UNITED
STATES



SECURITIES
AND EXCHANGE COMMISSION



Washington,
D.C. 20549



FORM 20-F/A



Amendment No. 1



(Mark
One)







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





OR







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





For
the fiscal year ended December 31, 2021





OR





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



For
the transition period from to





OR





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







Date
of event requiring this shell company report _____________



Commission
file number: 001-40301



|Infobird Co., Ltd                                                                                                                                                                                                              
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(Exact Name of Registrant
    as Specified in Its Charter)                                                                                                                                                                     
|                                                                                                                                                                                                                               
|N/A                                                                                                                                                                                                                            
|(Translation of Registrant’s
    Name Into English)                                                                                                                                                                            
|                                                                                                                                                                                                                               
|Cayman Islands                                                                                                                                                                                                                 
|(Jurisdiction of Incorporation
    or Organization)                                                                                                                                                                            
|                                                                                                                                                                                                                               
|Room 12A05, Block A, Boya International Center, Building 2, No. 1 Courtyard, Lize Zhongyi RoadChaoyang District, Beijing, China 100102                                                                                         
|(Address of Principal Executive
    Offices)                                                                                                                                                                                   
|                                                                                                                                                                                                                               
|Yimin Wu
    Chief Executive OfficerRoom 12A05, Block A, Boya International Center, Building 2, No. 1 Courtyard, Lize Zhongyi RoadChaoyang District, Beijing, China 100102E-mail: wuym@infobird.comTelephone: + 86-010-52411819
|(Name, Telephone, E-mail
    and/or Facsimile number and Address of Company Contact Person)                                                                                                                                    

















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



|Title
of each class                         |  | Trading
symbol(s) |  | Name
of each exchange on which registered
|------------------------------------------- |  | ----------------- |  | -----------------------------------------
|Ordinary
Shares, par value $0.005 per share |  | IFBD              |  | The Nasdaq Stock Market
LLC              





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





|None            
|----------------
|(Title of Class)





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





|None            
|----------------
|(Title of Class)





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



As of December 31, 2021, there were 5,093,315
ordinary shares issued and outstanding, par value $0.005 per ordinary share.



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



☐ Yes
☒ No



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



☐ Yes
☒ No



Note
– Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 from their obligations under those Sections.



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



☒ Yes
☐ No



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



☒ Yes
☐ No













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





|Large accelerated filer ☐ |  | Accelerated
    filer ☐ |  | Non-accelerated filer ☒ |  | Emerging growth
    company ☒
|------------------------- |  | ----------------------- |  | ----------------------- |  | -----------------------------





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



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



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



☐



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





|U.S. GAAP ☒ |  | International Financial Reporting Standards as issued by the International Accounting Standards Board ☐ |  | Other ☐
|----------- |  | ------------------------------------------------------------------------------------------------------- |  | -------





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



☐ Item
17 ☐ Item 18



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



☐ Yes
☒ No



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



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



☐ Yes
☐ No













TABLE
OF CONTENTS



|                                                                                      | Page
|------------------------------------------------------------------------------------- | ----
|INTRODUCTION                                                                          | iii 
|                                                                                      |     
|FORWARD-LOOKING
STATEMENTS AND RISK FACTORS SUMMARY                                   | xxi 
|                                                                                      |     
|PART I                                                                                | 1   
|                                                                                      |     
|ITEM
1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                         | 1   
|ITEM
2. OFFER STATISTICS AND EXPECTED TIMETABLE                                       | 1   
|ITEM
3. KEY INFORMATION                                                               | 1   
|ITEM
4. INFORMATION ON THE COMPANY                                                    | 30  
|ITEM
4A. UNRESOLVED STAFF COMMENTS                                                    | 53  
|ITEM
5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                  | 53  
|ITEM
6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                    | 78  
|ITEM
7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                             | 84  
|ITEM
8. FINANCIAL INFORMATION                                                         | 86  
|ITEM
9. THE OFFER AND LISTING                                                         | 86  
|ITEM
10. ADDITIONAL INFORMATION                                                       | 87  
|ITEM
11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                   | 95  
|ITEM
12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                       | 95  
|                                                                                      |     
|PART II                                                                               | 96  
|                                                                                      |     
|ITEM
13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                              | 96  
|ITEM
14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS | 96  
|ITEM
15. CONTROLS AND PROCEDURES                                                      | 96  
|ITEM
16A. AUDIT COMMITTEE FINANCIAL EXPERT                                            | 99  
|ITEM
16B. CODE OF ETHICS                                                              | 99  
|ITEM
16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES                                      | 99  
|ITEM
16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                  | 99  
|ITEM
16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS      | 99  
|ITEM
16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT                                | 100 
|ITEM
16G. CORPORATE GOVERNANCE                                                        | 100 
|ITEM
16H. MINE SAFETY DISCLOSURE                                                      | 100 
|ITEM
16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.        | 100 
|                                                                                      |     
|PART III                                                                              | 101 
|                                                                                      |     
|ITEM
17. FINANCIAL STATEMENTS                                                         | 101 
|ITEM
18. FINANCIAL STATEMENTS                                                         | 101 
|ITEM
19. EXHIBITS                                                                     | 101 
|                                                                                      |     
|INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS                                            | F-1 





i







EXPLANATORY
NOTE



Infobird Co., Ltd (the “Company”)
is filing this Amendment No. 1 (the “Amendment No. 1”) to the Annual Report on Form 20-F for the year ended December 31,
2021 filed with the Securities and Exchange Commission (the “SEC”) on May 16, 2022 (the “Form 20-F”), to provide
additional disclosure regarding (i) the Company’s unique risks with operations conducted by the Company’s subsidiaries and
Beijing Infobird Software Co., Ltd (the “VIE”) and the VIE’s subsidiaries based in China, (ii) the relationships among
the Company, its subsidiaries, the VIE and the VIE’s subsidiaries, (iii) cash and asset flows through the organization and (iv)
certain disaggregated financial information as of December 31, 2021 and 2020 and for the years ended December 31, 2021, 2020 and 2019.
In addition, this Amendment No. 1 reflects a1-for-5 share consolidation, effected on September
9, 2022 (the “Share Consolidation”), of the Company’s ordinary shares pursuant to its second amended and restated memorandum
and articles of association, which is filed as Exhibit 1.2 to this Amendment No. 1. The Company has retroactively restated all
share and per share data for all of the periods presented pursuant to ASC 260 to reflect the Share Consolidation. This Amendment No.
1 also consists of a revised “Item 19. Exhibits” and reflects clerical changes in the references to certain defined terms.



As
required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended, new certifications under the Sarbanes-Oxley
Act of 2002 by the Company’s chief executive officer and chief financial officer are filed as exhibits to this Amendment No.
1.





This Amendment No. 1 speaks
as of the filing date of the Form 20-F. Other than as set forth above, this Amendment No. 1 does not, and does not purport to, amend,
update or restate any other information or disclosure included in the Form 20-F, or reflect any events that have occurred since the original
filing date of the Form 20-F, including certain changes in the Company’s board of directors effected on October 14, 2022 and a
change in the address of the Company’s principal executive office, each as disclosed on a report on Form 6-K as filed with the
SEC on October 18, 2022.





ii











INTRODUCTION



Unless
otherwise indicated or the context otherwise requires, references in this annual report on Form 20-F to:





| | ● | “Infobird Cayman,”
    the “Company,” “we,” “us” and “our” refer to Infobird Co., Ltd, a holding company
    incorporated with limited liability under the laws of the Cayman Island, and its subsidiaries, Infobird HK and Infobird WFOE, and,
    in the context of describing our operations and consolidated financial information, also include the variable interest entity, Infobird
    Beijing, and its subsidiaries, Infobird Guiyang, Infobird Anhui and Shanghai Qishu.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | ● | “Infobird HK” refers to Infobird
    International Limited, a holding company established under the laws of Hong Kong and a wholly-owned subsidiary of Infobird Cayman.                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | “Infobird WFOE” refers to Infobird
    Digital Technology (Beijing) Co., Ltd., a company established under the laws of the PRC and a wholly-owned subsidiary of Infobird
    HK.                                                                                              
| | ● | “Infobird Beijing”, the “variable
    interest entity” or the “VIE” refers to Beijing Infobird Software Co., Ltd., a company established under the laws
    of the PRC and a variable interest entity of Infobird WFOE.                                                       
| | ● | “Infobird Guiyang” refers to Guiyang
    Infobird Cloud Computing Co., Ltd, a company established under the laws of the PRC and a 90.18% owned subsidiary of Infobird Beijing.                                                                                                
| | ● | “Infobird Anhui” refers to Anhui
    Xinlijia E-commerce Co., Ltd (formerly known as Anhui Infobird Software Information Technology Co., Ltd), a company established under
    the laws of the PRC and a 99.95% owned subsidiary of Infobird Beijing.                         
| | ● | “Shanghai Qishu” refers to Shanghai
    Qishuo Technology Inc., a company established under the laws of the PRC and a 51% owned subsidiary of Infobird Beijing.                                                                                                               
| | ● | “PRC” or “China”
    refers to the People’s Republic of China, excluding, for the purpose of this annual report, Taiwan. “RMB” or “Renminbi”
    refers to the legal currency of China and “$”, “US$” or “U.S. Dollars” refers to the legal currency
    of the United States.





| |  | We have made rounding
    adjustments to some of the figures included in this annual report. Accordingly, numerical figures shown as totals in some tables
    may not be an arithmetic aggregation of the figures that preceded them.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Our functional currency
is RMB. Our consolidated financial statements are presented in U.S. dollars. We use U.S. dollars as the reporting currency in our consolidated
financial statements and in this annual report. Assets and liabilities are translated into U.S. dollars at the noon buying rate in the
City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York as of the balance
sheet dates, the statements of income are translated using the average rate of exchange in effect during the reporting periods, and the
equity accounts are translated at historical exchange rates. Translation adjustments resulting from this process are included in accumulated
other comprehensive income (loss). Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated
in a currency other than the functional currency are included in the results of operations as incurred. With respect to amounts not recorded
in our consolidated financial statements included elsewhere in this annual report, unless otherwise stated, the balance sheet amounts,
with the exception of equity at December 31, 2021 and 2020 were translated at 6.3726 RMB and 6.5250 RMB, respectively. The equity accounts
were stated at their historical rate. The average translation rates applied to statement of income accounts for the years ended December
31, 2021, 2020, and 2019 were 6.4508 RMB, 6.9042 RMB and 6.9081 RMB to $1.00, respectively. Cash flows were also translated at average
translation rates for the periods, therefore, amounts reported on the statements of cash flows will not necessarily agree with changes
in the corresponding balances on the consolidated balance sheets.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Our Corporate Structure and Contractual Arrangements with the VIE



It is important to note that Infobird Cayman is not a Chinese
operating company but a Cayman Islands holding company with no operations of its own that uses a structure that involves a variable interest
entity, or VIE, based in China. Investors in Infobird Cayman’s ordinary shares are not purchasing equity interest in
operating entities in China but instead are purchasing equity interest in a Cayman Islands holding company. Infobird Cayman’s subsidiaries
and the VIE and the VIE’s subsidiaries conduct operations in China. The VIE is consolidated for accounting purposes but it is not
an entity in which Infobird Cayman or its subsidiaries own equity.





iii







Infobird Cayman is not a Chinese operating company but a Cayman Islands holding
company with operations conducted by its subsidiaries and through contractual arrangements with the VIE based in China, and this structure
involves unique risks to investors. Infobird Cayman and its subsidiaries have no equity ownership in the VIE or the VIE’s subsidiaries.
We, Infobird Cayman, conduct our operations in China through (i) our subsidiaries, and (ii) the VIE with which we have maintained contractual
arrangements and its subsidiaries in China. The VIE structure is used to provide investors with exposure to foreign investment in China-based
companies where Chinese law prohibits direct foreign investment in the operating companies. We, Infobird Cayman, are a holding company
registered in the Cayman Islands and Infobird WFOE is considered a foreign-invested enterprise. To comply with PRC laws and regulations,
we conduct our business in China mainly through the VIE and its subsidiaries, based on a series of contractual arrangements by and among
Infobird WFOE, the VIE, and the VIE’s shareholders, or the Contractual Arrangements. Investors in Infobird Cayman’s ordinary
shares may never hold equity interests in the Chinese operating companies but instead hold equity interests in Infobird Cayman, which
is a holding company incorporated in the Cayman Islands.



The Contractual Arrangements
may not be as effective as direct ownership in providing us with control over the VIE and we may incur substantial costs to enforce the
terms of the Contractual Arrangements. In addition, the Contractual Arrangements have not been tested in a court of law, including in
China courts. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—We conduct
our business through Infobird Beijing by means of Contractual Arrangements. If the PRC courts or administrative authorities determine
that these Contractual Arrangements do not comply with applicable regulations, we could be subject to severe penalties and our business
could be adversely affected. In addition, changes in or different interpretations of such PRC laws and regulations may also materially
and adversely affect our business.” This structure involves unique risks to investors. See “Item 3. Key Information—D.
Risk Factors—Risks Related to Our Corporate Structure—We depend upon the Contractual Arrangements in conducting our business
in China, which may not be as effective as direct ownership” and “Item 3. Key Information—D. Risk Factors—Risks
Related to Our Corporate Structure—Because we rely on the Contractual Arrangements for our revenue, the termination of these agreements
would severely and detrimentally affect our continuing business viability under our current corporate structure.”



There are also substantial
uncertainties regarding the interpretation and application of current and future PRC laws, regulations and rules regarding the status
of the rights of our Cayman Islands holding company with respect to the Contractual Arrangements with the VIE and its shareholders. It
is uncertain whether any new PRC laws or regulations relating to variable interest entity structures will be adopted or if adopted, what
they would provide. If we or the variable interest entity are found to be in violation of any existing or future PRC laws or regulations,
or fail to obtain or maintain any required permits or approvals, the relevant PRC regulatory authorities would have broad discretion
to take action in dealing with such violations or failures, including that the PRC regulatory authorities could disallow the variable
interest entity structure. These risks could result in a material change in our operations and/or a material change in the value of the
securities, including that it could cause the value of such securities to significantly decline or become worthless. See “Item
3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—Contractual arrangements in relation to
the VIE may be subject to scrutiny by the PRC tax authorities and they may determine that we or the VIE owe additional taxes, which could
negatively affect our financial condition and the value of your investment.” and “Item 3. Key Information—D. Risk Factors—Risks
Related to Our Corporate Structure—We conduct our business through Infobird Beijing by means of Contractual Arrangements. If the
PRC courts or administrative authorities determine that these Contractual Arrangements do not comply with applicable regulations, we
could be subject to severe penalties and our business could be adversely affected. In addition, changes in or different interpretations
of such PRC laws and regulations may also materially and adversely affect our business.”



We face various legal and operational
risks associated with being based in or having the majority of our operations in China, and we are subject to complex and evolving PRC
laws and regulations. For example, we face risks associated with recent statements and regulatory actions by China’s government,
such as those related to the use of variable interest entities, regulatory approvals on offshore offerings, anti-monopoly concerns and
regulatory actions, and oversight of data security, which may impact our ability to conduct our business, accept foreign investments,
or list on the United States or other foreign exchange. New laws and regulations may be adopted from time to time, which may require
us to obtain additional licenses and permits for our operations and services. If we offer new functions and services in the future, we
may be required to obtain additional licenses, permits, filings or approvals for such functions or services. These risks could result
in a material change in our operations and/or the value of our ordinary shares or could significantly limit or completely hinder our
ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.
For a detailed description of risks related to doing business in China, please refer to risks disclosed under “Item 3. Key Information—D.
Risk Factors—Risks Related to Doing Business in China.” For a detailed description of risks related to the use of variable
interest entity and data security or anti-monopoly concerns, which have or may impact the company’s ability to conduct its business,
accept foreign investments, or list on a U.S. or other foreign exchange, please refer to risks disclosed under “Item 3. Key Information—D.
Risk Factors—Risks Related to Our Corporate Structure—Our current corporate structure and business operations may be affected
by the relatively newly enacted Foreign Investment Law”, “Item 3. Key Information—D. Risk Factors—Risks Related
to Doing Business in China—Failure of beneficial owners of our shares who are PRC residents to comply with certain PRC foreign
exchange regulations could restrict our ability to distribute profits, restrict our overseas and cross-border investment activities and
subject us to liability under PRC law” and “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business
in China—Our business generates and processes a large amount of data, and we are required to comply with PRC and other applicable
laws relating to privacy and cybersecurity. The improper use or disclosure of data could have a material and adverse effect on our business
and prospects”, as well as “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—
Certain PRC regulations may make it more difficult for us to pursue growth through acquisitions.”





iv







There are risks arising from
the legal system in China, including risks and uncertainties regarding the enforcement of laws. In particular, there are uncertainties
regarding the interpretation and enforcement of PRC laws, rules and regulations, and changes in policies, laws, rules and regulations
in the PRC could adversely affect us. Most of our operations are conducted in the PRC, and are governed by PRC laws, rules and regulations.
China has not developed a fully integrated legal system, and enacted laws, rules and regulations may not sufficiently cover all aspects
of economic activities in China or may be subject to a significant degree of interpretation by PRC regulatory agencies and courts. Further,
rules and regulations in China can change quickly with little advance notice. In particular, because these laws, rules and regulations
are relatively new and quickly evolving, and because of the limited number of published decisions and the non-precedential nature of
these decisions, and because the laws, rules and regulations often give the relevant regulator certain discretion in how to enforce them,
the interpretation and enforcement of these laws, rules and regulations involve uncertainties and can be inconsistent and unpredictable.
In addition, the PRC legal system is based in part on government policies and internal rules, some of which are not published on a timely
basis or at all, and which may have a retroactive effect. Therefore, we may not be aware of our violation of these policies and rules
until after the occurrence of the violation, which could result in a material change in our operations and/or the value of our ordinary
shares. For more details, see “Item 4. Information on the Company—B. Business Overview—Regulations” and “Item
3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Uncertainties with respect to China’s
legal system could materially and adversely affect us.”



Furthermore, substantially
all of our assets and operations are located in China. Accordingly, our business, financial condition, results of operations and
prospects may be influenced to a significant degree by political, economic and social conditions in China generally and therefore by
the significant discretion of Chinese governmental authorities. The Chinese government may exercise significant oversight and
discretion over offerings that are conducted overseas and the conduct of our business, may intervene in or influence our operations
at any time, and may exert more control over foreign investment in China-based issuers, which could result in a material change in
our operations and/or the value of our ordinary shares, and significantly limit or completely hinder our ability to offer or
continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless. For more details, see “Item 3. Key Information—D. Risk Factors—Risks
Related to Doing Business in China—Changes in China’s economic, political or social conditions or government policies
could have a material adverse effect on our business and operations.” and “Item 3. Key Information-D. Risk
Factors—Risks Related to Doing Business in China—We are based in, and our operations are located in, China through our
subsidiaries, the VIE and its subsidiaries. Our ability to operate in China may be impaired by changes in Chinese laws and
regulations, including those relating to taxation, environmental regulation, restrictions on foreign investment, and other
matters.”





v







Infobird Cayman is not an operating
company in China but is a Cayman Islands holding company that does not conduct operations and uses a structure that involves a VIE based
in China. Our investors purchase equity interests in Infobird Cayman, the Cayman Islands holding company, not in the Chinese operating
companies. The following diagram illustrates the corporate structure of Infobird Cayman, its subsidiaries, and the VIE and its subsidiaries
as of the date of this annual report:









Investors in Infobird Cayman’s
ordinary shares are not purchasing equity interest in operating entities in China but instead are purchasing equity interest in a Cayman
Islands holding company. Infobird Cayman is not a Chinese operating company, but is instead a Cayman Islands holding company. Our operations
are conducted in China through our subsidiaries and Infobird Beijing, which is considered a variable interest entity for accounting purposes,
and its subsidiaries. The Contractual Arrangements, including powers of attorney, exclusive business cooperation agreement, equity interest
pledge agreements, exclusive option agreements and spousal consent letters, have been entered into by and among Infobird WFOE, the VIE
and the VIE’s shareholders. As a result of the Contractual Arrangements, we, through Infobird WFOE, have economic rights and exercise
control over the VIE and are considered the primary beneficiary of the VIE for accounting purposes, and, accordingly we have consolidated
the VIE’s operations and financial results into our consolidated financial statements. For more details of the Contractual Arrangements,
see “Item 4. Information on the Company—A. History and Development of the Company—Contractual Arrangements.”



Our affiliation with Infobird
Beijing is managed through the Contractual Arrangements, which agreements may not be as effective in providing us with control over Infobird
Beijing and its subsidiaries as direct ownership in controlling entities organized in the PRC, which often hold the licenses necessary
to conduct business in the PRC. The Contractual Arrangements are not equivalent to equity ownership in the business of the VIE. Neither
the investors in Infobird Cayman, the Cayman Islands holding company, nor Infobird Cayman itself have an equity ownership in, direct
foreign investment in, or control of, through such ownership or investment, the VIE. Further, the Contractual Arrangements have not been
tested in a court of law, including in China courts. The Contractual Arrangements are governed by and would be interpreted in accordance
with the laws of the PRC. If Infobird Beijing fails to perform the obligations under the Contractual Arrangements, we may have to rely
on legal remedies under the laws of the PRC, including seeking specific performance or injunctive relief and claiming damages. There
is a risk that we may be unable to obtain any of these remedies, which could affect our investors and the value of their investment.
The legal environment in the PRC is not as developed as in other jurisdictions. As a result, uncertainties in the PRC legal system could
limit our ability to enforce the Contractual Arrangements, or could affect the validity of the Contractual Arrangements. Thus, the Contractual
Arrangements may be less effective than direct ownership and we may incur substantial costs to enforce the terms of the Contractual Arrangements.
See “Item 4. Information on the Company—C. Organizational Structure.” and “Item 3. Key Information—D. Risk
Factors—Risks Related to Our Corporate Structure—We depend upon the Contractual Arrangements in conducting our business in
China, which may not be as effective as direct ownership.” In addition, such Contractual Arrangements have not been tested in a
court of law, including China courts, and we may face challenges enforcing these Contractual Arrangements due to legal uncertainties
and jurisdictional limits, and thus there are uncertainties regarding the status of the rights of the Cayman Islands holding company
with respect to the Contractual Arrangements with the VIE and its shareholders. See also “Item 3. Key Information—D. Risk
Factors—Risks Related to Our Corporate Structure—We conduct our business through Infobird Beijing by means of Contractual
Arrangements. If the PRC courts or administrative authorities determine that these Contractual Arrangements do not comply with applicable
regulations, we could be subject to severe penalties and our business could be adversely affected. In addition, changes in or different
interpretations of such PRC laws and regulations may also materially and adversely affect our business.”



The Contractual Arrangements
are not equivalent to equity ownership in the business of the VIE. Neither the investors in Infobird Cayman, the Cayman Islands holding
company, nor Infobird Cayman itself have an equity ownership in, direct foreign investment in, or control of, through such ownership
or investment, the VIE. Our business is conducted through Infobird Beijing, which is considered a VIE for accounting purposes, and we,
through Infobird WFOE, are considered the primary beneficiary of Infobird Beijing for accounting purposes, thus enabling us to consolidate
Infobird Beijing’s operations and financial results in our consolidated financial statements. Infobird Cayman and Infobird HK were
established as the holding companies of Infobird WFOE. Infobird WFOE is the primary beneficiary for accounting purposes of Infobird Beijing
and its subsidiaries. All of these entities are under common control which results in the consolidation of Infobird Beijing and subsidiaries
which have been accounted for as a reorganization of entities under common control at carrying value. Infobird WFOE is deemed to have
a controlling financial interest and be the primary beneficiary for accounting purposes of Infobird Beijing because it has both of the
following characteristics: (1) the power to direct activities at Infobird Beijing that most significantly impact such entity’s
economic performance, and (2) the right to receive benefits from Infobird Beijing that could potentially be significant to such entity.





vi







In the event that in the future
Infobird Beijing, which is a VIE, no longer meets the definition of a VIE under applicable accounting rules, or Infobird Co., Ltd is
deemed not to be the primary beneficiary for accounting purposes, we would not be able to consolidate line by line Infobird Beijing’s
operations and financial results in our consolidated financial statements for reporting purposes. For more details, see “Item 3.
Key Information—D Risk Factors—Risks Related to Our Corporate Structure - We may not be able to consolidate the operations
or financial results of some of our affiliated companies or such consolidation could materially and adversely affect our operating results
and financial condition.”



Further, the Contractual Arrangements
have not been tested in a court of law, including in China courts. See “Item 3. Key Information—D. Risk Factors—Risks
Related to Our Corporate Structure—We conduct our business through Infobird Beijing by means of Contractual Arrangements. If the
PRC courts or administrative authorities determine that these Contractual Arrangements do not comply with applicable regulations, we
could be subject to severe penalties and our business could be adversely affected. In addition, changes in or different interpretations
of such PRC laws and regulations may also materially and adversely affect our business.”



The Holding Foreign Companies Accountable Act



In addition, on December 2,
2021, the Securities and Exchange Commission, or the SEC, adopted final amendments to its rules relating to the implementation of certain
disclosure and documentation requirements of the Holding Foreign Companies Accountable Act, or the HFCAA, which took effect on January
10, 2022. We will be required to comply with these rules if the SEC identifies us as having a “non-inspection” year, as defined
in the rules, under a process to be subsequently established by the SEC. The SEC is assessing how to implement other requirements of
the HFCAA, including the listing and trading prohibition requirements described above. Under the HFCAA, our securities may be prohibited
from trading on the Nasdaq or other U.S. stock exchanges if our auditor is not inspected by the Public Company Accounting Oversight Board,
or the PCAOB, for three consecutive years, and this ultimately could result in our shares being delisted.



Furthermore, on June 22, 2021,
the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, which, if enacted, would amend the HFCAA and require
the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections
for two consecutive years instead of three consecutive years, meaning the number of “non-inspection” years would be decreased
from three to two, and thus, would reduce the time before securities may be prohibited from trading or delisted. On September 22, 2021,
the PCAOB adopted a final rule implementing the HFCAA, which provides a framework for the PCAOB to use when determining, as contemplated
under the HFCAA, whether the PCAOB is unable to inspect or investigate completely registered public accounting firms located in a foreign
jurisdiction because of a position taken by one or more authorities in that jurisdiction.



Pursuant to the HFCAA, on December
16, 2021, the PCAOB issued a determination report which found that the PCAOB is unable to inspect or investigate completely registered
public accounting firms headquartered in: (1) mainland China of the People’s Republic of China; and (2) Hong Kong, a Special Administrative
Region of the PRC. In addition, the PCAOB’s report identified the specific registered public accounting firms which are subject
to these determinations. Our registered public accounting firm, Friedman LLP, who audited our financial statements for the fiscal years
ended December 31, 2021, 2020 and 2019, is not headquartered in mainland China or Hong Kong and was not identified in the PCAOB’s
report on December 16, 2021 as a firm subject to the PCAOB’s determination. Friedman LLP is headquartered in Manhattan, New York,
and has been inspected by the PCAOB on a regular basis with the last inspection in June 2018. Notwithstanding the foregoing, if the PCAOB
is not able to fully conduct inspections of our auditor’s work papers in China, investors may be deprived of the benefits of such
inspection which could result in limitation or restriction of our access to the U.S. capital markets and trading of our securities may
be prohibited under the HFCAA. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—The
recent joint statement by the SEC and the Public Company Accounting Oversight Board, or the PCAOB, proposed rule changes submitted by
Nasdaq, and the Holding Foreign Companies Accountable Act, or the HFCAA, all call for additional and more stringent criteria to be applied
to emerging market companies upon assessing the qualification of their auditors, especially non-U.S. auditors who are not inspected by
the PCAOB.”





vii







Permissions Required for Our Operations in
China



As of the date of this annual
report, Infobird Guiyang has obtained a VATS License with the business scope of “Domestic Call Center Services in Guizhou Province
only” while a broader scope covering national service is required, and Infobird Beijing has obtained a VATS License with the business
scope of “Nationwide Domestic Call Center Services”. However, due to the development of our businesses, and also given the
uncertainties of interpretation and implementation of relevant laws and regulations and the enforcement practice by relevant government
authorities, we are required and may further be required to obtain additional licenses, permits, filings or approvals for the functions
and services of our platform in the future. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related
to Our Business and Industry—Failure to adhere to regulations that govern our customers’ businesses could result in breaches
of contracts with our customers. Failure to adhere to the regulations that govern our business could result in our being unable to effectively
perform our services.”



As of the date of this annual
report, we, our subsidiaries and the variable interest entity, are not covered by permissions requirements from the China Securities
Regulatory Commission, or the CSRC, Cyberspace Administration of China, or the CAC, or any other governmental agency that is required
to approve the VIE’s operations, as we, our subsidiaries and the variable interest entity (i) are not required to obtain permissions
from the CSRC, (ii) are not required to go through cybersecurity review by the CAC, and (iii) have not received or were denied any such
requisite permissions or approvals by any PRC authority.



However, given that our business
generates and processes a large quantity of data, in connection with any future overseas capital markets activities, we may need to obtain
permission from the CSRC, undergo a cybersecurity review conducted by the CAC, or meet other regulatory requirements that may be adopted
in the future by PRC authorities. To the extent such requirements are or become applicable, we cannot assure you that we would be able
to fully comply with them on a timely basis, if at all. Any failure to obtain or delay in obtaining such permission, clearing such review
process or meeting such requirements would subject us to restrictions and penalties imposed by the CSRC, the CAC or other PRC regulatory
authorities, which could include fines and penalties on our operations in China, delays of or restrictions on the repatriation of the
proceeds from our offshore offerings into China, or other actions that could materially and adversely affect our business, financial
condition, results of operations, and prospects, as well as the trading price of our securities. For more detailed information, see “Item
3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—The approval of, or report and fillings
with the CSRC or other PRC government authorities may be required in connection with our offshore offerings under PRC law, and, if required,
we cannot predict whether or for how long we will be able to obtain such approval or complete such filing and report process.”
and “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Our business generates
and processes a large amount of data, and we are required to comply with PRC and other applicable laws relating to privacy and cybersecurity.
The improper use or disclosure of data could have a material and adverse effect on our business and prospects.”



If we, our subsidiaries or
the VIE and its subsidiaries (i) do not receive or maintain such permissions or approvals, (ii) inadvertently conclude that such permissions
or approvals are not required, or (iii) applicable laws, regulations, or interpretations change, and we or the VIE or its subsidiaries
are required to obtain such permissions or approvals in the future, we and our investors may face consequences as we may be unable to
obtain such necessary approvals, permits, registrations or filings in a timely manner, or at all, and such approvals, permits, registrations
or filings may be rescinded even if obtained. Any such circumstance may subject us to fines and other regulatory, civil or criminal liabilities,
and we may be ordered by the competent PRC authorities to suspend relevant operations, which could materially and adversely affect our
business, financial condition, and results of operations and prospects. These risks could also result in a material adverse change in
the value of our ordinary shares, significantly limit or completely hinder our ability to offer or continue to offer securities to investors,
or cause such securities to significantly decline in value or become worthless. For more detailed information, see “Item 3. Key
Information—D. Risk Factors—Risks Related to Doing Business in China—Failure to adhere to regulations that govern our
customers’ businesses could result in breaches of contracts with our customers. Failure to adhere to the regulations that govern
our business could result in our being unable to effectively perform our services.”



Cash and Asset Flows through Our Organization



Infobird WFOE, the VIE
and its consolidated subsidiaries, or investors transfer funds through our organization under the applicable PRC laws and regulations.
To the extent our cash in the business is in the PRC or a PRC entity, the funds may not be available to distribute dividends to
our investors, or for other use outside of the PRC, due to interventions in or the imposition of restrictions and limitations
on the ability of us, our subsidiaries, or the VIE by the PRC government to transfer cash. As of the date of this annual report,
none of Infobird Cayman, its subsidiaries, the VIE or its subsidiaries has written cash management policies or procedures in place
that dictate how funds are transferred. Rather, the funds can be transferred in accordance with the applicable PRC laws and regulations.





viii







Transfers between the VIE and Infobird WFOE



The VIE and its consolidated
subsidiaries are the main operating entities, which receive their revenues in RMB. Infobird WFOE may receive payments from the VIE, pursuant
to the Contractual Arrangements. There may also be transfers via intercompany loans between Infobird WFOE and the VIE.



Transfer between Infobird Cayman, Infobird
HK and Infobird WFOE



Infobird Cayman and Infobird
HK are holding companies and may rely on dividends from Infobird WFOE to fund cash and financing requirements. Cash transfers may also
be in the form of capital injection from the holding companies to Infobird WFOE or via intercompany loans between the holding companies
and Infobird WFOE. Under existing PRC foreign exchange regulations, payments of current account items, such as profit distributions and
trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from the State Administration
of Foreign Exchange, or SAFE, by complying with certain procedural requirements. Therefore, our PRC subsidiary, Infobird WFOE, is able
to pay dividends in foreign currencies to us without prior approval from SAFE, subject to the condition that the remittance of such dividends
outside of the PRC complies with certain routine procedures under PRC foreign exchange regulations, such as the overseas investment registrations
by shareholders who are PRC residents. Approval from or registration with appropriate government authorities is, however, required where
the RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated
in foreign currencies. The PRC government may also at its discretion restrict access in the future to foreign currencies for current
account transactions.



For our Hong Kong subsidiary,
Infobird HK, and the holding company, Infobird Cayman, or the Non-PRC Entities, there is no restriction on foreign exchange for such
entities and they are able to transfer cash among these entities, across borders and to U.S. investors. Also, there are no restrictions
or limitations on the abilities of the Non-PRC Entities to distribute earnings from the businesses, including the subsidiaries and/or
the consolidated VIE, to Infobird Cayman or from Infobird Cayman to U.S. investors, as well as the ability to settle amounts owed under
the Contractual Arrangements. There are also no restrictions or limitations on the ability of Infobird WFOE to settle amounts owed under
the Contractual Arrangements as both Infobird WFOE and the VIE are incorporated in China and the amount to be settled will be in RMB
without foreign exchange control. For more details, see “Item 3 Key Information—D. Risk Factors—Risks Related to Doing
Business in China—PRC governmental control of currency conversion may limit our ability to utilize our net revenues effectively
and affect the value of your investment.”



We, Infobird Cayman, are a
Cayman Islands holding company, and we may rely principally on dividends and other distributions on equity paid by our subsidiaries for
cash and financing requirements we may have, including the funds necessary to pay dividends and other cash distributions to our shareholders
and service any debt we may incur. If any of our subsidiaries incur debt on their own behalf in the future, the instruments governing
the debt may restrict their ability to pay dividends or make other distributions to us. As we conduct our operations in China primarily
through our subsidiaries, the VIE and its subsidiaries, our ability to pay dividends to the shareholders and to service any debt we may
incur may depend upon dividends paid by our subsidiaries and license and service fees paid by the VIE. Current PRC regulations permit
Infobird WFOE to pay dividends to the Company only out of its accumulated profits, if any, determined in accordance with Chinese accounting
standards and regulations. Remittance of dividends by a wholly foreign-owned enterprise out of China is also subject to examination by
the banks designated by SAFE. In addition, our subsidiaries, the VIE and its subsidiaries in China are required to set aside at least
10% of their after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital.
For more details, see “Item 3 Key Information—D. Risk Factors—Risks Related to Doing Business in China—We may
rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have,
and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material and adverse effect on our ability
to conduct our business.” Each such entity in China is also required to further set aside a portion of its after-tax profits to
fund the employee welfare fund, although the amount to be set aside, if any, is determined at the discretion of its board of directors.
For more details about the employee welfare fund, see “Item 3 Key Information—D. Risk Factors—Risks Related to Doing
Business in China—Failure to make adequate contributions to various employee benefits plans as required by PRC regulations may
subject us to penalties.” Although the statutory reserves can be used, among other ways, to increase the registered capital and
eliminate future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends
except in the event of liquidation. In addition, the Enterprise Income Tax Law and its implementation rules provide that a withholding
tax at a rate of 10% will be applicable to dividends payable by Chinese companies to non-PRC-resident enterprises unless reduced under
treaties or arrangements between the PRC central government and the governments of other countries or regions where the non-PRC resident
enterprises are tax resident. Pursuant to the tax agreement between mainland China and the Hong Kong Special Administrative Region, the
withholding tax rate in respect to the payment of dividends by a PRC company to a Hong Kong resident enterprise may be reduced to 5%
from a standard rate of 10%, if a Hong Kong resident enterprise owns more than 25% of the equity interest in the PRC company. Under the
Notice of the State Taxation Administration on Issues regarding the Administration of the Dividend Provision in Tax Treaties promulgated
in 2009, the taxpayer needs to satisfy certain conditions to enjoy the benefits under a tax treaty. These conditions include, but are
not limited to: (i) the taxpayer must be the beneficial owner of the relevant dividends, and (ii) the corporate shareholder to receive
dividends from the PRC subsidiaries must have met the direct ownership thresholds during the twelve consecutive months preceding the
receipt of the dividends. Further, the State Taxation Administration, or the STA, promulgated the Announcement of the Certain Issues
with Respect to the “Beneficial Owner” in Tax Treaties in 2018, which sets forth certain detailed factors in determining
“beneficial owner” status, and specifically, if an applicant’s business activities do not constitute substantive business
activities, the applicant will not qualify as a “beneficial owner”. Furthermore, the Administrative Measures for Non-resident
Taxpayers to Enjoy Treatment under Treaties, which became effective in January 2020, require non-resident enterprises to determine whether
they are qualified to enjoy the preferential tax treatment under the tax treaties and file relevant report with the tax authorities.
Therefore, if the relevant tax authorities determine that our transactions or arrangements are for the primary purpose of enjoying a
favorable tax treatment rather than substantive business activities, then we will not qualify as a “beneficial owner”, and
the relevant tax authorities may adjust the favorable withholding tax in the future. Accordingly, there is no assurance that the reduced
5% withholding rate will apply to dividends received by our Hong Kong subsidiary from our PRC subsidiaries. This withholding tax will
reduce the amount of dividends we may receive from our PRC subsidiaries. For more details, see “Item 3 Key Information—D.
Risk Factors—Risks Related to Doing Business in China—We may rely on dividends and other distributions on equity paid by
our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries
to make payments to us could have a material and adverse effect on our ability to conduct our business.”





ix







As of the date of this annual
report, no dividends or distributions have been made to date between the holding company, Infobird Cayman, its subsidiaries, and the
consolidated VIE, or to investors, including the U.S. investors (i.e., there have not been any dividends or distributions that a subsidiary
or consolidated VIE have made to the holding company, Infobird Cayman, or to investors, including U.S. investors). The holding company,
Infobird Cayman, its subsidiaries, and the consolidated VIE do not have any plans to distribute earnings or dividends or settle amounts
owed under the Contractual Arrangements in the foreseeable future.



