assets  and  liabilities  due  to  the  recognition  of  right-of-use  assets  and  lease  liabilities  on  its
consolidated balance sheets, with an immaterial impact on its consolidated statements of comprehensive loss and cash flows.

F-26

 
 
 
 
 
  
 
CLPS INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollars (“$”), except for number of shares)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Recent accounting pronouncements (continued)

In  June  2016,  the  FASB  issued  ASU  No.  2016-13,  Financial  Instruments—Credit  Losses  (Topic  326):  Measurement  of  Credit  Losses  on  Financial
Instruments,  or  ASU  2016-13.  This  ASU  is  intended  to  improve  financial  reporting  by  requiring  timelier  recording  of  credit  losses  on  loans  and  other
financial instruments held by financial institutions and other organizations. This ASU requires the measurement of all expected credit losses for financial
assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This ASU requires enhanced
disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well
as the credit quality and underwriting standards of the Company’s portfolio. These disclosures include qualitative and quantitative requirements that provide
additional  information  about  the  amounts  recorded  in  the  financial  statements.  In  November  2018,  the  FASB  issued  ASU  No.  2018-19,  Codification
Improvements to Topic 326, Financial Instruments—Credit Losses, which clarifies that receivables arising from operating leases should be accounted for in
accordance  with  ASC  842,  Leases  (“ASC  842”)  instead  of  ASC  Subtopic  326-20.  In  November  2019,  the  FASB  issued  ASU  No.  2019-10,  Financial
Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, which amended the effective date of
ASU 2016-13. The amendments in these ASUs are effective for the Company’s annual reporting period ending June 30, 2023 and interim periods during the
year ending June 30, 2023. Early adoption is permitted. The Company does not expect to early adopt this guidance and is in the process of evaluating the
impact of adoption of this guidance on the Company’s consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, as part of its Simplification Initiative to reduce the cost and
complexity in accounting for income taxes. This standard removes certain exceptions related to the approach for intra period tax allocation, the methodology
for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also amends other aspects of
the guidance to help simplify and promote consistent application of GAAP. ASU 2019-12 is effective for the Company’s annual reporting period ending June
30,  2022  and  interim  periods  during  the  year  ending  June  30,  2023.  The  Company  does  not  expect  to  early  adopt  this  guidance  and  is  in  the  process  of
evaluating the impact of adoption of this guidance on the Company’s consolidated financial statements.

F-27

 
 
 
 
 
 
 
CLPS INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollars (“$”), except for number of shares)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Recent accounting pronouncements (continued)

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which simplifies the accounting for goodwill impairment by
eliminating  Step  two  from  the  goodwill  impairment  test.  If  the  carrying  amount  of  a  reporting  unit  exceeds  its  fair  value,  an  impairment  loss  shall  be
recognized in an amount equal to that excess, versus determining an implied fair value in Step two to measure the impairment loss. The guidance begins to
take effect for impairment tests performed during the fiscal year ending June 30, 2022. Earlier application is permitted. The guidance should be applied on a
prospective basis. The Company does not expect to early adopt this guidance and is in the process of evaluating the impact of adoption of this guidance on
the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) – Disclosure Framework-Changes to the Disclosure Requirements for
Fair Value Measurement (“ASU 2018-13”), which modifies the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement.
Under the new guidance, disclosure requirements on the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the
policy  for  timing  of  transfers  between  levels  and  the  valuation  processes  for  Level  3  fair  value  measurements  are  being  removed;  and  for  investments  in
certain entities that calculate net asset value, an entity is required to disclose the timing of liquidation of an investee’s assets and the date when restrictions
from redemption might lapse only if the investee has communicated the timing to the entity or announced the timing publicly. In addition, new disclosure
requirements are added on the changes in unrealized gains and losses for the period included in other comprehensive loss for recurring Level 3 fair value
measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair
value measurements, for certain unobservable inputs. An entity may disclose other quantitative information (such as the median or arithmetic average) in lieu
of the weighted average if the entity determines that other quantitative information would be a more reasonable and rational method to reflect the distribution
of  unobservable  inputs  used  to  develop  Level  3  fair  value  measurements.  The  guidance  is  effective  for  the  Company  beginning  July  1,  2020.  Earlier
application is permitted. The Company does not expect the adoption will have material impact on the consolidation financial statements.

In January 2020, the FASB issued ASU No. 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic
323), and Derivatives and Hedging (Topic 815). The amendments clarify that an entity should consider observable transactions that require it to either apply
or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before
applying  or  upon  discontinuing  the  equity  method.  The  amendments  also  clarify  that  for  the  purpose  of  applying  paragraph  815-10-15-141(a)  an  entity
should not consider whether, upon the settlement of the forward contract or exercise of the purchased option, individually or with existing investments, the
underlying  securities  would  be  accounted  for  under  the  equity  method  in  Topic  323  or  the  fair  value  option  in  accordance  with  the  financial  instruments
guidance  in  Topic  825.  An  entity  also  would  evaluate  the  remaining  characteristics  in  paragraph  815-10-15-141  to  determine  the  accounting  for  those
forward contracts and purchased options. The amendments are effective for fiscal years beginning July 1, 2022, and interim periods within those fiscal years.
The Company does not expect to early adopt this guidance and is in the process of evaluating the impact of adoption of this guidance on the Company’s
consolidated financial statements.

The Company does not believe other recently issued but not yet effective accounting statements, if recently adopted, would have a material effect on the
Company’s consolidated balance sheets, statements of comprehensive income (loss) and statements of cash flows.

F-28

 
 
 
 
 
  
 
 
 
CLPS INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollars (“$”), except for number of shares)

NOTE 3 – BUSINESS ACQUISITION

Acquisition of Huanyu

On September 27, 2017, the Company made an investment of $0.15 million (RMB 1,000,000) for a 30% of equity interest in Huanyu which was accounted
for as an equity method investment (Note 10).

On May 24, 2019, the Company purchased the remaining 70% equity interest of Huanyu for $0.07 million (RMB 462,000) and became the sole shareholder
of Huanyu.

The transaction was accounted for as a business combination using the purchase method of accounting. As the business combination was achieved in stages,
the  Company  remeasured  its  previously  held  30%  of  equity  interest  in  Huanyu  at  its  acquisition  date  fair  value  of  $152,312.  A  loss  of  $19,682  was
recognized in subsidies and other income net in relation to the remeasurement. The valuation considered a discount for lack of control premium and lack of
marketability applied to the fair value of the acquired business of Huanyu, which was determined using the income approach.

The purchase price allocation of the transaction was determined by the Company with the assistance of an independent appraisal firm based on the estimated
fair value of the assets acquired and liabilities assumed as of the acquisition date. The purchase price allocation to assets acquired and liabilities assumed as
of the date of acquisition was as follows:

Cash acquired
Accounts receivable, net
Prepayments, deposits and other assets, net
Accounts payable and other current liabilities
Goodwill
Previous held equity interests
Cash consideration
Total consideration

Amounts

79,156 
87,674 
7,707 
(5,310)
50,045 
152,312 
66,960 
219,272 

  $

  $

The goodwill is mainly attributable to the excess of the consideration paid over the fair value of the net assets acquired that cannot be recognized separately
as identifiable assets under U.S.GAAP, and comprise the expected but unidentifiable business growth as a result of the synergy resulting from the acquisition.
The goodwill is not tax deductible. No intangible assets were identified from the acquisition.

Pro forma financial information of Huanyu is not presented as the effects of the acquisition on the Company’s consolidated financial statements were not
material.

Acquisition of Infogain

On August 20, 2018, CLPS SG acquired an 80% equity interest in Infogain located in Singapore from Sharma Devendra Prasad and Deepak Malhotra with
the final purchase price of $0.4 million (or approximately 576,000 Singapore dollars).

The transaction was accounted for as a business combination using the purchase method of accounting. The purchase price allocation of the transaction was
determined  by  the  Company  with  the  assistance  of  an  independent  appraisal  firm  based  on  the  estimated  fair  value  of  the  assets  acquired  and  liabilities
assumed as of the acquisition date. The most significant variables in the valuation are discount rate, terminal value, the number of years on which to base the
cash  flow  projections,  as  well  as  the  assumptions  and  estimates  used  to  determine  the  cash  inflows  and  outflows.  The  purchase  price  allocation  to  assets
acquired and liabilities assumed as of the date of acquisition was as follows:

Cash acquired
Accounts receivable, net
Prepayments, deposits and other assets, net
Property and equipment, net
Intangible assets, net
Accounts payable and other current liabilities
Deferred tax liabilities
Non-controlling interests
Goodwill
Total consideration

F-29

Amounts

6,843 
458,943 
14,454 
1,190 
337,685 
(504,235)
(57,406)
(64,879)
227,506 
420,101 

  $

  $

 
 
 
 
 
 
 
 
 
 
 
 
   
   
   
   
   
   
  
 
 
 
 
 
 
 
 
   
   
   
   
   
   
   
   
 
CLPS INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollars (“$”), except for number of shares)

NOTE 3 – BUSINESS ACQUISITION - continued

Acquisition of Infogain (continued)

Identifiable intangible assets acquired include customer contracts, which were valued using an income approach and determined to carry estimated remaining
useful lives of approximately three years.

The goodwill recognized represents the expected synergies and is not tax deductible.

Pro forma financial information of Infogain is not presented as the effects of the acquisition on the Company’s consolidated financial statements were not
material.

Acquisition of Ridik Pte. and Ridik Consulting

On September 26, 2019, Qiner acquired an 80% equity interest in Ridik Pte. Ltd. (“Ridik Pte.”) located in Singapore from third-party selling shareholders
with  the  final  purchase  price  of  $2,462,580  (3,402,304  Singapore  dollars),  in  the  form  of  cash  of  $2,026,043  (2,799,180  Singapore  dollars)  and  the
Company’s common shares valued at $436,537 (603,123 Singapore dollars), respectively. Ridik Sdn. Bhd. (“Ridik Sdn.”), Ridik Software Solutions Pte. Ltd.
(“Ridik Software Pte.”) and Ridik Software Solutions Ltd. (“Ridik Software”) are all subsidiaries of Ridik Pte.

The transactions were accounted for as business combinations using the purchase method of accounting. The purchase price allocations of the transactions
were determined by the Company with the assistance of an independent appraisal firm based on the estimated fair value of the assets acquired and liabilities
assumed as of the acquisition dates. The most significant variables in the valuation are discount rates, terminal value, the number of years on which to base
the cash flow projections, as well as the assumptions and estimates used to determine the cash inflows and outflows.

The purchase price allocation to assets acquired and liabilities assumed as of the date of acquisition was as follows:

Cash acquired
Accounts receivable, net
Prepayments, deposits and other assets, net
Property and equipment, net
Customer relationship
Short-term bank loans
Accounts payable and other current liabilities
Tax payables
Salaries and benefits payable
Long-term bank loans
Deferred tax liabilities
Non-controlling interests
Goodwill

Total consideration

Amounts

474,323 
618,144 
103,697 
1,493 
904,748 
(48,103)
(128,688)
(102,978)
(431,548)
(44,201)
(162,855)
(411,351)
1,689,899 
2,462,580 

  $

  $

Identifiable  intangible  assets  acquired  included  customer  relationship,  which  was  valued  using  an  income  approach  and  determined  to  carry  estimated
remaining useful life of approximately ten years.

On January 6, 2020, Ridik Pte. acquired 100% equity interest in Ridik Consulting Private Limited (“Ridik Consulting”) from third-party selling shareholders
with  the  final  purchase  price  of  $5,520  (396,700  Indian  Rupees).  The  fair  value  of  the  net  liabilities  acquired  was  $3,839  (275,800  Indian  Rupees)  and
goodwill was recognized at $9,359 (672,500 Indian Rupees).

The goodwill recognized represents the expected synergies and is not tax deductible.

Pro  forma  financial  information  of  Ridik  Pte.  and  Ridik  Consulting  are  not  presented  as  the  effects  of  the  acquisition  on  the  Company’s  consolidated
financial statements were not material.

F-30

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
   
   
   
   
   
   
   
   
   
   
 
 
 
 
  
CLPS INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollars (“$”), except for number of shares)

NOTE 4 – ACCOUNTS RECEIVABLE, NET

Accounts receivable, net consisted of the following:

Trade accounts receivable
Less: allowance for doubtful accounts
Accounts receivable, net

The movement of the allowance for doubtful accounts is as follows:

Balance at the beginning of the year
Provision for (reversal of) doubtful accounts
Foreign currency translation adjustments
Balance at the end of the year

NOTE 5 – ESCROW RECEIVABLE

As of June 30,

2020
25,850,996    $
(97,140)    
25,753,856    $

2019
19,345,329 
(81,745)
19,263,584 

As of June 30,

2020

2019

81,745    $
17,711     
(2,316)    
97,140    $

151,347 
(65,076)
(4,526)
81,745 

  $

  $

  $

  $

As of June 30, 2019, the Company placed $200,000 in an escrow account in connection with the Company’s indemnification as part of its IPO raise. The
escrow receivable was collected on February 10, 2020.

NOTE 6 – PREPAYMENTS, DEPOSITS AND OTHER ASSETS, NET

Prepayments, deposits and other assets, net consisted of the following: 

Advances and deposits to suppliers
Contract assets
Prepaid expenses
Due from Judge Asia
Deferred contract costs
Note receivables
Advances to employees
Unbilled receivables
Less: allowance for doubtful accounts
Total
Less: Long-term portion
Prepayments, deposits and other assets – current portion

F-31

As of June 30,

2020

2019

633,706    $
233,149     
388,010     
212,447     
106,734     
110,744     
53,011     
-     
(212,447)    
1,525,354     
(244,387)    
1,280,967    $

596,437 
- 
280,290 
- 
- 
60,842 
164,910 
148,329 
(147)
1,250,661 
(222,507)
1,028,154 

  $

  $

 
  
 
 
 
 
 
 
 
 
   
 
   
 
 
 
 
 
 
 
   
 
   
   
 
 
 
 
 
 
 
 
 
 
   
 
   
   
   
   
   
   
   
   
   
   
  
CLPS INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollars (“$”), except for number of shares)

NOTE 6 – PREPAYMENTS, DEPOSITS AND OTHER ASSETS, NET - continued

The movement of the allowance for doubtful accounts is as follows:

Balance at the beginning of the year
Provision (reversal) for doubtful accounts
Write-off
Foreign currency translation adjustment
Balance at the end of the year

NOTE 7 – PROPERTY AND EQUIPMENT, NET

Property and equipment, net consisted of the following:

Equipment
Office Furniture
Automobiles
Leasehold improvements
Construction in progress
Total
Less: accumulated depreciation
Property and equipment, net

As of June 30,

2020

2019

147    $
213,422     
(144)    
(978)    
212,447    $

6,149 
(5,817)
- 
(185)
147 

As of June 30,

2020

737,833    $
130,026     
78,206     
416,936     
73,672     
1,436,673     
(984,201)    
452,472    $

2019

590,771 
126,279 
80,486 
416,724 
- 
1,214,260 
(647,669)
566,591 

  $

  $

  $

  $

Depreciation  expense  was  $360,302,  $239,349  and  $152,342  for  the  years  ended  June  30,  2020,  2019  and  2018,  respectively.  No  impairment  loss  was
recognized for the years ended June 30, 2020, 2019 and 2018.

NOTE 8 – INTANGIBLE ASSETS, NET

As of June 30, 2020, intangible assets, net consisted of the following:

Customer contracts
Customer relationship
Software
Less: accumulated amortization
Intangible assets, net

As of June 30,

2020

2019

  $

  $

658,224    $
896,572     
63,884     
(474,101)    
1,144,579    $

677,767 
- 
- 
(249,998)
427,769 

Customer contracts were derived from the acquisitions of Judge China during the year ended June 30, 2017 and Infogain during the year ended June 30,
2019, and the customer relationship was derived from the acquisition of Ridik Pte. during the year ended June 30, 2020 with an estimated useful life of 10, 3
and 10 years, respectively (Note 3).

F-32

 
 
 
 
 
 
 
 
 
 
   
 
   
   
   
 
 
 
 
 
 
 
 
   
 
   
   
   
   
   
   
 
 
 
 
 
 
 
 
 
   
 
   
   
   
 
 
CLPS INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollars (“$”), except for number of shares)

NOTE 8 – INTANGIBLE ASSETS, NET - continued

The movement of intangible assets, net is as follow:

Balance as of July 1, 2019
Addition
Amortization
Foreign currency translation adjustment
Balance as of June 30, 2020

For the year
ended
June 30,
2020

  $

  $

427,769 
940,913 
(232,871)
8,768 
1,144,579 

The amortization expenses were $232,871, $164,351 and $53,827 for the years ended June 30, 2020, 2019 and 2018. Estimated future amortization expenses
are as follows:

Year ending June 30,
2021
2022
2023
2024
2025
2026 and after
Total

No impairment losses were recognized for the years ended June 30, 2020, 2019 and 2018.

NOTE 9 – GOODWILL

The changes in the carrying amount of goodwill for the year ended June 30, 2020 were as follows:

Balance as of July 1, 2019
Goodwill arising from acquisition of Ridik Pte.(Note 3)
Goodwill arising from acquisition of Ridik Consulting (Note 3)
Foreign currency translation adjustment
Balance as of June 30, 2020

Amortization
expense

  $

  $

262,670 
151,973 
147,845 
102,434 
98,613 
381,044 
1,144,579 

For the year
ended
June 30,
2020

  $

  $

447,790 
1,689,899 
9,359 
(28,348)
2,118,700 

The Company has only one reporting unit. For the years ended June 30, 2020 and 2019, the Company performed a qualitative assessment of the goodwill for
the reporting unit based on the requirements of ASC 350-20. The Company evaluated all relevant factors, weighed all factors in their entirety and concluded
that  it  was  not  more-likely-than-not  that  the  fair  value  of  the  reporting  unit  was  less  than  its  carrying  amount.  Therefore,  further  impairment  testing  on
goodwill was unnecessary as of June 30, 2020 and 2019, respectively.

F-33

 
 
 
 
 
 
 
 
   
   
   
 
 
 
 
   
   
   
   
   
 
  
 
 
 
 
 
   
   
   
   
 
CLPS INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollars (“$”), except for number of shares)

NOTE 10 – LONG-TERM INVESTMENTS

Equity investments without readily determinable fair values
CLPS Lihong Financial Information Services Co., Ltd. (“CLPS Lihong”)

Equity method investments
CLPS Lihong
Economic Modeling Information Technology Co., Ltd. (“EMIT”)
Total

a)

Investment in CLPS Lihong

As of June 30,

2020

2019

510,405     

- 

-     
169,726     
680,131    $

844,643 
69,363 
914,006 

  $

On March 1, 2019, the Company purchased approximately 37% equity interest in CLPS Lihong at a cash consideration of $0.15 (RMB 1). In May 2019, the
Company made capital contribution to CLPS Lihong of $1.01 million (RMB 7 million). The Company accounts for the investment in CLPS Lihong as an
equity method investment due to its significant influence over the entity. For the year ended June 30, 2019, the Company’s share of CLPS Lihong’s results of
operations was a loss of $176,148 (RMB 1,201,523).

On April 29, 2020, the Company sold an 18.42% equity interest in CLPS Lihong with the carrying amount of $535,119 (RMB 3,779,120) to a third-party
investor for a cash consideration of $995,605 (RMB 7 million) which was received as of June 30, 2020. The disposal gain of $433,490 (RMB 3,047,824) was
recorded  in  the  consolidated  statements  of  comprehensive  income  for  the  year  ended  June  30,  2020.  Concurrently,  on  April  29,  2020,  the  Company’s
remaining equity interest in CLPS Lihong was further diluted to 7% as CLPS Lihong raised additional capital from other third-party investors.

After the partial disposal, the carrying amount of long-term investment in CLPS Lihong was $510,405 (RMB 3,606,065). As the Company no longer had
significant  influence  over  CLPS  Lihong,  it  accounted  for  the  investment  in  accordance  with  ASC  321  using  the  measurement  alternative  and  elected  to
measure such equity investments without readily determinable fair values at cost, less any impairment, plus or minus changes resulting from observable price
changes in orderly transactions for identical or similar investments of the same issuer, if any.

For  the  period  from  July  1,  2019  to  April  29,  2020,  the  Company’s  share  of  CLPS  Lihong’s  results  of  operations  was  an  income  of  $250,290  (RMB
1,759,764) in accordance with ASC 323. For the period from April 30, 2020 to June 30, 2020, unrealized gains (upward adjustments) and losses (downward
adjustments  and  impairment)  under  ASC  321  was  nil  as  there  was  no  such  remeasurement  for  the  equity  investments  without  readily  determinable  fair
values.

b)

Investment in EMIT

On April 3, 2019, Qiner purchased a 30% equity interest of EMIT at nil consideration with a committed to invest $445,454.14 (RMB 3,000,000.00) in total
within 20 years. During the years ended June 30, 2020 and 2019, the Company made capital contribution to EMIT of $143,299 (RMB 1,000,000.00) and
$73,593 (RMB500,000.00), respectively. The Company accounts for the investment in EMIT as an equity method investment due to its significant influence
over the entity. For the years ended June 30, 2020 and 2019, the Company’s share of EMIT’s results of operations was a loss of $42,927 (RMB 301,878) and
$4,230  (RMB  28,853),  respectively.  As  the  end  of  June  30,  2020  and  2019,  the  committed  but  not  yet  made  investment  in  EMIT  was  $228,561  (RMB
1,500,000.00) and $371,860 (RMB 2,500,000.00), respectively.

Selected financial information of the equity method investees are not presented as the effects were not material.

F-34

 
 
   
  
 
 
 
 
 
   
 
   
      
  
   
 
   
      
  
   
      
  
   
   
 
 
 
 
 
 
 
 
 
CLPS INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollars (“$”), except for number of shares)

NOTE 11 – BANK LOANS

Outstanding balances of short-term bank loans consisted of the following:

Loan from Bank of Communication
Loans from China Merchants Bank
Loans from Development Bank of Singapore
Total
Less: Long-term portion
Short term bank loans

As of June 30,

2020

2019

  $

  $

  $

1,132,327    $
990,785     
60,681     
2,183,793    $
(22,554)    
2,161,239    $

728,332 
1,456,664 
- 
2,184,996 
- 
2,184,996 

Bank loans payable consisted of several bank loans denominated in RMB and Singapore dollars (“SGD”).

On January 3, 2018, the Company entered into a credit facility with China Merchants Bank which permits the Company to borrow up to $1,111,712 (RMB
7,000,000). The Company borrowed $1,111,712 (RMB 7,000,000) with an interest rate at 5.655% per annum on February 9, 2018 and repaid the loan on July
2, 2018.

On  June  22,  2018,  the  Company  entered  into  a  revolving  credit  facility  with  China  Merchants  Bank  (“CMB  Credit  Facility  2018”)  which  permits  the
Company to borrow up to approximately $1,543,115 (RMB 10,000,000) for the period from July 11, 2018 to July 10, 2019 with an interest rate at 5.655% per
annum. The CMB Credit Facility 2018 is guaranteed by the CEO, the wife of the CEO, Chairman, and the wife of Chairman of the Company, and Shanghai
Small  and  Medium-sized  Enterprises  Policy  Financing  Guarantee  Fund  Management  Centre  as  joint  guarantors.  Under  the  credit  facility,  the  Company
borrowed a total of $1,543,115 (RMB 10,000,000) which was repaid between August 9, 2019 and December 20, 2019.

On December 16, 2019, the Company entered into a revolving credit facility with China Merchants Bank (“CMB Credit Facility 2019”) which permits the
Company to borrow up to approximately $2,830,816 (RMB 20,000,000) for the period from December 16, 2019 to December 15, 2020 with an interest rate
at 4.5% to 4.785% per annum. The CMB Credit Facility 2019 is guaranteed by the CEO, the wife of the CEO, Chairman, and the wife of Chairman of the
Company  as  joint  guarantors.  Under  the  credit  facility,  the  Company  borrowed  a  total  of  $2,689,275  (RMB  19,000,000)  with  an  interest  rate  at  4.5%  to
4.785% per annum which was repaid on April 21, 2020 and July 7, 2020.

On December 5, 2019, the Company entered into a credit facility with Bank of Communication which permits the Company to borrow up to $707,704 (RMB
5,000,000). The Company borrowed $707,704 (RMB 5,000,000) with an interest rate at 4.785% per annum on December 5, 2019 and repaid the loan on July
3, 2020.

On January 8, 2020, the Company entered into a credit facility with Bank of Communication which permits the Company to borrow up to $424,622 (RMB
3,000,000). The Company borrowed $424,622 (RMB 3,000,000) with an interest rate at 4.785% per annum on January 8, 2020 and repaid the loan on July 6,
2020.

On April 20, 2018, the Company entered into a credit facility with Development Bank of Singapore which permits the Company to borrow up to $86,071
(SGD 120,000). The Company borrowed $86,071 (SGD 120,000) with an interest rate at 7% per annum on April 20, 2018 which is repaid by installments
from April 20, 2018 to April 19, 2021. The credit facility is guaranteed by Srustijeet Mishra, the non-controlling interest shareholder of Ridik Pte.

On February 11, 2019, the Company entered into a credit facility with Development Bank of Singapore which permits the Company to borrow up to $50,208
(SGD  70,000).  The  Company  borrowed  $50,208  (SGD  70,000)  with  an  interest  rate  at  6.75%  per  annum  on  February  11,  2019  which  shall  be  repaid  by
installments from 2019 to 2023. The Company repaid $15,269 (SGD21,288) by the end of June 30, 2020. The amount of $22,554 (SGD 31,445) due after
June 30, 2021 was classified as “Long-term portion”.

Interest expenses were $90,940, $96,278 and $82,507 for the years ended June 30, 2020, 2019 and 2018, respectively. The effective weighted average interest
rates were 4.168%, 5.231% and 5.845% for the years ended June 30, 2020, 2019 and 2018, respectively. 

NOTE 12 – SALARIES AND BENEFITS PAYABLE

Full time employees of the Company located in the PRC participate in a government-mandated defined contribution plan pursuant to which certain pension
benefits, medical care, unemployment insurance, employee housing fund and other welfare benefits are provided to employees. The Company accrued for
these benefits based on certain percentages of the employees’ salaries. Salaries and benefits payable included $2,319,120 and $1,856,456 accrued employer
portion of social benefits payable to local governments as of June 30, 2020 and 2019, respectively.

F-35

 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
   
 
 
   
   
   
 
 
 
 
 
 
 
 
 
 
 
 
CLPS INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollars (“$”), except for number of shares)

NOTE 13 – RELATED PARTY TRANSACTIONS

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other
party in making financial and operational decisions. The related parties that had transactions or balances with the Company in 2020 and 2019 consisted of:

Related Party
Judge Asia

Xiao Feng Yang
Raymond Ming Hui Lin
EMIT
CareerWin Executive Search Co., Ltd (“CareerWin”)
Ridik Technology Pte Ltd
Srustijeet Mishra
Beijing Bright Technology Co., Ltd (“Beijing Bright”)
CLPS Lihong

(a)   Related party balances

The balances due to and due from related parties were as follows:

Due from related parties:

Judge Asia
Raymond Ming Hui Lin

Total

  Non-controlling interest shareholder of Judge China before November 9,

Relationship with the Company

2019 

  Chairman of the Board
  CEO of the Company
  Equity investee of the Company
  Non-controlling interest shareholder of Judge HR
  Controlled by non-controlling interest shareholder of Ridik Pte.
  Non-controlling interest shareholder of Ridik Pte.
  Non-controlling interest shareholder of Judge China
  Equity investee of the Company

As of June 30,

2020

2019

  $

  $

-    $
169,185     
169,185    $

212,736 
17,804 
230,540 

Due  from  related  parties  mainly  represents  the  expenses  paid  on  behalf  of  the  non-controlling  interest  shareholder  of  Judge  China  and  advances  to  the
Company’s CEO.

(b)   Related party transactions

a)

b)

c)

d)

e)

f)

Consulting services provided to the related parties
CareerWin

Consulting services provided by the related parties
CareerWin
EMIT
Beijing Bright

Purchase of software from the related parties
Beijing Bright
EMIT

Loans provided to the related parties
CLPS Lihong
EMIT

Repayment of loans from the related parties
CLPS Lihong
EMIT

Interest income received from the related party
CLPS Lihong

For the year ended,  
2019

2018

2020

  $

165,161    $

     -  $

    -

   $

  $

   $

  $

   $

  $

   $

  $

  $

195,817     $
196,422     
114,052     
506,291    $

50,988     $
12,896     
63,884    $

149,341     $
28,446     
177,787    $

149,341     $
28,446     
177,787    $

-  $ 
-   
-   
-  $

-   $
-   
-  $

820,982   $
-   
820,982  $

820,982   $
-   
820,982  $

2,328    $

33,096  $

-
-
-
-

-
-
-

-
-
-

-
-
-

-

The CEO, the wife of the CEO, Chairman, and the wife of Chairman of the Company provided joint guarantee to the revolving credit facility entered by the
Company with China Merchants Bank on June 22, 2018 and December 16, 2019. (Note 11)

Srustijeet Mishra, the non-controlling interest shareholder of Ridik Pte provided guarantee to a credit facility up to $86,071 (SGD 120,000) entered by the
Company with Development Bank of Singapore on April 20, 2018. 

F-36

 
 
 
 
 
 
  
 
 
 
 
 
 
 
   
 
   
      
  
   
  
 
 
 
 
 
 
 
 
   
 
 
 
 
   
 
 
 
 
   
 
 
 
 
 
   
      
    
 
   
      
    
 
 
 
   
 
   
 
 
   
      
 
   
 
 
 
   
 
 
   
      
    
 
 
 
   
 
 
   
      
    
 
 
 
   
 
 
   
      
    
 
 
 
 
CLPS INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollars (“$”), except for number of shares)

NOTE 14 – TAXES

(a)

Corporate Income Taxes (“CIT”)

CLPS was incorporated in the Cayman Islands as an offshore holding company and is not subject to tax on income or capital gain under the laws of Cayman
Islands.

CLPS Hong Kong, Qiner, Qinheng and Qinson were established in Hong Kong and are subject to Hong Kong profits tax of 16.5% on its activities conducted
in  Hong  Kong.  CLPS  SG,  Infogain,  Ridik  Pte.  and  Ridik  Software  Pte.  are  subject  to  Singapore  income  tax  at  the  rate  of  17%.  CLPS  Ridik  AU  was
established in Australia. Australian enterprises are usually subject to a unified 30% enterprise income tax rate while CLPS Ridik AU is subject to corporate
income tax at 27.5% as a small company in the fiscal 2020, 2019 and 2018. CLPS Japan was established in Japan and is subject to statutory income tax at
23.2%. Ridik Consulting was established in India and is subject to statutory income rate at 18.5%. Ridik Sdn. was established in Malaysia and is subject to
statutory income tax rate at 24%. CLPS US was established in US and is subject to federal tax at a rate of 21% and state tax at a rate of 0% in Delaware,
CLPS  California  was  established  in  US  and  is  subject  to  federal  tax  at  a  rate  of  21%  and  state  tax  at  a  rate  of  8.84%  in  California.  Ridik  Software  was
established in UK and is subject to statutory income tax rate at 19%.

Under the Enterprise Income Tax (“EIT”) Law of PRC, domestic enterprises and Foreign Investment Enterprises (the “FIE”) are usually subject to a unified
25% enterprise income tax rate while preferential tax rates, tax holidays and even tax exemption may be granted if qualified. EIT Law grants a preferential
tax  rate  to  High  and  New  Technology  Enterprises  (“HNTEs”).  In  accordance  with  the  PRC  Income Tax  Laws,  an  enterprise  awarded  with  the  “HNTE”s
certificate may enjoy a reduced EIT rate of 15%. CLPS Shanghai, the Company’s main operating subsidiary in PRC, was recognized as qualified HNTEs in
2013 and enjoyed a preferential tax rate of 15% from 2013 to 2015. The status was renewed in 2016 for 2016 to 2018 and it renewed, again, in October 2019
for 2019 to 2021. The impact of the preferential tax treatment noted above decreased income taxes by $193,004, $217,671 and $285,130 for the fiscal 2020,
2019 and 2018, respectively.

Income (loss) before income taxes

PRC
Non-PRC

The following table reconciles the statutory rate to the Company’s effective tax rate:

PRC statutory income tax rate
Effect of income tax rate difference in other jurisdictions
Effect of tax rate changes on deferred taxes
Effect of PRC preferential tax rate and tax holidays
R&D credits
Tax receivable
Deferred tax
Change in valuation allowances
Others

Effective tax rate

F-37

For the years ended June 30,
2019
6,082,916    $
(9,183,561)    
(3,100,645)   $

2020
9,266,586    $
(5,559,127)    
3,707,459    $

2018
2,863,419 
(260,649)
2,602,770 

  $

  $

For the years ended June 30,
2019

2018

2020

25.0%    
36.8%    
4.5%    
(7.8)%   
(52.4)%   
- 
(0.1)%   
12.1%    
4.4%    
22.5%    

25.0%    
(70.7)%   
3.6%    
7.0%    
53.4%    
5.8%    
(12.8)%   
(17.0)%   
(0.3)%   
(6.0)%   

25.0%
(1.8)%
- 
(11.0)%
(18.3)%
- 
- 
7.9%
(6.1)%
(4.3)%

 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
   
   
   
   
   
   
   
   
   
  
CLPS INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollars (“$”), except for number of shares)

NOTE 14 – TAXES - continued

(a)

Corporate Income Taxes (“CIT”) (continued)

The provision (benefit) for income tax consists of the following:

Current income tax
Deferred income tax

Total provision (benefit) for income tax expenses

For the years ended June 30,
2019

2020

2018

  $

  $

662,704    $
172,740     
835,444    $

86,506    $
100,109     
186,615    $

95,923 
(208,051)
(112,128)

As  of  June  30,  2020  and  2019,  the  Company  had  net  operating  loss  carry  forwards  of  approximately  $5,721,651  and  $4,326,319,  respectively,  from  the
Company’s  PRC  subsidiaries,  which  will  expire  between  2020  and  2025  if  not  utilized.  As  of  June  30,  2020,  the  Company  had  net  operating  loss  carry
forwards  of  approximately  $509,033,  $251,128,  $1,518,  $11,228  and  $5,513  from  its  operations  in  Singapore,  Australia,  Hong  Kong,  Japan  and  India,
respectively. The net operating losses in Singapore, Australia and Hong Kong will be carried forward indefinitely while the net operating losses in Japan and
India will be carried forward for 10 years and 8 years, respectively.

The significant components of the deferred tax assets are as follows:

Deferred tax assets:

Net operating loss carry forwards
Accrued expenses and other
Share of investee’s loss
Intangible assets, net
Valuation allowances
Total deferred tax assets

Deferred tax liabilities:
Intangible assets, net
Share of investee’s income
Total deferred tax liabilities

As of June 30,

2020

2019

1,589,884    $
236,245     
7,123     
-     
(1,630,005)    
203,247    $

1,227,940 
336,383 
- 
(39,914)
(1,186,188)
338,221 

160,911   $
2,252    
163,163    $

- 
- 
- 

  $

  $

  $

  $

Realization  of  the  net  deferred  tax  assets  is  dependent  on  factors  including  future  reversals  of  existing  taxable  temporary  differences  and  adequate  future
taxable  income,  exclusive  of  reversing  deductible  temporary  differences  and  tax  loss  or  credit  carry  forwards.  As  of  June  30,  2020  and  2019,  valuation
allowances were provided against deferred tax assets in entities which were in a three-year cumulative losses position and/or are not forecasted to turn profits
in the foreseeable future as of June 30, 2020.

Pursuant to the PRC EIT Law, 10% withholding tax is levied on dividends declared to foreign investors from the foreign investment enterprises established
in PRC. The requirement is effective from January 1, 2008 and applies to earnings after December 31, 2007. As of June 30, 2020 and 2019, the Company
intends to permanently reinvest the undistributed earnings from PRC subsidiaries to fund future operations and thus no deferred tax has been recognized for
withholding taxes that would be payable on the unremitted earnings that are subject to withholding taxes of the Company’s subsidiaries established in PRC.
The amount of unrecognized deferred tax liabilities for temporary differences related to investments in foreign subsidiaries is not determined because such a
determination is not practicable. 

F-38

 
 
 
 
 
 
 
 
 
 
 
   
   
 
   
 
   
 
 
 
 
 
 
   
 
   
      
  
   
   
   
   
 
   
      
  
   
      
  
   
 
 
CLPS INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollars (“$”), except for number of shares)

NOTE 14 – TAXES - continued

(a)

Corporate Income Taxes (“CIT”) (continued)

Uncertain tax positions

The Company evaluates each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measure
the unrecognized benefits associated with the tax positions. It is possible that the amount of unrecognized benefit will further change in the next 12 months;
however, an estimate of the range of the possible change cannot be made at this moment. As of June 30, 2020, the Company had unrecognized tax benefits of
$194,939, if ultimately recognized, will impact the effective tax rate. The Company has presented unrecognized tax benefits of $128,467 on a net basis with
deferred  tax  assets  relating  to  tax  losses  carry  forward  which  otherwise  a  full  valuation  allowance  would  be  recorded.  The  Company  did  not  record  any
interest and penalties related to potential underpaid income tax expenses for the years ended June 30, 2020 and 2019, respectively.

A reconciliation of the beginning and ending amount of unrecognized tax benefit was as follows:

Balance as of July 1, 2019
Increases
Decreases
Foreign currency translation adjustment
Balance as of June 30, 2020

For the year
ended
June 30,
2020

  $

  $

128,467 
228,358 
(157,906)
(3,980)
194,939 

As  of  June  30,  2020,  the  tax  years  ended  December  31,  2015  through  December  31,  2019  for  the  Company’s  PRC  entities  remain  open  for  statutory
examination by PRC tax authorities.

(b)

Tax Payables

The Company’s tax payables consist of the following:

VAT tax payable
Corporate income tax payable
Withholding tax payable
Disability insurance fund payable
Other tax payables
Total tax payables

As of June 30,

2020

2019

  $

  $

532,649    $
225,311     
194,747     
438,759     
35,148     
1,426,614    $

282,340 
113,083 
133,210 
363,149 
23,847 
915,629 

NOTE 15 – COMMITMENTS AND CONTINGENCIES

The Company’s subsidiaries lease administrative office space under various operating leases. Rental expenses recognized using the straight-line basis under
operating leases amounted to $944,645, $827,593 and $730,705 for the years ended June 30, 2020, 2019 and 2018, respectively.

Future minimum lease payments under non-cancellable operating leases are as follows:

Twelve months ending June 30,
2021
2022
Total

Contingencies:

Lease
expense

  $

  $

775,891 
181,354 
957,245 

From  time  to  time,  the  Company  is  subject  to  legal  proceedings,  investigations,  and  claims  incidental  to  the  conduct  of  its  business.  The  Company  is
currently not involved in any legal or administrative proceedings that may have a material adverse impact on the Company’s business, financial position,
results of operations or cash flows. 

F-39

 
 
 
 
 
 
 
 
 
 
 
   
   
   
  
 
 
 
 
 
 
 
 
   
 
 
   
     
 
   
   
   
   
   
 
 
 
 
 
   
 
 
CLPS INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollars (“$”), except for number of shares)

NOTE 16 – EARNINGS (LOSS) PER SHARE

The following table sets forth the computation of basic and diluted earnings (loss) per share for the periods indicated:

Basic earnings (loss) per share calculation:
Numerator:

Net income (loss) attributable to common shares

Denominator:

Weighted average common shares outstanding

Basic earnings (loss) per share attributable to common shares
Diluted earnings (loss) per share calculation:
Numerator:

For the years ended June 30,
2019

2020

2018

  $

2,938,239    $

(3,269,776)   $

2,434,463 

14,689,224     
0.20    $

13,843,764     
(0.24)   $

11,517,123 
0.21 

  $

Net income (loss) attributable to common shares for calculating diluted earnings per share

  $

2,938,239    $

(3,269,776)   $

2,434,463 

Denominator:
Weighted average common shares outstanding
Weighted average common shares equivalents:

Effects of dilutive securities

Warrants
RSUs

Shares used in computing diluted earnings per share attributable to common shares

Diluted earnings (loss) per share attributable to common shares

14,689,224     

13,843,764     

11,517,123 

-     
3,075     
14,692,299     
0.20    $

-     
-     
13,843,764     
(0.24)   $

119,244 
- 
11,636,367 
0.21 

  $

For the year ended June 30, 2020, warrants and options were out-of-the-money with no dilutive effect. For the year ended June 30, 2019, warrants, RSUs and
options were excluded from the computation of diluted loss per share as the effects were antidilutive. For the year ended June 30, 2018, there were no RSUs
or options issued and outstanding.

