UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

(Mark One)

☐ REGISTRATION STATEMENT PURSUANT TO SECTION12(b) OR (g) OF THE SECURITIES
EXCHANGE ACT OF 1934

OR

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

For the fiscal year ended June 30, 2025

OR

☐ TRANSITION REPORT PURSUANT TO SECTION13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

OR

☐ SHELL COMPANY REPORT PURSUANT TO SECTION13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

Date of event requiring this shell company report        

For the transition period from         to        

Commission file number: 001-41590

QuantaSing Group Limited

(Exact name of registrant as specified in itscharter)

N/A

(Translation of Registrant’s name intoEnglish) 

Cayman Islands

(Jurisdiction of incorporation) 

2/F, Building D, Ronsin Technology Center

Chaoyang District, Beijing 100102

People’s Republic of China

(Address of principal executive offices)

Dong Xie, Chief Financial Officer

Telephone: +86-10 6493-7857

E-mail: tim.xie@quantasing.com

2/F, Building D, Ronsin Technology Center

Chaoyang District, Beijing 100102

People’s Republic of China

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

Securities registered or to be registered, pursuantto Section 12(b) of the Act

Securities registered or to be registered pursuantto Section 12(g) of the Act.

None

Securities for which there is a reporting obligationpursuant to Section 15(d) of the Act.

None

Indicate the number of issued and outstanding shares of each of theissuer’s classes of capital or common stock as of the close of the period covered by the annual report:

Class A ordinary shares, par value US$0.0001 each, 114,114,919 sharesoutstanding as of June 30, 2025

Class B ordinary shares, par value US$0.0001 each, 49,859,049 sharesoutstanding as of June 30, 2025

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 checkmark 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 allreports 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 requirementsfor the past 90 days.   Yes  ☒    No    ☐ 

Indicate by check mark whether the registrant has submitted electronicallyevery Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) duringthe 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 acceleratedfiler, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,”“accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

Indicate by check mark whether the registrant has filed a report onand attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) ofthe Sarbanes-Oxley Act (10 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

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

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

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

If “Other” has been checked in response to the previousquestion 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 registrantis a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  ☐    No  ☒

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

Indicate by check mark whether the registrant has filed all documentsand reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distributionof securities under a plan confirmed by a court.   Yes  ☐    No  ☐

TABLE OF CONTENTS

INTRODUCTION

Except where the context otherwise requires andfor purposes of this annual report on Form 20-F only:

Names of certain companies provided in this annualreport are translated or transliterated from their original Chinese legal names.

Discrepancies in any table between the amountsidentified as total amounts and the sum of the amounts listed therein are due to rounding.

This annual report on Form 20-F includes ouraudited consolidated financial statements as of June 30, 2024 and 2025 and for the fiscal years ended June 30, 2023, 2024 and 2025.

This annual report contains translations of certainRenminbi amounts into U.S. dollars at specified rates solely for the convenience of the reader. Unless otherwise stated, the translationof Renminbi into U.S. dollars has been made at RMB7.1636 to US$1.00, the noon buying rate in effect on June 30, 2025 as set forth in theH.10 Statistical Release of the Federal Reserve Board. We make no representation that any Renminbi or U.S. dollar amounts could have been,or could be, converted into U.S. dollars or Renminbi, as the case may be, at any particular rate, the rates stated below, or at all. ThePRC government imposes controls over its foreign currency reserves in part through direct regulation of the conversion of Renminbi intoforeign exchange and through restrictions on foreign trade.

The ADSs are listed on the Nasdaq Global Marketunder the symbol “QSG.”

FORWARD LOOKING STATEMENT

This annual report contains forward-looking statementsthat reflect our current expectations and views of future events. These forward-looking statements are made under the “safe harbor”provision under Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the SecuritiesExchange Act of 1934, as amended (the “Exchange Act”), and as defined in the Private Securities Litigation Reform Act of 1995.These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievementsto be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.All statements other than statements of historical fact in this annual report constitute forward-looking statements. We have used wordsor phrases such as “may,” “would,” “will,” “expect,” “anticipate,” “intend,”“seek,” “estimate,” “plan,” “believe,” “is/are likely to” or other similarexpressions in this annual report to identify some of these forward-looking statements. These forward-looking statements, including, amongothers, those relating to our future business prospects, product development, revenues, profits, costs, capital expenditures, cash flowsand working capital, are necessarily estimates reflecting the best judgment of directors and management and involve a number of risksand uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. As a consequence,these forward-looking statements should be considered in light of various important factors, including those set forth in this annualreport.

These statements involve risks, uncertainties andother factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the informationexpressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis for each forward-lookingstatement contained in this annual report, we caution you that these statements are based on a combination of facts and factors currentlyknown by us and our projections of the future, about which we cannot be certain. Forward-looking statements in this annual report include,but are not limited to, statements about:

You should read this annual report, including therisk factors disclosed in “Item 3. Key Information—D. Risk Factors” and the documents that we refer to in this annualreport thoroughly and with the understanding that our actual future results may be materially different from and worse than what we expect.Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time and it is not possible forour management to predict all risk factors and uncertainties, nor can we assess the impact of all factors on our business or the extentto which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-lookingstatements. We qualify all of our forward-looking statements by these cautionary statements.

Market data and certain industry forecasts usedin this annual report were obtained from internal surveys, market research, publicly available information and industry publications.Industry publications generally state that the information contained therein has been obtained from sources believed to be reliable, butthat the accuracy and completeness of such information is not guaranteed. Similarly, internal surveys, industry forecasts and market research,while believed to be reliable, have not been independently verified, and we make no representation as to the accuracy of such information.

You should not rely upon forward-looking statementsas predictions of future events. The forward-looking statements made in this annual report relate only to events or information as ofthe date on which the statements are made in this annual report. We undertake no obligation to update or revise any forward-looking statements,whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect theoccurrence of unanticipated events.

The forward-looking statements made in this annualreport relate only to events or information as of the date on which the statements are made in this annual report. Except as requiredby law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information,future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. Youshould read this annual report and the documents that we refer to in this annual report and have filed as exhibits to the registrationstatement, of which this annual report is a part, completely and with the understanding that our actual future results may be materiallydifferent from what we expect.

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

Our Company

QuantaSing Group Limited is a pop toy company.We create collectible pop toys, such as plush toys and figures, under our “HERE奇梦岛” brand. We operatean expanding IP portfolio that primarily include our proprietary IPs, including our flagship WAKUKU and ZIYULI, and, to a lesser extent,certain licensed IPs. Historically, before we terminated our contractual arrangements with the variable interest entities in 2025, we had primarily operated the individual online learning services under the brand of Qiuniu, Jiangzhen and Qianchi, includingfinancial literacy courses and skills upgrading and recreation and leisure courses.

Our Holding Company Structure

QuantaSingGroup Limited is an exempted company with limited liability incorporated under the laws of the Cayman Islands with no substantiveoperations. We carry out our current business in China through Shenzhen Chaowan World Information Technology Co., Ltd.(“Shenzhen Chaowan”) and Beijing Liangzizhige, our WFOEs, and their respective subsidiaries.Historically, we carried out our legacy individual learning services business in China through Beijing Liangzizhige, and itscontractual arrangements, commonly known as the VIE structure, with Beijing Chuangyuqizhi and Beijing Feierlai, the variableinterest entities based in China, and their respective nominee shareholder. For details, see “Item 4. Information onthe Company—A. History and Development of the Company” and “Item 4. Information on the Company—C.Organizational Structure—Our Historical Contractual Arrangements.” Such VIEstructure is used to provide investors with exposure to foreign investment in China-based companies where the PRC law restrictsdirect foreign investment in certain operating companies, such as certain value-added telecommunication services and other internetrelated business. Neither QuantaSing Group Limited nor our WFOEs owned any equity interests in the affiliated entities. Ourhistorical contractual arrangements with the VIEs and their nominee shareholder were not equivalent of an investment in the equityinterest of the VIEs, and investors may never hold equity interests in the Chinese operating companies, including the affiliatedentities. Instead, we were regarded as the primary beneficiary of the VIEs and consolidated the financial results of the affiliatedentities under U.S. GAAP in light of the VIE structure at the relevant time. Investors in the ADSs are purchasing the equitysecurities of QuantaSing Group Limited, the Cayman Islands holding company, rather than the equity securities of our operatingentities.

The following diagram illustrates our simplifiedcorporate structure, including our principal subsidiaries, as of the date of this annual report:

Permissions and Licenses Required from thePRC Authorities for Our Operations and Overseas Securities Offerings

Theoperations of the businesses that we own and operate are subject to PRC laws and regulations. The laws and regulations are relativelynew and quickly evolving, hence bringing uncertainties to their interpretation and enforcement. For example, our operations in China aresubject to regulatory approvals and permit requirements, rules governing product quality and liability, oversight on cybersecurity anddata privacy, and guidelines about blind boxes, with respect to which the applicable laws and regulations have evolved substantially inrecent years. For details, see “Item 4. Information on the Company—B. Business Overview—Regulation” in this annualreport.