To the extent cash and/or assets
in the business are in the PRC and/or Hong Kong or our PRC and/or Hong Kong entities, such funds and/or assets may not be available to
fund operations or for other use outside of the PRC and/or Hong Kong due to interventions in or the imposition of restrictions and limitations
on the ability of us or our subsidiaries by the PRC government to transfer cash and/or assets. The cash transfer among the holding company,
Infobird Cayman, its subsidiaries and the consolidated VIE is typically transferred through payment for intercompany services or intercompany
borrowings between the holding company, Infobird Cayman, its subsidiaries and the consolidated VIE. There are no tax consequences for
intercompany borrowings or the payment for intercompany services, except for the standard value added taxes and/or income taxes for the
revenues and/or profits generated from such services.



During the fiscal year ended
December 31, 2021, cash and other asset transfers between the holding company, Infobird Cayman, its subsidiaries, and the consolidated
VIE were as follows:



|During
the Fiscal Year Ended December 31, 2021
|----------------------------------------------
|Transfer
 From                                
|Infobird Cayman                               
|Infobird HK                                   
|Infobird WFOE                                 
|Infobird
WFOE                                 
|VIE                                           
|Infobird
HK                                   



There were
no cash or other asset transfers during the fiscal years ended December 31, 2020 or 2019 between the holding company, Infobird Cayman,
its subsidiaries, and the consolidated VIE.



Financial Information Related to the VIE



The following tables present
the disaggregated condensed consolidating schedules of financial position as of December 31, 2021 and 2020 and the disaggregated condensed
consolidating schedules of cash flows and results of operations for the years ended December 31, 2020, 2021 and 2019 of all of the entities
that are consolidated in the consolidated financial statements included elsewhere in this annual report, which are the following entities:
Infobird Cayman, Infobird HK, the VIE and its consolidated subsidiaries, and Infobird WFOE which is the primary beneficiary of the VIE
for accounting purposes.





x







UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEETS



AS OF DECEMBER 31, 2021





|                                                                 |  | Infobird
    Cayman |             | Infobird
    HK |  |  |            | Elimination |  | Subtotal |    | Infobird
    WFOE |  | VIE
    and consolidated subsidiaries |             |   |  | Elimination |             | Subtotal |  |  | Elimination |   | Consolidating
|---------------------------------------------------------------- |  | ------------------- | ----------- | --------------- |  |  | ---------- | ----------- |  | -------- | -- | ----------------- |  | ------------------------------------- | ----------- | - |  | ----------- | ----------- | -------- |  |  | ----------- | - | -------------
|Cash                                                             |  |                     | 2,623,915   |                 |  |  | 1,069,809  |             |  |          |    |                   |  |                                       |             |   |  |             | 3,693,724   |          |  |  | 1,274,488   |   |              
|Account
    receivable                                           |  |                     |             |                 |  |  |            |             |  |          |    |                   |  |                                       |             |   |  |             |             |          |  |  |             |   |              
|Other
    current assets                                         |  |                     | 20,000      |                 |  |  |            |             |  |          |    |                   |  |                                       |             |   |  |             | 20,000      |          |  |  | 114,985     |   |              
|Due
    from VIE                                                 |  |                     |             |                 |  |  |            |             |  |          |    |                   |  |                                       |             |   |  |             |             |          |  |  | 5,992,235   |   |              
|                                                                 |  |                     |             |                 |  |  |            |             |  |          |    |                   |  |                                       |             |   |  |             |             |          |  |  | 5,495,925   |   |              
|                                                                 |  |                     |             |                 |  |  |            |             |  |          |    |                   |  |                                       |             |   |  |             |             |          |  |  | 348,715     |   |              
|Short-term
    investment                                        |  |                     | 7,091,939   |                 |  |  |            |             |  |          |    |                   |  |                                       |             |   |  |             | 7,091,939   |          |  |  |             |   |              
|Deferred
    IPO cost                                            |  |                     |             |                 |  |  |            |             |  |          |    |                   |  |                                       |             |   |  |             |             |          |  |  |             |   |              
|Total
    Current assets                                         |  |                     | 9,735,854   |                 |  |  | 1,069,809  |             |  |          |    |                   |  |                                       |             |   |  |             | 10,805,663  |          |  |  | 13,226,348  |   |              
|                                                                 |  |                     |             |                 |  |  |            |             |  |          |    |                   |  |                                       |             |   |  |             |             |          |  |  |             |   |              
|Property
    and equipment, net                                  |  |                     |             |                 |  |  |            |             |  |          |    |                   |  |                                       |             |   |  |             |             |          |  |  |             |   |              
|Intangible
    asset                                             |  |                     |             |                 |  |  |            |             |  |          |    |                   |  |                                       |             |   |  |             |             |          |  |  |             |   |              
|Escrow                                                           |  |                     | 600,000     |                 |  |  |            |             |  |          |    |                   |  |                                       |             |   |  |             | 600,000     |          |  |  |             |   |              
|Goodwill                                                         |  |                     |             |                 |  |  |            |             |  |          |    |                   |  |                                       |             |   |  |             |             |          |  |  |             |   |              
|Investment
    in subsidiary                                     |  |                     |             |                 |  |  | 4,312,752  |             |  |          |    |                   |  |                                       |             |   |  |             | 4,312,752   |          |  |  |             |   |              
|Other
    receivable-intercompany                                |  |                     | 10,999,974  |                 |  |  | —          |             |  |          | (1 | )                 |  |                                       | (10,999,974 | ) |  |             |             |          |  |  |             |   |              
|Other
    noncurrent assets                                      |  |                     |             |                 |  |  | —          |             |  |          |    |                   |  |                                       |             |   |  |             |             |          |  |  |             |   |              
|Total
    Assets                                                 |  |                     | 21,335,828  |                 |  |  | 5,382,561  |             |  |          |    |                   |  |                                       | (10,999,974 | ) |  |             | 15,718,415  |          |  |  | 13,226,348  |   |              
|                                                                 |  |                     |             |                 |  |  |            |             |  |          |    |                   |  |                                       |             |   |  |             |             |          |  |  |             |   |              
|Current
    Liabilities                                          |  |                     |             |                 |  |  |            |             |  |          |    |                   |  |                                       |             |   |  |             |             |          |  |  |             |   |              
|Account
    payable                                              |  |                     |             |                 |  |  |            |             |  |          |    |                   |  |                                       |             |   |  |             |             |          |  |  | 4,029,998   |   |              
|Bank
    loans-current                                           |  |                     |             |                 |  |  |            |             |  |          |    |                   |  |                                       |             |   |  |             |             |          |  |  |             |   |              
|Deferred
    revenues                                            |  |                     |             |                 |  |  |            |             |  |          |    |                   |  |                                       |             |   |  |             |             |          |  |  |             |   |              
|Other
    payables and accrued liabilities                       |  |                     |             |                 |  |  |            |             |  |          |    |                   |  |                                       |             |   |  |             |             |          |  |  | 5,563,165   |   |              
|Other
    payable - due to Infobird WFOE/VIE                     |  |                     |             |                 |  |  |            |             |  |          |    |                   |  |                                       |             |   |  |             |             |          |  |  |             |   |              
|Other
    payable - intercompany                                 |  |                     |             |                 |  |  | 10,999,957 |             |  |          | (1 | )                 |  |                                       | (10,999,957 | ) |  |             |             |          |  |  |             |   |              
|Operating
    lease liabilities                                  |  |                     |             |                 |  |  |            |             |  |          |    |                   |  |                                       |             |   |  |             |             |          |  |  |             |   |              
|Taxes
    payable                                                |  |                     |             |                 |  |  |            |             |  |          |    |                   |  |                                       |             |   |  |             |             |          |  |  | (679,567    | ) |              
|Deficit
    of investment in subsidiaries                        |  |                     | 6,285,110   |                 |  |  |            |             |  |          | (3 | )                 |  |                                       | (5,617,396  | ) |  |             | 667,714     |          |  |  |             |   |              
|Total
    current liabilities                                    |  |                     | 6,285,110   |                 |  |  | 10,999,957 |             |  |          |    |                   |  |                                       | (16,617,353 | ) |  |             | 667,714     |          |  |  | 8,913,596   |   |              
|                                                                 |  |                     |             |                 |  |  |            |             |  |          |    |                   |  |                                       |             |   |  |             |             |          |  |  |             |   |              
|Due
    to VIE                                                   |  |                     |             |                 |  |  |            |             |  |          |    |                   |  |                                       |             |   |  |             |             |          |  |  |             |   |              
|Bank
    loans-noncurrent                                        |  |                     |             |                 |  |  |            |             |  |          |    |                   |  |                                       |             |   |  |             |             |          |  |  |             |   |              
|Operating
    lease liabilities - noncurrent                     |  |                     |             |                 |  |  |            |             |  |          |    |                   |  |                                       |             |   |  |             |             |          |  |  |             |   |              
|Deferred
    tax liabilities, net                                |  |                     |             |                 |  |  |            |             |  |          |    |                   |  |                                       |             |   |  |             |             |          |  |  |             |   |              
|Total
    Liabilities                                            |  |                     | 6,285,110   |                 |  |  | 10,999,957 |             |  |          |    |                   |  |                                       | (16,617,353 | ) |  |             | 667,714     |          |  |  | 8,913,596   |   |              
|                                                                 |  |                     |             |                 |  |  |            |             |  |          |    |                   |  |                                       |             |   |  |             |             |          |  |  |             |   |              
|SHAREHOLDERS’
    EQUITY                                         |  |                     |             |                 |  |  |            |             |  |          |    |                   |  |                                       |             |   |  |             |             |          |  |  |             |   |              
|Ordinary
    shares & additional paid in capital                 |  |                     | 26,808,800  |                 |  |  | (70,000    | )           |  |          | (3 | )                 |  |                                       | 70,000      |   |  |             | 26,808,800  |          |  |  | 9,500,000   |   |              
|Retained
    earnings                                            |  |                     | (12,799,436 | )               |  |  | (5,547,396 | )           |  |          | (3 | )                 |  |                                       | 5,547,396   |   |  |             | (12,799,436 | )        |  |  | (5,285,417  | ) |              
|Statutory
    reserves                                           |  |                     | 449,136     |                 |  |  |            |             |  |          |    |                   |  |                                       |             |   |  |             | 449,136     |          |  |  |             |   |              
|Accumulated
    other comprehensive loss                         |  |                     | 592,218     |                 |  |  |            |             |  |          |    |                   |  |                                       | (17         | ) |  |             | 592,201     |          |  |  | 98,169      |   |              
|Total
    shareholders’ equity attributable to Infobird Co., Ltd |  |                     | 15,050,718  |                 |  |  | (5,617,396 | )           |  |          |    |                   |  |                                       | 5,617,379   |   |  |             | 15,050,701  |          |  |  | 4,312,752   |   |              
|                                                                 |  |                     |             |                 |  |  |            |             |  |          |    |                   |  |                                       |             |   |  |             |             |          |  |  |             |   |              
|NONCONTROLLING
    INTERESTS                                     |  |                     |             |                 |  |  |            |             |  |          |    |                   |  |                                       |             |   |  |             |             |          |  |  |             |   |              
|                                                                 |  |                     |             |                 |  |  |            |             |  |          |    |                   |  |                                       |             |   |  |             |             |          |  |  |             |   |              
|Total
    equity                                                 |  |                     | 15,050,718  |                 |  |  | (5,617,396 | )           |  |          |    |                   |  |                                       | 5,617,379   |   |  |             | 15,050,701  |          |  |  | 4,312,752   |   |              
|                                                                 |  |                     |             |                 |  |  |            |             |  |          |    |                   |  |                                       |             |   |  |             |             |          |  |  |             |   |              
|Total
    liabilities and shareholders’ equity                   |  |                     | 21,335,828  |                 |  |  | 5,382,561  |             |  |          |    |                   |  |                                       | (10,999,974 | ) |  |             | 15,718,415  |          |  |  | 13,226,348  |   |              





xi







(1) The amount represents cash transfer of $11.0 million
from Infobird Cayman to Infobird HK in May 2021. The balance is transferred to investment in Infobird HK in 2022.



(2-1) This amount represents approximately $6.0
million of costs and expenses paid by Infobird WFOE on behalf of the VIE.



(2-2) This amount represents approximately $5.8
million cash transfer to the VIE, offset by approximately $0.3 million of services provided by the VIE to Infobird WFOE.



(2-3) This amount represents approximately $0.3
million receivable from the VIE for services provided by Infobird WFOE to the VIE.



(3) This amount represents Infobird Cayman’s
investment in subsidiaries which represent the total equity of its subsidiaries and is eliminated upon consolidation.



(4) This amount represents the total equity of
the VIE that was pledged to Infobird WFOE when the Contractual Arrangements were signed on May 27, 2020 and service income recorded by
Infobird WFOE.



(5) The amount represents deferred IPO costs paid
for by the VIE and net against equity during consolidation.



(6) This amount represents investment of $9.5
million from Infobird HK to Infobird WFOE in 2021.





xii







UNAUDITED
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

For
the Year Ended December 31, 2021



|                                                 |  | Infobird
Cayman |             | Infobird
HK |  |  |             | Elimination |  | Subtotal |    | Infobird
WFOE |  | VIE
and consolidated subsidiaries |            |  |  | Elimination |             | Subtotal |  |  |             | Elimination |  | Consolidating
|------------------------------------------------ |  | --------------- | ----------- | ----------- |  |  | ----------- | ----------- |  | -------- | -- | ------------- |  | --------------------------------- | ---------- |  |  | ----------- | ----------- | -------- |  |  | ----------- | ----------- |  | -------------
|Operating
revenues                               |  |                 |             |             |  |  |             |             |  |          |    |               |  |                                   |            |  |  |             |             |          |  |  | 324,988     |             |  |              
|Cost
of revenue                                  |  |                 |             |             |  |  |             |             |  |          |    |               |  |                                   |            |  |  |             |             |          |  |  |             |             |  |              
|Gross
profit                                     |  |                 |             |             |  |  |             |             |  |          |    |               |  |                                   |            |  |  |             |             |          |  |  | 324,988     |             |  |              
|Operating
expenses                               |  |                 | (797,334    | )           |  |  | (68,127     | )           |  |          |    |               |  |                                   |            |  |  |             | (865,461    | )        |  |  |             |             |  |              
|Income
from operations                           |  |                 | (797,334    | )           |  |  | (68,127     | )           |  |          |    |               |  |                                   | 292,021    |  |  |             | (865,461    | )        |  |  | 324,988     |             |  |              
|Other
income (expense)                           |  |                 | 165,713     |             |  |  |             |             |  |          |    |               |  |                                   |            |  |  |             | 165,713     |          |  |  | (14,786     | )           |  |              
|Provision
fro income tax                         |  |                 |             |             |  |  |             |             |  |          |    |               |  |                                   |            |  |  |             |             |          |  |  |             |             |  |              
|Income
from VIE                                  |  |                 |             |             |  |  |             |             |  |          |    |               |  |                                   |            |  |  |             |             |          |  |  | (13,482,686 | )           |  |              
|Loss
in subsidiaries                             |  |                 | (13,240,611 | )           |  |  | (13,172,484 | )           |  |          | (7 | )             |  |                                   | 13,240,611 |  |  |             | (13,172,484 | )        |  |  |             |             |  |              
|Net
loss attributable to noncontrolling interest |  |                 |             |             |  |  |             |             |  |          |    |               |  |                                   |            |  |  |             |             |          |  |  |             |             |  |              
|Net
loss attributable to Infobird Co., Ltd       |  |                 | (13,872,232 | )           |  |  | (13,240,611 | )           |  |          |    |               |  |                                   | 13,532,632 |  |  |             | (13,872,232 | )        |  |  | (13,172,484 | )           |  |              



(7) This amount represents income flow through from subsidiaries using the equity
method where Infobird Cayman recorded equity income from its subsidiaries and is eliminated during consolidation.





(8) This amount eliminates intercompany revenue
of $0.6 million between Infobird WFOE and the VIE which is eliminated during consolidation.



(9) This amount represents service income recorded
by Infobird WFOE pursuant to the exclusive business cooperation agreement and is eliminated during consolidation.



(10) This amount represents income flow through
from Infobird WFOE using the equity method where Infobird HK recorded equity income from its subsidiary and is eliminated during consolidation.





xiii







UNAUDITED CONDENSED CONSOLIDATING
STATEMENTS OF CASH FLOWS

For
the Year Ended December 31, 2021





|                                                        |  | Infobird
    Cayman |             | Infobird
    HK |  | Subtotal |            | Infobird
    WFOE |  | VIE
    and consolidated subsidiaries |             | Elimination |  | Consolidating
|------------------------------------------------------- |  | ------------------- | ----------- | --------------- |  | -------- | ---------- | ----------------- |  | ------------------------------------- | ----------- | ----------- |  | -------------
|Net
    cash provided by (used in) operating activities |  |                     | (11,676,840 | )               |  |          | 5,312,094  |                   |  |                                       | (6,364,746  | )           |  |              
|Net
    cash provided by (used in) investing activities |  |                     | (6,926,226  | )               |  |          | (4,312,752 | )                 |  |                                       | (11,238,978 | )           |  |              
|Net
    cash provided by (used) in financing activities |  |                     | 21,226,982  |                 |  |          | 70,467     |                   |  |                                       | 21,297,449  |             |  |              
|Effect
    of exchange rate                             |  |                     |             |                 |  |          |            |                   |  |                                       |             |             |  |              
|Net
    increase in cash and cash equivalents           |  |                     | 2,623,916   |                 |  |          | 1,069,809  |                   |  |                                       | 3,693,725   |             |  |              
|CASH
    AND CASH EQUIVALENTS, beginning of year        |  |                     |             |                 |  |          |            |                   |  |                                       |             |             |  |              
|CASH
    AND CASH EQUIVALENTS, end of year              |  |                     | 2,623,916   |                 |  |          | 1,069,809  |                   |  |                                       | 3,693,725   |             |  |              





xiv







UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEETS

AS OF DECEMBER 31, 2020



|                                                                 |  | Infobird
    Cayman |           | Infobird
    HK |  | Infobird
    WFOE |           | VIE
    and consolidated subsidiaries |  | Subtotal |           |  |  | Elimination |            | Consolidating
|---------------------------------------------------------------- |  | ------------------- | --------- | --------------- |  | ----------------- | --------- | ------------------------------------- |  | -------- | --------- |  |  | ----------- | ---------- | -------------
|Cash                                                             |  |                     |           |                 |  |                   |           |                                       |  |          |           |  |  |             | 1,682,526  |              
|Account
    receivable                                           |  |                     |           |                 |  |                   |           |                                       |  |          |           |  |  |             | 4,118,502  |              
|Other
    receivables                                            |  |                     |           |                 |  |                   |           |                                       |  |          |           |  |  |             | 72,255     |              
|Prepayments                                                      |  |                     |           |                 |  |                   |           |                                       |  |          |           |  |  |             | 1,412,570  |              
|Total
    Current assets                                         |  |                     |           |                 |  |                   |           |                                       |  |          |           |  |  |             | 7,285,853  |              
|                                                                 |  |                     |           |                 |  |                   |           |                                       |  |          |           |  |  |             |            |              
|Property
    and equipment, net                                  |  |                     |           |                 |  |                   |           |                                       |  |          |           |  |  |             | 2,193,189  |              
|Intangible
    asset                                             |  |                     |           |                 |  |                   |           |                                       |  |          |           |  |  |             | 5,247,752  |              
|Long
    term deposit                                            |  |                     |           |                 |  |                   |           |                                       |  |          |           |  |  |             | 107,260    |              
|Due
    from VIE                                                 |  |                     |           |                 |  |                   |           |                                       |  |          | 7,887,067 |  |  |             |            |              
|Deferred
    expense                                             |  |                     |           |                 |  |                   |           |                                       |  |          |           |  |  |             | 389,893    |              
|Deferred
    IPO cost                                            |  |                     |           |                 |  |                   |           |                                       |  |          |           |  |  |             | 730,586    |              
|Investment
    in subsidiary                                     |  |                     | 7,887,067 |                 |  |                   | 7,887,067 |                                       |  |          |           |  |  |             |            |              
|Total
    Assets                                                 |  |                     | 7,887,067 |                 |  |                   | 7,887,067 |                                       |  |          | 7,887,067 |  |  |             | 15,954,533 |              
|                                                                 |  |                     |           |                 |  |                   |           |                                       |  |          |           |  |  |             |            |              
|Account
    payable                                              |  |                     |           |                 |  |                   |           |                                       |  |          |           |  |  |             | 552,540    |              
|Bank
    loans-current                                           |  |                     |           |                 |  |                   |           |                                       |  |          |           |  |  |             | 3,065,134  |              
|Deferred
    revenues                                            |  |                     |           |                 |  |                   |           |                                       |  |          |           |  |  |             | 1,755,967  |              
|Interest
    payable                                             |  |                     |           |                 |  |                   |           |                                       |  |          |           |  |  |             | 574,065    |              
|Other
    payables and accrued liabilities                       |  |                     |           |                 |  |                   |           |                                       |  |          |           |  |  |             | 687,702    |              
|Taxes
    payable                                                |  |                     |           |                 |  |                   |           |                                       |  |          |           |  |  |             | 865,795    |              
|Total
    current liabilities                                    |  |                     |           |                 |  |                   |           |                                       |  |          |           |  |  |             | 7,501,203  |              
|                                                                 |  |                     |           |                 |  |                   |           |                                       |  |          |           |  |  |             |            |              
|Deferred
    tax liabilities, net                                |  |                     |           |                 |  |                   |           |                                       |  |          |           |  |  |             | 322,035    |              
|Total
    Liability                                              |  |                     |           |                 |  |                   |           |                                       |  |          |           |  |  |             | 7,823,238  |              
|                                                                 |  |                     |           |                 |  |                   |           |                                       |  |          |           |  |  |             |            |              
|SHAREHOLDERS’
    EQUITY                                         |  |                     |           |                 |  |                   |           |                                       |  |          |           |  |  |             |            |              
|Ordinary
    shares & additional paid in capital                 |  |                     | 5,871,089 |                 |  |                   |           |                                       |  |          |           |  |  |             | 5,871,089  |              
|Retained
    earnings                                            |  |                     | 1,084,383 |                 |  |                   | 7,887,067 |                                       |  |          | 7,887,067 |  |  |             | 1,084,383  |              
|Statutory
    reserves                                           |  |                     | 437,549   |                 |  |                   |           |                                       |  |          |           |  |  |             | 437,549    |              
|Accumulated
    other comprehensive loss                         |  |                     | 494,046   |                 |  |                   |           |                                       |  |          |           |  |  |             | 494,046    |              
|Total
    shareholders’ equity attributable to Infobird Co., Ltd |  |                     | 7,887,067 |                 |  |                   | 7,887,067 |                                       |  |          | 7,887,067 |  |  |             | 7,887,067  |              
|                                                                 |  |                     |           |                 |  |                   |           |                                       |  |          |           |  |  |             |            |              
|NONCONTROLLING
    INTERESTS                                     |  |                     |           |                 |  |                   |           |                                       |  |          |           |  |  |             | 244,228    |              
|                                                                 |  |                     |           |                 |  |                   |           |                                       |  |          |           |  |  |             |            |              
|Total
    equity                                                 |  |                     | 7,887,067 |                 |  |                   | 7,887,067 |                                       |  |          | 7,887,067 |  |  |             | 8,131,295  |              
|                                                                 |  |                     |           |                 |  |                   |           |                                       |  |          |           |  |  |             |            |              
|Total
    liabilities and shareholders’ equity                   |  |                     | 7,887,067 |                 |  |                   | 7,887,067 |                                       |  |          | 7,887,067 |  |  |             | 15,954,533 |              





(1) This amount represents investment in subsidiaries
which represent the total equity of its subsidiaries and is eliminated upon consolidation.



(2) Due from VIE represents the total equity of
the VIE that was pledged to Infobird WFOE when the Contractual Arrangements were signed on May 27, 2020 and service income recorded by
Infobird WFOE.





xv







UNAUDITED
CONDENSED CONSOLIDATING STATEMENTS OF INCOME AND COMPREHENSIVE INCOME



For
the Year Ended December 31, 2020



|                                                       |  | Infobird
    Cayman |           | Infobird
    HK |  |  |           | Elimination |  | Subtotal |    | Infobird
    WFOE |  | VIE
    and consolidated subsidiaries |            |   |  | Elimination |           | Subtotal |  |  |           | Elimination |  | Consolidating
|------------------------------------------------------ |  | ------------------- | --------- | --------------- |  |  | --------- | ----------- |  | -------- | -- | ----------------- |  | ------------------------------------- | ---------- | - |  | ----------- | --------- | -------- |  |  | --------- | ----------- |  | -------------
|Operating
    revenues                                 |  |                     |           |                 |  |  |           |             |  |          |    |                   |  |                                       |            |   |  |             |           |          |  |  |           |             |  |              
|Cost
    of revenue                                    |  |                     |           |                 |  |  |           |             |  |          |    |                   |  |                                       |            |   |  |             |           |          |  |  |           |             |  |              
|Gross
    profit                                       |  |                     |           |                 |  |  |           |             |  |          |    |                   |  |                                       |            |   |  |             |           |          |  |  |           |             |  |              
|Operating
    expenses                                 |  |                     |           |                 |  |  |           |             |  |          |    |                   |  |                                       |            |   |  |             |           |          |  |  |           |             |  |              
|Income
    from operations                             |  |                     |           |                 |  |  |           |             |  |          |    |                   |  |                                       |            |   |  |             |           |          |  |  |           |             |  |              
|Other
    income(expense)                              |  |                     |           |                 |  |  |           |             |  |          |    |                   |  |                                       |            |   |  |             |           |          |  |  |           |             |  |              
|Other
    income, net                                  |  |                     |           |                 |  |  |           |             |  |          |    |                   |  |                                       |            |   |  |             |           |          |  |  |           |             |  |              
|Provision
    fro income tax                           |  |                     |           |                 |  |  |           |             |  |          |    |                   |  |                                       |            |   |  |             |           |          |  |  |           |             |  |              
|Income
    from VIE                                    |  |                     |           |                 |  |  |           |             |  |          |    |                   |  |                                       |            |   |  |             |           |          |  |  | 3,998,274 |             |  |              
|Equity
    income of subsidiaries                      |  |                     | 3,998,274 |                 |  |  | 3,998,274 |             |  |          | (3 | )                 |  |                                       | (3,998,274 | ) |  |             | 3,998,274 |          |  |  |           |             |  |              
|Net
    income attributable to noncontrolling interest |  |                     |           |                 |  |  |           |             |  |          |    |                   |  |                                       |            |   |  |             |           |          |  |  |           |             |  |              
|Net
    Income attributable to Infobird Co., Ltd       |  |                     | 3,998,274 |                 |  |  | 3,998,274 |             |  |          |    |                   |  |                                       |            |   |  |             | 3,998,274 |          |  |  | 3,998,274 |             |  |              



(3) These amounts represent income flow through
from subsidiaries using the equity method where parent recorded equity income from its subsidiaries and is eliminated on consolidation.



(4) This amount represents service income recorded
by Infobird WFOE pursuant to the exclusive business cooperation agreement and is eliminated during consolidation.





xvi







UNAUDITED
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

For
the Year Ended December 31, 2020



|                                             |  | Infobird
Cayman |  | Infobird
HK |  | Infobird
WFOE |  | VIE
and consolidated subsidiaries |  | Elimination |  | Consolidating
|-------------------------------------------- |  | --------------- |  | ----------- |  | ------------- |  | --------------------------------- |  | ----------- |  | -------------
|Net
cash provided by operating activities    |  |                 |  |             |  |               |  |                                   |  |             |  |              
|Net
cash used in investing activities        |  |                 |  |             |  |               |  |                                   |  |             |  |              
|Net
cash used in financing activities        |  |                 |  |             |  |               |  |                                   |  |             |  |              
|Effect
of exchange rate                      |  |                 |  |             |  |               |  |                                   |  |             |  |              
|Net
increase in cash and cash equivalents    |  |                 |  |             |  |               |  |                                   |  |             |  |              
|CASH
AND CASH EQUIVALENTS, beginning of year |  |                 |  |             |  |               |  |                                   |  |             |  |              
|CASH
AND CASH EQUIVALENTS, end of year       |  |                 |  |             |  |               |  |                                   |  |             |  |              





xvii







UNAUDITED
CONDENSED CONSOLIDATING STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

For
the Year Ended December 31, 2019





|                                                       |  | Infobird
    Cayman |           | Infobird
    HK |  | Subtotal |           | Infobird
    WFOE |  | VIE
    and consolidated subsidiaries |           |  | Elimination |  | Subtotal  |  |  | Elimination |            | Consolidating
|------------------------------------------------------ |  | ------------------- | --------- | --------------- |  | -------- | --------- | ----------------- |  | ------------------------------------- | --------- |  | ----------- |  | --------- |  |  | ----------- | ---------- | -------------
|Operating
    revenues                                 |  |                     |           |                 |  |          |           |                   |  |                                       |           |  |             |  |           |  |  |             | 18,248,289 |              
|Cost
    of revenue                                    |  |                     |           |                 |  |          |           |                   |  |                                       |           |  |             |  |           |  |  |             | (7,987,146 | )            
|Gross
    profit                                       |  |                     |           |                 |  |          |           |                   |  |                                       |           |  |             |  |           |  |  |             | 10,261,143 |              
|Operating
    expenses                                 |  |                     |           |                 |  |          |           |                   |  |                                       |           |  |             |  |           |  |  |             | (4,222,263 | )            
|Income
    from operations                             |  |                     |           |                 |  |          |           |                   |  |                                       |           |  |             |  |           |  |  |             | 6,038,880  |              
|Other
    income(expense)                              |  |                     |           |                 |  |          |           |                   |  |                                       |           |  |             |  |           |  |  |             | (402,475   | )            
|Other
    income, net                                  |  |                     |           |                 |  |          |           |                   |  |                                       |           |  |             |  |           |  |  |             | 138,457    |              
|Provision
    fro income tax                           |  |                     |           |                 |  |          |           |                   |  |                                       |           |  |             |  |           |  |  |             | (673,034   | )            
|Income
    from VIE                                    |  |                     |           |                 |  |          |           |                   |  |                                       |           |  |             |  | 4,847,357 |  |  |             |            | (2)          
|Equity
    income of subsidiaries                      |  |                     | 4,847,357 |                 |  |          | 4,847,357 |                   |  |                                       | 9,694,714 |  |             |  |           |  |  |             |            |              
|Net
    income attributable to noncontrolling interest |  |                     |           |                 |  |          |           |                   |  |                                       |           |  |             |  |           |  |  |             | (254,471   | )            
|Net
    Income attributable to Infobird Co., Ltd       |  |                     | 4,847,357 |                 |  |          | 4,847,357 |                   |  |                                       | 9,694,714 |  |             |  | 4,847,357 |  |  |             | 4,847,357  |              



(1) These amounts represent income flow through
from subsidiaries using the equity method where parent recorded equity income from its subsidiaries and is eliminated on consolidation.



(2) This amount represent service income recorded
by Infobird WFOE pursuant to the exclusive business cooperation agreement and is eliminated during consolidation.





xviii







UNAUDITED CONDENSED CONSOLIDATING STATEMENTS
OF CASH FLOWS

For
the Year Ended December 31, 2019



|                                             |  | Infobird
Cayman |  | Infobird
HK |  | Subtotal |  | Infobird
WFOE |  | VIE
and consolidated subsidiaries |  | Elimination |  | Consolidating
|-------------------------------------------- |  | --------------- |  | ----------- |  | -------- |  | ------------- |  | --------------------------------- |  | ----------- |  | -------------
|Net
cash provided by operating activities    |  |                 |  |             |  |          |  |               |  |                                   |  |             |  |              
|Net
cash used in investing activities        |  |                 |  |             |  |          |  |               |  |                                   |  |             |  |              
|Net
cash used in financing activities        |  |                 |  |             |  |          |  |               |  |                                   |  |             |  |              
|Effect
of exchange rate                      |  |                 |  |             |  |          |  |               |  |                                   |  |             |  |              
|Net
increase in cash and cash equivalents    |  |                 |  |             |  |          |  |               |  |                                   |  |             |  |              
|CASH
AND CASH EQUIVALENTS, beginning of year |  |                 |  |             |  |          |  |               |  |                                   |  |             |  |              
|CASH
AND CASH EQUIVALENTS, end of year       |  |                 |  |             |  |          |  |               |  |                                   |  |             |  |              





xix











FORWARD-LOOKING
STATEMENTS AND RISK FACTORS SUMMARY



This
annual report on Form 20-F contains forward-looking statements that reflect our current expectations and views of future events.
Known and unknown risks, uncertainties and other factors, including those listed under “Item 3. Key Information—D. Risk Factors”,
may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking
statements.



You can identify some
of these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,”
“aim,” “estimate,” “intend,” “plan,” “believe,” “is/are likely to,”
“potential,” “continue” or other similar expressions. We have based these forward-looking statements largely
on our current expectations and projections about future events that we believe may affect our financial condition, results of operations,
business strategy and financial needs. Factors that could cause our actual results, performance or achievements to be materially different
from those expressed or implied by the forward-looking statements, include, but are not limited to, the factors summarized below, which
also summarize some of the principal risks that could adversely affect our business, financial condition, results of operations or cash
flows and prospects. This summary is not complete and the risks summarized below are not the only risks we face. These risks are discussed
more fully further below in “Item 3. Key Information—D. Risk Factors”. These risks include, but are not limited to,
the following:





Risks Related to our Corporate Structure





| | ● | We depend upon
the Contractual Arrangements in conducting our business in China, which may not be as effective as direct ownership.  The Contractual
Arrangements are not equivalent to equity ownership in the business of the VIE. Neither the investors in Infobird Cayman, the Cayman
Islands holding company, nor Infobird Cayman itself have an equity ownership in, direct foreign investment in, or control of, through
such ownership or investment, the VIE. Further, the Contractual Arrangements have not been tested in a court of law, including in China
courts.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | We may not be able to consolidate
the operations and financial results of some of our affiliated companies or such consolidation could materially and adversely affect
our operating results and financial condition.                                                                                                                                                                                                                                                                                                                                                          
| | ● | We conduct our business
through Infobird Beijing by means of Contractual Arrangements. If the PRC courts or administrative authorities determine that these Contractual
Arrangements do not comply with applicable regulations, we could be subject to severe penalties and our business could be adversely affected.
In addition, changes in or different interpretations of such PRC laws and regulations may also materially and adversely affect our business.                                                                                                             
| | ● | Because we rely on the Contractual
Arrangements for our revenue, the termination of these agreements would severely and detrimentally affect our continuing business viability
under our current corporate structure.                                                                                                                                                                                                                                                                                                                                                          
| | ● | Contractual arrangements
in relation to the VIE may be subject to scrutiny by the PRC tax authorities and they may determine that we or the VIE owe additional
taxes, which could negatively affect our financial condition and the value of your investment.                                                                                                                                                                                                                                                                                                                  
| | ● | Our current corporate structure
and business operations may be affected by the relatively newly enacted Foreign Investment Law.                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ● | The shareholders of the
VIE may have actual or potential conflicts of interest with us and as a result may refuse to perform, or may breach, the Contractual
Arrangements, which may materially and adversely affect our business and financial condition.                                                                                                                                                                                                                                                                                                                     
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                





xx







| | Risks Related to Doing Business in China                                                                                   
| | ---------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                            
| | ●                                                                                                                          
| | ●                                                                                                                          
| | ●                                                                                                                          
| | ●                                                                                                                          
| | ●                                                                                                                          
| | ●                                                                                                                          
| | ●                                                                                                                          
| | ●                                                                                                                          
| | ●                                                                                                                          
| |                                                                                                                            
| | Risks Related to our Business and Industry, Risks Related to Intellectual Property and Risks Related to our Ordinary Shares
| | ●                                                                                                                          
| | ●                                                                                                                          
| | ●                                                                                                                          
| | ●                                                                                                                          
| | ●                                                                                                                          





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



You
should not rely upon forward-looking statements as predictions of future events. The forward-looking statements made in this annual report
relate only to events or information as of the date on which the statements are made in this annual report. Except as required by 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.





xxi











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



See
“Introduction” and “Forward-Looking Statements and Risk Factors Summary” above.