NOTE 17 – PUBLIC OFFERING WARRANTS

In connection with the closing of the Company’s IPO on May 24, 2018, the Company issued 283,192 warrants to several placement agents of the IPO. Each
warrant entitles the warrant holder to purchase the Company’s common shares at $4.20 or $6.3 per share. The warrants carry a term of five years expiring in
May 2023 and shall not be exercisable for a period of 180 days from May 23, 2018. During year ended June 30, 2018, no warrants were exercised. During
the year ended June 30, 2019, 176,192 warrants were exercised and 99,380 common shares were issued. During year ended June 30, 2020, no warrants were
exercised. As of June 30, 2020 and 2019, 107,000 warrants were issued and outstanding.

The  warrants  are  classified  as  equity  contracts  and  measured  at  the  grant  date  fair  value.  The  Company  used  the  Black-Scholes  option  pricing  model  to
estimate the fair value of warrants. The assumptions used to value the Company’s warrants were as follows:

Expected term (in years)
Expected volatility
Risk-free interest rate

For the
year ended
June 30,
2018

2.75 
49.39%
2.11%

Expected  term  represents  the  weighted  average  period  of  time  that  the  warrants  granted  are  expected  to  be  outstanding  giving  consideration  to  historical
exercise  patterns.  Expected  volatilities  are  based  on  similar  public  companies’  volatilities  of  the  similar  public  companies’  common  shares  over  the
respective  expected  terms  of  share-based  awards.  Risk-free  interest  rate  is  based  on  US  Treasury  zero-coupon  issues  with  maturity  terms  similar  to  the
expected term on the warrants. The aggregated fair value of the public offering warrants on May 24, 2018 was $612,223.

F-40

 
 
  
 
 
 
 
 
 
 
   
   
 
 
   
   
 
   
 
 
   
      
      
  
   
      
      
  
   
      
      
  
   
   
      
      
  
   
      
      
  
   
      
      
  
   
   
      
      
  
   
      
      
  
   
   
   
 
 
 
 
 
 
 
 
   
   
   
 
 
CLPS INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollars (“$”), except for number of shares)

NOTE 18 – SHARE-BASED PAYMENT

a) The 2017 Stock Incentive Plan (the “2017 Plan”)

In November 2017, the Company’s shareholders and Board of Directors (“Board”) approved the 2017 Plan. The 2017 Plan provides for discretionary grants
of, among others, RSU, stock options, stock awards and stock unit awards to key employees and directors of the Company. The purpose of the Plan is to
recognize contributions made to the Company by such individuals and to provide them with additional incentive to achieve the objectives of the Company.
The  Board  authorized  up  to  2,210,000  shares  for  grants  under  the  terms  of  the  2017  Plan.  The  grants  under  the  2017  Plan  generally  have  a  maximum
contractual term of ten years from the date of grant. The terms of individual agreements for various grants under the Plan will be determined by the Board (or
its Compensation Committee) and may contain both service and performance conditions.

b) 2019 Equity Incentive Plan (the “2019 Plan”)

In  April  2019,  the  Company’s  shareholders  and  Board  approved  the  2019  Plan.  The  2019  Plan  provides  for  discretionary  grants  of,  among  others,  stock
options, stock awards and stock unit awards to key employees and directors of the Company. The purpose of the 2019 Plan is to recognize contributions
made to the Company by such individuals and to provide them with additional incentive to achieve the objectives of the Company. The Board authorized up
to 2,220,000 shares for grants under the terms of the 2019 Plan.

c)

2020 Equity Incentive Plan (the “2020 Plan”)

In April 2020, the Company’s shareholders and Board approved the 2020 Plan. The 2020 Plan is to cancel the rest of authorized shares not granted under the
2017 and 2019 Plan. The 2020 Plan provides for discretionary grants of, among others, stock options, stock awards and stock unit awards to key employees
and directors of the Company. The purpose of the 2020 Plan is to recognize contributions made to the Company by such individuals and to provide them with
additional incentive to achieve the objectives of the Company. The Board authorized up to 11,011,663 shares for grants under the 2020 Plan.

Stock Options

On November 20, 2018, the Company granted an aggregate of 306,967 stock options to key employees and senior executives under the 2017 Plan. The stock
options are valid for a period of 10 years from the grant date and cliff vest 25% per year in equal annual installments at the end of each anniversary over a
four-year period, with the first 25% vesting on November 20, 2019 and the second, third and fourth 25% cliff vest on November 20, 2020, 2021 and 2022,
respectively.

The options granted to employees are accounted for as equity awards and measured at their grant date fair value using binomial lattice model. The weighted-
average grant-date fair value per share was $3.13 for senior executives and $2.87 for key employees, respectively. The estimated total fair value of stock
options granted was $0.9 million at the grant date.

On November 27, 2019, the Company granted an aggregate of 775,250 stock options to key employees and senior executives under the 2017 Plan. The stock
options are valid for a period of 5 years from the grant date and cliff vest 25% per year in equal annual installments at the end of each anniversary over a
four-year period, with the first 25% vesting on November 27, 2020 and the second, third and fourth 25% cliff vest on November 27, 2021, 2022 and 2023,
respectively.

The options granted to employees are accounted for as equity awards and measured at their grant date fair value using binomial lattice model. The weighted-
average grant-date fair value per share was $1.03 for senior executives and $1.01 for key employees, respectively. The estimated total fair value of stock
options granted was $0.8 million at the grant date.

The Company recognizes the compensation expenses over the service requisite periods using the accelerated method. Share-based compensation cost of $0.5
million and $0.3 million were recognized for the years ended June 30, 2020 and 2019, respectively.

The assumptions used to value the Company’s stock options grants were as follows:  

Expected volatility
Risk-free interest rate
Exercise multiples
Expected dividend yield
Forfeited rates
Fair market value per common share

F-41

For the years ended
June 30,

2020

2019

43%   
1.63%   

2.2~2.8 

0%   
9~10%   
  $
5.25 

47%
3.06%

2.2~2.8 

0%
5~10%
5.80 

  $

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
   
 
   
   
   
   
   
   
CLPS INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollars (“$”), except for number of shares)

NOTE 18 – SHARE-BASED PAYMENT - continued

Expected volatilities are based on historical volatilities of the similar public companies’ common shares over the respective expected term of the share-based
awards. Risk-free interest rate is based on US Treasury zero-coupon issues with maturity terms similar to the expected term on the share-based awards. The
exercise multiples are the share price multiples upon which the employees are likely to exercise share options. Fair market value per common share are the
market value of the Company’s stocks on the grant date.

The following table sets forth the summary of stock options activities:

Outstanding as of July 1, 2018
Granted
Exercised
Forfeited or expired
Outstanding as of June 30, 2019
Outstanding and exercisable as of June 30, 2019
Vested and expected to vest as of June 30, 2019

Outstanding as of July 1, 2019
Granted
Exercised
Forfeited or expired
Outstanding as of June 30, 2020
Outstanding and exercisable as of June 30, 2020
Vested and expected to vest as of June 30, 2020

Number of
stock
options

Weighted
Average
Exercise
Price

Weighted
Average
Grant-date
Fair Value

Weighted
Average
Remaining
Contractual
Life

Aggregate
Intrinsic
Value

-    $
306,967    $
-     
(12,560)   $
294,407    $
-     
276,447    $

294,407    $
775,250    $
-     
(80,725)   $
988,932    $
86,337    $
766,407    $

-    $
5.25    $
-     
5.25    $
5.25    $
-     
5.25    $

5.25    $
2.68    $
-     
3.46    $
3.38    $
5.25    $
3.47    $

-     
3.00     
-     
2.87     
3.01     
-     
3.02     

3.01     
1.02     
-     
1.59     
1.56     
3.04     
1.63     

-     
-     
-     
-     
9.4 years     
-     
9.4 years     

9.4 years     
-     
-     
-     
5.4 years     
-     
5.4 years     

- 
- 
- 
- 
117,763 
- 
110,579 

117,763 
- 
- 
- 
- 
- 
- 

The aggregate intrinsic value in the table above represents the difference between the closing stock price on the last trading day in fiscal 2020 and 2019 and
the options’ respective exercise price. Total intrinsic value of options exercised for the year ended June 30, 2020 was nil.

As of June 30, 2020, there was $0.6 million of unrecognized compensation cost, adjusted for estimated forfeitures based on historical data, related to non-
vested stock options granted to the Company’s employees and directors. Total unrecognized compensation cost is expected to be recognized over a period of
1.6 years as of June 30, 2020. Total unrecognized compensation cost may be adjusted for future changes in estimated forfeitures.

Restricted Share Units

On July 12, 2018, the Company granted an aggregate of 671,469 RSUs to key employees and directors under the 2017 Plan. RSUs granted to key employees
and directors generally vest within two years. RSUs are valid for a period of 10 years from the grant date. RSUs cliff vest in three installments, with the first
33% vesting on the grant date, second 33% and remaining 34% vest at the end of the first and second anniversary, respectively. The weighted-average grant-
date fair value per share was $12.22 and the estimated total fair value of the RSUs granted was $8.2 million.

On June 11, 2019, the Company granted 12,000 RSUs to a key employee under the 2017 Plan. The RSUs granted to the employee fully vest in one year after
the grant date. The RSUs are valid for a period of 10 years from the grant date. The weighted-average grant-date fair value per share was $5.91 and the
estimated total fair value of the RSUs granted was $70,920.

F-42

 
 
 
 
  
 
 
 
   
   
   
   
 
   
   
   
   
   
   
   
 
   
      
      
      
      
  
   
   
   
   
   
   
   
 
 
 
 
 
 
CLPS INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollars (“$”), except for number of shares)

NOTE 18 – SHARE-BASED PAYMENT - continued

On October 8, 2019, the Company granted 18,700 RSUs to key employees under the 2017 Plan. The RSUs granted to the employees fully vest in one year
after the grant date. The RSUs are valid for a period of 10 years from the grant date. The weighted-average grant-date fair value per share was $5.07 and the
estimated total fair value of the RSUs granted was $94,809.

On November 27, 2019, the Company granted 594,600 RSUs to key employees and directors under the 2017 Plan. The RSUs granted to the employees and
directors fully vest on the grant date. The RSUs are valid for a period of 10 years from the grant date. The weighted-average grant-date fair value per share
was $2.70 and the estimated total fair value of the RSUs granted was $1,605,420.

On May 6, 2020, the Company granted 1,073,700 RSUs to key employees under the 2020 Plan. The RSUs granted to the employees fully vest on the grant
date. The RSUs are valid for a period of 10 years from the grant date. The weighted-average grant-date fair value per share was $2.06 and the estimated total
fair value of the RSUs granted was $2,208,601.

On June 24, 2020, the Company granted 46,050 RSUs to key employees under the 2020 Plan. The RSUs granted to the employees fully vest on specified
date within two years. The RSUs are valid for a period of 10 years from the grant date. The weighted-average grant-date fair value per share was $2.41 and
the estimated total fair value of the RSUs granted was $110,981.

The weighted-average fair value per share is determined as the closing stock price at the grant date.

The Company recognizes the compensation expenses over the service requisite periods using the accelerated method. Share-based compensation cost of $3.5
million and 6.7 million was recognized for the year ended June 30, 2020 and 2019, respectively.

The following table sets forth the summary of RSUs activities:  

Outstanding as of July 1, 2019
Granted
Vested
Forfeited or expired
Outstanding as of June 30, 2020

Number of
Shares

Weighted-
Average
Grant Date
Fair Value  

459,648    $
1,733,050    $
(1,830,514)   $
(153,216)   $
208,968    $

12.06 
2.32 
3.12 
12.03 
9.56 

As of June 30, 2020, there was $0.2 million of unrecognized compensation cost, adjusted for estimated forfeitures based on historical data, related to non-
vested, service-based RSUs granted to the Company’s employees and directors. The RSUs are expected to be recognized over a weighted-average period of
0.2  years.  The  total  fair  value  of  the  restricted  share  units  vested  was  $4.7  million  and  $2.7  million  during  the  year  ended  June  30,  2020  and  2019,
respectively.

During the year ended June 30, 2019, the Company recognized total share-based compensation expenses of $7.02 million, including $9,472, $46,100 and
$6,960,517 in cost of revenues, selling and marketing expenses, and general and administrative expenses, respectively.

During the year ended June 30, 2020, the Company recognized total share-based compensation expenses of $4.03 million, including $14,110, $211,573 and
$3,821,563 in cost of revenues, selling and marketing expenses, and general and administrative expenses, respectively. 

F-43

 
 
 
 
 
 
 
 
 
 
  
 
 
   
 
 
 
   
 
 
   
   
   
   
   
 
   
 
CLPS INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollars (“$”), except for number of shares)

NOTE 19 – SHAREHOLDERS’ EQUITY

Common shares

CLPS was established under the laws of Cayman Islands on May 11, 2017. The original authorized number of common shares was 1 share with a par value
of $1.

On December 7, 2017, in order to optimize the Company’s share capital structure, the Board of Directors approved a stock split of the Company’s issued and
outstanding  shares  of  common  shares  at  a  ratio  of  1-10,000.  After  the  stock  split,  the  Company’s  issued  and  outstanding  common  shares  became  10,000
shares with par value of $0.0001. The Board of Directors also approved to amend the articles of association (the “Amendment”) to increase total authorized
number of common shares from 10,000 shares to 100,000,000 shares with par value of $0.0001. In connection with the Amendment, the Board of Directors
further approved to issue 11,280,000 common shares at par value (the “Nominal share issuance”) to the existing shareholders of the Company. As a result,
the existing shareholders of the Company have the same equity interests percentage in the Company as in CLPS shanghai prior to the reorganization. The
Company  believes  it  is  appropriate  to  reflect  the  stock  split,  Amendment  and  the  Nominal  share  issuance  on  a  retroactive  basis  similar  to  share  split,  in
accordance with SEC SAB Topic 4.

On May 24, 2018, CLPS consummated its IPO of 2,000,000 common shares with $0.0001 par value per share. The units were sold at an offering price of
$5.25 per unit, generating total gross proceeds of $10.5 million. Net proceeds from the IPO were $9.5 million. The Company’s shares trade on the Nasdaq
Capital Market under the trading symbol “CLPS”.

On June 8, 2018, CLPS Incorporation (the “Company”) closed on the exercise in full of the over-allotment option to purchase an additional 300,000 common
shares of the Company by The Benchmark Company, LLC, the representative of the underwriters in connection with and the book running manager of the
Company’s U.S. firm commitment underwritten initial public offering (“IPO”) (“Benchmark”), at the IPO price of $5.25 per share. As a result, the Company
raised gross proceeds of approximately $1.58 million. Net proceeds from the over-allotment of approximately $1.47 million were received on July 4, 2018.

On September 26, 2019, Qiner acquired an 80% interest in Ridik Pte. Ltd. (“Ridik Pte.”) located in Singapore from third party selling shareholders with the
final  purchase  price  of  $2,462,580  (3,402,304  Singapore  dollars),  in  the  form  of  cash  of  $2,026,043  (2,799,180  Singapore  dollars)  and  the  Company’s
common shares were valued at $436,537 (603,123 Singapore dollars), respectively. On December 3, 2019, the Company issued 86,615 common shares with
$0.0001 par value per share to the selling shareholders (Note 3).

Prior to December 2019, CLPS Shanghai held a 70% equity interest of CLPS Shenzhen and an 80% equity interest of CLPS Hong Kong, which held the
remaining 30% equity interest of CLPS Shenzhen. On December 9, 2019, Qiner acquired the remaining 20% equity interest of CLPS Hong Kong from the
non-controlling shareholder with the consideration of the Company’s 100,000 common shares valued at $278,000, therefore holding 100% of CLPS Hong
Kong and CLPS Shenzhen’s equity interest accordingly. On December 3, 2019, the Company issued 100,000 common shares with $0.0001 par value per
share to non-controlling shareholder. The carrying amount of the non-controlling interests was $(130,992). The transaction was accounted for as an equity
transaction and the difference of $131,002 between the purchase consideration and the carrying value of the non-controlling interest of CLPS Hong Kong and
CLPS Shenzhen was recorded in the additional paid-in capital on the consolidated balance sheets.

F-44

 
 
 
 
 
 
 
 
 
 
 
CLPS INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollars (“$”), except for number of shares)

NOTE 19 – SHAREHOLDERS’ EQUITY - continued

Additional paid-in capital

Prior to June 2018, the Company held a 70% equity interest of CLPS Beijing which primarily engages in software development. On June 27, 2018, Qiner
purchased the remaining 30% equity interest of CLPS Beijing at a cash consideration of $0.6 million from the non-controlling shareholders and became the
sole  shareholder  of  CLPS  Beijing.  The  carrying  amount  of  the  non-controlling  interests  was  $91,533.  The  transaction  was  accounted  for  as  an  equity
transaction and the difference of $0.5 million between the purchase consideration and the carrying value of the non-controlling interest of CLPS Beijing was
recorded in the additional paid-in capital on the consolidated balance sheets.

During the fiscal 2017, CLPS Shanghai declared dividends of $1.3 million to its existing shareholders. $0.7 million was paid in fiscal 2017 and $0.6 million
was paid in fiscal 2018. No dividend was declared during the years ended June 30, 2020, 2019 and 2018.

Statutory reserve and restricted net assets

The Company’s subsidiaries located in mainland China are required to make appropriations to certain reserve funds, comprising the statutory surplus reserve
and  the  discretionary  surplus  reserve,  based  on  after-tax  net  income  determined  in  accordance  with  generally  accepted  accounting  principles  of  the  PRC
(“PRC GAAP”). Appropriations to the statutory surplus reserve are required to be at least 10% of the after-tax net income determined in accordance with
PRC GAAP until the reserve is equal to 50% of the entity’s registered capital. Appropriations to the discretionary surplus reserve are made at the discretion
of the Board of Directors. The Company allocated $970,009, $715,335 and $437,796 to statutory reserves during the years ended June 30, 2020, 2019 and
2018, respectively in accordance with PRC GAAP.

PRC laws and regulations permit payments of dividends by the Company’s subsidiaries incorporated in the PRC only out of their retained earnings, if any, as
determined in accordance with PRC accounting standards and regulations. In addition, the Company’s subsidiaries incorporated in the PRC are required to
annually  appropriate  10%  of  their  net  income  to  the  statutory  reserve  prior  to  payment  of  any  dividends,  unless  the  reserve  has  reached  50%  of  their
respective  registered  capital.  Furthermore,  registered  share  capital  and  capital  reserve  accounts  are  also  restricted  from  distribution.  As  a  result  of  the
restrictions described above and elsewhere under PRC laws and regulations, the Company’s subsidiaries incorporated in the PRC are restricted in their ability
to transfer a portion of their net assets to the Company in the form of dividends payments, loans or advances. Amounts of net assets restricted amounted to
$9.9 million and $8.7 million as of June 30, 2020 and 2019, respectively. Except for the above or disclosed elsewhere, there is no other restriction on the use
of proceeds generated by the Company’s subsidiaries to satisfy any obligations of the Company.

F-45

 
 
 
 
 
  
 
 
 
 
CLPS INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollars (“$”), except for number of shares)

NOTE 20 – SEGMENT INFORMATION AND REVENUE ANALYSIS

The Company follows ASC 280, Segment Reporting,  which  requires  that  companies  to  disclose  segment  data  based  on  how  management  makes  decision
about  allocating  resources  to  each  segment  and  evaluating  their  performances.  The  Company  has  one  reporting  segment.  The  Company’s  chief  operating
decision maker has been identified as the Chief Executive Officer, who reviews consolidated results when making decisions about allocating resources and
assessing performance of the Company. The Company’s revenue and net income are substantially derived from enterprise application services and financial
industry IT services.

The Company’s operations are primarily based in China, where the Company derives a substantial portion of their revenues. The following table presents
revenues generated in domestic and overseas markets for the years ended June 30, 2020, 2019 and 2018.

Mainland China
Singapore
Hong Kong
Australia
Malaysia
Japan
India
Taiwan
 Total

For the years ended June 30,
2019
60,398,820    $
2,525,489     
1,961,763     
46,865     
-     
-     
-     
-     
64,932,937    $

2020
78,840,635    $
7,369,345     
3,071,857     
2,167     
125,748     
5,394     
652     
-     
89,415,798    $

2018
47,196,671 
- 
1,414,175 
210,984 
- 
- 
- 
116,763 
48,938,593 

  $

  $

The following table presents revenues by the service lines for the years ended June 30, 2020, 2019 and 2018.

IT consulting service
Customized IT solution service
Other
Total

NOTE 21 – SUBSEQUENT EVENTS

For the years ended June 30,
2019
61,755,355    $
3,041,482     
136,100     
64,932,937    $

2020
87,136,754    $
1,844,892     
434,152     
89,415,798    $

2018
47,159,651 
1,634,100 
144,842 
48,938,593 

  $

  $

On July 27, 2020, the Company and a third-party company incorporated CLPS Guangdong Zhichuang Software Technology Co., Ltd. (“CLPS Guangdong
Zhichuang”) in Shenzhen. The Company holds 10% of equity interest in CLPS Guangdong Zhichuang for $0.14 million (RMB 1,000,000). On August 13,
2020, the Company injected $28,571 (RMB 200,000) to CLPS Guangdong Zhichuang.

On  August  28,  2020,  the  Company,  the  Chairman  of  the  Company  and  a  third-party  incorporated  CLPS  Shenzhen  Robotics  Co.  Ltd  (“CLPS  Shenzhen
Robotics”) in Shenzhen. The Company holds 10% of equity interest in CLPS Shenzhen Robotics for $0.14 million (RMB 1,000,000). On September 15,
2020, the Company injected $147,451 (RMB1,000,000) to CLPS Shenzhen Robotics. 

F-46

 
 
 
 
 
 
 
 
 
 
 
   
   
 
   
   
   
   
   
   
   
 
 
 
 
 
 
 
   
   
 
   
   
 
  
  
CLPS INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollars (“$”), except for number of shares)

NOTE 22 – PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION

Condensed balance sheets

ASSETS
Current assets
Cash and cash equivalents
Escrow receivable
Amounts due from subsidiaries
Prepayments, deposits and other assets, net
Total Current Assets

Investments in subsidiaries
Total Assets

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Salaries and benefits payable

Total Current Liabilities

Commitments and Contingencies

Shareholders’ Equity
Common stock, $0.0001 par value, 100,000,000 shares authorized; 15,930,330 shares issued and outstanding as of June

30, 2020; 13,913,201 shares issued and outstanding as of June 30, 2019. *

Additional paid-in capital
Accumulated (deficits) retained earnings
Accumulated other comprehensive loss

Total Shareholders’ Equity

Total Liabilities and Shareholders’ Equity

  *

The shares and per share data are presented on a retroactive basis to reflect the nominal share issuance (Note 19).

F-47

As of June 30,

2020

2019

  $

181,513    $
-     
7,121,760     
161,767     
7,465,040     

3,471,191 
200,000 
4,987,999 
39,961 
8,699,151 

20,598,908     
28,063,948    $

12,673,565 
21,372,716 

  $

715,304     

584,280 

715,304     

584,280 

1,593     
28,586,048     
123,668     
(1,362,665)    

1,391 
24,276,622 
(2,675,927)
(813,650)

27,348,644     

20,788,436 

  $

28,063,948    $

21,372,716 

 
 
 
 
  
 
 
 
 
 
   
 
 
    
  
   
      
  
   
   
   
   
 
   
      
  
   
 
   
      
  
   
      
  
   
      
  
   
 
   
      
  
   
 
   
      
  
   
      
  
 
   
      
  
   
      
  
   
   
   
   
 
   
      
  
   
 
   
      
  
 
 
CLPS INCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollars (“$”), except for number of shares)

NOTE 22 – PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION - continued

Condensed statements of comprehensive (loss) income

Revenues
Less: Cost of revenues
Gross profit (loss)

General and administrative expenses
Share of profit in subsidiaries, net (Note a)
Other income
Other expenses

Income (loss) before income tax
Benefit for income tax
Net income (loss)

Other comprehensive (loss) income
Foreign currency translation (loss) gain

Comprehensive income (loss)

Condensed statements of cash flows

Net cash used in operating activities
Net cash provided by financing activities
Effect of exchange rate changes on cash
Net (decrease) increase in cash
Cash and cash equivalents, at the beginning of the year
Cash, cash equivalents at the end of the year

(a) Basis of presentation

For the years ended June 30,
2019

2020

2018

-    $
-     
-     

201,614    $
(200,954)    
660     

- 
- 
- 

(5,505,559)    
8,404,632     
46,904     
(7,739)    

(8,651,816)    
5,317,315     
66,806     
(2,741)    

2,938,238     
-     
2,938,238     

(3,269,776)    
-     
(3,269,776)    

(619,892)
3,055,340 
- 
(985)

2,434,463 
- 
2,434,463 

(549,015)   $

(411,973)   $

45,593 

2,389,223    $

(3,681,749)   $

2,480,056 

For the years ended June 30,
2019
(3,189,448)   $
1,472,592     
569     
(1,716,287)    
5,187,478    $
3,471,191    $

2020
(3,586,857)   $
200,000     
97,179     
(3,289,678)    
3,471,191    $
181,513    $

2018
(4,099,305)
9,341,538 
(54,755)
5,187,478 
- 
5,187,478 

  $

  $

  $

  $

  $
  $

In the Company-only financial statements, the Company’s investment in subsidiaries is stated at cost plus equity in undistributed earnings of subsidiaries
since inception.

The Company records its investment in its subsidiaries under the equity method of accounting as prescribed in ASC 323-10 Investment-Equity Method and
Joint Ventures. Such investments are presented on the balance sheets as “Investments in subsidiaries” and share of the subsidiaries’ profit or loss are shown
as “Share of profit in subsidiaries, net” on the statements of comprehensive income (loss).

Certain  information  and  footnote  disclosures  normally  included  in  financial  statements  prepared  in  accordance  with  U.S.  GAAP  have  been  condensed  or
omitted and as such, these Company-only financial statements should be read in conjunction with the Company’s consolidated financial statements.

F-48

 
 
 
 
 
 
 
 
 
 
   
   
 
 
   
   
 
   
 
 
   
   
 
   
      
      
  
   
   
   
   
 
   
      
      
  
   
   
   
 
   
      
      
  
   
      
      
  
 
   
      
      
  
 
 
 
 
 
 
 
   
   
 
   
   
   
 
 
 
 
   
ITEM 19.

EXHIBITS

The financial statements are filed as part of this Annual Report beginning on page F-1.

Exhibit No.

  Description

1.1
2
3.1
4.1
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
12.1

12.2

13.1

  Form of Underwriting Agreement (2).
  Description of Securities registered under Section 12 of the Exchange Act
  Memorandum and Articles of Association (1).
  Specimen Share Certificate (1).
  2017 Equity Incentive Plan (1).
  2019 Equity Incentive Plan (3).
  2020 Equity Incentive Plan(4)
  Form Independent Director Agreement (1).
  Employment Agreement between the Company and Xiao Feng Yang (1).
  Employment Agreement between the Company and Raymond Ming Hui Lin (1).
  Employment Agreement between the Company and Rui Yang (5).
  Employment Agreement between the Company and Li Li.
  ANZ Global Services and Operations (Chengdu) Company Limited Agreement (1).
  Master Lease Agreement - Shanghai Pudong Software Park Co., Ltd..
  Master Lease Agreement - Shanghai Pudong Software Park Co., Ltd..
  Master Lease Agreement - Sun Hung Kai Real Estate Agency Ltd..
  Form of Framework Contract for Subcontracting (1).
  Form Warrant Agreement (2).
  Form Lockup Agreement (2).
  Escrow Indemnification Agreement (2).
  Credit Agreement with China Merchants Bank Co. Ltd.-3 million
  Credit Agreement with China Merchants Bank Co. Ltd.-5 million
  Credit Agreement with Bank of Communications Co., Ltd.
  Certification  of  the  Chief  Executive  Officer  (Principal  Executive  Officer)  pursuant  to  Rule  13a-14(a)  of  the  Securities  Exchange  Act,  as

amended.

  Certification  of  the  Chief  Financial  Officer  (Principal  Financial  Officer)  pursuant  to  Rule  13a-14(a)  of  the  Securities  Exchange  Act,  as

amended.

  Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of

14.1
21.1
23.1
23.2
99.1
99.2
99.3
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE

the Sarbanes-Oxley Act of 2002.
  Code of Conduct and Ethics (1).
  List of Subsidiaries of the Registrant.
  Consent of Ernst & Young Hua Ming LLP.
  Consent of Friedman LLP.
  Charter of the Audit Committee (1).
  Charter of the Compensation Committee (1).
  Charter of the Nominating Committee (1).
  XBRL Instance Document
  XBRL Taxonomy Extension Schema Document
  XBRL Taxonomy Extension Calculation Linkbase Document
  XBRL Taxonomy Extension Definition Linkbase Document
  XBRL Taxonomy Extension Label Linkbase Document
  XBRL Taxonomy Extension Presentation Linkbase Document

(1) Previously filed as part of the registration statement filed with the SEC on March 27, 2018 and incorporated by reference herein.

(2) Previously filed with the SEC as an exhibit to Report on Form 6-K and incorporated by reference herein.

(3) Previously filed as part of the registration statement filed with the SEC on April 29, 2019 and incorporated by reference herein.

(4) Previously filed as part of the registration statement filed with the SEC on April 27, 2020 and incorporated by reference herein.

(5) Previously filed as part of the registration statement filed with the SEC on November 4, 2019 and incorporated by reference herein.

105

 
 
 
 
 
   
 
 
 
 
 
 
The  Registrant  hereby  certifies  that  it  meets  all  of  the  requirements  for  filing  on  Form  20-F  and  that  it  has  duly  caused  and  authorized  the

undersigned to sign this annual report on its behalf.

SIGNATURES

October 22, 2020

October 22, 2020

CLPS Incorporation

By:

/s/ Raymond Ming Hui Lin
Name:  Raymond Ming Hui Lin
Title: Chief Executive Officer 

(Principal Executive Officer)

By:

/s/ Rui Yang
Name:  Rui Yang
Title: Acting Chief Financial Officer 

(Principal Financial and Accounting Officer)

106

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
DESCRIPTION OF COMMON SHARES

Exhibit 2

We  are  a  Cayman  Islands  company  and  our  affairs  are  governed  by  our  Memorandum  and  Articles  of  Association  and  Companies  Law  of  the
Cayman Islands, which we refer to as the Companies Law below. As of the date hereof, our authorized share capital consists of 100,000,000 common shares
with  a  par  value  of  US$0.0001  per  share.  The  following  are  summaries  of  material  provisions  of  our  memorandum  and  articles  of  association  and  the
Companies Law insofar as they relate to the material terms of our shares.

Common Shares

General.    All  of  our  outstanding  common  shares  are  fully  paid  and  non-assessable.  Certificates  representing  the  common  shares  are  issued  in
registered  form.  Our  shareholders,  whether  or  not  they  are  non-residents  of  the  Cayman  Islands,  may  freely  hold  and  transfer  their  common  shares  in
accordance with the Memorandum and Articles of Association.

Dividends. The holders of our common shares are entitled to such dividends as may be declared by our board of directors. Our articles of association

provide that our board of directors may declare and pay dividends if justified by our financial position and permitted by law. 

Voting  Rights.  In  respect  of  all  matters  subject  to  a  shareholders’  vote,  each  common  share  is  entitled  to  one  vote.  Voting  at  any  meeting  of
shareholders is by show of hands unless voting by way of a poll is required by the rules of any stock exchange on which our shares are listed for trading, or a
poll is demanded by the chairman of such meeting or one or more shareholders holding not less than 10% of the total voting rights of all shareholders having
the right to vote at the meeting. A quorum required for a meeting of shareholders consists of one shareholder who holds at least one-third of our issued voting
shares. Shareholders’ meetings may be held annually. Each general meeting, other than an annual general meeting, shall be an extraordinary general meeting.
Extraordinary general meetings may be called by a majority of our board of directors or upon a requisition of shareholders holding at the date of deposit of
the requisition not less than 40% of the aggregate share capital of our company that carries the right to vote at a general meeting, in which case an advance
notice of at least 120 clear days is required for the convening of our annual general meeting and other general meetings by requisition of the shareholders. An
ordinary resolution to be passed at a meeting by the shareholders requires the affirmative vote of a simple majority of the votes attaching to the common
shares cast at a meeting, while a special resolution requires the affirmative vote of no less than two-thirds of the votes attaching to the common shares cast at
a  meeting.  A  special  resolution  will  be  required  for  important  matters  such  as  a  change  of  name  or  making  changes  to  our  memorandum  and  articles  of
association.

Transfer of Common Shares. Subject to the restrictions set out below, any of our shareholders may transfer all or any of his or her common shares
by an instrument of transfer in the usual or common form or any other form approved by our board of directors. Our board of directors may, in its absolute
discretion, decline to register any transfer of any common share irrespective of whether the shares is fully paid or the Company has no lien over it. If our
board of directors refuses to register a transfer, it shall, within two months after the date on which the transfer was lodged, send to each of the transferor and
the  transferee  notice  of  such  refusal.  Upon  completion  of  this  offering,  we  intend  to  waive  our  right  to  refuse  transfers  of  any  common  shares.  The
registration of transfers may, after compliance with any notice required of the stock exchange on which our shares are listed, be suspended at such times and
for such periods as our board of directors may determine, provided, however, that the registration of transfers shall not be suspended for more than 30 days in
any year as our board of directors may determine.

Calls on Common Shares and Forfeiture of Common Shares. Our board of directors may from time to time make calls upon shareholders for any
amounts unpaid on their common shares in a notice served to such shareholders at least 14 clear days prior to the specified time of payment. The common
shares that have been called upon and remain unpaid are subject to forfeiture.

 
 
 
 
  
 
 
 
 
 
Redemption of Common Shares. The Companies Law and our memorandum of association permit us to purchase our own shares. In accordance
with our articles of association and provided the necessary shareholders or board approval have been obtained, we may issue shares on terms that are subject
to  redemption,  at  our  option  or  at  the  option  of  the  holders  of  these  shares,  on  such  terms  and  in  such  manner,  provided  the  requirements  under  the
Companies Law have been satisfied, including out of capital, as may be determined by our board of directors.

Inspection of Books and Records. Holders of our common shares have no general right under our articles of association to inspect or obtain copies
of our list of shareholders or our corporate records. However, we will provide our shareholders with annual audited financial statements. See “Where You
Can Find Additional Information.”

Issuance of Additional Shares. Our memorandum of association authorizes our board of directors to issue additional common shares from time to
time as our board of directors shall determine, to the extent of available authorized but unissued shares. Our memorandum of association also authorizes our
board of directors to establish from time to time one or more series of preference shares and to determine, with respect to any series of preference shares, the
terms and rights of that series, including: 

● the designation of the series to be issued;

● the number of shares of the series;

● the dividend rights, dividend rates, conversion rights, voting rights; and

● the rights and terms of redemption and liquidation preferences.

Our board of directors may issue preference shares without action by our shareholders to the extent authorized but unissued. Issuance of these shares

may dilute the voting power of holders of common shares.

Anti-Takeover Provisions.  Some  provisions  of  our  memorandum  and  articles  of  association  may  discourage,  delay  or  prevent  a  change  of  control  of  our
company or management that shareholders may consider favorable, including provisions that authorize our board of directors to issue preference shares in
one or more series and to designate the price, rights, preferences, privileges and restrictions of such preference shares without any further vote or action by
our shareholders.

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
  
  
  
 
 
EMPLOYMENT AGREEMENT

Exhibit 10.8

This EMPLOYMENT AGREEMENT (the “Agreement”) is entered into as of June 11, 2019 with the effective date of June 11, 2019 (the “Effective
Date”), by and between CLPS INCORPORATION, a Cayman Islands corporation (the “Company”) having its principal place of business at c/o 2nd Floor,
Building 18, Shanghai Pudong Software Park, 498 Guoshoujin Road, Pudong, Shanghai 201203, People’s Republic of China, and Li Li (“Executive”, and
the Company and the Executive collectively referred to herein as the “Parties”).

WHEREAS,  the  Company  desires  to  hire  Executive  and  to  employ  him  as  the  Company’s  Chief  Operation  Officer  (“COO”)  effective  as  of  the

Effective Date, and the Parties desire to enter into this Agreement embodying the terms of such employment;

NOW, THISEFORE, in consideration of the premises and the mutual covenants and promises of the Parties contained herein, the Parties, intending

WITNESSETH:

to be legally bound, hereby agree as follows:

1. Title and Job Duties.

(a) Subject to the terms and conditions set forth in this Agreement, the Company agrees to employ Executive as Chief Operation Officer.

Executive shall report directly to the Chief Executive Officer of the Company (the “CEO”).

(b) Executive accepts such employment and agrees, during the term of his employment, to devote his full business and professional time
and energy to the Company, and agrees faithfully to perform his duties and responsibilities in an efficient, trustworthy and business-like manner. Executive
also agrees that the CEO shall determine from time to time such of his duties as may be assigned to him. Executive agrees to carry out and abide by such
directions of the CEO. Visible leadership is expected from Executive, which will require frequent travelling.

(c) Without limiting the generality of the foregoing, Executive shall not, without the written approval of the Company, render services of a
business  or  commercial  nature  on  his  own  behalf  or  on  behalf  of  any  person,  firm,  or  corporation,  whether  for  compensation  or  otherwise,  during  his
employment hereunder. The foregoing limitation shall not apply to Executive’s involvement in associations, charities and service on another entity’s board of
directors,  provided  such  involvement  does  not  interfere  with  Executives  responsibilities  (and  as  it  pertains  to  any  service  on  another  entity’s  board  of
directors, provided such action is pre-approved by the Company).

2. Salary and Additional Compensation.

(a) Base Salary. The Company shall pay to Executive an annual base salary (“Base Salary”) of a total of RMB 360,000, HK$273,600, in
accordance  with  the  Company’s  normal  payroll  procedures  and  an  eligibility  to  receive  12,000  restricted  shares  in  November  2020.  The  Compensation
Committee  shall  review  the  Executive’s  Base  Salary  no  less  than  annually  and  may  increase  (but  not  decrease)  such  Base  Salary  during  the  term  of  this
Agreement.

 
 
 
 
 
 
 
 
 
 
 
 
 
(b)  Annual  Bonus.  Commencing  with  the  year  ending  June  30,  2020,  Executive  will  be  entitled  to  receive  an  annual  cash  bonus  (the
“Annual Bonus”), payable with respect to each year of the Term subsequent to the issuance of the Company’s final audited financial statements for such year.
The final determination on the amount, if any, of the Annual Bonus will be made by, and in the sole discretion of the Compensation Committee of the Board
of  Directors  of  the  Company  (the  “Board”)  (or  the  Board,  if  such  committee  has  been  dissolved),  based  on  criteria  established  by  the  Compensation
Committee  of  the  Board  (or  the  Board,  if  such  committee  has  been  dissolved).  For  the  fiscal  year  in  which  Executive  commences  employment  with  the
Company, Executive will be entitled to receive an Annual Bonus which is prorated based on the number of days from the Effective Date until the end of the
fiscal year divided by 365.

3. Expenses. In accordance with Company policy, the Company shall reimburse Executive for all reasonable association fees, professional related
expenses (certifications, licenses and continuing professional education) and business expenses properly and necessarily incurred and paid by Executive in
the  performance  of  his  duties  under  this  Agreement,  including  without  limitation  all  travel  expenses  to  and  from  his  designated  office  as  set  forth  in  the
opening  paragraph  of  this  Agreement,  upon  his  presentment  of  detailed  receipts  in  the  form  required  by  the  Company’s  policy.  Notwithstanding  the
foregoing, all expenses must be promptly submitted for reimbursement by the Executive. In no event shall any reimbursement be paid by the Company after
the end of the year following the year in which the expense is incurred by the Executive.

4. Benefits.

Vacation must be taken in the year in which it accrues and the dates of any vacation must be approved by the CEO.

(a) Vacation .. Executive shall be entitled to eighteen (18) days of vacation per year , which shall accrue at a pro rata rate per pay period.

(b) Health  Insurance  and  Other  Plans.  Executive  shall  be  eligible  to  participate  in  the  Company’s  medical,  dental  and  other  employee
benefit programs, if any, that are provided by the Company for its employees at Executive’s level in accordance with the provisions of any such plans, as the
same may be in effect from time to time.