We,through our WFOEs, conduct our current operations in China. Our operations in China are governed by PRC laws and regulations. We are requiredto obtain certain licenses, permits from or filing with relevant governmental authorities in China in order to operate our business andconduct overseas securities offerings and listings. As of June 30, 2025, as advised by our PRC counsel, CM Law Firm, our WFOEs and theaffiliated entities had obtained the licenses, permits and registrations from the PRC government authorities necessary for our businessoperations in China, including, among others, the Value-added Telecommunications Business Operating License for internet information service,the Permit for Production and Operation of Radio and Television Programs, and the Publication Operation License, except for the Licensefor Online Transmission of Audio-Visual Program for offering certain courses in live streaming or audio-visual contents. Given the uncertaintiesof interpretation and implementation of relevant laws and regulations and the enforcement practice by relevant government authorities,and the promulgation of new laws and regulations and amendment to the existing ones, we may be required to obtain additional licenses,permits, registrations, filings or approvals for our business operations in the future. We cannot assure you that we will be able to obtain,in a timely manner or at all, or maintain such licenses, permits or approvals, and we or the affiliated entities may also inadvertentlyconclude that such permissions or approvals are not required. Any lack of or failure to maintain requisite approvals, licenses or permitsapplicable to us or the affiliated entities may have a material adverse impact on our business, results of operations, financial conditionand prospects and cause the value of any securities we offer to significantly decline or become worthless. For details, see “Item 3.Key Information—D. Risk Factors—Risks Related to Our Operations—We may face risksand uncertainties with respect to the licensing requirement for our business. Any lack of or failure to maintain requisite approvals,licenses or permits applicable to us may have a material adverse impact on our business, results of operations and financial condition.”

OnDecember 28, 2021, the CAC and other twelve PRC regulatory authorities jointly revised and promulgated the Measures for CybersecurityReview (the “Cybersecurity Review Measures”), which became effective on February 15, 2022. As a network platform operatorwho possesses personal information of more than one million users for purposes of the Cybersecurity Review Measures, we had applied forand completed a cybersecurity review for the initial public offering and listing of the ADSs on the Nasdaq Stock Market pursuant to theCybersecurity Review Measures. The review was completed in August 2022. We have not received any material adverse findings in such review.As of the date of this annual report, save as disclosed above, we have not received any notice that we are a critical information infrastructureoperator from any government authority, nor have we received any request from the CAC, to undergo a cybersecurity review pursuant to anyPRC laws or regulations. Moreover, none of us, our subsidiaries or the affiliated entities have received any notice from any PRC authorityrequiring us to obtain any permissions, in each case in connection with our previous issuance of securities to foreign investors.

OnFebruary 17, 2023, the CSRC, as approved by the State Council, released the Trial Measures for Administration of Overseas Securities Offeringsand Listings by Domestic Enterprises and five interpretive guidelines (collectively, the “CSRC Filing Rules”), which cameinto effect on March 31, 2023. Under the CSRC Filing Rules, a filing-based regulatory system shall be applied to “indirect overseasofferings and listings” of PRC domestic enterprises, which refers to securities offerings and listings in an overseas market madeunder the name of an offshore entity but based on the underlying equity, assets, earnings or other similar rights of a domestic enterprisethat operates its main business domestically. The CSRC Filing Rules state that, any post-listing follow-on offering by an issuer in thesame overseas market where it has previously offered and listed securities, including issuance of shares, convertible notes and othersimilar securities, shall be subject to filing requirement within three business days after the completion of the offering, and if thesubsequent offering is conducted in other overseas markets, it shall be filed with the CSRC within three working days after the applicationsfor such offerings are submitted. Therefore, any of our future offering and listing of our securities in an overseas market shall be subjectto the filing requirements under the CSRC Filing Rules. In addition, we are required to submit a report to CSRC after the occurrence andpublic disclosure of the following material events: (1) change of control; (2) investigations or sanctions imposed by overseas securitiesregulatory agencies or other relevant competent authorities; (3) change of listing status or transfer of listing segment and (4) voluntaryor mandatory delisting. If we fail to complete the filing or reporting procedures, under the CSRC Filing Rules or otherwise, for any futureoverseas securities offering or listing, we may face sanctions by the CSRC or other PRC regulatory authorities, which may include ordersfor correction, warnings and fines. Any adverse regulatory actions or sanctions could have a material adverse effect on our business,financial condition, results of operations, reputation and prospects, as well as the trading price of the ADSs. For details, see “Item 3.Key Information—D. Risk Factors—Risks Related to Doing Business in China—The filingwith and reporting to the CSRC will be required in connection with our capital raising activities and occurrences of other specific events,and we cannot assure you that we will be able to make such filing or reporting in a timely manner or at all, in which case we may faceregulatory sanctions for failure to make such filing or reporting.”

Cash and Asset Flows through Our Organization

Inlight of our holding company structure, our ability to pay dividends to the shareholders, including the investors in the ADSs, andto service any debt we may incur may highly depend upon dividends paid by our subsidiaries (including our WFOEs) to us, despite thatwe may obtain financing at the holding company level through other methods. Under the VIE structure, such ability also relied on theservice fees paid by the affiliated entities to our WFOEs. For instance, if any of our WFOEs incurs debt on its own behalf in thefuture, the instruments governing such debt may restrict its ability to pay dividends to us and the investors in the ADS as well asthe ability to settle amounts owed under the contractual arrangements. In June 2024 and April 2025, Beijing Liangzizhige made thecash distribution of US$5.3 million and US$10.0 million, respectively, to Witty Digital Technology Limited (“WittyDigital”), its holding company in Hong Kong. In October 2024, our board of directors declared a special cash dividend in theamount of US$0.067 per ordinary share, or US$0.201 per ADS. The cash dividend was paid in November 2024 to shareholders of record atthe close of business on October 30, 2024. The aggregate amount of cash dividends paid was US$10.9 million. As of the date of thisannual report, save as disclosed above, none of QuantaSing Group Limited, our WFOEs and the VIEs have paid any dividends or made anydistributions to their respective shareholder(s), including any U.S. investors. In the fiscal years ended June 30, 2023, 2024and 2025, the total amount of the service fees that Beijing Feierlai, Beijing Chuangyuqizhi and their subsidiaries paid to BeijingLiangzizhige under the contractual arrangements was RMB415.7 million, RMB713.7 million and RMB612.7 million, respectively. Otherthan such payments, there were no service fee payments under the contractual arrangements within our group. For details, see“—Financial Information Relating to the Affiliated Entities.” We expect to continue to distribute earnings at therequest of our WFOEs and based on our business needs. We currently have not maintained any cash management policies thatspecifically dictate how funds shall be transferred among QuantaSing Group Limited, the subsidiaries of QuantaSing Group Limited(including our WFOEs) and investors. We will determine the payment of dividends and fund transfer based on our specific businessneeds in accordance with the applicable laws and regulations.

Under PRC laws and regulations,our WFOEs are permitted to pay dividends only out of their retained earnings, if any, as determined in accordance with PRC accountingstandards and regulations. Furthermore, our WFOEs are required to make appropriations to certain statutory reserve funds or may make appropriationsto certain discretionary funds, which are not distributable as cash dividends except in the event of a solvent liquidation of the companies.Remittance of dividends by our WFOEs out of China is also subject to certain procedures with the banks designated by the PRC State Administrationof Foreign Exchange (“SAFE”). These restrictions are benchmarked against the paid-up capital and the statutory reserve fundsof our WFOEs. In addition, while there are currently no such restrictions on foreign exchange and our ability to transfer cash or assetsbetween QuantaSing Group Limited and our Hong Kong subsidiaries, if certain PRC laws and regulations, including existing laws and regulationsand those enacted or promulgated in the future were to become applicable to our Hong Kong subsidiaries in the future, and to the extentour cash or assets are in Hong Kong or a Hong Kong entity, such funds or assets may not be available due to interventions in or the impositionof restrictions and limitations on our ability to transfer funds or assets by the PRC government. Furthermore, we cannot assure you thatthe PRC government will not intervene or impose restrictions on QuantaSing Group Limited or its subsidiaries to transfer or distributecash within the organization, which could result in an inability of or prohibition on making transfers or distributions to entities outsideof mainland China and Hong Kong. For details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Businessin China—We rely on dividends and other distributions on equity paid by our WFOEs to fund any cash and financing requirements wemay have, and any limitation on the ability of our WFOEs to make payments to us could have a material adverse effect on our ability toconduct our business,” and “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Restrictionson the remittance of Renminbi into and out of China and governmental control of currency conversion may limit our ability to pay dividendsand other obligations, and affect the value of your investment.”