A.
[Reserved]



B.
Capitalization and Indebtedness



Not
applicable.



C.
Reasons for the Offer and Use of Proceeds



Not
applicable.



D.
Risk Factors



Risks
Related to Our Business and Industry



We
have a limited operating history. There is no assurance that our future operations will be profitable. If we cannot generate sufficient
revenues to operate profitably, we may suspend or cease operations.



Given
the limited operating history of Infobird Cayman, there can be no assurance that we can maintain our business such that we can continuously
earn a significant profit or any profit at all. The future of our business will depend upon our ability to obtain and retain customers
and when needed, obtain sufficient financing and support from creditors, while we strive to achieve and maintain profitable operations.
The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in
connection with the operations that we undertake. There is no history upon which to base any assumption that our business will prove
to be successful, and there is significant risk that we will not be able to generate the sales volumes and revenues necessary to achieve
profitable operations. To the extent that we cannot achieve our plans and generate revenues which exceed expenses on a consistent basis,
our business, results of operations, financial condition and prospects will be materially adversely affected.



Our
management team has limited public company experience. We have not previously operated as a public company in the United States and several
of our senior management positions are currently held by employees who have been with us for a short period of time. Our entire management
team, as well as other company personnel, will need to devote substantial time to compliance, and may not effectively or efficiently
manage our transition into a public company. If we are unable to effectively comply with the regulations applicable to public companies
or if we are unable to produce accurate and timely financial statements, which may result in material misstatements in our consolidated
financial statements or possible restatement of financial results, our stock price may be materially and adversely affected, and we may
be unable to maintain compliance with the listing requirements of Nasdaq. Any such failures could also result in litigation or regulatory
actions by the Securities and Exchange Commission, or the SEC, or other regulatory authorities, loss of investor confidence, delisting
of our securities, harm to our reputation and diversion of financial and management resources from the operation of our business, any
of which could materially and adversely affect our business, financial condition, results of operations and growth prospects. Additionally,
the failure of a key employee to perform in his or her current position could result in our inability to continue to grow our business
or to implement our business strategy.



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



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





1







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



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

















We
generate a significant portion of our revenues primarily from a few major customers, and loss of business from such customers could reduce
our revenues and significantly harm our business.



We
generate a significant portion of our revenues primarily from a few major customers, and loss of business from such customers could reduce
our revenues and significantly harm our business. One or a few customers have in the past, and may in the future, represent a substantial
portion of our total revenues in any one year or over a period of several years. We believe that in the foreseeable future we will continue
to derive a significant portion of our revenues from a small number of major customers.



For
the year ended December 31, 2021, four customers accounted for 20.9%, 11.8%, 10.6% and 10.4% of our total revenues, respectively,
and four customers accounted for 34.7%, 22.7%, 17.1% and 14.7% of the total balance of our accounts receivable, respectively. For
the year ended December 31, 2020, two customers, one of which was China Guangfa Bank, accounted for 34.8% and 13.2% of our total revenues,
respectively, and three customers accounted for 50.8%, 19.9%, and 10.9% of the total balance of our accounts receivable, respectively.
For the year ended December 31, 2019, one customer, China Guangfa Bank, accounted for 77.3% of our total revenues and the same one customer,
China Guangfa Bank, accounted for 77.6% and another customer accounted for 10.4%, respectively, of the total balance of our accounts
receivable. China Guangfa Bank accounted for 0% of our total revenues for the year ended December 31, 2021.



Our
ability to maintain close relationships with major customers is essential to the growth and profitability
of our business. However, the volume of work performed for a specific customer is likely to vary from year to year, in particular sincewe are generally not our customers’ exclusive technology services provider and we do not have long-term commitments from
any of our customers to purchase our services. A major customer in one year may not provide the same level of revenues for us in any
subsequent year. The services we provide to our customers, and the revenues and income from those services, may decline or vary as the
type and quantity of services we provide changes over time. In addition, our reliance on any individual customer for a significant portion
of our revenues may give that customer a certain degree of pricing leverage against us when negotiating contracts and terms of service.
In addition, a number of factors other than our performance could cause the loss of or reduction in business or revenues from a customer,
and these factors are not predictable. These factors may include organization restructuring, pricing pressure, changes to its technology
strategy, switching to another services provider or returning work in-house. The loss of any of our major customers could adversely affect
our financial condition and results of operations.





2























We
primarily rely on a limited number of vendors, and the loss of any such vendor could harm our business.





For
the year ended December 31, 2021, three vendors accounted for 38.4%, 15.0% and 11.9% of our total purchases, and two vendors accounted
for 73.4% and 23.1% of the total balance of our accounts payable, respectively. For the year ended December 31, 2020, two vendors accounted
for 19.1% and 10.9% of our total purchases, and three vendors accounted for 38.7%, 22.1% and 14.7% of the total balance of our accounts
payable, respectively. For the year ended December 31, 2019, three vendors accounted for 16.0%, 13.1% and 10.3%, respectively, of our
total purchases, and also accounted for 18.6%, 12.9% and 12.3%, respectively, of the total balance of our accounts payable. For 2019
and 2020, our vendors were mainly telecommunications carriers and our purchases from such vendors were value-added telecommunications
services, such as voice lines and research services.   For 2021, our vendors were mainly system hardware and information software
suppliers for our business integration solution business. We enter into agreements with vendors in the ordinary course of our business.
Such agreements generally have initial terms ranging from two to three years and typically contain automatic renewal provisions. Any
difficulty in replacing such vendors could negatively affect our performance. If we are prevented or delayed in obtaining services, products,
or components for products, due to political, civil, labor or other factors beyond our control that affect our vendors, including natural
disasters or pandemics, our operations may be substantially disrupted, potentially for a significant period of time. Such delays may
significantly reduce our revenues and profitability and harm our business while alternative sources of supply are secured.





We
operate in highly competitive markets and the size and resources of many of our competitors may allow them to compete more effectively
than we can, preventing us from achieving profitability.



The
markets we compete in are highly competitive. Competition may result in pricing pressures, reduced profit margins or lost market share,
or a failure to grow our market share, any of which could substantially harm our business and results of operations. We compete for customers
primarily on the basis of our brand name, price and the range of products and services that we offer. Across our business, we face competitors
who are constantly seeking ideas which will appeal to customers and introducing new products that compete with our products. Many of
our competitors have significant competitive advantages, including longer operating histories, larger and broader customer bases, less-costly
production, more established relationships with a broader set of suppliers and customers, greater brand recognition and greater financial,
research and development, marketing, distribution and other resources than we do. We cannot assure that we will be able to successfully
compete against new or existing competitors. If we fail to maintain our reputation and competitiveness, customers demand for our products
may decline.



In
addition to existing competitors, new participants with a popular product or service idea could gain access to customers and become a
significant source of competition in a short period of time. These existing and new competitors may be able to respond more rapidly than
us to changes in customer preferences. Our competitors’ products may achieve greater market acceptance than our products and potentially
reduce demand for our products, lower our revenues and lower our profitability.



Our
future growth depends in part on new products and new technology innovation, and failure to invent and innovate could materially and
adversely impact our business prospects.



Our
future growth depends in part on maintaining our current products in new and existing markets, as well as our ability to develop new
products and technologies to serve such markets. To the extent that competitors develop competitive products and technologies, or new
products or technologies that achieve higher customer satisfaction, our business prospects may be materially and adversely impacted.
In addition, regulatory approvals for new products or technologies may be required, these approvals may not be obtained in a timely or
cost effective manner, which may also materially and adversely impact our business prospects.



If
we fail to increase our brand recognition, we may face difficulty in obtaining new customers.



Although
we believe our brand is reputable in the PRC customer engagement industry, we still believe that maintaining and enhancing our brand
recognition in a cost-effective manner outside of that market is critical to achieving widespread acceptance of our current and future
products and services and is an important element in our effort to increase our customer base. Successful promotion of our brand will
depend largely on our ability to maintain a sizeable and active customer base, our marketing efforts and ability to provide reliable
and useful products and services at competitive prices. Brand promotion activities may not yield increased revenue, and even if they
do, any increased revenue may not offset the expenses we will incur in building our brand. If we fail to successfully promote and maintain
our brand, or if we incur substantial expenses in an unsuccessful attempt to promote and maintain our brand, we may fail to attract enough
new customers or retain our existing customers to the extent necessary to realize a sufficient return on our brand-building efforts,
in which case our business, operating results and financial condition, would be materially and adversely affected.





3









Any
failure to offer high-quality customer support may materially and adversely affect our relationships with our customers.



Our
ability to retain existing customers and attract new customers depends on our ability to maintain a consistently high level of customer
service and technical support. Our customers depend on our service support team to assist them in utilizing our services effectively
and to help them to resolve issues quickly and to provide ongoing support. If we are unable to hire and train sufficient support resources
or are otherwise unsuccessful in assisting our customers effectively, it may materially and adversely affect our ability to retain existing
customers and could prevent prospective customers from adopting to our services. We may be unable to respond quickly enough to accommodate
short-term increases in demand for customer support. We also may be unable to modify the nature, scope and delivery of our customer support
to compete with changes in the support services provided by our competitors. Increased demand for customer support, without corresponding
revenue, could increase our costs and adversely affect our business, results of operations and financial condition. Our sales are highly
dependent on our business reputation and on positive recommendations from customers. Any failure to maintain high-quality customer support,
or a market perception that we do not maintain high-quality customer support, may materially and adversely affect our reputation, business,
results of operations and financial condition.



Incorrect
or improper implementation or use of our services could result in customer dissatisfaction and negatively affect our business, results
of operations, financial condition, and growth prospects.



Our
services are deployed in a wide variety of increasingly complex technology environments, including on premises, in the cloud or in hybrid
environments. We believe our future success will depend on our ability to increase sales of our services for use in such deployments.
We must often assist our customers in achieving successful implementations of our services, which we do through our professional consulting
and technical support services. If our customers are unable to implement our services successfully, or unable to do so in a timely manner,
customer perceptions of our services may be harmed, our reputation and brand may suffer, and customers may choose to cease usage of our
services or not to expand their use of our services. Our customers may need training in the proper use of and the variety of benefits
that can be derived from our services to maximize their benefits. If our services are not effectively implemented or used correctly or
as intended, or if we fail to adequately train customers on how to efficiently and effectively use our services, our customers may not
be able to achieve satisfactory outcomes. This could result in negative publicity and legal claims against us, which may cause us to
generate fewer sales to new customers and reductions in renewals or expansions of the use of our services with existing customers, any
of which would harm our business and results of operations.



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



Our
customers’ business operations are subject to certain rules and regulations in China or elsewhere. Our customers may contractually
require that we perform our services in a manner that would enable them to comply with such rules and regulations. Failure to perform
our services in such manner could result in breaches of contract with our customers and, in some limited circumstances, civil fines and
criminal penalties for us.



In
addition, the internet industry in China is highly regulated, and we are required under various Chinese laws to obtain and maintain permits
and licenses to conduct our business.





Pursuant to the PRC Regulations
on Telecommunications, in order to engage in value-added telecommunications services, or VATS, a services provider must obtain a value-added
telecommunications business operating license, or VATS License, from the MIIT or its provincial level counterparts. For example, pursuant
to the Catalogue of Telecommunications Business, the call center business refers to the provision of business consultation, information
consultation and data query services to users, with the entrustment of enterprises or institutions, based on the call center system and
database technology connected to public communication network or the internet and the information database established by information
collection, processing and storage. Therefore, a VATS License with the business scope of “Nationwide Domestic Call Center Services”
is required for the provision of call center services all over China. As of December 31, 2021, Infobird Guiyang has obtained a VATS License
with the business scope of “Domestic Call Center Services in Guizhou Province only” while a broader scope covering national
service is required. In addition, Infobird Beijing has obtained a VATS License with the business scope of “Nationwide Domestic Call
Center Services”. We are currently in the process of switching the counterparty on our relevant existing agreements with customers
from Infobird Guiyang to Infobird Beijing in order to be compliant with such restrictions. If the relevant PRC government authority decides
that we are operating without the proper license, we may be subject to penalties such as confiscation of the revenues that were generated
through the unlicensed activities, the imposition of fines and the discontinuation of our operations.



As of December 31, 2021, we have
not been subject to any material penalties from the relevant government authorities for failure to obtain any license for our business
operations in the past. We cannot assure you, however, that the government authorities will not do so in the future. If we do not obtain,
hold or maintain our licenses or other qualifications to provide our services, we may not be able to provide services to existing customers
or be able to attract new customers and could lose revenues, and we may also be subject to penalties, which could have a material and
adverse effect on our business and results of operations.





Failure
to disclose the outsourcing of our BPO services to customers or reach an agreement on the outsourcing with customers could result in
breaches and terminations of contracts with our customers, and may substantially harm our business and results of operations.



We
provide BPO services partially through outsourced service providers, in which event the BPO services are actually provided by the outsourced
service providers to our customers. However, we do not disclose the outsourcing to our customers, nor do we reach an agreement with our
customers on the outsourcing in the BPO services contracts signed between our customers and us. Such failure could result in breaches
and terminations of BPO services contracts, and we may also be subject to liabilities for breach of contracts, which may have a material
adverse effect on our business and results of operations.





4











If
our new enhancements to our services do not achieve sufficient market acceptance, our financial results and competitive position will
suffer.



We
spend substantial amounts of time and money to research and develop new enhancements of our services to incorporate additional features,
improve functionality or other enhancements in order to meet our customers’ rapidly evolving demands. When we develop an enhancement
to our services, we typically incur expenses and expend resources upfront to develop, market and promote the new enhancements. Therefore,
when we develop and introduce new enhancements to our services, they must achieve high levels of market acceptance in order to justify
the amount of our investment in developing and bringing them to market. If our new enhancements to our services do not garner widespread
market adoption and implementations, our business, business prospects, future financial results and competitive position may be materially
and adversely affected.



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



If
we make errors in the course of delivering services to our customers or fail to consistently meet service requirements of a customer,
these errors or failures could disrupt the customer’s business, which could result in a reduction in our net revenues or a claim
for substantial damages against us. In addition, a failure or inability to meet a contractual requirement could seriously damage our
reputation and affect our ability to attract new business.



The
services we provide are often critical to our customers’ businesses. We generally provide customer support after our customized
application is delivered. Certain of our customer contracts require us to comply with security obligations including maintaining system
security, ensuring our system is virus-free, maintaining business continuity procedures, and verifying the integrity of employees that
work with our customers by conducting background checks. Any failure in a customer’s system or breach of security relating to the
services we provide to the customer could damage our reputation or result in a claim for substantial damages against us. Any significant
failure of our systems could impede our ability to provide services to our customers, have a negative impact on our reputation, which
may materially and adversely affect our business, financial conditional and results of operations.



Interruptions
or performance problems associated with our technology and infrastructure may materially and adversely affect our business, results of
operations, and financial condition.



Our
continued growth depends in part on the ability of our existing customers and new customers to access our SaaS services, at any time
and within an acceptable amount of time. We may in the future experience, service disruptions, outages and other performance problems
due to a variety of factors, including infrastructure changes, human or software errors or capacity constraints. In some instances, we
may not be able to identify the cause or causes of these performance problems within an acceptable period of time. It may become increasingly
difficult to maintain and improve our performance as our SaaS services become more complex. If our services are unavailable or if our
customers are unable to access features of our services within a reasonable amount of time or at all, our business, results of operations,
and financial condition may be materially and adversely affected would be negatively affected.



We
currently provide our SaaS services via designated data centers. We expect that in the future we may experience interruptions, delays
and outages in service and availability from time to time due to a variety of factors, including infrastructure changes, human or software
errors, website hosting disruptions and capacity constraints. Capacity constraints could be due to a number of potential causes including
technical failures, natural disasters, fraud or security attacks. In addition, if our security, or that of our data center providers,
is compromised, our services are unavailable or our customers are unable to use our services within a reasonable amount of time or at
all, then our business, results of operations and financial condition may be materially and adversely affected. In some instances, we
expect that we may not be able to identify the cause or causes of these performance problems within a period of time acceptable to our
customers. It may become increasingly difficult to maintain and improve our service performance, in particular during peak usage times,
as the features of our services become more complex and the usage of our services increases. Any of the above circumstances or events
may harm our reputation, cause customers to stop using our services, or impair our ability to increase revenue from existing customers,
impair our ability to grow our customer base, our business, results of operations, and financial condition may be materially and adversely
affected.



Unauthorized
disclosure, destruction or modification of data, through cybersecurity breaches, computer viruses or otherwise or disruption of our services
could expose us to liability, protracted and costly litigation and damage our reputation.



Our
business involves the collection, storage, processing and transmission of customers’ business data. An increasing number of organizations,
including large merchants and businesses, other large technology companies, financial institutions and government institutions, have
disclosed breaches of their information technology, or IT, systems, some of which have involved sophisticated and highly targeted cybersecurity
attacks, including on portions of their websites or infrastructure. We may also be subjected to breaches of cybersecurity by hackers.
Threats may derive from human error, fraud or malice on the part of employees or third parties, or may result from accidental technological
failure. Concerns about cybersecurity are increased when we transmit information. Electronic transmissions can also be subjected to cybersecurity
attacks, interception or loss. Also, computer viruses and malware can be distributed and spread rapidly over the internet and could infiltrate
our systems or those of our associated participants, which can impact the confidentiality, integrity and availability of information,
and the integrity and availability of our products, services and systems, among other effects. Denial of service or other cybersecurity
attacks could be targeted against us for a variety of purposes, including interfering with our products and services or creating a diversion
for other malicious activities. These types of actions and attacks could disrupt our delivery of products and services or make them unavailable,
which could damage our reputation, force us to incur significant expenses in remediating the resulting impacts, expose us to uninsured
liabilities, subject us to lawsuits, fines or sanctions, distract our management or increase our costs of doing business.



Our
encryption of data and other protective measures may not prevent unauthorized access or use of sensitive data. A breach of our system
or that of one of our associated participants may subject us to material losses or liability. A misuse of such data or a cybersecurity
breach could harm our reputation and deter customers from using our products and services, thus reducing our revenue. In addition, any
such misuse or breach could cause us to incur costs to correct the breaches or failures, expose us to uninsured liabilities, increase
our risk of regulatory scrutiny, subject us to lawsuits, result in the imposition of material penalties and fines under applying laws
or regulations.





5











We
cannot assure that there are written agreements in place with every associated participant or that such written agreements will prevent
the unauthorized use, modification, destruction or disclosure of data or enable us or our customers to obtain reimbursement in the event
we should suffer incidents resulting in unauthorized use, modification, destruction or disclosure of data. Any unauthorized use, modification,
destruction or disclosure of data could result in protracted and costly litigation, which could have a material and adverse effect on
our business, financial condition and results of operations.



Cybersecurity
attack incidents are increasing in frequency and evolving in nature and include, but are not limited to, installation of malicious software,
unauthorized access to data and other electronic security breaches that could lead to disruptions in systems, unauthorized release of
confidential or otherwise protected information and the corruption of data. Given the unpredictability of the timing, nature and scope
of information technology disruptions, there can be no assurance that the procedures and controls we employ will be sufficient to prevent
security breaches from occurring and we could be subject to manipulation or improper use of our systems and networks or financial losses
from remedial actions, any of which could have a material and adverse effect on our business, financial condition and results of operations.



The
PRC Cyber Security Law, effective on June 1, 2017, stipulates that a network operator must adopt technical measures and other necessary
measures in accordance with applicable laws and regulations as well as compulsory national and industrial standards to safeguard the
safety and stability of network operations, effectively respond to network security incidents, prevent illegal and criminal activities,
maintain the integrity, confidentiality and availability of network data. We are making efforts to comply with the applicable laws, regulations
and standards, but there can be no assurance that our measures will be effective and sufficient under the PRC Cyber Security Law. If
we were found by the regulatory authorities to have failed to comply with the PRC Cyber Security Law, we would be subject to warning,
fines, confiscation of illegal revenue, revocation of licenses, cancellation of filings, shutdown of our platform or even criminal liability
and our business, results of operations and financial condition would also be adversely affected. In addition, in light of the evolving
regulatory framework of China for the protection of information in cyberspace, we may be subject to uncertainties of and adjustments
to our business practices, which may incur additional operating expenses and adversely affect our results of operations and financial
condition.



We
face intense competition from onshore and offshore customer engagement service providers, and, if we are unable to compete effectively,
we may lose customers and our revenues may decline.



The
market for customer engagement services is highly competitive and we expect competition to persist and intensify. We believe that the
principal competitive factors in our markets are industry expertise, breadth and depth of service offerings, quality of the services
offered, reputation and track record, marketing and selling skills, scalability of technology infrastructure and price. In the customer
engagement market, customers tend to engage multiple service providers instead of using an exclusive service provider, which could reduce
our revenues to the extent that customers obtain similar or substituted services from other competing providers. Our ability to compete
also depends in part on a number of factors beyond our control, including the ability of our competitors to recruit, train, develop and
retain highly skilled employees, in particular research and development employees, the price at which our competitors offer comparable
services and our competitors’ responsiveness to customer needs and market trends. Therefore, we cannot assure you that we will
be able to retain our customers while competing against such competitors. Increased competition, our inability to compete successfully
against competitors, pricing pressures or loss of market share may materially and adversely affect our business, financial condition
and results of operations.



We
have engaged in transactions with related parties, and such transactions present possible conflicts of interest that could have a material
and adverse effect on our business, financial condition and results of operations.



We
have entered into a number of transactions with related parties. See “Item 7.B. Major Shareholders and Related Party Transactions”
for further details on related party transactions. We may in the future enter into additional transactions with entities in which members
of our board of directors and other related parties hold ownership interests.



Transactions
with related parties present potential for conflicts of interest, as the interests of related parties may not align with the interests
of our shareholders. Although we believe that these transactions were in our best interests, we cannot assure you that these transactions
were entered into on terms as favorable to us as those that could have been obtained in an arms-length transaction. We may also engage
in transactions with related parties in the future. Conflicts of interests may arise when we transact business with related parties.
These transactions, individually or in the aggregate, may have a material and adverse effect on our business, financial condition and
results of operations or may result in litigation.





6







Changes
in demand for our products and business relationships with key customers and vendors may materially and adversely affect operating results.



To
achieve our objectives, we must develop and sell products that are subject to the demands of our customers. This is dependent on several
factors, including managing and maintaining relationships with key customers, responding to the rapid pace of technological change and
obsolescence, which may require increased investment by us or result in greater pressure to commercialize developments rapidly or at
prices that may not fully recover the associated investment, and the effect on demand resulting from customers’ research and development,
capital expenditure plans and capacity utilization. If we are unable to keep up with our customers’ demands, our sales, earnings
and operating results may be materially and adversely affected.



Our
future success depends in part on our ability to retain key executives and to attract, retain and motivate qualified personnel.



We
are highly dependent on the principal members of our executive team listed in “Item 6. Directors, Senior Management and Employees”
located elsewhere in this annual report, the loss of whose services may materially and adversely impact the achievement of our objectives.
Recruiting and retaining other qualified employees for our business, including technical personnel, will also be critical to our success.
Competition for skilled personnel is intense and the turnover rate can be high. We may not be able to attract and retain personnel on
acceptable terms given the competition among numerous companies for individuals with similar skill sets. The inability to recruit or
loss of the services of any executive or key employee may materially and adversely affect our business.



We
may need to expand our organization, and we may experience difficulties in managing this growth, which could disrupt our operations.



As
of December 31, 2021, we had 391 employees, all of whom were full-time employees and were located in China.  As our company continues
to grow, we also expect to expand our employee base. In addition, we intend to grow by expanding our business, increasing market penetration
of our existing products and developing new products. Future growth would impose significant additional responsibilities on our management,
including the need to develop and improve our existing administrative and operational systems and our financial and management controls
and to identify, recruit, maintain, motivate, train, manage and integrate additional employees, consultants and contractors. Also, our
management may need to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial
amount of time to managing these growth activities. We may not be able to effectively manage the expansion of our operations, which may
result in weaknesses in our infrastructure, give rise to operational mistakes, loss of business opportunities, loss of employees and
reduced productivity among remaining employees. Future growth could require significant capital expenditures and may divert financial
resources from other projects, such as the development of our existing or future product candidates. If our management is unable to effectively
manage our growth, our expenses may increase more than expected, our ability to generate and grow revenue could be reduced, and we may
not be able to implement our business strategy. Our future financial performance and our ability to compete effectively will depend,
in part, on our ability to effectively manage any future growth.



Failure
of beneficial owners of our shares who are PRC residents to comply with certain PRC foreign exchange regulations could restrict our ability
to distribute profits, restrict our overseas and cross-border investment activities and subject us to liability under PRC law.



The
State Administration of Foreign Exchange, or SAFE, has promulgated regulations, including the Notice on Relevant Issues Relating to Foreign
Exchange Control on Domestic Residents’ Investment and Financing and Round-Trip Investment through Special Purpose Vehicles, or
SAFE Circular 37, and its appendices. These regulations require PRC residents, including PRC institutions and individuals, to register
with local branches of SAFE in connection with their direct establishment or indirect control of an offshore entity, for the purpose
of overseas investment and financing, with such PRC residents’ legally owned assets or equity interests in domestic enterprises
or offshore assets or interests, referred to in SAFE Circular 37 as a “special purpose vehicle”, or SPV. The term “control”
under SAFE Circular 37 is broadly defined as the operation rights, beneficiary rights or decision-making rights acquired by the PRC residents
in the offshore SPVs by such means as acquisition, trust, proxy, voting rights, repurchase, convertible bonds or other arrangements.
SAFE Circular 37 further requires amendment to the registration in the event of any significant changes with respect to the SPV, such
as increase or decrease of capital contributed by PRC individuals, share transfer or exchange, merger, division or other material event.
In the event that a PRC shareholder holding interests in a SPV fails to fulfill the required SAFE registration, the PRC subsidiaries
of that SPV may be prohibited from making profit distributions to the offshore parent and from carrying out subsequent cross-border foreign
exchange activities, and the SPV may be restricted in its ability to contribute additional capital into its PRC subsidiaries. Further,
failure to comply with the various SAFE registration requirements described above could result in liability under PRC law for foreign
exchange evasion.





These regulations apply
to our direct and indirect shareholders who are PRC residents and may apply to any offshore acquisitions or share transfers that
we make in the future if our shares are issued to PRC residents. However, in practice, different local SAFE branches may have different
views and procedures on the application and implementation of SAFE regulations, and there remains uncertainty with respect to its
implementation. We cannot assure you that these direct or indirect shareholders of our company who are PRC residents will be able
to successfully update the registration of their direct and indirect equity interest as required in the future. If they fail to
update the registration, our PRC subsidiaries could be subject to fines and legal penalties, and SAFE could restrict our cross-border
investment activities and our foreign exchange activities, including restricting our PRC subsidiaries’ ability to distribute
dividends to, or obtain loans denominated in foreign currencies from, our company, or prevent us from contributing additional capital
into our PRC subsidiaries. As a result, our business operations and our ability to make distributions to you could be materially
and adversely affected. In addition, non-U.S. shareholders may experience unfavorable tax consequences if such non-U.S. shareholders
are determined to be a resident enterprise for PRC tax purposes. See “Item 4. Information on the Company - B. Business Overview
- Regulations - Regulations on Tax in the PRC” and “Item 10.E. Taxation - PRC Taxation” for further information.







7







As
of the date of this annual report, to our knowledge, all of our shareholders had registered according to SAFE Circular 37.



Failure
to make adequate contributions to various employee benefits plans as required by PRC regulations may subject us to penalties.





Companies operating in China are
required to participate in various government sponsored employee benefit plans, including certain social insurance, housing funds and
other welfare-oriented payment obligations, and contribute to the plans in amounts equal to certain percentages of salaries, including
bonuses and allowances, of employees up to a maximum amount specified by the local government from time to time at locations where they
operate their businesses. The requirement of employee benefit plans has not been implemented consistently by the local governments in
China given the different levels of economic development in different locations. As of December 31, 2021, we have not made adequate employee
benefit payments in strict compliance with the relevant PRC regulations for and on behalf of our employees.  Our failure in
making contributions to various employee benefits plans in strict compliance with applicable PRC labor-related laws and regulations may
subject us to late payment penalties, and we could also be required to make up the contributions for these plans as well as to pay late
fees and fines. If we are subject to late fees or fines in relation to the underpaid employee benefits, our financial condition and results
of operations may be adversely affected.





We
do not have business insurance coverage. Any future business liability, disruption or litigation we experience might divert management
focus from our business and could significantly impact our financial results.



Availability
of business insurance products and coverage in China is limited, and most such products are expensive in relation to the coverage offered.
We have determined that the risks of disruption, cost of such insurance and the difficulties associated with acquiring such insurances
on commercially reasonable terms make it impractical for us to maintain such insurance. As a result, we do not have any business liability,
disruption or litigation insurance coverage for our operations in China. Accordingly, a business disruption, litigation or natural disaster
may result in substantial costs and divert management’s attention from our business, which would have an adverse effect on our
results of operations and financial condition.



We
may require additional financing in the future and our operations could be curtailed if we are unable to obtain required additional financing
when needed.



In
addition to the net proceeds raised in our initial public offering, we may need to obtain additional debt or equity financing to fund
future capital expenditures. While we do not anticipate seeking additional financing in the immediate future, any additional equity financing
may result in dilution to the holders of our outstanding ordinary shares. Additional debt financing may impose affirmative and negative
covenants that restrict our freedom to operate our business. We cannot guaranty that we will be able to obtain additional financing on
terms that are acceptable to us, or any financing at all, and the failure to obtain sufficient financing could materially and adversely
affect our business operations.



We
are subject to risks relating to our leased properties, which in turn could materially and adversely affect our business, results of
operations and financial condition.





Currently, all of our offices are
located on leased premises. As of December 31, 2021, some of the lessors of our leased properties in China have not provided us with their
property ownership certificates. If our lessors are not the owners of the properties, or if they have not obtained the proper authorization
from the legal owners of the properties, our leases could be invalidated. If this occurs, we may have to renegotiate the leases with the
owners or other parties who have the right to lease the properties, and the terms of the new leases may be less favorable to us. Although
we may seek damages from such lessors, such leases may be void and we may be forced to relocate. Any relocation would require us to locate
and secure additional facilities, expenditures of additional funds in connection with the relocation and preparation of replacement facilities.
This could affect our ability to provide uninterrupted services to our customers and harm our reputation, which in turn could materially
and adversely affect our business, results of operations and financial condition.



Risks
Related to Intellectual Property



If
we are not able to adequately protect our proprietary intellectual property and information, and protect against third party claims that
we are infringing on their intellectual property rights, our results of operations could be adversely affected.



The
value of our business depends in part on our ability to protect our intellectual property and information, including our patents, copyrights,
trademarks, trade secrets, and rights under agreements with third parties, in China and around the world, as well as our customer, employee,
and customer data. Third parties may try to challenge our ownership of our intellectual property in China and around the world. In addition,
intellectual property rights and protections in China may be insufficient to protect material intellectual property rights in China.
Further, our business is subject to the risk of third parties counterfeiting our products or infringing on our intellectual property
rights. The steps we have taken may not prevent unauthorized use of our intellectual property. We may need to resort to litigation to
protect our intellectual property rights, which could result in substantial costs and diversion of resources. If we fail to protect our
proprietary intellectual property and information, including with respect to any successful challenge to our ownership of intellectual
property or material infringements of our intellectual property, this failure could have a significant adverse effect on our business,
financial condition, and results of operations.



If
we are unable to adequately protect our intellectual property rights, or if we are accused of infringing on the intellectual property
rights of others, our competitive position could be harmed or we could be required to incur significant expenses to enforce or defend
our rights.



Our
commercial success will depend in part on our success in obtaining and maintaining patents, copyrights, trademarks, trade secrets and
other intellectual property rights in China and elsewhere and protecting our proprietary technology. If we do not adequately protect
our intellectual property and proprietary technology, competitors may be able to use our technologies or the goodwill we have acquired
in the marketplace and erode or negate any competitive advantage we may have, which could harm our business and ability to achieve profitability.





8











We
cannot make any assurances that our core trademarks include a scope sufficient to protect our services and products. For example, our
key trademarks “”
(Infobird), “”
(Xun Niao), “”
(Yun Tong Bao) and “”
(Qi Tong Bao) are not registered under the category “Software as a Service (SaaS)” in Class 42, in which event third parties
would be able to use such logos under category “Software as a Service (SaaS)” in Class 42 without our authorization, and
we may even be subjected to claims by third parties for infringement by using such logos. In addition, we did not enter into a trademark
transfer agreement with the transferor on trademark “”
in 2012, in which event the transferor may claim that the historical transfer of the trademark is flawed and file a claim against the
ownership of the transferred trademark.



We
cannot make any assurances that the protection of our copyrights are sufficient. For example, our core technology, our no-code development
platform, is not registered as a software copyright, which makes the technology vulnerable to the risk of third party’s infringement.
Even though we intend to submit an application for copyright registration for our no-code development platform, we cannot assure you
when the application will be submitted or the registration will be completed, if at all, and whether the application will be rejected
by the National Copyright Administration of the PRC once submitted.



We
cannot provide any assurances that any of our patents have, or that any of our pending patent applications that mature into issued patents
will include, claims with a scope sufficient to protect our products, any additional features we develop for our products or any new
products. Other parties may have developed technologies that may be related or competitive to our system, may have filed or may file
patent applications and may have received or may receive patents that overlap or conflict with our patent applications, either by claiming
the same methods or devices or by claiming subject matter that could dominate our patent position. Our patent position may involve complex
legal and factual questions, and, therefore, the scope, validity and enforceability of any patent claims that we may obtain cannot be
predicted with certainty. Patents, if issued, may be challenged, deemed unenforceable, invalidated or circumvented. Proceedings challenging
our patents could result in either loss of the patent or denial of the patent application or loss or reduction in the scope of one or
more of the claims of the patent or patent application. In addition, such proceedings may be costly. Thus, any patents that we may own
may not provide any protection against competitors. Furthermore, an adverse decision in an interference proceeding can result in a third
party receiving the patent right sought by us, which in turn could affect our ability to commercialize our products.



Though
an issued patent is presumed valid and enforceable, its issuance is not conclusive as to its validity or its enforceability and it may
not provide us with adequate proprietary protection or competitive advantages against competitors with similar products. Competitors
could purchase our products and attempt to replicate some or all of the competitive advantages we derive from our development efforts,
willfully infringe our intellectual property rights, design around our patents, or develop and obtain patent protection for more effective
technologies, designs or methods. We may be unable to prevent the unauthorized disclosure or use of our technical knowledge or trade
secrets by consultants, suppliers, vendors, former employees and current employees.



Our
ability to enforce our patent rights depends on our ability to detect infringement. It may be difficult to detect infringers who do not
advertise the components that are used in their products. Moreover, it may be difficult or impossible to obtain evidence of infringement
in a competitor’s or potential competitor’s product. We may not prevail in any lawsuits that we initiate and the damages
or other remedies awarded if we were to prevail may not be commercially meaningful.



In
addition, proceedings to enforce or defend our patents could put our patents at risk of being invalidated, held unenforceable or interpreted
narrowly. Such proceedings could also provoke third parties to assert claims against us, including that some or all of the claims in
one or more of our patents are invalid or otherwise unenforceable. If any of our patents covering our products are invalidated or found
unenforceable, or if a court found that valid, enforceable patents held by third parties covered one or more of our products, our competitive
position could be harmed or we could be required to incur significant expenses to enforce or defend our rights.



The
degree of future protection for our proprietary rights is uncertain, and we cannot ensure that:





| | ● | any of our patents, or
    any of our pending patent applications, if issued, will include claims having a scope sufficient to protect our products;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | any of our pending patent applications
will be issued as patents;
| | - | -----------------------------------------------------------------



| | ● | we will be able to successfully
    commercialize our products on a substantial scale, if approved, before our relevant patents we may have expire;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | we were the first to make
    the inventions covered by each of our patents and pending patent applications;
| | - | ------------------------------------------------------------------------------------------------------------



| | ● | we were the first to file
    patent applications for these inventions;
| | - | -----------------------------------------------------------------------





9













| | ● | others will not develop
    similar or alternative technologies that do not infringe our patents; any of our patents will be found to ultimately be valid and
    enforceable;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | any patents issued to us will
provide a basis for an exclusive market for our commercially viable products, will provide us with any competitive advantages or will
not be challenged by third parties;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | we will develop additional
    proprietary technologies or products that are separately patentable; or
| | - | ------------------------------------------------------------------------------------------------------



| | ● | our commercial activities
    or products will not infringe upon the patents of others.
| | - | ---------------------------------------------------------------------------------------





We
rely, in part, upon unpatented trade secrets, unpatented know-how and continuing technological innovation to develop and maintain our
competitive position. Further, our trade secrets could otherwise become known or be independently discovered by our competitors.



Litigation
or other proceedings or third-party claims of intellectual property infringement could require us to spend significant time and money
and could prevent us from selling our products or affect our stock price.