5. Term. The term of employment under this Agreement (the “Term) shall be for a five-year period commencing on the Effective Date and shall be
automatically  extended  for  an  additional  consecutive  twelve  (12)-month  period  on  the  fifth  (5th)  anniversary  of  the  Effective  Date  and  each  subsequent
anniversary  thereof,  unless  and  until  the  Company  or  Executive  provides  written  notice  to  the  other  party  not  less  than  ninety  (90)  days  before  such
anniversary date that such party is electing not to extend the Term, in which case the Term shall end at the expiration of the Term as last extended, unless
sooner  terminated  as  set  forth  below.  Following  any  such  notice  by  the  Company  of  its  election  not  to  extend  the  Term,  Executive  may  terminate  his
employment at any time prior to the expiration of the Term by giving written notice to the Company at least thirty (30) days prior to the effective date of
termination, and upon the earlier of such effective date of termination or the expiration of the Term, Executive shall be entitled to receive the same severance
benefits as are provided upon a termination of employment by the Company without Cause as described in Section 7(a) and Section 7(d).

2

 
 
 
 
 
 
 
 
6. Termination.

(a) Termination at the Company’s Election.

(i) For Cause.  At  the  election  of  the  Company,  Executive’s  employment  may  be  terminated  at  any  time  for  Cause  (as  defined
below) upon written notice to Executive given pursuant to Section 12 of this Agreement. For purposes of this Agreement, “Cause” for termination shall mean
that  Executive:  (A)  pleads  “guilty”  or  “no  contest”  to,  or  is  convicted  of  an  act  which  is  defined  as  a  felony  under  federal  or  state  law,  or  is  indicted  or
formally charged with acts involving criminal fraud or embezzlement; (B) in carrying out his duties, engages in conduct that constitutes gross negligence or
willful  misconduct;  (C)  engages  in  substantiated  fraud,  misappropriation  or  embezzlement  against  the  Company;  (D)  engages  in  any  inappropriate  or
improper  conduct  that  causes  material  harm  to  the  reputation  of  the  Company;  or  (E)  materially  breaches  any  term  of  this  Agreement.  With  respect  to
subsection  (E)  of  this  section,  to  the  extent  such  material  breach  may  be  cured,  the  Company  shall  provide  Executive  with  written  notice  of  the  material
breach and Executive shall have ten (10) days to cure such breach.

(ii) Upon Disability, Death or Without Cause. At the election of the Company, Executive’s employment may be terminated: (A)
should  Executive  have  a  physical  or  mental  impairment  that  substantially  limits  a  major  life  activity  and  Executive  is  unable  to  perform  the  essential
functions of his job with or without reasonable accommodation (“Disability”); (B) upon Executive’s death; or (C) with ninety (90) days prior written notice,
at any time Without Cause for any or no reason.

(b) Termination at Executive’s Election; Good Reason Termination. Notwithstanding anything contained elsewhere in this Agreement to
the contrary, Executive may terminate his employment hereunder at any time and for any reason, upon thirty (30) days’ prior written notice given pursuant to
Section  12  of  this  Agreement  (“Voluntary Resignation”),  provided  that  upon  notice  of  resignation,  the  Company  may  terminate  Executive’s  employment
immediately and pay Executive thirty (30) days’ Base Salary in lieu of notice. Furthermore, the Executive may terminate this Agreement for “Good Reason,”
which  shall  be  deemed  to  exist:  (i)  if  the  Company’s  Board  of  Directors  or  that  of  any  successor  entity  of  Company,  fails  to  appoint  or  reappoint  the
Executive  or  removes  the  Executive  as  the  CFO  of  the  Company;  (ii)  if  Executive  is  assigned  any  duties  materially  inconsistent  with  the  duties  or
responsibilities of the CFO of the Company as contemplated by this Agreement or any other action by the Company that results in a material diminution in
such position, authority, duties, or responsibilities, excluding an isolated, insubstantial, and inadvertent action not taken in bad faith; or (iii) a material breach
by the Company of this Agreement. Good Reason shall not exist hereunder unless the Executive provides notice in writing to the Company of the existence
of a condition described above within a period not to exceed ninety (90) days of the initial existence of the condition, and with respect to subsection (iii) of
this section, to the extent such material breach may be cured, the Company does not remedy the condition within thirty (30) days of receipt of such notice.

(c) Termination in General. If Executive’s employment with the Company terminates for any reason, the Company will pay or provide to
Executive: (i) any unpaid Salary through the date of employment termination, (ii) any unpaid Annual Bonus for the fiscal year prior to the fiscal year in
which the termination occurs (payable at the time the bonuses are paid to employees generally), (iii) any accrued but unused vacation or paid time off in
accordance  with  the  Company’s  policy,  (iv)  reimbursement  for  any  unreimbursed  business  expenses  incurred  through  the  termination  date,  to  the  extent
reimbursable in accordance with Section 3, and (v) all other payments or benefits (if any) to which Executive is entitled under the terms of any benefit plan
or arrangement.

3

 
 
 
 
 
 
 
 
7. Severance.

(a) Subject to Section 7(b) below, if Executive’s employment is terminated prior to the end of the Term by the Company without Cause or
by Executive for Good Reason, Executive shall be entitled to receive a severance payment equal to a pro rata portion of the target Annual Bonus for the year
in  which  such  termination  occurs.  Such  severance  payment  shall  be  made  in  a  single  lump  sum  sixty  (60)  days  following  such  termination,  provided  the
Executive has executed and delivered to the Company, and has not revoked a general release of the Company, its parents, subsidiaries and affiliates and each
of  its  officers,  directors,  employees,  agents,  successors  and  assigns,  and  such  other  persons  and/or  entities  as  the  Company  may  determine,  in  a  form
reasonably acceptable to the Company. Such general release shall be delivered on or about the date of termination and must be executed within fifty-five (55)
days of termination.

(b) If Executive’s employment is terminated prior to the end of the Term by the Company without Cause or by Executive for Good Reason,
and such termination occurs within three months prior to a Change in Control in contemplation of the Change in Control or within six (6) months after the
Change in Control, Executive shall be entitled to receive, in addition to any severance pursuant to Section 7(a) above, an acceleration of the vesting of the RS
Grant or, if the termination occurs after the Change of Control, the Substitute Grant, as applicable. For purposes of this Agreement, “Change  in  Control”
means the occurrence of any of the following events: (i) an acquisition (other than directly from the Company) of any voting securities of the Company by
any  person  or  group  of  affiliated  or  related  persons  (as  such  term  is  defined  in  Sections  13(d)  and  14(d)(2)  of  the  Securities  Exchange  Act  of  1934
(“Exchange Act”)), immediately after which such person or group has beneficial ownership (within the meaning of the Exchange Act) of more than fifty
percent  (50%)  of  the  combined  voting  power  of  the  Company’s  then  outstanding  voting  securities;  provided  that  this  subsection  shall  not  apply  to  an
acquisition  of  voting  securities  by  any  employee  benefit  plan  or  trust  maintained  by  or  for  the  benefit  of  the  Company  or  its  employees;  (ii)  a  merger,
consolidation or reorganization involving the Company whereby the holders of Company common stock immediately preceding such transaction no longer
hold  a  majority  of  the  shares  of  Company  common  stock  after  such  transaction;  or  (iii)  the  sale  or  other  disposition  of  all  or  substantially  all  of  the
Company’s assets.

(c) If Executive’s employment is terminated prior to the end of the Term by the Company without Cause or by Executive for Good Reason,
and if Executive is eligible for and elects to continue to participate in the Company’s medical and dental benefit programs, the Company will continue to pay
the same portion of Executive’s medical and dental insurance premiums as during active employment (for Executive and eligible spouse and dependents)
until the earlier of: (1) nine months from Executive’s cessation from employment; or (2) the date Executive is eligible for medical and/or dental insurance
benefits from another employer.

4

 
 
 
 
 
 
8. Confidentiality Agreement.

(a)  Executive  understands  that  during  the  Term  he  may  have  access  to  unpublished  and  otherwise  confidential  information  both  of  a
technical and non-technical nature, relating to the business of the Company and any of its parents, subsidiaries, divisions, affiliates (collectively, “Affiliated
Entities”),  or  clients,  including  without  limitation  any  of  their  actual  or  anticipated  business,  research  or  development,  any  of  their  technology  or  the
implementation  or  exploitation  thereof,  including  without  limitation  information  Executive  and  other  have  collected,  obtained  or  created,  information
pertaining  to  patent  formulations,  vendors,  prices,  costs,  materials,  processes,  codes,  material  results,  technology,  system  designs,  system  specifications,
materials  of  construction,  trade  secrets  and  equipment  designs,  including  information  disclosed  to  the  Company  by  other  under  agreements  to  hold  such
information confidential (collectively, the “Confidential Information”). Executive agrees to observe all Company policies and procedures concerning such
Confidential  Information.  Executive  further  agrees  not  to  disclose  or  use,  either  during  his  employment  or  at  any  time  thereafter,  any  Confidential
Information for any purpose, including without limitation any competitive purpose, unless authorized to do so by the Company in writing, except that he may
disclose  and  use  such  information  when  necessary  in  the  performance  of  his  duties  for  the  Company.  Executive’s  obligations  under  this  Agreement  will
continue with respect to Confidential Information, whether or not his employment is terminated, until such information becomes generally available from
public sources through no action of Executive. Notwithstanding the foregoing, however, Executive shall be permitted to disclose Confidential Information as
may  be  required  by  a  subpoena  or  other  governmental  order,  provided  that  he  first  notifies  promptly  the  Company  of  such  subpoena,  order  or  other
requirement and allows the Company the opportunity to obtain a protective order or other appropriate remedy.

(b) During Executive’s employment, upon the Company’s request, or upon the termination of his employment for any reason, Executive
will promptly deliver to the Company all documents, records, files, notebooks, manuals, letters, notes, reports, customer and supplier lists, cost and profit
data, e-mail, apparatus, computers, cell phones, tablets, hardware, software, drawings, and any other material of the Company or any of its Affiliated Entities
or  clients,  including  all  materials  pertaining  to  Confidential  Information  developed  by  Executive  or  other,  and  all  copies  of  such  materials,  whether  of  a
technical,  business  or  fiscal  nature,  whether  on  the  hard  drive  of  a  laptop  or  desktop  computer,  in  hard  copy,  disk  or  any  other  format,  which  are  in
Executive’s possession, custody or control.

(c)  Executive  will  promptly  disclose  to  the  Company  any  idea,  invention,  discovery  or  improvement,  whether  patentable  or  not
(“Creations”),  conceived  or  made  by  him  alone  or  with  other  at  any  time  during  his  employment.  Executive  agrees  that  the  Company  owns  all  such
Creations, conceived or made by Executive alone or with other at any time during his employment, and Executive hereby assigns and agrees to assign to the
Company all rights he has or may acquire their and agrees to execute any and all applications, assignments and other instruments relating thereto which the
Company deems necessary or desirable. These obligations shall continue beyond the termination of his employment with respect to Creations and derivatives
of  such  Creations  conceived  or  made  during  his  employment  with  the  Company.  Executive  understands  that  the  obligation  to  assign  Creations  to  the
Company shall not apply to any Creation which is developed entirely on his own time without using any of the Company’s equipment, supplies, facilities,
and/or Confidential Information unless such Creation (a) relates in any way to the business or to the current or anticipated research or development of the
Company or any of its Affiliated Entities; or (b) results in any way from his work at the Company.

5

 
 
 
 
 
 
(d) Executive will not assert any rights to any invention, discovery, idea or improvement relating to the business of the Company or any of

its Affiliated Entities or to his duties hereunder as having been made or acquired by Executive prior to his work for the Company.

(e)  During  the  Term,  the  Company  is  hereby  granted  and  shall  have  a  non-  exclusive,  royalty-free,  irrevocable,  perpetual,  worldwide
license (with the right to grant and authorize sublicenses) to make, have made, modify, use, sell, offer to sell, import, reproduce, distribute, publish, prepare
derivative works of, display, perform publicly and by means of digital audio transmission and otherwise exploit as part of or in connection with any product,
process or machine created or incorporated by the Executive.

(f) Executive agrees to cooperate fully with the Company, both during and after his employment with the Company, with respect to the
procurement, maintenance and enforcement of copyrights, patents, trademarks and other intellectual property rights (both in the United States and foreign
countries) relating to such Creations. Executive shall sign all papers, including, without limitation, copyright applications, patent applications, declarations,
oaths, formal assignments, assignments of priority rights and powers of attorney, which the Company may deem necessary or desirable in order to protect its
rights and interests in any Creations. Executive further agrees that if the Company is unable, after reasonable effort, to secure Executive’s signature on any
such  papers,  any  officer  of  the  Company  shall  be  entitled  to  execute  such  papers  as  his  agent  and  attorney-in-fact  and  Executive  hereby  irrevocably
designates and appoints each officer of the Company as his agent and attorney-in-fact to execute any such papers on his behalf and to take any and all actions
as the Company may deem necessary or desirable in order to protect its rights and interests in any Creations, under the conditions described in this paragraph.

9.  Non-solicitation;  non-competition.  (a)  Executive  agrees  that,  during  the  Term  of  his  employment,  Executive  will  not,  directly  or  indirectly,
including  on  behalf  of  any  person,  firm  or  other  entity,  employ  or  actively  solicit  for  employment  any  employee  of  the  Company  or  any  of  its  Affiliated
Entities, or anyone who was an employee of the Company or any of its Affiliated Entities within the termination of Executive’s employment, or induce any
such employee to terminate him or his employment with the Company or any of its Affiliated Entities.

(b) Executive further agrees that, during the Term, Executive will not, directly or indirectly, including on behalf of any person, firm or other
entity, without the express written consent of an authorized representative of the Company, (i) perform services within the Territory (as defined below) for
any Competing Business (as defined below), whether as an employee, consultant, agent, contractor or in any other capacity, (ii) hold office as an officer or
director  or  like  position  in  any  Competing  Business,  or  (iii)  request  any  present  or  future  customers  or  suppliers  of  the  Company  or  any  of  its  Affiliated
Entities  to  curtail  or  cancel  their  business  with  the  Company  or  any  of  its  Affiliated  Entities.  These  obligations  will  continue  for  the  specified  period
regardless of whether the termination of Executive’s employment was voluntary or involuntary or with or without Cause or for any other reason.

(c) “Competing Business” means any corporation, partnership or other entity or person (other than the Company) which is engaged (a) in
the  development,  manufacture,  marketing,  distribution  or  sale  of,  or  research  directed  to  the  development,  manufacture,  marketing,  distribution  or  sale  of
competing anti-cancer drug candidates or products or (b) in any other business activity carried on or planned to be carried on by the Company or any of its
Affiliates during the Term.

6

 
 
 
 
 
 
 
 
(d)  “Territory”  shall  mean  within  any  state  or  foreign  jurisdiction  in  which  the  Company  or  any  subsidiary  of  the  Company  is  then

providing services or products or marketing its services or products (or engaged in active discussions to provide such services).

(e) Executive agrees that in the event a court determines the length of time or the geographic area or activities prohibited under this Section
9  are  too  restrictive  to  be  enforceable,  the  court  shall  reduce  the  scope  of  the  restriction  to  the  extent  necessary  to  make  the  restriction  enforceable.  In
furtherance and not in limitation of the foregoing, the Company and the Executive each intend that the covenants contained in this Section 9 shall be deemed
to  be  a  series  of  separate  covenants,  one  for  each  and  every  state,  territory  or  jurisdiction  of  the  United  States,  the  People’s  Republic  of  China,  and  any
foreign  country  set  forth  therein.  If,  in  any  judicial  proceeding,  a  court  shall  refuse  to  enforce  any  of  such  separate  covenants,  then  such  unenforceable
covenants shall be deemed eliminated from the provisions hereof for the purpose of such proceedings to the extent necessary to permit the remaining separate
covenants to be enforced in such proceedings.

10. Representation and Warranty. The Executive hereby acknowledges and represents that he has had the opportunity to consult with legal counsel
regarding his rights and obligations under this Agreement and that he fully understands the terms and conditions contained herein. Executive represents and
warrants that Executive has provided the Company a true and correct copy of any agreements that purport: (a) to limit Executive’s right to be employed by
the Company; (b) to prohibit Executive from engaging in any activities on behalf of the Company; or (c) to restrict Executive’s right to use or disclose any
information  while  employed  by  the  Company.  Executive  further  represents  and  warrants  that  Executive  will  not  use  on  the  Company’s  behalf  any
information,  materials,  data  or  documents  belonging  to  a  third  party  that  are  not  generally  available  to  the  public,  unless  Executive  has  obtained  written
authorization to do so from the third party and provided such authorization to the Company. In the course of Executive’s employment with the Company,
Executive is not to breach any obligation of confidentiality that Executive has with third parties, and Executive agrees to fulfill all such obligations during
Executive’s employment with the Company. Executive further agrees not to disclose to the Company or use while working for the Company any trade secrets
belonging to a third party.

11.  Injunctive  Relief.  Without  limiting  the  remedies  available  to  the  Company,  Executive  acknowledges  that  a  breach  of  any  of  the  covenants
contained in Sections 7(c) and 9 above may result in material irreparable injury to the Company for which there is no adequate remedy at law, that it will not
be possible to measure precisely damages for such injuries and that, in the event of such a breach or threat thereof, the Company shall be entitled, without the
requirement  to  post  bond  or  other  security,  to  obtain  a  temporary  restraining  order  and/or  injunction  restraining  Executive  from  engaging  in  activities
prohibited by this Agreement or such other relief as may be required to specifically enforce any of the covenants in Sections 7(c) and 9 of this Agreement.

7

 
 
 
 
 
 
12.  Notice.  Any  notice  or  other  communication  required  or  permitted  to  be  given  to  the  Parties  shall  be  deemed  to  have  been  given  if  either

personally delivered, or if sent for next- day delivery by nationally recognized overnight courier, and addressed as follows:

(a) If to Executive, to:

2nd Floor, Building 18, Shanghai Pudong Software Park,
498 Guoshoujin Road, Pudong, Shanghai 201203
People’s Republic of China

(b) If to the Company, to:

2nd Floor, Building 18, Shanghai Pudong Software Park,
498 Guoshoujin Road, Pudong, Shanghai 201203
People’s Republic of China

13. Severability. If any provision of this Agreement is declared void or unenforceable by a court of competent jurisdiction, all other provisions shall

nonetheless remain in full force and effect.

14. Withholding.  The  Company  may  withhold  from  any  payment  that  it  is  required  to  make  under  this  Agreement  amounts  sufficient  to  satisfy

applicable withholding requirements under any federal, state or local law.

15. Indemnification.  The  Company  agrees  that  Executive  will  be  covered  by  any  “directors  and  officers”  insurance  policies  then  in  effect  with

respect to Executive’s acts as an officer.

16. Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of Hong Kong, without regard

to the conflict of laws provisions thereof.

17. Waiver. The waiver by either Party of a breach of any provision of this Agreement shall not be or be construed as a waiver of any subsequent
breach. The failure of a Party to insist upon strict adherence to any provision of this Agreement on one or more occasions shall not be considered a waiver or
deprive that Party of the right thereafter to insist upon strict adherence to that provision or any other provision of this Agreement. Any such waiver must be in
writing, signed by the Party against whom such waiver is to be enforced.

18. Assignment. This Agreement is a personal contract and Executive may not sell, transfer, assign, pledge or hypothecate his rights, interests and
obligations hereunder. Except as otherwise herein expressly provided, this Agreement shall be binding upon and shall inure to the benefit of Executive and
his personal representatives and shall inure to the benefit of and be binding upon the Company and its successors and assigns, including without limitation,
any corporation or other entity into which the Company is merged or which acquires all or substantially all of the assets of the Company.

8

 
 
 
 
 
 
 
 
 
 
 
 
 
19.  Entire Agreement.  This  Agreement  embodies  all  of  the  representations,  warranties,  covenants,  understandings  and  agreements  between  the
Parties relating to Executive’s employment with the Company. No other representations, warranties, covenants, understandings, or agreements exist between
the Parties relating to Executive’s employment. This Agreement shall supersede all prior agreements, written or oral, relating to Executive’s employment.
This Agreement may not be amended or modified except by a writing signed by the Parties.

[Signature page follows]

9

 
 
 
 
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed and delivered on the date first written above.

CLPS INCORPORATION

/s/ Raymond Ming Hui Lin

By:
Name:  Raymond Ming Hui Lin
Title: Chief Executive Officer

Agreed to and Accepted:

/s/ Li Li

Date: June 11, 2019

10

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental Contract for Shanghai Pudong Software Park Guo Shoujing Park

Exhibit 10.10

Both parties to this contract:
Party A (Lessor): Shanghai Pudong Software Park Co., Ltd.
Party B (Lessee): ChinaLink Professional Services Co., Ltd.

According to Contract Law of the People’s Republic of China and Regulations of Shanghai Municipality on House Leasing, both parties conclude the
contract on the basis of equality, voluntariness, fairness, honesty and credibility, for consenting that Party B should lease the house that Party A can lease
according to law.

Section 1.

1-1 The house which is rented to Party B by Party A is located in Room 18201/18202/18203/18204/18205/18206/18207/18208, Building 18, Guo Shoujing
Road No.498, Zhang Jiang High Tech Park, Pudong, Shanghai (hereinafter referred to as “the House”). The building area of the House is 1259.94 square
meters. The House should be used for research and development and office. The structure of the House is reinforced concrete structure. The plan of the
house is shown in Annex I (of this contract).

1-2 Party A establishes a leasing relationship with Party B as the real estate owner of the House. Party A has told Party B and Party B has fully known that

the House has been mortgaged before the contract is signed.

1-3 The following (if any) is shown in Annex II and/or supplementary agreements of the Contract: the scope of use, conditions and requirements of public or
shared parts of the House, the existing decoration of the House, ancillary facilities and equipment status, and the contents, standards, related matters of
the  decoration  and  additional  facilities  which  Party  A  allows  Party  B  to  do  in  writing.  Both  parties  agree  that  all  attachments  and  supplementary
agreements should be a basis for acceptance of housing delivery and return when the Contract is terminated or released.

1-4 When the Contract is signed, the House has accepted and used by Party B, and Party B confirm that the House can fit the purpose and acquirement of
rental at the beginning of the tenancy term. On the basis of Party B’s occupancy of the House, Party A does not have to perform any further duty to
deliver the House to Party B.

2. Rental Purposes

2-1 Party B has fully known the House’s properties and uses and Party B promises to Party A that the House will only be used for research and development

and office and Party B will abide by the state and the city regulations on the use of housing and property management.

2-2 Party B  promises  that  the  above-mentioned  purpose  of  the  use  will  not  be  changed  during  the  rental  term  unless  such  change  gets  Party  A’s  written

consent and is approved by the relevant departments according to relative regulations.

3. Renewal Term

3-1 The Contract is a renewal contract based on the original contract (No. ZL20170016) which was signed for renting the House.

3-2 The renewal term is from July 1st, 2019 (hereinafter referred to as “lease date”) to June 30th, 2021 (hereinafter referred to as “terminal date”). The rent

will be counted from July 1st, 2019 (hereinafter referred to as “rent date”) to terminal date.

4. Rent and Payment Methods

4-1 Both Parties agree that the unit rental price is counted according to the daily construction area per square meter.

From July 1st, 2019 to June 30th, 2020, the unit rental price is RMB 3.71 yuan (US$0.51).
From July 1st, 2020 to June 30th, 2021, the unit rental price is RMB 3.86 yuan (US$0.53).

(The above unit rental prices are tax-inclusive prices)

4-2 Party B should pay the rent for the first month no later than the rent date. The days for calculating the rent for the first mouth is started form the rent date
to the last day of the mouth. The monthly rent will be calculated and paid according to the calendar days of the month (the monthly rent calculation
formula is: housing construction area ╳ unit rental price ╳ the calendar days of the month. The monthly rental amount is rounded to one decimal place).
Party B should pay the rent to Party A before the 10th of each month (in case of national legal holidays postponed to the next working day). The last
month’s rent should be calculated from the first day of last month to the terminal day. If the days of the last month are less than 10, the last month’s rent
should be paid before the terminal date. If the days of the last month are not less than 10, the last month’s rent should be paid before the10th day of the
month (in case of national legal holidays postponed to the next working day). Party A should issue the corresponding rental invoice to Party B within 3
working days after receiving the rent of the month.

 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
4-3 Party A should issue the corresponding rental invoice to Party B within 3 working days after receiving the rent of the month. In the term of the Contract,
if the invoice type or tax rate changes due to the change of taxation policies of the state and government, Party B agrees to adjust the price of rent and
deposit according to the latest tax rate during the remaining lease. At that time, Party A will give Party B a formal notice, and both Parties should sign up
supplementary agreements.

4-4 Party B pays the rent to Party A’s following account by check or transfer:

Shanghai Pudong Software Park Co., Ltd.

[_]

4-5 The rent is denominated and settled in RMB. In any case that the rent needs to be denominated and settled in other currency (the currency should be
accepted by Chinese banks and convertible into RMB), the actual amount of RMB exchanged by the bank designated by Party A shall prevail. Relevant
fees due to the payment (such as bank charges) should be borne by Party B.

4-6 Party A may entrust a property management company to assist in collecting the rent.

5. Rental Deposit and Other Fees

5-1 Both Parties  agree  that  Party  B  shall  pay  rental  deposit  to  Party  A  within  5  working  days  after  signing  the  Contract.  The  amount  of  the  deposit  is
equivalent to the rent for the three months (90 days) of the highest unit price within the lease term, which is RMB437,703 (US$59,714) yuan. Party B
has paid RMB 404,819.00 (US$55,198) yuan for rental deposit under the original contract, and it will be automatically converted to the deposit under the
Contract after the Contract becomes effective. The margin of the deposit is RMB 32,884.00 (US$4,516) yuan, and Party B shall pay it to Party A within
5 working days after signing the Contract. Party A shall issue a receipt to Party B after receiving the deposit. If Party B fails to pay the lease deposit in
full to Party A in accordance with the provisions of this contract, Party B shall pay Party A late payment fee of 0.3% of the outstanding amount per day,
until the full payment is completed. If Party B delays or fails to pay more than 15 working days, Party A has the right to rescind the contract.

2

 
 
 
 
 
 
 
 
 
 
During the term of this contract, Party B shall, due to breach of contract, pay liquidated damages and/or damages to Party A in accordance with the
provisions of this contract, and Party B shall separately pay Party A liquidated damages and/or damages, and shall not have the right to request Party A
to deduct from the above deposit. Party A shall have the right (without any obligation) to deduct such liquidated damages and / or damages from Party
B’s rental deposit and notify Party B in writing of the amount of the deduction and margin supplement. Party B should pay Party A to complement the
margin within 5 working days after accepting the notice from Party A.

Within 10 working days after the termination of the lease, Party A will refund Party B the balance of deposit to offset the fees (with no interest) which
Party  B  should  bear  under  the  Contract  (including  but  not  limited  to  the  monthly  rent  payable  by  Party  B,  property  management  fees,  energy
consumption, Party B’s liquidated damages and / or compensation for damages). However, if Party B uses the House for the registration of Party B’s
residence, Party B shall, within 30 days from the date of the termination of the lease, complete the cancellation or alteration registration, and deliver the
copy of the registration approval to Party A for record. Party A shall return the lease deposit to Party B according to the above term after that.

5-2 Besides the house rent and property management fees, Party B shall bear the costs of energy consumption (electricity, water and gas), communication
expenses, rental fees for equipment and facilities incurred for its own use. Party A shall install separate meter for Party B’s energy consumption and
collect the fees from Party B according to the meter reading before transferring it to the offices of utilities. Party A may entrust property management
companies to assist in collecting the above fees.

5-3 Both parties agree that the property management company entrusted by Party A (hereinafter referred to as “the management company”) is responsible
for the property management of the House. At the time of signing the Contract, the management company is Shanghai Puyuan Property Management
Co., Ltd., which will be responsible for the property equipment operation, daily management and services of the House. Party B shall pay the property
management fee. Party B shall sign the Property Management Agreement with the property management company prior to the transfer of the House.
Property management fee and payment method of the House shall be implemented in accordance with the Property Management Agreement signed by
Party B and the property management company.

3

 
 
 
 
 
 
6. Housing Requirements and Maintenance Responsibilities

6-1 During the rental term, Party A promises that the House and its ancillary public facilities would be in normal usable and safe condition. If Party B finds
that there is any damage or malfunction of the House or its ancillary public facilities (other than Party B’s decoration and equipment), Party B shall
notice Party A and / or the management company to repair. Party A and / or the management company shall conduct inspection or repair in 48 hours
after receiving the written notice from Party B and repair it within the period agreed on by both parties or within a reasonable period. If Party A shall
assume the responsibility for maintenance but Party A fails to repair it overdue, Party B may take the maintenance for it and reasonable maintenance
expenses shall be borne by Party A.

6-2 During the rental term, Party B shall fair use and take good care of the House and its affiliated public facilities, and take various preventive measures to
make the House safe from rain, wind or other natural causes. Party B shall assume maintenance responsibility for the improper or unreasonable use of
Party B which results in the damage or failure of the House and its affiliated public facilities. If Party B refuses to assume responsibility for maintenance,
Party A can take the maintenance on behalf of Party B, and reasonable maintenance costs borne by Party B. The maintenance of non-public facilities
which is owned by Party B can be entrusted to the property management companies, and maintenance costs borne by Party B.

6-3 Party  B  shall  strictly  follow  the  applicable  laws,  regulations,  rules  and  regulations  of  China  and  use  the  House  in  accordance  with  the  contractual
purposes, especially not to use the House in any unreasonable or unethical way. Party B will not use the House in any way that invalidates or increases
the  risk  of  insurance.  Party  B  shall  ensure  that  the  business  activities  engaged  in  using  the  House  have  obtained  the  business  license  issued  by  the
government administration for industry and commerce and guarantee that legal registration and permission shall be kept throughout the lease period.

6-4 During the rental term, Party A reserves the right to publish or authorize others to advertise, improve or add public facilities in other proper places where

is not exclusively for Party B. Party A shall not affect Party B’s normal use of the House and Party B’s Normal business.

4

 
 
 
 
 
 
 
6-5 Party B agrees to guarantee that Party A and / or Party A’s personnel shall be exempt from Party B’s personal injury and / or property damage, and Party

A and Party A’s personnel shall also be exempt from the third party’s claims and litigation caused by Party B.

7. Decoration and Accretion

7-1 Party B shall be responsible for the second decoration of the House. Party B’s decoration plan (including marking on the building facade or roof or other
public parts of the House) shall be subject to Party A’s approval and Party A’s written consent. Party B shall not, without prior written consent of Party
A, carry out any unauthorized activities or allow any other person to carry out any unauthorized alteration or addition of the House and its decoration,
ancillary  facilities  and  equipment  (including  but  not  limited  to  trunk  lines,  drainage,  firefighting,  indoor  and  outdoor  appearances  and  existing
installations). If such decoration needs the approval of the government department, Party B shall obtain the approval before construction.

7-2 During renovating the House, Party B shall not damage the building’s facade or carry out any internal structural alterations that may affect the service
life and safety of the House, including but not limited to the demolition and alteration of the bearing beam walls. If Party B needs to change the structure
of  the  house  or  modify  the  ancillary  facilities  and  equipment  of  the  house,  etc.,  in  addition  to  the  written  consent  of  Party  A,  Party  B  shall  pay  the
structural restoration fee deposit in accordance with the “Relevant Charges for Second Renovation of Leased Office of Shanghai Pudong Software Park”,
otherwise Party B shall not carry out construction.

7-3 During the  rental  term,  the  decoration  belongs  to  Party  B,  and  its  responsibility  for  maintenance  is  also  borne  by  Party  B,  unless  the  Parties  agree
otherwise. After the expiry of the rental term (including any early termination of the Contract attributable to Party B), Party B is obliged to remove the
decoration extras and restore the house to the pre-lease status (except for natural losses). If Party B does not move on schedule, Party A can take the
behalf of the removal, and the cost borne by Party B or deducted the cost from the deposit unless Party A agrees that Party B shall retain decoration
remnants when returning the house.

5

 
 
 
 
 
 
 
7-4 Party A’s  written  consent  to  the  decoration  of  Party  B  shall  not  be  construed  as  Party  A’s  obligation  or  responsibility  to  Party  B’s  decoration  and  its
consequences. Party B shall guarantee that its decoration and other facilities for its own addition are safe and will not cause any potential safety hazard
for the House or its users. Party B shall assume complete legal, technical and economic responsibility for its own decoration and its consequences.

7-5 Party A shall have the right to request Party B immediately to take all necessary measures to solve such safety problems if Party A finds any potential
safety hazard caused by Party B’s decoration and attachment actions during and after the lease and whether or not Party A agrees to such decoration and
attachment plan, until Party A unilaterally lift the lease. Party B entrusts the contractor to renovate the house. If it is not the cause of Party A, which
violates the laws and regulations of China, and the relevant provisions of construction, fire control and safety management, or causes property damage,
Party B and the contractor shall take the responsibility.

8. Enter and Check

8-1 During the lease, in order to ensure that the house and its ancillary facilities are properly accessible and safe, Party A and / or the management company
shall have the right to send staff to enter the house for reasonable inspection, maintenance and repair, but Party A and / or the management company
shall notify Party B at least 1 working day in advance (except: emergency situation and situation that Party A cannot be foreseen or controlled). Party B
should be cooperated with inspection, maintenance and repair, but Party A should minimize the impact on the use of the House by Party B.

8-2 If Party  B  renounces  the  right  of  renewal,  or  terminates  this  contract  prematurely  according  to  the  Contract,  or  Party  A  and  Party  B  fail  to  agree  on
whether to renew or not, Party B agrees that Party A has the right to accompany the interested subsequent tenants to visit the House within the time
agreed upon by both parties within 6 months prior to the termination, but Party A should give advanced notice to Party B.

6

 
 
 
  
 
 
 
9. Sublet, Mix, Transfer and Exchange

9-1 Without the prior written consent of Party A, Party B shall not sublet part or whole of the House to any third party in any form (including but not limited
to contracting, pooling affiliates, establishing affiliates, etc.) during the rental term, or mixed-use the House with any third party, or transfer the House to
others for rent, or exchange with others.

9-2 If Party B sublets part or whole of the House to any third party during the rental term, or uses it in combination with any third party, or transfers the
House to others for rent, or exchanges with other people’s rented houses in accordance with a separate written agreement between Party A and Party B,
Party B shall still be liable for the behavior of actual user of the House and the consequences during the rental term.

10. Priority Renewal Rights

10-
1

If the lease of the Contract expires and Party B needs to continue leasing the House, Party B shall submit a written request for renewal to Party A at least
four months before the expiry of the rental term of the Contract, and re-sign the rental contract with the consent of Party A. Under the same conditions,
Party B shall enjoy the priority of renewal of the whole of the House, except as otherwise stipulated by laws and regulations. If Party B submits to Party
A only a written request for renewal of the part of the House, Party B will not enjoy the priority of renewal. If Party B lately requests for the renewal of a
written request, it shall be deemed that Party B renounces the priority of renewal.

10-
2

After Party A agrees with Party B’s renewal and renewal conditions, both parties shall conclude a rental contract for the renewal of the House 3 months
before the expiry date of the Contract. If Party B fails to sign the renewal contract with Party A overdue, it shall be deemed that Party B renounces the
priority of renewal. The renewal rent is determined according to the renewal contract.

11. Return

11-1Party B shall return the House to Party A no later than the expiry date of the lease or the date on which the Contract is terminated prematurely.

11-2Before Party B returns the House to Party A, Party B shall clean the House so that the House is in good condition and can be rented. The House which is
returned by Party B shall be in conformity with the condition when the house was delivered (that is, it meets the requirements of Annex II and / or other
supplementary agreements). When the House is returned, it should be checked by Party A or / and the property management company entrusted by Party
A and the expenses should be settled.

7

 
 
  
 
 
 
 
 
  
 
 
11-3Party B may retain the status quo of the House’s decoration if it has the written consent of Party A (permit that Party B may produce some natural wear
and tear due to normal use) and move out of the House (hereinafter referred to as “move out of the House”), otherwise, it should be reinstated. If Party A
shall agree in writing before Party B can retain the status quo of the House’s decoration, Party A shall have no obligation to make any compensation or
compensation for Party B’s construction or renovation of the House and its decoration and facilities. If the Contract is terminated early due to Party A’s
reason or because Party A breaches the Contract, Party B has no obligation to restore the status quo ante, and the House will be returned according to the
current status.

11-4If Party B fails to return the house to Party A without the written consent of Party A or does not reach an agreement in writing with Party A on renewing
the term, Party B shall pay the overdue liquidated damages of the House which is 3 times the rent to Party A, and shall bear all the energy, equipment,
property management fees and all other expenses stipulated in the Contract during the period of occupation of the House. In addition, if Party B fails to
return the house to Party A 15 days after the expiry date of the lease or the early termination date of the Contract, Party A has the right to release the
house after written notice to Party B, Party A can (but does not have the obligation to) deposit it locally or expeditiously and Party A has the right to
collect the custody fee and removal fee from Party B in respect of the objects and has the right to sell, transfer, discard or other ways which Party A
deems it appropriate, and use the proceeds (if any) for any payment that Party B owes Party A and for any loss. In case of insufficient payment and
compensation, Party A shall have the right to recover the balance from Party B.

12. Exemption for Party A

12-
1

During the rental term, when Party B occupies the House and its ancillary facilities, public facilities, if Party B causes any loss of property, damage and
personal injury caused by any of the following circumstances, Party B hereby agree, not because of Party A’s intention or gross negligence, Party A does
not bear any responsibility:

(1) Any loss or damage due to expropriation, acquisition, confiscation, nationalization or any force majeure caused by state or government agencies;

8

 
 
 
  
 
 
 
(2) Any loss or damage caused by theft, robbery and other criminal cases;

(3) No water, electricity, telephone, fax, air-conditioning and other services to the House at any time or any public facilities in the House, including the

planned maintenance and inspection of public facilities by a third party entrusted by Party A, are not operated and it is not due to Party A’s reasons;

(4) Party B’s losses and damages caused by other lessees or third parties;

(5) Party B’s losses and damages which is not caused by Party A’s intentional or gross negligence (Party A and / or the security guards and watchman’s

security services provided to the House do not constitute Party A’s liability to the House, personnel, and property).

13. Breach of the Contract and Liability for Breach of Contract

Party A’s default

13-
1

(1) Party A shall compensate for the loss of Party B due to Party A’s transfer of property right caused by Party A’s setting up a new mortgage to the

House during the rental term as stipulated in this contract.

(2) During the rental term, Party A fails to perform the repair and maintenance responsibilities as stipulated in the Contract in time, resulting in damage
to the House or property, or personal injury to Party B’s personnel, sub-contractors, agents, employees, and decorators due to the structural problems
of the House, Party A should be responsible for compensation.

(3) During the rental term, except the exempt situation regulated by the Contract, laws or regulations, if Party A decides to terminate this contract or
take the House back early without authorization, Party A should give a written notice to Party B 6 months early. In this case, in addition to returning
the deposit to Party B, Party A should also pay liquidated damages which is amount to the monthly rent at that time to Party B. If Party A informs
Party B 3 months early but less than 6 months, Party A should pay liquidated damages which is twice the monthly rent at that time to Party B. If
Party A does not inform Party B 3 months early, Party A should pay liquidated damages which is triple the monthly rent at that time to Party B.

9

 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
Party B’s default

13-
2

(1) If Party B overdue payment of rent, deposit, equipment rental fee, energy consumption fee, property management fee or other relevant expenses
payable,  Party  B  shall  pay  overdue  fine  which  is  0.3%  of  the  amount  of  overdue  payment  per  day.  If  overdue  30  days,  Party  A  has  the  right  to
interrupt the water, electricity and other energy supply, until Party B pays all the expenses. And Party B should bear the cost of re-connection.

(2) If Party B fails to obtain the written consent of Party A to renovates the House or additional facilities beyond the written consent of Party A, Party A
has  the  right  to  request  Party  B  to  restore  the  original  state  of  the  House.  Party  B  shall  be  responsible  for  indemnification  if  Party  B  causes
irreparable damage to the House or Party A suffers losses (including but not limited to fines, damages, etc.) due to the aforesaid acts of Party B.

(3) Party B or any person expressly or implicitly authorized by Party B to enter the House or parking space shall be regarded as Party B’s act. If such act

causes damage or loss of personal or property to Party A or building, Party B shall jointly and severally liable for compensation.