Under PRC laws and regulations,we, the Cayman Islands holding company, may fund our WFOEs only through capital contributions or loans, and fund the affiliated entities(if any) only through loans, subject to satisfaction of applicable government registration and approval requirements. For the fiscal yearsended June 30, 2023, 2024 and 2025, (1) the aggregate amount of loans and by QuantaSing Group Limited to our subsidiaries in the BVI andHong Kong was RMB114.3 million, nil and RMB26.8 million for the fiscal years ended June 30, 2023, 2024 and 2025, respectively. Forthe fiscal year ended June 30, 2024, the net amount of loans repaid by our subsidiaries to QuantaSing Group Limited was RMB118.2million; (2) the net amount of loan by our subsidiaries to QuantaSing Group Limited was RMB61.8 million for fiscal year ended June 30,2025; (3) the aggregate amount of dividend by our WFOEs to our subsidiary in Hong Kong was RMB35.5 million and RMB71.6 million for thefiscal year ended June 30, 2024 and 2025; (4) the aggregate of loans by our WFOEs to the VIEs and their subsidiaries was RMB17.0 million,RMB45.7 million and RMB131.0 million for the fiscal years ended June 30, 2023, 2024 and 2025, respectively; (5) thenet amount of loans provided by the VIEs and their subsidiaries to our WFOEs was nil, nil and RMB174.8 million, respectively, in additionto the service fees paid under the contractual arrangements. For the fiscal year ended June 30, 2023, the net amount of loan repaid byour WFOE to the VIE was RMB156.0 million, in addition to the net cash of RMB17.0 million provided by our WFOE to the VIE; and (6) thenet amount of loan provided by the VIEs and their subsidiaries to other subsidiaries was RMB142.0 million for the fiscal year ended June30, 2024 and the net amount of loan repaid by other subsidiaries to the VIEs and their subsidiaries was RMB149.8 million for the fiscalyear ended June 30, 2025; (7) the net amount of loan provided by our WFOE to our subsidiaries was RMB274.1 million for the fiscal yearended June 30, 2025; and (8) for the fiscal year ended June 30, 2025, the net amount of RMB4.9 million and RMB0.1 million transferredby the VIEs and their subsidiaries and WFOE, respectively, to other subsidiaries for theservices and products provided. In the fiscal years ended June 30, 2023, 2024 and 2025, no assets other than cash were transferred withinour organization. For details, see “—Financial Information Relating to the Affiliated Entities.”

In the fiscal years endedJune 30, 2024 and 2025, Beijing Liangzizhige distributed a portion of its retained earnings of approximate US$5.3 million and US$10.0million to its holding company in Hong Kong, Witty Digital Technology Limited, respectively. As of June 30, 2024, we had appliedwithholding tax rate of 5% based on the facts and circumstances of the offshore subsidiary and management’s interpretation of theHK DTA back then. During the year ended June 30, 2025, as there were new changes in relevant facts and circumstances, we accruedwithholding tax on undistributed earnings as of June 30, 2025 using a 10% tax rate to reflect the management’ estimation accordingly.

Financial Information Relating to the Affiliated Entities

The following tables presentthe condensed consolidating schedules for QuantaSing Group Limited, our WFOE that is the primary beneficiary of the VIEs under the U.S.GAAP (the “primary beneficiary of the VIEs”), the VIEs and their subsidiaries, and our other subsidiaries that are not theprimary beneficiaries of the VIEs (i.e., our subsidiaries in the BVI and Hong Kong) for the periods and as of the dates indicated.

Condensed consolidatingstatements of operations information

Condensed consolidatingbalance sheets information

Condensed consolidatingcash flows information

Notes to the condensed consolidating financial information:

Holding Foreign Companies Accountable Act and PCAOB’s Inspectionover Financial Statements

Pursuant to the HFCAA, if the SEC determines thatwe have filed audit reports issued by a registered public accounting firm that has not been subject to inspections by the PCAOB for twoconsecutive years, the SEC will prohibit our shares or the ADSs from being traded on a national securities exchange or in the over-the-countertrading market in the United States. On December 16, 2021, the PCAOB issued a report to notify the SEC of its determination that the PCAOBwas unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong, includingour auditor. On December 15, 2022, the PCAOB issued a report that vacated its December 16, 2021 determination and removed mainland Chinaand Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered public accounting firms.For this reason, we do not expect to be identified as a Commission-Identified Issuer under the HFCAA after we file this annual reporton Form 20-F. Each year, the PCAOB will determine whether it can inspect and investigate completely audit firms in mainland China andHong Kong, among other jurisdictions. If PCAOB determines in the future that it no longer has full access to inspect and investigate completelyaccounting firms in mainland China and Hong Kong and we continue to use an accounting firm headquartered in one of these jurisdictionsto issue an audit report on our financial statements filed with the SEC, we would be identified as a Commission-Identified Issuer followingthe filing of the annual report on Form 20-F for the relevant fiscal year. There can be no assurance that we would not be identified asa Commission-Identified Issuer for any future fiscal year, and if we were so identified for two consecutive years, we would become subjectto the prohibition on trading under the HFCAA. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Businessand Industry—The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financialstatements and the inability of the PCAOB to conduct inspections of our auditor in the past has deprived our investors with the benefitsof such inspections,” and “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—TheADSs may be prohibited from trading in the United States under the HFCAA in the future if the PCAOB is unable to inspect or investigatecompletely auditors located in China. The delisting of the ADSs, or the threat of their being delisted, may materially and adversely affectthe value of your investment.”

A. [Reserved]

B. Capitalization and Indebtedness

Not applicable.

C. Reasons for the Offer and Use of Proceeds

Not applicable.

D. Risk Factors

Summary of Risk Factors

Our business is subject to numerous risks and uncertainties,including risks that may prevent us from achieving our business objectives or may adversely affect our business, financial condition,results of operations, cash flows, and prospects. These risks are discussed more fully below and include, but are not limited to, risksrelated to:

Risks related to our business, industry and general operations

Risks related to doing business in China

Risks related to our corporate structure

Risks related to our corporate governance

Risks related to the ADSs

Risks Related to the Evolvement of Our Business Model

Our historicaloperating and financial performance as well as growth rate are not indicative of our future performance. If we fail to manage our growthor implement our future business strategies effectively, the success of our business and our future prospects may be compromised.

We have shifted our business model from the traffic-driven establishedbusinesses, which primarily comprise the legacy individual online learning services, to the product-driven pop toy business. We beganto offer our financial literacy learning services in July 2019, which accounted for 60.8%, 34.4% and 32.3% of our total revenues in thefiscal years ended June 30, 2023, 2024 and 2025, respectively. From August 2021, we began to launch additional courses for otherpersonal interests in skills upgrading and recreation and leisure, which in the aggregate accounted for 27.9%, 54.2% and 49.6% of ourtotal revenues in the fiscal years ended June 30, 2023, 2024 and 2025, respectively. In addition, starting from early 2023, we enteredinto the consumer goods sector through e-commerce. For the fiscal years ended June 30, 2023, 2024 and 2025, revenue from consumer businessaccounted for 0.4%, 4.6% and 7.8% of our total revenue, respectively. Our historical performance, which is primarily reflective of theresults of our established businesses, is not directly comparable with or indicative of the performance of our current business, mainlyour pop toy business, which we began to operate in 2025 along with the acquisition of equity interests in Shenzhen Letsvan. We acquiredequity interests in Shenzhen Letsvan from December 2024 and obtained control over Shenzhen Letsvan in March 2025 (the “Acquisitionof Shenzhen Letsvan”) and began to consolidate its results of operations from April 2025. For the fiscal year ended June 30, 2025,we recorded revenue from our pop toy business of RMB65.8 million (US$9.2 million). Subsequent to the Acquisition of Shenzhen Letsvan,we undertook further steps to acquire all of the remaining equity in Shenzhen Letsvan. As of the date of this annual report, we hold 76.3%of the equity interests in Shenzhen Letsvan, and we are still in the process of acquiring certain remaining equity interests in ShenzhenLetsvan, upon completion of which Shenzhen Letsvan will become our wholly-owned subsidiary. In September 2025, to restructure our establishedbusinesses, the following agreements were entered into by and among the relevant parties: (1) a termination agreement (the “VIETermination Agreement”) by and among Beijing Liangzizhige, Beijing Feierlai, Beijing Chuangyuqizhi, and Shenzhen Erwan EducationTechnology Co., Ltd. (“Shenzhen Erwan”) to terminate the VIE agreements among these parties (the “VIE Agreements”);(2) an equity transfer agreement by and among Beijing Liangzizhige, Beijing Feierlai, Beijing Chuangyuqizhi, Shenzhen Erwan and the relevantbuyer; and (3) an equity transfer agreement by and among the company, QuantaSing International Limited (“QS International”),Rare River Group Limited (“Rare River”) and the relevant buyer. Upon the effectiveness of the termination of the VIE Agreements(the “VIE Termination”), we no longer consolidate the financial results of Beijing Feierlai and Beijing Chuangyuqizhi, effectivefrom September 30, 2025, and we began to operate as a pop toy company. For details of these transactions, see “Item 4.Information on the Company—A. History and Development of the Company.”