Our
commercial success will depend in part on not infringing the patents or copyrights, or otherwise violating the other proprietary rights,
of others. Significant litigation regarding patent rights and copyright rights occur in our industry. Our competitors in both the United
States and abroad, many of which have substantially greater resources and have made substantial investments in patent portfolios and
competing technologies, may have applied for or obtained or may in the future apply for and obtain, patents that will prevent, limit
or otherwise interfere with our ability to make, use and sell our products. We do not always conduct independent reviews of patents issued
to third parties. In addition, patent applications in China and elsewhere can be pending for many years before issuance, or unintentionally
abandoned patents or applications can be revived, so there may be applications of others now pending or recently revived patents of which
we are unaware. These applications may later result in issued patents, or the revival of previously abandoned patents, that will prevent,
limit or otherwise interfere with our ability to make, use or sell our products. Third parties may, in the future, assert claims that
we are employing their proprietary technology without authorization, including claims from competitors or from non-practicing entities
that have no relevant product revenue and against whom our own patent portfolio may have no deterrent effect. As we continue to commercialize
our products in their current or updated forms, launch new products and enter new markets, we expect competitors may claim that one or
more of our products infringe their intellectual property rights as part of business strategies designed to impede our successful commercialization
and entry into new markets. The large number of patents, the rapid rate of new patent applications and issuances, the complexities of
the technology involved, and the uncertainty of litigation may increase the risk of business resources and management’s attention
being diverted to patent litigation. We have, and we may in the future, receive letters or other threats or claims from third parties
inviting us to take licenses under, or alleging that we infringe, their patents.



Moreover,
we may become party to future adversarial proceedings regarding our patent portfolio or the patents of third parties. Patents may be
subjected to opposition, post-grant review or comparable proceedings lodged in various foreign, both national and regional, patent offices.
The legal threshold for initiating litigation or contested proceedings may be low, so that even lawsuits or proceedings with a low probability
of success might be initiated. Litigation and contested proceedings can also be expensive and time-consuming, and our adversaries in
these proceedings may have the ability to dedicate substantially greater resources to prosecuting these legal actions than we can. We
may also occasionally use these proceedings to challenge the patent rights of others. We cannot be certain that any particular challenge
will be successful in limiting or eliminating the challenged patent rights of the third party.



Any
lawsuits resulting from such allegations could subject us to significant liability for damages and invalidate our proprietary rights.
Any potential intellectual property litigation also could force us to do one or more of the following:





| | ● | stop making, selling or
    using products or technologies that allegedly infringe the asserted intellectual property;
| | - | ----------------------------------------------------------------------------------------------------------------------



| | ● | lose the opportunity to license
our technology to others or to collect royalty payments based upon successful protection and assertion of our intellectual property rights
against others; incur significant legal expenses;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | pay substantial damages
    or royalties to the party whose intellectual property rights we may be found to be infringing;
| | - | --------------------------------------------------------------------------------------------------------------------------



| | ● | pay the attorney’s
    fees and costs of litigation to the party whose intellectual property rights we may be found to be infringing;
| | - | -------------------------------------------------------------------------------------------------------------------------------------



| | ● | redesign those products
    that contain the allegedly infringing intellectual property, which could be costly, disruptive and infeasible; and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------



| | ● | attempt to obtain a license
    to the relevant intellectual property from third parties, which may not be available on reasonable terms or at all, or from third
    parties who may attempt to license rights that they do not have.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





Any
litigation or claim against us, even those without merit, may cause us to incur substantial costs, and could place a significant strain
on our financial resources, divert the attention of management from our core business and harm our reputation. If we are found to infringe
the intellectual property rights of third parties, we could be required to pay substantial damages (which may be increased up to three
times of awarded damages) and/or substantial royalties and could be prevented from selling our products unless we obtain a license or
are able to redesign our products to avoid infringement. Any such license may not be available on reasonable terms, if at all, and there
can be no assurance that we would be able to redesign our products in a way that would not infringe the intellectual property rights
of others. We could encounter delays in product introductions while we attempt to develop alternative methods or products. If we fail
to obtain any required licenses or make any necessary changes to our products or technologies, we may have to withdraw existing products
from the market or may be unable to commercialize one or more of our products.





10











If
we are unable to protect the confidentiality of our trade secrets, our business and competitive position could be harmed.



We
rely on copyright, patent, trade secret, and trademark protection as well as confidentiality agreements with our employees, consultants
and third parties, and we may in the future rely on additional intellectual property protection, to protect our confidential and proprietary
information. In addition to contractual measures, we try to protect the confidential nature of our proprietary information using commonly
accepted physical and technological security measures. Such measures may not, for example, in the case of misappropriation of a trade
secret by an employee or third party with authorized access, provide adequate protection for our proprietary information. Our security
measures may not prevent an employee or consultant from misappropriating our trade secrets and providing them to a competitor, and recourse
we take against such misconduct may not provide an adequate remedy to protect our interests fully. Unauthorized parties may also attempt
to copy or reverse engineer certain aspects of our products that we consider proprietary. Enforcing a claim that a party illegally disclosed
or misappropriated a trade secret can be difficult, expensive and time-consuming, and the outcome is unpredictable. Even though we use
commonly accepted security measures, trade secret violations are often a matter of state law, and the criteria for protection of trade
secrets can vary among different jurisdictions. In addition, trade secrets may be independently developed by others in a manner that
could prevent legal recourse by us. If any of our confidential or proprietary information, such as our trade secrets, were to be disclosed
or misappropriated, or if any such information was independently developed by a competitor, our business and competitive position could
be harmed.



Third
parties may assert ownership or commercial rights to inventions we develop, which could have a material adverse effect on our business.



Third
parties may in the future make claims challenging the inventorship or ownership of our intellectual property. Any infringement claims
or lawsuits, even if not meritorious, could be expensive and time consuming to defend, divert management’s attention and resources,
require us to redesign our products and services, if feasible, require us to pay royalties or enter into licensing agreements in order
to obtain the right to use necessary technologies, and/or may materially disrupt the conduct of our business.



In
addition, we may face claims by third parties that our agreements with employees, contractors or third parties obligating them to assign
intellectual property to us are ineffective or in conflict with prior or competing contractual obligations of assignment, which could
result in ownership disputes regarding intellectual property we have developed or will develop and interfere with our ability to capture
the commercial value of such intellectual property. Litigation may be necessary to resolve an ownership dispute, and if we are not successful,
we may be precluded from using certain intellectual property or may lose our exclusive rights in that intellectual property. Either outcome
could harm our business and competitive position.



Third
parties may assert that our employees or contractors have wrongfully used or disclosed confidential information or misappropriated trade
secrets, which could result in litigation.



We
may employ individuals who previously worked with other companies, including our competitors or potential competitors. Although we try
to ensure that our employees and contractors do not use the proprietary information or know-how of others in their work for us, we may
be subject to claims that we or our employees or contractors have inadvertently or otherwise used or disclosed intellectual property
or personal data, including trade secrets or other proprietary information, of a former employer or other third party. Litigation may
be necessary to defend against these claims. If we fail in defending any such claims or settling those claims, in addition to paying
monetary damages or a settlement payment, we may lose valuable intellectual property rights or personnel. Even if we are successful in
defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.



Our
computer systems and operations may be vulnerable to security breaches, which could materially and adversely affect our business.



We
believe the safety of our computer network and our secure transmission of information over the internet will be essential to our operations
and our services. Our network and our computer infrastructure are potentially vulnerable to physical breaches or to the introduction
of computer viruses, abuse of use and similar disruptive problems and security breaches that could cause loss (both economic and otherwise),
interruptions, delays or loss of services to our users. It is possible that advances in computer capabilities or new technologies could
result in a compromise or breach of the technology we use to protect user transaction data. A party that is able to circumvent our security
systems could misappropriate proprietary information, cause interruptions in our operations or utilize our network without authorization.
Security breaches also could damage our reputation and expose us to a risk of loss, litigation and possible liability. We cannot guarantee
you that our security measures will prevent security breaches.



Risks
Related to Our Corporate Structure



We
depend upon the Contractual Arrangements in conducting our business in China, which may not be as effective as direct ownership.



Our affiliation with Infobird
Beijing is managed through the Contractual Arrangements, which agreements may not be as effective in providing us with control over Infobird
Beijing as direct ownership in controlling entities organized in the PRC, which often hold the licenses necessary to conduct business
in the PRC. The Contractual Arrangements are not equivalent to equity ownership in the business of the VIE. Neither the investors in
Infobird Cayman, the Cayman Islands holding company, nor Infobird Cayman itself have an equity ownership in, direct foreign investment
in, or control of, through such ownership or investment, the VIE. Further, the Contractual Arrangements have not been tested in a court
of law, including in China courts. The Contractual Arrangements are governed by and would be interpreted in accordance with the laws
of the PRC. If Infobird Beijing fails to perform the obligations under the Contractual Arrangements, we may have to rely on legal remedies
under the laws of the PRC, including seeking specific performance or injunctive relief, and claiming damages. There is a risk that we
may be unable to obtain any of these remedies, which could affect our investors and the value of their investment. The legal environment
in the PRC is not as developed as in other jurisdictions. As a result, uncertainties in the PRC legal system could limit our ability
to enforce the Contractual Arrangements, or could affect the validity of the Contractual Arrangements. Thus, the Contractual Arrangements
may be less effective than direct ownership and we may incur substantial costs to enforce the terms of the Contractual Arrangements.





11







We
may not be able to consolidate the operations and financial results of some of our affiliated companies or such consolidation could materially
and adversely affect our operating results and financial condition.



The Contractual Arrangements are not equivalent
to equity ownership in the business of the VIE. Neither the investors in Infobird Cayman, the Cayman Islands holding company, nor Infobird
Cayman itself have an equity ownership in, direct foreign investment in, or control of, through such ownership or investment, the VIE.
Our business is conducted through Infobird Beijing, which is considered a VIE for accounting purposes, and we, through Infobird WFOE,
are considered the primary beneficiary for accounting purposes, thus enabling us to consolidate Infobird Beijing’s operations and
financial results in our consolidated financial statements. Infobird Cayman and Infobird HK were established as the holding companies
of Infobird WFOE. Infobird WFOE is the primary beneficiary for accounting purposes of Infobird Beijing and its subsidiaries. All of these
entities are under common control which results in the consolidation of Infobird Beijing and subsidiaries which have been accounted for
as a reorganization of entities under common control at carrying value. Infobird WFOE is deemed to have a controlling financial interest
and be the primary beneficiary for accounting purposes of Infobird Beijing because it has both of the following characteristics: (1)
the power to direct activities at Infobird Beijing that most significantly impact such entity’s economic performance, and (2) the
right to receive benefits from Infobird Beijing that could potentially be significant to such entity.



In the event that in the future Infobird Beijing
no longer meets the definition of a VIE under applicable accounting rules, or we are deemed not to be the primary beneficiary for accounting
purposes, we would not be able to consolidate line by line Infobird Beijing’s operations and financial results in our consolidated
financial statements for reporting purposes. Also, if in the future an affiliate company becomes a VIE and we become the primary beneficiary
for accounting purposes, we would be required to consolidate that entity’s operations sand financial results in our consolidated
financial statements for accounting purposes. If such entity’s financial results were negative, this would have a corresponding
negative impact on our operating results for reporting purposes.



Because
we rely on the Contractual Arrangements for our revenue, the termination of these agreements would severely and detrimentally affect
our continuing business viability under our current corporate structure.



We are a holding company and
all of our business operations are conducted through the Contractual Arrangements. The Contractual Arrangements are not equivalent to
equity ownership in the business of the VIE. Neither the investors in Infobird Cayman, the Cayman Islands holding company, nor Infobird
Cayman itself have an equity ownership in, direct foreign investment in, or control of, through such ownership or investment, the VIE.
Further, the Contractual Arrangements have not been tested in a court of law, including in China courts. Although Infobird Beijing does
not have termination rights pursuant to the Contractual Arrangements, it could terminate, or refuse to perform under, the Contractual
Arrangements. Because neither we, nor our subsidiaries, own equity interests of Infobird Beijing, the termination or non-performance
of the Contractual Arrangements would sever our ability to receive payments from Infobird Beijing under our current holding company structure.
While we are currently not aware of any event or reason that may cause the Contractual Arrangements to terminate, we cannot assure you
that such an event or reason will not occur in the future. In the event that the Contractual Arrangements are terminated, this would
have a severe and detrimental effect on our continuing business viability under our current corporate structure, which, in turn, would
affect the value of your investment.



Contractual
arrangements in relation to the VIE may be subject to scrutiny by the PRC tax authorities and they may determine that we or the VIE owe
additional taxes, which could negatively affect our financial condition and the value of your investment.



Under
applicable PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the
PRC tax authorities within ten years after the taxable year when the transactions are conducted. We could face material and adverse tax
consequences if the PRC tax authorities determine that the VIE contractual arrangements were not entered into on an arm’s-length
basis in such a way as to result in an impermissible reduction in taxes under applicable PRC laws, rules and regulations, and adjust
the income of the VIE in the form of a transfer pricing adjustment. The PRC tax authorities could effectively disregard the VIE structure,
resulting in increased tax liabilities. A transfer pricing adjustment could, among other things, result in a reduction of expense deductions
recorded by the VIE for PRC tax purposes, which could in turn increase tax liabilities without reducing our tax expenses. In addition,
the PRC tax authorities may impose late payment fees and other penalties on the VIE for the adjusted but unpaid taxes according to the
applicable regulations. Our financial position could be materially and adversely affected if the VIE’s tax liabilities increase
or if it is required to pay late payment fees and other penalties.



We
conduct our business through Infobird Beijing by means of Contractual Arrangements. If the PRC courts or administrative authorities determine
that these Contractual Arrangements do not comply with applicable regulations, we could be subject to severe
penalties and our business could be adversely affected. In addition, changes in or different interpretations of such PRC laws and regulations
may also materially and adversely affect our business.





PRC laws and regulations
impose certain restrictions or prohibitions on foreign ownership of companies that engage in internet and other related businesses, including
the provision of domestic call center services. The major foreign investor of a domestic call center services provider is required to
have a record of good performance and operating experience in managing value-added telecommunications business, however, such requirement
of record of good performance and operating experience in managing value-added telecommunications business for the major foreign investor
was repealed by the Decision of the State Council on Revising and Repealing Certain Administrative Regulations, effective on May 1, 2022.
We are a company registered in the Cayman Islands and Infobird WFOE is considered a foreign-invested enterprise. To comply with PRC laws
and regulations, we conduct our business in China mainly through Infobird Beijing and its subsidiaries, based on a series of contractual
arrangements by and among Infobird WFOE, Infobird Beijing and its shareholders, or the Contractual Arrangements. The Contractual Arrangements
are not equivalent to equity ownership in the business of the VIE. Neither the investors in Infobird Cayman, the Cayman Islands holding
company, nor Infobird Cayman itself have an equity ownership in, direct foreign investment in, or control of, through such ownership
or investment, the VIE. Further, the Contractual Arrangements have not been tested in a court of law, including in China courts.





There
are uncertainties regarding the interpretation and application of PRC laws, rules and regulations, including the laws, rules and regulations
governing the validity and enforcement of the Contractual Arrangements between Infobird WFOE and Infobird Beijing. We have been advised
by our PRC counsel, Fangda Partners, based on their understanding of the current PRC laws, rules and regulations, that (i) the structure
for operating our business in China (including our corporate structure and Contractual Arrangements with Infobird WFOE, Infobird Beijing
and its shareholders) will not result in any violation of PRC laws or regulations currently in effect; and (ii) the Contractual Arrangements
among Infobird WFOE and Infobird Beijing and its shareholders governed by PRC law are valid, binding and enforceable, and will not result
in any violation of PRC laws or regulations currently in effect. However, there are substantial uncertainties regarding the interpretation
and application of current or future PRC laws and regulations concerning foreign investment in the PRC, and their application to and
effect on the legality, binding effect and enforceability of the Contractual Arrangements. In particular, we cannot rule out the possibility
that PRC regulatory authorities, courts or arbitral tribunals may in the future adopt a different or contrary interpretation or take
a view that is inconsistent with the opinion of our PRC legal counsel. Therefore, the Contractual Arrangements may be determined by PRC
authorities to be inconsistent with the laws and regulations of the PRC, including those related to foreign investment in certain industries.
Our ordinary shares could decline in value or become worthless if such determinations, changes, or interpretations result in our inability
to assert contractual control over the assets of our PRC subsidiaries and the VIE that conduct substantially all of our operations.





12







In
addition, if any of our PRC entities or their ownership structure or the Contractual Arrangements are determined to be in violation of
any existing or future PRC laws, rules or regulations, or any of our PRC entities fail to obtain or maintain any of the required governmental
permits or approvals, the relevant PRC regulatory authorities would have broad discretion in dealing with such violations, including:





| | ● | revoking the business and
    operating licenses;
| | - | -------------------------------------------------



| | ● | discontinuing or restricting
    the operations;
| | - | ------------------------------------------------



| | ● | imposing conditions or
    requirements with which the PRC entities may not be able to comply;
| | - | ----------------------------------------------------------------------------------------------



| | ● | requiring us and our PRC
entities to restructure the relevant ownership structure or operations, including termination of the Contractual Arrangements with the
VIE and deregistering the equity pledge of the VIE, which in turn would affect our ability to consolidate, derive economic interests
from, or exert effective control the VIE;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | restricting or prohibiting
    our use of the proceeds from our initial public offering to finance our business and operations in China, and taking other regulatory
    or enforcement actions that could be harmful to our business; or
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | imposing fines or confiscating
    the income from our PRC subsidiaries or the VIE.
| | - | -----------------------------------------------------------------------------------





The
imposition of any of these penalties would severely disrupt our ability to conduct business and have a material adverse effect on our
financial condition, results of operations and prospects.



The
shareholders of the VIE may have actual or potential conflicts of interest with us and as a result may refuse to perform, or may breach,
the Contractual Arrangements, which may materially and adversely affect our business and financial condition.



The
shareholders of the VIE may have actual or potential conflicts of interest with us. These shareholders may refuse to perform or sign
or may breach, or cause the VIE to breach, or refuse to renew, the existing Contractual Arrangements, which would have a material and
adverse effect on our ability to effectively control the VIE and receive economic benefits from it. As a result, control over, and funds
due from, the VIE may be jeopardized if the shareholders of the VIE breach, or refuse to renew, the Contractual Arrangements. For example,
the shareholders may be able to cause our agreements with the VIE to be performed in a manner adverse to us by, among other things, failing
to remit payments due under the Contractual Arrangements to us on a timely basis. We cannot assure you that when conflicts of interest
arise any or all of these shareholders will act in the best interests of our company or such conflicts will be resolved in our favor.
Currently, we do not have any arrangements to address potential conflicts of interest between these shareholders and our company. If
we cannot resolve any conflict of interest or dispute between us and these shareholders, we would have to rely on legal proceedings,
which could result in disruption of our business and subject us to substantial uncertainty as to the outcome of any such legal proceedings.



Any
failure by the VIE or its shareholders to perform their obligations under the Contractual Arrangements, or any unauthorized use of indicia
of corporate power or authority, would have a material adverse effect on our business.



If
the VIE or its shareholders fail to perform their respective obligations under the Contractual Arrangements or if any physical instruments,
such as chops and seals, or other indicia of corporate power or authority, are used without our authorization, we may have to incur substantial
costs and expend additional resources to seek legal remedies under PRC laws, including specific performance or injunctive relief, and/or
claiming damages, which we cannot assure you will be effective under PRC laws. For example, if the shareholders of the VIE were to refuse
to transfer their equity interest in the VIE to us or our designee if we exercise the purchase option pursuant to the Contractual Arrangements,
or if they were otherwise to act in bad faith toward us, then we may have to take legal action to compel them to perform their contractual
obligations.



The
Contractual Arrangements are governed by PRC laws. Accordingly, any disputes would be resolved in accordance with PRC legal procedures.
The legal environment in the PRC is not as developed as in other jurisdictions, such as the U.S. As a result, uncertainties in the PRC
legal system could limit our ability to enforce the Contractual Arrangements or could affect the validity of the Contractual Arrangements,
and as a result we may not be able to exert effective control over the VIE, and our ability to conduct our business may therefore be
materially adversely affected.



Our current corporate
structure and business operations may be affected by the relatively newly enacted Foreign Investment Law.







On March 15, 2019, the National
People’s Congress approved the Foreign Investment Law, which took effect on January 1, 2020. In addition, the State Council approved
the Regulation on Implementing the PRC Foreign Investment Law, or the Implementation Regulations, on December 26, 2019, effective from
January 1, 2020. Since they are relatively new, uncertainties exist in relation to their interpretation. The Foreign Investment Law does
not explicitly classify whether variable interest entities that are controlled through contractual arrangements would be deemed as foreign-invested
enterprises if they are ultimately “controlled” by foreign investors. However, it has a catch-all provision under definition
of “foreign investment” that includes investments made by foreign investors in China through other means as provided by laws,
administrative regulations or the State Council of the PRC, or the State Council. Therefore, it still leaves leeway for future laws,
administrative regulations or provisions of the State Council to provide for contractual arrangements as a form of foreign investment.
Therefore, there can be no assurance that our control over the VIE through contractual arrangements will not be deemed as foreign investment
in the future.





The
Foreign Investment Law grants national treatment to foreign-invested entities, except for those foreign-invested entities that operate
in industries specified as either “restricted” or “prohibited” from foreign investment in a “negative list”.
The Foreign Investment Law provides that foreign-invested entities operating in “restricted” or “prohibited”
industries will require market entry clearance and other approvals from relevant PRC government authorities. If our control over the
VIE through contractual arrangements are deemed as foreign investment in the future, and any business of the VIE is “restricted”
or “prohibited” from foreign investment under the “negative list” effective at the time, we may be deemed to
be in violation of the Foreign Investment Law, the contractual arrangements that allow us to have control over the VIE may be deemed
as invalid and illegal, and we may be required to unwind such contractual arrangements and/or restructure our business operations, any
of which may have a material adverse effect on our business operations.











13







Furthermore,
if future laws, administrative regulations or provisions mandate further actions to be taken by companies with respect to existing contractual
arrangements, we may face substantial uncertainties as to whether we can complete such actions in a timely manner, or at all. Failure
to take timely and appropriate measures to cope with any of these or similar regulatory compliance challenges could materially and adversely
affect our current corporate structure and business operations.



If
any of our affiliated entities becomes the subject of a bankruptcy or liquidation proceeding, we may lose the ability to use and enjoy
assets held by such entity, which could materially and adversely affect our business, financial condition and results of operations.



We
currently conduct our operations in China through our Contractual Arrangements. As part of these arrangements, substantially all of our
assets that are significant to the operation of our business are held by our affiliated entities. If any of these entities becomes bankrupt
and all or part of their assets become subject to liens or rights of third-party creditors, we may be unable to continue some or all
of our business activities, which could materially and adversely affect our business, financial condition and results of operations.
In addition, if any of our affiliated entities undergoes a voluntary or involuntary liquidation proceeding, its equity owner or unrelated
third-party creditors may claim rights relating to some or all of these assets, which would hinder our ability to operate our business
and could materially and adversely affect our business, our ability to generate revenue and the market price of our ordinary shares.



Risks
Related to Doing Business in China



We
face risks related to natural disasters, health epidemics and other outbreaks, specifically the coronavirus, which could significantly
disrupt our operations.



In recent years, there have
been outbreaks of epidemics in various countries, including China. Recently, there was an outbreak of a novel strain of coronavirus,
or COVID-19, in China, which spread rapidly to several parts of the world. COVID-19 has resulted in quarantines, travel restrictions,
and the temporary closure of stores and facilities throughout China and several other parts of the world. In March 2020, the World
Health Organization declared COVID-19 a pandemic.





Substantially
all of our revenues and our workforce are concentrated in China. Consequently, our results of operations will likely be adversely, and
may be materially, affected, to the extent that the COVID-19 pandemic or any other epidemic harms the Chinese and global economy in general.
Any potential impact to our results will depend on, to a large extent, future developments and new information that may emerge regarding
the duration and severity of the COVID-19 pandemic and the actions taken by government authorities and other entities to contain the
COVID-19 pandemic or treat its impact, almost all of which are beyond our control. Current and potential impacts include, but are not
limited to, the following:





| | ● | We temporarily closed our offices and implemented a work-from-home policy beginning in February 2020, as required by relevant PRC regulatory authorities. We reopened our offices in April 2020. We then closed our office again in Shanghai in April 2022 (which remain closed as of the date of this annual report), and the majority of the employees at our Beijing offices are working from home while such offices remain open as of the date of this annual report, as required by relevant PRC regulatory authorities. Our other offices in China remain open and employees are currently working onsite as of the date of this annual report;                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ● | Due to the nature of our business, the impact of the closure on our operational capabilities was not significant, as most of our work force continued working offsite during such office closures;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ● | Our customers were negatively impacted by COVID-19, which may reduce their budgets for customer services in 2021 and beyond. We experienced a slowdown in revenue growth in 2021, as our business was negatively impacted by the COVID-19 pandemic; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ● | The situation may worsen if the COVID-19 pandemic
    continues. Some of our customers has been affected by COVID-19 and requested additional time to pay us which required us to record additional
    allowances of $2.3 million. We will continue to closely monitor our payment collections throughout 2021 and beyond.
    
    Our construction progress in Guiyang has been further
    delayed due to the temporary postponement of certain activities by local government authorities to slow the spread of COVID-19. As a result,
    for the year ended December 31, 2021, we recorded an impairment of approximately $2.4 million through the delay of our construction progress
    and land use rights from our subsidiary, Infobird Guiyang. In addition, due to reduced profit projections as a result of the resurgence
    of COVID-19 in China in the first quarter of 2022 that caused lock-downs in various places in China, we recorded additional impairment
    on our intangible assets of $1.3 million for the year ended December 31, 2021.



Because of the uncertainty surrounding
the COVID-19 pandemic, the financial impact related to COVID-19 cannot be reasonably estimated at this time. Our consolidated results
for fiscal year 2021 have been adversely affected, but we expect our revenue in 2022 to increase due to demand for our services across
industries. However, due to various reasons, such as actual operational capability and the recent outbreak of COVID-19 in China, we cannot
guarantee that our total revenues for fiscal year 2022 will grow or remain at a similar level compared to fiscal year 2021, and such results
of operations for fiscal year 2022 may still be adversely impacted by the COVID-19 pandemic.





14







In
general, our business could be adversely affected by the effects of epidemics, including, but not limited to, COVID-19, avian influenza,
severe acute respiratory syndrome (SARS), the influenza A virus, Ebola virus, severe weather conditions such as a snowstorm, flood or
hazardous air pollution, or other outbreaks. In response to an epidemic, severe weather conditions, or other outbreaks, government and
other organizations may adopt regulations and policies that could lead to severe disruption to our daily operations, including temporary
closure of our offices and other facilities. These severe conditions may cause us and/or our partners to make internal adjustments, including
but not limited to, temporarily closing down business, limiting business hours, and setting restrictions on travel and/or visits with
clients and partners for a prolonged period of time. Various impacts arising from severe conditions may cause business disruption, resulting
in material, adverse impact to our financial condition and results of operations.



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



Substantially
all of our assets and operations are located in China. Accordingly, our business, financial condition, results of operations and
prospects may be influenced to a significant degree by political, economic and social conditions in China generally and therefore by
the significant discretion of Chinese governmental authorities. The Chinese economy differs from the economies of most developed
countries in many respects, including the level of government involvement, level of development, growth rate, control of foreign
exchange and allocation of resources. Although the PRC government has implemented measures emphasizing the utilization of market
forces for economic reform, the reduction of state ownership of productive assets, and the establishment of improved corporate
governance in business enterprises, a substantial portion of productive assets in China is still owned by the government. In
addition, the PRC government continues to play a significant role in regulating industry development by imposing industrial
policies. The PRC government also exercises significant control over China’s economic growth through allocating resources,
controlling payment of foreign currency-denominated obligations, setting monetary policy, and providing preferential treatment to
particular industries or companies. The increased global focus on environmental and social issues and China’s potential
adoption of more stringent standards in these areas may adversely impact the operations of China-based issuers, including
us.



While
the Chinese economy has experienced significant growth over past decades, growth has been uneven, both geographically and among various
sectors of the economy, and the rate of growth has been slowing since 2012. Any adverse changes in economic conditions in China, in the
policies of the PRC government or in the laws and regulations in China could have a material adverse effect on the overall economic growth
of China. Such developments could materially and adversely affect our business and operating results, lead to a reduction in demand for
our services and adversely affect our competitive position. The PRC government has implemented various measures to encourage economic
growth and guide the allocation of resources. Some of these measures may benefit the overall Chinese economy, but may have a negative
effect on us. For example, our financial condition and results of operations may be adversely affected by government control over capital
investments or changes in tax regulations. In addition, in the past the PRC government has implemented certain measures, including interest
rate adjustment, to control the pace of economic growth. These measures may cause decreased economic activity in China, which may materially
and adversely affect our business and operating results.



We
are based in, and our operations are located in, China through our subsidiaries, the VIE and its subsidiaries. Our ability to
operate in China may be impaired by changes in Chinese laws and regulations, including those relating to taxation, environmental regulation,
restrictions on foreign investment, and other matters.



Because
our operations are conducted in China through our subsidiaries, the VIE and its subsidiaries, the Chinese government may exercise
significant oversight and discretion over the conduct of our business, may intervene in or influence our operations at any time, and
may exertmore oversight and control over offerings conducted overseas and/or foreign
investment in China-based issuers, any of which such actions by the Chinese government could significantly limit or completely
hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly
decline or be worthless, and could result in a material change in our operations and/or the value of our ordinary shares. The
Chinese government has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy
through regulation and state ownership. The central Chinese government or local governments having jurisdiction within China may
impose new, stricter regulations, or interpretations of existing regulations, that would require additional expenditures and efforts
on our part to ensure our compliance with such regulations or interpretations. As such, our subsidiaries, the VIE and its
subsidiaries in the PRC may be subject to governmental and regulatory interference in the provinces in which they operate. We could
also be subject to regulation by various political and regulatory entities, including local and municipal agencies and other
governmental subdivisions. Our ability to operate in China may be impaired by any such laws or regulations, or any changes in laws
and regulations in the PRC. We may incur increased costs necessary to comply with existing and future laws and regulations or
penalties for any failure to comply. Recent statements by the Chinese government have indicated an intent to exert more oversight
and control over offerings that are conducted overseas and/or foreign investments in China-based issuers. Given the current
regulatory environment in the PRC, we are subject to the uncertainty of different interpretation and enforcement of rules and
regulations in the PRC adverse to us, which may be announced or implemented with little or no advance notice. Our operations could
be adversely affected, directly or indirectly, by existing or future laws and regulations relating to our business or industry,
particularly in the event permission to list on U.S. exchanges becomes required, or if such permission may be withheld or rescinded
once granted. Accordingly, the Chinese government’s actions in the future, including any decision to intervene in or influence
our operations at any time or to exert control over foreign investment in China-based issuers, may cause us to make material changes
to our operations, may significantly limit or completely hinder our ability to offer or continue to offer securities to investors,
and/or may cause the value of such securities to significantly decline or be worthless.





15







If
we become subject to the recent scrutiny, criticism and negative publicity involving U.S.-listed China-based companies, we may have to
expend significant resources to investigate and resolve the matter which could harm our business operations and our reputation and could
result in a loss of your investment in our ordinary shares, in particular if such matter cannot be addressed and resolved favorably.



Recently,
U.S. public companies that have substantially all of their operations in China have been the subject of intense scrutiny, criticism and
negative publicity by investors, financial commentators and regulatory agencies. Much of the scrutiny, criticism and negative publicity
has centered around financial and accounting irregularities, a lack of effective internal controls over financial accounting, inadequate
corporate governance policies or a lack of adherence thereto and, in some cases, allegations of fraud. As a result of the scrutiny, criticism
and negative publicity, the publicly traded stock of many U.S.-listed China-based companies has decreased in value and, in some cases,
has become virtually worthless. Many of these companies are now subject to shareholder lawsuits and SEC enforcement actions and are conducting
internal and external investigations into the allegations. It is not clear what effect this sector-wide scrutiny, criticism and negative
publicity will have on us or our business. If we become the subject of any unfavorable allegations, whether such allegations are proven
to be true or untrue, we will have to expend significant resources to investigate such allegations and/or defend our company. This situation
may be a major distraction to our management. If such allegations are not proven to be groundless, our business operations will be severely
hindered and your investment in our ordinary shares could be rendered worthless.



U.S.
regulatory bodies may be limited in their ability to conduct investigations or inspections of our operations in China.



Any
disclosure of documents or information located in China by foreign agencies may be subject to jurisdiction constraints and must comply
with China’s state secrecy laws, which broadly define the scope of “state secrets” to include matters involving economic
interests and technologies. There is no guarantee that requests from U.S. federal or state regulators or agencies to investigate or inspect
our operations will be honored by us, by entities who provide services to us or with whom we associate, without violating PRC legal requirements,
particularly those entities that are located within China. Furthermore, under the current PRC laws, an on-site inspection of our facilities
by any of these regulators may be limited or prohibited.



There
are uncertainties under the PRC laws relating to the procedures for U.S. regulators to investigate and collect evidence from companies
located in the PRC.



Shareholder
claims that are common in the United States, including securities law class actions and fraud claims, generally are difficult to pursue
as a matter of law or practicality in China. For example, in China, there are significant legal and other obstacles to obtaining information
needed for shareholder investigations or litigation outside China or otherwise with respect to foreign entities. Although the local authorities
in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to
implement cross-border supervision and administration, such regulatory cooperation with the securities regulatory authorities in the
Unities States have not been efficient in the absence of mutual and practical cooperation mechanism. According to Article 177 of the
PRC Securities Law, which became effective in March 2020, or Article 177, the securities regulatory authority of the State Council may
collaborate with securities regulatory authorities of other countries or regions in order to monitor and oversee cross border securities
activities. Article 177 further provides that overseas securities regulatory authorities are not allowed to carry out investigation and
evidence collection directly within the territory of the PRC, and that any Chinese entities and individuals are not allowed to provide
documents or materials related to securities business activities to overseas agencies without prior consent of the securities regulatory
authority of the State Council and the competent departments of the State Council.



Our
principal business operations are conducted in the PRC. In the event that the U.S. regulators carry out investigations on us and there
is a need to conduct investigation or collect evidence within the territory of the PRC, the U.S. regulators may not be able to carry
out such investigation or evidence collection directly in the PRC under the PRC laws. The U.S. regulators may consider cross-border cooperation
with securities regulatory authority of the PRC by way of judicial assistance, diplomatic channels or regulatory cooperation mechanism
established with the securities regulatory authority of the PRC. However, there is no assurance that the U.S. regulators could succeed
in establishing such cross-border cooperation in a specific case or could establish the cooperation in a timely manner. If U.S. regulators
are unable to conduct such investigations, such U.S. regulators may determine to suspend and ultimately delist our ordinary shares from
the Nasdaq Capital Market or choose to suspend or de-register our SEC registration.



Uncertainties
with respect to China’s legal system could materially and adversely affect us.



There
are risks arising from the legal system in China, including risks and uncertainties regarding the enforcement of laws. In particular,
there are uncertainties regarding the interpretation and enforcement of PRC laws, rules and regulations, and changes in policies, laws,
rules and regulations in the PRC could adversely affect us. Most of our operations are conducted in the PRC through our subsidiaries,
the VIE and its subsidiaries, and are governed by PRC laws, rules and regulations. The PRC legal system is a civil law system based on
written statutes. Unlike the common law system, prior court decisions under the civil law system may be cited for reference but have
limited precedential value.





In 1979, the PRC government
began to promulgate a comprehensive system of laws and regulations governing economic matters in general. The overall effect of legislation
over the past three decades has significantly enhanced the protections afforded to various forms of foreign investments in China. However,
PRC law still restricts certain foreign investments in China, and such laws are continually evolving, as more fully described under “Item
4. Information on the Company - B. Business Overview - Regulations - Regulations Relating to Foreign Investment”. China has not
developed a fully integrated legal system, and recently enacted laws and regulations may not sufficiently cover all aspects of economic
activities in China. In particular, the interpretation and enforcement of these laws and regulations involve uncertainties. Further,
rules and regulations in China can change quickly with little advance notice. In particular, because these laws, rules and regulations
are relatively new and quickly evolving, and because of the limited number of published decisions and the non-precedential nature of
these decisions, and because the laws, rules and regulations often give the relevant regulator certain discretion in how to enforce them,
the interpretation and enforcement of these laws, rules and regulations involve uncertainties and can be inconsistent and unpredictable.



Since PRC administrative and court authorities have significant discretion in interpreting
and implementing statutory provisions and contractual terms, it may be difficult to evaluate the outcome of administrative and
court proceedings and the level of legal protection we enjoy. These uncertainties may affect our judgment on the relevance of legal
requirements and our ability to enforce our contractual arrangements and rights, including under the Contractual Arrangements,
or tort claims. In addition, the regulatory uncertainties may be exploited through unmerited or frivolous legal actions or threats
in attempts to extract payments or benefits from us.





Furthermore,
the PRC legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or
at all and may have a retroactive effect. As a result, we may not be aware of our violation of any of these policies and rules until
sometime after the violation, which could result in a material change in our operations and/or the value of our ordinary shares. In
addition, any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources
and management attention. Further, such evolving laws and regulations and the inconsistent enforcement thereof could also lead to failure
to obtain or maintain licenses and permits to do business in China, which would adversely affect us.