(4) During  the  rental  term,  except  the  exempt  situation  regulated  by  the  Contract,  if  Party  B  decides  to  terminate  this  contract  early  without
authorization and Party B gives a written notice to Party A 3 months early, Party B should pay liquidated damages which is amount to the monthly
rent at that time to Party A. If Party B does not inform Party A 3 months early, Party B should pay liquidated damages which is triple the monthly
rent at that time to Party A. Party A may deduct the above liquidated damages from the remaining balance of the rental deposit that Party B has
already paid, and the insufficient part will be delivered separately by Party B.

Retirement refers to the behavior that Party B decides to terminate the lease relationship early for its own reasons, limited to a written statement.

(5) If Party B registers the House as its domicile, and Party B fails to complete the registration of alteration or cancellation within 30 days from the date
of  termination  of  the  tenancy  or  provide  the  copy  of  certificate  of  registration  to  Party  A  for  the  record,  Party  B  shall  pay  Party  A  liquidated
damages which is amount to the monthly rent at that time.

(6) Party A has right to request Party B to compensate Party A for the losses suffered thereby, if Party B takes the following actions:

(1)

Intentional or negligent act of Party B and its employees and contractors on any part of the building or the House;

10

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(2) Party B violates or fails to comply with any applicable provisions of the Contract;

(3) Party B, its employees and other acts of the contractor will affect the normal operation and management of the building by Party A and the
property management company unless Party B provides reasonable explanations within 24 hours after receiving the written notice from Party
A.

14. The Force Majeure

14-
1

If either the Property or any part of the Building is destroyed or is not suitable for research and development and office during the lease period due to
Force Majeure, either party shall be entitled to notify the other in writing of the termination of the Contract, and neither party shall pursue the default
responsibility. The Contract is terminated from the day when notice is given by either party. Party A should return Party B the remaining rental deposit,
rental after the force majeure, and other expenses that Party B has prepaid within 10 working days from the date of termination of the Contract after
deducting the relevant expenses according to Clause 13 of the Contract without interest, as long as Party B pays all the expenses payable by Party B
before the force majeure which is regulated by the Contract and the supplementary agreements.

14-
2

The above “force majeure” means any unforeseen event beyond the reasonable control of one party and which is unavoidable despite reasonable care is
given  by  the  party,  including  but  not  limited  to,  earthquake,  typhoon,  plague,  flood,  fire,  storms,  tidal  waves  or  other  natural  disasters,  declared  or
undeclared war, riots and so on.

15. Terminate the Contract

15-
1

Both  Parties  agree  that  one  party  may  be  written  notice  to  the  other  party  to  terminate  the  Contract  under  the  following  situations,  and  the  party
breaching the Contract shall pay liquidated damages which is triple the monthly rent at that time to the other party. If the party breaching the Contract
also cause damages to the other party, and if the liquidated damages are insufficient to meet the damages, the balance still needs to be made up.

11

 
 
 
 
 
 
  
 
 
  
 
(1) Party A fails to deliver the House on time and still cannot deliver the House 30 days after the written notice from Party B;

(2) The house delivered by Party A does not meet the contract stipulated in Annex Ⅱ of the Contract, resulting in the failure to realize the purpose

of the lease; or the House delivered by Party A is defective and endangers the safety of Party B;

(3) Party B fails to obtain the written consent of Party A to change the use of the House;

(4) Party B causes damage to the main structure of the House or other irreparable damage;

(5) Party B, without the written consent of Party A and the approval of the relevant department, arbitrarily changed the nature of the production

and use involved in the property planning;

(6) Party B fails to obtain the written consent of Party A and permission from the safety production supervision, fire control and other relevant

departments to add or modify special equipment or to produce, manage, transport, store, use or dispose of hazardous chemicals;

(7) Party B renders part or all of the House to any third party without authorization, or uses it in combination with any third party, or transfers the

House to others for rent or exchanges with other people’s houses;

(8) Party B has not paid the rent over 30 days, and still cannot pay the rent 30 days after the written notice from Party A.

15-
2

Due to the breach of item (8) of the preceding paragraph, the Party A has the right to retain all the articles in the House until Party B pays all the money
(including the liquidated damages) to Party A.

Both Parties agree that the Contract is terminated under the following situations, and neither of them should be responsible for the termination.

15-
3

(1) The land use rights within the occupied area of the House are recovered early according to law;

(2) The House is requisitioned according to law because of public interests;

(3) The House is included in the scope of the permit for house demolition due to urban construction;

(4) The House is damaged, lost or has been identified as a dangerous house;

(5) Party A has informed Party B that the mortgage has been set before the rental, and is now being disposed of.

12

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
16. Statements and Guarantees

a) Party A hereby states and guarantees as follows:

(1) Party A has all the necessary authorizations to formally and effectively sign and perform the Contract and possess all the necessary powers  and

capabilities to lease the House to Party B in accordance with applicable laws.

(2) Party A’s signing and performance of the Contract shall not constitute a violation of the applicable law or any contract signed by Party A with any

third party.

(3) Party A guarantees that the House has been built and in good condition in accordance with applicable laws (including but not limited to safety and

health related laws and regulations) and has legal ownership over it.

  b)

Party B hereby states and guarantees as follows:

(1) Party B has all the necessary authorizations to formally and effectively sign and perform the Contract.

(2) Party B has legal business qualification. During the renewal of the Contract, Party B will engage in business activities in accordance with the scope

of its business license, and its business activities must comply with the relevant provisions of national laws and regulations.

(3) Party B promises not to disclose any information involved in the Contract to any third party, including but not limited to the rental price. If Party

B’s behavior leaks any of above mentioned information, Party A reserves the right to retroactively indemnify Party B.

17. Safe Production

17-
1

Party B shall strictly comply with the safety management code of the park including the Notice on Enterprise Safety Management in Shanghai Pudong
Software Park (see Annex Ⅲ for details) and shall be fully responsible for its own safety management. Party B shall immediately inform Party A in an
effective manner once a safety accident has occurred, and provide a written report after the incident, while trying its best to avoid or reduce the casualties
or property damage. If the circumstances of the accident are serious and have caused or may cause casualties, Party B shall also directly report to the
relevant government department in accordance with the law.

13

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
17-
2

During the rental term of the Contract, Party A shall have the right to recourse to Party B and terminate the Contract if Party B produces safety accident
in the area of Shanghai Pudong Software Park. If the safety accidents cause loss of Party A, Party B should compensate Party A.

Party B’s safety records shall be used as a reference for Party B’s priority rights such as renewal and extension of lease (if any).

17-
3

18. Other Terms

18-
1

18-
2

The Contract takes effect immediately after both parties have signed and sealed the contract.

The  unaccomplished  matters  of  the  Contract  may  be  concluded  by  the  supplementary  agreements  or  terms  between  Party  A  and  Party  B.  The
supplementary agreement, the terms and the supplements to the Contract are an integral part of the Contract. The written words in the Contract and its
supplementary terms, agreements and the space in the appendix have the same effect as the printed language.

18-
3

When both parties sign the Contract, they shall clearly understand their respective rights, obligations and responsibilities and are willing to fulfill their
obligations strictly according to the Contract. If one party violates the Contract, the other party is entitled to claim according to the Contract.

18-
4

Party A  and  Party  B  shall  settle  their  disputes  through  negotiation  during  the  performance  of  the  Contract.  If  they  fail  to  reach  a  consensus  through
negotiation, both parties agree to choose the following method (2) to settle in accordance with the laws of the People’s Republic of China:

(1)

submitted to China International Economic and Trade Arbitration Commission Shanghai Branch for arbitration;

(2) bring a lawsuit to the people’s court where the House is located.

18-5 The Contract has four copies with the Annex, and Party A, Party B, the business department, the tax department each hold a copy. All of them have the

same effect.

18-
6

All fees and taxes related to the registration of the Contract (including but not limited to stamp duty) should be borne by both parties in accordance with
the regulations of the People’s Republic of China and Shanghai.

18-
7

Party B is obliged to cooperate with Party A to complete all forms of non-profitable research activities for the purpose of industry research, including but
not limited to questionnaires, interviews with business executives, and collection of economic data. Party A will not disclose any information or data
provided  by  Party  B  for  other  purpose  other  than  industry  research  and  will  not  disclose  any  trade  secrets  to  any  third  party  which  is  not  related  to
industrial research.

14

 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
Annex I
Plan of the House

15

 
 
 
the existing decoration of the House, ancillary facilities and equipment status, and the decoration and additional facilities which Party A allows Party B to do
in writing

Annex II

16

 
 
 
 
Annex III
Notice of Shanghai Pudong Software Park Park Enterprise Security Management

According to Production Safety Law of the People’s Republic of China, Regulations on the Reporting, Investigation and Handling of Work Safety Accidents,
Regulations on Production Safety of Shanghai, for further strengthen the security management of Shanghai Pudong Software Park, effectively protect the life
of the park personnel and property safety, we will inform about the safety management in the park as follows:

1. Safety Management Responsibilities of Companies in the Park

The  company  in  the  park  should  be  responsible  for  the  work  of  safety  management,  including  the  area  that  the  company  leased,  in  the  process  of
working, employee’s safety management during working or work-related experiences, and take the responsibility.

1.

2.

3.

The park enterprise assigns the safety commissioner as the first safety liaison and is in charge of the safety work in the leased area and liaises with
Shanghai Pudong Software Park Co., Ltd. (hereinafter referred to as “Pu soft”). If there is a change of position in the safety commissioner, the job
successor automatically becomes the first safety liaison or the park shall assign another person and informed in writing to Pu Soft.

Strictly abide by the laws, regulations and rules related to safety and possess the qualifications and conditions for safety production required for the
operation of the business and industry.

Pursuant  to  the  written  approval  by  Pu  soft  company,  if  a  company  can  sublease  or  sublet  the  office,  it  shall  conclude  a  safety  management
agreement  with  the  sub-tenant  on  the  basis  of  the  contents  of  this  circular  with  a  clear  emphasis  on  safety  responsibilities  and  management
requirements.

2. Safety Requirements of Daily Operation

1.

2.

3.

Establish safety  management  rules  and  systems  with  safety  responsibility  system  as  the  core.  Strengthen  safety  education  and  management  of
suppliers. Enhance daily education and training of employees in safety work. Provide safety management personnel and equipment. In accordance
with the relevant regulations and establish safety standards emergency rescue and evacuation plan.

The renovations within the scope of renter and equipment installation should comply with the relevant provisions, norms and standards of safety
and fire safety. According to national and local regulations, construction and equipment installation needs to be reviewed and accepted.

The facilities and equipment must pass inspection, tests and acceptance, and should be operated by trained and qualified people. Those people who
are engaged in special operations must have the appropriate qualifications. The equipment and operations personnel should be reviewed annually in
accordance with related regulations.

17

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4. Don’t produce, store toxic, harmful, flammable, explosive materials.

5.

6.

7.

Loading and unloading of goods in the designated area, do a good job of on-site safety supervision and support.

It is strictly forbidden to lodge staff in the office area of Shanghai Pudong Software Park.

The  risk  of  accidents  or  insecurity  should  be  self-examination  and  timely  rectification.  Cooperate  with  Pu  soft  company  and  the  property
management unit for safety inspection and rectification.

3. Requirements of Fire Safety

1. Actively involved in the fire drill and cooperate with Pu soft company and property management units.

2.

3.

4.

Equip fire extinguisher in line with the provisions in their own rented area. Set in line with the provisions of the requirements, identify the obvious
emergency evacuation diagram. Always keep the evacuation routes and entrances and exits open.

Smoking is strictly forbidden in non-smoking areas. It is forbidden to use open flame in violation of regulation.

It is forbidden to block, close, occupy the evacuation routes and entrances and exits.

4. Requirements of Security and Traffic Safety

1.

2.

Improve staff’s awareness of personal safety, property safety and traffic safety. Properly store their valuables such as cash and securities, and set up
more reliable safety precautions to prevent theft.

The motor  vehicles  owned  by  their  employees  or  their  employees’  relatives  shall  strictly  follow  the  traffic  lights’  instruction  and  traffic  signs’
instruction to drive. Parking in the line with norms and regulations.

If any unexpected incident or accident occurs, including but not limited to safety production, anti-crime, traffic or public security, it shall be reported to Pu
soft  as  soon  as  possible.  In  the  case  of  emergencies,  it  shall  be  reported  directly  to  the  police,  fire  department,  rescue  department  and  other  departments
immediately, afterwards be reported to Pu soft company.

18

 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental Contract for Shanghai Pudong Software Park Guo Shoujing Park

Exhibit 10.11

Contract No.ZL (N) 20180016

Both parties to this contract:
Party A (Lessor): Shanghai Pudong Software Park Co., Ltd.
Party B (Lessee): ChinaLink Professional Services Co., Ltd.

According to Contract Law of the People’s Republic of China and Regulations of Shanghai Municipality on House Leasing, both parties conclude the
contract on the basis of equality, voluntariness, fairness, honesty and credibility, for consenting that Party B should lease the house that Party A can lease
according to law.

Section 1.

1-1 The house which is rented to Party B by Party A is located in Room 18101/18102/18103/18104, Building 18, Guo Shoujing Road No.498, Zhang Jiang
High Tech Park, Pudong, Shanghai (hereinafter referred to as “the House”). The building area of the House is 914.62 square meters. The House should
be used for research and development and office. The structure of the House is reinforced concrete structure. The plan of the house is shown in Annex I
of this contract.

1-2 Party A establishes a leasing relationship with Party B as the real estate owner of the House. Party A has told Party B and Party B has fully known that

the House has been mortgaged before the contract is signed.

1-3 The following (if any) is shown in Annex II and/or supplementary agreements of the Contract: the scope of use, conditions and requirements of public or
shared parts of the House, the existing decoration of the House, ancillary facilities and equipment status, and the contents, standards, related matters of
the  decoration  and  additional  facilities  which  Party  A  allows  Party  B  to  do  in  writing.  Both  parties  agree  that  all  attachments  and  supplementary
agreements should be a basis for acceptance of housing delivery and return when the Contract is terminated or released.

1-4 When the Contract is signed, the House has accepted and used by Party B, and Party B confirm that the House can fit the purpose and acquirement of
rental at the beginning of the tenancy term. On the basis of Party B’s occupancy of the House, Party A does not have to perform any further duty to
deliver the House to Party B.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
2. Rental Purposes

2-1 Party B has fully known the House’s properties and uses and Party B promises to Party A that the House will only be used for research and development

and office and Party B will abide by the state and the city regulations on the use of housing and property management.

2-2 Party B  promises  that  the  above-mentioned  purpose  of  the  use  will  not  be  changed  during  the  rental  term  unless  such  change  gets  Party  A’s  written

consent and is approved by the relevant departments according to relative regulations.

3. Lease Term

3-1 The lease term is from January 1st ,2019 (hereinafter referred to as “lease date”) to December 31st ,2020 (hereinafter referred to as “terminal date”). The

rent will be counted from February 15th , 2019 (hereinafter referred to as “rent date”) to terminal date.

3-2 The delivery date of the house is January 1, 2019.

3-3 Party A shall inform Party B of the acceptance and handover of the house at least one day in advance and no later than the delivery date. Party B shall
send representatives to jointly inspect and accept the house with Party A and or the property management company entrusted by Party A according to the
time notified by Party A. After the acceptance, Party B shall sign a written House acceptance handover letter to show that Party A has delivered the
house to Party B.

If the house and its ancillary facilities do not meet the delivery standard agreed in this contract after both parties check, Party A shall correct it within 3
days or within a reasonable period agreed by both parties to meet the delivery standard, and inform Party B and Party A to jointly check and accept the
house again. After the re acceptance, Party B shall sign a written “House acceptance handover letter” to show that Party A has delivered the house to
Party B.

If the House fails to be delivered to Party B due to Party A’s reasons, Party A shall postpone Party B’s starting date of the lease as of the date specified in
article 3-1, and the new starting date shall be calculated from the actual delivery date. If the house is delayed in delivery for more than 10 working days
due to Party A’s reasons, Party A shall pay 10% of the daily rent of the house to Party B as liquidated damages for each day of delayed delivery from the
11th working day after the lease starting date of article 3-1, and the lease starting date of Party B shall be postponed. The new lease starting date shall be
calculated  from  the  actual  delivery  date.  If  the  starting  date  of  rent  is  postponed  in  accordance  with  this  clause,  the  starting  date  of  rent  shall  be
postponed accordingly. If the above-mentioned breach of contract by Party A lasts for more than 30 days, Party B has the right to terminate this contract.

2

 
 
 
 
 
 
 
 
 
 
 
 
 
3-4 Party B  shall  handle  the  relevant  handover  procedures  of  the  leased  house  no  later  than  the  delivery  date.  Party  B’s  delay  in  handling  the  handover
procedures does not affect the rent payable by Party B from the date of rent payment and other expenses that shall be borne by Party B. If Party B fails to
complete the relevant handover procedures within 30 days after the delivery date agreed in this contract due to Party B’s reasons, Party A has the right to
terminate this contract.

4. Rent and Payment Methods

4-1 Both Parties agree that the unit rental price is counted according to the daily construction area per square meter.

Within the lease term agreed in this contract, the rent free period is from January 1, 2019 to February 14, 2019.

From February 15th , 2019 to December 31st ,2019, the unit rental price is RMB 3.85 yuan (US$0.55).

From January 1st , 2020 to December 31st ,2020, the unit rental price is RMB 3.97 yuan (US$0.56).

(The above unit rental prices are tax-inclusive prices)

4-2 Party B should pay the rent for the first month no later than the rent date. The days for calculating the rent for the first mouth is started form the rent date
to the last day of the mouth. The monthly rent will be calculated and paid according to the calendar days of the month (the monthly rent calculation
formula is: housing construction area ☒ unit rental price ☒ the calendar days of the month. The monthly rental amount is rounded to one decimal place).
Party B should pay the rent to Party A before the 10th of each month (in case of national legal holidays postponed to the next working day). The last
month’s rent should be calculated from the first day of last month to the terminal day. If the days of the last month are less than 10, the last month’s rent
should be paid before the terminal date. If the days of the last month are not less than 10, the last month’s rent should be paid before the10th day of the
month (in case of national legal holidays postponed to the next working day). Party A should issue the corresponding rental invoice to Party B within 3
working days after receiving the rent of the month.

3

 
 
 
 
 
 
 
 
 
  
4-3 Party A should issue the corresponding rental invoice to Party B within 3 working days after receiving the rent of the month. In the term of the Contract,
if the invoice type or tax rate changes due to the change of taxation policies of the state and government, Party B agrees to adjust the price of rent and
deposit according to the latest tax rate during the remaining lease. At that time, Party A will give Party B a formal notice, and both Parties should sign up
supplementary agreements.

4-4 Party B pays the rent to Party A’s following account by check or transfer:

Shanghai Pudong Software Park Co., Ltd.

[_]

4-5 The rent is denominated and settled in RMB. In any case that the rent needs to be denominated and settled in other currency (the currency should be
accepted by Chinese banks and convertible into RMB), the actual amount of RMB exchanged by the bank designated by Party A shall prevail. Relevant
fees due to the payment (such as bank charges) should be borne by Party B.

4-6 Party A may entrust a property management company to assist in collecting the rent.

5. Rental Deposit and Other Fees

5-1 Both Parties  agree  that  Party  B  shall  pay  rental  deposit  to  Party  A  within  5  working  days  after  signing  the  Contract.  The  amount  of  the  deposit  is
equivalent to the rent for the three months (90 days) of the highest unit price within the lease term, which is RMB326,794.00 (US$46,255) yuan. Party A
shall issue a receipt to Party B after receiving the deposit. If Party B fails to pay the lease deposit in full to Party A in accordance with the provisions of
this contract, Party B shall pay Party A  late  payment  fee  of  0.3%  of  the  outstanding  amount  per  day,  until  the  full  payment  is  completed.  If  Party  B
delays or fails to pay more than 15 working days, Party A has the right to rescind the contract.

4

 
 
 
 
 
 
 
 
 
 
During the term of this contract, Party B shall, due to breach of contract, pay liquidated damages and/or damages to Party A in accordance with the
provisions of this contract, and Party B shall separately pay Party A liquidated damages and/or damages, and shall not have the right to request Party A
to deduct from the above deposit. Party A shall have the right (without any obligation) to deduct such liquidated damages and / or damages from Party
B’s rental deposit and notify Party B in writing of the amount of the deduction and margin supplement. Party B should pay Party A to complement the
margin within 5 working days after accepting the notice from Party A.

Within 10 working days after the termination of the lease, Party A will refund Party B the balance of deposit to offset the fees (with no interest) which
Party  B  should  bear  under  the  Contract  (including  but  not  limited  to  the  monthly  rent  payable  by  Party  B,  property  management  fees,  energy
consumption, Party B’s liquidated damages and / or compensation for damages). However, if Party B uses the House for the registration of Party B’s
residence, Party B shall, within 30 days from the date of the termination of the lease, complete the cancellation or alteration registration, and deliver the
copy of the registration approval to Party A for record. Party A shall return the lease deposit to Party B according to the above term after that.

5-2 Besides the house rent and property management fees, Party B shall bear the costs of energy consumption (electricity, water and gas), communication
expenses, rental fees for equipment and facilities incurred for its own use. Party A shall install separate meter for Party B’s energy consumption and
collect the fees from Party B according to the meter reading before transferring it to the offices of utilities. Party A may entrust property management
companies to assist in collecting the above fees.

5-3 Both parties agree that the property management company entrusted by Party A (hereinafter referred to as “the management company”) is responsible
for the property management of the House. At the time of signing the Contract, the management company is Shanghai Puyuan Property Management
Co., Ltd., which will be responsible for the property equipment operation, daily management and services of the House. Party B shall pay the property
management fee. Party B shall sign the Property Management Agreement with the property management company prior to the transfer of the House.
Property management fee and payment method of the House shall be implemented in accordance with the Property Management Agreement signed by
Party B and the property management company.

5

 
 
 
 
 
 
6. Housing Requirements and Maintenance Responsibilities

6-1 During the rental term, Party A promises that the House and its ancillary public facilities would be in normal usable and safe condition. If Party B finds
that there is any damage or malfunction of the House or its ancillary public facilities (other than Party B’s decoration and equipment), Party B shall
notice Party A and / or the management company to repair. Party A and / or the management company shall conduct inspection or repair in 48 hours
after receiving the written notice from Party B and repair it within the period agreed on by both parties or within a reasonable period. If Party A shall
assume the responsibility for maintenance but Party A fails to repair it overdue, Party B may take the maintenance for it and reasonable maintenance
expenses shall be borne by Party A.

6-2 During the rental term, Party B shall fair use and take good care of the House and its affiliated public facilities, and take various preventive measures to
make the House safe from rain, wind or other natural causes. Party B shall assume maintenance responsibility for the improper or unreasonable use of
Party B which results in the damage or failure of the House and its affiliated public facilities. If Party B refuses to assume responsibility for maintenance,
Party A can take the maintenance on behalf of Party B, and reasonable maintenance costs borne by Party B. The maintenance of non-public facilities
which is owned by Party B can be entrusted to the property management companies, and maintenance costs borne by Party B.

6-3 Party  B  shall  strictly  follow  the  applicable  laws,  regulations,  rules  and  regulations  of  China  and  use  the  House  in  accordance  with  the  contractual
purposes, especially not to use the House in any unreasonable or unethical way. Party B will not use the House in any way that invalidates or increases
the  risk  of  insurance.  Party  B  shall  ensure  that  the  business  activities  engaged  in  using  the  House  have  obtained  the  business  license  issued  by  the
government administration for industry and commerce and guarantee that legal registration and permission shall be kept throughout the lease period.

6-4 During the rental term, Party A reserves the right to publish or authorize others to advertise, improve or add public facilities in other proper places where

is not exclusively for Party B. Party A shall not affect Party B’s normal use of the House and Party B’s Normal business.

6

 
 
 
 
 
 
 
6-5 Party B agrees to guarantee that Party A and / or Party A’s personnel shall be exempt from Party B’s personal injury and / or property damage, and

Party A and Party A’s personnel shall also be exempt from the third party’s claims and litigation caused by Party B.

7. Decoration and Accretion

7-1 Party B shall be responsible for the second decoration of the House. Party B’s decoration plan (including marking on the building facade or roof or
other public parts of the House) shall be subject to Party A’s approval and Party A’s written consent. Party B shall not, without prior written consent of
Party  A,  carry  out  any  unauthorized  activities  or  allow  any  other  person  to  carry  out  any  unauthorized  alteration  or  addition  of  the  House  and  its
decoration,  ancillary  facilities  and  equipment  (including  but  not  limited  to  trunk  lines,  drainage,  firefighting,  indoor  and  outdoor  appearances  and
existing installations). If such decoration needs the approval of the government department, Party B shall obtain the approval before construction.

7-2 During renovating the House, Party B shall not damage the building’s facade or carry out any internal structural alterations that may affect the service
life  and  safety  of  the  House,  including  but  not  limited  to  the  demolition  and  alteration  of  the  bearing  beam  walls.  If  Party  B  needs  to  change  the
structure of the house or modify the ancillary facilities and equipment of the house, etc., in addition to the written consent of Party A, Party B shall pay
the structural restoration fee deposit in accordance with the “Relevant Charges for Second Renovation of Leased Office of Shanghai Pudong Software
Park”, otherwise Party B shall not carry out construction.

7-3 During the  rental  term,  the  decoration  belongs  to  Party  B,  and  its  responsibility  for  maintenance  is  also  borne  by  Party  B,  unless  the  Parties  agree
otherwise. After the expiry of the rental term (including any early termination of the Contract attributable to Party B), Party B is obliged to remove the
decoration extras and restore the house to the pre-lease status (except for natural losses). If Party B does not move on schedule, Party A can take the
behalf of the removal, and the cost borne by Party B or deducted the cost from the deposit unless Party A agrees that Party B shall retain decoration
remnants when returning the house.

7

 
 
 
 
 
 
 
7-4 Party A’s  written  consent  to  the  decoration  of  Party  B  shall  not  be  construed  as  Party  A’s  obligation  or  responsibility  to  Party  B’s  decoration  and  its
consequences. Party B shall guarantee that its decoration and other facilities for its own addition are safe and will not cause any potential safety hazard
for the House or its users. Party B shall assume complete legal, technical and economic responsibility for its own decoration and its consequences.

7-5 Party A shall have the right to request Party B immediately to take all necessary measures to solve such safety problems if Party A finds any potential
safety hazard caused by Party B’s decoration and attachment actions during and after the lease and whether or not Party A agrees to such decoration and
attachment plan, until Party A unilaterally lift the lease. Party B entrusts the contractor to renovate the house. If it is not the cause of Party A, which
violates the laws and regulations of China, and the relevant provisions of construction, fire control and safety management, or causes property damage,
Party B and the contractor shall take the responsibility.

8. Enter and Check

8-1 During the lease, in order to ensure that the house and its ancillary facilities are properly accessible and safe, Party A and / or the management company
shall have the right to send staff to enter the house for reasonable inspection, maintenance and repair, but Party A and / or the management company
shall notify Party B at least 1 working day in advance (except: emergency situation and situation that Party A cannot be foreseen or controlled). Party B
should be cooperated with inspection, maintenance and repair, but Party A should minimize the impact on the use of the House by Party B.

8-2 If Party  B  renounces  the  right  of  renewal,  or  terminates  this  contract  prematurely  according  to  the  Contract,  or  Party  A  and  Party  B  fail  to  agree  on
whether to renew or not, Party B agrees that Party A has the right to accompany the interested subsequent tenants to visit the House within the time
agreed upon by both parties within 6 months prior to the termination, but Party A should give advanced notice to Party B.

8

 
 
 
 
 
 
 
9. Sublet, Mix, Transfer and Exchange

9-1 Without the prior written consent of Party A, Party B shall not sublet part or whole of the House to any third party in any form (including but not limited
to contracting, pooling affiliates, establishing affiliates, etc.) during the rental term, or mixed-use the House with any third party, or transfer the House to
others for rent, or exchange with others.

9-2 If Party B sublets part or whole of the House to any third party during the rental term, or uses it in combination with any third party, or transfers the
House to others for rent, or exchanges with other people’s rented houses in accordance with a separate written agreement between Party A and Party B,
Party B shall still be liable for the behavior of actual user of the House and the consequences during the rental term.

10. Priority Renewal Rights

10-
1

If the lease of the Contract expires and Party B needs to continue leasing the House, Party B shall submit a written request for renewal to Party A at least
four months before the expiry of the rental term of the Contract, and re-sign the rental contract with the consent of Party A. Under the same conditions,
Party B shall enjoy the priority of renewal of the whole of the House, except as otherwise stipulated by laws and regulations. If Party B submits to Party
A only a written request for renewal of the part of the House, Party B will not enjoy the priority of renewal. If Party B lately requests for the renewal of a
written request, it shall be deemed that Party B renounces the priority of renewal.

10-
2

After Party A agrees with Party B’s renewal and renewal conditions, both parties shall conclude a rental contract for the renewal of the House 3 months
before the expiry date of the Contract. If Party B fails to sign the renewal contract with Party A overdue, it shall be deemed that Party B renounces the
priority of renewal. The renewal rent is determined according to the renewal contract.

11. Return

11-1Party B shall return the House to Party A no later than the expiry date of the lease or the date on which the Contract is terminated prematurely.

11-2Before Party B returns the House to Party A, Party B shall clean the House so that the House is in good condition and can be rented. The House which is
returned by Party B shall be in conformity with the condition when the house was delivered (that is, it meets the requirements of Annex II and / or other
supplementary agreements). When the House is returned, it should be checked by Party A or / and the property management company entrusted by Party
A and the expenses should be settled.

9

 
 
  
 
 
 
 
 
  
 
 
11-3 Party B may retain the status quo of the House’s decoration if it has the written consent of Party A (permit that Party B may produce some natural wear
and tear due to normal use) and move out of the House (hereinafter referred to as “move out of the House”), otherwise, it should be reinstated. If Party
A shall agree in writing before Party B can retain the status quo of the House’s decoration, Party A shall have no obligation to make any compensation
or compensation for Party B’s construction or renovation of the House and its decoration and facilities. If the Contract is terminated early due to Party
A’s reason or because Party A breaches the Contract, Party B has no obligation to restore the status quo ante, and the House will be returned according
to the current status.

11-4 If Party  B  fails  to  return  the  house  to  Party  A  without  the  written  consent  of  Party  A  or  does  not  reach  an  agreement  in  writing  with  Party  A  on
renewing the term, Party B shall pay the overdue liquidated damages of the House which is 3 times the rent to Party A, and shall bear all the energy,
equipment, property management fees and all other expenses stipulated in the Contract during the period of occupation of the House. In addition, if
Party B fails to return the house to Party A 15 days after the expiry date of the lease or the early termination date of the Contract, Party A has the right
to release the house after written notice to Party B, Party A can (but does not have the obligation to) deposit it locally or expeditiously and Party A has
the right to collect the custody fee and removal fee from Party B in respect of the objects and has the right to sell, transfer, discard or other ways which
Party A deems it appropriate, and use the proceeds (if any) for any payment that Party B owes Party A and for any loss. In case of insufficient payment
and compensation, Party A shall have the right to recover the balance from Party B.

12. Exemption for Party A

12-1 During the rental term, when Party B occupies the House and its ancillary facilities, public facilities, if Party B causes any loss of property, damage and
personal injury caused by any of the following circumstances, Party B hereby agree, not because of Party A’s intention or gross negligence, Party A
does not bear any responsibility:

(1) Any loss or damage due to expropriation, acquisition, confiscation, nationalization or any force majeure caused by state or government agencies;

10

 
 
 
 
 
 
 
 
 
(2) Any loss or damage caused by theft, robbery and other criminal cases;

(3) No water, electricity, telephone, fax, air-conditioning and other services to the House at any time or any public facilities in the House, including the

planned maintenance and inspection of public facilities by a third party entrusted by Party A, are not operated and it is not due to Party A’s reasons;

(4) Party B’s losses and damages caused by other lessees or third parties;

(5) Party B’s losses and damages which is not caused by Party A’s intentional or gross negligence (Party A and / or the security guards and watchman’s

security services provided to the House do not constitute Party A’s liability to the House, personnel, and property).

13. Breach of the Contract and Liability for Breach of Contract

13-1 Party A’s default

(1) Party A shall compensate for the loss of Party B due to Party A’s transfer of property right caused by Party A’s setting up a new mortgage to the

House during the rental term as stipulated in this contract.

(2) During the rental term, Party A fails to perform the repair and maintenance responsibilities as stipulated in the Contract in time, resulting in damage
to the House or property, or personal injury to Party B’s personnel, sub-contractors, agents, employees, and decorators due to the structural problems
of the House, Party A should be responsible for compensation.

(3) During the rental term, except the exempt situation regulated by the Contract, laws or regulations, if Party A decides to terminate this contract or
take the House back early without authorization, Party A should give a written notice to Party B 6 months early. In this case, in addition to returning
the deposit to Party B, Party A should also pay liquidated damages which is amount to the monthly rent at that time to Party B. If Party A informs
Party B 3 months early but less than 6 months, Party A should pay liquidated damages which is twice the monthly rent at that time to Party B. If
Party A does not inform Party B 3 months early, Party A should pay liquidated damages which is triple the monthly rent at that time to Party B.

11

 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
Party B’s default

13-
2

(1) If Party B overdue payment of rent, deposit, equipment rental fee, energy consumption fee, property management fee or other relevant expenses
payable,  Party  B  shall  pay  overdue  fine  which  is  0.3%  of  the  amount  of  overdue  payment  per  day.  If  overdue  30  days,  Party  A  has  the  right  to
interrupt the water, electricity and other energy supply, until Party B pays all the expenses. And Party B should bear the cost of re-connection.

(2) If Party B fails to obtain the written consent of Party A to renovates the House or additional facilities beyond the written consent of Party A, Party A
has  the  right  to  request  Party  B  to  restore  the  original  state  of  the  House.  Party  B  shall  be  responsible  for  indemnification  if  Party  B  causes
irreparable damage to the House or Party A suffers losses (including but not limited to fines, damages, etc.) due to the aforesaid acts of Party B.

(3) Party B or any person expressly or implicitly authorized by Party B to enter the House or parking space shall be regarded as Party B’s act. If such act

causes damage or loss of personal or property to Party A or building, Party B shall jointly and severally liable for compensation.

(4) During  the  rental  term,  except  the  exempt  situation  regulated  by  the  Contract,  if  Party  B  decides  to  terminate  this  contract  early  without
authorization and Party B gives a written notice to Party A 3 months early, Party B should pay liquidated damages which is amount to the monthly
rent at that time to Party A. If Party B does not inform Party A 3 months early, Party B should pay liquidated damages which is triple the monthly
rent at that time to Party A. Party A may deduct the above liquidated damages from the remaining balance of the rental deposit that Party B has
already paid, and the insufficient part will be delivered separately by Party B.

Retirement refers to the behavior that Party B decides to terminate the lease relationship early for its own reasons, limited to a written statement.

(5) If Party B registers the House as its domicile, and Party B fails to complete the registration of alteration or cancellation within 30 days from the date
of  termination  of  the  tenancy  or  provide  the  copy  of  certificate  of  registration  to  Party  A  for  the  record,  Party  B  shall  pay  Party  A  liquidated
damages which is amount to the monthly rent at that time.

(6) Party A has right to request Party B to compensate Party A for the losses suffered thereby, if Party B takes the following actions:

(1) Intentional or negligent act of Party B and its employees and contractors on any part of the building or the House;

12

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(2) Party B violates or fails to comply with any applicable provisions of the Contract;

(3) Party B, its employees and other acts of the contractor will affect the normal operation and management of the building by Party A  and  the
property management company unless Party B provides reasonable explanations within 24 hours after receiving the written notice from Party
A.

14. The Force Majeure

14-
1

If either the Property or any part of the Building is destroyed or is not suitable for research and development and office during the lease period due to
Force Majeure, either party shall be entitled to notify the other in writing of the termination of the Contract, and neither party shall pursue the default
responsibility. The Contract is terminated from the day when notice is given by either party. Party A should return Party B the remaining rental deposit,
rental after the force majeure, and other expenses that Party B has prepaid within 10 working days from the date of termination of the Contract after
deducting the relevant expenses according to Clause 13 of the Contract without interest, as long as Party B pays all the expenses payable by Party B
before the force majeure which is regulated by the Contract and the supplementary agreements.

14-
2

The above “force majeure” means any unforeseen event beyond the reasonable control of one party and which is unavoidable despite reasonable care is
given  by  the  party,  including  but  not  limited  to,  earthquake,  typhoon,  plague,  flood,  fire,  storms,  tidal  waves  or  other  natural  disasters,  declared  or
undeclared war, riots and so on.

15. Terminate the Contract

15-
1

Both  Parties  agree  that  one  party  may  be  written  notice  to  the  other  party  to  terminate  the  Contract  under  the  following  situations,  and  the  party
breaching the Contract shall pay liquidated damages which is triple the monthly rent at that time to the other party. If the party breaching the Contract
also cause damages to the other party, and if the liquidated damages are insufficient to meet the damages, the balance still needs to be made up.

13

 
 
 
 
 
 
 
 
 
  
 
 
  
 
(1) Party A fails to deliver the House on time and still cannot deliver the House 30 days after the written notice from Party B;

(2) The house delivered by Party A does not meet the contract stipulated in Annex Ⅱ of the Contract, resulting in the failure to realize the purpose of

the lease; or the House delivered by Party A is defective and endangers the safety of Party B;

(3) Party B fails to obtain the written consent of Party A to change the use of the House;

(4) Party B causes damage to the main structure of the House or other irreparable damage;

(5) Party B, without the written consent of Party A and the approval of the relevant department, arbitrarily changed the nature of the production and

use involved in the property planning;

(6) Party B fails to obtain the written consent of Party A and permission from the safety production supervision, fire control and other relevant

departments to add or modify special equipment or to produce, manage, transport, store, use or dispose of hazardous chemicals;

(7) Party B renders part or all of the House to any third party without authorization, or uses it in combination with any third party, or transfers the

House to others for rent or exchanges with other people’s houses;

(8) Party B has not paid the rent over 30 days, and still cannot pay the rent 30 days after the written notice from Party A.

15-
2

Due to the breach of item (8) of the preceding paragraph, the Party A has the right to retain all the articles in the House until Party B pays all the money
(including the liquidated damages) to Party A.

Both Parties agree that the Contract is terminated under the following situations, and neither of them should be responsible for the termination.

15-
3

(1) The land use rights within the occupied area of the House are recovered early according to law;

(2) The House is requisitioned according to law because of public interests;

(3) The House is included in the scope of the permit for house demolition due to urban construction;

(4) The House is damaged, lost or has been identified as a dangerous house;

(5) Party A has informed Party B that the mortgage has been set before the rental, and is now being disposed of.

14

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
16. Statements and Guarantees

a) Party A hereby states and guarantees as follows:

(1) Party A  has  all  the  necessary  authorizations  to  formally  and  effectively  sign  and  perform  the  Contract  and  possess  all  the  necessary  powers  and

capabilities to lease the House to Party B in accordance with applicable laws.

(2) Party A’s signing and performance of the Contract shall not constitute a violation of the applicable law or any contract signed by Party A with any

third party.

(3) Party A guarantees that the House has been built and in good condition in accordance with applicable laws (including but not limited to safety and

health related laws and regulations) and has legal ownership over it.

b) Party B hereby states and guarantees as follows:

(1) Party B has all the necessary authorizations to formally and effectively sign and perform the Contract.

(2) Party B has legal business qualification. During the renewal of the Contract, Party B will engage in business activities in accordance with the scope

of its business license, and its business activities must comply with the relevant provisions of national laws and regulations.

(3) Party B promises not to disclose any information involved in the Contract to any third party, including but not limited to the rental price. If Party B’s

behavior leaks any of above mentioned information, Party A reserves the right to retroactively indemnify Party B.

17. Safe Production

17-
1

Party B shall strictly comply with the safety management code of the park including the Notice on Enterprise Safety Management in Shanghai Pudong
Software Park (see Annex Ⅲ for details) and shall be fully responsible for its own safety management. Party B shall immediately inform Party A in an
effective manner once a safety accident has occurred, and provide a written report after the incident, while trying its best to avoid or reduce the casualties
or property damage. If the circumstances of the accident are serious and have caused or may cause casualties, Party B shall also directly report to the
relevant government department in accordance with the law.

15

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
17-
2

During the rental term of the Contract, Party A shall have the right to recourse to Party B and terminate the Contract if Party B produces safety accident
in the area of Shanghai Pudong Software Park. If the safety accidents cause loss of Party A, Party B should compensate Party A.

Party B’s safety records shall be used as a reference for Party B’s priority rights such as renewal and extension of lease (if any).