As such, our historical businessmodel with our established businesses does not serve as an adequate basis for evaluating our prospects and future operating and financialresults, including, among others, our overall revenue growth, margin level and operating cash flows.  We cannot assure youthat our new business will achieve the same level of success as that of our established businesses. In addition, the completion of therestructuring is subject to uncertainties, including the satisfaction of closing conditions, regulatory approvals (if any) and filings,and the ability of prospective parties to fulfill their obligations under the transaction agreements. We also cannot assure you that therestructuring will be successfully consummated on expected terms or within the anticipated timeframe. Moreover, we and the counterpartieshave made a number of representations and warranties and covenants in the agreements for consummating the restructuring, including theequity transfer agreements through which we spin off our individual online learning services. For instance, we are obligated to cause suchbusiness to be operated in the ordinary course before the closing. We cannot assure you that we could perform such covenants as stipulatedin the agreements due to factors beyond our control, or that there would be no disputes arising from our or the counterparties regardingthe accuracy and truthfulness of the respective representations or warranties and the performance of the respective covenants, which maysubject us to liabilities (including indemnifications) if we are found to be in breach of such terms, or losses and other negative consequencesif the counterparties are found to be in breach of such terms. All of these uncertainties may have a material adverse effect on our business,results of operations and financial condition, as well as our future prospects and the price of the ADSs.

We have undertaken several new business initiatives and monetization strategies in the past, and we may continue to experience shifts in businessmodel in the future. We cannot assure you that such new business initiatives and monetization strategies and shifts in business modelwill be successful and achieve desired benefits to us.

Before we terminated theVIE Agreements and disposed of our interests in our legacy individual online learning service business and certain consumer andother businesses, we had diversified our individual online learning services beyond financial literacy, including upgrading ourcourses relating to other personal interests in skills upgrading and recreation and leisure. In early 2023, we entered into theconsumer goods sector through e-commerce. We entered into the pop toy sector through the acquisition of equity interests in ShenzhenLetsvan in initially in December 2024.

We have a limited track recordor experience in generating revenue from new business initiatives, which may adversely affect our prospects and ability to compete withthe existing market players in the relevant fields. The endeavors to offer new products, which are usually costly and time-consuming,could disrupt our ongoing business, divert our management resources, and require us to make significant investments in establishing andmaintaining cooperative relations, pursuing new projects, and furthering sales and marketing efforts, all of which may not be successful.We may also have to optimize our employee structure to adapt to the evolving market and business conditions, which may adversely affectour business, results of operations, financial condition and reputation. We cannot assure you that any of our new business initiativeswill achieve market acceptance or generate sufficient revenues in a timely manner, or at all, to offset the costs and expenses incurredprior to their launch, which may have a negative impact on our profitability and return on relevant investments. We also cannot assureyou that any such initiatives will attain the growth rate as we anticipate, which could affect our growth prospects. For instance, whilewe launched enterprise talent management services in June 2022, we had not recognized significant revenues from such services. In addition,we had suspended certain new consumer business before establishing a track record of relevant operations, such as the baijiu business.

Moreover, our pop toy businessdiffers significantly from our established businesses and may fail to generate any synergistic effect with our existing resources or letus achieve any operating leverage. Our new business initiatives, whether successful or not, may also incur negative publicity, cause anegative impact to our reputation, and subject us to relevant legal and regulatory risks. If we are unsuccessful in the exploration ofnew businesses due to financial constraints, failure to attract qualified personnel, lack of relevant experience or other reasons, wemay not be able to maintain or increase our revenue or recover any associated costs, expenses and expenditures, and we may have to adjustour operations and strategies accordingly, which could adversely affect our business, results of operations and financial condition.

To seize the rising demandsin oversea markets, we are also exploring opportunities to expand our offerings into overseas markets. We have selectively explored overseasbusiness opportunities with our pop toy business, primarily through the overseas operations of pop toy business after the acquisitionof Shenzhen Letsvan. The investment and additional resources required to establish operations and manage growth in other regions and countriesmay not produce desired levels of revenue or profitability, or at all. We may also encounter challenges typically associated with overseasoperations, which we have limited experience in dealing with, such as adaption to local market practices, compliance with local laws andregulations, cultivation and maintenance of local customer base and management of local presence. We cannot assure you that we can addressthese challenges in a satisfactory manner, or at all, which could affect our future prospects.

We may in the future introducenew services and products to further diversify our revenue streams, including services and products with which we have little or no prioroperating experience. These activities may also require significant capital expenditures and investment of valuable management and financialresources, and our growth will continue to place significant demands on such resources. We cannot assure you that we will be able to effectivelymanage any future growth in an efficient, cost-effective and timely manner, or at all. If we do not effectively manage the growth of ournew business and strategies, our business, results of operations and financial condition could be adversely affected.

Risks Related to Our Pop Toy Business and the Industry

We have limited experience with the operationsand management of our new pop toy business, and the future development of our pop toy business is subject to uncertainties.

Since 2023, we have pursuedbusiness opportunities facing consumers with several new ventures, through both organic growth and external investments, including ourbusiness expansion into e-commerce and wellness products businesses. We began to operate in the pop toys industry with our investmentin Shenzhen Letsvan since early 2025, and we have become a pop toy company after the VIE Termination. The pop toy business differsfrom our established businesses in many aspects, including business model, sales and marketing strategies, growth strategies, distributionchannels, monetization methods, day-to-day operations, cash and income streams, cost management and IP management. The competitive landscapeof the pop toys sector is also novel to us. We cannot assure you whether we can successfully leverage our existing operational expertiseto manage and develop our pop toy business.

We cannot assure you thatour pop toy business will attain the level of success of our online learning business in the near term or at all. Moreover, we are subjectto a number of risks related to our pop toy business, many of which are different from our established businesses in which we have moreexperience, including:

If we fail to effectivelymanage any of these risks, we may not be able to execute the growth strategies of our pop toy business as planned, and we may have todevote significant costs and management attention to resolving the relevant issues, which in turn imposes a negative impact on our business,reputation, results of operations and financial condition.

As a pop toy company, it is critical forus to adjust our product portfolio to keep pace with changing consumer preferences and industry trends. If we fail to design and developproducts that will be popular with consumers, we may not be able to attract and retain our customers, which could have a material adverseeffect on our business, financial condition and results of operation.

The development of the poptoy market is subject to uncertainties and may be impacted by changing social and economic circumstances and evolving consumer preferences.The pop toy market faces unpredictable challenges, driven by shifting social, economic and cultural dynamics. Consumers’ discretionaryspending patterns on toys are influenced by various factors, including economic conditions, demographic trends, social changes and volatilefuture economic prospects. The interests of consumers evolve extremely quickly and can change dramatically from time to time. These factorscontribute to the unpredictability of consumer behavior and present significant risks to the pop toy market, which in turn could affectour business. The popularity and consumer appeal of various types of toys are also affected by evolving consumer preferences. Any declinein the pop toy market as a whole could have a material and adverse impact on our future prospects, business, results of operations andfinancial condition.

To be successful, we mustanticipate both the IPs and the products that will appeal to consumers and quickly develop and introduce products that can compete successfullyfor consumers’ limited time, attention and spending. Evolving consumer tastes and shifting interests, coupled with an ever changingand expanding pipeline of consumer products and content that compete for consumers’ interest and acceptance, create an environmentin which some products and content can fail to achieve consumer acceptance, while others can be popular during a certain period of timebut then be rapidly replaced. Consumer demand for pop culture products can and does shift rapidly and without warning. Even if our productofferings are initially successful, there can be no guarantee that we will be able to maintain their popularity with consumers. Accordingly,our success will depend, in part, on our ability to continually create and introduce new products that consumers find appealing. To theextent that we are unable to do so, our sales and profitability will be adversely affected. If we devote time and resources to developingand marketing products that consumers do not find appealing enough to meet our sales targets or at all, our sales and profits may declineand our business performance may be harmed.

The pop toy industry is competitive andfragmented, and we cannot ensure that we can acquire greater market share, retain existing market share, or otherwise compete effectively.

The pop toy industry is highlycompetitive and relatively fragmented. To thrive in the competitive environment and stand out among competitors, ongoing innovation andadaptability to consumer tastes and trends are paramount. We compete against competitors of varying brand and product portfolios in anumber of areas that were different from the competitive landscape of the online learning industry, such as innovation capabilities, adaptabilityto consumer tastes and trends, IP-related abilities (e.g., the selection, development, commercialization and preservation of IPs), productquality and sales and marketing prowess. Failure as to any of these aspects can negatively affect our ability to sustain the popularityand market momentum of our product offering or continuously adjust our product offering in response to changing consumer preferences,which could have a material and adverse impact on our business, results of operations and financial condition.

The popularity of our existing IP portfoliomay deteriorate, and we may not be able to successfully source, develop or commercialize new IPs.

The success of our pop toysis heavily reliant on the recognition and popularity of the IPs in our IP portfolio. However, whether such IPs will remain popular amongthe consumers is beyond our control, as consumer preferences may shift and unforeseen negative publicity surrounding these IPs may arise.Any decline in the recognition or popularity of our IPs could significantly affect our sales performance and reputation. In addition,we cannot assure you that we will always be successful in developing or identifying IPs that resonate with consumers. For proprietaryIPs, success depends on our ability to interpret market trends, create engaging themes, develop compelling storylines and characters,and produce content that resonates with consumers. Misjudging market preferences could lead to a mismatch between expectations and actualmarket reception, while rapid changes in consumer tastes or market dynamics could result in newly launched IPs losing appeal or relevance.