16









Our business generates
and processes a large amount of data, and we are required to comply with PRC and other applicable laws relating to privacy and
cybersecurity. The improper use or disclosure of data could have a material and adverse effect on our business and prospects.





Our business generates and
processes a large quantity of data. We face risks inherent in handling and protecting a large volume of data. In general, we expect
that data security and data protection compliance will receive greater attention and focus from regulators, both domestically and
globally, as well as attract continued or greater public scrutiny and attention going forward, which could increase our compliance
costs and subject us to heightened risks and challenges associated with data security and protection. If we are unable to manage
these risks, we could become subject to penalties, including fines, suspension of business and revocation of required licenses, and
our reputation and results of operations could be materially and adversely affected.



The PRC regulatory and enforcement
regime with regard to data security and data protection is evolving and may be subject to different interpretations or significant changes.
Moreover, different PRC regulatory bodies, including the Standing Committee of the National People’s Congress, or the SCNPC, the
Ministry of Industry and Information Technology, or the MIIT, the CAC, the Ministry of Public Security, or the MPS and State Administration
of Market Regulation, or the SAMR, have enforced data privacy and protections laws and regulations with varying standards and applications.
See “Item 4. Information on the Company—B. Business Overview—Regulations—Regulations Relating to Information
Security and Privacy Protection.” Compliance with the PRC Cybersecurity Law, the PRC National Security Law, the Data Security Law,
the Personal Information Protection Law, the Cybersecurity Review Measures, as well as additional laws and regulations that may come
into effect in the future, including the Measures for the Security Assessment of Cross-border Data Transmission and other data security
and personal information protection laws and regulations, may result in a significant increase in our compliance costs, force us to change
our business practices, adversely affect our business performance as well as subject us to negative publicity, which could harm our reputation
among users and negatively affect the trading price of our securities. As many of these laws and regulations have not come into effect
yet, or only came into effect recently, there are uncertainties with respect to how they will be interpreted, implemented and enforced
in practice, and we may be subject to regulatory investigations, fines, suspension of businesses and revocation of licenses.



As of the date of this annual
report, we, our subsidiaries and the VIE, are not covered by permissions requirements from the CAC or any other governmental agency that
is required to approve the VIE’s operations, as we, our subsidiaries and the VIE (i) are not required to go through cybersecurity
review by the CAC, and (ii) have not received or were denied any such requisite permissions or approvals by any PRC authority. However,
considering that the interpretation and application of data protection laws are often uncertain, in flux and complicated, and the regulatory
framework in China for the protection of information in cyberspace is evolving quickly, we cannot assure you that we would be able to
fully comply with them. Any failure to or delay in clearing such review process would subject us to restrictions and penalties imposed
by the CAC or other PRC regulatory authorities, which could include fines and penalties on our operations in China, delays of or restrictions
on the repatriation of the proceeds from our offshore offerings into China, or other actions that could materially and adversely affect
our business, financial condition, results of operations, and prospects, as well as the trading price of our securities.



The following are examples of certain recent PRC regulatory activities
in this area:





Cybersecurity and Data Security



In June 2021, the SCNPC promulgated
the Data Security Law, which took effect in September 2021. The Data Security Law, among other things, provides for security review procedure
for data-related activities that may affect national security. The Data Security Law prohibits entities and individuals in China from
providing any foreign judicial or law enforcement authority with any data stored in China without approval from competent PRC authority,
and sets forth the legal liabilities of entities and individuals found to be in violation of their data protection obligations, including
rectification order, warning, fines, suspension of relevant business, and revocation of business permits or licenses. In July 2021, the
state council promulgated the Regulations on Protection of Critical Information Infrastructure, which became effective on September 1,
2021. Pursuant to this regulation, critical information infrastructure means key network facilities or information systems of critical
industries or sectors, such as public communication and information service, energy, transportation, water conservation, finance, public
services, e-government affairs and national defense science, the damage, malfunction or data leakage of which may endanger national security,
people’s livelihoods and the public interest. In December 2021, the CAC, together with other authorities, jointly promulgated the
Cybersecurity Review Measures, which became effective on February 15, 2022 and replaces its predecessor regulation. Pursuant to the Cybersecurity
Review Measures, critical information infrastructure operators that procure internet products and services must be subject to the cybersecurity
review if their activities affect or may affect national security. The Cybersecurity Review Measures further stipulates that network
platform operators that hold personal information of over one million users must apply with the Cybersecurity Review Office for a cybersecurity
review before any public listing on a foreign stock exchange. As of the date of this annual report, no detailed rules or implementation
rules have been issued by any authority and we have not been informed that we are a critical information infrastructure operator by any
government authorities. Furthermore, the exact scope of “critical information infrastructure operators” under the current
regulatory regime remains unclear, and the PRC government authorities may have wide discretion in the interpretation and enforcement
of the applicable laws. Therefore, it is uncertain whether we would be deemed to be a critical information infrastructure operator under
PRC law. If we are deemed to be a critical information infrastructure operator under the PRC cybersecurity laws and regulations, we may
be subject to obligations in addition to what we have fulfilled under the PRC cybersecurity laws and regulations.



In November 2021, the CAC released
the Regulations of Internet Data Security Management (Draft for Comments), or the Draft Regulations. The Draft Regulations provide that
data processors refer to individuals or organizations that, during their data processing activities such as data collection, storage,
utilization, transmission, publication and deletion, have autonomy over the purpose and the manner of data processing. In accordance
with the Draft Regulations, data processors shall apply for a cybersecurity review for certain activities, including, among other things,(i)
the listing in a foreign country of data processors that process the personal information of more than one million users and (ii) any
data processing activity that affects or may affect national security. However, there have been no clarifications from the relevant authorities
as of the date of this annual report as to the standards for determining whether an activity is one that “affects or may affect
national security.” In addition, the Draft Regulations requires that data processors that process “important data”
or are listed overseas must conduct an annual data security assessment by itself or commission a data security service provider to do
so, and submit the assessment report of the preceding year to the municipal cybersecurity department by the end of January each year.
As of the date of this annual report, the Draft Regulations was released for public comment only, and their respective provisions and
anticipated adoption or effective date may be subject to change with substantial uncertainty. In light of the fact that the interpretation
and application of data protection laws are often uncertain, in flux and complicated, it is possible that existing or newly introduced
laws and regulations, or their interpretation, application or enforcement, could significantly affect the value of our data, force us
to change our data collection, data use and other business practices, cause us to incur significant compliance costs, and subject us
to regulatory investigations, fines, suspension of businesses and revocation of licenses, which may materially and adversely affect our
business, financial condition, results of operations, and prospects, as well as the trading price of our securities. Furthermore, if
such regulations were to be adopted in their current form, given that our business generates and processes a large quantity of data,
we may be subject to additional regulatory obligations with respect to data security, and may face challenges in addressing their requirements
and amending our internal data processing policies and practices to ensure compliance therewith.





Moreover, on July 7, 2022,
the CAC promulgated the Measures for the Security Assessment of Cross-border Data Transmission, which will come into effect on September
1, 2022. According to these measures, personal data processors will be subject to security assessment conducted by the CAC prior to any
cross-border transfer of data if the transfer involves (i) important data; (ii) personal information transferred overseas by operators
of critical information infrastructure or a data processor that has processed personal data of more than one million persons; (iii) personal
information transferred overseas by a data processor who has already provided personal data of 100,000 persons or sensitive personal
data of 10,000 persons overseas since January 1 of last year; or (iv) other circumstances as requested by the CAC. According to the official
interpretation of the CAC, the Measures for the Security Assessment of Cross-border Data Transmission cover (1) overseas transmission
and storage by data processors of data generated during PRC domestic operations, and (2) access to or use of the data collected and generated
by data processors and stored in the PRC by overseas institutions, organizations or individuals. Furthermore, any cross-border data transfer
activities conducted in violation of the Measures for the Security Assessment of Cross-border Data Transmission before the effectiveness
of these measures are required to be rectified by March 2023. As of the date of this annual report, these measures have not taken effect,
and substantial uncertainties still exist with respect to the interpretation and implementation of these measures in practice and how
they will affect our business operations. Despite the fact that we do not collect or process personal data of more than one million persons,
nor collect or process personal data of 100,000 persons or sensitive personal data of 10,000 persons, considering that the interpretation
and application of data protection laws are often uncertain, in flux and complicated, if we were found by the regulatory authorities
to have failed to comply with the applicable rules and regulations on cyber security, we would be subject to warnings, fines, confiscation
of illegal revenue, revocation of licenses, cancellation of filings, or even criminal liability and our business, results of operations
and financial condition would also be adversely affected. Furthermore, in light of the evolving regulatory framework in China for the
protection of information in cyberspace, we may be subject to uncertainties of and adjustments to our business practices, which may incur
additional operating expenses and adversely affect our results of operations and financial condition.





Although
as of the date of this annual report, we, our subsidiaries and the VIE, are not covered by permissions requirements from the CAC or any
other governmental agency that is required to approve the VIE’s operations, considering the uncertainty of the interpretation and
application of data protection laws, we will closely monitor and assess any development in the rule-making process. To address the concerns
brought by the recently issued laws and regulations on data privacy and security, we are taking a more prudent approach in business operation
and believe we can reduce our risk of exposure related to the implementation of these laws and regulations to a certain extent by the
following measures:



| | l | Pay
                                            close attention to the latest trends in regulatory development and maintain continuous communication
                                            with the relevant regulatory authorities;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | l | Enhance
                                            and improve the data processing activities in accordance with the latest regulatory requirements;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------



| | l | Adopt
                                            additional security measures and internal control system to protect the customer data from
                                            the risks of data leakage, theft and destruction and illegal control, and make advanced preparations
                                            in light of the regulatory development; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | l | Continue
                                            to improve cybersecurity awareness in our future network development and deployment.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------



Although
we are making efforts to comply with the applicable laws, regulations and standards, there can be no assurance that our measures will
be effective and sufficient under the foregoing rules and regulations. If we were found by the regulatory authorities to have failed
to comply with the applicable rules and regulations on cyber security, we would be subject to warnings, fines, confiscation of illegal
revenue, revocation of licenses, cancellation of filings, or even criminal liability and our business, results of operations and financial
condition would also be adversely affected.





17







Personal Information
and Privacy



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



Many of
the data-related legislations are relatively new and certain concepts thereunder remain subject to interpretation by the regulators.
If any data that we possess belongs to data categories that are subject to heightened scrutiny, we may be required to adopt stricter
measures for protection and management of such data. The Cybersecurity Review Measures and the Draft Regulations remain unclear on whether
the relevant requirements will be applicable to companies that are already listed in the United States, such as us. We cannot predict
the impact of the Cybersecurity Review Measures and the Draft Regulations, if any, at this stage, and we will closely monitor and assess
any development in the rule-making process. If the Cybersecurity Review Measures and the enacted version of the Draft Regulations mandate
clearance of cybersecurity review and other specific actions to be taken by issuers like us, we face uncertainties as to whether these
additional procedures can be completed by us timely, or at all, which may subject us to government enforcement actions and investigations,
fines, penalties or suspension of our non-compliant operations, and materially and adversely affect our business and results of operations.
As of the date of this annual report, we have not been involved in any formal investigations on cybersecurity review made by the CAC
on such basis. In general, compliance with the existing PRC laws and regulations, as well as additional laws and regulations that PRC
regulatory bodies may enact in the future, related to data security and personal information protection, may be costly and result in
additional expenses to us, and subject us to negative publicity, which could harm our reputation and business operations. There are also
uncertainties with respect to how such laws and regulations will be implemented and interpreted in practice.

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

The Regulations on Mergers
and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies in
2006 and amended in 2009, requires an overseas special purpose vehicle formed for listing purposes through acquisitions of PRC
domestic companies and controlled by PRC persons or entities to obtain the approval of the CSRC prior to the listing and trading
of such special purpose vehicle’s securities on an overseas stock exchange. The interpretation and application of the regulations
remain unclear, and our offshore offerings may ultimately require approval of the CSRC. If the CSRC approval is required, it is
uncertain whether we can or how long it will take us to obtain the approval and, even if we obtain such CSRC approval, the approval
could be rescinded. Any failure to obtain or delay in obtaining the CSRC approval for any of our offshore offerings, or a rescission
of such approval if obtained by us, would subject us to sanctions imposed by the CSRC or other PRC regulatory authorities, which
could include fines and penalties on our operations in China, restrictions or limitations on our ability to pay dividends outside
of China, and other forms of sanctions that may materially and adversely affect our business, financial condition, and results
of operations.



On July 6, 2021, the relevant
PRC government authorities issued Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with the Law.
These opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas
listings by China-based companies and proposed to take effective measures, such as promoting the construction of relevant regulatory
systems to deal with the risks and incidents faced by China-based overseas-listed companies. As a follow-up, on December 24, 2021,
the CSRC issued a draft of the Provisions of the State Council on the Administration of Overseas Securities Offering and Listing
by Domestic Companies, and a draft of Administration Measures for the Filing of Overseas Securities Offering and Listing by Domestic
Companies for public comments. These draft measures propose to establish a new filing-based regime to regulate overseas offerings
and listings by domestic companies. Specifically, an overseas offering and listing by a PRC company, whether directly or indirectly,
an initial or follow-on offering, must be filed with the CSRC. The examination and determination of an indirect offering and listing
will be conducted on a substance-over-form basis, and an offering and listing shall be deemed as a PRC company’s indirect
overseas offering and listing if the issuer meets the following conditions: (i) any of the operating income, gross profit, total
assets, or net assets of the PRC enterprise in the most recent fiscal year was more than 50% of the relevant line item in the issuer’s
audited consolidated financial statement for that year; and (ii) senior management personnel responsible for business operations
and management are mostly PRC citizens or are ordinarily resident in the PRC, and the principal place of business is in the PRC
or carried out in the PRC. The issuer or its affiliated PRC entity, as the case may be, shall file with the CSRC for its initial
public offering, follow-on offering and other equivalent offing activities. Particularly, the issuer shall submit the filing with
respect to its initial public offering and listing within three business days after its initial filing of the listing application,
and submit the filing with respect to its follow-on offering within three business days after the completion of the follow-on offering.
Failure to comply with the filing requirements may result in fines to the relevant PRC companies, suspension of their businesses,
revocation of their business licenses and operation permits and fines on the controlling shareholder and other responsible persons.
Theses draft measures also set forth certain regulatory red lines for overseas offerings and listings by PRC enterprises. On April
2, 2022, the CSRC promulgated Provisions on Strengthening the Confidentiality and Archives Administration of Overseas Securities
Issuance and Listing by Domestic Enterprises (Draft for Comments), according to which, a domestic company that plans to, either
directly or through its overseas listed entity, publicly disclose or provide to relevant entities or individuals including securities
companies, securities service providers, and overseas regulators, documents and materials that contain state secrets or government
work secrets, shall first obtain approval from competent authorities according to law, and file with the secrecy administrative
department at the same level. A domestic company that plans to, either directly or through its overseas listed entity, publicly
disclose or provide to relevant entities or individuals including securities companies, securities service providers, and overseas
regulators, other documents and materials that, if divulged, will jeopardize national security or public interest, shall strictly
fulfil relevant procedures stipulated by applicable national regulations. For more information, see “Item 4. Information
on the Company—B. Business Overview—Regulations—Regulations Related to Mergers and Acquisitions and Overseas
Listings.”





18







There are substantial uncertainties
as to whether these draft measures to regulate direct or indirect overseas offering and listing would be further amended, revised
or updated, their enactment timetable and final content. As the CSRC may formulate and publish guidelines for filings in the future,
the draft of Administration Measures for the Filing of Overseas Securities Offering and Listing by Domestic Companies for public
comments does not provide for detailed requirements of the substance and form of the filing documents. In a Q&A released on
its official website, the respondent CSRC official indicated that the proposed new filing requirement will start with new companies
and the existing companies seeking to carry out activities like follow-on financing. As for the filings for the existing companies,
the regulator will grant adequate transition period and apply separate arrangements. The Q&A also addressed the contractual
arrangements and pointed out that if relevant domestic laws and regulations have been observed, companies with compliant VIE structure
may seek overseas listing after completion of the CSRC filings. Nevertheless, it does not specify what qualify as compliant VIE
structures and what relevant domestic laws and regulations are required to be complied with. The draft Provisions on Strengthening
the Confidentiality and Archives Administration of Overseas Securities Issuance and Listing by Domestic Enterprises does not provide
for a clear scope of government work secrets or the documents and materials that, if divulged, will jeopardize national security
or public interest, and the PRC government authorities may have wide discretion in the interpretation and enforcement of the applicable
laws. Given the substantial uncertainties surrounding the latest CSRC filing requirements at this stage, we cannot assure you that
we will be able to complete the filings and fully comply with the relevant new rules on a timely basis, if at all.









As of the date of this annual
report, we, our subsidiaries and the VIE, are not covered by permissions requirements from the CSRC, or any other governmental agency
that is required to approve the VIE’s operations, as we, our subsidiaries and the VIE (i) are not required to obtain permissions
from the CSRC; and (iii) have not received or were denied any such requisite permissions or approvals by any PRC authority.



However, given that our business
generates and processes a large quantity of data, in connection with any future overseas capital markets activities, we may need to obtain
permission from the CSRC or meet other regulatory requirements that may be adopted in the future by PRC authorities. To the extent such
requirements are or become applicable, we cannot assure you that we would be able to fully comply with them on a timely basis, if at
all. Any failure to obtain or delay in obtaining such permission or meeting such requirements would subject us to restrictions and penalties
imposed by the CSRC or other PRC regulatory authorities, which could include fines and penalties on our operations in China, delays of
or restrictions on the repatriation of the proceeds from our offshore offerings into China, or other actions that could materially and
adversely affect our business, financial condition, results of operations, and prospects, as well as the trading price of our securities.



Changes
in international trade policies, trade disputes, barriers to trade, or the emergence of a trade war may dampen growth in China and may
have a material adverse effect on our business.



Political
events, international trade disputes, and other business interruptions could harm or disrupt international commerce and the global economy,
and could have a material adverse effect on us and our customers, service providers, and other partners. International trade disputes
could result in tariffs and other protectionist measures which may materially and adversely affect our business. Tariffs could increase
the cost of the goods and products which could affect customers’ spending levels. In addition, political uncertainty surrounding
international trade disputes and the potential of the escalation to trade war and global recession could have a negative effect on customer
confidence, which could materially and adversely affect our business. We may have also access to fewer business opportunities, and our
operations may be negatively impacted as a result. In addition, the current and future actions or escalations by either the United States
or China that affect trade relations may cause global economic turmoil and potentially have a negative impact on our markets, our business,
or our results of operations, and we cannot provide any assurances as to whether such actions will occur or the form that they may take.







You
may experience difficulties in effecting service of legal process, enforcing foreign judgments, including those obtained in the U.S.,
or bringing actions in China against us or our management based on foreign laws.



We
are a holding company incorporated under the laws of the Cayman Islands. We conduct substantially all of our operations in China and
substantially all of our assets are located in China. In addition, all our senior employees reside within China for a significant portion
of the time and most are PRC residents. As a result, it may be difficult for our shareholders to effect service of process upon us or
those persons inside mainland China, including our management. In addition, China does not have treaties providing for the reciprocal
recognition and enforcement of judgments of courts with the Cayman Islands and many other countries and regions. Therefore, recognition
and enforcement in China of judgments of a court in any of these non-PRC jurisdictions, including the U.S., in relation to any matter
not subject to a binding arbitration provision may be difficult or impossible.



We
may rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may
have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material and adverse effect on our
ability to conduct our business.



We
are a Cayman Islands holding company and we rely principally on dividends and other distributions on equity from our PRC subsidiaries
for our cash requirements, including for services of any debt we may incur. Our PRC subsidiaries’ ability to distribute dividends
is based upon its distributable earnings. Current PRC regulations permit our PRC subsidiaries to pay dividends to its respective shareholders
only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, each
of our PRC subsidiaries is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve
until such reserve reaches 50% of its registered capital. Each of our PRC subsidiaries as a FIE is also required to further set aside
a portion of its after-tax profits to fund the employee welfare fund, although the amount to be set aside, if any, is determined at its
discretion. These reserves are not distributable as cash dividends. If our PRC subsidiaries incur debt on their own behalf in the future,
the instruments governing the debt may restrict their ability to pay dividends or make other payments to us. Any limitation on the ability
of our PRC subsidiaries to distribute dividends or other payments to their respective shareholders could materially and adversely limit
our ability to grow, make investments or acquisitions that could be beneficial to our businesses, pay dividends or otherwise fund and
conduct our business.





In addition, the Enterprise
Income Tax Law, or EIT Law, and its implementation rules provide that a withholding tax rate of up to 10% will be applicable to
dividends payable by Chinese companies to non-PRC-resident enterprises unless otherwise exempted or reduced according to treaties
or arrangements between the PRC central government and governments of other countries or regions where the non-PRC resident enterprises
are incorporated.







Pursuant to a special arrangement
between Hong Kong and China, such rate may be reduced to 5% if a Hong Kong resident enterprise owns more than 25% of the equity
interest in the PRC company. Under the Notice of the State Taxation Administration on Issues regarding the Administration of the
Dividend Provision in Tax Treaties promulgated in 2009, the taxpayer needs to satisfy certain conditions to enjoy the benefits
under a tax treaty. These conditions include, but are not limited to: (i) the taxpayer must be the beneficial owner of the relevant
dividends, and (ii) the corporate shareholder to receive dividends from the PRC subsidiaries must have met the direct ownership
thresholds during the 12 consecutive months preceding the receipt of the dividends. Further, the STA promulgated the Announcement
of the Certain Issues with Respect to the “Beneficial Owner” in Tax Treaties in 2018, which sets forth certain detailed
factors in determining “beneficial owner” status, and specifically, if an applicant’s business activities do
not constitute substantive business activities, the applicant will not qualify as a “beneficial owner.” Entitlement
to a lower tax rate on dividends according to tax treaties or arrangements between the PRC central government and governments of
other countries or regions is subject to the Administrative Measures for Non-Resident Taxpayers to Enjoy Treatments under Tax Treaties
promulgated by the STA on October 14, 2019 and became effective from January 1, 2020, which provides that non-resident enterprises
are not required to obtain pre-approval from the relevant tax authority in order to enjoy the reduced withholding tax. Instead,
non-resident enterprises and their withholding agents may, by self-assessment and on confirmation that the prescribed criteria
to enjoy the tax treaty benefits are met, directly apply the reduced withholding tax rate, collect and retain relevant materials
for reference in accordance with these treaties and accept supervision and management from the tax authorities.







PRC regulation of
loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may
restrict or prevent us from using the proceeds of our initial public offering to make loans or additional capital contributions
to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.





Any funds we transfer to
our PRC subsidiaries, either as a shareholder loan or as an increase in registered capital, are subject to approval by or registration
with relevant governmental authorities in China. According to the relevant PRC regulations on FIEs in China, capital contributions
to our PRC subsidiaries are subject to the requirement of making necessary filings in the Foreign Investment Comprehensive Management
Information System and registration with other governmental authorities in China. In addition, (a) any foreign loan procured by
our PRC subsidiaries is required to be registered with SAFE or its local branches, and (b) our PRC subsidiaries may not procure
loans which exceed the statutory limits. Any medium-or long- term loan to be provided by us to our PRC subsidiaries must be filed
and registered with the National Development and Reform Commission, or NDRC and the SAFE or its local branches. We may not obtain
these government approvals or complete such registrations on a timely basis, with respect to future capital contributions or foreign
loans by us to our PRC subsidiaries. If we fail to receive such approvals or complete such registration, our ability to use the
proceeds of our initial public offering and to capitalize our PRC operations may be negatively affected, which could materially
and adversely affect our liquidity and our ability to fund and expand our business.







19









In 2008, SAFE promulgated
the Circular on the Relevant Operating Issues Concerning the Improvement of the Administration of the Payment and Settlement of
Foreign Currency Capital of Foreign-Invested Enterprises, or SAFE Circular 142. SAFE Circular 142 regulates the conversion by FIEs
of foreign currency into Renminbi by restricting the usage of converted Renminbi. SAFE Circular 142 provides that any Renminbi
capital converted from registered capitals in foreign currency of FIEs may only be used for purposes within the business scopes
approved by PRC governmental authority and such Renminbi capital may not be used for equity investments within China unless otherwise
permitted by PRC law. In addition, the SAFE strengthened its oversight of the flow and use of Renminbi capital converted from registered
capital in foreign currency of FIEs. The use of such Renminbi capital may not be changed without SAFE approval, and such Renminbi
capital may not in any case be used to repay Renminbi loans if the proceeds of such loans have not been utilized. On July 4, 2014,
SAFE issued the Circular of the SAFE on Relevant Issues Concerning the Pilot Reform in Certain Areas of the Administrative Method
of the Conversion of Foreign Exchange Funds by Foreign-invested Enterprises, or SAFE Circular 36, which launched the pilot reform
of administration regarding conversion of foreign currency registered capitals of FIEs in 16 pilot areas. According to SAFE Circular
36, some of the restrictions under SAFE Circular 142 will not apply to the settlement of the foreign exchange capitals of an ordinary
FIE in the pilot areas, and such FIE is permitted to use Renminbi converted from its foreign-currency registered capital to make
equity investments in the PRC within and in accordance with the authorized business scope of such FIEs, subject to certain registration
and settlement procedure as set forth in SAFE Circular 36. On March 30, 2015, the SAFE promulgated the Circular on Reforming the
Management Approach Regarding the Foreign Exchange Capital Settlement of Foreign-Invested Enterprises, or SAFE Circular 19. SAFE
Circular 19 took effect as of June 1, 2015 and superseded SAFE Circular 36 and SAFE Circular 142 on the same date. SAFE Circular
19 launched a nationwide reform of the administration of the settlement of the foreign exchange capitals of FIEs and allows FIEs
to settle their foreign exchange capital at their discretion, but continues to prohibit FIEs from using the Renminbi fund converted
from their foreign exchange capitals for expenditure beyond their business scopes, providing entrusted loans or repaying loans
between non-financial enterprises. Violations of these Circulars could result in severe monetary or other penalties. SAFE Circular
19 may significantly limit our ability to use transfer any foreign currency we hold, including the net proceeds of our initial
public offering to fund the establishment of new entities in China by our subsidiaries, to invest in or acquire any other PRC companies
through our PRC subsidiaries, or to establish variable interest entities in the PRC, which may materially and adversely affect
our business, financial condition and results of operations. In light of the various requirements imposed by PRC regulations on
loans to and direct investment in PRC entities by offshore holding companies, we cannot assure you that we will be able to complete
the necessary registration or obtain the necessary approval on a timely basis, or at all. If we fail to complete the necessary
registration or obtain the necessary approval, our ability to make loans or equity contributions to our PRC subsidiaries may be
negatively affected, which could materially and adversely affect our PRC subsidiaries’ liquidity and its ability to fund
its working capital and expansion projects and meet its obligations and commitments.





Discontinuation
of any of the preferential tax treatments available to us or imposition of any additional taxes could adversely affect our financial
condition and results of operations.



The EIT Law and its implementation
rules, effective 2008, unified the previously existing separate income tax laws for domestic enterprises and FIEs and adopted a
unified 25% enterprise income tax, or the EIT, rate applicable to all resident enterprises in China, subject to certain exceptions.
In addition, certain enterprises may enjoy a preferential EIT rate of 15% under the EIT Law if they qualify as High and New Technology
Enterprise, or HNTE, subject to various qualification criteria. For example, in 2021, Infobird Beijing qualified as a HNTE and
was eligible for a 15% preferential tax rate effective for two years starting from 2021 to 2023. If Infobird Beijing fails to maintain
or renew its HNTE status, its applicable EIT rate may be increased to 25%, which could have a material adverse effect on our financial
condition and results of operations.











Fluctuations
in exchange rates could have a material and adverse effect on our results of operations and the value of your investment.



The
value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political
and economic conditions in China and by China’s foreign exchange policies. On July 21, 2005, the PRC government changed its decade-old
policy of pegging the value of the Renminbi to the U.S. dollar, and the Renminbi appreciated more than 20% against the U.S. dollar over
the following three years. Between July 2008 and June 2010, this appreciation halted and the exchange rate between the Renminbi and the
U.S. dollar remained within a narrow band. Since June 2010, the Renminbi has fluctuated against the U.S. dollar, at times significantly
and unpredictably. On November 30, 2015, the Executive Board of the International Monetary Fund (IMF) completed the regular five-year
review of the basket of currencies that make up the Special Drawing Right, or the SDR, and decided that with effect from October 1, 2016,
Renminbi is determined to be a freely usable currency and will be included in the SDR basket as a fifth currency, along with the U.S.
dollar, the Euro, the Japanese yen and the British pound. With the development of the foreign exchange market and progress towards interest
rate liberalization and Renminbi internationalization, the PRC government may in the future announce further changes to the exchange
rate system, and we cannot assure you that the Renminbi will not appreciate or depreciate significantly in value against the U.S. dollar
in the future. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the
Renminbi and the U.S. dollar in the future.



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



Very
limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into
any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging
transactions in the future, the availability and effectiveness of these hedges may be limited, and we may not be able to adequately hedge
our exposure, or at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict
our ability to convert Renminbi into foreign currency. As a result, fluctuations in exchange rates may have a material and adverse effect
on your investment.





20







PRC
governmental control of currency conversion
may limit our ability to utilize our net revenues effectively and affect the value of your investment.



The
PRC government imposes controls on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of
currency into or out of China, which essentially may restrict the ability to transfer funds into or out of China. We receive substantially
all of our revenues in Renminbi. Under our current corporate structure, our Cayman Islands holding company primarily relies on dividend
payments from our PRC subsidiaries to fund any cash and financing requirements we may have. Under existing PRC foreign exchange regulations,
payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions,
can be made in foreign currencies without prior approval of the SAFE by complying with certain procedural requirements. Specifically,
under the existing exchange restrictions, without prior approval of SAFE, cash generated from the operations of our PRC subsidiaries
in China may be used to pay dividends to our company. However, approval from or registration with appropriate government authorities
is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment
of loans denominated in foreign currencies. As a result, we need to obtain SAFE approval to use cash generated from the operations of
our PRC subsidiaries to pay off their respective debt in a currency other than Renminbi owed to entities outside China, or to make other
capital expenditure payments outside China in a currency other than Renminbi. The PRC government may at its discretion restrict access
to foreign currencies for current account transactions in the future. If the foreign exchange control system prevents us from obtaining
sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our
shareholders.









Certain
PRC regulations may make it more difficult for us to pursue growth through acquisitions.





Among other things, the
Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, adopted by six PRC
regulatory agencies in 2006 and amended in 2009, established additional procedures and requirements that could make merger and
acquisition activities by foreign investors more time-consuming and complex. Such regulation requires, among other things, that
the MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor acquires control of a PRC domestic
enterprise or a foreign company with substantial PRC operations, if certain thresholds under the Provisions on Thresholds for Prior
Notification of Concentrations of Undertakings, issued by the State Council in 2008, are triggered. Moreover, the Anti-Monopoly
Law promulgated by the Standing Committee of the NPC which became effective in 2008 requires that transactions which are deemed
concentrations and involve parties with specified turnover thresholds must be cleared by the MOFCOM before they can be completed.
In addition, PRC national security review rules which became effective in September 2011 require acquisitions by foreign investors
of PRC companies engaged in military related or certain other industries that are crucial to national security be subject to security
review before consummation of any such acquisition. In 2011, the General Office of the State Council promulgated a Notice on Establishing
the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, also known as Circular 6,
which officially established a security review system for mergers and acquisitions of domestic enterprises by foreign investors.
Further, MOFCOM promulgated the Regulations on Implementation of Security Review System for the Merger and Acquisition of Domestic
Enterprises by Foreign Investors, effective in September 2011, to implement Circular 6. Under Circular 6, a security review is
required for mergers and acquisitions by foreign investors having “national defense and security” concerns and mergers
and acquisitions by which foreign investors may acquire the “de facto control” of domestic enterprises with “national
security” concerns. Under the foregoing MOFCOM regulations, MOFCOM will focus on the substance and actual impact of the transaction
when deciding whether a specific merger or acquisition is subject to security review. If MOFCOM decides that a specific merger
or acquisition is subject to a security review, it will submit it to the Inter-Ministerial Panel, an authority established under
Circular 6 led by the NDRC, and MOFCOM under the leadership of the State Council, to carry out security review. The regulations
prohibit foreign investors from bypassing the security review by structuring transactions through trusts, indirect investments,
leases, loans, control through contractual arrangements or offshore transactions. There is no explicit provision or official interpretation
stating that the merging or acquisition of a company engaged in the software services business requires security review, and there
is no requirement that acquisitions completed prior to the promulgation of the Security Review Circular are subject to MOFCOM review.
On December 19, 2020, the NDRC and the MOFCOM jointly promulgated the Measures on the Security Review of Foreign Investment, effective
on January 18, 2021, setting forth provisions concerning the security review mechanism on foreign investment, including the types
of investments subject to review, review scopes and procedures, among others. The Office of the Working Mechanism of the Security
Review of Foreign Investment, or the Office of the Working Mechanism, will be established under the NDRC, who will lead the task
together with the MOFCOM. Foreign investor or relevant parties in China must declare the security review to the Office of the Working
Mechanism prior to the investments in, among other industries, important cultural products and services, important information
technology and internet products and services, important financial services, key technologies and other important fields relating
to national security, and obtain control in the target enterprise. See “Item 4. Information on the Company—B. Business
Overview—Regulations— Regulations Relating to Foreign Investment.”





We may pursue potential strategic acquisitions that are complementary to our business and operations. Complying with the
requirements of these regulations to complete such transactions could be time-consuming, and any required approval processes, including
obtaining approval or clearance from the MOFCOM, may delay or inhibit our ability to complete such transactions, which could affect our
ability to expand our business or maintain our market share.



PRC
regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident beneficial
owners or our PRC subsidiaries to liability or penalties, limit our ability to inject capital into our PRC subsidiaries, limit our PRC
subsidiaries’ ability to increase their registered capital or distribute profits to us, or may otherwise adversely affect us.



In
July 2014, SAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore
Investment and Financing and Roundtrip Investment Through Special Purpose Vehicles, or SAFE Circular 37, to replace the Notice on Relevant
Issues Concerning Foreign Exchange Administration for Domestic Residents’ Financing and Roundtrip Investment Through Offshore Special
Purpose Vehicles, or SAFE Circular 75, which ceased to be effective upon the promulgation of SAFE Circular 37. SAFE Circular 37 requires
PRC residents (including PRC individuals and PRC corporate entities) to register with SAFE or its local branches in connection with their
direct or indirect offshore investment activities. SAFE Circular 37 is applicable to our shareholders who are PRC residents and may be
applicable to any offshore acquisitions that we make in the future.



Under
SAFE Circular 37, PRC residents who make, or have prior to the implementation of SAFE Circular 37 made, direct or indirect investments
in offshore SPVs will be required to register such investments with the SAFE or its local branches. In addition, any PRC resident who
is a direct or indirect shareholder of a SPV is required to update its filed registration with the local branch of SAFE with respect
to that SPV, to reflect any material change. Moreover, any subsidiary of such SPV in China is required to urge the PRC resident shareholders
to update their registration with the local branch of SAFE. If any PRC shareholder of such SPV fails to make the required registration
or to update the previously filed registration, the subsidiary of such SPV in China may be prohibited from distributing its profits or
the proceeds from any capital reduction, share transfer or liquidation to the SPV, and the SPV may also be prohibited from making additional
capital contributions into its subsidiary in China. On February 13, 2015, the SAFE promulgated a Notice on Further Simplifying and Improving
Foreign Exchange Administration Policy on Direct Investment, or SAFE Circular 13, which became effective on June 1, 2015. Under SAFE
Circular 13, applications for foreign exchange registration of inbound foreign direct investments and outbound overseas direct investments,
including those required under SAFE Circular 37, will be filed with qualified banks instead of the SAFE. The qualified banks will directly
examine the applications and accept registrations under the supervision of the SAFE.



We
cannot assure you that all of our shareholders that may be subject to SAFE regulations have completed all necessary registrations with
the local SAFE branch or qualified banks as required by SAFE Circular 37, and we cannot assure you that these individuals may continue
to make required filings or updates on a timely manner, or at all. We can provide no assurance that we are or will in the future continue
to be informed of identities of all PRC residents holding direct or indirect interest in our company. Any failure or inability by such
individuals to comply with the SAFE regulations may subject us to fines or legal sanctions, such as restrictions on our cross-border
investment activities or our PRC subsidiaries’ ability to distribute dividends to, or obtain foreign exchange-denominated loans
from, our company or prevent us from making distributions or paying dividends. As a result, our business operations and our ability to
make distributions to you could be materially and adversely affected.





21







Furthermore,
as these foreign exchange regulations are still relatively new and their interpretation and implementation has been constantly evolving,
it is unclear how these regulations, and any future regulation concerning offshore or cross-border transactions, will be interpreted,
amended and implemented by the relevant government authorities. For example, we may be subject to a more stringent review and approval
process with respect to our foreign exchange activities, such as remittance of dividends and foreign-currency-denominated borrowings,
which may materially and adversely affect our financial condition and results of operations. In addition, if we decide to acquire a PRC
domestic company, we cannot assure you that we or the owners of such company, as the case may be, will be able to obtain the necessary
approvals or complete the necessary filings and registrations required by the foreign exchange regulations. This may restrict our ability
to implement our acquisition strategy and could adversely affect our business and prospects.