17-
3

18. Other Terms

18-
1

18-
2

The Contract takes effect immediately after both parties have signed and sealed the contract.

The  unaccomplished  matters  of  the  Contract  may  be  concluded  by  the  supplementary  agreements  or  terms  between  Party  A  and  Party  B.  The
supplementary agreement, the terms and the supplements to the Contract are an integral part of the Contract. The written words in the Contract and its
supplementary terms, agreements and the space in the appendix have the same effect as the printed language.

18-
3

When both parties sign the Contract, they shall clearly understand their respective rights, obligations and responsibilities and are willing to fulfill their
obligations strictly according to the Contract. If one party violates the Contract, the other party is entitled to claim according to the Contract.

18-
4

Party A  and  Party  B  shall  settle  their  disputes  through  negotiation  during  the  performance  of  the  Contract.  If  they  fail  to  reach  a  consensus  through
negotiation, both parties agree to choose the following method (2) to settle in accordance with the laws of the People’s Republic of China:

(1) submitted to China International Economic and Trade Arbitration Commission Shanghai Branch for arbitration;

(2) bring a lawsuit to the people’s court where the House is located.

18-
5

The Contract has four copies with the Annex, and Party A, Party B, the business department, the tax department each hold a copy. All of them have the
same effect.

18-
6

All fees and taxes related to the registration of the Contract (including but not limited to stamp duty) should be borne by both parties in accordance with
the regulations of the People’s Republic of China and Shanghai.

18-
7

Party B is obliged to cooperate with Party A to complete all forms of non-profitable research activities for the purpose of industry research, including but
not limited to questionnaires, interviews with business executives, and collection of economic data. Party A will not disclose any information or data
provided  by  Party  B  for  other  purpose  other  than  industry  research  and  will  not  disclose  any  trade  secrets  to  any  third  party  which  is  not  related  to
industrial research.

16

 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
Annex I

Plan of the House

17

 
 
 
 
the existing decoration of the House, ancillary facilities and equipment status, and the decoration and additional facilities which Party A allows Party B to do
in writing

Annex II

18

 
 
 
 
Annex III

Notice of Shanghai Pudong Software Park Park Enterprise Security Management

According to Production Safety Law of the People’s Republic of China, Regulations on the Reporting, Investigation and Handling of Work Safety Accidents,
Regulations on Production Safety of Shanghai, for further strengthen the security management of Shanghai Pudong Software Park, effectively protect the life
of the park personnel and property safety, we will inform about the safety management in the park as follows:

1. Safety Management Responsibilities of Companies in the Park

The  company  in  the  park  should  be  responsible  for  the  work  of  safety  management,  including  the  area  that  the  company  leased,  in  the  process  of
working, employee’s safety management during working or work-related experiences, and take the responsibility.

1. The park enterprise assigns the safety commissioner as the first safety liaison and is in charge of the safety work in the leased area and liaises with
Shanghai Pudong Software Park Co., Ltd. (hereinafter referred to as “Pu soft”). If there is a change of position in the safety commissioner, the job
successor automatically becomes the first safety liaison or the park shall assign another person and informed in writing to Pu Soft.

2. Strictly abide by the laws, regulations and rules related to safety and possess the qualifications and conditions for safety production required for the

operation of the business and industry.

3. Pursuant  to  the  written  approval  by  Pu  soft  company,  if  a  company  can  sublease  or  sublet  the  office,  it  shall  conclude  a  safety  management
agreement  with  the  sub-tenant  on  the  basis  of  the  contents  of  this  circular  with  a  clear  emphasis  on  safety  responsibilities  and  management
requirements.

2. Safety Requirements of Daily Operation

1. Establish  safety  management  rules  and  systems  with  safety  responsibility  system  as  the  core.  Strengthen  safety  education  and  management  of
suppliers. Enhance daily education and training of employees in safety work. Provide safety management personnel and equipment. In accordance
with the relevant regulations and establish safety standards emergency rescue and evacuation plan.

2. The renovations within the scope of renter and equipment installation should comply with the relevant provisions, norms and standards of safety and

fire safety. According to national and local regulations, construction and equipment installation needs to be reviewed and accepted.

3. The facilities and equipment must pass inspection, tests and acceptance, and should be operated by trained and qualified people. Those people who
are engaged in special operations must have the appropriate qualifications. The equipment and operations personnel should be reviewed annually in
accordance with related regulations.

19

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4. Don’t produce, store toxic, harmful, flammable, explosive materials.

5. Loading and unloading of goods in the designated area, do a good job of on-site safety supervision and support.

6.

It is strictly forbidden to lodge staff in the office area of Shanghai Pudong Software Park.

7. The  risk  of  accidents  or  insecurity  should  be  self-examination  and  timely  rectification.  Cooperate  with  Pu  soft  company  and  the  property

management unit for safety inspection and rectification.

3. Requirements of Fire Safety

1. Actively involved in the fire drill and cooperate with Pu soft company and property management units.

2. Equip fire extinguisher in line with the provisions in their own rented area. Set in line with the provisions of the requirements, identify the obvious

emergency evacuation diagram. Always keep the evacuation routes and entrances and exits open.

3. Smoking is strictly forbidden in non-smoking areas. It is forbidden to use open flame in violation of regulation.

4.

It is forbidden to block, close, occupy the evacuation routes and entrances and exits.

4. Requirements of Security and Traffic Safety

1.

Improve staff’s awareness of personal safety, property safety and traffic safety. Properly store their valuables such as cash and securities, and set up
more reliable safety precautions to prevent theft.

2. The motor  vehicles  owned  by  their  employees  or  their  employees’  relatives  shall  strictly  follow  the  traffic  lights’  instruction  and  traffic  signs’

instruction to drive. Parking in the line with norms and regulations.

If any unexpected incident or accident occurs, including but not limited to safety production, anti-crime, traffic or public security, it shall be reported to Pu
soft  as  soon  as  possible.  In  the  case  of  emergencies,  it  shall  be  reported  directly  to  the  police,  fire  department,  rescue  department  and  other  departments
immediately, afterwards be reported to Pu soft company.

20

 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exhibit 10.12

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exhibit 10.17

No. Z1912LN15693732

Current Fund Loan Contract
(Applicable to 531)

Bank of Communications Co., Ltd.

 
 
 
 
 
Current Fund Loan Contract

Important Notes

Please  read  the  full  text  of  this  contract  carefully,  especially  those  articles  marked  with
▲▲. Please inquire the loaner in case of any question.

No. Z1912LN15693732

Whereas, the borrower applies to the loaner for the line of credit of current fund, both parties hereby enter into this contract through negotiations to

clarify the obligations of each party.

Article 1. Definition

“Line of credit” refers to the maximum amount of balance of loan (under the revolving line of credit) or total loan (under the one-time line of credit)
that the loaner may issue to the borrower according to this contract. Such line of credit may be revolving or one-time (to be used for one or several times) in
accordance with this contract.

“Revolving line of credit” refers to the line of credit within which the borrower may apply for the loan for several times according to this contract.

“Balance of loan” refers to the sum of principal of the outstanding loan that the borrower obtains under this contract.

“Balance of line of credit” refers to the balance of the line of credit deducted with the balance of loan (under the revolving line of credit) or total loan

(under the one-time line of credit).

“Period  of  line  of  credit”  refers  to  the  period  for  the  loaner  to  issue  the  loan  to  the  borrower  according  to  the  application  by  the  borrower  and  this

contract that it is in relation to the occurrence of loan but not the loan itself.

“Period  of  loan”  refers  to  the  period  of  each  loan  that  both  parties  determine  in  the  corresponding  Application  for  Use  of  Line  of  Credit  of  Bank  of

Communications (hereinafter referred to as Application for Use of Line of Credit).

“Business day of bank” and “business day” refer to the day on which banks at the place of the loaner operate the corporation business, excluding legal
holidays  and  rest  days  (excluding  those  adjusted  to  be  business  days).  If  any  issuance,  repayment,  interest  payment  or  maturity  of  loan  lies  at  any  non-
business day, it should be postponed to the next business day.

Terms including affiliate, affiliate transaction and major investor should contain the same meaning with those contained in the Accounting Standards for

Business Enterprises No.36 – Disclosure of Affiliates (CK [2006] No.3) published by the Ministry of Finance, as well as its subsequent revisions.

2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Article 2. Use of Line of Credit

2.1 Each time when needing to use the line of credit, the borrower should submit the application to the loaner at least 5 business days in advance. The

borrower should fill in the Application for Use of Line of Credit to obtain the approval by the loaner before using the line of credit.

▲▲2.2 Use of the line of credit must meeting following conditions:

(1) Balance of loan (under the revolving line of credit) or total loan (under the one-time line of credit) is within the line of credit;

(2) Amount of applied loan is within the balance of line of credit;

(3) Application date and issuance date are within the period of line of credit;

(4) Period of loan and maturity date of loan comply with this contract;

(5) Guarantee contract (if any) under this contract is effective and surviving, and while the guarantee contract is in the form of mortgage contract and/or

pledge contract, the secured real right is already set and surviving;

(6) The borrower has handled procedures to obtain licenses, approvals and registrations from the government necessary for the application for the loan,

and such licenses, approvals or registrations are surviving;

(7) No serious adverse change occurs in the operation status or financial status of the borrower after this contract takes effect;

(8) Application by the borrower meets relevant rules and regulations of the loaner;

(9) The borrower does not violate this contract;

(10) Payment mode of the loan meets this contract and if the loaner is entrusted to make the payment, the loaner should agree with the payment;

(11) If the loan is provided in any foreign currency, the borrower should provide the certificate providing that the loan meets relevant policies on the

management of foreign currency, including but not limited to the valid purpose certificate or registration document of foreign currency;

(12) The borrower has appointed the dedicated fund withdrawal account as required by the loaner and has signed the account management agreement.

▲▲2.3 If the loaner agrees to issue the loan, the final issuance information should be subject to the column of Application for Use of Line of Credit

printed by the bank. Application for Use of Line of Credit should be regarded as the Loan Certificate.

▲▲2.4 If the currency of the Application for Use of Line of Credit is different from that of the line of credit, it should be converted at the exchange rate
published by Bank of Communications Co., Ltd. in the beginning of each day only for the purpose of recognizing the balance of line of credit. If there is no
available exchange rate, it should be converted by the exchange rate reasonably determined by Bank of Communications Co., Ltd.

3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
▲▲2.5 After the borrower becomes the shareholder of the guarantor or the “actual controller” defined by the Company Law, the loaner may suspend or
cancel the line of credit not used by the borrower until the guarantor provides the resolution made by its Board of Shareholders (General Meeting) about
securing the borrower that is acceptable to the loaner.

Article 3. Interest Rate and Payment of Interest

3.1 Basic regulations on determining the interest rate

3.1.1 The interest rate should be agreed by both parties in the Application for Use of Line of Credit through negotiations in each use of the line of credit.
Unless  any  specific  interest  rate  is  agreed  by  both  parties  in  the  Application  for  Use  of  Line  of  Credit,  the  specific  interest  rate  of  each  loan  should  be
determined in accordance with the type of benchmark interest rate, applicable date of benchmark interest rate, fluctuation extent/increase (decrease) value of
interest  rate,  interest  rate  fluctuation  rules,  interest  rate  fluctuation  cycle,  interest  rate  fluctuation  cycle  unit  and  specific  beginning  date  of  fluctuation  (if
necessary) agreed in the corresponding Application for Use of Line of Credit.

3.1.2 Type and definition of “benchmark interest rate”: (1) “Benchmark interest rate of the People’s Bank” refers to the benchmark interest rate of RMB
loan of financial institutions published by the People’s Bank of China; (2) LPR quotation of Bank of Communications refers to the quotation for benchmark
interest rate of loan published by Bank of Communications Co., Ltd. on its official website; (3) LPR mean interest rate refers to the benchmark interest rate
of loan published by the National Inter-bank Funding Center.

3.1.3 If the currency is RMB, daily interest rate = monthly interest rate/30, monthly interest rate = annual interest rate/12; if the currency is HKD, GBP
and AUD, daily interest rate = annual interest rate/365; if the currency is USD, Euro, JPN and other foreign currencies accepted by the loaner, daily interest
rate = annual interest rate/360.

▲▲3.2 Interest rate of loan

The interest rate of each loan at the time of issuance should be determined in accordance with the fluctuation extent/increase (decrease) value on the
basis  of  the  benchmark  interest  rate.  If  the  “applicable  date  of  benchmark  interest  rate”  is  set  as  T  Day,  then  the  benchmark  interest  rate  to  calculate  the
specific interest rate of the loan at the time of issuance should be determined by following rules:

If the benchmark interest rate of the People’s Bank applies, the benchmark interest rate should be the benchmark interest rate of the People’s Bank on T

Day;

If LPR quotation of Bank of Communications applies, the benchmark interest rate should be the LPR value published on the latest business day before
T Day, and, if no LPR is published on the latest business day before T Day, the benchmark interest rate should be the LPR value published on the former
business day before that day;

4

 
 
 
 
 
 
 
 
 
 
 
 
If LPR mean interest rate applies, the benchmark interest rate should be the LPR value published on the latest business day before T Day, and, if no
LPR is published on the latest business day before T Day, the benchmark interest rate should be the LPR value published on the former business day before
that day.

3.3 Adjustment of interest rate

3.3.1 Once the interest rate is recorded in the Application for Use of Line of Credit as fixed, such interest rate should apply to the loan within the period

of loan.

▲ ▲ 3.3.2  Once  the  interest  rate  is  recorded  in  the  Application  for  Use  of  Line  of  Credit  as  fluctuating,  the  interest  rate  adjustment  date  should  be
determined according to the interest rate fluctuation rules, interest rate fluctuation cycle, interest rate fluctuation cycle unit and specific beginning date of
fluctuation (if necessary) agreed in the Application for Use of Line of Credit, and the adjusted interest rate should apply since the interest rate adjustment
date.

3.3.2.1  If  the  benchmark  interest  rate  is  adjusted  within  the  period  of  loan,  the  adjustment  cycle  of  interest  rate  should  be  calculated  by  choosing
“fluctuating at bookkeeping date” or “fluctuating at specific date” in the “interest rate fluctuation rules” since the “bookkeeping date” or “specific date”. The
column of interest rate fluctuation cycle should be filled with the quantity of interest rate fluctuation cycles, the column of interest rate fluctuation cycle unit
may be filled with day or month. If the quantity of interest rate fluctuation cycle is “1” while the interest rate fluctuation unit is “day”, then the adjustment
date of benchmark interest rate should be the adjustment date of loan interest rate; if the quantity of interest rate fluctuation cycle is “3” while the interest rate
fluctuation  unit  is  “day”,  then  the  adjustment  date  of  loan  interest  rate  should  be  every  third  day  since  the  “bookkeeping  date”  or  “specific  date”;  if  the
quantity of interest rate fluctuation cycle is “1” while the interest rate fluctuation unit is “month”, then the adjustment date of loan interest rate should be the
end of every month since the “bookkeeping date” or “specific date”; if the quantity of interest rate fluctuation cycle is “3” while the interest rate fluctuation
unit is “month”, then the adjustment date of loan interest rate should be the end of every third month since the “bookkeeping date” or “specific date”, the
same below.

3.3.2.2 Loan interest rate at the adjustment date of loan interest rate should be determined according to the benchmark interest rate at the adjustment
date of loan interest while the interest rate fluctuation/increase (decrease) value is kept unchanged (unless negotiated by both parties to be adjusted). If the
“adjustment date of loan interest rate” is set as T Day, then the benchmark interest rate of adjusted loan interest rate should be determined by following rules:

If the benchmark interest rate of the People’s Bank applies, the benchmark interest rate should be the benchmark interest rate of the People’s Bank on T

Day;

If LPR quotation of Bank of Communications applies, the benchmark interest rate should be the LPR value published on the latest business day before
T Day, and, if no LPR is published on the latest business day before T Day, the benchmark interest rate should be the LPR value published on the former
business day before that day;

5

 
 
 
 
 
 
 
 
 
 
If LPR mean interest rate applies, the benchmark interest rate should be the LPR value published on the latest business day before T Day, and, if no
LPR is published on the latest business day before T Day, the benchmark interest rate should be the LPR value published on the former business day before
that day.

▲▲3.3.3 If the “benchmark interest rate of the People’s Bank” is applied as the benchmark interest rate and the benchmark interest rate of the People’s
Bank  is  adjusted  to  be  fluctuating  interest  rate  or  cancelled,  both  parties  should  adjust  the  interest  rate  of  the  loan  through  separate  negotiations  but  the
adjusted interest rate should be no lower than the prevailing interest rate; if both parties fail to reach a common sense on the adjustment of interest rate within
one month since the adjustment date of the People’s Bank, the loaner may announce the earlier maturity of the loan.

If the “LPR quotation of Bank of Communications” or “LPR mean interest rate” is applied as the benchmark interest rate and the relevant benchmark
interest  rate  is  cancelled  according  to  the  regulation  requirement  or  suspended  by  the  issuer  according  to  the  regulation  requirement,  both  parties  should
adjust  the  interest  rate  of  the  loan  through  separate  negotiations  but  the  adjusted  interest  rate  should  be  no  lower  than  the  prevailing  interest  rate;  if  both
parties fail to reach a common sense on the adjustment of interest rate within one month since the relevant benchmark interest rate is cancelled or suspended,
the loaner may announce the earlier maturity of the loan.

▲▲3.3.4 Both parties may adjust the fluctuation extent or increase (decrease) value of the corresponding loan interest rate through negotiation at each

adjustment date of loan interest rate.

3.4 If the currency is RMB, default interest of the overdue loan should be fluctuated upwards by 50% on the basis of the interest rate specified in this
contract, and that of the embezzled loan should be fluctuated upwards by 100% on the basis of the interest rate specified in this contract. If the benchmark
interest rate is adjusted, the loaner may adjust the rate of default interest of each loan and apply the new rate of default interest since the adjustment date of
loan interest rate specified in the Application for Use of Line of Credit.

3.5 Calculation of interest

3.5.1 Normal interest = interest rate specified in this contract X issued loan X days of occupation.

Days of occupation begins from the issuance date (included) and ends at the maturity date (excluded), and may be postponed if the maturity date is not a

business day while the postponed period should be accounted into the occupation and charged with the interest according to this contract.

3.5.2 The default interest of overdue loan and embezzled loan should be calculated according to the overdue or embezzled amount and the actual days

(since the date of overdue or embezzlement (included) to the repayment date of principal and interest (excluded)).

3.5.3 If there are too many numbers after the decimal point of the calculated interest/default interest, the loaner may round off the result to two numbers

after the decimal point.

▲▲3.6 If the borrower repays the loan in advance or the loaner withdraws the loan in advance according to this contract, the corresponding interest

rate shall still be subject to that specified in this contract.

6

 
 
 
 
 
 
 
 
 
 
 
 
 
3.7 If the loan is in any foreign currency, the determination of interest rate, adjustment of interest rate, default interest rate of overdue and embezzlement

should be subject to Article 17 of this contract.

Article 4. Payment of Loan

4.1 If the issuance account appointed by the borrower is the dedicated loan issuance account opened at the loaner, the issuance and payment of loan
should be handled through the account, which may only be used to issue and externally pay the loan fund and only sell the certificate of “Application for
Settlement Business” but may not be used to handle any check, draft, bank acceptance or any other settlement. When handling the allocation of loan fund
independently, the borrower must handle procedures at the counter of the bank of deposit. The deposit interest of the account should be accounted into the
repayment account of the borrower.

4.2  When  drawing  the  loan  according  to  this  contract,  the  borrower  should  clarify  the  payment  mode  (entrusted  payment  by  loaner  or  independent

payment by borrower) and only one mode is applicable in each time of drawing.

4.3  In  the  mode  of  entrusted  payment  by  loaner,  the  loaner  will,  after  receiving  the  payment  entrustment  from  the  borrower  and  issuing  the  loan
according to this contract, pay the loan fund directly to the counterparty of the borrower meeting the purpose specified in this contract through the account of
the borrower.

If  the  amount  of  a  single  payment  is  beyond  the  limit  of  the  independent  payment  or  any  condition  specified  in  Article  19.3,  the  mode  of  entrusted

payment should apply.

When choosing the mode of entrusted payment by the loaner, the borrower should submit the loaner with the Application for Use of Line of Credit,
corresponding payment entrustment and other materials required by the loaner (including but not limited to the commercial contract, invoice and receipt) to
clarify the amount of loan and the receiver and amount of payment, while the amount of drawn loan should equal to that of the payment.

▲▲ If the payment planned by the borrower does not comply with this contract or the corresponding commercial contract, or contains any other defect,

the loaner may refuse to make the payment and return the payment entrustment submitted by the borrower.

▲▲  If  the  loaner  agrees  but  fails  to  make  the  payment  or  the  payment  is  returned  due  to  any  incorrect  information  provided  by  the  borrower,  the
borrower should submit relevant documents and materials containing the correct information within the period regulated by the loaner, and the loaner should
be expected from any liability for any delay or failure of payment.

4.4 In the mode of independent payment by the borrower, after the loaner issues the loan fund to the account of the loaner according to this contract, the

borrower pays the fund to the counterparty of the borrower meeting the purpose specified in this contract independently.

7

 
 
 
 
 
 
 
 
 
 
 
 
When  choosing  the  mode  of  independent  payment  by  the  borrower,  the  borrower  should  submit  the  loaner  with  the  Application  for  Use  of  Line  of
Credit, description of fund usage and other materials required by the loaner. The borrower should report the payment situation of the loan fund to the loaner.
The loaner may check whether the loan is paid for the regulated purpose by analyzing the account, verifying the certificate and conducting the on-site survey,
and the borrower shall cooperate with such verification by the loaner.

Article 5. Repayment of Loan

5.1 The borrower should make the repayment according to the date and amount specified in the corresponding Application for Use of Line of Credit.

▲▲5.2 Without the written consent from the loaner, the borrower may not repay the loan in advance.

▲▲5.3 The repayment schedule of principal and interest agreed by the borrower and the loaner in the Application for Use of Line of Credit is the true
intention of both parties through negotiations on a voluntary basis. Under the repayment arrangement chosen by both parties, the principal should prior to the
interest  in  the  repayment  without  influencing  the  repayment  liability  of  the  borrower  for  the  payable  interest,  and  the  borrower  may  not  set  up  any  plea
against the repayment of payable interest. The borrower should be responsible for repaying all the principal and interest under any repayment arrangement.

▲▲5.4 When the amount repaid by the borrower is insufficient to cover all the debt of the borrower:

(1) It should be firstly used to repay the overdue amount. If the principal and interest are overdue for less than 90 days, the balance after such repayment
should be firstly used to repay the outstanding interest, default interest or compound interest before any overdue principal; if the principal and interest are
overdue  for  more  than  90  days,  the  balance  after  such  repayment  should  be  firstly  used  to  repay  the  outstanding  principal  and  then  the  overdue  interest,
default interest or compound interest;

(2) If there are several debts of the borrower (including debts of the borrower owed to the loaner under any other contract), the loaner may determine the
repayment sequence of each debt, only if such sequence does not violate any applicable law, rule, regulation, system or any compulsory regulatory provision
of the loaner. The loaner should inform the borrower of the repayment result, unless otherwise regulated.

Article 6. Representation and Guarantee of Borrower

6.1 The borrower is legally incorporated and surviving, possesses all the necessary capacities, perform obligations under this contract it its own name

and assumes civil liabilities.

6.2  Signing  and  performing  this  contract  are  the  true  intention  of  the  borrower  that  they  must  obtain  all  the  necessary  approvals,  permissions  and

authorizations to contain no legal defect.

6.3  The  borrower  conducts  production  and  operation  in  compliance  with  laws  and  regulations,  possesses  the  constant  operation  capability  and  legal
repayment source, involves no serious environmental or social risk, possesses no serious adverse credit record and no officer of the borrower possesses any
adverse record.

8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
6.4  All  the  documents,  statements,  materials  and  information  provided  by  the  borrower  to  the  loaner  when  signing  and  performing  this  contract  are
authentic,  accurate,  complete  and  valid.  The  borrower  does  not  conceal  any  information  that  may  affect  its  financial  status  and  solvency,  and  there  is  no
serious adverse change to the financial status of the borrower since the issuance of the latest financial statement.

▲▲6.5 Neither the borrower nor any of its affiliate belongs to the enterprise or individual sanctioned by the UN, EU or US, or is located in any country

or area sanctioned by the UN, EU or US.

Article 7. Rights and Obligations of Loaner

7.1 The loaner may withdraw the principal and interest (including compound interest and default interest of overdue and embezzled loan) of the loan
according to this contract, collect the payable expense from the borrower, withdraw the loan in advance at its own discretion depending on the fund status of
the borrower, and may exercise other rights under laws, regulations or this contract.

▲▲7.2 The loaner only conducts the formal examination of materials provided by the borrower during the performance of this contract that the loaner
should be exempted from any liability for the failure to complete entrusted payment if the borrower provides any false, inaccurate or uncomplete material or
the borrower makes the payment in violation to this contract.

▲▲7.3 The loaner should issue the loan and make the payment according to this contract. The loaner should be exempted from the liability if the
loaner fails to issue the loan or make the payment due to any cause below, but the loaner should send a notice to the borrower in time: the issuance account
appointed by the borrower is frozen, the account of the receiver is frozen, there is any force majeure, communicaiton or network fault, or the system fault of
the loaner, unless otherwise regulated in this contract.

Article 8. Obligations of Borrower

8.1 The borrower should repay the principal and interest of loan under this contract according to the time, amount, currency and interest rate specified in

this contract and the corresponding Application for Use of Line of Credit.

The  fund  collection  account  appointed  by  the  borrower  should  be  used  to  collect  the  corresponding  sales  income  or  planned  repayment  fund.  If  the
corresponding sales income is not settled in cash, the borrower should ensure to allocate it to the fund collection account upon receiving it. The borrower
should provide the cash flow of the fund collection upon the request from the loaner.

8.2 The borrower should use the line of credit for the purpose specified in this contract and use the loan for the purpose specified in the corresponding
Application for Use of Line of Credit but may not embezzle the loan for any other purpose, or the investment in fixed assets, equity or any production or
operation prohibited by the government.

The borrower should draw the loan fund in the mode agreed by both parties but not avoid the entrusted payment by the loaner by breaking up the whole
into parts; in the mode of independent payment by the borrower, the borrower should use the loan within the reasonable period required by the regulatory
authority of the loaner, and the payment of loan fund should meeting this contract.

9

 
 
 
 
 
 
 
 
 
 
 
 
 
▲ ▲ 8.3  The  borrower  should  assume  the  settlement  expense  (if  any)  of  the  payment  of  loan  fund  (including  entrusted  payment  by  the  loaner  and
independent payment by the borrower), and the special charge standard is subject to laws, rules, regulations, regulatory provisions and the prevailing Charge
List of Services of Bank of Communications published by the loaner.

If the issuance account is dedicated for the issuance of loan and the collection account is not opened at Bank of Communications in the payment of loan
fund  (including  entrusted  payment  by  the  loaner  and  independent  payment  by  the  borrower),  the  fund  may  be  processed  by  the  payment  system  or  local
clearing system of the People’s Bank.

If the issuance account is not dedicated for the issuance of loan and the collection account is not local or opened at Bank of Communications in the
payment of loan fund (including entrusted payment by the loaner and independent payment by the borrower), the fund should be processed by the payment
system of the People’s Bank.

▲▲8.4 The borrower should cooperate with the loaner in the management of loan payment and the supervision and inspection of the use of loan and
operation situation of the borrower, provide the financial statement, use record and material of the loan fund, information of affiliate and affiliate transaction,
environmental and social risk report, other materials and information necessary for the after-loan risk management required by the loaner, and shall ensure
the authenticity, integrity and accuracy of such documents, materials and information.

▲▲8.5 Under either circumstance below, the borrower should send a written notice to the loaner at least 30 days in advance and take no action before

repaying the principal and interest under this contract or providing the repayment plan or guarantee recognized by the loaner:

(1) The borrower sells, presents, leases, lends, transfers, mortgages, pledges or disposes in any other manner all or a large part of the assets or important

assets;

(2) The operation mechanism or ownership organization of the borrower suffers from any great change, including but not limited to the contracting,
lease, association, corporate system transformation, joint stock cooperation system transformation, sales, combination (merger), joint venture (cooperation),
separation of enterprise, establishing of subsidiary, equity transfer, ownership transfer, and decrease of capital.

(3) The external investment or increase of debt financing of the borrower exceeds the agreed limit.

▲▲8.6 The borrower should send a written notice to the loaner within 7 days since the occurrence or possible occurrence of any circumstance below:

(1) The borrower or its affiliate revises the Memorandum of Association, changes the name, legal representative (responsible person), domicile, mailing

address or business scope of the enterprise, or makes any decision that affects the finance or human resource greatly;

10

 
 
 
 
 
 
 
 
 
 
 
 
(2) The borrower, its affiliate or guarantor plans to apply for bankruptcy or may be or has been applied by the creditor for bankruptcy;

(3) The borrower or its affiliate is involved in any serious lawsuit, arbitration or administrative measure, or its major assets or the guarantee under this
contract is executed with the property preservation or any other compulsory measure, or the security of its major assets or the guarantee under this contract is
or may be affected or the value is or may be decreased;

(4)  The  borrower  or  its  affiliate  provides  any  guarantee  to  any  third  party  to  affect  its  economic  status,  financial  status  or  capability  in  performing

obligations under this contract significantly;

(5) The borrower or its affiliate enters into any contract with significant influence on its operation and financial status;

(6) The borrower repays the immature debt in advance or repay other mature debt firstly, or increases any form of guarantee for any other existing debt,

or makes any arrangement with the similar effect or enters into any relevant document;

(7) The borrower, its affiliate or guarantor is shut down, closed, dissolved, suspended, cancelled, or the business license is withdrawn;

(8)  The  borrower  or  its  affiliate,  major  investor  of  the  borrower  or  its  affiliate,  legal  representative  (responsible  person),  director  or  officer  of  the

borrower or its affiliate is missing or involved in any violation, to any law, regulation or rule of stock exchange, or suffers from any abnormal change;

(9)  The  borrower  or  its  affiliate  suffers  from  serious  difficulty  or  deterioration  of  financial  status  in  the  operation,  or  there  is  any  other  event  with

adverse influence on the operation, financial status, solvency or economic status of the borrower or its affiliate;

(10) There is any affiliated transaction and its amount reaches or exceeds 10% of the latest audited net assets;

(11) Before repaying all the debts under this contract, the borrower becomes or may become the shareholder or the “actual controller” defined by the

Company Law of the guarantor;

(12) The borrower or its affiliate causes any liability accident or is made public by the media by violating any law, rule, regulation, national policy or

industrial standard;

(13) The borrower or its affiliate encounters any safety or environment protection accident;

(14) The relationship between the affiliate and the borrower is changed;

(15) The borrower or its affiliate encounters any significant equity change;

(16) The opinion issued by the external audit of the borrower on its financial statements is not the standard unreserved opinion;

11

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(17) The borrower is or may be investigated, punished or taken with other similar measures by the competent authority as it violates the law or rule

and/or regulatory requirement;

(18) The borrower or its affiliate is listed to be sanctioned by the UN, EU or US, or the country or area where the borrower or its affiliate resides in is

listed to be sanctioned by the UN, EU or US;

(19) There is any other event with serious adverse influence on the solvency of the borrower or its affiliate.

▲▲8.7 In case of any change of guarantee under this contract that is adverse to the creditor’s right of the loaner, the borrower should provide other

guarantee recognized by the loaner in time.

The  “change”  specified  here  includes  but  not  limited  to:  merger,  separation,  shutdown,  dissolution,  suspension,  cancellation,  withdrawal  of  business
license, and applying or being applied for bankruptcy of the guarantor; significant change of the operation or financial status of the guarantor; the guarantor is
involved in any serious lawsuit, arbitration or administrative measures, or the major assets is taken with property preservation or other compulsory measure;
the security of the guarantee is or may be affected; the value of the guarantee is or may be decreased, or taken with measures of property preservation, such
as  sealing;  the  guarantor  or  its  legal  representative  (responsible  person)  or  officer  violates  any  law,  regulation  or  applicable  rules  of  stock  exchange;  the
guarantor (when it is an individual) is missing or dead (announced to be dead); the guarantor breaches the guarantee contract; there is any dispute between
the guarantor and the borrower; the guarantor requires cancelling the guarantee contract; the guarantee contract does not take effect, or is invalid or cancelled;
the secured real right is not set up or take effect; any other event affecting the security of the creditor’s right of the loaner.

▲ ▲ 8.8  The  borrower  promises:  during  the  period  since  the  signing  date  of  this  contract  to  the  date  at  which  the  principal,  interest  and  relevant
expenses  of  the  loan  under  this  contract  are  paid  off,  the  financial  index,  external  rating,  as  well  as  production  and  operation  qualification/license  of  the
borrower will always comply with this contract, and such production and operation qualification/license will pass the annual inspection if necessary.

8.9 The borrower guarantees to obey laws, rules and relevant policies about the anti-money laundering of the government that it will not conduct any
activity  involving  money  laundering  or  terrorism  financing,  cooperate  with  the  loaner  in  identifying  the  customer,  keeping  the  transaction  record,  and
reporting the large-amount and suspected transaction.

8.10  The  borrower  guarantees  that  the  borrower,  together  with  any  of  its  employee  or  agent  will  not  offer,  present,  require  or  receive  any  form  of
material interest not included in this contract to or from the loaner or its employee (including but not limited to cash, physical card, tour, etc.) or any other
non-material interest; or use the fund or service provided by the loaner to any activity in relation to the corruption or bribery in any manner, whether directly
or indirectly; once becoming aware of any circumstance breaching this article, the borrower should provide clues and relevant information to the loaner on an
authentic, complete and accurate basis and offer the cooperation required by the loaner.

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▲▲Article 9. Adjustment of Line of Credit, Acceleration of Maturity and Repricing of Risk

9.1 Any event below should be deemed as the “early maturity event” of this contract:

(1) The borrower does not repay the principal or interest of the loan according to the Application for Use of Line of Credit under this contract;

(2) The borrower makes any false representation or guarantee under this contract;

(3) Any event that should be notified as specified in Article 8.6 occurs and influences or may influence the security of the creditor’s right of the loaner;

(4) Any law, rule or regulatory policy is changed to the extent that the loaner will or may violate the law or rule if it issues the loan according to this

contract;

(5) While performing the contract with the loaner or any third party, the borrower conducts any breach or the debt may be or has been announced to be

mature in advance;

(6) The borrower breaches any other article of this contract.

9.2 In case of any “early maturity event”, the loaner may take any one, several or all measures below:

(1) To lower, suspend or cancel the line of credit under this contract;

(2) To stop issuing the loan unused by the borrower;

(3) To stop paying the loan unused but already withdrawn by the borrower;

(4) To require the borrower to supplement the issuance and payment conditions of loan to the loaner with the regulated period;

(5) To require the borrower to change the payment mode as required by the loaner;

(6) To reprice against the risk in executing the loan according to Article 9.3;

(7) To announce that the principal of loan already issued under this contract becomes mature and require the borrower to repay the principal and interest

of all the mature loan immediately.

9.3 In view of the production and operation situation of the borrower when signing this contract, both parties have determined the interest rate and its
adjustment through negotiations. The borrower agrees that in case of any “early maturity event”, the loaner may reprice against the risk in executing the loan
according to this article.

9.3.1 The repricing mentioned above consists of two modes, including repricing and directly raising the loan interest rate. The specific mode is agreed

by both parties in Article 21.

9.3.2  “Negotiated  reprice”  means  that  the  loaner  may  require  the  borrower  to  negotiate  with  the  loaner  within  the  regulated  period  to  raise  the  loan

interest rate and both parties will determine the “repricing date” and relevant interest rate in the form of supplemental agreement.

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9.3.3 “Direct raise of loan interest rate” means that the loaner may directly raise the loan interest rate according to this article and Article 21.

9.3.3.1 Since the loan sends a notice of “repricing date” to the borrower, the loan interest rate should be applied to each loan that the borrower has not

repaid by the “repricing date”.

9.3.3.2 If the loan currency is RMB and the type of benchmark interest rate of each loan is kept unchanged, then the raised loan interest rate should be

determined by the fluctuating extent/increase (decrease) value specified in Article 21 on the basis of the benchmark interest rate of “repricing date”.

If the “repricing date” is set as T Day, then the benchmark interest rate to calculate the raised loan interest rate should be determined by following rules

① If the benchmark interest rate of the People’s Bank applies, the benchmark interest rate should be the benchmark interest rate of the People’s Bank on

T Day;

②  If  LPR  quotation  of  Bank  of  Communications  applies,  the  benchmark  interest  rate  should  be  the  LPR  value  published  on  the  latest  business  day
before T Day, and, if no LPR is published on the latest business day before T Day, the benchmark interest rate should be the LPR value published on the
former business day before that day;

③ If LPR mean interest rate applies, the benchmark interest rate should be the LPR value published on the latest business day before T Day, and, if no
LPR is published on the latest business day before T Day, the benchmark interest rate should be the LPR value published on the former business day before
that day.

9.3.3.3 If the loan is in any foreign currency, the raised loan interest rate should be determined according to Article 21.

9.3.4 After the loaner reprices against the risk according to the article mentioned above, the new interest rate should be applied since the “repricing
date”.  Regulations  on  the  fluctuation  is  still  subject  to  that  mentioned  in  Article  3  of  this  contract,  and  if  both  parties  negotiate  to  change  the  relevant
regulation, the changed regulation shall be applied. If the loan becomes overdue (including the circumstance that the borrower fails to make the repayment in
time or the loan is announced by the loaner to be mature in advance) or embezzled, the overdue and embezzlement default interest rate should be determined
on the basis of the new interest rate (including the interest rate adjusted according to regulations on fluctuation of this contract) while the compound interest
rate should also be correspondingly adjusted.

9.3.5 Execution of the “repricing against risk” should not be deemed or construed as that the loaner waives any other right under any law, rule or this
contract.  The  loaner  may  take  other  protective  measures  for  the  creditor’s  right  according  to  laws,  rules  and  this  contract,  including  but  not  limited  to
measures specified in Article 9.2 of this contract.

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▲▲Article 10. Breach

10.1 If the borrower does not repay the principle or interest of the loan in time or uses the loan for any purpose not included in this contract, the loaner
will collect the interest at the default interest rate of overdue or embezzled loan, and collect the compound interest of the outstanding interest. If the default
interest rate is adjusted according to this contract, the compound interest rate should also be adjusted correspondingly.

10.2 If the borrower does not repay the principle or interest of the loan in time, it should assume the calling expense, lawsuit expense (or arbitration
expense), preservation expense, announcement expense, execution expense, attorney’s fee, travel expense and other expenses of the loaner in realizing the
creditor’s right.

▲▲Article 11. Deduction

11.1 The borrower authorizes that in case of any payable principal, interest, default interest, compound interest or any other expense of the loan, the
loaner  may  deduct  the  fund  in  any  account  of  the  borrower  opened  at  any  branch  of  Bank  of  Communications  Co.,  Ltd.  to  repay  the  amount  mentioned
above.

11.2 After such deduction, the loaner should inform the borrower of relevant account number, contract number, number of Application for Use of Line

of Credit, deduction amount and remaining debt.

11.3 If the deducted fund is insufficient to repay all the debt of the borrower, the debt to be repaid by such fund should be determined according to this

contract.

11.4 If the currency of the deducted fund is different from that of the debt to be repaid, the deducted fund should be converted at the exchange rate
published by Bank of Communications Co., Ltd. at the time of deduction. If any settlement, sales or exchange procedure of foreign currency is necessary, the
borrower is obliged to assist the loaner and assume the risk in exchange rate.

Article 12. Notice

12.1 Contact details provided by the borrower in this contract (including mailing address, telephone number and fax number) are all authentic and valid.
In  case  of  any  change  of  any  contact  detail,  the  borrower  should  send/deliver  such  change  to  the  mailing  address  offered  by  the  loaner  in  this  contract
immediately. Such change should take effect when the loaner receives the notice of change.

12.2 Unless otherwise specified in this contract, the loaner may send a notice to the borrower in any manner below. The loaner may choose the manner
it thinks fit but is relieved from any liability for the error, omission or delay caused by the postal service, fax, telephone or any other communication system.
If the loaner chooses several manners, the one delivering the notice to the borrower, the fastest should prevail.