The ability to successfullycommercialize our IPs is also crucial to our business. Our efforts to commercialize IPs may not always yield the desired outcomes. Theeconomic benefits derived from new IPs may fall short of expectations or fail to offset the research and development costs linked to proprietaryIPs. Any failure to commercialize our IPs could have a material and adverse impact on our future prospects, business, results of operationsand financial condition.

Our success depends on the creation processof our design team. The loss of designers, or our inability to attract and retain such designers and maintain our design team, could adverselyaffect our business.

Our success depends to a significantextent on the continued service and performance of our in-house design team, whose creative process is vital to our operations. The lossof any member of our in-house design team could impair our ability to diversify, extend and enhance our IP and product portfolio. In addition,competition for talented designers is intense. We compete with other companies in recruiting, hiring and retaining our innovative designers.Competition for these individuals could cause us to offer higher compensation and other benefits in order to attract and retain them,which would increase our operating costs. If we experience significant attrition of our design team, or if we incur significant cost increaseto recruit and retain our designers, our business, results of operations, financial condition and prospects will be materially and adverselyaffected.

We may incur significant costs on marketingefforts, and some marketing campaigns may not achieve our expected results.

We operate in a competitiveindustry and engage in a variety of sales and marketing activities to enhance the exposure and popularity of our IPs and products. Weincur substantial advertising and marketing expenditures and other resources to maintain and increase our market recognition. Our marketingactivities may not be well received by the market and may not result in the level of sales that we anticipate. We also may not be ableto retain or recruit a sufficient number of experienced sales and marketing personnel, or to train newly hired sales and marketing personnel,which we believe is critical to implementing our sales and marketing strategies cost-effectively. Further, sales and marketing approachesand tools in China’s pop toy market are evolving rapidly. This requires us to continually enhance our sales and marketing approachesand experiment with new strategies to keep pace with industry developments and consumer preferences. Failure to engage in sales and marketingactivities in a cost-effective manner and failure to achieve the anticipated results from our sales and marketing activities may reduceour market share, cause our revenues to decline, negatively impact our profitability, and materially harm our business, financial conditionand results of operations.

Furthermore, a number of thePRC laws and regulations regulate advertisement of products, including the Advertising Law of the PRC and the Law of the PRC on the Protectionof Customer Rights and Interests. Violation of these laws or regulations may result in penalties, such as fines, orders to cease disseminationof the advertisements, or orders to eliminate the influence of such advertisements, among others.

Our business depends significantly on marketrecognition of our brand, and any damage to our brand, trademarks or reputation, or failure to effectively promote our brand, could materiallyand adversely affect our business and results of operations.

Brand image is a key factorin consumer purchase decisions. We believe that market awareness of our brand has contributed, in part, to the success of our businessto date. Historically, we had operated our legacy individual online learning services business under multiple brands, including Qiniu,Jiangzhen and Qianchi, and we have established new brands for our pop toy business. With our pivot to the pop toy sector,maintaining and enhancing our brand has become even more critical to our efforts to increase the market awareness of our products, whichare in turn critical to our business growth. We believe that our future success depends substantially on the popularity of our Hereand Letsvan brand and our reputation for popular and high-quality pop toy products.

Therefore, maintaining andenhancing the recognition and image of our brand is critical to our ability to differentiate our products and to compete effectively.Any actual or perceived contamination, spoilage or other product misbranding or tampering may lead to the erosion of our brand and damageto our brand value, regardless of its merits. We have invested significant resources in our high quality and popular products throughoutour sales and distribution network. Our brand also depends on our ability to respond to competitive pressures. If we fail to do so, thevalue of our brand or reputation may be diminished and our business and results of operations may be materially and adversely affected.Furthermore, as we continue to grow in size, expand our product offerings and extend our geographic reach, maintaining product qualityand consistency may be more difficult and we cannot assure you that we can maintain our customers’ confidence in our brand name.If consumers perceive or experience a reduction in the quality of our products or service, or consider in any way that we fail to delivera consistently high quality products, our brand value could suffer, which could have a material and adverse effect on our business.

We may be unable to expand and manage oursales and distribution network effectively.

We face risks associated withexpanding and managing our sales and distribution network. There are a number of factors which could affect our ability to expand oursales network, and achieve satisfactory sales and profitability levels with our sales and distribution network, including: (1) our abilityto suitable partners and locations, including whether our terms with these partners on terms will be commercially acceptable to us; (2)competition for popular sales channels; (3) our ability to maintain an efficient and cost-effective operation (including adequate managementand financial resources) with these sales channels; (4) our ability to effectively compete with other stores selling pop toys; (5) ourability to attract and retain high caliber sales personnel; and (6) our ability to maintain suitable level of inventories with our saleschannel. If we fail to expand our sales and distribution channels effectively, we may not achieve optimal sales performance and our IPsmay not be promoted effectively, and our results of operations and future prospects might be affected.

We may encounter challengesin maintaining positive relationships with existing partners within our sales channels, experience disputes with them, or struggle toexpand our sales network with new partners under favorable terms, our market presence across different channels or regions may be compromised.Failure to effectively execute our development and growth strategies, along with providing sufficient resources and operational supportto our sales channels, could have a material and adverse impact on our future prospects, business, results of operations and financialcondition.

We also face various risksin relation to the distributorship model as part of our sales channels. We have limited control over our distributors, who may not alwayscomply with relevant laws, regulations, government guidelines, or adhere to agreements with us. Some distributors may sell our productsto sub-distributors without our involvement or oversight, making it difficult to control their sales activities. Some distributors mayviolate our guidelines and sales strategies, and we may have limited control over disorganized ordering and stockpiling by distributors,making it challenging to make sales forecast and manage inventory levels effectively. All of these activities could cause harm to theeffective management of sales channels, harm our reputation, and affect our results of operations.

If we are unable to obtain, maintain andprotect our intellectual property rights, in particular trademarks and copyrights, our ability to compete could be affected.

Our intellectual propertyis a valuable asset of our business. The market for our products depends to a significant extent upon the value associated with our productdesign and the intellectual properties we develop and license. Although certain of our intellectual property is registered, there canbe no assurances with respect to the rights associated with such intellectual property in those jurisdictions, including our ability toregister, use, maintain or defend key trademarks and copyrights. To the extent possible, we rely on trademark, trade dress, copyright,patent and trade secret laws, as well as confidentiality procedures or other contractual restrictions of same or similar nature, to establishand protect our intellectual property or other proprietary rights. However, these laws, procedures and restrictions may provide only limitedand uncertain protection and any of our intellectual property rights may be challenged, invalidated, circumvented, infringed or misappropriated,including by counterfeiters. In addition, our intellectual property portfolio in foreign countries is less extensive than our portfolioin the PRC, and the laws of foreign countries, including emerging markets in which our products are sold, may not protect our intellectualproperty rights to the same extent as the laws of the PRC. The costs required to protect our trademarks and copyrights may be substantial.

In addition, we may fail toapply for, or be unable to obtain, protection for certain aspects of the intellectual property used in or beneficial to our business.Further, we cannot provide assurance that our applications for trademarks, copyrights and other intellectual property rights will be granted,or, if granted, will provide sound and effective protection. Certain of our trademarks may have already been registered in the overseas markets that we are expanding or intendto expand to. In addition, third parties could bring infringement, invalidity or similarclaims with respect to any of our current trademarks, copyrights and other intellectual properties, or any trademarks, copyrights or otherintellectual properties we may seek to obtain in the future. Any such claims, whether or not successful, could be extremely costly todefend, divert management’s attention and resources, damage our reputation and brands, and substantially harm our business and resultsof operations. Any lawsuits or proceedings that we initiate could be expensive, take significant time and divert management’s attentionfrom other business concerns. Litigation and other proceedings also put our intellectual property at risk of being invalidated, or ifnot invalidated, may result in the scope of our intellectual property rights being narrowed. In addition, our efforts to try to protectand defend our trademarks and copyrights and other intellectual properties may be ineffective. Additionally, we may provoke third partiesto assert claims against us. We may not prevail in any lawsuits or other proceedings that we initiate, and the damages or other remediesawarded, if any, may not be commercially valuable. The occurrence of any of these events may have a material adverse effect on our business,financial condition and results of operations.

Furthermore, some of ourproducts bear the trademarks and other intellectual property rights of our licensors, and the value of our products is affected by thevalue of those rights. Our licensors’ ability to maintain and protect their trademarks and other intellectual property rights issubject to risks similar to those described above with respect to our intellectual properties. We do not control the protection of thetrademarks and other intellectual property rights of our licensors and we cannot ensure that our licensors will be able to secure or protecttheir trademarks and other intellectual property rights. The loss of any of our significant owned or licensed trademarks, copyrights orother intellectual property could have a material adverse effect on our business, financial condition and results of operations. In addition,our licensors may engage in activities or otherwise be subject to negative publicity that could harm their reputation and impair the valueof the intellectual property rights we license from them, which could reduce consumer demand for our products and adversely affect ourbusiness, financial condition and results of operations.