As
of the date of this annual report, to our knowledge, all of our shareholders had registered according to SAFE Circular 37.





We
face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.



On
February 3, 2015, the State Administration of Taxation of the PRC, or the SAT, issued the Announcement of the State Administration of
Taxation on Several Issues Relating to Enterprise Income Tax on Indirect Transfers of Assets by Non-resident Enterprises, or SAT Bulletin
7, which was partially abolished on December 1, 2017 and December 29, 2017. SAT Bulletin 7 extends its tax jurisdiction to transactions
involving transfer of taxable assets through the offshore transfer of a foreign intermediate holding company. In addition, SAT Bulletin
7 has introduced safe harbors for internal group restructurings and the purchase and sale of equity through a public securities market.
SAT Bulletin 7 also brings challenges to both foreign transferor and transferee (or other person who is obligated to pay for the transfer)
of taxable assets.



On
October 17, 2017, the SAT issued the Announcement of the State Administration of Taxation on Issues Concerning the Withholding of Non-resident
Enterprise Income Tax at Source, or SAT Bulletin 37, which was partially revised. SAT Bulletin 37 came into effect on December 1, 2017.
The SAT Bulletin 37 further clarifies the practice and procedure of withholding of non-resident enterprise income tax.



Where
a non-resident enterprise transfers taxable assets indirectly by disposing of the equity interests of an overseas holding company, which
is an Indirect Transfer, the non-resident enterprise as either transferor or transferee, or the PRC entity that directly owns the taxable
assets, may report such Indirect Transfer to the relevant tax authority. Using a “substance over form” principle, the PRC
tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established
for the purpose of reducing, avoiding or deferring PRC tax. As a result, gains derived from such Indirect Transfer may be subject to
PRC enterprise income tax, and the transferee or other person who is obligated to pay for the transfer is obligated to withhold the applicable
taxes, currently at a rate of 10% for the transfer of equity interests in a PRC resident enterprise. Both the transferor and the transferee
may be subject to penalties under PRC tax laws if the transferee fails to withhold the taxes and the transferor fails to pay the taxes.



We
face uncertainties as to the reporting and other implications of certain past and future transactions where PRC taxable assets are involved,
such as offshore restructuring, sale of the shares in our offshore subsidiaries and investments. Our company may be subject to filing
obligations or taxed if our company is transferor in such transactions, and may be subject to withholding obligations if our company
is transferee in such transactions, under SAT Bulletin 7 and/or SAT Bulletin 37. For transfer of shares in our company by investors who
are non-PRC resident enterprises, our PRC subsidiaries may be requested to assist in the filing under SAT Bulletin 7 and/or SAT Bulletin
37. As a result, we may be required to expend valuable resources to comply with SAT Bulletin 7 and/or SAT Bulletin 37 or to request the
relevant transferors from whom we purchase taxable assets to comply with these circulars, or to establish that our company should not
be taxed under these circulars, which may have a material adverse effect on our financial condition and results of operations.



Additional
factors outside of our control related to doing business in China could negatively affect our business.



Additional
factors that could negatively affect our business include a potential significant revaluation of the Renminbi, which may result in an
increase in the cost of producing products in China, labor shortages and increases in labor costs in China as well as difficulties in
moving products manufactured in China out of the country, whether due to port congestion, labor disputes, slowdowns, product regulations
and/or inspections or other factors. Prolonged disputes or slowdowns can negatively impact both the time and cost of transporting goods.
Natural disasters or health pandemics impacting China can also have a significant negative impact on our business. Further, the imposition
of trade sanctions or other regulations against products imported by us from, or the loss of “normal trade relations” status
with, China, could significantly increase our cost of products exported outside of China and harm our business.





22







The
recent joint statement by the SEC and the Public Company Accounting Oversight Board, or the PCAOB, proposed rule changes submitted by
Nasdaq, and the Holding Foreign Companies Accountable Act, or the HFCAA, all call for additional and more stringent criteria to be applied
to emerging market companies upon assessing the qualification of their auditors, especially non-U.S. auditors who are not inspected by
the PCAOB.



On
April 21, 2020, SEC Chairman Jay Clayton and PCAOB Chairman William D. Duhnke III, along with other senior SEC staff, released a joint
statement highlighting the risks associated with investing in companies based in or that have substantial operations in emerging markets
including China. The joint statement emphasized the risks associated with lack of access for the PCAOB to inspect auditors and audit
work papers in China and higher risks of fraud in emerging markets.



On
May 18, 2020, Nasdaq filed three proposals with the SEC to (i) apply minimum offering size requirement for companies primarily operating
in a “Restrictive Market”, (ii) adopt a new requirement relating to the qualification of management or board of director
for Restrictive Market companies, and (iii) apply additional and more stringent criteria to an applicant or listed company based on the
qualifications of the company’s auditors.



On
May 20, 2020, the U.S. Senate passed the HFCAA requiring a foreign company to certify it is not owned or controlled by a foreign government
if the PCAOB is unable to audit specified reports because the company uses a foreign auditor not subject to PCAOB inspection. If the
PCAOB is unable to inspect the company’s auditors for three consecutive years, the issuer’s securities are prohibited to
trade on a national exchange. On December 2, 2020, the U.S. House of Representatives approved the HFCAA. On December 18, 2020, the HFCAA
was signed into law. Additionally, in July 2020, the U.S. President’s Working Group on Financial Markets issued recommendations
for actions that can be taken by the executive branch, the SEC, the PCAOB or other federal agencies and department with respect to Chinese
companies listed on U.S. stock exchanges and their audit firms, in an effort to protect investors in the United States. In response,
on November 23, 2020, the SEC issued guidance highlighting certain risks, and their implications to U.S. investors, associated with investments
in China-based issuers and summarizing enhanced disclosures the SEC recommends China-based issuers make regarding such risks.



On
December 2, 2021, the SEC adopted final amendments to its rules relating to the implementation of certain disclosure and documentation
requirements of the HFCAA, which took effect on January 10, 2022. We will be required to comply with these rules if the SEC identifies
us as having a “non-inspection” year, as defined in the rules, under a process to be subsequently established by the SEC.
The SEC is assessing how to implement other requirements of the HFCAA, including the listing and trading prohibition requirements described
above. Under the HFCAA, our securities may be prohibited from trading on the Nasdaq or other U.S. stock exchanges if our auditor is not
inspected by the PCAOB for three consecutive years, and this ultimately could result in our shares being delisted. Furthermore, on June
22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, which, if enacted, would amend the HFCAA
and require the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to
PCAOB inspections for two consecutive years instead of three consecutive years, meaning the number of “non-inspection” years
would be decreased from three to two, and thus, would reduce the time before securities may be prohibited from trading or delisted. On
September 22, 2021, the PCAOB adopted a final rule implementing the HFCAA, which provides a framework for the PCAOB to use when determining,
as contemplated under the HFCAA, whether the PCAOB is unable to inspect or investigate completely registered public accounting firms
located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction.



Pursuant to the HFCAA, on December
16, 2021, the PCAOB issued a determination report which found that the PCAOB is unable to inspect or investigate completely registered
public accounting firms headquartered in: (1) mainland China of the People’s Republic of China; and (2) Hong Kong, a Special Administrative
Region of the PRC, because of positions taken by PRC authorities in those jurisdictions. Our auditor, Friedman LLP, who audited our financial
statements for the fiscal years ended December 31, 2021, 2020 and 2019, is not headquartered in mainland China or Hong Kong and was not
identified by the PCAOB in its report on December 16, 2021 as a firm subject to the PCAOB’s determination. Notwithstanding the
foregoing, if the PCAOB is not able to fully conduct inspections of our auditor’s work papers in China, investors may be deprived
of the benefits of such inspection which could result in limitation or restriction of our access to the U.S. capital markets and trading
of our securities may be prohibited under the HFCAA.



The
lack of access to the PCAOB inspection in China prevents the PCAOB from fully evaluating audits and quality control procedures of the
auditors based in China. As a result, investors may be deprived of the benefits of such PCAOB inspections. The inability of the PCAOB
to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of these accounting firms’ audit
procedures or quality control procedures as compared to auditors outside of China that are subject to the PCAOB inspections, which could
cause existing and potential investors in our stock to lose confidence in our audit procedures and reported financial information and
the quality of our financial statements. Although our auditor was not identified by the PCAOB in its report as a firm subject to the
PCAOB’s determination, should the PCAOB be unable to fully conduct inspection of our auditor’s work papers in China, this
could adversely affect us and our securities for the reasons noted above.



Our auditor, Friedman LLP,
the independent registered public accounting firm that issues the audit report included elsewhere in this annual report and who audited
our financial statements for the fiscal years ended December 31, 2021, 2020 and 2019, as an auditor of companies that are traded publicly
in the United States and a firm registered with the PCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts
regular inspections to assess our auditor’s compliance with the applicable professional standards. Our auditor, Friedman LLP, is
headquartered in Manhattan, New York, and has been inspected by the PCAOB on a regular basis with the last inspection in June 2018. However,
the recent developments may add uncertainties and we cannot assure you whether Nasdaq or regulatory authorities would apply additional
and more stringent criteria to us after considering the effectiveness of our auditor’s audit procedures and quality control procedures,
adequacy of personnel and training, or sufficiency of resources, geographic reach or experience as it relates to the audit of our financial
statements.





23







Risks
Related to our Ordinary Shares



We
have identified material weaknesses in our internal control over financial reporting. If we fail to implement and maintain an effective
system of internal control, we may be unable to accurately report our operating results, meet our reporting obligations or prevent fraud.



Prior
to our initial public offering, we were a private company with limited accounting personnel and other resources with which to address
our internal controls and procedures. Our management has not completed an assessment of the effectiveness of our internal control over
financial reporting, and our independent registered public accounting firm has not conducted an audit of our internal control over financial
reporting.





In the course of auditing our
consolidated financial statements as of and for the year ended December 31, 2021, we and our independent registered public accounting
firm identified eight material weaknesses in our internal control over financial reporting. As defined in standards established by the
Public Company Accounting Oversight Board (United States), a “material weakness” is a deficiency, or a combination of deficiencies,
in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual
or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses identified relate to (i)
a lack of accounting staff and resources with appropriate knowledge of generally accepted accounting principles in the United States,
or U.S. GAAP, and SEC reporting and compliance requirements. The other material weaknesses related to the absence of policies and procedures
and related risk mitigations surrounding our IT policies and procedures, including (ii) deficiencies in third party vendor management,
(iii) deficiencies in backup management and recovery management, (iv) deficiencies in user accounts management, (v) lack of segregation
of duties and monitoring of privileged accounts, (vi) deficiencies in monitoring access to systems and data, (vii) deficiencies in password
management and (viii) deficiencies in vulnerability assessment and patch management. We are currently in the process of remediating the
material weaknesses described above and we intend to continue implementing the following measures, among others, to remediate the material
weaknesses. We plan to: (i) improve our reporting process by actively hiring more qualified accounting personnel; (ii) prepare a systematic
policies and procedures manual for our IT processes in order to develop enhanced risk assessment procedures and controls related to changes
in IT systems; (iii) regularly conduct internal evaluation for IT-related departments and all IT staff; (iv) regularly conduct network
security training for IT employees to provide employees with security awareness; (v) establish a qualification assessment procedure for
third-party service providers; (vi) improve demand analysis and detailed design/specification of new IT projects. All new IT projects
undergo user acceptance testing and implementation approval; (vii) ensure system and information security, strictly control the approval
of system permissions and review them regularly, enforce password complexity policies, and regularly audit and analyze logs; and (viii)
enforce and monitor IT standard procedures and safety management specifications.





We
are now a public company in the United States subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act of 2002
requires that we include a report of management on our internal control over financial reporting in our annual report on Form 20-F beginning
with this annual report for the fiscal year ending December 31, 2021. See “Item 15. Disclosure Controls and Procedures” for
further information. In addition, once we cease to be an “emerging growth company” as such term is defined under the JOBS
Act, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial
reporting. Our management may conclude that our internal control over financial reporting is not effective. Moreover, even if our management
concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting
its own independent testing, may issue a report that is qualified if it is not satisfied with our internal controls or the level at which
our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition,
our reporting obligations may place a significant strain on our management, operational and financial resources and systems for the foreseeable
future. We may be unable to timely complete our evaluation testing and any required remediation.



During
the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley
Act of 2002, we may identify other weaknesses and deficiencies in our internal control over financial reporting. In addition, if we fail
to maintain the adequacy of our internal control over financial reporting, as these standards are modified, supplemented or amended from
time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in
accordance with Section 404 of the Sarbanes-Oxley Act of 2002. Generally, if we fail to achieve and maintain an effective internal control
environment, we could suffer material misstatements in our consolidated financial statements and fail to meet our reporting obligations,
which would likely cause investors to lose confidence in our reported financial information. This could in turn limit our access to capital
markets, and harm our results of operations. Additionally, ineffective internal control over financial reporting could expose us to increased
risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory
investigations and civil or criminal sanctions.



An
active trading market for our ordinary shares may not be sustained.



Our
ordinary shares have been listed on Nasdaq only since April 20, 2021, and we cannot assure you that an active trading market for our
ordinary shares will be sustained or maintained. The lack of an active trading market may impair the value of your shares and your ability
to sell your shares at the time you wish to sell them. An inactive trading market may also impair our ability to raise capital by selling
our ordinary shares and entering into strategic partnerships or acquiring other complementary products, technologies or businesses by
using our ordinary shares as consideration. In addition, if we fail to satisfy exchange listing standards, we could be delisted, which
would have a negative effect on the price of our ordinary shares.



We
expect that the price of our ordinary shares will fluctuate substantially and you may not be able to sell your shares at or above the
price you purchased the shares at.







24







The
market price of our ordinary shares is likely to be highly volatile and may fluctuate substantially due to many factors, including:





| | ● | the volume and timing of sales
of our products;                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                       
| | ● | the introduction of new products
or product enhancements by us or others in our industry;                                                             
| |   |                                                                                                                                                       
| | ● | disputes or other developments
with respect to our or others’ intellectual property rights;                                                           
| |   |                                                                                                                                                       
| | ● | our ability to develop, obtain
regulatory clearance or approval for, and market new and enhanced products on a timely basis;                          
| |   |                                                                                                                                                       
| | ● | product liability claims or
other litigation;                                                                                                         
| |   |                                                                                                                                                       
| | ● | quarterly variations in our
results of operations or those of others in our industry;                                                                 
| |   |                                                                                                                                                       
| | ● | media exposure of our products
or of those of others in our industry;                                                                                 
| |   |                                                                                                                                                       
| | ● | changes in governmental regulations
or in reimbursement;                                                                                              
| |   |                                                                                                                                                       
| | ● | changes in earnings estimates
or recommendations by securities analysts; and                                                                          
| |   |                                                                                                                                                       
| | ● | general market conditions and
other factors, including factors unrelated to our operating performance or the operating performance of our competitors.





In
recent years, the stock markets generally have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate
to the operating performance of those companies. Broad market and industry factors may significantly affect the market price of our ordinary
shares, regardless of our actual operating performance.



In
addition, in the past, class action litigation has often been instituted against companies whose securities have experienced periods
of volatility in market price. Securities litigation brought against us following volatility in our stock price, regardless of the merit
or ultimate results of such litigation, could result in substantial costs, which would hurt our financial condition and operating results
and divert management’s attention and resources from our business.



Our
stock may trade below $5.00 per ordinary share and thus could be known as a penny stock, subject to certain exceptions. Trading in penny
stocks has certain restrictions and these restrictions could negatively affect the price and liquidity of our ordinary shares.



Our
stock may trade below $5.00 per share. As a result, our stock could be known as a “penny stock”, subject to certain exceptions,
which is subject to various regulations involving disclosures to be given to you prior to the purchase of any penny stock. The SEC has
adopted regulations which generally define a “penny stock” to be any equity security that has a market price of less than
$5.00 per share, subject to certain exceptions. Depending on market fluctuations, our ordinary shares could be considered to be a “penny
stock”, subject to certain exceptions. A penny stock is subject to rules that impose additional sales practice requirements on
broker/dealers who sell these securities to persons other than established members and accredited investors. For transactions covered
by these rules, the broker/dealer must make a special suitability determination for the purchase of these securities. In addition, a
broker/dealer must receive the purchaser’s written consent to the transaction prior to the purchase and must also provide certain
written disclosures to the purchaser. Consequently, the “penny stock” rules may restrict the ability of broker/dealers to
sell our ordinary shares, and may negatively affect the ability of holders of shares of our ordinary shares to resell them, if the “penny
stock” rules apply. These disclosures require you to acknowledge that you understand the risks associated with buying penny stocks
and that you can absorb the loss of your entire investment. Penny stocks generally do not have a very high trading volume. Consequently,
the price of the stock is often volatile and you may not be able to buy or sell the stock when you want to.



If
we fail to meet applicable listing requirements, Nasdaq may delist our ordinary shares from trading, in which case the liquidity and
market price of our ordinary shares could decline.



We
cannot assure you that we will be able to meet the continued listing standards of Nasdaq in the future. For
example, legislative or other regulatory action in the United States could result in listing standards or other requirements that, if
we cannot meet, may result in delisting and adversely affect our liquidity or the trading price of our shares that are listed or traded
in the United States.If we fail to comply with the applicable listing standards and Nasdaq delists our ordinary shares, we
and our shareholders could face significant material adverse consequences, including:





| | ● | a limited availability of market
quotations for our ordinary shares;                                                                                                                                                                                                        
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                             
| | ● | reduced liquidity for our ordinary
shares;                                                                                                                                                                                                                                  
| |   |                                                                                                                                                                                                                                                                             
| | ● | a determination that our ordinary
shares are “penny stock”, which would require brokers trading in our ordinary shares to adhere to more stringent rules and
possibly result in a reduced level of trading activity in the secondary trading market for our ordinary shares;
| |   |                                                                                                                                                                                                                                                                             
| | ● | a limited amount of news about
us and analyst coverage of us; and                                                                                                                                                                                                           
| |   |                                                                                                                                                                                                                                                                             
| | ● | a decreased ability for us
to issue additional equity securities or obtain additional equity or debt financing in the future.                                                                                                                                               







25







The
National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the
sale of certain securities, which are referred to as “covered securities.” Because we expect that our ordinary shares will
be listed on Nasdaq, such securities will be covered securities. Although the states are preempted from regulating the sale of our securities,
the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent
activity, then the states can regulate or bar the sale of covered securities in a particular case. Further, if we were no longer listed
on Nasdaq, our securities would not be covered securities and we would be subject to regulations in each state in which we offer our
securities.







A
significant portion of our total outstanding shares are restricted from immediate resale but may be sold into the market in the near
future. This could cause the market price of our ordinary shares to drop significantly, even if our business is doing well.





Sales of a substantial
number of our ordinary shares in the public market could occur at any time. We have issued and outstanding 5,093,315 ordinary
shares. Of that amount, 2,636,967 shares are restricted as of May 9, 2022  as a result of securities laws and/or lock-up
agreements, but will be able to be sold in the future subject to securities laws and/or lock-up agreements. If held by one of
our affiliates, the resale of those securities will be subject to volume limitations under Rule 144 of the Securities Act.



Our
directors, officers and principal shareholders have significant voting power and may take actions that may not be in the best interests
of our other shareholders.





Our directors, officers and principal
shareholders holding 5% or more of our ordinary shares, collectively, control approximately 50.12% of our outstanding ordinary shares.
As a result, these shareholders, if they act together, will be able to control the management and affairs of our company and most matters
requiring shareholder approval, including the election of directors and approval of significant corporate transactions. The interests
of these shareholders may not be the same as or may even conflict with your interests. For example, these shareholders could attempt to
delay or prevent a change in control of us, even if such change in control would benefit our other shareholders, which could deprive our
shareholders of an opportunity to receive a premium for their ordinary shares as part of a sale of us or our assets, and might affect
the prevailing market price of our ordinary shares due to investors’ perceptions that conflicts of interest may exist or arise.
As a result, this concentration of ownership may not be in the best interests of our other shareholders.





We
have broad discretion in the use of proceeds from our initial public offering designated for working capital and general corporate purposes.



In April 2021, we issued and
sold 1,250,000 ordinary shares in our initial public offering, and in June 2021, we issued and sold 25,000 ordinary shares pursuant to
the partial exercise of the underwriter’s over-allotment option in connection with our initial public offering. We have used net
proceeds from our initial public offering for strengthening sales and marketing, research and development, and general corporate purposes,
including the expenses we spent to become, and maintain our status as, a publicly listed company in the United States.   Within
those categories, we have not determined the specific allocation of the net proceeds. Our management will have broad discretion over
the use and investment of the net proceeds within those categories. Accordingly, investors have only limited information concerning management’s
specific intentions and will need to rely upon the judgment of our management with respect to the use of proceeds.





We
expect to incur significant additional costs as a result of being a public company, which may materially and adversely affect our business,
financial condition and results of operations.



As
a public company, we incur significant additional costs associated with corporate governance requirements, including rules and regulations
of the SEC, under the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and the Exchange Act,
as well as the rules of the Nasdaq. These rules and regulations are expected to significantly increase our accounting, legal and financial
compliance costs and make some activities more time-consuming. We also expect these rules and regulations to make it more expensive for
us to obtain and maintain directors’ and officers’ liability insurance. As a result, it may be more difficult for us to attract
and retain qualified persons to serve on our board of directors or as executive officers. Accordingly, increases in costs incurred as
a result of becoming a publicly traded company may materially and adversely affect our business, financial condition and results of operations.



Our
disclosure controls and procedures may not prevent or detect all errors or acts of fraud.



We
are subject to the periodic reporting requirements of the Exchange Act. We will design our disclosure controls and procedures to provide
reasonable assurance that information we must disclose in reports we file or submit under the Exchange Act is accumulated and communicated
to management, and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC.
We believe that any disclosure controls and procedures, no matter how well-conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met.



These
inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of
simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more
people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements
due to error or fraud may occur and not be detected.





26







Because
we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be
your sole source of gain.







We
have never declared or paid cash dividends. We currently intend to retain all of our future earnings, if any, to finance the growth and
development of our business. As a result, capital appreciation, if any, of our ordinary shares will be your sole source of gain for the
foreseeable future.



Securities
analysts may not publish favorable research or reports about our business or may publish no information at all, which could cause our
stock price or trading volume to decline.



If
a trading market for our ordinary shares develops, the trading market will be influenced to some extent by the research and reports that
industry or financial analysts publish about us and our business. We do not control these analysts. As a newly public company, we may
be slow to attract research coverage and the analysts who publish information about our ordinary shares will have had relatively little
experience with us or our industry, which could affect their ability to accurately forecast our results and could make it more likely
that we fail to meet their estimates. In the event we obtain securities or industry analyst coverage, if any of the analysts who cover
us provide inaccurate or unfavorable research or issue an adverse opinion regarding our stock price, our stock price could decline. If
one or more of these analysts cease coverage of us or fail to publish reports covering us regularly, we could lose visibility in the
market, which in turn could cause our stock price or trading volume to decline and result in the loss of all or a part of your investment
in us.



Recently
introduced economic substance legislation of the Cayman Islands may impact us and our operations.



The
Cayman Islands, together with several other non-European Union jurisdictions, has recently introduced legislation aimed at addressing
concerns raised by the Council of the European Union as to offshore structures engaged in certain activities which attract profits without
real economic activity. With effect from January 1, 2019, the International Tax Co-operation (Economic Substance) Law, 2018, or the Substance
Law, and issued Regulations and Guidance Notes came into force in the Cayman Islands introducing certain economic substance requirements
for “relevant entities” which are engaged in certain “relevant activities,” which in the case of exempted companies
incorporated before January 1, 2019, will apply in respect of financial years commencing July 1, 2019 and onwards. A “relevant
entity” includes an exempted company incorporated in the Cayman Islands, as is Infobird Cayman; however, it does not include an
entity that is tax resident outside of the Cayman Islands. Accordingly, for so long as Infobird Cayman is a tax resident outside of the
Cayman Islands, we are not required to satisfy the economic substance test set out in the Substance Law. Although it is presently anticipated
that the Substance Law will have little material impact on us and our operations, as the legislation is new and remains subject to further
clarification and interpretation, it is not currently possible to ascertain the precise impact of these legislative changes on us and
our operations.



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



We
are an exempted company incorporated under the laws of the Cayman Islands. Our corporate affairs are governed by our memorandum and articles
of association, the Companies Act (2021 Revision) of the Cayman Islands and the common law of the Cayman Islands. The rights of shareholders
to take action against our directors, actions by our minority shareholders and the fiduciary duties of our directors to us under Cayman
Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in
part from comparatively limited judicial precedent in the Cayman Islands as well as from the common law of England and Wales, the decisions
of whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of our shareholders and
the fiduciary duties of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial
precedent in some jurisdictions in the United States. In particular, the Cayman Islands have a less developed body of securities laws
than the United States. Some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate
law than the Cayman Islands. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action
in a federal court of the United States. Moreover, while under Delaware law, controlling shareholders owe fiduciary duties to the companies
they control and their minority shareholders, under Cayman Islands law, our controlling shareholders do not owe any such fiduciary duties
to our company or to our minority shareholders. Accordingly, our controlling shareholders may exercise their powers as shareholders,
including the exercise of voting rights in respect of their shares, in such manner as they think fit.





27









Shareholders
of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporate records (other than
the memorandum and articles of association) or to obtain copies of lists of shareholders of these companies. Our directors have discretion
under our amended and restated memorandum and articles of association to determine whether or not, and under what conditions, our corporate
records may be inspected by our shareholders, but are not obliged to make them available to our shareholders unless required by the Companies
Act of the Cayman Islands or other applicable law or authorized by the directors or by ordinary resolution. This may make it more difficult
for you to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders
in connection with a proxy contest.



Certain
corporate governance practices in the Cayman Islands, which is our home country, differ significantly from requirements for companies
incorporated in other jurisdictions such as the United States. Currently, we do not plan to rely on home country practices with
respect to any corporate governance matter. To the extent we choose to follow home country practices with respect to corporate governance
matters, our shareholders may be afforded less protection than they otherwise would under rules and regulations applicable to U.S. domestic
issuers.



As
a result of all of the above, our public shareholders may have more difficulty in protecting their interests in the face of actions taken
by our management, members of our board of directors or controlling shareholders than they would as public shareholders of a company
incorporated in the United States.



Certain
judgments obtained against us by our shareholders may not be enforceable.



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



We
are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.



We
are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from requirements
applicable to other public companies that are not emerging growth companies, including, most significantly, not being required to comply
with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 for so long as we remain an emerging growth
company. As a result, if we elect not to comply with such auditor attestation requirements, our investors may not have access to certain
information they may deem important.



The
JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards
until such date that a private company is otherwise required to comply with such new or revised accounting standards. We do not plan
to “opt out” of such exemptions afforded to an emerging growth company. As a result of this election, our financial statements
may not be comparable to those of companies that comply with public company effective dates.



We
qualify as a foreign private issuer and, as a result, we will not be subject to U.S. proxy rules and will be subject to Exchange Act
reporting obligations that permit less detailed and less frequent reporting than that of a U.S. domestic public company.



We
report under the Exchange Act as a non-U.S. company with foreign private issuer status. Because we qualify as a foreign private
issuer under the Exchange Act, we are exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public
companies, including (i) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in
respect of a security registered under the Exchange Act; (ii) the sections of the Exchange Act requiring insiders to file public
reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time;
and (iii) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing
unaudited financial and other specified information, or current reports on Form 8-K upon the occurrence of specified significant
events. In addition, our officers, directors and principal shareholders are exempt from the reporting and “short-swing” profit
recovery provisions of Section 16 of the Exchange Act and the rules thereunder. Therefore, our shareholders may not know on a timely
basis when our officers, directors and principal shareholders purchase or sell our ordinary shares. In addition, foreign private issuers
are not required to file their annual report on Form 20-F until one hundred twenty (120) days after the end of each fiscal
year, while U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10-K within seventy-five
(75) days after the end of each fiscal year. Foreign private issuers also are exempt from Regulation Fair Disclosure, aimed at preventing
issuers from making selective disclosures of material information. As a result of the above, you may not have the same protections afforded
to shareholders of companies that are not foreign private issuers.





28







If
we lose our status as a foreign private issuer, we would be required to comply with the Exchange Act reporting and other requirements
applicable to U.S. domestic issuers, which are more detailed and extensive than the requirements for foreign private issuers. We may
also be required to make changes in our corporate governance practices in accordance with various SEC and Nasdaq rules. The regulatory
and compliance costs to us under U.S. securities laws if we are required to comply with the reporting requirements applicable to a U.S.
domestic issuer may be significantly higher than the cost we would incur as a foreign private issuer. As a result, we expect that a loss
of foreign private issuer status would increase our legal and financial compliance costs and would make some activities highly time consuming
and costly. We also expect that if we were required to comply with the rules and regulations applicable to U.S. domestic issuers, it
would make it more difficult and expensive for us to obtain and maintain directors’ and officers’ liability insurance, and
we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These rules and regulations could
also make it more difficult for us to attract and retain qualified members of our board of directors.





As
a foreign private issuer, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ
significantly from Nasdaq corporate governance listing standards. These practices may afford less protection to shareholders than they
would enjoy if we complied fully with corporate governance listing standards.



As
a foreign private issuer, we are permitted to take advantage of certain provisions in the Nasdaq rules that allow us to follow our home
country law for certain governance matters. Certain corporate governance practices in our home country, the Cayman Islands, may differ
significantly from corporate governance listing standards. Currently, we do not plan to rely on home country practices with respect to
our corporate governance. If we choose to follow home country practices in the future, our shareholders may be afforded less protection
than they would otherwise enjoy under the Nasdaq corporate governance listing standards applicable to U.S. domestic issuers.



There
can be no assurance that we will not be a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for any taxable
year, which could result in adverse U.S. federal income tax consequences to U.S. holders of our ordinary shares.



A
non-U.S. corporation will be a PFIC for any taxable year if either (i) at least 75% of its gross income for such year consists of certain
types of “passive” income; or (ii) at least 50% of the value of its assets (based on an average of the quarterly values of
the assets) during such year is attributable to assets that produce passive income or are held for the production of passive income,
or the asset test. Based on our current and expected income and assets (taking into account the expected cash proceeds and our anticipated
market capitalization following our initial public offering), we do not presently expect to be a PFIC for the current taxable year or
the foreseeable future. However, no assurance can be given in this regard because the determination of whether we are or will become
a PFIC is a fact-intensive inquiry made on an annual basis that depends, in part, upon the composition of our income and assets. In addition,
there can be no assurance that the Internal Revenue Service, or IRS, will agree with our conclusion or that the IRS would not successfully
challenge our position. Fluctuations in the market price of our ordinary shares may cause us to become a PFIC for the current or subsequent
taxable years because the value of our assets for the purpose of the asset test may be determined by reference to the market price of
our ordinary shares. The composition of our income and assets may also be affected by how, and how quickly, we use our liquid assets
and the cash raised in our initial public offering. If we were to be or become a PFIC for any taxable year during which a U.S. Holder
holds our ordinary shares, certain adverse U.S. federal income tax consequences could apply to such U.S. Holder. See “Item 10.E.
Taxation— Passive Foreign Investment Company Consequences.”



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



As
discussed above, we are a foreign private issuer, and therefore, we are not required to comply with all of the periodic disclosure and
current reporting requirements of the Exchange Act. The determination of foreign private issuer status is made annually on the last business
day of an issuer’s most recently completed second fiscal quarter. We would lose our foreign private issuer status if, for example,
more than 50% of our ordinary shares are directly or indirectly held by residents of the United States and we fail to meet additional
requirements necessary to maintain our foreign private issuer status. If we lose our foreign private issuer status on this date, we will
be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms, which are more detailed
and extensive than the forms available to a foreign private issuer. We will also have to mandatorily comply with U.S. federal proxy requirements,
and our officers, directors and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions
of Section 16 of the Exchange Act. In addition, we will lose our ability to rely upon exemptions from certain corporate governance requirements
under the Nasdaq rules. As a U.S. listed public company that is not a foreign private issuer, we will incur significant additional legal,
accounting and other expenses that we will not incur as a foreign private issuer, and accounting, reporting and other expenses in order
to maintain a listing on a U.S. securities exchange.





29







ITEM
4. INFORMATION ON THE COMPANY



A.
History and Development of the Company



Our
company, Infobird Co., Ltd, or Infobird Cayman, is a holding company incorporated on March 26, 2020 under the laws of the Cayman Islands.
We have no substantive operations other than holding all of the outstanding share capital of Infobird International Limited, or Infobird
HK, which was established in Hong Kong on April 21, 2020. Infobird HK is also a holding company holding all of the outstanding equity
of Infobird Digital Technology (Beijing) Co., Ltd, or Infobird WFOE, which was established on May 20, 2020 under the laws of the PRC.



We,
through the variable interest entity, or VIE, Beijing Infobird Software Co., Ltd, or Infobird Beijing, a PRC limited liability
company, and through its subsidiaries, principally engage in developing and providing customer engagement cloud-based services. The officers
of Infobird Beijing are (i) Yimin Wu, chairman of the board of directors and the chief executive officer of each of Infobird Beijing
and Infobird Cayman; (ii) Hsiaochien Tseng, executive vice president of each of Infobird Beijing and Infobird Cayman; and (iii) Chunhsiang
Chen, vice president of Infobird Beijing and chief technology officer and vice president of Infobird Cayman. The board of directors of
Infobird Beijing consists of three individuals: (i) Yimin Wu; (ii) Bing Weng, a shareholder of Infobird Beijing and the sole director
and shareholder of OmniConnect Limited, one of Infobird Cayman’s principal shareholders; and (iii) Dongliang Jiang, one of Infobird
Cayman’s directors and the sole director and shareholder of Orbitchannel Limited, one of Infobird Cayman’s principal shareholders.



Infobird Beijing, a PRC limited
liability company, was established on October 26, 2001 under the laws of the PRC. On October 17, 2013, Infobird Beijing established a
90.18% owned subsidiary, Guiyang Infobird Cloud Computing Co., Ltd, or Infobird Guiyang, a PRC limited liability company, while Shengmin
Wu, the brother of Yimin Wu, owns 0.82% and Lanlan Luo, an unrelated third party, owns 9.00% of the noncontrolling interests in Infobird
Guiyang. On June 20, 2012, Infobird Beijing established a 99.95% owned subsidiary, Anhui Xinlijia E-commerce Co., Ltd (formerly known
as Anhui Infobird Software Information Technology Co., Ltd, which changed its name to Anhui Xinlijia E-commerce Co., Ltd in January 2022),
or Infobird Anhui, a PRC limited liability company, while Ji Meng, a shareholder of Infobird Beijing and a shareholder of one of our principal
shareholders, CRExperience Limited, owns 0.05% of the noncontrolling interests in Infobird Anhui. Infobird Guiyang engages in software
development and mainly provides business process outsourcing, or BPO, services to customers, and Infobird Anhui engages in software development
and mainly provides cloud services and technology solutions to customers.



On May 27, 2020, Infobird Cayman
completed a reorganization of entities under common control of its then existing shareholders, who collectively owned all of the equity
interests of Infobird Cayman prior to the reorganization. Infobird Cayman and Infobird HK were established as the holding companies of
Infobird WFOE. Infobird WFOE is the primary beneficiary for accounting purposes of Infobird Beijing and its subsidiaries. All of these
entities are under common control which results in the consolidation of Infobird Beijing and subsidiaries which have been accounted for
as a reorganization of entities under common control at carrying value. Infobird WFOE is deemed to have a controlling financial interest
and be the primary beneficiary for accounting purposes of Infobird Beijing because it has both of the following characteristics: (1)
the power to direct activities at Infobird Beijing that most significantly impact such entity’s economic performance, and (2) the
right to receive benefits from Infobird Beijing that could potentially be significant to such entity. The consolidated financial statements
are prepared on the basis as if the reorganization became effective as of the beginning of the first period presented in the consolidated
financial statements of Infobird Cayman. The sale of Infobird Cayman’s securities in March 2020 was in the same proportion as the
ownership of Infobird Beijing prior to the reorganization. To our knowledge, such investors still currently own their same interests
in Infobird Beijing.



On
December 2, 2021, Infobird Beijing completed a 51% acquisition of Shanghai Qishuo Technology Inc., or Shanghai Qishuo, a PRC limited
liability company and a SaaS provider of big data analysis to retail stores aimed at operation improvement, for approximately $1.3 million
(RMB 8.6 million). Shanghai Qishuo is a fast-growing provider of consumer product and retail store digitalization solutions.





On September 9, 2022, we effected
a1-for-5 share consolidation, or the share consolidation, of our ordinary shares pursuant
to our second amended and restated memorandum and articles of association, which is filed as Exhibit 1.2 to this annual report.
We have retroactively restated all share and per share data for all of the periods presented pursuant to ASC 260 to reflect the share
consolidation.





30







Contractual
Arrangements



Due to legal restrictions on foreign ownership and investment in, among other
areas, the development and operation of information technology in China, including cloud computing and big data analytics, we operate
our businesses in which foreign investment is restricted or prohibited in the PRC through certain PRC domestic companies through the Contractual
Arrangements. Neither we nor our subsidiaries own any equity interest in Infobird Beijing. As such, Infobird Beijing is controlled through
the Contractual Arrangements in lieu of direct equity ownership by Infobird Cayman or any of its subsidiaries. Such Contractual Arrangements
consist of a series of three agreements, along with shareholders’ powers of attorney, or POAs, and spousal consent letters, which
were signed on May 27, 2020.