(1) If the loaner chooses the announcement, the date at which the loaner publishes the announcement on its website, online bank, telephone bank or

outlet should be deemed as the delivery date;

(2) If the loaner chooses the personal delivery, the date at which the borrower signs to confirm the reception should be deemed as the delivery date;

(3) If the loaner chooses the postal service (including express delivery, ordinary mail and registered mail) to send the notice to the latest mailing address
of  the  borrower  that  the  loaner  knows,  the  third  day  (in  the  same  city)/the  fifth  day  (in  different  cities)  since  the  sending  date  should  be  deemed  as  the
delivery date;

15

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(4) If the loaner chooses the fax, SMS or other electronic communication means to deliver the notice to the latest fax number of the borrower that the

loaner knows, the mobile telephone number or e-mail appointed by the borrower, the sending date should be deemed as the delivery date.

12.3 The borrower agrees that unless the loaner receives the written notice about changing the mailing address from the borrower, the mailing address
provided  by  the  borrower  in  this  contract  is  the  address  for  the  court  to  send  the  judicial  instrument  and  other  written  documents.  During  the  process  of
dispute solution, if the court sends the judicial instrument or other written documents to the latest mailing address of the borrower that the loaner knows
through  the  postal  service  (including  express  delivery,  ordinary  mail  and  registered  mail),  the  date  at  which  the  borrower  signs  on  the  receipt  should  be
regarded as the delivery date; if the borrower does not sign on the receipt, the third day (in the same city)/the fifth day (in different cities) since the sending
date should be deemed as the delivery date;

Except for the written judgment, written verdict or mediation agreement, the court may send any notice to the borrower by any communication means
specified  in  Article  12.2.  The  court  may  choose  the  communication  means  it  thinks  fit  but  is  relieved  from  any  liability  for  the  error,  omission  or  delay
caused by the postal service, fax, telephone or any other communication system. If the court chooses several manners, the one delivering the notice to the
borrower, the fastest should prevail.

▲▲Article 13. Disclosure and Confidentiality

13.1 With respect to the information and materials of the borrower obtained in the signing and performance of this contract, the loaner may not violate
any law, rule or regulatory requirement to use such information and materials. It should assume the confidentiality liability but not disclose such information
and materials to any third party, except for under following circumstances:

(1) The law or rule requires such disclosure;

(2) The judicial department or regulatory authority requires such disclosure;

(3) When the borrower does not repay the principal and/or interest of the loan in time, the loaner has to make the disclosure to the external professional

advisor for the purpose of realizing the creditor’s right under this contract but such external professional advisor must assume the confidentiality obligation;

(4) The borrower agrees or authorizes the loaner to make the disclosure.

13.2 The borrower confirms that it has signed the Credit Information Inquiry and Provision Authorization. The loaner may inquire, use and keep the

credit information of the borrower within the scope regulated by the authorization.

13.3  Besides  the  circumstance  specified  in  Article  13.1  and  Article  13.2,  the  borrower  further  agrees  Bank  of  Communications  Co.,  Ltd.  to  use  or
disclose the information and materials of the borrower under following circumstances, including but not limited to the basic information, credit transaction
information, adverse information and other relevant information and materials of the borrower, and is willing to assume all the consequences thereof:

16

 
 
 
 
 
 
 
 
 
 
 
 
 
Bank of Communications Co., Ltd. may disclose such information and materials on a confidentiality basis to the business outsourcing institution, third
party  service  provider,  other  financial  institutions  and  other  institutions  or  individuals  that  the  loaner  deems  necessary,  including  but  not  limited  to  other
branches or wholly-owned subsidiaries of Bank of Communications Co., Ltd. for the purpose below: ① It conducts the line of credit business or any relevant
business, such as promoting the line of credit business of Bank of Communications Co., Ltd., calling for the debt from the borrower and transferring the
creditor’s right of the line of credit business; ② The loaner provides or may provide the borrower with the new product or service, or further provides the
service.

Whether Article 13.3 is applicable should be subject to Article 24 of this contract.

Article 14. Applicable Laws and Dispute Solution

Laws of the People’s Republic of China (for the purpose of this contract, excluding laws of Hong Kong, Macau and Taiwan) apply to this contract. Any
dispute under this contact should be brought to the competent court at the place of the loaner, unless otherwise regulated in this contract. Both parties should
continue to perform those articles not involved in the dispute during the period of dispute solution.

Article 15. Effectiveness and Constitution of Contract

15.1  This  contract  takes  effect  with  the  signature  of  the  legal  representative  (responsible  person)  or  the  authorized  representative  (or  seal)  and  the

common seal of the borrower, as well as the signature of the responsible person or the authorized representative (or seal) and the common seal of the loaner.

15.2 The Application for Use of Line of Credit and other relevant documents and materials signed under this contract are indispensable parts of this

contract.

15.3 Application for Use of Line of Credit is the supplement to this contract. Unless otherwise regulated in the Application for Use of Line of Credit,

rights, obligations and other matters of the borrower and the loaner should still be subject to this contract.

Article 16. Specific Content of Line of Credit

16.1 Currency of line of credit: RMB; Amount in words: three million yuan; Available for √ RMB ☐ (foreign currency); Belonging to √ Revolving line

of credit ☐ One-time line of credit (used for several time) ☐ One-time line of credit (used for only once).

16.2 Purpose of line of credit: operation turnover .

16.3 Period of line of credit is November 21, 2019 to November 21, 2020.

Article 17. Interest Rate

If the loan is in any foreign currency, the determination and adjustment of interest rate, and the default interest rate of overdue and embezzled loan are

regulated as follows:

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Article 18. Account

/

18.1 The borrower appoints the following account to be the issuance account. The account ☐ is √ is not the dedicated loan issuance account opened at

the loaner. If both parties otherwise regulate in the Application for Use of Line of Credit, such Application for Use of Line of Credit should prevail.

Account name:

CLPS

Account number:

310066865018010213932

Bank of deposit:

Zhangjiang Sub-branch of Bank of Communications

18.2 The borrower appoints that:

(1) The repayment account:

Account name:

CLPS

Account number:

310066865018010213932

Bank of deposit:

Zhangjiang Sub-branch of Bank of Communications

(2) The fund collection account:

Account name:

CLPS

Account number:

310066865018010213932

Bank of deposit:

Zhangjiang Sub-branch of Bank of Communications

Article 19. Issuance, Payment and Repayment of Loan

19.1 The period of each loan withdrawn under this contract should be no longer than 12√ months ☐ days, and the maturity date of all the loan should be

no later than May 21, 2021.

19.2 The limit of independent payment under this contract should be RMB 0.

19.3 The entrusted payment by loaner is compulsory once any condition below is met:

/

19.4 In the mode of independent payment by the borrower, the borrower should report the payment of loan fund to the loaner within 15 days since the

issuance of loan.

Article 20. Financial Restriction, External Rating, Production and Operation Qualification/License

20.1 Limit on the external investment by the borrower is RMB10,000,000,000; limit on the increase of debt financing is RMB10,000,000,000.

18

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
20.2 Specific regulations on the financial indexes of the borrower:

(1)

(2)

(3)

20.3 Specific regulations on the external rating:

(1)

(2)

/

/

20.4 Specific regulations on the production and operation qualification/license of the borrower:

(1)

(2)

▲▲Article 21. Repricing of Risk

/

21.1 This contract adopts the first repricing mode below: (1) Repricing through negotiations; (2) Direct raising the loan interest rate.

21.2 Once the “direct raising the loan interest rate” is adopted:

21.2.1  If  the  loan  currency  is  RMB,  the  fluctuation  extent/increase  (decrease)  value  of  the  raised  loan:  ☐  Benchmark  interest  rate  (without
fluctuation/increase or decrease) ☐ Fluctuated upwards by    /   % ☐ Fluctuated downwards by    /   % ☐ Increased by    /   % ☐ Decreased by    /   %. If any
specific regulation is reached in a certain loan, the fluctuation extent/increase (decrease) value of the raised interest rate should be subject to the applicable
Application for Use of Line of Credit.

21.2.2 If the loan currency is a foreign currency, interest rate of the raised loan is:

Article 22. Contact Details

Contact details of the borrower to receive the notice specified in Article 12:

Mailing address: 

2F, Building 18, 498 Guoshoujing Road

Addressee:

Li Jin

Post code:

Tel:

Mobile:

Fax:

E-mail:

15821203042

19

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Article 23. Counterparts

This contract is made with three copies. Both parties and the guarantor (if any) holds one copy (ies) respectively.

Article 24. Miscellaneous

24.1 Both parties agree that Article 13.3 √ applies ☐ does not apply to this contract.

24.2 The loaner will issue the legal VAT invoice according to laws, rules and regulations, while the specific time and mode should be determined by

both parties through negotiations.

24.3 The payment mode of loan under this contract should be subject to the Application for Use of Line of Credit signed by the loaner.

Borrower: CLPS

Legal representative (responsible person): Yang Xiaofeng

Address: Room 26C01, 828-838 Zhangyang Road, China (Shanghai) Free Trade Area

Loaner: Xinqu Branch (Sub-branch) of Bank of Communications Co., Ltd.

Responsible person: Cai Yue

Mailing address: 260 Xinjinqiao Road

The borrower has read this contract and the loaner has made detailed descriptions as required
by the borrower. The borrower possesses no objection or doubt when signing this contract and
understands  all  the  articles,  especially  the  meaning  and  legal  consequence  of  those  marked
with ▲▲.

(No text below in this page)

20

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Borrower: (Seal)

(Seal: CLPS)

Legal representative (responsible person) or authorized
representative

Loaner: (Seal)

(Seal: Line of Credit Business Contract Seal of Shanghai
Xinqu Sub-branch of Bank of Communications Co., Ltd.)

Legal representative (responsible person) or authorized
representative

(Signature or seal)

Date: January 8, 2020

(Signature or seal)

Date: January 8, 2020

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Green Credit Agreement

Important Notes

Please read the full text of this contract carefully, especially those articles
marked with ▲▲. Please inquire the loaner in case of any question.

No. Z1912LN15693732

Borrower: CLPS

Legal representative (responsible person): Yang Xiaofeng

Address: Room 26C01, 828-838 Zhangyang Road, China (Shanghai) Free Trade Area

Mailing address: 2F, Building 18, 498 Guoshoujing Road

Loaner: Xinqu Branch (Sub-branch) of Bank of Communications Co., Ltd.

Responsible person: Cai Yue

Mailing address: 260 Xinjinqiao Road

Whereas, the borrower and loaner have entered into the Current Fund Loan Contract, Contract No. Z1912LN15693732, (Hereinafter referred to as the
original  contract),  According  to  Green  credit  guidelines  (issued  by  CBRC  [2012]  No.4.),  Notice  on  printing  and  distributing  key  evaluation  indicators  of
green credit implementation (issued by CBRC [2014] No.186.)’s supervision requirements, both parties agree as follows on matters related to borrower’s
environmental and social risk management(cid:0)

Article 1 Add the following contents as “representation and guarantee” under the original contract“

1.1 Party A’s internal management documents related to environmental and social risks conform to the requirements of laws and regulations and are

effectively implemented;

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1.2 Party A has no major lawsuit involving environmental and social risks

1.3 all behaviors and performance related to environmental and social risks of Party A are in compliance.

Article 2 Add the following contents as Party A’s obligations under the original contract.

21. Establish and improve the internal management system of environmental and social risks, and specify the responsibilities, obligations and punishment
measures of Party A’s relevant responsible personnel;

2.2 Establish and improve the emergency mechanism and measures for environmental and social risk emergencies;

2.3 Set up special departments and / or appoint special personnel to be responsible for environmental and social risk issues;

2.4 Cooperate with Party B or its recognized third party in the assessment and inspection of Party A’s environmental and social risks;

2.5  respond  appropriately  or  take  other  necessary  actions  when  the  public  or  other  stakeholders  strongly  question  Party  A’s  performance  in  controlling
environmental and social risks;

2.6 urge Party A’s vital related parties to strengthen management to prevent environmental and social risks of related parties from infecting Party A;

2.7 Party B shall perform other obligations related to the control of environmental and social risks.

▲▲Article 3 Adds the following items as the items under the original contract that “shall be notified in writing within 7 days from the date of occurrence or
possible occurrence of the following matters”, and Party A shall notify Party B in writing within 7 days after the occurrence or possible occurrence of the
following matters:

3.1 All kinds of permits, approvals and approvals related to environment, society and risks in the process of commencement, construction, operation and
shutdown;

3.2 Assessment and inspection of environmental and social risks of Party A by environmental and social risk regulatory agency or its recognized institution;

3.3 Supporting construction and operation of environmental facilities; and;

3.4 Discharge and compliance of pollutants;

3.5 Safety and health of employees;

3.6 Major complaints and protests of the neighboring communities against Party A;

37 Major environmental and social claims;

3.8 Other major situations that Party B considers to be related to environmental and social risks.

▲ ▲ Article  4  Adds  the  following  events  as  “early  maturity  event”  and  /  or  “quota  adjustment  event”  under  the  original  contract.  In  case  of  any  of  the
following events, Party B has the right to take one, more or all of the measures stipulated in the original contract:

(1) Party A violates any agreement of this supplementary agreement;

(2) Any statement or warranty made by Party A in this supplementary agreement is false, inaccurate or misleading;

(3) Party A is punished by relevant government departments due to poor environmental and social risk management;

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(4) It is strongly questioned by the public and / or the media due to poor management of environmental and social risks, and the relevant situation is verified;

(5) Party A violates the obligations of environmental and social risk management agreed with Party B in other contracts.

Article 5 If this supplementary agreement is inconsistent with the original contract, matters related to Party A’s strengthening environmental and social risk
management shall apply to the provisions of this supplementary agreement, and other matters shall be subject to the original contract.

Article 6 This supplementary agreement shall come into force after being signed (or sealed) by Party A’s legal representative or authorized representative and
sealed by Party B’s responsible person or authorized representative.

Party  A  has  read  all  the  terms  of  the  agreement,  and  Party  B  has  made  a
detailed  description  at 
this
supplementary  agreement,  Party  A  has  no  doubt  and  objection  to  all  the
contents, and understands the contract terms, especially the eight clauses with
AA mark and their legal consequences.

the  request  of  Party  A.  when  signing 

Borrower: (Seal)

(Seal: CLPS)

Legal representative (responsible person) or authorized
representative

Loaner: (Seal)

(Seal: Line of Credit Business Contract Seal of Shanghai
Xinqu Sub-branch of Bank of Communications Co., Ltd.)

Legal representative (responsible person) or authorized
representative

(Signature or seal)

Date: January 8, 2020

(Signature or seal)

Date: January 8, 2020

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
No. Z1911LN15664330

Exhibit 10.18

Current Fund Loan Contract

(Applicable to 531)

Bank of Communications Co., Ltd.

Current Fund Loan Contract

Important Notes

Please  read  the  full  text  of  this  contract  carefully,  especially  those  articles  marked  with
▲▲. Please inquire the loaner in case of any question.

Whereas,  the  borrower  applies  to  the  loaner  for  the  line  of  credit  of  current  fund,  both  parties  hereby  enter  into  this  contract  through  negotiations  to

clarify the obligations of each party.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Article 1. Definition

“Line of credit” refers to the maximum amount of balance of loan (under the revolving line of credit) or total loan (under the one-time line of credit) that
the loaner may issue to the borrower according to this contract. Such line of credit may be revolving or one-time (to be used for one or several times) in
accordance with this contract.

“Revolving line of credit” refers to the line of credit within which the borrower may apply for the loan for several times according to this contract.

“Balance of loan” refers to the sum of principal of the outstanding loan that the borrower obtains under this contract.

“Balance of line of credit” refers to the balance of the line of credit deducted with the balance of loan (under the revolving line of credit) or total loan

(under the one-time line of credit).

“Period  of  line  of  credit”  refers  to  the  period  for  the  loaner  to  issue  the  loan  to  the  borrower  according  to  the  application  by  the  borrower  and  this

contract that it is in relation to the occurrence of loan but not the loan itself.

“Period  of  loan”  refers  to  the  period  of  each  loan  that  both  parties  determine  in  the  corresponding  Application  for  Use  of  Line  of  Credit  of  Bank  of

Communications (hereinafter referred to as Application for Use of Line of Credit).

“Business day of bank” and “business day” refer to the day on which banks at the place of the loaner operate the corporation business, excluding legal
holidays  and  rest  days  (excluding  those  adjusted  to  be  business  days).  If  any  issuance,  repayment,  interest  payment  or  maturity  of  loan  lies  at  any  non-
business day, it should be postponed to the next business day.

Terms including affiliate, affiliate transaction and major investor should contain the same meaning with those contained in the Accounting Standards for

Business Enterprises No.36 – Disclosure of Affiliates (CK [2006] No.3) published by the Ministry of Finance, as well as its subsequent revisions.

2

 
 
 
 
 
 
 
 
 
 
 
Article 2. Use of Line of Credit

2.1 Each time when needing to use the line of credit, the borrower should submit the application to the loaner at least 5 business days in advance. The

borrower should fill in the Application for Use of Line of Credit to obtain the approval by the loaner before using the line of credit.

▲▲2.2 Use of the line of credit must meeting following conditions:

(1) Balance of loan (under the revolving line of credit) or total loan (under the one-time line of credit) is within the line of credit;

(2) Amount of applied loan is within the balance of line of credit;

(3) Application date and issuance date are within the period of line of credit;

(4) Period of loan and maturity date of loan comply with this contract;

(5) Guarantee contract (if any) under this contract is effective and surviving, and while the guarantee contract is in the form of mortgage contract and/or

pledge contract, the secured real right is already set and surviving;

(6) The borrower has handled procedures to obtain licenses, approvals and registrations from the government necessary for the application for the loan,

and such licenses, approvals or registrations are surviving;

(7) No serious adverse change occurs in the operation status or financial status of the borrower after this contract takes effect;

(8) Application by the borrower meets relevant rules and regulations of the loaner;

(9) The borrower does not violate this contract;

(10) Payment mode of the loan meets this contract and if the loaner is entrusted to make the payment, the loaner should agree with the payment;

(11) If the loan is provided in any foreign currency, the borrower should provide the certificate providing that the loan meets relevant policies on the

management of foreign currency, including but not limited to the valid purpose certificate or registration document of foreign currency;

(12) The borrower has appointed the dedicated fund withdrawal account as required by the loaner and has signed the account management agreement.

3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
▲▲2.3 If the loaner agrees to issue the loan, the final issuance information should be subject to the column of Application for Use of Line of Credit

printed by the bank. Application for Use of Line of Credit should be regarded as the Loan Certificate.

▲▲2.4 If the currency of the Application for Use of Line of Credit is different from that of the line of credit, it should be converted at the exchange rate
published by Bank of Communications Co., Ltd. in the beginning of each day only for the purpose of recognizing the balance of line of credit. If there is no
available exchange rate, it should be converted by the exchange rate reasonably determined by Bank of Communications Co., Ltd.

▲▲2.5 After the borrower becomes the shareholder of the guarantor or the “actual controller” defined by the Company Law, the loaner may suspend or
cancel the line of credit not used by the borrower until the guarantor provides the resolution made by its Board of Shareholders (General Meeting) about
securing the borrower that is acceptable to the loaner.

Article 3. Interest Rate and Payment of Interest

3.1 Basic regulations on determining the interest rate

3.1.1 The interest rate should be agreed by both parties in the Application for Use of Line of Credit through negotiations in each use of the line of credit.
Unless  any  specific  interest  rate  is  agreed  by  both  parties  in  the  Application  for  Use  of  Line  of  Credit,  the  specific  interest  rate  of  each  loan  should  be
determined in accordance with the type of benchmark interest rate, applicable date of benchmark interest rate, fluctuation extent/increase (decrease) value of
interest  rate,  interest  rate  fluctuation  rules,  interest  rate  fluctuation  cycle,  interest  rate  fluctuation  cycle  unit  and  specific  beginning  date  of  fluctuation  (if
necessary) agreed in the corresponding Application for Use of Line of Credit.

3.1.2 Type and definition of “benchmark interest rate”: (1) “Benchmark interest rate of the People’s Bank” refers to the benchmark interest rate of RMB
loan of financial institutions published by the People’s Bank of China; (2) LPR quotation of Bank of Communications refers to the quotation for benchmark
interest rate of loan published by Bank of Communications Co., Ltd. on its official website; (3) LPR mean interest rate refers to the benchmark interest rate
of loan published by the National Inter-bank Funding Center.

3.1.3 If the currency is RMB, daily interest rate = monthly interest rate/30, monthly interest rate = annual interest rate/12; if the currency is HKD, GBP
and AUD, daily interest rate = annual interest rate/365; if the currency is USD, Euro, JPN and other foreign currencies accepted by the loaner, daily interest
rate = annual interest rate/360.

4

 
 
 
 
 
 
 
 
 
 
▲▲3.2 Interest rate of loan

The interest rate of each loan at the time of issuance should be determined in accordance with the fluctuation extent/increase (decrease) value on the
basis  of  the  benchmark  interest  rate.  If  the  “applicable  date  of  benchmark  interest  rate”  is  set  as  T  Day,  then  the  benchmark  interest  rate  to  calculate  the
specific interest rate of the loan at the time of issuance should be determined by following rules:

If the benchmark interest rate of the People’s Bank applies, the benchmark interest rate should be the benchmark interest rate of the People’s Bank on T

Day;

If LPR quotation of Bank of Communications applies, the benchmark interest rate should be the LPR value published on the latest business day before T
Day,  and,  if  no  LPR  is  published  on  the  latest  business  day  before  T  Day,  the  benchmark  interest  rate  should  be  the  LPR  value  published  on  the  former
business day before that day;

If LPR mean interest rate applies, the benchmark interest rate should be the LPR value published on the latest business day before T Day, and, if no LPR
is published on the latest business day before T Day, the benchmark interest rate should be the LPR value published on the former business day before that
day.

3.3 Adjustment of interest rate

3.3.1 Once the interest rate is recorded in the Application for Use of Line of Credit as fixed, such interest rate should apply to the loan within the period

of loan.

▲ ▲ 3.3.2  Once  the  interest  rate  is  recorded  in  the  Application  for  Use  of  Line  of  Credit  as  fluctuating,  the  interest  rate  adjustment  date  should  be
determined according to the interest rate fluctuation rules, interest rate fluctuation cycle, interest rate fluctuation cycle unit and specific beginning date of
fluctuation (if necessary) agreed in the Application for Use of Line of Credit, and the adjusted interest rate should apply since the interest rate adjustment
date.

5

 
 
 
 
 
 
 
 
 
 
3.3.2.1  If  the  benchmark  interest  rate  is  adjusted  within  the  period  of  loan,  the  adjustment  cycle  of  interest  rate  should  be  calculated  by  choosing
“fluctuating at bookkeeping date” or “fluctuating at specific date” in the “interest rate fluctuation rules” since the “bookkeeping date” or “specific date”. The
column of interest rate fluctuation cycle should be filled with the quantity of interest rate fluctuation cycles, the column of interest rate fluctuation cycle unit
may be filled with day or month. If the quantity of interest rate fluctuation cycle is “1” while the interest rate fluctuation unit is “day”, then the adjustment
date of benchmark interest rate should be the adjustment date of loan interest rate; if the quantity of interest rate fluctuation cycle is “3” while the interest rate
fluctuation  unit  is  “day”,  then  the  adjustment  date  of  loan  interest  rate  should  be  every  third  day  since  the  “bookkeeping  date”  or  “specific  date”;  if  the
quantity of interest rate fluctuation cycle is “1” while the interest rate fluctuation unit is “month”, then the adjustment date of loan interest rate should be the
end of every month since the “bookkeeping date” or “specific date”; if the quantity of interest rate fluctuation cycle is “3” while the interest rate fluctuation
unit is “month”, then the adjustment date of loan interest rate should be the end of every third month since the “bookkeeping date” or “specific date”, the
same below.

3.3.2.2 Loan interest rate at the adjustment date of loan interest rate should be determined according to the benchmark interest rate at the adjustment date
of  loan  interest  while  the  interest  rate  fluctuation/increase  (decrease)  value  is  kept  unchanged  (unless  negotiated  by  both  parties  to  be  adjusted).  If  the
“adjustment date of loan interest rate” is set as T Day, then the benchmark interest rate of adjusted loan interest rate should be determined by following rules:

If the benchmark interest rate of the People’s Bank applies, the benchmark interest rate should be the benchmark interest rate of the People’s Bank on T

Day;

If LPR quotation of Bank of Communications applies, the benchmark interest rate should be the LPR value published on the latest business day before T
Day,  and,  if  no  LPR  is  published  on  the  latest  business  day  before  T  Day,  the  benchmark  interest  rate  should  be  the  LPR  value  published  on  the  former
business day before that day;

If LPR mean interest rate applies, the benchmark interest rate should be the LPR value published on the latest business day before T Day, and, if no LPR
is published on the latest business day before T Day, the benchmark interest rate should be the LPR value published on the former business day before that
day.

6

 
 
 
 
 
 
 
▲▲3.3.3 If the “benchmark interest rate of the People’s Bank” is applied as the benchmark interest rate and the benchmark interest rate of the People’s
Bank  is  adjusted  to  be  fluctuating  interest  rate  or  cancelled,  both  parties  should  adjust  the  interest  rate  of  the  loan  through  separate  negotiations  but  the
adjusted interest rate should be no lower than the prevailing interest rate; if both parties fail to reach a common sense on the adjustment of interest rate within
one month since the adjustment date of the People’s Bank, the loaner may announce the earlier maturity of the loan.

If the “LPR quotation of Bank of Communications” or “LPR mean interest rate” is applied as the benchmark interest rate and the relevant benchmark
interest  rate  is  cancelled  according  to  the  regulation  requirement  or  suspended  by  the  issuer  according  to  the  regulation  requirement,  both  parties  should
adjust  the  interest  rate  of  the  loan  through  separate  negotiations  but  the  adjusted  interest  rate  should  be  no  lower  than  the  prevailing  interest  rate;  if  both
parties fail to reach a common sense on the adjustment of interest rate within one month since the relevant benchmark interest rate is cancelled or suspended,
the loaner may announce the earlier maturity of the loan.

▲▲3.3.4 Both parties may adjust the fluctuation extent or increase (decrease) value of the corresponding loan interest rate through negotiation at each

adjustment date of loan interest rate.

3.4 If the currency is RMB, default interest of the overdue loan should be fluctuated upwards by 50% on the basis of the interest rate specified in this
contract, and that of the embezzled loan should be fluctuated upwards by 100% on the basis of the interest rate specified in this contract. If the benchmark
interest rate is adjusted, the loaner may adjust the rate of default interest of each loan and apply the new rate of default interest since the adjustment date of
loan interest rate specified in the Application for Use of Line of Credit.

3.5 Calculation of interest

3.5.1 Normal interest = interest rate specified in this contract X issued loan X days of occupation.

Days of occupation begins from the issuance date (included) and ends at the maturity date (excluded), and may be postponed if the maturity date is not a

business day while the postponed period should be accounted into the occupation and charged with the interest according to this contract.

7

 
 
 
 
 
 
 
 
 
3.5.2 The default interest of overdue loan and embezzled loan should be calculated according to the overdue or embezzled amount and the actual days

(since the date of overdue or embezzlement (included) to the repayment date of principal and interest (excluded)).

3.5.3 If there are too many numbers after the decimal point of the calculated interest/default interest, the loaner may round off the result to two numbers

after the decimal point.

▲▲3.6 If the borrower repays the loan in advance or the loaner withdraws the loan in advance according to this contract, the corresponding interest rate

shall still be subject to that specified in this contract.

3.7 If the loan is in any foreign currency, the determination of interest rate, adjustment of interest rate, default interest rate of overdue and embezzlement

should be subject to Article 17 of this contract.

Article 4. Payment of Loan

4.1 If the issuance account appointed by the borrower is the dedicated loan issuance account opened at the loaner, the issuance and payment of loan
should be handled through the account, which may only be used to issue and externally pay the loan fund and only sell the certificate of “Application for
Settlement Business” but may not be used to handle any check, draft, bank acceptance or any other settlement. When handling the allocation of loan fund
independently, the borrower must handle procedures at the counter of the bank of deposit. The deposit interest of the account should be accounted into the
repayment account of the borrower.

4.2  When  drawing  the  loan  according  to  this  contract,  the  borrower  should  clarify  the  payment  mode  (entrusted  payment  by  loaner  or  independent

payment by borrower) and only one mode is applicable in each time of drawing.

4.3  In  the  mode  of  entrusted  payment  by  loaner,  the  loaner  will,  after  receiving  the  payment  entrustment  from  the  borrower  and  issuing  the  loan
according to this contract, pay the loan fund directly to the counterparty of the borrower meeting the purpose specified in this contract through the account of
the borrower.

If  the  amount  of  a  single  payment  is  beyond  the  limit  of  the  independent  payment  or  any  condition  specified  in  Article  19.3,  the  mode  of  entrusted

payment should apply.

8

 
 
 
 
 
 
 
 
 
 
 
When  choosing  the  mode  of  entrusted  payment  by  the  loaner,  the  borrower  should  submit  the  loaner  with  the  Application  for  Use  of  Line  of  Credit,
corresponding payment entrustment and other materials required by the loaner (including but not limited to the commercial contract, invoice and receipt) to
clarify the amount of loan and the receiver and amount of payment, while the amount of drawn loan should equal to that of the payment.

▲▲ If the payment planned by the borrower does not comply with this contract or the corresponding commercial contract, or contains any other defect,

the loaner may refuse to make the payment and return the payment entrustment submitted by the borrower.

▲ ▲   If  the  loaner  agrees  but  fails  to  make  the  payment  or  the  payment  is  returned  due  to  any  incorrect  information  provided  by  the  borrower,  the
borrower should submit relevant documents and materials containing the correct information within the period regulated by the loaner, and the loaner should
be expected from any liability for any delay or failure of payment.

4.4 In the mode of independent payment by the borrower, after the loaner issues the loan fund to the account of the loaner according to this contract, the

borrower pays the fund to the counterparty of the borrower meeting the purpose specified in this contract independently.

When choosing the mode of independent payment by the borrower, the borrower should submit the loaner with the Application for Use of Line of Credit,
description of fund usage and other materials required by the loaner. The borrower should report the payment situation of the loan fund to the loaner. The
loaner may check whether the loan is paid for the regulated purpose by analyzing the account, verifying the certificate and conducting the on-site survey, and
the borrower shall cooperate with such verification by the loaner.

Article 5. Repayment of Loan

5.1 The borrower should make the repayment according to the date and amount specified in the corresponding Application for Use of Line of Credit.

▲▲5.2 Without the written consent from the loaner, the borrower may not repay the loan in advance.

9

 
 
 
 
 
 
 
 
 
 
▲▲5.3 The repayment schedule of principal and interest agreed by the borrower and the loaner in the Application for Use of Line of Credit is the true
intention of both parties through negotiations on a voluntary basis. Under the repayment arrangement chosen by both parties, the principal should prior to the
interest  in  the  repayment  without  influencing  the  repayment  liability  of  the  borrower  for  the  payable  interest,  and  the  borrower  may  not  set  up  any  plea
against the repayment of payable interest. The borrower should be responsible for repaying all the principal and interest under any repayment arrangement.

▲▲5.4 When the amount repaid by the borrower is insufficient to cover all the debt of the borrower:

(1) It should be firstly used to repay the overdue amount. If the principal and interest are overdue for less than 90 days, the balance after such repayment
should be firstly used to repay the outstanding interest, default interest or compound interest before any overdue principal; if the principal and interest are
overdue  for  more  than  90  days,  the  balance  after  such  repayment  should  be  firstly  used  to  repay  the  outstanding  principal  and  then  the  overdue  interest,
default interest or compound interest;

(2) If there are several debts of the borrower (including debts of the borrower owed to the loaner under any other contract), the loaner may determine the
repayment sequence of each debt, only if such sequence does not violate any applicable law, rule, regulation, system or any compulsory regulatory provision
of the loaner. The loaner should inform the borrower of the repayment result, unless otherwise regulated.

Article 6. Representation and Guarantee of Borrower

6.1 The borrower is legally incorporated and surviving, possesses all the necessary capacities, perform obligations under this contract it its own name

and assumes civil liabilities.

6.2  Signing  and  performing  this  contract  are  the  true  intention  of  the  borrower  that  they  must  obtain  all  the  necessary  approvals,  permissions  and

authorizations to contain no legal defect.

6.3  The  borrower  conducts  production  and  operation  in  compliance  with  laws  and  regulations,  possesses  the  constant  operation  capability  and  legal
repayment source, involves no serious environmental or social risk, possesses no serious adverse credit record and no officer of the borrower possesses any
adverse record.

10

 
 
 
 
 
 
 
 
 
 
6.4 All  the  documents,  statements,  materials  and  information  provided  by  the  borrower  to  the  loaner  when  signing  and  performing  this  contract  are
authentic,  accurate,  complete  and  valid.  The  borrower  does  not  conceal  any  information  that  may  affect  its  financial  status  and  solvency,  and  there  is  no
serious adverse change to the financial status of the borrower since the issuance of the latest financial statement.

▲▲6.5 Neither the borrower nor any of its affiliate belongs to the enterprise or individual sanctioned by the UN, EU or US, or is located in any country

or area sanctioned by the UN, EU or US.

Article 7. Rights and Obligations of Loaner

7.1 The loaner may withdraw the principal and interest (including compound interest and default interest of overdue and embezzled loan) of the loan
according to this contract, collect the payable expense from the borrower, withdraw the loan in advance at its own discretion depending on the fund status of
the borrower, and may exercise other rights under laws, regulations or this contract.

▲▲7.2 The loaner only conducts the formal examination of materials provided by the borrower during the performance of this contract that the loaner
should be exempted from any liability for the failure to complete entrusted payment if the borrower provides any false, inaccurate or uncomplete material or
the borrower makes the payment in violation to this contract.

▲▲7.3 The loaner should issue the loan and make the payment according to this contract. The loaner should be exempted from the liability if the loaner
fails  to  issue  the  loan  or  make  the  payment  due  to  any  cause  below,  but  the  loaner  should  send  a  notice  to  the  borrower  in  time:  the  issuance  account
appointed by the borrower is frozen, the account of the receiver is frozen, there is any force majeure, communicaiton or network fault, or the system fault of
the loaner, unless otherwise regulated in this contract.

Article 8. Obligations of Borrower

8.1 The borrower should repay the principal and interest of loan under this contract according to the time, amount, currency and interest rate specified in

this contract and the corresponding Application for Use of Line of Credit.

The  fund  collection  account  appointed  by  the  borrower  should  be  used  to  collect  the  corresponding  sales  income  or  planned  repayment  fund.  If  the
corresponding sales income is not settled in cash, the borrower should ensure to allocate it to the fund collection account upon receiving it. The borrower
should provide the cash flow of the fund collection upon the request from the loaner.

11

 
 
 
 
 
 
 
 
 
 
 
8.2 The borrower should use the line of credit for the purpose specified in this contract and use the loan for the purpose specified in the corresponding
Application for Use of Line of Credit but may not embezzle the loan for any other purpose, or the investment in fixed assets, equity or any production or
operation prohibited by the government.

The borrower should draw the loan fund in the mode agreed by both parties but not avoid the entrusted payment by the loaner by breaking up the whole
into parts; in the mode of independent payment by the borrower, the borrower should use the loan within the reasonable period required by the regulatory
authority of the loaner, and the payment of loan fund should meeting this contract.

▲ ▲ 8.3  The  borrower  should  assume  the  settlement  expense  (if  any)  of  the  payment  of  loan  fund  (including  entrusted  payment  by  the  loaner  and
independent payment by the borrower), and the special charge standard is subject to laws, rules, regulations, regulatory provisions and the prevailing Charge
List of Services of Bank of Communications published by the loaner.

If the issuance account is dedicated for the issuance of loan and the collection account is not opened at Bank of Communications in the payment of loan
fund  (including  entrusted  payment  by  the  loaner  and  independent  payment  by  the  borrower),  the  fund  may  be  processed  by  the  payment  system  or  local
clearing system of the People’s Bank.

If the issuance account is not dedicated for the issuance of loan and the collection account is not local or opened at Bank of Communications in the
payment of loan fund (including entrusted payment by the loaner and independent payment by the borrower), the fund should be processed by the payment
system of the People’s Bank.

▲▲8.4 The borrower should cooperate with the loaner in the management of loan payment and the supervision and inspection of the use of loan and
operation situation of the borrower, provide the financial statement, use record and material of the loan fund, information of affiliate and affiliate transaction,
environmental and social risk report, other materials and information necessary for the after-loan risk management required by the loaner, and shall ensure
the authenticity, integrity and accuracy of such documents, materials and information.

12

 
 
 
 
 
 
 
 
▲▲8.5 Under either circumstance below, the borrower should send a written notice to the loaner at least 30 days in advance and take no action before

repaying the principal and interest under this contract or providing the repayment plan or guarantee recognized by the loaner:

(1) The borrower sells, presents, leases, lends, transfers, mortgages, pledges or disposes in any other manner all or a large part of the assets or important

assets;

(2) The  operation  mechanism  or  ownership  organization  of  the  borrower  suffers  from  any  great  change,  including  but  not  limited  to  the  contracting,
lease, association, corporate system transformation, joint stock cooperation system transformation, sales, combination (merger), joint venture (cooperation),
separation of enterprise, establishing of subsidiary, equity transfer, ownership transfer, and decrease of capital.

(3) The external investment or increase of debt financing of the borrower exceeds the agreed limit.

▲▲8.6 The borrower should send a written notice to the loaner within 7 days since the occurrence or possible occurrence of any circumstance below:

(1) The borrower or its affiliate revises the Memorandum of Association, changes the name, legal representative (responsible person), domicile, mailing

address or business scope of the enterprise, or makes any decision that affects the finance or human resource greatly;

(2) The borrower, its affiliate or guarantor plans to apply for bankruptcy or may be or has been applied by the creditor for bankruptcy;

(3) The borrower or its affiliate is involved in any serious lawsuit, arbitration or administrative measure, or its major assets or the guarantee under this
contract is executed with the property preservation or any other compulsory measure, or the security of its major assets or the guarantee under this contract is
or may be affected or the value is or may be decreased;

(4)  The  borrower  or  its  affiliate  provides  any  guarantee  to  any  third  party  to  affect  its  economic  status,  financial  status  or  capability  in  performing

obligations under this contract significantly;

13

 
 
 
 
 
 
 
 
 
 
 
(5) The borrower or its affiliate enters into any contract with significant influence on its operation and financial status;

(6) The borrower repays the immature debt in advance or repay other mature debt firstly, or increases any form of guarantee for any other existing debt,

or makes any arrangement with the similar effect or enters into any relevant document;

(7) The borrower, its affiliate or guarantor is shut down, closed, dissolved, suspended, cancelled, or the business license is withdrawn;

(8)  The  borrower  or  its  affiliate,  major  investor  of  the  borrower  or  its  affiliate,  legal  representative  (responsible  person),  director  or  officer  of  the

borrower or its affiliate is missing or involved in any violation, to any law, regulation or rule of stock exchange, or suffers from any abnormal change;

(9) The borrower or its affiliate suffers from serious difficulty or deterioration of financial status in the operation, or there is any other event with adverse

influence on the operation, financial status, solvency or economic status of the borrower or its affiliate;

(10) There is any affiliated transaction and its amount reaches or exceeds 10% of the latest audited net assets;

(11) Before repaying all the debts under this contract, the borrower becomes or may become the shareholder or the “actual controller” defined by the

Company Law of the guarantor;

(12) The borrower or its affiliate causes any liability accident or is made public by the media by violating any law, rule, regulation, national policy or

industrial standard;

(13) The borrower or its affiliate encounters any safety or environment protection accident;

(14) The relationship between the affiliate and the borrower is changed;

(15) The borrower or its affiliate encounters any significant equity change;

(16) The opinion issued by the external audit of the borrower on its financial statements is not the standard unreserved opinion;

14

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(17) The borrower is or may be investigated, punished or taken with other similar measures by the competent authority as it violates the law or rule

and/or regulatory requirement;

(18) The borrower or its affiliate is listed to be sanctioned by the UN, EU or US, or the country or area where the borrower or its affiliate resides in is

listed to be sanctioned by the UN, EU or US;

(19) There is any other event with serious adverse influence on the solvency of the borrower or its affiliate.

▲▲8.7 In case of any change of guarantee under this contract that is adverse to the creditor’s right of the loaner, the borrower should provide other

guarantee recognized by the loaner in time.