We have been, and expect tocontinue to be involved with litigation and other legal proceedings related to intellectual property rights. For instance, with respectto our legacy individual online learning services business, certain of our competitors are infringing certain copyrights of our financialliteracy course contents and we have sued such companies and claimed for, among others, injunctive relief and monetary damages. Litigationmay be necessary to enforce our intellectual property rights, protect our trade secrets, or determine the validity and scope of the proprietaryrights of others. Such litigation, however, may be costly and divert management’s attention away from our business. An adverse determinationin any such litigation would impair our intellectual property rights and may harm our business, prospects and reputation. Enforcementof judgments in China is uncertain, and even if we are successful in litigation, it may not provide us with an effective remedy. In addition,we have no insurance coverage against litigation costs and would have to bear all costs arising from such litigation to the extent weare unable to recover them from other parties. The occurrence of any of the foregoing could result in substantial costs and diversionof our resources, and have a material adverse effect on our business, results of operations and financial condition.

Our collaborations with third-party partnerfactories for our products presents risks to our business. Failure in product quality control may adversely affect our business.

We collaborate with specializedthird-party partner factories to manufacture our products. As a result, the loss or unavailability of one of our major partner factories,even temporarily, could have a negative impact on our business, financial condition and results of operations. While we could replaceour partner factories if necessary, any such move may be time-consuming and costly. We may also be required to seek out additional factoriesin response to increased demand for our products, as our current partner factories may not have the capacity to increase production. Ifwe fail to receive a material portion of the products made by our partner factories, or if we fail to shift partner factories, our salesand profitability could be significantly reduced.

We may not have effectivecontrol over whether our third-party partner factories would strictly follow our specifications and instructions as to, for example, rawmaterials to be used in the production of our products. There are risks that one or more of our third-party partner factories will notcomply with our requirements, and that we may not be able to discover such non-compliance immediately or at all. As such, the use of third-partypartner factories may expose us to product liability claims, administration penalties, confiscation or destruction of certain products,the revocation of business license, or the imposition of other administrative or even criminal liabilities. If defective products aresold, it would result in damage to our reputation, product recall, consumer litigation and others that could materially and adverselyaffect our business.

We are exposed to inventory management risksand may face inventory excess, obsolescence, impairment or shortage.

As of June 30, 2025, we hadinventories of RMB21.5 million (US$3.0 million). We must maintain sufficient inventory levels to ensure our product demand can be met,while avoiding excess inventory. Failure to forecast consumer demand or respond to any unexpected event negatively affecting the salesof our products could expose us to inventory obsolescence or result in a decline in inventory value or inventory write-downs. Changesto our business focus or product portfolio may also cause our inventories to be irrelevant and render our capital outlays for inventoriesunnecessary. For instance, we have incurred purchase commitment loss of inventories for our baijiu business as we voluntarily suspendedrelevant operations. On the other hand, inaccurate sales forecast or insufficient production capacity at our partner factories may leadto inventory shortage and result in our inability to meet market demand for our products and satisfy orders from our sales partners. Failurein managing our inventory could have a material and adverse impact on our business, results of operations and financial condition.

We are exposed to risks relating to warehousingand third-party logistics service providers.

Significant disruption tothe operation of our warehouses, whether as a result of natural disasters, public health incidents, labor shortages, fires or other causes,or any unexpected and adverse changes in the storage conditions of our warehouses, could disrupt our operations, which may cause delayin product deliveries or even destroy our products. Prolonged disruptions in warehousing could also result in a loss of sales. Furthermore,we may fail to secure the lease agreement of our warehouses on favorable terms, or at all. Any of these events could have a material andadverse impact on our business, results of operations and financial condition.

We engage third-party logisticsservice providers to transport our products from partner factories to our warehouses and/or customers. Our dependence on third- partylogistics providers could expose us to potential service disruptions or inefficiencies. If these providers fail to meet their serviceobligations due to operational issues, financial difficulties, or other unforeseen circumstances, our ability to deliver products to customersin a timely and cost-effective manner may be impacted, which could cause a decline in product sales and loss of revenue. In addition,improper handling of our products by the logistics service providers could also result in product damage, which could lead to productliabilities or claims and negatively affect our brand image and reputation. Any of these events could have a material and adverse impacton our business, results of operations and financial condition.

The success of our operations depends onour ability to avoid infringing, misappropriating or otherwise violating the trademarks, copyrights, trade secrets, know-how, patentsand other proprietary rights of third parties.

We cannot assure you thatour business practices do not and will not infringe, misappropriate or otherwise violate any trademarks, copyrights, trade secrets, know-how,patents and other proprietary rights of third parties, given the uncertainties inherent in the scope of certain trademarks, copyrights,trade secrets, know-how, patents and other proprietary rights. Intellectual property related litigation is usually complex and the resultsof such litigation are unpredictable. As we gain greater visibility and market exposure as a public company, we may also be at greaterrisk of being the subject of intellectual property–related litigation. Third parties may claim that our products or activities infringe,misappropriate or otherwise violate their trademarks, copyrights, trade secrets, know-how, patents or other proprietary rights. Defendingagainst these allegations and lawsuits could be costly, take a significant amount of time, distract management from our business operationsand delay our product launch. In addition, if we are found to have infringed, misappropriated or otherwise violated a third party’strademarks, copyrights, trade secrets, know-how, patents or other proprietary rights, we may be required to pay substantial damages orbe subject to orders, judgments or administrative penalties that prohibit us from selling certain products or impose other liabilitieson us. In addition, any allegation of infringement of the intellectual property rights of others, even if unfounded, could damage ourreputation and tarnish our brand image. Furthermore, our use of the disputed intellectual properties may be restricted, which could disruptour operations. Occurrence of any of these incidents could have a material and adverse impact on our business, results of operations andfinancial condition.

We have undertaken strategic collaborationswith IP licensors. If we fail to expand or maintain our collaboration with IP licensors, or our existing collaboration with any of ourIP licensors is terminated or curtailed, or if we are no longer able to benefit from such business collaborations, our business and resultsof operations may be adversely affected.

Strategic collaborations withIP licensors is part of our business expansion strategies. We collaborate with IP licensors to jointly develop products that attract consumers.If we are unable to expand or maintain our collaboration with them in the future, our business and operating results may be materiallyand adversely affected. To the extent we cannot maintain our cooperative relationships with any of these IP licensors, it might be difficultfor us to identify alternative qualified IP licensors, which might adversely impact our daily operation and consumer experience. Our cooperationwith IP licensors may also be adversely affected by negative publicities regarding our IP licensors, which could negatively affect ourreputation, business and results of operations. In addition, the license agreements we entered into with IP licensors may contain extensiveand detailed provisions setting forth scope of licenses, such as categories and sub-categories of products authorized to use licensedIPs, authorized sales channels, territories where sales of co-branded products are allowed, among others. We, our employees and our businesspartners may inadvertently breach such IP protection provisions and therefore subject us to liabilities under our agreements with IP licensors.Disputes may also arise due to reasons that we are unable to foresee. If we are unable to resolve disputes with IP licensors, we may notbe able to continue our cooperation with our IP licensors, which could have a material and adverse effect on our business and operatingresults.

In addition, if we are unable to sell all of the co-branded productsin our inventory within a reasonable period of time after the expiration of relevant agreements, we will not be able to continue to sellthose products and may have to destroy our inventories. As a result, we may have to write down such inventories, which would result innegative impacts on our operating results and financial conditions.

Risks Related to Our Operations

We have a short history of profitabilityand may not maintain profitability in the future.

Wehad generally incurred net losses prior to the fiscal year ended June 30, 2024. We recorded net loss of RMB108.7 million in thefiscal year ended June 30, 2023, and we recorded net income of RMB385.5 million and RMB356.6 million (US$49.8 million) in thefiscal years ended June 30, 2024 and 2025, respectively, which are primarily associated with our legacy individual online learningbusiness. We cannot assure you that we will be able to continue to generate net income or positive cash flow from operatingactivities in the future. Our future ability to maintain profitability will depend in large part on our ability to successfullyoperate and monetize from our pop toy business, maintain or increase our operating margin, either by growing our revenues at a ratefaster than our costs and operating expenses increase, or by reducing our costs and operating expenses as a percentage of ourrevenues. In particular, our ability to achieve and maintain profitability will depend on the success of our IPs and products, whichmay take time to win market awareness and popularity. As a result of the foregoing, we may not be able to maintain or improve ourprofitability in the future.

We may be adverselyaffected by negative publicity concerning us or our current and legacy business, brands, IPs, products and services, shareholders, affiliates,directors, officers, employees, the industries in which we operate regardless of its accuracy.

Negative publicity aboutus and our current and legacy business, brands, IPs, products and services, shareholders, affiliates, directors, officers,employees, the industries in which we operate can harm our brand recognition and reputation. For instance, with respect to ourlegacy individual online learning services, we had, from time to time, been subject to online complaints from alleged users or thirdparties claiming that our paid courses were overpriced and not useful, or claiming that the content on our platforms and thedescription about our services are invalid and misleading, or against our current or legacy brands. We were also exposed to negativepublicity concerning refund disputes over course fees between us and the learners for our legacy individual online learning servicesor administrative penalties. We had also been subject to claims of fraudulent activities for the provision of our online learningservices, which could harm consumer interests. Moreover, with our pop toy business, the reputation of our HERE奇梦岛 brand (previously known as Letsvan) plays a crucial role in consumer perception of us and thesales of our products. Addressing such adverse publicity may necessitate the launch of defensive media campaigns or legal actions,leading to increased marketing and legal expenses and diverting management’s focus from core operations. Any counterfeitproducts or knockoffs may also infringe and undermine our brand reputation in general.