Our affiliation with Infobird
Beijing is managed through the Contractual Arrangements, which agreements may not be as effective in providing us with control over Infobird
Beijing and its subsidiaries as direct ownership in controlling entities organized in the PRC, which often hold the licenses necessary
to conduct business in the PRC. The Contractual Arrangements are not equivalent to equity ownership in the business of the VIE. Neither
the investors in Infobird Cayman, the Cayman Islands holding company, nor Infobird Cayman itself have an equity ownership in, direct foreign
investment in, or control of, through such ownership or investment, the VIE. Further, the Contractual Arrangements have not been tested
in a court of law, including in China courts. The Contractual Arrangements are governed by and would be interpreted in accordance with
the laws of the PRC. If Infobird Beijing fails to perform the obligations under the Contractual Arrangements, we may have to rely on legal
remedies under the laws of the PRC, including seeking specific performance or injunctive relief and claiming damages. There is a risk
that we may be unable to obtain any of these remedies, which could affect our investors and the value of their investment. The legal environment
in the PRC is not as developed as in other jurisdictions. As a result, uncertainties in the PRC legal system could limit our ability to
enforce the Contractual Arrangements, or could affect the validity of the Contractual Arrangements. Thus, the Contractual Arrangements
may be less effective than direct ownership and we may incur substantial costs to enforce the terms of the Contractual Arrangements. See
“Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—We depend upon the Contractual
Arrangements in conducting our business in China, which may not be as effective as direct ownership.” In addition, such Contractual
Arrangements have not been tested in a court of law, including China courts, and we may face challenges enforcing these Contractual Arrangements
due to legal uncertainties and jurisdictional limits, and thus there are uncertainties regarding the status of the rights of the Cayman
Islands holding company with respect to the Contractual Arrangements with the VIE and its shareholders. See also “Item 3. Key Information—D.
Risk Factors—Risks Related to Our Corporate Structure—We conduct our business through Infobird Beijing by means of Contractual
Arrangements. If the PRC courts or administrative authorities determine that these Contractual Arrangements do not comply with applicable
regulations, we could be subject to severe penalties and our business could be adversely affected. In addition, changes in or different
interpretations of such PRC laws and regulations may also materially and adversely affect our business.”



The
significant terms of the Contractual Arrangements are as follows:



Exclusive
Business Cooperation Agreement



Pursuant
to the exclusive business cooperation agreement between Infobird WFOE and Infobird Beijing, Infobird WFOE has the exclusive right to
provide Infobird Beijing with technical support services, consulting services and other services, including technical support and training,
business management consultation, consultation, collection and research of technology and market information, marketing and promotion
services, customer order management and customer services, lease equipment or properties, provide legitimate rights to use software license,
provide deployment, maintenances and upgrade of software, design installation, daily management, maintenance and updating network system,
hardware and database, and other services requested by Infobird Beijing from time to time to the extent permitted under PRC law. In exchange,
Infobird WFOE is entitled to a service fee that equals to all of the consolidated net income. The service fee may be adjusted by Infobird
WFOE based on the actual scope of services rendered by Infobird WFOE and the operational needs and expanding demands of Infobird Beijing.
Pursuant to the exclusive business cooperation agreement, the service fees may be adjusted based on the actual scope of services rendered
by Infobird WFOE and the operational needs of Infobird Beijing.



The
exclusive business cooperation agreement remains in effect unless terminated in accordance with the following provision of the agreement
or terminated in writing by Infobird WFOE.



During
the term of the exclusive business cooperation agreement, Infobird WFOE and Infobird Beijing shall renew the operation term prior to
the expiration thereof so as to enable the exclusive business cooperation agreement to remain effective. The exclusive business cooperation
agreement shall be terminated upon the expiration of the operation term of either Infobird WFOE or Infobird Beijing if the application
for renewal of the operation term is not approved by relevant government authorities. If an application for renewal of the operation
term is not approved, according to the PRC Company Law, the expiration of the operation term may lead to the dissolution and cancellation
of such PRC company.



Exclusive
Option Agreements



Pursuant
to the exclusive option agreements among Infobird WFOE, Infobird Beijing and the shareholders who collectively owned all of Infobird
Beijing, such shareholders jointly and severally grant Infobird WFOE an option to purchase their equity interests in Infobird Beijing.
The purchase price shall be the lowest price then permitted under applicable PRC laws. Infobird WFOE or its designated person may exercise
such option at any time to purchase all or part of the equity interests in Infobird Beijing until it has acquired all equity interests
of Infobird Beijing, which is irrevocable during the term of the agreements.



The
exclusive option agreements remain in effect until all equity interest held by shareholders in Infobird Beijing has been transferred
or assigned to Infobird WFOE and/or any other person designated by the Infobird WFOE in accordance with such agreement.



Equity
Interest Pledge Agreements



Pursuant
to the equity interest pledge agreements, among Infobird WFOE, Infobird Beijing, and the shareholders who collectively owned all of Infobird
Beijing, such shareholders pledge all of the equity interests in Infobird Beijing to Infobird WFOE as collateral to secure the obligations
of Infobird Beijing under the exclusive business cooperation agreement and exclusive option agreements. These shareholders are prohibited
from transferring the pledged equity interests without the prior consent of Infobird WFOE unless transferring the equity interests to
Infobird WFOE or its designated person in accordance to the exclusive option agreements.





The equity interest pledge
agreements shall come into force the date on which the pledged interests are recorded, which is within three (3) days after signing
of the agreements on May 27, 2020, under Infobird Beijing’s register of shareholders and are registered with the competent
Administration for Market Regulation of Infobird Beijing until all of the obligations to Infobird WFOE have been fulfilled completely
by Infobird Beijing. Nineteen shareholders of Infobird Beijing have registered the pledges of equity interest with the competent
Administration for Market Regulation in accordance with the Civil Code of the PRC and we intend to register the pledge of equity
interest of one shareholder with the competent Administration for Market Regulation once practicable.





Shareholders’
POAs



Pursuant
to the shareholders’ POAs, the shareholders of Infobird Beijing give Infobird WFOE an irrevocable proxy to act on their behalf
on all matters pertaining to Infobird Beijing and to exercise all of their rights as shareholders of Infobird Beijing, including the
(i) right to attend shareholders meeting; (ii) to exercise voting rights and all of the other rights including but not limited to the
sale or transfer or pledge or disposition of the shares held in part or in whole; and (iii) designate and appoint on behalf of the shareholder
the legal representative, the directors, supervisors, the chief executive officer and other senior management members of Infobird Beijing,
and to sign transfer documents and any other documents in relation to the fulfillment of the obligations under the exclusive option agreements
and the equity interest pledge agreements. The shareholders’ POAs shall remain in effect while the shareholders of Infobird Beijing
hold the equity interests in Infobird Beijing.





31







Spousal
Consent Letters



Pursuant
to the spousal consent letters, the spouses of the shareholders of Infobird Beijing commit that they have no right to make any assertions
in connection with the equity interests of Infobird Beijing, which are held by the shareholders. In the event that the spouses obtain
any equity interests of Infobird Beijing, which are held by the shareholders, for any reasons, the spouses of the shareholders shall
be bound by the exclusive option agreement, the equity interest pledge agreement, the shareholder POA and the exclusive business cooperation
agreement and comply with the obligations thereunder as a shareholder of Infobird Beijing. The letters are irrevocable and shall not
be withdrawn without the consent of Infobird WFOE.



Based on the foregoing Contractual
Arrangements, which grant Infobird WFOE effective control of Infobird Beijing and subsidiaries and enable Infobird WFOE to receive all
of their expected residual returns, we account for Infobird Beijing as a VIE. Accordingly, we consolidate the accounts of Infobird Beijing
and subsidiaries for the periods presented herein, in accordance with Regulation S-X-3A-02 promulgated by the SEC, and Accounting Standards
Codification, or ASC, 810-10, Consolidation.



On
April 22, 2021, we completed our initial public offering, and since April 20, 2021, our ordinary shares have been listed on the Nasdaq
Capital Market under the symbol “IFBD”.



Our
principal executive office is located at Room 12A05, Block A, Boya International Center, Building 2, No. 1 Courtyard, Lize Zhongyi Road,
Chaoyang District, Beijing, China 100102. Our telephone number is 86-010-52411819. Our registered office in the Cayman Islands is located
at the office of Campbells Corporate Services Limited, Floor 4, Willow House, Cricket Square, Grand Cayman KY1-9010, Cayman Islands.



Our capital expenditures
were incurred primarily in connection with payment of property and equipment and software. Our capital expenditures were approximately
$2.2 million, $3.2 million and $2.1 million for the years ended December 31, 2021, 2020, and 2019, respectively. We were in the
process of constructing a cloud computing facility in Guiyang, China, which has been postponed due to the time needed to negotiate
with various vendors and to obtain various government permits, particularly due to the impacts of COVID-19. The facility is expected
to have two buildings consisting of approximately 43,000 square meters in total, which is expected to house our cloud and BPO services
operations and also fulfill the purposes of offices, research centers, logistics and employee dormitories. This facility is intended
to replace our current facilities in Guiyang and some of our facilities in Beijing and Hefei, China, which are currently leased.
We have completed demolition, underground structure and design. As we were in the process of negotiating with contractors and other
parties for the construction of the facility and obtaining various government permits for the start of construction, we had no
material existing capital expenditure commitments as of December 31, 2021. In June 2020, we obtained the Guiyang Provincial Enterprise
Investment Project Filing Certificate. Due to further delays of the project related to local governments’ limitation of economic
activities in response to the resurgence of COVID-19 variants, we recorded impairment loss of $2.0 million of our construction
in progress for the year ended December 31, 2021, as we were unable to estimate when we will obtain the permits to start construction
and we will continue leasing our facilities for expansion needs.





The
SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically
with the SEC on http://www.sec.gov. You can also find information on our website located at http://www.infobird.com. Information contained
on, or that can be accessed through, our website is not a part of, and shall not be incorporated by reference into, this annual report.



B.
Business Overview



We
are a software-as-a-service, or SaaS, provider of innovative AI-powered, or artificial intelligence enabled, customer engagement
solutions in China. Leveraging self-developed cloud-native architecture, AI and machine learning capabilities, patented Voice over
Internet Protocol or VoIP application technologies, no-code development platform, and in-depth industry expertise, we primarily
provide holistic software solutions to help our corporate clients proactively deliver and manage end-to-end customer engagement
activities at all stages of the sales process including pre-sales and sales activities and post-sales customer support. We also
offer AI-powered cloud-based sales force management software including intelligent quality inspection and intelligent training
software to help our clients monitor, benchmark and improve the performances of agents. We empower our clients with our business
value-driven solutions to increase revenue, reduce cost, and enhance customer service quality and customer satisfaction. We
currently specialize in serving corporate clients in the finance industry and also cover a broad array of other industries,
including the education, public services, healthcare and consumer products industries. We believe we are one of the leading and
long-standing domestic SaaS providers in serving large enterprises in the finance industry in customer engagement with over 10 years
of experience. We offer a comprehensive portfolio of customer engagement SaaS solutions that are highly intelligent, customizable
and with proof of stability and security at scale with concurrence of over 10,000 agents. We continue to innovate by developing
technologies that enable us to deliver a series of solutions and services which address the evolving and changing needs of our
corporate clientele.



We
rely on the following self-developed novel technologies to deliver customizable, high-quality, scalable, configurable, secure, and steady
customer engagement solutions.





| | ● | Cloud-native architecture.We use a cloud-native architecture as the basic infrastructure for our software, which empowers us with flexible scale-out capabilities
and high tolerance of failures and default, and supports ultra-large-scale concurrence capabilities.                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | ● | AI and machine learning
capabilities.We incorporate our self-developed natural language processing, or NLP, licensed automatic speech recognition, or
ASR, and text to speech, or TTS, to empower our software to have the capability of conducting multiple rounds of free conversations with
customers, referring to the context for better understanding, automatically capturing key words, recognizing the intentions of customers
and accurately converting voice to text or vice versa.                                                                                                                                                                                                                             
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | ● | Patented VoIP technologies.Our patented VoIP technologies ensure high-quality telecommunications through intelligent routing, multi-voice coding support,
and multi-endpoint access support. The intelligent routing and multi-voice coding support enable us to provide optimal voice transmission
quality by monitoring network fluctuation to deploy voice routing notes and adjusting voice coding based on the latest status of network
bandwidth.                                                                                                                                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | ● | No-code development platform.We developed a no-code development platform that is flexible by design, enabling us to deploy pre-coded microservice modules
and packages to quickly respond and adjust to customer requirements, and we can also combine microservice modules into customized end-to-end
solutions, and thus, significantly reduce the time required for our software engineers to program customized services and products for
our clients. Our software developed through the no-code development platform also supports open application programming interface, or
API, and software development kit, or SDK, and therefore allows easy integration with our clients’ call centers, websites and software.





Our
customer engagement services are founded on a series of our customer engagement software, and each may be used on an individual and/or
integrated basis. The following are the primary types of our fundamental software:







32







AI
Customer Engagement Software





| | ● | Cloud call center –
proprietary technologies that ensure scalable, steady, secure, and flexible access to accounts and also support functions which can automatically
initiate outbound calls by taking into account available agents, anticipated talk time, and anticipated wait time, and then distribute
the answered calls to the agents.                                                      
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                     
| | ● | Intelligent telemarketing– automatically initiate calls in batch files, which are files often used to help load programs, run multiple processes
at a time, and perform common or repetitive tasks, support AI voice Chatbot and collect information from interactions between sales representatives
and customers to create labels for each customer and to analyze and predict customer behaviors.
| |   |                                                                                                                                                                                                                                                                                                                                                                                                     
| | ● | Intelligent omni-channel
customer service– integrate interactions through telephone calls, videos, emails, social media platforms, websites, and text
messages, and provide tickets that can promote business flows across different departments.                                                                                                                                                   
| |   |                                                                                                                                                                                                                                                                                                                                                                                                     
| | ● | AI voice Chatbot and AI
text Chatbot- multiple rounds of free conversation with customers, referring to the context for better understanding, and recognizing
the intentions of customers.                                                                                                                                                                                                          





AI
Sales Force Management Software





| | ● | Intelligent quality inspection– monitoring and benchmarking performances of sales and customer service representatives, and aiding in the fulfillment of
obligations under compliance regulations.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                   
| | ● | Intelligent training–
interactive training sessions and tests with computers for sales and customer service representatives                                                                       





We
design our software to be easy to use, customizable and self-operated. We allow our clients to incorporate their business needs and/or
approach to customer management in our software by using our self-developed no-code programming technology. Clients may also configure
certain parameters and scripts for agents. Our software also allows easy integration with our clients’ call centers, websites and
software. Through years of experience serving our clients and analyzing the interactions between our clients and their customers, we
have accumulated valuable vertical knowledge and know-how of our clients’ industries. We continually strive to understand the objectives
of our clients at different stages of their businesses to further our understanding on their operating industries. We have integrated
this knowledge with our technology to develop software that provides a comprehensive customer experience.



We value our proprietary
technologies and strong research and development capabilities, which we believe differentiate us from other software companies
in the customer engagement industry. As of December 31, 2021, we had an intellectual property portfolio consisting of 19 patents,
52 software copyrights, 1 artwork copyright, 41 registered trademarks and 27 domain names in the PRC and 3 registered trademarks
outside of the PRC.







Our research and development department
was composed of 131 personnel, including software engineers and internet technology specialists, as of December 31, 2021, which accounted
for approximately 33.5% of our total employees. We have invested significantly in research and development and intend to continue to do
so. For the years ended December 31, 2021, 2020 and 2019, our research and development expenses amounted to approximately
$3.3 million, $1.9 million and $1.5 million, respectively.



In 2021, we had approximately 4,712
average monthly paid user accounts. We have been diversifying and expanding our customer base with our standard cloud-based services which
require less customization effort than customized cloud-based services and are capable of scaling quickly. With prevailing standard cloud-based
services, we gradually decreased the percentage of revenue generated from China Guangfa Bank in our total revenue from 77.3% for the year
ended December 31, 2019 to 34.8% for the year ended December 31, 2020 and 0% for the year ended December 31, 2021. Our ability
to maintain close relationships with our clients is essential to the growth and profitability of our business. Through constant technological
innovation and accumulated vertical knowledge in our clients’ industries, we continue to build strong relationships with our clients.
Once a client utilizes our solutions, we subsequently seek to deepen such relationships through cross-selling and upselling our services
and products. We deploy both direct and indirect sales approaches, including outreach by our sales team, organizing and participating
in forums and seminars, online advertising, and cooperating with referral and reseller partners. The majority of our sales team is based
in four major cities in China: Beijing, Shanghai, Guangzhou, and Guiyang, which cover the most developed and populated cities of China.









We
intend to further expand our client base and increase our market share in the finance industry, as well as penetrating other
industries with our enhanced sales and marketing efforts. We plan to conduct a better client lifecycle management, expand our sales
team, cooperate with referral or reseller partners, continue to organize and participate in forums and seminars, launch online and
offline advertising campaigns, and improve our website and social media accounts. We also plan to attract new clients, and retain
existing clients, by continuing to innovate our products and services. In addition, we intend to construct the following
capabilities in our AI applications: customer engagement hub, one single view of customer, knowledge graphs, and customer journey
maps, in order to facilitate proactive customer engagement through consolidation of interactions with customers from various
channels, including telephone, email, social media platforms, websites and text messages, among others, along with predictions of
customers’ intentions and behaviors.



For
information on our financial performance, see “Item 5.A. Operating Results.”



Our
Products and Services





We offer cloud-based standard
and customized customer engagement services with various SaaS and BPO services to corporate clients. Our customer engagement services
are generally categorized into (i) standard cloud-based services, which are our standard SaaS or assembly of some of our fundamental SaaS
to meet our clients’ needs, which generally requires less resources than our customized cloud-based services, and (ii) customized
cloud-based services, which involve preliminary research of clients’ businesses and their objective of customer engagement, along
with design, modification, and integration of some of our fundamental SaaS in order to fit seamlessly with our clients’ actual business
processes in a short period of time and with low cost through our no-code development platform. Customized cloud-based services include
customized SaaS, voice/data plan, which includes telecommunication usage such as telephone calls and messaging that our customers can
subscribe for, and technical support. Clients that use either standard or customized cloud-based services generally enter into contracts
that range between one to three years. Dependent on the contractual arrangements, once a contract has been entered into, the clients are
subscribed to our paid user accounts and we will charge them either a one-off subscription fee or we will charge them based on the usage
of our services. For the years ended December 31, 2021, 2020 and 2019, standard cloud-based services amounted to approximately $2.0 million,
$1.4 million and $2.0 million, representing approximately 20.6%, 9.7% and 11.1% of our total revenues, respectively. For the years
ended December 31, 2021, 2020 and 2019, customized cloud-based services amounted to approximately $0, $5.0 million and $12.9 million,
representing approximately 0%, 33.8% and 70.5% of our total revenues, respectively.







33







The
cornerstone of our customer engagement cloud-based services is a series of customer engagement SaaS. Our SaaS is accessible from multiple
types of devices, including personal computers, tablets and mobile devices. We programmed our SaaS in the languages of Java, C++, PHP,
Objective-C and Python and to support and run on Windows, macOS, Linux, Android and iOS operating systems.



We
offer the flexibility of three methods of deployment of our SaaS: public cloud, hybrid cloud and private cloud. In a public cloud, we
rent and leverage cloud resources from third parties and therefore do not need to supply supporting infrastructure, such as hardware,
storage, and servers, and deliver the services over the internet to clients. Clients share the computing resources with others in the
public domain, which is the nature of public cloud services. In a private cloud, the infrastructure is physically located at a client’s
facility and the services are dedicated solely to such client. A hybrid cloud combines a private cloud with a public cloud. In a hybrid
cloud, data and applications can move between private and public clouds for greater flexibility and additional deployment options. Upon
clients’ requests, we also provide necessary hardware and middleware, which is software that provides services to software applications
beyond those available from the operating system, installation and maintenance services, and uptime monitoring for our clients who choose
hybrid and private clouds. We also maintain a technical support team that is responsible for installation and maintenance. We procure
or rent all infrastructure equipment from third parties. Our standard cloud-based services are typically deployed on public clouds whereas
our customized cloud-based services are typically deployed on hybrid or private clouds.



We
have obtained the national compliance operation qualification of internet information service provider and call center service provider
from the MIIT and its provincial level counterparts to conduct call center businesses. We have also obtained the international ISO27001
Certificate of Information Security Management System from China Cybersecurity Review Technology and Certification Center to meet high
cybersecurity standards required to conduct customer engagement services in certain industries such as the finance industry.



We
have categorized our primary SaaS into two groups: AI customer engagement software and AI sales force management software.



AI
Customer Engagement Software



Cloud
Call Center



Our
cloud call center services are delivered over the internet. Our clients access their accounts and take inbound or outbound calls through
applications on mobile devices, tablets, and personal computers. Our cloud call center is our longest standing product and we take pride
in the stability and high quality of telephone calls, as well as the add-on services we have provided since its introduction, such as
intelligent interactive voice response, batch inbound or outbound calls, and recording. Infobird Beijing began as a cloud-based call
center-focused company. We believe our business is differentiated from other cloud call centers as a result of our all-software approach
and patented VoIP technologies. We utilize software throughout the process from session initiation, transmission and switching to endpoints,
which requires no physical investment on the client’s part and, at the same time, ensures a high tolerance of failures and default
and flexible scale-out capabilities, and supports ultra-large-scale concurrence capabilities. By leveraging intelligent routing and multi-voice
coding support, our VoIP technologies enable us to provide high voice transmission quality by monitoring network fluctuation to deploy
voice routing notes and adjusting voice coding to the latest status of network bandwidth. To better meet user habits, we can also emulate
the use of certain telephone service equipment, such as digitized telephone sets and fax machines, with a VoIP network.



We
also incorporate the predictive dialing robot, a dialing robot that can help agents automatically dial numbers and transfer connected
phone calls to the next available agent, in our cloud call center, which can significantly increase the working efficiency of agents
by reducing the time spent on waiting for calls to be answered. It automatically initiates outbound calls by taking into account available
agents, anticipated talk time, and anticipated wait time, and then distributes the answered calls to the agents. Our clients often further
opt to configure the AI voice Chatbot with the predictive dialing robot in an attempt to increase efficiency and reduce costs.



We
have also embedded data analytics in our cloud call center. It can provide insights of performances for our clients by generating charts
that display several items of key data such as number of calls, percentage of occupancy of agents, and level of satisfaction of customers.



Intelligent
Telemarketing



Our
intelligent telemarketing software is a tool for initiating follow-up calls with sales leads. It utilizes our cloud call center and can
be packaged with other intelligent application software such as AI voice Chatbot and the predictive dialing robot. Our clients are able
to automatically initiate calls in batch files, starting the conversation with AI, and redirect prospective customers to sales representatives.
With our intelligent telemarketing software, our clients may reduce marketing costs by increasing the efficiency of sales representatives.
Depending on the clients’ needs, we also have the capability to collect information from the interactions between the sales representatives
and the customers to create labels for each customer and to analyze and predict customer behaviors.



Intelligent
Omni-Channel Customer Service



Our
intelligent omni-channel customer service software enables our clients to interact with their customers through common channels that
individuals in the China market typically use to communicate, including telephone calls, videos, websites, e-mails, social media platforms,
such as WeChat, a popular Chinese multi-purpose messaging, social media and mobile payment application, and Weibo, a popular Chinese
microblogging site, and text messages. This software creates a customer database and can label each customer with their properties for
screening. It also offers customizable worksheets and ticket management, which can be used to organize customer service issues across
different departments within the organization.



Our
intelligent omni-channel customer service software typically produces optimal outcomes when it is packaged with our intelligent application
software, including AI voice Chatbot, AI text Chatbot, intelligent form filling, and intelligent quality inspection. Intelligent form
filling is an important tool used for documenting interactions with customers and for communication between various departments within
our corporate clients. We collect information from the interactions and provide data analytics services that automatically generate summaries
of indicators of our client’s customer services. The summaries are fundamental for our clients to understand and improve the performance
of their customer service representatives.





34











AI
voice Chatbot and AI text Chatbot



We
have developed two AI Chatbots that are voice-based and text-based. By leveraging AI technologies such as our self-developed natural
language processing, or NLP, licensed automatic speech recognition, or ASR, and text to speech, or TTS, our AI voice and text Chatbots
are able to perform various tasks while engaging in different scenarios in customer engagement such as announcing notifications, obtaining
confirmations, carrying out limited conversations, asking questions to collect basic information, and providing answers to commonly raised
questions. Our AI Chatbots can support the customer services and sales agents to increase the working efficiency as they can carry out
pre-programmed, simple and repetitive tasks automatically without human intervention. With designed work flows, our AI Chatbots support
human and AI collaborative working scenarios, for example, our AI Chatbots interact or carry out conversations first to collect basic
information and then transfer such information to human agents for further services. Both AI voice and text Chatbots can be add-on software
to our omni-channel customer service software or other companies’ software, as they are embedded with open API, and they can also
be independent software for sale. AI text Chatbot can help answer questions using a text-based approach, and AI voice Chatbot can help
answer questions using a voice-based approach.



After
years of research and development, our AI Chatbots also encompass advanced functions. For example, they can analyze real-time conversation,
understand conversation context and flows and proactively recommend products and services. Our AI voice Chatbot also has the capability
to recognize when the customer starts and finishes talking so it will not interrupt the customer. We also implement human voice recording
in our AI voice Chatbot, in particular in the finance industry.



AI
Sales Force Management Software



Intelligent
Quality Inspection



Our
intelligent quality inspection software is designed to input AI-driven models which can measure the performances of agents and to support
financial institutions to aid in the fulfillment of their obligations under compliance regulations. Our intelligent quality inspection
software conducts mass quality inspection of recordings of conversations between agents and customers through AI and then generates results
and data analytics in minutes. The speed of inspection is cost sensitive and clients can choose their desired speed. The inspection software
examines multiple criteria of a recording including keywords, specific sentence pattern, speech speed, silence, call duration, and interruptions.
The criteria are highly customizable and we can combine multiple criteria to customize the intelligent quality inspection software to
serve in several scenarios.



We
believe that our intelligent quality inspection is highly efficient and thorough compared to traditional manual inspection. Companies
that use traditional manual inspection typically hire inspectors to sample the recordings and listen to each recording one by one. The
process can be expensive, time-consuming, and prone to error. However, with our intelligent quality inspection software, companies can
perform real-time inspections of all recordings. If our intelligent quality inspection software detects a violation of a specified criteria,
it will send a notification to the agent with an excerpt of the relevant portion of the recording within minutes. The excerpt is also
converted into text, with the violation denoted in red text, so that the agent is able to efficiently read a transcript of the relevant
text during the telephone call.



We
also offer interactive data analytics with intelligent quality inspection in order to empower our clients to monitor and benchmark the
performances of agents. For example, our clients can quantify the performances of agents by scoring recordings, listing the recurring
violations, or generating infographics showing violation trends over time.



Intelligent
Training



Our
intelligent training software is designed for standardized training for sales representatives and customer service representatives. It
may reduce costs associated with training new recruits, providing online lectures and virtual tests, and interactive training with virtual
customers. It also allows customization in contents, management of training plans, and data analytics of test results.



The
signature function of our intelligent training software is the interactive training with virtual customers. By pre-programming training
materials in our interactive training section, it can simulate real-life interactions with a potential customer. For instance, the virtual
customer would begin by asking interactive questions with the newly recruited agents or existing agents that require further training.
After answering the interactive questions, the agents will receive a final score as well as detailed score for every question answered
during the training session. They will also be provided with the correct answer for each question they answered incorrectly. This interactive
training session can assist the management team in training newly recruited agents on a cost-efficient basis and targeting specific areas
that they aim to improve for agents’ performance by providing focused training sessions. It can also provide the agents more training
flexibility as it can be accessed on mobile phones and desktops, which can result in skill improvement within a short time frame.



BPO
Services



We
provide BPO services through utilization of the technologies used in our cloud call center and our experiences in customer engagement.
BPO is the contracting of business activities and functions to third-party providers, such as technical support, sales and marketing,
customer service and BPO operation management. Our BPO services consist of call center outsourcing operation services. We supply a full
set of resources for such services, including the physical space, physical agents, call center equipment, fixed line and internet network,
system management, maintenance and other services to meet our clients’ needs. Either way, clients can choose whether to empower
such call center with our intelligent application software. We also offer data analytics on qualified indicators of performances of BPO
for clients. Revenue from BPO services is generated from assisting customers to operate the call centers services. Customers using these
services are not permitted to take possession of our software and physical resources and the contract is for a defined period, where
customers pay a monthly service fee. For the years ended December 31, 2021, 2020 and 2019, our BPO service fees amounted to approximately
$2.3 million, $1.7 million and $2.0 million, representing approximately 23.5%, 12.0% and 11.0% of our total revenues, respectively.



We have provided BPO services
exclusively through Infobird Guiyang, subsidiary of the VIE, since 2015. As of December 31, 2021, we employed 128 agents and outsourced
61 agents in connection with our BPO services, and we have served 15 corporate clients in the finance, consumer products, and information
technology services industries that utilized our BPO services.





35







Sales
and Marketing



We
deploy both direct and indirect sales approaches to market our services to both existing and potential clients.



We utilize the direct approaches with our sales team and in the fiscal year 2021, we formed a team of 77 sales
representatives, which mainly includes regional sales representatives and telemarketing sales representatives. Our regional sales
representatives are to target mid-to-large enterprises in four major geographic markets in China: Beijing, Shanghai, Guangzhou,
and Guiyang. We have also recruited several experienced sales representatives with rich resources in the strategic industries we
target, who we believe can proactively create high-quality new sales leads. In addition, we have established a telemarketing team
to target small-to-medium enterprises with our standard cloud-based services. Our sales team is also responsible for the renewal
of existing contracts and the promotion of new products to existing clients. Once we have established relationships with clients,
we subsequently seek to deepen such relationships through cross-selling and upselling our solutions, so that we become an integral
part of our clients’ operations.



We
also cooperate with various online advertising networks and have been promoting our services and products on widely used search engines
in China primarily to pursue small and mid-sized clients. The search engines will automatically forward the sales leads to our sales
team who will respond to the queries. Our sales team will continue to follow up with clients who have expressed interest in our services,
identify clients’ needs, and engage our software engineers to develop tailored proposals for our clients.



We
also directly engage clients through attending and organizing forums and seminars for senior management personnel in our targeted industries,
including the finance industry. During such forums and seminars, we initiate contact with such senior management to understand their
specific needs in customer engagement and develop customized solutions. For example, in May 2019, we organized the FINTECH Intelligent
Finance Forum of China International Big Data Industry Expo 2019 in Guiyang, sponsored by the Guiyang municipality government, which
attracted hundreds of attendees.



We
have also adopted indirect approaches to sales and marketing, such as relationships with telecommunications carriers. For example, we
have established relationships with certain telecommunications carriers that have immense client bases. Through proactive communication,
the carriers facilitate cooperation between us and their customers who have expressed needs in cloud-based customer engagement.



Generally,
we focus our sales and marketing efforts on increasing awareness of our company, establishing and promoting our brand, creating sales
leads and supporting our community of customers. We also work with multiple online media outlets to publish press releases about our
business, including our services and products and industry insights. We intend to continue to invest in sales and marketing by expanding
our sales team, managing clients’ lifecycles, cooperating with referral and reseller partners, engaging independent third-party
consulting and rating companies, organizing and participating in forums and seminars, launching online and offline advertising campaigns,
and improving our website and social media accounts.









Research
and Development



We
invest significant resources in research and development—not only to support our existing business and enhance our service and
product offerings—but also to incubate new technological breakthroughs and business initiatives. As of December 31, 2021, our
research and development team consisted of 131 personnel, including software engineers and internet technology specialists, which
accounted for approximately 33.5% of our total employees.  We have invested significant resources to maintain our technological
advantages and intend to continue to extensively invest in our research and development capabilities. For the years ended December
31, 2021, 2020 and 2019, our research and development expenses amounted to approximately $3.3 million, $1.9 million and $1.5
million, respectively.



Our
Technologies



Our
key technologies include the following:





| | ● | Cloud-native architecture.We believe we are one of the first SaaS companies in the customer engagement industry in China that uses cloud-native architecture
throughout the lifecycle of our software. Due to the self-developed cloud-native architecture, our products have flexible scale-out capabilities,
high tolerance of failures and default, and support ultra-large-scale concurrence capabilities.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                               
| | ● | AI and machine learning
capabilities.Our software is capable of conducting multiple rounds of free conversation with customers, analyzing the context
for better understanding, and automatically capturing key words and recognizing the intentions of customers. We use self-developed NLP,
licensed ASR and TTS.                                                                                           



| | ● | Patented VoIP technologies.Our patented VoIP technologies feature self-developed intelligent routing, multi-voice coding support and multi-endpoint access
support. The intelligent routing and multi-voice coding support enable us to provide the most optimal voice transmission quality by monitoring
network fluctuation to deploy voice routing notes and adjusting voice coding based on the latest status of network bandwidth. In addition,
our patented VoIP technologies are able to provide multi-endpoint access supports to mobile applications, computer software, website,
session initiation protocol, or SIP, soft-phone and hard-phone, and simultaneously, support multi-endpoint software’s SDK and API,
making it easily integrated to third-party software.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | ● | Self-developed cloud-based
no-code development platform.Our self-developed cloud-based no-code development platform allows us to quickly develop new SaaS,
customize and package our SaaS to meet market demand. Our no-code development platform fundamentally changes how our software engineers
develop new products. It is a “middle platform” where our software engineers write codes and algorithms to generate microservice
modules, further integrate the modules to generate microservice packages, and store such pre-programmed modules and packages. The microservice
module is the smallest unit that a client can use, and the microservice package is the smallest unit that a client can subscribe. All
of our modules and packages are configurable, sharable, and scalable. Our software engineers can easily modify the parameters of the
pre-programmed microservice modules and packages and use drag-and-drop tools to configure the modules and packages to create new or customized
software. Therefore, our no-code development platform has significantly shortened the time required to develop new products compared
to the traditional way of going through the complete lifecycle of software development from designing and coding every time. We have
built a database of microservice modules and packages that cover the recurring issues throughout the years serving our clients and continuously
enhance existing modules and add new modules to respond to newly emerged market opportunities.







36







Intellectual
Property



Our
success and future revenue growth depend, in part, on our ability to protect our intellectual property. We rely primarily on patent,
copyright, trademark and trade secret laws, as well as confidentiality procedures, to protect our proprietary technologies and processes.



We
believe that the core of our business is comprised of our proprietary technologies, including our patented VoIP and other internet technologies
and software copyrights. As a result, we strive to maintain a robust intellectual property portfolio. Our success and future revenue
growth may depend, in part, on our ability to protect our intellectual property as products and services that are material to our operating
results incorporate patented technology.



We
have pursued rights in intellectual property since our founding and we focus our intellectual property efforts in China. Our patent strategy
is designed to provide a balance between the need for coverage in our strategic market and the need to maintain reasonable costs.





We believe our rights to
patents, copyrights, trademarks and other intellectual property rights serve to distinguish and protect our products from infringement
and contribute to our competitive advantages. As of December 31, 2021, we had rights to 19 patents, 52 software copyrights, 1 artwork
copyright, 41 registered trademarks and 27 domain names in the PRC and 3 registered trademarks outside of the PRC.





We
cannot assure you that any patents or copyrights will be issued from any of our pending applications. In addition, any rights granted
under any of our existing or future patents, copyrights or trademarks may not provide meaningful protection or any commercial advantage
to us. With respect to our other proprietary rights, it may be possible for third parties to copy or otherwise obtain and use proprietary
technology without authorization or to develop similar technology independently. We may in the future initiate claims or litigation against
third parties to determine the validity and scope of proprietary rights of others. In addition, we may in the future initiate litigation
to enforce our intellectual property rights or to protect our trade secrets. Additional information about the risks relating to our intellectual
property is provided under “Item 3. Key Information—D. Risk Factors—Risks Related to Intellectual Property.”



Competition



We
face significant competition in our evolving market from numerous competitors, particularly cloud-based customer engagement SaaS providers
in China. We believe that the SaaS customer engagement industry in China is still at the beginning of the growth phase in the industry
lifecycle, where the market is segmented and no large players have yet dominated the market. To differentiate us from other SaaS providers
in the industry, we provide more intelligent and customized solutions with an industry focus on finance. We embed our SaaS with AI and
machine learning capabilities, and our no-code development platform allows easy customization and significantly decreases our time to
market.



Participants
in the cloud-based customer engagement service industry include call center providers, software developers focusing on customer engagement,
traditional technology companies providing customized development, implementation and support services, and several other categories
of competitors. Many of our competitors developed cloud-based software similar to us. We may also face competition from new and emerging
companies.



Compared
to our company, our current and potential competitors may have:





| | ● | better established credibility
and market reputations, and broader service and product offerings;                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                          
| | ● | greater financial, technical,
marketing and other resources, which may allow them to pursue enhanced design, development, sales, marketing, distribution and support
for their services and products; and
| |   |                                                                                                                                                                                                          
| | ● | more extensive customer and
partner relationships, which may position them to identify and respond more successfully to market developments and changes in customer
demands.                             