The  “change”  specified  here  includes  but  not  limited  to:  merger,  separation,  shutdown,  dissolution,  suspension,  cancellation,  withdrawal  of  business
license, and applying or being applied for bankruptcy of the guarantor; significant change of the operation or financial status of the guarantor; the guarantor is
involved in any serious lawsuit, arbitration or administrative measures, or the major assets is taken with property preservation or other compulsory measure;
the security of the guarantee is or may be affected; the value of the guarantee is or may be decreased, or taken with measures of property preservation, such
as  sealing;  the  guarantor  or  its  legal  representative  (responsible  person)  or  officer  violates  any  law,  regulation  or  applicable  rules  of  stock  exchange;  the
guarantor (when it is an individual) is missing or dead (announced to be dead); the guarantor breaches the guarantee contract; there is any dispute between
the guarantor and the borrower; the guarantor requires cancelling the guarantee contract; the guarantee contract does not take effect, or is invalid or cancelled;
the secured real right is not set up or take effect; any other event affecting the security of the creditor’s right of the loaner.

▲▲8.8 The borrower promises: during the period since the signing date of this contract to the date at which the principal, interest and relevant expenses
of the loan under this contract are paid off, the financial index, external rating, as well as production and operation qualification/license of the borrower will
always comply with this contract, and such production and operation qualification/license will pass the annual inspection if necessary.

15

 
 
 
 
 
 
 
 
8.9 The borrower guarantees to obey laws, rules and relevant policies about the anti-money laundering of the government that it will not conduct any
activity  involving  money  laundering  or  terrorism  financing,  cooperate  with  the  loaner  in  identifying  the  customer,  keeping  the  transaction  record,  and
reporting the large-amount and suspected transaction.

8.10  The  borrower  guarantees  that  the  borrower,  together  with  any  of  its  employee  or  agent  will  not  offer,  present,  require  or  receive  any  form  of
material interest not included in this contract to or from the loaner or its employee (including but not limited to cash, physical card, tour, etc.) or any other
non-material interest; or use the fund or service provided by the loaner to any activity in relation to the corruption or bribery in any manner, whether directly
or indirectly; once becoming aware of any circumstance breaching this article, the borrower should provide clues and relevant information to the loaner on an
authentic, complete and accurate basis and offer the cooperation required by the loaner.

▲▲Article 9. Adjustment of Line of Credit, Acceleration of Maturity and Repricing of Risk

9.1 Any event below should be deemed as the “early maturity event” of this contract:

(1) The borrower does not repay the principal or interest of the loan according to the Application for Use of Line of Credit under this contract;

(2) The borrower makes any false representation or guarantee under this contract;

(3) Any event that should be notified as specified in Article 8.6 occurs and influences or may influence the security of the creditor’s right of the loaner;

(4) Any law, rule or regulatory policy is changed to the extent that the loaner will or may violate the law or rule if it issues the loan according to this

contract;

(5) While performing the contract with the loaner or any third party, the borrower conducts any breach or the debt may be or has been announced to be

mature in advance;

(6) The borrower breaches any other article of this contract.

16

 
 
 
 
 
 
 
 
 
 
 
 
9.2 In case of any “early maturity event”, the loaner may take any one, several or all measures below:

(1) To lower, suspend or cancel the line of credit under this contract;

(2) To stop issuing the loan unused by the borrower;

(3) To stop paying the loan unused but already withdrawn by the borrower;

(4) To require the borrower to supplement the issuance and payment conditions of loan to the loaner with the regulated period;

(5) To require the borrower to change the payment mode as required by the loaner;

(6) To reprice against the risk in executing the loan according to Article 9.3;

(7) To announce that the principal of loan already issued under this contract becomes mature and require the borrower to repay the principal and interest

of all the mature loan immediately.

9.3 In view of the production and operation situation of the borrower when signing this contract, both parties have determined the interest rate and its
adjustment through negotiations. The borrower agrees that in case of any “early maturity event”, the loaner may reprice against the risk in executing the loan
according to this article.

9.3.1 The repricing mentioned above consists of two modes, including repricing and directly raising the loan interest rate. The specific mode is agreed by

both parties in Article 21.

9.3.2  “Negotiated  reprice”  means  that  the  loaner  may  require  the  borrower  to  negotiate  with  the  loaner  within  the  regulated  period  to  raise  the  loan

interest rate and both parties will determine the “repricing date” and relevant interest rate in the form of supplemental agreement.

9.3.3 “Direct raise of loan interest rate” means that the loaner may directly raise the loan interest rate according to this article and Article 21.

9.3.3.1 Since the loan sends a notice of “repricing date” to the borrower, the loan interest rate should be applied to each loan that the borrower has not

repaid by the “repricing date”.

9.3.3.2 If the loan currency is RMB and the type of benchmark interest rate of each loan is kept unchanged, then the raised loan interest rate should be

determined by the fluctuating extent/increase (decrease) value specified in Article 21 on the basis of the benchmark interest rate of “repricing date”.

17

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
If the “repricing date” is set as T Day, then the benchmark interest rate to calculate the raised loan interest rate should be determined by following rules

① If the benchmark interest rate of the People’s Bank applies, the benchmark interest rate should be the benchmark interest rate of the People’s Bank on

T Day;

②   If  LPR  quotation  of  Bank  of  Communications  applies,  the  benchmark  interest  rate  should  be  the  LPR  value  published  on  the  latest  business  day
before T Day, and, if no LPR is published on the latest business day before T Day, the benchmark interest rate should be the LPR value published on the
former business day before that day;

③ If LPR mean interest rate applies, the benchmark interest rate should be the LPR value published on the latest business day before T Day, and, if no
LPR is published on the latest business day before T Day, the benchmark interest rate should be the LPR value published on the former business day before
that day.

9.3.3.3 If the loan is in any foreign currency, the raised loan interest rate should be determined according to Article 21.

9.3.4 After the loaner reprices against the risk according to the article mentioned above, the new interest rate should be applied since the “repricing date”.
Regulations on the fluctuation is still subject to that mentioned in Article 3 of this contract, and if both parties negotiate to change the relevant regulation, the
changed regulation shall be applied. If the loan becomes overdue (including the circumstance that the borrower fails to make the repayment in time or the
loan is announced by the loaner to be mature in advance) or embezzled, the overdue and embezzlement default interest rate should be determined on the basis
of the new interest rate (including the interest rate adjusted according to regulations on fluctuation of this contract) while the compound interest rate should
also be correspondingly adjusted.

9.3.5 Execution of the “repricing against risk” should not be deemed or construed as that the loaner waives any other right under any law, rule or this
contract.  The  loaner  may  take  other  protective  measures  for  the  creditor’s  right  according  to  laws,  rules  and  this  contract,  including  but  not  limited  to
measures specified in Article 9.2 of this contract.

18

 
 
 
 
 
 
 
 
 
▲▲Article 10. Breach

10.1 If the borrower does not repay the principle or interest of the loan in time or uses the loan for any purpose not included in this contract, the loaner
will collect the interest at the default interest rate of overdue or embezzled loan, and collect the compound interest of the outstanding interest. If the default
interest rate is adjusted according to this contract, the compound interest rate should also be adjusted correspondingly.

10.2 If the borrower does not repay the principle or interest of the loan in time, it should assume the calling expense, lawsuit expense (or arbitration
expense), preservation expense, announcement expense, execution expense, attorney’s fee, travel expense and other expenses of the loaner in realizing the
creditor’s right.

▲▲Article 11. Deduction

11.1 The borrower authorizes that in case of any payable principal, interest, default interest, compound interest or any other expense of the loan, the
loaner  may  deduct  the  fund  in  any  account  of  the  borrower  opened  at  any  branch  of  Bank  of  Communications  Co.,  Ltd.  to  repay  the  amount  mentioned
above.

11.2 After such deduction, the loaner should inform the borrower of relevant account number, contract number, number of Application for Use of Line of

Credit, deduction amount and remaining debt.

11.3 If the deducted fund is insufficient to repay all the debt of the borrower, the debt to be repaid by such fund should be determined according to this

contract.

11.4  If  the  currency  of  the  deducted  fund  is  different  from  that  of  the  debt  to  be  repaid,  the  deducted  fund  should  be  converted  at  the  exchange  rate
published by Bank of Communications Co., Ltd. at the time of deduction. If any settlement, sales or exchange procedure of foreign currency is necessary, the
borrower is obliged to assist the loaner and assume the risk in exchange rate.

Article 12. Notice

12.1 Contact details provided by the borrower in this contract (including mailing address, telephone number and fax number) are all authentic and valid.
In  case  of  any  change  of  any  contact  detail,  the  borrower  should  send/deliver  such  change  to  the  mailing  address  offered  by  the  loaner  in  this  contract
immediately. Such change should take effect when the loaner receives the notice of change.

19

 
 
 
 
 
 
 
 
 
 
 
 
12.2 Unless otherwise specified in this contract, the loaner may send a notice to the borrower in any manner below. The loaner may choose the manner it
thinks fit but is relieved from any liability for the error, omission or delay caused by the postal service, fax, telephone or any other communication system. If
the loaner chooses several manners, the one delivering the notice to the borrower, the fastest should prevail.

(1)  If  the  loaner  chooses  the  announcement,  the  date  at  which  the  loaner  publishes  the  announcement  on  its  website,  online  bank,  telephone  bank  or

outlet should be deemed as the delivery date;

(2) If the loaner chooses the personal delivery, the date at which the borrower signs to confirm the reception should be deemed as the delivery date;

(3) If the loaner chooses the postal service (including express delivery, ordinary mail and registered mail) to send the notice to the latest mailing address
of  the  borrower  that  the  loaner  knows,  the  third  day  (in  the  same  city)/the  fifth  day  (in  different  cities)  since  the  sending  date  should  be  deemed  as  the
delivery date;

(4) If the loaner chooses the fax, SMS or other electronic communication means to deliver the notice to the latest fax number of the borrower that the

loaner knows, the mobile telephone number or e-mail appointed by the borrower, the sending date should be deemed as the delivery date.

12.3 The borrower agrees that unless the loaner receives the written notice about changing the mailing address from the borrower, the mailing address
provided  by  the  borrower  in  this  contract  is  the  address  for  the  court  to  send  the  judicial  instrument  and  other  written  documents.  During  the  process  of
dispute solution, if the court sends the judicial instrument or other written documents to the latest mailing address of the borrower that the loaner knows
through  the  postal  service  (including  express  delivery,  ordinary  mail  and  registered  mail),  the  date  at  which  the  borrower  signs  on  the  receipt  should  be
regarded as the delivery date; if the borrower does not sign on the receipt, the third day (in the same city)/the fifth day (in different cities) since the sending
date should be deemed as the delivery date; Except for the written judgment, written verdict or mediation agreement, the court may send any notice to the
borrower  by  any  communication  means  specified  in  Article  12.2.  The  court  may  choose  the  communication  means  it  thinks  fit  but  is  relieved  from  any
liability  for  the  error,  omission  or  delay  caused  by  the  postal  service,  fax,  telephone  or  any  other  communication  system.  If  the  court  chooses  several
manners, the one delivering the notice to the borrower, the fastest should prevail.

20

 
 
 
 
 
 
 
 
▲▲Article 13. Disclosure and Confidentiality

13.1 With respect to the information and materials of the borrower obtained in the signing and performance of this contract, the loaner may not violate
any law, rule or regulatory requirement to use such information and materials. It should assume the confidentiality liability but not disclose such information
and materials to any third party, except for under following circumstances:

(1) The law or rule requires such disclosure;

(2) The judicial department or regulatory authority requires such disclosure;

(3) When the borrower does not repay the principal and/or interest of the loan in time, the loaner has to make the disclosure to the external professional

advisor for the purpose of realizing the creditor’s right under this contract but such external professional advisor must assume the confidentiality obligation;

(4) The borrower agrees or authorizes the loaner to make the disclosure.

13.2 The borrower confirms that it has signed the Credit Information Inquiry and Provision Authorization. The loaner may inquire, use and keep the

credit information of the borrower within the scope regulated by the authorization.

13.3  Besides  the  circumstance  specified  in  Article  13.1  and  Article  13.2,  the  borrower  further  agrees  Bank  of  Communications  Co.,  Ltd.  to  use  or
disclose the information and materials of the borrower under following circumstances, including but not limited to the basic information, credit transaction
information, adverse information and other relevant information and materials of the borrower, and is willing to assume all the consequences thereof:

Bank of Communications Co., Ltd. may disclose such information and materials on a confidentiality basis to the business outsourcing institution, third
party  service  provider,  other  financial  institutions  and  other  institutions  or  individuals  that  the  loaner  deems  necessary,  including  but  not  limited  to  other
branches or wholly-owned subsidiaries of Bank of Communications Co., Ltd. for the purpose below: ① It conducts the line of credit business or any relevant
business, such as promoting the line of credit business of Bank of Communications Co., Ltd., calling for the debt from the borrower and transferring the
creditor’s right of the line of credit business; ② The loaner provides or may provide the borrower with the new product or service, or further provides the
service.

21

 
 
 
 
 
 
 
 
 
 
 
Whether Article 13.3 is applicable should be subject to Article 24 of this contract.

Article 14. Applicable Laws and Dispute Solution

Laws of the People’s Republic of China (for the purpose of this contract, excluding laws of Hong Kong, Macau and Taiwan) apply to this contract. Any
dispute under this contact should be brought to the competent court at the place of the loaner, unless otherwise regulated in this contract. Both parties should
continue to perform those articles not involved in the dispute during the period of dispute solution.

Article 15. Effectiveness and Constitution of Contract

15.1  This  contract  takes  effect  with  the  signature  of  the  legal  representative  (responsible  person)  or  the  authorized  representative  (or  seal)  and  the

common seal of the borrower, as well as the signature of the responsible person or the authorized representative (or seal) and the common seal of the loaner.

15.2 The Application  for  Use  of  Line  of  Credit  and  other  relevant  documents  and  materials  signed  under  this  contract  are  indispensable  parts  of  this

contract.

15.3 Application for Use of Line of Credit is the supplement to this contract. Unless otherwise regulated in the Application for Use of Line of Credit,

rights, obligations and other matters of the borrower and the loaner should still be subject to this contract.

Article 16. Specific Content of Line of Credit

16.1 Currency of line of credit: RMB; Amount in words: five million yuan; Available for √RMB ☐ (foreign currency); Belonging to √Revolving line of

credit ☐ One-time line of credit (used for several time) □One-time line of credit (used for only once).

22

 
 
 
 
 
 
 
 
 
 
 
16.2 Purpose of line of credit: operation turnover .

16.3 Period of line of credit is November 21, 2019 to November 21, 2020.

Article 17. Interest Rate

If the loan is in any foreign currency, the determination and adjustment of interest rate, and the default interest rate of overdue and embezzled loan are

regulated as follows:

                                      /                                      

Article 18. Account

18.1 The borrower appoints the following account to be the issuance account. The account ☐ is √is not the dedicated loan issuance account opened at the

loaner. If both parties otherwise regulate in the Application for Use of Line of Credit, such Application for Use of Line of Credit should prevail.

Account name: CLPS

Account number: 310066865018010213932

Bank of deposit: Zhangjiang Sub-branch of Bank of Communications

18.2 The borrower appoints that:

(1) The repayment account:

Account name: CLPS

Account number: 310066865018010213932

Bank of deposit: Zhangjiang Sub-branch of Bank of Communications

(2) The fund collection account:

Account name: CLPS

Account number: 310066865018010213932

Bank of deposit: Zhangjiang Sub-branch of Bank of Communications

Article 19. Issuance, Payment and Repayment of Loan

19.1 The period of each loan withdrawn under this contract should be no longer than 12

23

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
√months ☐ days, and the maturity date of all the loan should be no later than May 21, 2021.

19.2 The limit of independent payment under this contract should be RMB 0.

19.3 The entrusted payment by loaner is compulsory once any condition below is met:

                                     /                                     

                                     /                                     

19.4 In the mode of independent payment by the borrower, the borrower should report the payment of loan fund to the loaner within 15 days since the

issuance of loan.

Article 20. Financial Restriction, External Rating, Production and Operation Qualification/License

20.1 Limit on the external investment by the borrower is RMB10,000,000,000; limit on the increase of debt financing is RMB10,000,000,000.

20.2 Specific regulations on the financial indexes of the borrower:

(1)                                      /                                     

(2)                                      /                                     

(3)                                      /                                     

20.3 Specific regulations on the external rating:

(1)                                      /                                     

(2)                                      /                                     

20.4 Specific regulations on the production and operation qualification/license of the borrower:

(1)                                      /                                     

(2)                                      /                                     

▲▲Article 21. Repricing of Risk

21.1 This contract adopts the first repricing mode below: (1) Repricing through negotiations; (2) Direct raising the loan interest rate.

24

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
21.2 Once the “direct raising the loan interest rate” is adopted:

21.2.1  If  the  loan  currency  is  RMB,  the  fluctuation  extent/increase  (decrease)  value  of  the  raised  loan:  ☐  Benchmark  interest  rate  (without
fluctuation/increase or decrease) ☐ Fluctuated upwards by      /      % ☐ Fluctuated downwards by      /     % ☐ Increased by       /      %☐ Decreased by
      /      %. If any specific regulation is reached in a certain loan, the fluctuation extent/increase (decrease) value of the raised interest rate should be subject
to the applicable Application for Use of Line of Credit.

21.2.2 If the loan currency is a foreign currency, interest rate of the raised loan is:

                                    /                                    

Article 22. Contact Details

Contact details of the borrower to receive the notice specified in Article 12:

Mailing address: 3F, Building 10, 498 Guoshoujing Road

Addressee:                                     Yang Rui                                    

Post code:                                     201203                                    

Tel:                                                                                                       

Mobile:                                     18621327026                                    

Fax:                                                                                                             

E-mail:                                                                                                             

Article 23. Counterparts

This contract is made with three copies. Both parties and the guarantor (if any) holds one copy (ies) respectively.

Article 24. Miscellaneous

24.1 Both parties agree that Article 13.3 √applies □does not apply to this contract.

24.2 The loaner will issue the legal VAT invoice according to laws, rules and regulations, while the specific time and mode should be determined by both

parties through negotiations.

24.3 The payment mode of loan under this contract should be subject to the Application for Use of Line of Credit signed by the loaner.

25

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Borrower:                                     CLPS                                    

Legal representative (responsible person):                                     Yang Xiaofeng                                    

Address: Room 26C01, 828-838 Zhangyang Road, China (Shanghai) Free Trade Area

Loaner: Xinqu Branch (Sub-branch) of Bank of Communications Co., Ltd.

Responsible person:                                     Cai Yue                                    

Mailing address:                                     260 Xinjinqiao Road                                    

The borrower has read this contract and the loaner has made detailed descriptions as required
by the borrower. The borrower possesses no objection or doubt when signing this contract and
understands  all  the  articles,  especially  the  meaning  and  legal  consequence  of  those  marked
with ▲▲.

(No text below in this page)

Borrower: (Seal)

(Seal: CLPS)

Loaner: (Seal)

(Seal:  Line  of  Credit  Business  Contract  Seal  of  Shanghai
Xinqu Sub-branch of Bank of Communications Co., Ltd.)

26

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Legal  representative  (responsible  person)  or  authorized
representative

Legal  representative  (responsible  person)  or  authorized
representative

(Signature or seal)

(Signature or seal)

Date: December 4, 2019

Date: December 4, 2019

27

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exhibit 10.19

China Merchants Bank Co., Ltd.

Shanghai Branch

Credit Granting Agreement

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(cid:0)It is applicable to the situation that the working capital loan does not need to sign another loan contract(cid:0)

Credit Granting Agreement

No.:121XY2019029438

Credit grantor: China Merchants Bank Co., Ltd., Shanghai Century Avenue Branch (hereinafter referred to as “Party A”)

Credit applicant: CLPS Incorporation (hereinafter referred to as “Party B”)

Upon  application  by  Party  B,  Party  A  agrees  to  provide  a  line  of  credit  (LOC)  to  Party  B.  Upon  fully  consultation,  Party  A  and  Party  B  have  reached  a
consensus in respect of the following terms and conditions in accordance with the relevant laws and regulations, and hereby enter into this agreement.

1. Line of Credit

1.1  Party  A  shall  grant  Party  B  a  LOC  of  RMB  Twenty  Million  yuan  (or  equivalent  amount  of  other  currencies,  which  shall  be  translated  with  the

exchange rate published by Party A on the date when the specific business occurs, the same below), including revolving LOC and/or one-time LOC.

If there is any outstanding balance of the specific business carried out under the credit agreement No. 5202180601 signed by Party A (or its subordinate
organization) and Party B (fill in the text name of the agreement), it will be automatically included in this Agreement and directly occupy the credit line
under this agreement

1.2 The credit term is 12 months, from December 16, 2019 to December 15, 2020. If Party B needs to use the credit line to handle the specific credit
business,  it  shall  apply  to  Party  A  for  the  use  of  the  credit  line  within  the  period.  Party  A  shall  not  accept  the  application  for  trial  use  of  the  credit  line
submitted by Party B beyond the expiration date of the credit period, unless otherwise specified in this agreement

1.3  The  varieties  of  credit  granting  under  the  LOC  includes  but  is  not  limited  to  credit  for  loan/order-related  loan,  trade  financing,  bill  discounting,
commercial  bill  acceptance,  guaranteed  discount  for  commercial  acceptance  bills,  international/domestic  letter  of  guarantee,  customs  duties  and  dues
payment guarantee, corporate account overdraft, derivative transaction and gold leasing or the combination thereof.

“Trade financing” includes but is not limited to international/domestic letters of credit, import bill advance, delivery against bank guarantee, import bill
advance  under  collection,  packaged  loans,  export  bill  advance,  export  negotiation,  export  bill  advance  under  collection,  remittance  financing  for
import/export, and credit insurance financing, factoring, bill analyzation and other business varieties.

1.4  The  revolving  LOC  refers  to  the  maximum  amount  of  total  principal  balance  of  the  credit  for  one  or  more  business  varieties  mentioned  in  the

preceding paragraph granted by Party A to Party B occurred during the credit period, which can be repeatedly used in a revolving manner.

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The one-time LOC means that the cumulative amount of credit for the business varieties mentioned in the preceding paragraph granted by Party A to
Party B occurred during the credit period shall not exceed the one-time LOC approved by Party A. Party B shall not use the one-time LOC in a revolving
manner, and the amount of each credit granting applied by Party B under the LOC shall offset the amount of one-time LOC until the amount of LOC is fully
offset by the accumulated amount of all the credit granting.

2. Arrangement of credit line

2.1 During the credit period, the credit business applied by the borrower and approved by loaner shall be automatically included in this Agreement and

occupy the credit line under this arrangement.

2.2 If Party A handles the factoring business with Party B as the payer (debtor of the accounts receivable), the accounts receivable right transferred by
Party A from a third party to Party B occupies the above credit line; if Party B applies to Party A for factoring business with Party B as the payee (creditor of
accounts  receivable),  Party  A’s  own  funds  or  other  funds  from  other  legal  sources  shall  pay  to  Party  B  The  payment  is  used  to  purchase  the  accounts
receivable bonds held by Party B, and the purchase money (purchase money) occupies the above credit line

2.3Where Party A, according to the needs of its internal processes, entrusts other branches of China Merchants Bank to issue a subsidiary letter of credit
to the beneficiary after issuing the master letter of credit, the bill advance and delivery against bank guarantee that occurs under such letter of credit shall
offset the above-mentioned LOC.

When the import letter of credit is used, if the import bill advance is actually incurred later under the same letter of credit, the import letter of credit and
import bill advance shall offset the same amount at different stages. That is, when the import bill advance occurs, the amount recovered after the letter of
credit is paid, if re-used for import bill advance, shall be deemed to offset the same amount under the original import license.

3. Approval and Usage of Credit Line

3.1 The types of LOC under this Agreement (revolving LOC or one-time LOC), the applicable types of credit granting, the amount of LOC under each
type of credit granting, the transferability of different types of credit granting, and the specific conditions for use, etc. are subject to the approval of Party A.
If  Party  A  makes  adjustments  to  its  original  approval  opinions  according  to  the  application  of  Party  B  during  the  credit  period,  the  subsequent  approval
opinions issued by Party A constitute supplements and changes to the original approval opinions, and so on.

3.2 Party B must apply for using the LOC on a case-by-case basis and submit the materials requested by Party A. Party A shall examine and approve the
application one by one. Party A has the right to comprehensively consider whether to approve based on its internal management requirements and Party B’s
operation,  and  has  the  right  to  refuse  Party  B’s  application  unilaterally,  without  bearing  any  form  of  legal  responsibility  for  Party  B.  In  the  event  of  any
inconsistency between this paragraph and other terms, the agreement in this paragraph shall prevail.

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When carrying out specific credit business with the approval of Party A, the specific business agreement (including but not limited to single agreement /
application, framework agreement or specific business contract) signed by Party A and Party B for specific credit business constituting an integral part of the
credit agreement. The specific amount, interest rate, term, purpose, cost and other business elements of each loan or other credit business shall be determined
by the specific business agreement, the business voucher (including but not limited to the loan receipt) confirmed by Party A and the business records of
Party A’s system

3.3 If Party B applies for working capital loan within the credit line, Party A and Party B do not need to sign the “loan contract” one by one. Party B’s

application for loan is the main one, and the withdrawal application is submitted by Party A for approval one by one

3.4 Each loan or other credit within the credit line shall be used based on the business needs of Party B and the business management regulations of

Party A. the maturity date of each specific business may be later than that of the credit period (unless otherwise required by Party A)

3.5 During the credit period, Party A has the right to evaluate Party B’s operation and financial performance on a regular basis every year, and adjust the

credit line available to Party B based on the evaluation

4 Liquidity loan interest rate clause

4.1 The interest rate of any loan under this Agreement shall be determined by Party B in the corresponding withdrawal application and approved by

Party A. if the withdrawal application is inconsistent with the loan receipt of the loan, the loan receipt shall prevail

Party A has the right to adjust the floating interest and / or basic point of working capital loan from time to time in combination with changes
in national policies, changes in domestic credit market prices or changes in Party A’s own credit policies. Once Party A decides to adjust, it shall
notify Party B in advance, and such adjustment shall take effect after Party A notifies Party B. the specific floating rate and / or basic point of the
newly withdrawn loans by Party B, as well as the loans that have been withdrawn but not yet returned by Party B before the notice takes effect,
shall be implemented according to the notice of Party A

In  case  of  any  conflict  or  inconsistency  between  this  clause  and  any  other  agreement  in  this  agreement,  the  agreement  in  this  clause  shall

prevail

4.3 If Party B fails to use the loan in accordance with this agreement, the penalty interest will be charged by 100% on the basis of the original interest

rate from the date of change of use. The original interest rate refers to the interest rate applicable before the loan is used for another purpose

If Party B fails to repay the loan on time, the expected interest (penalty interest) shall be charged for the outstanding part according to the standard of
50% (expected loan interest rate) based on the original interest rate from the date of overdue. The original interest rate refers to the interest rate applicable
before the maturity date of the loan (including seven days in advance) (if it is a floating rate, it is the last floating period before the maturity date of the loan
(including the early maturity date)

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If the loan is overdue and not used in accordance with the contract, the interest shall be calculated according to the higher of the above provisions

4.4 During the loan period, if there is any regulation of the people’s Bank of China on adjusting the loan interest rate, the relevant provisions of the

people’s Bank of China shall apply

4.5 If the maturity date of the loan is a holiday, the loan shall be automatically extended to the first working day after the holiday, and the interest shall

be calculated according to the actual number of days of loan funds

4.6 Party B shall pay the interest on each and previous day. Party A may directly deduct the interest from any account of Party B in China Merchants

Bank. If Party B fails to pay the interest on time, compound interest shall be calculated according to the overdue loan interest rate specified in this article

5. Guarantee Provisions

5.1  For  all  debts  owed  by  Party  B  to  Party  A  under  this  agreement,  Party  B  or  a  third  party  recognized  by  Party  A  shall  provide  property  mortgage

guarantee or joint guarantee. Party B or the third party as guarantor shall issue or sign the guarantee text separately according to the requirements of Party A

5.2 If the guarantor fails to sign the guarantee contract and complete the guarantee procedures in accordance with the provisions of this clause (including

the debtor of account receivable raises a defense before the receivable is pledged), Party A has the right to refuse to provide credit to Party B.

5.3 Under the circumstances that the guarantor provides the guarantee for any debt owed by Party B to Party A under this Agreement using real estate,
Party B shall immediately notify Party A if it knows that the collateral has been or may be included in the government demolition and land expropriation
plan,  and  press  the  guarantor  to  continue  to  provide  guarantees  for  Party  B’s  debts  in  accordance  with  the  guarantee  contract  using  the  compensation
provided by the expropriator and complete the corresponding guarantee procedures in a timely manner, or provide other guarantee measures required and
approved by Party A.

Under  the  circumstances  stated  in  the  preceding  paragraph,  if  the  guarantee  needs  to  be  reset  or  other  guarantee  measures  are  taken,  the  relevant
expenses incurred shall be borne by the guarantor, with Party B being jointly and severally liable for the expenses. Party A has the right to deduct these fees
directly from Party B’s account.

6. Rights and Obligations of Party B

6.1 Party B shall have right to:

6.1.1 Request Party A to provide loans or other credits within the LOC in accordance with the conditions specified in this Agreement;

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6.1.2 Use the LOC as stipulated in this Agreement;

6.1.3  Request  Party  A  to  keep  confidential  the  production,  operation,  property,  account  and  other  information  provided  by  Party  B,  unless  otherwise

required by laws and regulations or otherwise required by the regulatory authority; and

6.1.4 Transfer the debt to a third party after obtaining the consent of Party A.

6.2 Party B shall bear the following obligations:

6.2.1 It shall truthfully provide documents and information required by Party A (including but not limited to providing its true financial books/statements
and annual financial reports in the period required by Party A, major decisions and changes in production, operation and management, withdrawal/use of
funds, information related to guarantee, etc.), and all the bank accounts, account numbers and balance of deposits and loans, as well as cooperate with Party
A’s investigation, review and inspection.

6.2.2 It shall accept the supervision of Party A on its use of credit funds and related production operations and financial activities.

6.2.3 It shall use loans and/or other credits in accordance with the provision of this Agreement and the specific contract and/or promised purposes.

6.2.4 It shall repay the principal, interest and expenses of loans, advances and other debt under credit granting in full and on time in accordance with the

provisions of this Agreement and each specific contract.

6.2.5 It shall obtain Party A’s written consent if transferring all or part of the debts under this Agreement to a third party.

6.2.6 Under the following circumstances, it shall immediately notify Party A and actively cooperate with Party A to implement the guarantee measures

for the safe repayment of principal, interest and expenses of loans, advances and other debt under credit granting:

6.2.6.1 Occurrence of major financial losses, asset losses or other financial crisis;

6.2.6.2 Providing a loan or guarantee for a third party, or providing a collateral (pledge) guarantee with its own property (right);

6.2.6.3 Suspension of business, revocation or cancellation of business license, filing or being filed for bankruptcy, dissolution, etc;

6.2.6.4 The controlling shareholder and other related companies fall into a major operational or financial crisis, which affects their normal operation;

6.2.6.5 The amount of the related transaction with the controlling shareholder and other related companies exceeds 10% of the net assets of Party B;

6.2.6.6 Occurrence of any litigation, arbitration or criminal or administrative penalty that has a material adverse effect on its business or property status;

and

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6.2.6.7 Occurrence of other significant events that may affect its ability to pay its debts.

6.2.7  It  shall  not  neglect  to  manage  and  exercise  their  mature  creditor’s  right,  or  dispose  of  existing  primary  property  improperly  or  without

consideration.

6.2.8  It  shall  obtain  the  written  consent  of  Party  A  before  carrying  out  major  events  such  as  merger  (M&A),  division,  restructuring,  joint  venture

(cooperation), transfer of property (share) rights, joint-stock reform, foreign investment, and increase of debt financing.

6.2.9 In case of pledge of accounts receivable, Party B shall guarantee that the credit balance at any time point during the credit period is less than 80%
of the pledged balance of accounts receivable; otherwise, Party B must provide a new account receivable approved by Party A for pledge or deposit into the
deposit deposit (the deposit account number shall be automatically generated or recorded by Party A’s system when the deposit of deposit is subject to the
same below), until the balance of pledged accounts receivable Amount * 80% + effective margin > credit balance

6.2.10 If the balance of the deposit account is less than 95% of the corresponding business amount due to the fluctuation of exchange rate, Party B is

obliged to add the corresponding amount of deposit or other guarantee according to the requirements of Party A

6.2.11 It shall ensure that the payment for goods under the import transaction are collected through the account designated by Party A; in the event of

export negotiation, transfer the notes and/or documents under the letter of credit to Party A.

6.2.12  Party  B  shall  ensure  that  the  settlement,  payment  and  other  revenue  and  expenditure  activities  are  mainly  carried  out  in  the  British Airways
settlement account opened with Party A. during the credit period, Party B’s settlement transaction share in the designated account shall not be less than Party
B’s financing share in all banks in Party A’s financing amount

7. Rights and Obligations of Party A

7.1 Party A shall have:

7.1.1  Right  to  request  Party  B  to  repay  the  principal,  interest  and  expenses  of  the  loan,  advance  and  other  debt  under  the  credit  granting  under  this

Agreement and the specific contract in full and on time;

7.1.2 Right to request Party B to provide information related to the use of the LOC;

7.1.3 Right to know the production and operation and financial activities of Party B;

7.1.4  Right  to  supervise  Party  B’s  use  of  loans  and/or  other  credits  for  the  purposes  specified  in  this  Agreement  and  each  specific  contract;  directly
suspend  or  limit  the  corporate  online  banking  function  of  Party  B’s  account  when  the  business  needs  it  (including  but  not  limited  to  closing  the  online
banking, presetting the list of payment targets/single payment limit/phased payment limit, etc.), restrict the sale of settlement documents, or restrict telephone
banking, mobile banking and other non-counter payment and universal cash withdrawing functions of Party B’s account;

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7.1.5 Right to entrust other agencies of China Merchants Bank located at the place where the beneficiary is located to issue subsidiary letter of credit to

the beneficiary, according to the needs of its internal processes, after accepting Party B’s application for the opening of letter of credit;

7.1.6 Right to deduct directly from the account opened by Party B at any branch of China Merchants Bank to repay the debts owed by Party B under this
Agreement and each specific contract (when the debt under the credit granting is not in RMB, it has the right to deduct directly from the RMB account of
Party B and purchase foreign exchange at the exchange rate published by Party A to repay the principal, interest and expenses under the credit granting);

7.1.7 Right to transfer its creditor’s rights owed by Party B and notify Party B of the transfer and collect the debt in such manner as it deems appropriate,

including but not limited to by fax, posts, personal delivery, and announcement in public media;

7.1.8 Right to supervise the account of Party B and entrust other agencies of China Merchants Bank other than Party A to supervise Party B’s account,

and control the payment of loan funds according to the loan purpose and payment scope agreed by both parties; and

7.1.9 Party A finds that Party B has any of the circumstances stipulated in article 6.2.6 of this agreement, Party A has the right to require Party B to
implement  the  guarantee  measures  for  the  safe  repayment  of  the  principal  and  interest  of  the  credit  debt  and  all  related  expenses  under  this  agreement
according to the requirements of Party A, and also has the right to directly take one or more relief measures for breach of contract stipulated in the “event of
default and handling” clause of this agreement;

7.1.10 Other rights set out in this Agreement.

7.2 Party A shall bear the following obligations:

7.2.1 It shall grant loans or other credits to Party B within the LOC in accordance with the conditions stipulated in this Agreement and each specific

contract; and

7.2.2  It  shall  keep  confidential  the  information  of  assets,  finance,  production  and  operation  of  Party  B,  except  as  otherwise  provided  by  laws  and

regulations or otherwise required by the regulatory authority.

8. Party B specifically undertakes:

8.1  That  it  is  a  legal  person  duly  incorporated  and  validly  existing  under  the  laws  of  PRC  and  have  full  civil  capacity  to  sign  and  perform  this

Agreement, and its registration and annual report publicity procedures are true, legal and valid;

8.2 That it has been fully authorized by the Board of Directors or any other authorized body to sign and fulfill this Agreement;

8.3 That the documents, information, and vouchers provided by it regarding Party B, the guarantor, the mortgagor (pledgor), and the collateral (pledged

property) are true, accurate, complete, and valid, without any significant errors that are inconsistent with the facts or omissions of any significant facts;

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8.4 To strictly abide by covenants set out in the specific business agreements and various letters and related documents issued to Party A;

8.5 That at the time of signing this Agreement, there was no litigation, arbitration or criminal or administrative punishment that may have significant
adverse consequences for Party B or Party B’s major property, and such litigation, arbitration or criminal or administrative penalties will not occur during the
execution of this Agreement; in the event of occurrence, Party B shall immediately notify Party A;

8.6 To strictly abide by the national laws and regulations in business activities, carry out various business in strict accordance with the business scope
stipulated  by  the  business  license  of  Party  B  or  approved  according  to  law,  and  go  through  the  formalities  for  registration,  annual  inspection,  and  the
extension of term of business operation, etc. on time;

8.7 To maintain or enhance the management level, ensure the value preservation and appreciation of existing assets, and not to waive any mature claims

or dispose of existing major assets improperly or without consideration;

8.8 That without the permission of Party A, it shall not pay off other long-term debts in advance,

8.9 The loan projects applied for under the credit line comply with the requirements of laws and regulations. The loan shall not be used for investment in
fixed assets, equity, etc., or for speculation in securities, futures and real estate in violation of regulations; it shall not be used for mutual borrowing to obtain
illegal income; it shall not be used for the fields and purposes prohibited by the state for production and operation; and shall not be used for other purposes
other than those specified in this Agreement and each specific business agreement

If the loan fund is paid by the borrower independently, Party B shall regularly (at least monthly) report the payment of loan fund to Party A. Party A has

the right to determine whether the loan payment conforms to the agreed purpose through account analysis, certificate inspection and on-site investigation

8.10 When signing and performing this agreement, Party B does not have any other major events that affect the performance of Party B’s obligations

under this agreement

9. Special provisions on working capital loans

9.1 Withdrawals and payment

Party B’s use of working capital loan under this agreement includes independent payment and entrusted payment

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9.1.1 independent payment

Independent payment means that Party A, according to Party B’s withdrawal application, releases the loan funds to Party B’s account, and Party B pays the
loan funds to the counterparties that meet the purpose of the agreement

9.1.2 Entrusted payment

Entrusted  payment  means  that  Party  A,  according  to  Party  B’s  withdrawal  application  and  payment  entrustment,  pays  the  loan  funds  through  Party  B’s
account to Party B’s counterparties who meet the purpose agreed in the agreement. Party B shall authorize Party A to pay Party B’s counterparties through
Party B’s account on the day of loan granting (or the next working day after the loan is made) for the loan funds by entrusted payment method

9.1.3 Under the following circumstances, Party B shall unconditionally adopt the mode of entrusted payment

9.1.3.1 Party B’s single withdrawal exceeds RMB 10 million (including or equivalent foreign currency)

9.1.3.2 Party A requires Party B to adopt the method of entrusted payment according to regulatory requirements or risk control needs

9.1.4 If the entrusted payment is adopted, the external payment after the loan is issued shall be subject to the approval of Party A. Party B shall not evade
Party A’s supervision by means of online banking, reverse drawing of cheques and breaking up the whole into parts

9.2 When drawing money, Party B shall submit the withdrawal application (with Party B’s official seal or Party B’s reserved seal in Party A) as required by
Party A, loan receipt and materials required by Party B according to different requirements of independent payment and entrusted payment. Otherwise, Party
A has the right to refuse Party B’s withdrawal application. If the payment information provided by Party B is inaccurate and incomplete, resulting in
delay or failure of fund payment, Party A shall not be liable for the breach of contract or other losses caused by Party B to its counterparties

9.3 Loan development

If Party B fails to repay the loan under this Agreement on schedule and needs to extend the loan, it shall submit a written application to party a one month
before  the  maturity  of  the  relevant  loan;  if  Party  A  agrees  to  extend  the  loan  after  examination,  Party  A  and  Party  B  shall  sign  an  extension  agreement
separately.  If  Party  A  does  not  agree  to  the  extension,  the  loan  occupied  by  Party  B  and  the  interest  payable  shall  still  be  paid  in  accordance  with  the
provisions of this Agreement and the corresponding loan receipt

10. Event of Default and the Settlement

10.1 It shall be deemed an event of default if:

10.1.1 Party B fails to perform or breaches the obligations set out in this Agreement;

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10.1.2 The information in the representations or undertakings made by Party B under this Agreement is untrue or incomplete, or Party B breaches the

requirement and does not make correction as required by Party A;

10.1.3 It fails to withdraw and draw the loan as agreed in this agreement, or fails to repay the principal and interest or expenses of the loan in full and on
time  according  to  the  provisions  of  this  agreement,  or  fails  to  use  the  funds  to  recover  the  account  funds  as  required  by  Party  A,  or  fails  to  accept  the
supervision of Party A, and fails to rectify immediately as required by Party A

10.1.4 Party B has major breach of contract under the legal and effective contract signed with other creditors, and has not been satisfactorily resolved

within three months from the date of breach.