Negative publicity concerningthe foregoing could be related to a wide variety of matters, including but not limited to:

Our online marketing strategyrelies on third-party social media platforms. In particular, our fans and the influencers we work with may post contents relating to ourproducts from time to time. We may fail to detect and prevent illegal or inappropriate content from being posted, which may incur regulatoryinvestigations, legal liability, or removal from social media platforms. In addition, unfavorable publicity or negative news regardingus, our fans, the influencers we work with, or our IP proprietors, or negative review on our brands and products could adversely affectour reputation.

If our senior managementand other key personnel are unable to work together effectively or efficiently or if we lose their services, our business may be severelyaffected.

The continued services ofour senior management and other key personnel are important to our continued success. If they cannot work together effectively or efficiently,our business may be severely disrupted. If, in the future, one or more of our senior management members were unable or unwilling to continuein their present positions, and we cannot find suitable replacement in a timely and efficient manner, or at all, our business, resultsof operations and financial condition may be materially and adversely affected. If any of our senior management joins a competitor orforms a competing business, we face the risk of losing other key personnel. Our senior management has entered into employment agreementswith us which contain confidentiality clauses, as well as standalone confidentiality and non-compete agreements. While certainsenior management members have departed from our company due to their personal development decisions, we have not experienced any materialdisruptions to our business or material disputes with them in connection with such departures. However, if any dispute arises betweenour senior management and us, we may have to incur substantial costs and expenses in order to enforce such agreements in China or we maybe unable to enforce them at all.

We may face risksand uncertainties with respect to the licensing requirement for our business. Any lack of or failure to maintain requisite approvals,licenses or permits applicable to us may have a material adverse impact on our business, results of operations and financial condition.

We are subject to governmentregulations for our operations in China. With respect to the established businesses, as of June 30, 2025, as advised by our PRC counsel,CM Law Firm, our WFOE and the affiliated entities had obtained the licenses, permits and registrations from the PRC government authoritiesnecessary for our business operations in China, including, among others, the Value-added Telecommunications Business Operating Licensefor internet information service (the “ICP License”), the Permit for Production and Operation of Radio and Television Programs,and the Publication Operation License, except for the License for Online Transmission of Audio-Visual Program (the “Audio-VisualLicense”) for offering certain courses in live streaming or audio-visual contents. According to relevant PRC laws and regulations,no entities or individuals may provide internet audio-visual program services, which include making and editing of audio-visual programsconcerning educational content and broadcasting such content to the general public online, without the Audio-Visual License, issued bythe State Administration of Press, Publication, Radio, Film and Television (the “SAPPRFT”) (currently known as National Radioand Television Administration), or its local bureaus, and only state-owned or state-controlled entities are eligible to apply for an Audio-VisualLicense. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulationson online transmission of audio-visual programs.” With regards to our legacy individual online learning services business, we did not obtain the Audio-Visual License for offering certain courses in live streaming format and video recordings of live streaming coursesand certain other audio-video contents such as short, pre-recorded videos and audio podcasts through our platforms to our users.We are, however, not eligible to apply for such license since we are not a state-owned or state-controlled entity. As of the date of thisannual report, we have not been subject to any penalties imposed by, or any investigations initiated by, the relevant government authoritiesdue to such provision of internet audio-visual contents through our platforms without any requisite license. In addition, with respectto our established businesses, due to the ambiguity of the definition of “online publishing service” under the PRC laws andregulations, the online distribution of content, including our audio-visual contents and other course materials, through our platforms,may be regarded as an “online publishing service” and, therefore, we or the affiliated entities may be required to obtainan Online Publishing Service License. Failure to obtain such licenses may lead to fines, confiscation of relevant gains, suspensionof the operations of our online platforms and other liabilities. As of the date of this annual report, we have not been required by therelevant regulatory authorities to obtain such license, nor have we been subject to any penalties imposed by, or any investigations initiatedby, the relevant government authorities for failure to obtain such license.

As we have transitioned tothe pop toy sector, we are subject to laws, regulations and policies governing the pop toy sector. The regulatory regime for the industryhas been evolving, with new laws, regulations and other regulatory measures being introduced from time to time, such as the Product QualityLaw of the People’s Republic of China (2018 Revision). Such laws and regulations may become more comprehensive and stringent inthe future. While we closely monitor changes in the relevant laws and regulations and have implemented measures to ensure our ongoingcompliance, changes in the regulatory regime may materially and adversely affect our business. For example: (1) we may incur higher compliancecosts on our business and face challenges in launching new products; (2) we may encounter greater difficulties in obtaining relevant regulatoryapprovals; and (3) our sales and marketing activities may be restricted in scope, content, format and other aspects. Any non-compliancewith applicable laws and regulations may expose us to liabilities. In case of any non-compliance, we may incur significant expenses anddivert management’s attention and substantial resources to resolving deficiencies. More specifically, on June 8, 2023, the SAMRpromulgated the Blind Boxes Guidelines. The interpretation and enforcement of such newly promulgated guidelines can be uncertain.

We cannot assure you thatlocal PRC authorities will not adopt different enforcement practice or will not issue more explicit interpretation and rules or promulgatenew laws and regulations from time to time to further regulate the pop toy industry, which may subject us to additional licensing requirements.We may also be required to apply for and obtain additional licenses or permits for our operations in China as the interpretation and implementationof current PRC laws and regulations continue to evolve. If government authorities determine that our operations fall within the scopeof business operations that require additional licenses, permits or approvals, we may not be able to obtain such licenses, permits orapprovals in a timely manner or on commercially reasonable terms or at all, and failure to obtain such licenses, permits or approvalsmay subject us to fines, legal sanctions or an order to suspend our related operations. Moreover, we may fail to renew or update any ofour existing licenses and permits in a timely manner and on commercially reasonable terms, or at all, which could materially and adverselyaffect our business, results of operations and financial condition. Government authorities may also from time to time issue new laws,rules and regulations and enhance enforcement of existing laws, rules and regulations, which could require us to obtain new and additionallicenses, permits or approvals. If we are not able to comply with the applicable legal requirements, we may be subject to fines, confiscationof the gains derived from non-compliant operations, or suspension of non-compliant operations, any of which may materiallyand adversely affect our business, results of operations and financial condition.

We have been andmay continue to be subject to litigations, allegations, complaints, investigations and penalties from time to time, which may adverselyaffect our business, results of operations and financial condition.

Wehave been and may continue to be involved in legal and other disputes, including labor disputes, customer complaints, advertisements,unfair competition and other dissatisfactions, contractual disputes, product liability claims and administrative penalties in the ordinarycourse of our business operations. We have encountered and may also, in the future, encounter, disputes from time to time over rightsand obligations concerning intellectual property rights and allegations against us for potential infringement of third party’s intellectualproperty rights, and we may not prevail in those disputes. Any claims against us, with or without merit, could be time consuming and costlyto defend or litigate, divert our management’s attention and resources, or harm our brand equity. If a legal or administrative proceedingagainst us is successful, we may be required to pay substantial damages or fines and/or enter into agreements that may not be based uponcommercially reasonable terms, or we may be unable to enter into such agreements at all. We may also lose, or be limited in, the rightsto offer some of our products or be required to make changes to our product offerings or business model. As a result, the scope of ourofferings could be reduced, which could adversely affect our ability to attract consumers, harm our reputation and have a material adverseeffect on our business, results of operations and financial condition.

Our investments,acquisitions and alliances may require significant management attention and adversely affect our business operations, results of operationsand financial condition.

We continually evaluate andconsider strategic investments, combinations, acquisitions or alliances. For instance, in September 2023, we entered into an agreementrelating to the acquisition of KELLY’S EDUCATION LIMITED (“Kelly’s Education”), a personalized online languageeducation service provider in Hong Kong, pursuant to which we acquired all of the issued share capital of Kelly’s Education fora total consideration of HK$2.0 million. In addition, through a series of transactions during the fiscal year ended June 30, 2025, weacquired controlling interests in Shenzhen Letsvan, a company specializing in IP incubation, copyright commercialization, and the promotionand sales of pop toys, through which we began to engage in our primary business currently, namely pop toy business.

We may not be able to identifysuitable strategic alliances or acquisition opportunities, complete such transactions on commercially favorable terms, or successfullyintegrate business operations, infrastructure and management philosophies of acquired businesses and companies. Furthermore, these transactionscould be material to our business if consummated. We may not have the financial resources necessary to consummate any acquisitions inthe future or the ability to obtain the necessary funds on satisfactory terms. There may be particular complexities, regulatory or otherwise,associated with further expansion into new markets, and our strategies may not succeed beyond our and current markets. Any future acquisitionsmay also result in significant transaction expenses in addition to integration and consolidation risks. Because acquisitions historicallywere not a core part of our growth strategy in the past, we have no material experience in successfully utilizing acquisitions. We maynot have sufficient management, financial and other resources to integrate any such future acquisitions or to successfully operate newbusinesses, and we may be unable to profitably operate our expanded company. If we are unable to effectively address these challenges,our ability to execute acquisitions will be impaired, which could have an adverse effect on our growth.