The above-mentioned major breach refers to the fact that Party B’s breach of contract in the creditor’s right to claim more than RMB 10000

from Party B

10.1.5  Party  B  encounters  significant  obstacles  in  listing  its  shares  on  the  New  Third  Board  or  suspends  its  listing  application;  Party  B  is  subject  to
warning  letter,  ordered  corrections,  restrictions  on  securities  account  trading  and  other  self-regulatory  measures  for  more  than  three  times  or  subject  to
disciplinary punishment, termination of listing, etc; or

10.1.6When Party B is the supplier of the government procurement unit, the government procurement unit has risk information that is not conducive to
Party  A’s  credit  repayment,  such  as  continuous  or  cumulative  three-phase  delay  in  payment,  or  Party  B’s  supply  qualification  is  cancelled  (entering  the
blacklist  of  government  procurement),  untimely  supply,  unstable  product  quality,  operational  difficulties,  obvious  deterioration  of  financial  situation
(insolvency), project shutdown, etc ;

10.1.7 Party B’s financial indicators fail to continuously meet the requirements of this Agreement / specific business agreement; or any prerequisite (if

any) for Party A to provide credit / financing to Party B as agreed in this Agreement / specific business agreement has not been continuously met;

10.1.8 Party B uses the loan in the way of “breaking up the whole into parts” to avoid the external payment of loan funds entrusted by Party B to Party A

in accordance with the requirements of this Agreement;

10.1.9 other circumstances that Party A considers to damage the legitimate rights and interests of Party A occur.

10.2 If one of the following circumstances occurs to the guarantor, Party A believes that it may affect the guarantor’s guarantee capacity, and requires the
guarantor  to  eliminate  the  adverse  effects  caused  by  it,  or  requires  Party  B  to  increase  or  replace  the  guarantee,  but  the  guarantor  and  Party  B  fail  to
cooperate, it shall be deemed an event of default:

10.2.1  A  circumstance  similar  to  those  described  in  Clause  6.2.6  of  this  Agreement  occurs,  or  the  consent  of  Party  A  is  not  obtained  when  the

circumstances described in Clause 6.2.8 occur;

10.2.2 When  the  irrevocable  letter  of  guarantee  is  issued,  the  actual  guarantee  capacity  is  concealed,  or  the  authorization  of  relevant  authority  is  not

obtained;

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10.2.3 Failure to go through formalities for the annual inspection registration and the extension of term of business operation; or

10.2.4 Neglect to manage and exercise their mature creditor’s right, or disposal of existing primary property improperly or without consideration.

10.3 If one of the following circumstances occurs to the mortgagor (or pledgor), Party A believes that it may result in the invalidity of the mortgage (or
pledge) or the shortfall in the value of collateral (pledged property), and requires the mortgagor (or pledgor) to eliminate the adverse effects caused by it, or
requires Party B to increase or replace the mortgage (or pledge), but the mortgagor (or pledgor) and Party B fail to cooperate, it shall be deemed an event of
default:

10.3.1 The mortgagor (or pledgor) does not own or has no right to dispose of the collateral (or pledged property), or there is dispute over the ownership;

10.3.2 The collateral (or pledged property) has been rented, seized, detained, supervised, or is subject to legal right of priority (including but not limited

to priority of construction project), and / or such circumstances are concealed;

10.3.3 The mortgagor transfers, leases, re-collateralizes the collateral or dispose of it in any other improper manner without the written consent of Party
A, or although the disposal of the collateral is consented to by Party A, the proceeds from the disposal are not used to repay the debt owed by Party B to
Party A as required by Party A;

10.3.4  The  mortgagor  does  not  properly  keep,  maintain  and  repair  the  collateral,  and  thus  the  value  of  the  collateral  is  obviously  impaired;  or  the
mortgagor’s acts directly jeopardize the collateral, resulting in a decrease in the value of the collateral; or the mortgagor does not affect insurance for the
collateral during the mortgage period according to Party A’s requirements;

10.3.5 The  collateral  has  been  or  may  be  included  in  the  scope  of  government  demolition  and  expropriation,  and  the  mortgagor  fails  to  immediately

inform Party A and fulfill the relevant obligations as stipulated in the mortgage contract; or

10.3.6 Where the mortgagor uses its real estate mortgaged to China Merchants Bank to provide the residual value mortgage for the business under this
Agreement,  the  mortgagor  settles  the  personal  mortgage  loan  in  advance  without  the  consent  of  Party  A  before  Party  B  pays  off  the  debt  under  this
Agreement.

10.3.7 if the pledger has pledged the financial products, the source of the funds of the financial products is illegal / compliant;

10.3.8 other matters that may affect the value of the mortgaged property or Party A’s mortgage (pledge) right occur or may occur

12

 
 
 
 
 
 
 
 
 
 
 
 
 
10.4 When the guarantee under this Agreement includes the pledge of accounts receivable, if the debtor of the accounts receivable obviously deteriorates
in operation, transfers property/withdraws funds to avoid debts, colludes with the pledgor to change path for the payment of receivables, causing that the
collected  funds  are  not  transferred  to  the  account  designated  for  receivable  collection,  loses  business  reputation,  loses  or  may  lose  the  ability  to  perform
contract, or other significant events affecting the debtor’s solvency occurs, Party A has the right to request Party B to provide corresponding guarantee or
provide new valid receivables for pledge; if Party B fails to provide, it shall be deemed an event of default.

10.5 In the event of any of the above default, Party A shall have the right to adopt the following measures, separately or simultaneously:

10.5.1 Reducing the LOC under this agreement, or stop the use of remaining LOC balance;

10.5.2 Recovering in advance the principal, interest and related expenses of loans issued within the LOC;

10.5.3 For bills that have been accepted by Party A during the credit period, or letter of credit (including subsidiary letter of credit issued by branches
entrusted by Party A), letter of guarantee, and letter of delivery against bank guarantee, etc. that have been issued by Party A , Party A may request Party B to
increase the amount of the security deposit (regardless of whether Party A has made advance payment), or transfer the funds in other accounts opened by
Party B at Party A into its security deposit account as a security deposit for the settlement of Party A’s advances under this Agreement, or hand over the
corresponding funds to a third party as a security deposit for Party A’s advance payment for Party B;

10.5.4 For the unpaid accounts receivable transferred from Party B to Party A under factoring, Party A has the right to request Party B to immediately
fulfill repurchase obligations and take other recovery measures in accordance with the specific business agreements; for the accounts receivable transferred
from Party B to Party A under factoring, Party A has the right to seek recourse from Party B.

10.5.5  Party  A  may  directly  request  Party  B  to  provide  other  property  accepted  by  Party  A  as  a  new  guarantee,  and  if  Party  B  fails  to  provide  new

guarantee as required, a penalty shall be levied against it at a rate of 30 % of the LOC amount under this Agreement.

10.5.6 Directly freezing/deducting deposits from any settlement account and/or other accounts opened by Party B at China Merchants Bank; and

10.5.7 submit Party B’s breach of contract and breach of credit information to credit reference agencies and banking associations, and have the right to

share such information among banking institutions and even to the public through appropriate means;

10.5.8 dispose of the collateral and / or recover from the guarantor in accordance with the provisions of the guarantee text;

13

 
 
 
 
 
 
 
 
 
 
 
 
10.5.9 for the working capital loan under the credit line, change the entrusted payment conditions of the loan fund and cancel Party B’s use of the loan in

the way of “independent payment”;

10.5.10 recourse shall be made according to the agreement.

10.6  For  the  funds  obtained  by  Party  A  through  seeking  recourse,  the  repayment  sequence  shall  be  from  the  earliest  to  latest  according  to  the  actual
maturity date of each credit. For each credit, the repayment sequence shall be from expenses, penalty, compounded interest, penalty interest, interest, to the
principal of credit, until all the principal, interests and related expenses are paid off.

Party A has the right to unilaterally adjust the above repayment sequence, unless otherwise required by laws and regulations.

11. Change and Rescission of Contract

This Agreement may be changed and rescinded upon negotiation and conclusion of a written agreement by the Parties hereto. This Agreement shall still

be valid before the conclusion of the written agreement. Any Party shall not change, amend or rescind this Agreement unilaterally.

12. Miscellaneous

12.1 During the term of this Agreement, any tolerance, grace period granted by Party A for Party B’s breach of contract or delay of performance, or any
delay of Party A in performing any rights or interests under this Contract shall not damage, affect, or limit any rights and interests of Party A as a creditor
vested by relevant laws and this Agreement, and shall neither be deemed as Party A’s consent or approval to any breach of this Agreement by Party B, nor be
deemed as Party A’s waiver of right to take action against any existing or future default.

12.2 In the event that this Agreement or any part thereof becomes null and void for any reason, Party B shall still be liable for repaying all the debt owed
to Party A under this Agreement. Under the above-mentioned circumstances, Party A shall have the right to terminate this Agreement and promptly claim for
the repayment of all the debt owed by Party B under this Agreement. In the event that any change in the applicable laws and policy requirements causes the
increase of costs for Party A to perform the obligations under the Agreement, Party B shall compensate Party A for the new costs as required by Party A.

12.3 Notices, requests or other documents related to this Agreement between Party A and Party B shall be sent in writing (including but not limited to by

letters, faxes, e-mails, Party A’s online banking, SMS or WeChat).

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12.3.1  For  the  delivery  by  hand  (including  but  not  limited  to  delivery  by  lawyer/notary,  express,  etc.),  the  instrument  shall  be  deemed  to  have  been
served when the addressee signs the receipt (in the event of rejection by the addressee, it shall be deemed to have been served on the date of rejection/return
or the 7th day after mailing ( whichever is earlier)); for the delivery by mail, the instrument shall be deemed to have been served at the 7th day after mailing;
for the delivery by fax, email, Party A’s online banking notice, SMS, WeChat or other electronic means, the instrument shall be deemed to have been served
at the date when the sender’s corresponding system displays that the transmission is successful.

For the notice to Party B regarding the transfer of the creditor’s right or dunning published by Party A on mass media, it shall be deemed to have been

served on the date of publishing.

Any Party that changes the contact address, email address, fax number, mobile number or WeChat account number shall notify the other party of the
change within five working days from the date of the change, otherwise the other party shall have the right to deliver the instrument according to the original
contact address or information If the instrument is not successfully delivered due to the change of contact address, the date of return or the 7th day after
delivery (whichever is earlier) shall be deemed to be the date of service. The party making the change is responsible for the losses that may arise therefrom,
and the legal effect of delivery shall not be affected.

12.3.2 The above-mentioned contact address, email address, fax number, mobile number, and WeChat account number are also used as their respective
address for service of notary instruments and judicial instruments (including but not limited to bill of complaint/arbitration applications, evidence, subpoenas,
notice  of  responding  to  action,  notice  to  produce  evidence,  notice  of  court  session,  notice  of  hearing,  judgment/arbitration  award,  verdict,  conciliation
statement,  notice  for  performance  within  a  time  limit  and  other  instruments  in  the  hearing  and  execution  stages).  The  instruments  shall  be  deemed  to  be
served effectively if the court or notary office accepting the case delivers them in writing to such address in accordance with this Agreement (the specific
criteria for service shall be implemented by reference to the provisions of paragraphs 12.3.1).

12.4  The  parties  hereto  agree  that  for  each  business  application  under  the  trade  financing,  Party  B  shall  affix  the  seal  according  to  the  Letter  of

Authorization for Reserved Specimen Seal provided by Party B to Party A, and both parties shall recognize the validity of such seal.

12.5 Both parties agree that: if Party B submits various applications or business vouchers for credit business through Party A’s online enterprise banking
system, the electronic signature generated in the form of digital certificate shall be deemed as Party B’s valid signature and seal, representing Party B’s true
intention. Party A has the right to fill in relevant business vouchers according to the application information sent on the Internet, and Party B recognizes its
authenticity, accuracy and legality, and accepts its authenticity, accuracy and legality constraint.

12.6  In  order  to  facilitate  business  handling,  Party  A’s  operations  (including  but  not  limited  to  application  acceptance,  data  review,  loan  granting,
transaction confirmation, deduction, inquiry, receipt printing, collection, deduction, etc.) involved in the transaction can be processed and generated, issued or
issued by any business outlet within the jurisdiction of Party A. the business operation and correspondence of the branch under the jurisdiction of Party A
shall be deemed as Party A Party A’s actions shall be binding on Party B

15

 
 
 
 
 
 
 
 
 
12.7  The  annex  under  this  Agreement  constitutes  an  integral  part  of  this  Agreement  and  is  automatically  applicable  to  the  corresponding  specific

business actually occurred between the two parties

12.8  This  agreement  involves  notarization  (except  compulsory  notarization)  or  other  matters  entrusted  to  a  third  party  to  provide  services,  and  the

relevant expenses shall be borne by the client. If both parties jointly act as principals, each party shall bear 50%.

In the event that Party B fails to repay the debts owed to Party A under this Agreement on time, all expenses incurred by Party A to realize the creditor’s
rights, such as lawyer’s fees, litigation costs, travel expenses, announcement fees, delivery fees, etc., shall be borne by Party B in full, and Party B shall
authorize  Party  A  to  deduct  directly  from  Party  B’s  bank  account  in  Party  A.  In  case  of  any  shortage,  Party  B  shall  guarantee  to  repay  the  amount  after
receiving the notice from Party A without any proof from Party A.

12.9 Party B shall, according to the requirements of Party A (choose “✔” in the (cid:0)) (cid:0)

☐ To insure its core assets and appoint Party A as the first beneficiary(cid:0)

☐ Party A shall not sell or mortgage the 21 assets designated by Party A before the credit debts are settled(cid:0)

☐ Before the credit debt is settled; the following restrictions shall be made on the dividends of its shareholders according to the requirements of Party A(cid:0)

12.10 Party B shall ensure that the financial indicators of Party B during the credit period shall not be lower than the following requirements

12.11  At  the  same  time,  Party  B  agrees  to  be  bound  by  the  group  credit  business  cooperation  agreement  (including  the  adjustment  and
supplement  made  by  the  signing  party  from  time  to  time)  signed  by  the  first  party  of  China  Merchants  Bank  Co.,  Ltd.  and  Party  B’s  parent
company / head office / holding company (fill in the enterprise name), agree to be bound by the agreement, and agree to be a subordinate unit of the
group under the agreement Obligations set by the subordinate units of the group. In case of any violation, Party B shall be deemed to have breached
the contract, and Party A shall have the right to take various remedial measures for breach of contract stipulated in this agreement.

12.12other provisions: Party A has the right to adjust the benchmark interest rate or interest rate pricing method of the loan / other credit
extension under this agreement in combination with the market situation or its own credit policy. Such adjustment shall take effect after Party A
notifies Party B (the notice method is to announce at Party A’s website or official website, or send a notice to Party B’s reserved contact address /
method in this Agreement); if Party B does not accept the adjustment, it can repay in advance, otherwise it shall be deemed that the adjustment
shall be carried out according to the adjusted interest rate recorded in the notice.

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13. Account information

☐ 13.1 Special loan account(cid:0)If applicable, please mark✔in “☐”(cid:0)

All loans and payments under this agreement must be made through the following account(cid:0)

Account Name:       CLPS        

Account No.: 121908367810901

Bank of deposit: Century avenue Sub-branch of Bank of China Merchants

☐ 13.2 Fund withdrawal account

13.2.1 Party A and Party B agree to appoint the following account as Party B’s fund withdrawal account

Account Name:      CLPS      

Account No.: 121908367810901

Bank of deposit: Century avenue Sub-branch of Bank of China Merchants

13.2.2 the account monitoring requirements are as follows

Party A has the right to recover the loan in advance according to the withdrawal of Party B’s funds, that is, when the account has funds withdrawn,
the loan corresponding to the amount of the recovered funds can be regarded as early maturity, and Party A has the right to directly deduct money
from the account to repay this part of the loan.

13.3 Party B shall provide the capital in and out of the above account on a quarterly basis, and cooperate with Party A in monitoring the relevant accounts
and withdrawal funds.

14. Applicable law and dispute resolution

14.1The conclusion, interpretation and dispute settlement of this Agreement shall be governed by the laws of the people’s Republic of China (excluding the
laws of Hong Kong, Macao and Taiwan), and the rights and interests of Party A and Party B shall be protected by the laws of the people’s Republic of China.

17

 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
14.2 any dispute arising from the performance of this Agreement shall be settled by both parties through negotiation. If the negotiation fails, either party may
(choose one of the three, put an “inch” in the ☐): file a lawsuit to the people’s court with jurisdiction in the place where Party A is located)

☐ 14.2.1 Bring a lawsuit to the people’s court with jurisdiction in the place where Party A is located

☐ 14.2.2 bring a lawsuit to the people’s court with jurisdiction in the place where the agreement is signed, and the place where the agreement is signed is
Century avenue Sub-branch of Bank of China Merchants

☐ 14.2.3 Apply to (fill in the name of specific arbitration institution) for arbitration, and the place of arbitration is

14.3 after this Agreement and each specific business agreement have been notarized by both parties, Party A may directly apply to the people’s court with
jurisdiction for compulsory enforcement in order to recover the debts owed by Party B under this Agreement and each specific business agreement.

15. Effectiveness of Agreement

This Agreement shall become effective after being signed (or sealed) by the legal representatives/person in charge or the authorized signatories of both
parties and being affixed with the company seal/special seal for contract of both parties, and shall automatically terminate upon expiration of the credit period
or full repayment of the debt and other related fees under this Agreement owed by Party B to Party A (whichever comes later)

15. Supplementary Provisions

This Agreement shall be made in copies, with Party A, Party B, and each holding one copy, which have the same legal effect.

Annex I: Special Provisions regarding cross border trade financing business

Annex II: Special Provisions regarding Buyer / Import Factoring

Annex III: Special Provisions regarding Order-related Loan

Annex IV: Special Provisions regarding Guaranteed Discount for Commercial Acceptance Bills

Annex V: Special Provisions regarding Derivative Transactions

Annex VI: Special Provisions regarding Gold Leasing

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Annex I Special Provisions regarding cross border trade financing business

1.  Cross  border  linkage  trade  financing  business  refers  to  the  cross-border  trade  financing  business  provided  by  Party  A  and  overseas  institutions  of
China Merchants Bank (hereinafter referred to as “linkage platform”) that Party B applies to Party A for handling based on the real cross-border trade
background with overseas companies.

2. The  specific  types  of  cross-border  linkage  trade  financing  business  include  back-to-back  L  /  C,  entrusted  L  /  C,  entrusted  overseas  financing,  bill
guarantee,  overseas  credit  of  letter  of  guarantee  and  cross-border  trade  financing  through  train.  The  specific  meaning  and  business  rules  of  various
business types shall be stipulated by specific business agreement.

3. Under the back-to-back letter of credit, the parent letter of credit applied by Party B to Party A directly occupies the credit line under this agreement.
Under  such  parent  letter  of  credit,  Party  A’s  bills  or  advances  (whether  during  the  credit  period  or  not)  and  the  corresponding  interest  and  expenses
constitute the financing debt of Party B to Party A and are included in the scope of credit guarantee.

Under the entrustment of L / C / overseas financing, Party A entrusts the linkage platform to accept the letter of credit applied by overseas companies /
the  trade  financing  provided  by  Party  B  occupies  the  credit  line  under  this  agreement.  If  Party  A  issues  import  collection  and  pledge  remittance  or
provides  advance  money  to  Party  B  for  external  payment  under  import  collection,  such  pledged  remittance  or  advance  payment  (whether  within  the
credit period or not) and relevant interest and expenses directly constitute the financing debt of Party B to Party A and be included in the scope of credit
guarantee.

Under  the  bill  guarantee,  Party  A  directly  occupies  its  credit  line  under  this  agreement  according  to  the  application  of  Party  B,  and  guarantees  the
acceptance bill of Party B. If Party B fails to pay the bill in full and on time, Party A has the right to make advance payment directly on the guaranteed
bill,  and  such  advance  (whether  occurred  during  the  credit  period  or  not)  and  relevant  interest  and  expenses  shall  be  included  in  the  scope  of  credit
guarantee.

Under  the  overseas  credit  business  of  letter  of  guarantee,  the  letter  of  guarantee  /  standby  letter  of  credit  issued  by  Party  A  according  to  Party  B’s
application directly occupies the credit line under this agreement. After the overseas company transfers the collection rights (non claim rights) under the
letter of guarantee to the linkage platform, when the linkage platform claims to Party A according to the letter of guarantee / standby letter of credit, the
advances made by Party A (whether during the credit period or not) and the relevant interest and expenses directly constitute the financing debt of Party
B to Party A and are included in the scope of credit guarantee.

Under the cross-border trade financing through train, after Party A approves its trade financing according to Party B’s application, the trade financing
directly provided to Party B by the linkage platform occupies the credit line under this agreement. If Party B fails to repay the trade financing funds of
the linkage platform in full and on schedule, Party A has the right to repay it by way of documentary or advance payment. The relevant documentary or
advance payment (whether occurred in the credit period or not) and the relevant interest and expenses directly constitute the financing debt of Party B to
Party A and be included in the scope of credit guarantee.

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Annex II: Special Provisions regarding Buyer / Import Factoring

1. Definition

1.1  The  buyer/import  factoring  means  that  Party  A,  as  the  buyer/import  factor,  provides  approved  payment,  accounts  receivable  dunning  and
management and other comprehensive factoring services for seller/export factor after the seller/export factor transfers to it the accounts receivable (under
a business contract) of which Party B is the debtor.

Under the buyer/import factoring, if the buyer’s credit risk occurs, Party A shall be liable to seller/export factor for approved payment; if a dispute arises
during the performance of the business contract, Party A shall have the right to re-transfer to the seller/export factor the accounts receivable transferred
to it.

1.2 The seller/export factor is the party that signs a factoring agreement with the supplier/service provider (creditor of an account receivable) under the
business contract and to which the account receivable held by the creditor thereof is transferred. Party A may act both as a buyer/import factor and as a
seller/export factor.

1.3 The dispute refers to the defense, counter claim, offset or other similar acts filed by Party B in respect of the accounts receivable transferred to Party
A  due  to  any  dispute  related  to  the  goods,  services,  invoices  or  any  other  commercial  contracts  related  matters  between  the  creditor  of  the  accounts
receivable and Party B, and the acts of a third-party to make a claim on or apply for the freezing of the accounts receivable under this Agreement. If the
accounts receivable transferred to Party A cannot be recovered in full or in part due to non-buyer’s credit risk, it shall be deemed to be a dispute.

1.4  Business  contract:  refers  to  the  transaction  contract  signed  between  Party  B  and  the  creditors  of  the  accounts  receivable  for  the  purpose  of
commodity trading and/or service trading, with sale on credit as the settlement method.

1.5 Approved payment / guaranteed payment means that after the occurrence of buyer’s credit risk, Party A shall pay the corresponding amount of the
account receivable to the seller/export factor within a certain period after the account receivable is mature.

20

 
 
 
 
 
 
 
 
 
 
2.  Upon  Party  B’s  application,  Party  A  agrees  to  handle  the  Buyer  /  import  factoring  business  within  the  credit  line,  and  the  accounts  receivable
transferred from the seller / export factor shall be deducted / occupied according to the amount of the credit line under the credit agreement.

The amount paid by Party A as the Buyer / import factor to fulfill the responsibility of approved payment / guaranteed payment and related expenses
shall be deemed as the credit granted by Party A to Party B under the credit agreement, and shall be included in the scope of credit guarantee provided
by Party B. Party A has the right to claim the approved payment / guaranteed payment from Party B by taking various measures agreed in the credit
agreement.  As  long  as  Party  A  has  transferred  the  accounts  receivable  during  the  credit  period,  even  if  Party  A  performs  the  approved  payment
responsibility beyond the credit period, party a still has the right to claim against Party B according to the credit agreement and the business contract.

3. Commission fees of buyer/import factoring

Commission fees of factoring: mean the business management fee that should be charged by Party A for the buyer/import factoring services, which shall
be charged by Party A from Party B according to a certain percentage of the amount of accounts receivable at the time of transfer, with the specific rate
being reasonably determined by Party A in accordance with its business rules.

4. Party B shall waive the right to raise an objection based on disputes arising during the performance of the business contract. In view of this, regardless
of whether there are other agreements, if Party B fails to make payment in accordance with the provision of the business contract, it shall be deemed as
the occurrence of the buyer’s credit risk; Party A will make the approved payment, and Party B will raise no objection.

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Annex III: Special Provisions regarding Order-related Loan

1. The order-related loan means the loan lent by Party A to Party B based on the business contract (or engineering contract) signed between Party B and
its downstream customers, used for the performance of the business contract (or the engineering contract) for the business unit, with the proceeds from
the business contract (or engineering contract) being the first source for the repayment of the loan.

2. Party B shall open a special account at Party A for the collection of proceeds under the business contract (or engineering contract). All sales under the
business  contract  (or  engineering  contract)  based  on  which  the  order-related  loan  is  applied  must  be  directly  paid  to  the  special  account;  without  the
approval of Party A, the funds may not be used and the special account may not be changed. Party B shall notify the payer that the account is the only
account for the payment of sales proceeds. Party A has the right to deduct the funds from the special account for the repayment of the principal and
interest, penalty interest and other related expenses of the order-related loan.

3. Under any of the following circumstances, Party A may immediately stop the use of remaining LOC balance under the Credit Granting Agreement,
and take remedy measures in accordance with the Credit Granting Agreement:

3.1 The downstream customers of Party B have delayed in payment for three consecutive periods, and Party A has reasonably judged that their financial
status has deteriorated, which is not conducive to protecting Party A’s creditor’s rights; and

3.2 Party B’s supplier qualification is canceled by its downstream customers, Party B’s supply to the downstream customers is not timely, the product
quality is unstable, Party B fails to make progress in construction as scheduled in the engineering contract, which is not recognized by the downstream
customers,  the  industry  practice  qualification  of  Party  B  has  been  lowered,  which  results  in  its  failure  to  meet  the  requirements  of  downstream
customers, Party A has reasonably judged that Party B is difficult to operate and its financial status deteriorates, the funds collected from downstream
customers  is  less  than  the  monthly  total  repayment  amount  of  financing  contracts  under  the  credit  granting  for  three  consecutive  months,  or  the
downstream customers fail to pay the installments as agreed in the engineering contract for two consecutive period.

22

 
 
 
 
 
 
 
 
Annex IV: Special Provisions regarding Guaranteed Discount for Commercial Acceptance Bills

1.  Commercial  acceptance  bill  security  business  refers  to  the  business  that  Party  A  gives  discount  or  allows  the  holder  to  discount  the  commercial
acceptance bill accepted, endorsed or undertaken by Party B (including bill guarantee and guarantee provided by Party B for bill debtor in addition to the
bill, the same below) or allows the holder to discount any branch of China Merchants Bank (hereinafter referred to as “other discount accepting banks”).
The holder (hereinafter referred to as “discount applicant”) may apply for discount to Party A or other discount acceptance bank with the commercial
acceptance bill, and such discount business will occupy the credit line under this agreement.

In view of the fact that Party A provides Party B with the commercial acceptance bill security service is the precondition for other discount accepting
banks to accept the bill holder’s application for discount, other discount acceptance banks have the right to transfer the discounted bill to Party A, and
Party A has the obligation to accept the transfer. Party B has no objection to this.

2. The commercial acceptance bill mentioned in this article includes both paper commercial acceptance bill and electronic commercial acceptance bill
(hereinafter referred to as electronic commercial bill); the mode of interest payment includes the buyer’s interest payment, the seller’s interest payment,
the other party’s interest payment and agreement interest payment.

3. Party B shall open a deposit account for commercial acceptance bills with Party A (the account number shall be subject to the system generated or
recorded  by  Party  A  when  the  deposit  is  made),  and  before  acceptance  of  each  bill,  Party  B  shall  deposit  a  certain  amount  of  funds  into  the  deposit
account according to the proportion required by Party a, as the payment deposit of commercial acceptance bill discounted by Party A or transferred from
other discount acceptance banks.

If Party B is the acceptor of the commercial acceptance bill, Party B shall deposit the full amount of the payable bill to the deposit account opened by
Party A before the maturity of each commercial acceptance bill, so as to pay the bill when it is due.

4. During the credit period, the discount applicant may directly apply to Party A for discount with the commercial acceptance bill accepted, endorsed or
guaranteed by Party B, or apply for discount from other discount accepting banks. Party A or other discount accepting banks have the right to examine
the qualification of discount applicants, request Party B to review and confirm, and decide whether to apply for discount at their own discretion.

Ther  discount  accepting  banks  shall  have  the  right  to  endorse  and  transfer  the  discounted  commercial  acceptance  bill  to  Party  A  in  accordance  with
relevant  regulations  of  China  Merchants  Bank.  After  Party  A  processes  the  discount  or  accepts  the  commercial  acceptance  bill  from  other  discount
acceptance banks, Party B shall unconditionally and timely pay the bill payable to party a when Party B holds the bill for payment.

23

 
 
 
 
 
 
 
 
 
 
5. The opening, acceptance, endorsement, discount and other bill behaviors of each e-commerce bill shall be subject to the business information stored in
the  electronic  bill  system  of  Shanghai  bill  exchange,  or  the  business  records  of  customer  statements  filled  or  printed  accordingly.  The  information
retained in the electronic bill system of Shanghai ticketing exchange and the business records generated therefrom are integral parts of this annex and
have the same legal effect as this Annex. Party B recognizes its accuracy, authenticity and legality.

6. Any dispute arising from the basic contract of commercial acceptance bill guaranteed by Party A shall be settled by Party B and the parties concerned
by themselves, and Party B shall not be exempted from the obligation of timely and full deposit of deposit and draft money in accordance with Article 3.

7.  If  Party  A  has  discounted  the  commercial  acceptance  bills  accepted,  endorsed  or  guaranteed  by  Party  B,  or  has  transferred  such  commercial
acceptance  bills  from  other  discount  acceptance  banks,  if  the  bill  payer  or  Party  B  fails  to  pay  the  bill  in  full  before  the  due  date  of  the  commercial
acceptance bill, Party A has the right to directly take recourse against Party B, including but not limited to any account opened by Party B in China
Merchants Bank Account deduction for payment. For the amount advanced by Party A due to Party B’s insufficient delivery and insufficient account
balance,  Party  A  shall  collect  the  penalty  interest  from  Party  B  at  the  rate  of  0.05%  of  the  advance  amount  per  day  in  accordance  with  the  relevant
provisions of the payment and settlement measures.

24

 
 
 
 
 
Annex V: Special Provisions regarding Derivative Transactions

1. A derivative transaction for which Party A accepts the application of Party B may offset the LOC according to a certain percentage of the nominal
principal/transaction amount of the transaction, or when floating loss occurs to the derivative transaction, Party A may offset additional amount of LOC
granted to Party B according to the specific agreement between the parties (the additional amount being offset shall be determined by Party A according
to the type, duration and risk of the derivative, as well as the risk coefficient of the business corresponding to the offset LOC at the occurrence of each
specific trading). The amount of LOC being actually offset shall be subject to the notice of amount of LOC being offset issued by Party A and/or trading
confirmation letter/certificate and other trading documents.

2. Where there is a derivative transaction with a balance or loss during the credit period, it shall offset the LOC in accordance with the provisions of the
preceding clauses, regardless of whether the transaction occurs within the credit period.

25

 
 
 
 
 
Annex VI: Special Provisions regarding Gold Leasing

1. The gold leasing service means that Party A leases the physical gold to Party B, and Party B will return the same amount of gold with the same quality
after the expiration of the lease, and pay a lease fee to Party A by installment.

2. Party A may provide gold leasing service during the credit period and within the LOC according to the application of Party B. The physical gold
leased out by Party A shall offset the LOC according to the value agreed in the gold lease agreement signed by both parties, and constitute debts owed by
Party B to Party A.

26

 
 
 
 
 
Special Notes:

All terms and conditions of this Agreement (including attachments) have been fully negotiated by both parties. Party A has requested Party B to pay
special  attention  to  the  clauses  concerning  Exemption  or  limitation  of  Party  A’s  liability,  Party  A’s  unilateral  possession  of  certain  rights,  increase  of
Party B’s liability or limitation of Party B’s rights, and make a comprehensive and accurate understanding of them. Party A has made corresponding
explanation for the above terms at the request of Party B. All parties have the same understanding of the terms of this agreement.

(The content hereinafter contains no main text)

(The following is the signature column of the credit agreement No. 121xy2019029438)

(This page is the signature page for the (Credit Granting Agreement) numbered (5202180601))

Party A:                                                      (seal)

Person in charge or authorized signatory:

(signature/seal):

(China Merchants Bank Co., Ltd., Shanghai Century Avenue Branch)

Party B:                                                      (seal)

Legal representative/person in charge or the authorized signatory

(signature/seal):

CLPS Incorporation

Signed on: December 17, 2019

Signed in: Pudong New Area, Shanghai

27

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Certification
Pursuant to Rule 13a-14(a) of the Exchange Act

Exhibit 12.1

I, Raymond Ming Hui Lin, certify that:

1.

I have reviewed this annual report on Form 20-F of CLPS Incorporation;

2. Based  on  my  knowledge,  this  report  does  not  contain  any  untrue  statement  of  a  material  fact  or  omit  to  state  a  material  fact  necessary  to  make  the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based  on  my  knowledge,  the  financial  statements,  and  other  financial  information  included  in  this  report,  fairly  present  in  all  material  respects  the

financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The  company's  other  certifying  officer(s)  and  I  are  responsible  for  establishing  and  maintaining  disclosure  controls  and  procedures  (as  defined  in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the company and have:

a. Designed such  disclosure  controls  and  procedures,  or  caused  such  disclosure  controls  and  procedures  to  be  designed  under  our  supervision,  to
ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

b. Designed  such  internal  control  over  financial  reporting,  or  caused  such  internal  control  over  financial  reporting  to  be  designed  under  our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness

of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual

report that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and

5. The company's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the

company's auditors and the audit committee of the company's board of directors (or persons performing the equivalent functions):

a. All significant  deficiencies  and  material  weaknesses  in  the  design  or  operation  of  internal  control  over  financial  reporting  which  are  reasonably

likely to adversely affect the company's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control over

financial reporting.

Date: October 22, 2020

/s/ Raymond Ming Hui Lin

By:
Name:  Raymond Ming Hui Lin
Title: Chief Executive Officer

(Principal Executive Officer)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Certification
Pursuant to Rule 13a-14(a) of the Exchange Act

Exhibit 12.2

I, Rui Yang, certify that:

1.

I have reviewed this annual report on Form 20-F of CLPS Incorporation;

2. Based  on  my  knowledge,  this  report  does  not  contain  any  untrue  statement  of  a  material  fact  or  omit  to  state  a  material  fact  necessary  to  make  the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based  on  my  knowledge,  the  financial  statements,  and  other  financial  information  included  in  this  report,  fairly  present  in  all  material  respects  the

financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The  company's  other  certifying  officer(s)  and  I  are  responsible  for  establishing  and  maintaining  disclosure  controls  and  procedures  (as  defined  in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the company and have:

a. Designed such  disclosure  controls  and  procedures,  or  caused  such  disclosure  controls  and  procedures  to  be  designed  under  our  supervision,  to
ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

b. Designed  such  internal  control  over  financial  reporting,  or  caused  such  internal  control  over  financial  reporting  to  be  designed  under  our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness

of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual

report that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and

5. The company's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the

company's auditors and the audit committee of the company's board of directors (or persons performing the equivalent functions):

a. All significant  deficiencies  and  material  weaknesses  in  the  design  or  operation  of  internal  control  over  financial  reporting  which  are  reasonably

likely to adversely affect the company's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control over

financial reporting.

Date: October 22, 2020

/s/ Rui Yang

By:
Name:  Rui Yang
Title: Acting Chief Financial Officer

(Principal Financial and Accounting Officer)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Certification
Pursuant to 18 U.S.C. Section 1350

Exhibit 13.1

Pursuant to U.S.C. Section 1350 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code),
each of the undersigned officers of CLPS Incorporation (the “Company”), does hereby certify, to such officer's knowledge, that the Annual Report on Form
20-F for the year ended June 30, 2020 of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934
and information contained in the Form 20-F fairly presents, in all material respects, the financial condition and results of operations of the Company.

October 22, 2020

October 22, 2020

CLPS Incorporation

/s/ Raymond Ming Hui Lin

By:
Name: Raymond Ming Hui Lin
Title: Chief Executive Officer

(Principal Executive Officer)

/s/ Rui Yang

By:
Name:  Rui Yang
Title: Acting Chief Financial Officer 

(Principal Financial and Accounting Officer)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exhibit 21.1

Name of the Entity
Qinheng Co., Limited
Qiner Co., Limited
CLIVST Ltd.
FDT-CL Financial Technology Services Limited
JQ Technology Co., Limited
JIALIN Technology Limited
Shanghai Qincheng Information Technology Co., Ltd.
ChinaLink Professional Services Co., Ltd.
CLPS Dalian Co., Ltd.
CLPS Ruicheng Co., Ltd.
CLPS Beijing Hengtong Co., Ltd.
Judge (Shanghai) Co., Ltd.
Judge (Shanghai) Human Resource Co., Ltd.
CLPS-Ridik Technology (Australia) Pty. Ltd.
CLPS Technology (Singapore) Pte. Ltd.
CLPS Technology (HK) Co., Ltd.
CLPS Shenzhen Co., Ltd.
Tianjin Huanyu Qinshang Network Technology Co., Ltd.
CLPS Guangzhou Co., Ltd.
CLPS Technology (US) Ltd.
CLPS Technology (California) Inc.
Infogain Solutions PTE. Ltd.
CLPS Hangzhou Co. Ltd.
Ridik Pte. Ltd.
Ridik Consulting Private Limited
Ridik Sdn. Bhd.
Ridik Software Solutions Pte. Ltd.
Ridik Software Solutions Ltd.
Suzhou Ridik Information Technology Co., Ltd.
CLPS Technology Japan
Qinson Credit Card Services Limited

  Jurisdiction
  Hong Kong
  Hong Kong
  British Virgin Islands
  Hong Kong
  Hong Kong
  Taiwan
  PRC
  PRC
  PRC
  PRC
  PRC
  PRC
  PRC
  Australia
  Singapore
  Hong Kong
  PRC
  PRC
  PRC
  Delware
  California
  Singapore
  PRC
  Singapore
India
  Malaysia
  Singapore
  UK
  PRC
Japan

  Hong Kong

 
 
 
Consent of Independent Registered Public Accounting Firm

Exhibit 23.1

We consent to the incorporation by reference in the Post-Effective Amendment No. 1 to Registration Statement (Form S-8 No. 333-226110) and Registration
Statement (Form S-8 No. 333-226110) pertaining to the 2017 Equity Incentive Plan, Registration Statement (Form S-8 No. 333-231103) pertaining to the
2019  Equity  Incentive  Plan,  Amendment  No.  1  to  Registration  Statement  (Form  F-3  No.  333-231812)  and  Registration  Statement  (Form  F-3  No.  333-
231812), and Registration Statement (Form S-8 No. 333-237846) pertaining to the 2020 Equity Incentive Plan of CLPS Incorporation of our report dated
October 22, 2020, with respect to the consolidated financial statements of CLPS Incorporation, included in this Annual Report (on Form 20-F) for the year
ended June 30, 2020.

/s/ Ernst & Young Hua Ming LLP
Shanghai, The People’s Republic of China
October 22, 2020

 
 
 
 
Exhibit 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement to the Amendment No. 1 to Form F-3 (No. 333-231812), Form F-3 (No.
333-231812), Post-Effective Amendment No. 1 to Form S-8 (No. 333-226110) and Registration Statement (Form S-8 No. 333-226110) pertaining to the 2017
Equity Incentive Plan, Form S-8 (No. 333-231103) of CLPS Incorporation and subsidiaries (the “Company”) as of our report dated September 25, 2018 with
respect to the consolidated financial statements of CLPS Incorporation and subsidiaries included in its Annual Report on Form 20-F for the fiscal year ended
June 30, 2018, filed with the Securities and Exchange Commission on September 25, 2018. We also consent to the reference to our firm under the wording
“Experts” in such Registration Statement.

/s/ Friedman LLP

New York, New York
October 22, 2020