We are subjectto a variety of evolving laws and regulations regarding cybersecurity, data security and personal information protection. If the datasecurity measures adopted by us underperform, or if we otherwise fail to protect data security and personal information as required byrelevant laws and regulations or by our users, consumers may lose trust in us, and we may be subject to liabilities and other negativeconsequences.

Maintaining data securityand protecting personal information are critical to our business. For our legacy individual online learning services, we processed a largeamount of data and information in various aspects of our business, in particular certain personally identifiable information relatingto our users. For instance, users generally provide their mobile phone number and/or social media account information used for user registrationand mailing address for receipt of our delivery. Such information is potentially vulnerable to cyber-attacks, computer viruses, physicalor electronic break-ins or similar disruptions. In addition, we are also subject to a variety of laws and regulations regardingcybersecurity, data security and personal information protection, including restrictions on the collection, storage and use of personalinformation and requirements to take steps to prevent personal data from being divulged, stolen or tampered with.

A party may nevertheless circumventour data security measures and disseminate or misappropriate proprietary and confidential information and jeopardize the confidentialnature of such information. Any unauthorized or otherwise inappropriate disclosure or leakage of data, whether willful or accidental,may give rise to wrongful access, misuse or loss of our proprietary and confidential information or other records, which could disruptour business and expose us to potential liabilities, costly litigations and negative publicity. If security measures are breached becauseof third-party action, employee error, malfeasance or otherwise, or if design flaws in our technology infrastructure are exposed and exploited,our relationships with users and/or customers and business partners could be severely damaged, we could incur significant liabilitiesand our business and operations could be adversely affected. Furthermore, we have expanded our business to the pop toy sector. Any failureor perceived failure by us to prevent information security breaches or to comply with privacy policies or privacy-related legal obligations,or any compromise of security that results in the unauthorized release or transfer of personally identifiable information or other customerdata, could cause consumers to lose trust in us and could expose us to legal claims. A security breach that leads to leakage of data andinformation of our users and/or customers could subject us to legal liabilities, regulatory sanctions,reputational damage and loss of confidence. In addition, data breaches or any misconduct during the process of collection, analysis, andstorage of data, could result in a violation of applicable PRC data privacy and protection laws and regulations, and subject us to regulatoryactions, investigations or litigations. As of the date of this annual report, we have not incurred any material actions, investigationsor litigations relating to cybersecurity and personal information protection. However, we cannot guarantee that we will not encountersuch incidents in the future. If any of such events occurs, we could incur significant costs in investigating and defending against them,and could be subject to negative publicity about our privacy and data protection practices, which may affect our reputation in the marketplace.Any potential risks related to our processing of data could require us to implement measures to reduce our exposure to liability, whichmay require us to expend substantial resources and limit the attractiveness of our products to consumers. As a result, our business, resultsof operations and financial condition could be materially and adversely affected. Any of these issues could harm our reputation, adverselyaffect our ability to attract consumers, reduce their willingness to pay, or subject us to third-party lawsuits, regulatory fines or otheraction or liability. Any reputational damage resulting from breach of our security measures could create distrust of our company by consumersor investors. We may be required to spend significant additional resources to protect us against the threat of security measures breachesor to alleviate problems caused by such disruptions or breaches. Any concerns or claims about our practices and compliance with regardto the processing of personal information or other privacy-related matters, even if ungrounded, could damage our reputation and resultsof operations.

The PRC regulatoryframework for data security and personal information protection is rapidly evolving, and we could face challenges in our continued compliancewith the heightened regulatory scrutiny.

The PRC regulatory frameworkfor data security and personal information protection is rapidly evolving and is likely to remain uncertain for the foreseeable future.For instance, on June 10, 2021, the Standing Committee of the National People’s Congress (“SCNPC”) promulgatedthe PRC Data Security Law, which took effect on September 1, 2021. The PRC Data Security Law, among other things, requires data collectionto be conducted in a legitimate and proper manner, and stipulates that, for the purpose of data security, data processing activities mustbe conducted based on data classification and hierarchical protection system. Furthermore, the CAC promulgated the Security AssessmentMeasures for Outbound Data Transfer on July 7, 2022 (effective from September 1, 2022) and the Provisions on Promoting and RegulatingCross-Border Data Flows on March 22, 2024 (effective on the date of promulgation), respectively, to regulate outbound data transfer activities,protect the rights and interests of personal information, safeguard national security and social public interests, and promote the cross-bordersecurity and free flow of data. In addition, on December 8, 2022, the Ministry of Industry and Information Technology of the PRC (the“MIIT”) released the Administrative Measures for Data Security in Industry and Information Technology Sectors (Trial), effectivefrom January l, 2023, which, among other things, impose specific data security management requirements and certain filing and reportingobligations on processors of important data and core data in industry and information technology sectors. Since the categories of importantdata and core data still remain unclear, it is uncertain how the measures will be interpreted and implemented.

On August 20, 2021, theSCNPC passed the PRC Personal Information Protection Law (the “PIPL”), which took effect on November 1, 2021. The PIPLaccentuates the importance of processors’ obligations and responsibilities for personal information protection and sets out thebasic rules for processing personal information and the rules for cross-border transfer of personal information. Pursuant to the PIPL,a personal information processor is allowed to process (including to collect, store, use, transmit, provide, disclose and delete) personalinformation only under certain circumstances, such as processing with consent from such individual, or for necessity of performance ofa contract to which such individual is a contracting party or statutory duties, management of human resource under the labor rules andregulations developed in accordance with the law or a collective contract signed in accordance with the law, protection of public interest,or reasonable usage of legally disclosed information. Processing of sensitive personal information, such as the personal information thatis likely to result in damage to personal dignity, personal or property safety once illegally disclosed, as well as the personal informationof minors under the age of 14, is subject to higher regulatory requirements including specific purpose, sufficient necessity, duty ofexplanation to such individuals and consent from a parent or a guardian of such minors. See “Item4. Information on the Company—B. Business Overview—Regulation—Regulations on Privacy Protection” for details.We do not foresee any material impediments for us to comply with the PIPL and other existing PRC laws and regulations on cybersecurity,data security and personal data protection in all material respects, based on the following reasons: as of the date of this annual report,(1) we have implemented comprehensive cybersecurity and data protection policies, procedures and measures to safeguard personal informationrights and ensure secured storage and transmission of data and prevent unauthorized access or use of data; (2) there has been no materialleakage of data or personal information or violation of cybersecurity and data protection and privacy laws and regulations by us whichwill have a material adverse impact on our business operations; (3) we have not been subject to any material fines or administrative penalties,or other sanctions by any competent regulatory authorities in relation to the infringement of cybersecurity and data protection laws andregulations; (4) there has been no material cybersecurity and data protection incidents or infringement upon the rights of any third parties,or other legal proceedings, administrative or governmental proceedings, pending or, to the best of the knowledge of our company, threatenedagainst or relating to our company; and (5) we have not been involved in any investigations on cybersecurity review initiated by the CACon such basis and have not received any inquiry, notice, warning or sanctions in this respect.

However, we cannot assureyou that our existing data security and personal information protection system and technical measures will always be considered sufficientunder applicable laws, regulations and other privacy standards, or that we will comply with the applicable laws and regulation in allrespects. If relevant government authorities interpret or implement these and other laws or regulations in ways that may negatively affectus, our current practice of collecting and processing data and personal information may be ordered to be rectified or terminated by regulatoryauthorities, and we may also become subject to fines and other penalties. We could be adversely affected if PRC legislation or regulationsrequire changes in business practices or privacy policies, or if the relevant PRC government authorities interpret or implement theirlegislation or regulations in ways that negatively affect our business, results of operations and financial condition.

We are subjectto risks associated with our international expansion.

Overseas expansion is a crucialpart of our long-term business strategy, especially with our venture into the pop toy sector. We have selectively engaged in certain internationalexpansion initiatives, initially through the establishment of Kelly’s Education for learnings services overseas, and the overseasoperations of the pop toy business. While overseas operations currently have not contributed a significant portion of our revenue, asour overseas operations grow and deepen, we could be faced with increased risks, including, among others:

In addition, overseas operationsgenerally could involve higher costs, such as costs for maintaining an operational framework and structure compliant with local regimes,recruiting and retaining local staff and coordination of local operations. All of these risks above will also intensify with the scaleof our overseas operations and may have a negative impact on our business, results of operations, financial condition and prospects.

A material weaknessin our internal control over financial reporting has been identified, and if we fail to implement and maintain an effective system ofinternal control over financial reporting, we could be unable to accurately report our results of operations, meet our reporting obligationsor prevent fraud, and investor confidence and the market price of the ADSs may be materially and adversely affected.