However,
we believe we are well positioned to compete in this developing market as a result of our comprehensive service and product portfolio,
research and development capabilities, diverse sales and marketing network and experienced management team. We also focus on the customer
engagement SaaS in the finance industry where there are high thresholds of existing entry barriers due to strict compliance and security
requirements and capabilities to handle large volumes of services with stability.



The
principal competitive factors in our market include:





| | ● | intelligent and comprehensive service and product portfolio
that meets the demand of both small and medium sized businesses and large enterprises;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                   
| | ● | efficient customization of services and products;                                                                                                 
| |   |                                                                                                                                                   
| | ● | in-depth industry expertise, in particular in the finance
industry;                                                                               
| |   |                                                                                                                                                   
| | ● | brand recognition and reputation;                                                                                                                 
| |   |                                                                                                                                                   
| | ● | efficacy, reliability and ease of use of services and products;                                                                                   
| |   |                                                                                                                                                   
| | ● | ability to build customer loyalty, retain existing customers
and attract new customers;                                                           
| |   |                                                                                                                                                   
| | ● | strength of sales and marketing efforts; and                                                                                                      
| |   |                                                                                                                                                   
| | ● | advancement of innovation and research and development
of services and products.                                                                  





We
believe we compete favorably with respect to the factors mentioned above.





37







Regulations





Regulations on Value-added Telecommunications Services



The Telecommunications Regulations
of the PRC, or the Telecom Regulations, implemented on September 25, 2000 and amended on July 29, 2014 and February 6, 2016, are the primary
PRC law governing telecommunications services and set out the general framework for the provision of both “basic telecommunication
services” and “value-added telecommunication services” by domestic PRC companies. “Value-added telecommunication
services” is defined as telecommunications and information services provided through public networks, and, according to the Telecom
Regulations, operators of value-added telecommunications services shall obtain operating licenses prior to commencing operations from
the MIIT, or its provincial level counterparts. Enterprises operating telecommunication business in absence of operating license shall
be ordered by the MIIT, or its provincial level counterparts, to rectify the violations, the illegal income shall be confiscated, and
a penalty between three times and five times of the illegal income shall be imposed. If there is no illegal income or the illegal income
is lower than RMB 50,000 (approximately $7,100), a penalty between RMB 100,000 (approximately $14,200) and RMB 1,000,000 (approximately
$142,000) shall be imposed. In a serious case, the business shall be suspended.



The Catalogue of Telecommunications
Business, or the Catalogue, which was issued as an attachment to the Telecom Regulations and recently revised and promulgated on June
6, 2019, further identifies information services and online data processing and transaction processing services as value-added telecommunications
services. Pursuant to the Catalogue, the call center business refers to the provision of business consultation, information consultation
and data query services to users, with the entrustment of enterprises or institutions, based on the call center system and database technology
connected to public communication network or the internet and the information database established by information collection, processing
and storage. We engage in business activities that are value-added telecommunications services as defined and described by the Telecom
Regulations and the Catalogue.



On March 5, 2009, the MIIT issued
the Measures on the Administration of Telecommunications Business Operating Permits, or the Telecom License Measures, which initially
became effective on April 10, 2009 and was amended on July 3, 2017, effective on September 1, 2017, to supplement the Telecom Regulations.
The Telecom License Measures provide that there are two types of telecommunications operating licenses, or the VAT Licenses for operators
in China, one for basic telecommunications services and one for value-added telecommunications services. A distinction is also made to
licenses for value-added telecommunications services as to whether a license is granted for “intra-provincial” or “trans-regional”
(inter-provincial) activities. An appendix to each license granted will detail the permitted activities of the enterprise to which it
was granted. An approved telecommunications services operator must conduct its business (whether basic or value-added) in accordance with
the specifications recorded in its VAT License.

On January
8, 2021, the CAC promulgated the Internet Information Services Measures (Revised Draft for Comments), which sets forth detailed rules
on the internet information service activities. As of the date of this annual report, the draft has not been formally adopted.



Regulations on Foreign Direct Investment in Value-Added
Telecommunications Companies



Foreign direct investment in
telecommunications companies in China is governed by the Provisions on the Administration of Foreign-Invested Telecommunications Enterprises,
or the FITE Regulations, which were issued by the State Council on December 11, 2001, became effective on January 1, 2002 and recently
amended on March 29, 2022 and took effect on May 1, 2022, and the Catalog of Industries for Encouraging Foreign Investment (2020 Version),
or the Encouragement Catalogue, which were promulgated by the NDRC and the MOFCOM on December 27, 2020 and became effective on January
27, 2021, and the Special Management Measures (Negative List) for the Access of Foreign Investment (2021 Version), or the Negative List,
which were issued by NDRC, and the MOFCOM, on December 27, 2021. Under the aforesaid regulations, foreign invested telecommunications
enterprises in the PRC, or FITEs, are generally required to be established as Sino-foreign equity joint ventures with limited exceptions.
In general, the foreign party to a FITE engaging in value-added telecommunications services may hold up to 50% of the equity of the FITE
with limited exceptions, of which the geographical area it may conduct telecommunications services is provided by the MIIT in accordance
with relevant provisions as mentioned above.



On June 30, 2016, the MIIT issued
an Announcement of the Ministry of Industry and Information Technology on Issues concerning the Provision of Telecommunication Services
in Mainland China by Service Providers from Hong Kong and Macau, or the MIIT Announcement, which provides that investors from Hong Kong
and Macau may hold no more than 50% of the equity in FITEs engaging in certain specified categories of value-added telecommunications
services.



On July 13, 2006, the MIIT issued
the Notice of the Ministry of Information Industry on Intensifying the Administration of Foreign Investment in Value-added Telecommunications
Services, or the MIIT Notice, which reiterates certain provisions of the FITE Regulations. In addition to the provisions stated in FITE
Regulations, the MIIT Notice further provide that a domestic company that holds a value-added telecommunications license, is prohibited
from leasing, transferring or selling the value-added telecommunications license to foreign investors in any form, and from providing
any assistance, including providing resources, sites or facilities, to foreign investors to conduct value-added telecommunications businesses
illegally in China. The MIIT Notice also requires each value-added telecommunications license holder to have appropriate facilities for
its approved business operations and to maintain such facilities in the regions covered by its license, and specifically, with regard
to the domain names and trademarks, the MIIT Notice required that trademarks and domain names that are used in the provision of Internet
content services must be owned by the VAT License holder or its shareholders.



Regulations on Internet Information Services



The Administrative Measures on
Internet Information Services, or the Internet Information Measures, which was issued by the State Council on September 25, 2000 and amended
on January 8, 2011, set out guidelines on the provision of internet information services. Pursuant to the Internet Information Measures,
“internet information services” are defined as services that provide information to online users through the internet. The
Internet Information Measures classifies internet information services into commercial internet information services and non-commercial
Internet information services. The commercial internet information services refer to services that provide information or services to
internet users with charge. The Internet Information Measures requires commercial internet information services operators to obtain a
value-added telecommunications business operating license, or the ICP License, from the relevant government authorities before engaging
in any commercial internet information services operations in China.









38









In addition, internet information
service providers are required to monitor their websites to ensure that they do not contain content prohibited by laws or regulations.
Internet information service providers are prohibited from producing, copying, publishing or distributing information that is humiliating
or defamatory to others or that infringes the legal rights of others. The PRC government may require corrective actions to address
non-compliance by ICP License holders or revoke their ICP License for serious violations. Furthermore, the MIIT Circular on Regulating
the Use of Domain Names in Internet Information Services, issued on November 27, 2017 and that took effect on January 1, 2018,
requires internet information service providers to register and own the domain names they use in providing internet information
services.



Regulations on Mobile Internet Application
Information Services



The CAC issued the Administrative Provisions on Mobile Internet Application Information Services on June 28, 2016, which
took effect on August 1, 2016, requiring internet information service providers, or ICPs, who provide information services through
mobile internet applications, or APPs, i.e. mobile application providers, to authenticate the identity of the registered users,
establish procedures for protection of user information, establish procedures for information content censorship and management,
ensure that users are given adequate information concerning an APP and are able to choose whether an APP is installed and whether or
not to use an installed APP and its functions, protect intellectual property rights concerned and keep records of users’ logs
for sixty (60) days. Mobile application providers and application store service providers are prohibited from engaging in any
activity that may endanger national security, disturb the social order, or infringe the legal rights of third parties, and may not
produce, copy, issue or disseminate through mobile applications any content prohibited by laws and regulations. If an ICP violates
these regulations, mobile app stores through which the ICP distributes its APPs may issue warnings, suspend the release of its APPs,
or terminate the sale of its APPs, and/or report the violations to governmental authorities.



ICPs are also required under
the Interim Measures on the Administration of Pre-Installation and Distribution of Applications for Mobile Smart Terminals, which
was issued on December 16, 2016 and took effect on July 1, 2017, to ensure that APPs, as well as its ancillary resource files,
configuration files and user data, can be conveniently uninstalled by a user, unless it is a basic function software (i.e., software
that supports the normal functioning of hardware and operating system of a mobile smart device).



Regulations Relating to Information Security
and Privacy Protection



Regulations on Information Security



In recent years, PRC government
authorities have enacted laws and regulations with respect to internet information security and protection of personal information
from abusing or unauthorized disclosure. Pursuant to the Decision on the Maintenance of Internet Security issued by the NPC Standing
Committee on December 28, 2000, which was amended on August 27, 2009, persons may be subject to criminal liabilities in China for
any attempt to: (i) gain improper entry into a computer or system of strategic importance; (ii) disseminate politically disruptive
information; (iii) leak state secrets; (iv) spread false commercial information; (v) infringe upon intellectual property
rights or damage business credit or reputation of others; (vi) intentionally make, spread computer viruses and other destructive
programs, attack computer systems and communication networks which lead to damages to such systems and networks; (vii) carry out
theft, fraud, racketeering through internet; and (viii) other activities prohibited by relevant laws and regulations.



The Administration Measures
on the Security Protection of Computer Information Network with International Connections, issued by the Ministry of Public Security
of the PRC, or MPS, on December 16, 1997 and amended by the State Council on January 8, 2011, prohibits using the internet in ways
that result in a leak of state secrets or a spread of socially destabilizing content. The MPS has supervision and inspection powers
and relevant local security bureaus may also have jurisdiction. If a value-added-telecommunications service license holder violates
these measures, the government of the PRC may revoke its value-added-telecommunications service license and shut down its websites.



The Administrative Provisions
on Mobile Internet Application Information Services, issued by the CAC on June 28, 2016, which took effect on August 1, 2016,
providing that mobile Internet application providers are prohibited from engaging in any activity that may endanger national security,
disturb social order or infringe the legal rights of third parties, and may not produce, copy, release or disseminate through mobile
Internet applications any content prohibited by laws and regulations.



On November 7, 2016, the
NPC Standing Committee promulgated the Cyber Security Law of the PRC, or the PRC Cyber Security Law, which took effect on June
1, 2017, pursuant to which, network operators must comply with laws and regulations and fulfil their obligations to safeguard security
of the network when conducting business and providing services. Those who provide services through networks must take technical
measures and other necessary measures pursuant to laws, regulations and compulsory national requirements to safeguard the safe
and stable operation of the networks, respond to network security incidents effectively, prevent illegal and criminal activities,
and maintain the integrity, confidentiality and usability of network data. It also states that network operator may not collect
personal information that is irrelevant to the services it provides or collect or use the personal information in violation of
the provisions of laws or agreements between both parties. Under the Cyber Security Law, network operators are subject to various
security protection-related obligations, including:



| | ● | complying with security protection obligations in accordance with tiered requirements with respect to maintenance of the security of Internet systems, which include formulating internal security management rules and developing manuals, appointing personnel who will be responsible for internet security, adopting technical measures to prevent computer viruses and activities that threaten Internet security, adopting technical measures to monitor and record status of network operations, holding Internet security training events, retaining user logs for at least six (6) months, and adopting measures such as data classification, key data backup, and encryption for the purpose of securing networks from interference, vandalism, or unauthorized visits, and preventing network data from leakage, theft, or tampering;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ● | verifying users’ identities before signing agreements or providing services such as network access, domain name registration, landline telephone or mobile phone access, information publishing, or real-time communication services;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ● | clearly indicating the purposes, methods and scope of the information collection, the use of information collection, and obtain the consent of those from whom the information is collected when collecting or using personal information;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ● | strictly preserving the privacy of user information they collect, and establish and maintain systems to protect user privacy; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ● | strengthening management of information published by users. When the network operators discover information prohibited by laws and regulations from publication or dissemination, they shall immediately stop dissemination of that information, including taking measures such as deleting the information, preventing the information from spreading, saving relevant records, and reporting to the relevant governmental agencies.                                                                                                                                                                                                                                                                                                                                                                                                           





39









On November 15, 2018, the
CAC issued the Provisions on Security Assessment of the Internet Information Services with Public Opinion Attributes or Social
Mobilization Capacity, which came into effect on November 30, 2018. The provisions require Internet information providers to conduct
security assessments on their Internet information services if their services include forums, blogs, microblogs, chat rooms, communication
groups, public accounts, short-form videos, online live-streaming, information sharing, mini programs or other functions that provide
channels for the public to express opinions or have the capability of mobilizing the public to engage in specific activities. Internet
information providers must conduct self-assessment on, among other things, the legality of new technology involved in the services
and the effectiveness of security risk prevention measures, and file the assessment report with the local competent cyberspace
administration authority and public security authority.



The Regulations on Cyber
Security Supervision and Inspection of Public Security Organs, which was issued by the MPS on September 15, 2018 and came into
effect on November 1, 2018, is an important basis for the Public Security Bureau to strengthen the enforcement of the Cyber Security
Law.



Internet security in China
is also regulated and restricted from a national security standpoint. On July 1, 2015, the SCNPC promulgated the new National Security
Law, which took effect on the same date and replaced the former National Security Law promulgated in 1993. According to the new
National Security Law, the state shall ensure that the information system and data in important areas are secure and controllable.
In addition, according to the new National Security Law, the state shall establish national security review and supervision institutions
and mechanisms, and conduct national security reviews of key technologies and IT products and services that affect or may affect
national security. There are uncertainties on how the new National Security Law will be implemented in practice.



Pursuant to the Ninth Amendment
to the Criminal Law issued by the NPC Standing Committee on August 29, 2015, which took effect on November 1, 2015, any Internet
service provider that fails to fulfil the obligations related to internet information security administration as required by applicable
laws and refuses rectification orders is subject to criminal liability for (i) any dissemination of illegal information in large
scale, (ii) any severe effect due to leakage of the client’s information, (iii) any serious loss of criminal evidence, or
(iv) other severe situation. These amendments also state that any individual or entity that (i) sells or provides personal information
to others that violates applicable law, or (ii) steals or illegally obtains any personal information, is subject to criminal penalty
for severe violations.



On October 21, 2019, the
Supreme People’s Court and the Supreme People’s Procuratorate jointly issued the Interpretations on Certain Issues
Regarding the Applicable of Law in the Handling of Criminal Case Involving Illegal Use of Information Networks and Assisting Committing
Internet Crimes, which came into effect on November 1, 2019, and further clarifies the meaning of Internet service provider and
the severe situations of the relevant crimes.



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



On June 10, 2021, for purpose
of further regulating data processing activities, safeguarding data security, promoting data development and utilization, protecting
the lawful rights and interests of individuals and organizations, and maintaining national sovereignty, security, and development
interests, the SCNPC published the PRC Data Security Law, which took effect on September 1, 2021. The Data Security Law requires
data processing, which includes the collection, storage, use, processing, transmission, provision and publication of data, to be
conducted in a legitimate and proper manner. The Data Security Law provides for data security and privacy obligations on entities
and individuals carrying out data processing activities. The Data Security Law also introduces a data classification and hierarchical
protection system based on the importance of data in economic and social development, and the degree of harm it may cause to national
security, public interests, or legitimate rights and interests of individuals or organizations if such data are tampered with,
destroyed, leaked, illegally acquired or illegally used. The appropriate level of protection measures is required to be taken for
each respective category of data. For example, a processor of important data is required to designate the personnel and the management
body responsible for data security, carry out risk assessments of its data processing activities and file the risk assessment reports
with the competent authorities. State core data, i.e., data having a bearing on national security, the lifelines of national economy,
people’s key livelihood and major public interests, shall be subject to stricter management system. Moreover, the Data Security
Law provides a national security review procedure for those data processing activities which affect or may affect national security
and imposes export restrictions on certain data and information. In addition, the Data Security Law also provides that any organization
or individual within the territory of the PRC shall not provide any foreign judicial body and law enforcement body with any data
stored within the territory of the PRC without the approval of the competent PRC governmental authorities.



On August 17, 2021, the
State Council promulgated the Regulations on Security Protection of Critical Information Infrastructure, which became effective
on September 1, 2021. Pursuant to the Regulations on Protection of Critical Information Infrastructure, critical information infrastructure
refers to any important network facilities and information systems of an important industry and field such as public communication
and information service, energy, transport, water conservation, finance, public services, e-government affairs and national defense
related science and technology industry, and other industries and fields that may seriously endanger national security, people’s
livelihood and public interest in case of damage, function loss or data leakage. In addition, relevant administration departments
of each important industry and field are responsible for formulating eligibility criteria and determining the critical information
infrastructure in the respective industry or field. The operators will be informed about the final determination as to whether
they are categorized as critical information infrastructure operators.





40







On December 31, 2021, the
CAC, together with the MIIT, the MPS and the SAMR, jointly issued the Administrative Provisions on Algorithm Recommendation of
Internet Information Services, with effect from March 1, 2022, which provides that algorithm recommendation service providers are
not allowed to use algorithms to register false user accounts, block information, give excessive recommendations, and that users
should be given the option to easily turn off algorithm recommendation services.



On October 29, 2021, the
CAC published the Measures for the Security Assessment of Outbound Data (Draft for Comments), which intends to regulate the outbound
transfer of (including cross-border assess to) important data and/or personal information collected or generated in domestic operations
within the People’s Republic of China. The security assessment requirement was initially introduced in the PRC Cybersecurity
Law against the critical information infrastructure operators only, but the Measures for the Security Assessment of Outbound Data
(Draft for Comments) has extended the security assessment obligation to all data processors, and provides two types of security
assessment to be undertaken before providing data from China to overseas, namely risk self-assessment and security assessment by
CAC. As of the date of this annual report, the Measures for the Security Assessment of Outbound Data (Draft for Comments) has not
been formally adopted.



On November 14, 2021, the
CAC published the Regulations of Internet Data Security Management (Draft for Comments), which further regulate the internet data
processing activities and emphasize the supervision and management of network data security, and further stipulate the obligations
of internet platform operators, such as to establish a system for disclosure of platform rules, privacy policies and algorithmic
strategies related to data, and timely disclosure of formulation procedures and adjudication procedures and more. Specifically,
the draft regulations require data processors to, among others, (i) adopt immediate remediation measures when finding that network
products and services they use or provide have security defects and vulnerabilities, or threaten national security or endanger
public interest, and (ii) follow a series of detailed requirements with respect to processing of personal information, management
of important data and proposed overseas transfer of data. In addition, such draft regulations require data processors handling
important data or the data processors listed overseas to complete an annual data security assessment and file a data security assessment
report to applicable regulators. Such annual assessment, as required by the draft regulations, would encompass areas including
but not limited to the status of important data processing, data security risks identified and the measures adopted, the effectiveness
of data protection measures, the implementation of national data security laws and regulations, data security incidents that occurred
and their handling, and a security assessment with respect to sharing and provision of important data overseas. As of the date
of this annual report, the Regulations of Internet Data Security Management (Draft for Comments) has not been formally adopted.



On January 4, 2022, the
CAC and other twelve PRC regulatory authorities jointly revised and promulgated the Measures for Cybersecurity Review, or the Cybersecurity
Review Measures, which came into effect on February 15, 2022 and the Measures for Cybersecurity Review which took effect on June
1, 2020 was abolished at the same time. The Cybersecurity Review Measures requires that critical information infrastructure operators
that purchase network products and services shall anticipate the potential national security risk of products and services after
they enter operation. If they affect or may affect national security, a cybersecurity review shall be reported to the Cybersecurity
Review Office.



Regulations on Privacy Protection



On December 13, 2005, the
MPS issued the Regulations on Technological Measures for Internet Security Protection, or the Internet Protection Measures, which
took effect on March 1, 2006, requiring internet service providers to utilize standard technical measures for internet security
protection. and to keep records of certain information about their users (including user registration information, log-in and log-out
time, IP address, content and time of posts by users) for at least sixty (60) days and submit the above information as required
by laws and regulations.



Under the Several Provisions
on Regulating the Market Order of Internet Information Services issued by the MIIT on December 29, 2011 and that took effect on
March 15, 2012, ICPs are also prohibited from collecting any personal user information or providing any information to third parties
without the consent of the user. The Cyber Security Law provides an exception to the consent requirement where the information
is anonymous, not personally identifiable and unrecoverable. ICPs must expressly inform the users of the method, content and purpose
of the collection and processing of user personal information and may only collect information necessary for its services. ICPs
are also required to properly maintain user personal information, and in case of any leak or likely leak of user personal information,
ICPs must take remedial measures immediately and report any material leak to the telecommunications regulatory authority.







41







In addition, the Decision on
Strengthening Network Information Protection issued by the NPC Standing Committee on December 28, 2012 emphasizes the need to protect
electronic information that contains individual identification information and other private data. The decision requires ICPs to expressly
inform their users of the internet service providers’ collection and use of user personal information, establish and publish policies
regarding the purpose, manner and scope of Internet service providers’ collection and use of personal electronic information standards,
collect and use user personal information only with the consent of the users and only within the scope of such consent and to take necessary
measures to ensure the security of the information and to prevent leakage, damage or loss. The decision also mandates that Internet services
providers and their employees must keep strictly confidential user personal information that they collect.



Furthermore, MIIT’s Order
on Protection of Personal Information of Telecommunications and Internet Users, or the Order, which was issued on July 16, 2013 and took
effect on September 1, 2013, contains detailed requirements on the use and collection of personal information as well as the security
measures to be taken by ICPs. Most of the requirements under the Order that are relevant to Internet services providers are consistent
with the requirements already established under the MIIT provisions discussed above, except that under the Order the requirements are
more strict and have a wider scope. If an Internet services provider wishes to collect or use personal information, it may do so only
if such collection is necessary for the services it provides. Further, it must disclose to its users the purpose, method and scope of
any such collection or use, and must obtain consent from the users whose information is being collected or used. Internet services providers
are also required to establish and publish their protocols relating to personal information collection or use, keep any collected information
strictly confidential, and take technological and other measures to maintain the security of such information. Internet services providers
are also required to cease any collection or use of the user personal information, and de-register the relevant user account, when a given
user stops using the relevant Internet service. Internet services providers are further prohibited from divulging, distorting or destroying
any such personal information, or selling or providing such information unlawfully to other parties. The Order states, in broad terms,
that violators may face warnings, fines, and disclosure to the public and, in the most severe cases, criminal liability.



On January 5, 2015, the SAIC
promulgated the Measures on Punishment for Infringement of Consumer Rights, which was revised on October 23, 2020, pursuant to which business
operators collecting and using personal information of consumers must comply with the principles of legitimacy, propriety and necessity,
specify the purpose, method and scope of collection and use of the information, and obtain the consent of the consumers whose personal
information is to be collected. Business operators may not (i) collect or use personal information of consumers without their consent,
(ii) unlawfully divulge, sell or provide personal information of consumers to others or (iii) send commercial information to consumers
without their consent or request, or when a consumer has explicitly declined to receive such information.



On May 8, 2017, the Supreme People’s
Court and the Supreme People’s Procuratorate released the Interpretations of the Supreme People’s Court and the Supreme People’s
Procuratorate on Several Issues Concerning the Application of Law in the Handling of Criminal Cases Involving Infringement of Citizens’
Personal Information, which took effect on June 1, 2017. It clarifies several concepts regarding the crime of “infringement of citizens’
personal information,” including “citizen’s personal information,” “provision,” and “unlawful
acquisition.”



Pursuant to the Announcement
of Conducting Special Supervision against the Illegal Collection and Use of Personal Information by APP, which was issued on January 23,
2019, APP operators should collect and use personal information in compliance with the Cyber Security Law and should be responsible for
the security of personal information obtained from users and take effective measures to strengthen the personal information protection.
Furthermore, APP operators should not force their users to make authorization by means of bundling, suspending installation or in other
default forms and should not collect personal information in violation of laws, regulations or breach of user agreements. Such regulatory
requirements were emphasized by the Notice on the Special Rectification of APPs Infringing upon User’s Personal Rights and Interests,
which was issued by MIIT on October 31, 2019. On November 28, 2019, the CAC, MIIT, the MPS and SAMR jointly issued the Measures to Identify
Illegal Collection and Usage of Personal Information by Apps, which lists six types of illegal collection and usage of personal information,
including “failure to publish rules on the collection and usage of personal information,” “failure to expressly state
the purpose, manner and scope of the collection and usage of personal information,” “collecting and using personal information
without obtaining consents from users,” “collecting personal information irrelevant to the services provided,” “providing
personal information to other parties without obtaining consent” and “failure to provide the function of deleting or correcting
personal information as required by law or failure to publish the methods for complaints and reports or other information.”



In addition, the Civil Code of
the PRC, which was issued by the NPC on May 28, 2020 and took effect on January 1, 2021, requires personal information of individuals
to be protected. Any organization or individual requiring personal information of others shall obtain such information legally and ensure
the security of such information, and shall not illegally collect, use, process, or transmit such personal information, or illegally buy,
sell, provide, or publish such personal information.



On August 22, 2019, the CAC
 promulgated the Provisions on the Cyber Protection of Children’s Personal Information, which took effect on October
1, 2019, requiring that before collecting, using, transferring or disclosing the personal information of a child, any Internet service
operator should inform that child’s guardians in a noticeable and clear manner and obtain their consents. Meanwhile, Internet service
operators should take measures like encryption when storing children’s personal information.





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According to the Law of
the PRC on the Protection of Minors (2020 Revision), which took effect on June 1, 2021, information processors must follow the principles
of legality, legitimacy and necessity when processing personal information of minors via internet, and must obtain consent from minors’
parents or other guardians when processing personal information of minors under age of 14. In addition, internet service providers must
promptly alert upon the discovery of publishing private information by minors via the internet and take necessary protective measures.



On August 20, 2021, the SCNPC
promulgated the Personal Information Protection Law, which integrates the scattered rules with respect to personal information rights
and privacy protection and took effect on November 1, 2021. The Personal Information Protection Law raises the protection requirements
for processing personal information, and specifies the rules for processing sensitive personal information, which refers to personal information
that, once leaked or illegally used, may easily cause harm to the dignity of natural persons or cause harm to the safety of people or
property, including information on biometric characteristics, financial accounts, individual location tracking and others, as well as
personal information of minors under the age of 14. Personal information processors shall bear responsibility for their personal information
processing activities, and adopt necessary measures to safeguard the security of the personal information they process. Otherwise, the
personal information processors will be subject to correction of its operations, suspension or termination of the provision of services,
confiscation of illegal income, fines or other penalties.



On March 12, 2021, the CAC and
other governmental authorities promulgated Necessary Personal Information Range Provisions of Common Types of Apps, effective on May 1,
2021, which specify the scope of necessary personal information for common types of mobile apps. On April 26, 2021, the MIIT promulgated
Interim Provisions on the Administration of Personal Information Protection for Apps (Draft for Comments), which further stipulate the
protection and management of the personal information on mobile apps. As of the date of this annual report, the Interim Provisions on
the Administration of Personal Information Protection for Apps (Draft for Comments) has not been formally adopted



On January 5, 2022, the CAC issued
a revised version of the Administrative Provisions on Mobile Internet Applications Information Services (Draft for Comments), which emphasises
that mobile internet app providers shall comply with relevant provisions on the scope of necessary personal information when engaging
in personal information processing activities. Furthermore, mobile internet app providers shall not compel users to agree to non-essential
personal information collection out of any reason, and are prohibited from banning users from their basic functional services due to the
users’ refusal of providing non-essential personal information



Regulations Relating to Product Liability



Manufacturers and vendors of
defective products in the PRC may incur liability for losses and injuries caused by such products. Under the Civil Code of the PRC, which
was promulgated on May 28, 2020 and became effective on January 1, 2021, manufacturers or retailers of defective products that cause property
damage or physical injury to any person will be subject to civil liability.



The Product Quality Law of the
PRC (as amended in 2000, 2009 and 2018) and the Law of the PRC on the Protection of the Rights and Interests of Consumers (as amended
in 2009 and 2013), which were enacted to protect the legitimate rights and interests of end-users and consumers and to strengthen the
supervision and control of the quality of products. If our products are defective and cause any personal injuries or damage to assets,
our customers have the right to claim compensation from us.



Regulations on Intellectual Property in the PRC



Copyright



Pursuant to the Copyright Law
of the PRC, which was first promulgated by the Standing Committee of the National People’s Congress on September 7, 1990 and became
effective from June 1, 1991, and was last amended on November 11, 2020 and became effective as of June 1, 2021, copyrights include personal
rights such as the right of publication and that of attribution as well as property rights such as the right of production and that of
distribution. Reproducing, distributing, performing, projecting, broadcasting or compiling a work or communicating the same to the public
via an information network without permission from the owner of the copyright therein, unless otherwise provided in the Copyright Law
of the PRC, constitute infringements of copyrights. The amended Copyright Law extends copyright protection to Internet activities, products
disseminated over the internet and software products. In addition, there is a voluntary registration system administered by the China
Copyright Protection Center.



In order to further implement
the Computer Software Protection Regulations, promulgated by the State Council on June 4, 1991 and amended on January 30, 2013, the National
Copyright Administration, or the NCA, issued the Computer Software Copyright Registration Procedures on April 6, 1992 and amended on February
20, 2002, which specify detailed procedures and requirements with respect to the registration of software copyrights. The China Copyright
Protection Center shall grant registration certificates to the computer software copyrights applicants which meet the requirements of
both the software copyright registration procedures and the computer software protection regulations.









43







Trademark



Pursuant to the Trademark Law
of the PRC, or the Trademark Law, which was first promulgated by the Standing Committee of the National People’s Congress on August
23, 1982 and became effective from March 1, 1983, and was most recently amended on April 23, 2019 and became effective on November 1,
2019, the right to exclusive use of a registered trademark shall be limited to trademarks which have been approved for registration and
to goods and/or services for which the use of such trademark has been approved. The period of validity of a registered trademark shall
be ten years, counted from the day the registration is approved, and may be renewed for another ten years provided relevant application
procedures have been completed within twelve (12) months before the end of the validity period. According to this law, using a trademark
that is identical to or similar to a registered trademark in connection with the same or similar goods and/or services without the authorization
of the owner of the registered trademark constitutes an infringement of the exclusive right to use a registered trademark.



The Implementation Regulation
for the Trademark Law promulgated by the State Council came into effect on September 15, 2002 and was further amended on April 29, 2014.
Under the Trademark Law and the implementing regulation, the Trademark Office of the State Administration for Market Regulation, or the
Trademark Office, is responsible for the registration and administration of trademarks. The Trademark Office handles trademark registrations.
As with patents, China has adopted a “first-to-file” principle for trademark registration. If two or more applicants apply
for registration of identical or similar trademarks for the same or similar commodities, the application that was filed first will receive
preliminary approval and will be publicly announced. A registrant may apply to renew a registration within twelve (12) months before the
expiration date of the registration. If the registrant fails to apply in a timely manner, a grace period of six (6) additional months
may be granted. If the registrant fails to apply before the grace period expires, the registered trademark shall be deregistered. Renewed
registrations are valid for ten years.



In addition to the above, a Trademark
Review and Adjudication Board was established for resolving trademark disputes. According to the Trademark Law, within three (3) months
since the date of the announcement of a preliminarily validated trademark, if a titleholder is of the view that such trademark in application
is identical or similar to its registered trademark for the same type of commodities or similar commodities which violates relevant provisions
of the Trademark Law, such titleholder may raise an objection to the Trademark Office within the aforesaid period. In such event, the
Trademark Office shall consider the facts and grounds submitted by both the dissenting party and the party being challenged and shall
decide on whether the registration is allowed within twelve (12) months upon the expiration of the announcement after investigation and
verification, and notify the dissenting party and the person challenged in writing.



Patent



Pursuant to the Patent Law of
the PRC, which was promulgated by the Standing Committee of the National People’s Congress on March 12, 1984 and became effective
from April 1, 1985, and was most recently amended on October 17, 2020 and became effective on June 1, 2021, patents in China are classified
into three categories, namely, inventions, utility models and designs. The protection period of a patent right is 10 years for utility
models, 15 years for designs, and 20 years for inventions from the date of application. A patentable invention, utility model or design
must meet three conditions: novelty, inventiveness and practical applicability. Patents cannot be granted for scientific discoveries,
rules and methods for intellectual activities, methods used to diagnose or treat diseases, animal and plant breeds or substances obtained
by means of nuclear transformation. The Patent Office under the State Intellectual Property Office is responsible for receiving, examining
and approving patent applications. A patent is valid for a twenty-year term for an invention, a ten-year term for a utility model and
a fifteen-year term for a design, starting from the application date. After the grant of the patent right for an invention or utility
model, except where otherwise provided for in the Patent Law, no entity or individual may, without the authorization of the patent owner,
exploit the patent, that is, make, use, offer to sell, sell or import the patented product, or use the patented process, or use, offer
to sell, sell or import any product which is a direct result of the use of the patented process, for production or business purposes.
And after a patent right is granted for a design, no entity or individual shall, without the permission of the patent owner, exploit the
patent, that is, for production or business purposes, manufacture, offer to sell, sell, or import any product containing the patented
design.



Domain Name



Pursuant to the Administrative
Measures on Internet Domain Names of China, which was recently amended by the MIIT on August 24, 2017 and became effective on November
1, 2017, “domain name” shall refer to the character mark of hierarchical structure, which identifies and locates a computer
on the internet and corresponds to the internet protocol (IP) address of that computer. The principle of “first come, first serve”
is followed for the domain name registration service. Applicants for registration of domain names shall provide the true, accurate and
complete information of their identifications to domain name registration service institutions. After completing the domain name registration,
the applicant becomes the holder of the domain name registered by him/it. Furthermore, the holder shall pay operation fees for registered
domain names on schedule. If the domain name holder fails to pay the corresponding fees as required, the original domain name registrar
shall write it off and notify the holder of the domain name in written form.



Laws and Regulations on Labor Protection
in the PRC



According to the Labor Law of
the PRC, or the Labor Law, which was promulgated by the Standing Committee of the NPC on July 5, 1994, came into effect on January 1,
1995, and was most recently amended on December 29, 2018, an employer shall develop and improve its rules and regulations to safeguard
the rights of its workers. An employer shall develop and improve its labor safety and health system, stringently implement national protocols
and standards on labor safety and health, conduct labor safety and health education for workers, guard against labor accidents and reduce
occupational hazards. Labor safety and health facilities must comply with relevant national standards. An employer must provide workers
with the necessary labor protection gear that complies with labor safety and health conditions stipulated under national regulations,
as well as provide regular health checks for workers that are engaged in operations with occupational hazards. Laborers engaged in special
operations shall have received specialized training and have obtained the pertinent qualifications. An employer shall develop a vocational
training system. Vocational training funds shall be set aside and used in accordance with national regulations and vocational training
for workers shall be carried out systematically based on the actual conditions of the company.









44





The Labor Contract Law of the
PRC, which was promulgated by the SCNPC on June 29, 2007, came into effect on January 1, 2008, and was amended on December 28, 2012 and
became effective as of July 1, 2013, and the Implementation Regulations on Labor Contract Law, which was promulgated on September 18,
2008, and became effective since the same day, regulate both parties through a labor contract, namely the employer and the employee, and
contain specific provisions involving the terms of the labor contract. It is stipulated under the Labor Contract Law and the Implementation
Regulations on Labor Contract Law that a labor contract must be made in writing. if labor relationships are to be or have been established
between employers and the employees An employer and an employee may enter into a fixed-term labor contract, an un-fixed term labor contract,
or a labor contract that concludes upon the completion of certain work assignments, after reaching agreement upon due negotiations. An
employer may legally terminate a labor contract and dismiss its employees after reaching agreement upon due negotiations with the employee
or by fulfilling the statutory conditions. Labor contracts concluded prior to the enactment of the Labor Law and subsisting within the
validity period thereof shall continue to be honored. With respect to a circumstance where a labor relationship has already been established
but no formal written contract has been made, a written labor contract shall be entered into within one (1) month from the commencement
date of the employment. Employers are prohibited from forcing employees to work above certain time limit and employers shall pay employees
for overtime work in accordance to national regulations. In addition, employee wages shall be no lower than local standards on minimum
wages and shall be paid to employees timely.



According to the Interim Regulations
on the Collection and Payment of Social Insurance Premiums, the Regulations on Work Injury Insurance, the Regulations on Unemployment
Insurance and the Trial Measures on Employee Maternity Insurance of Enterprises, enterprises in the PRC shall provide benefit plans for
their employees, which include basic pension insurance, unemployment insurance, maternity insurance, work injury insurance and basic medical
insurance. An enterprise must provide social insurance by processing social insurance registration with local social insurance agencies,
and shall pay or withhold relevant social insurance premiums for or on behalf of employees. The Law on Social Insurance of the PRC, which
was promulgated by the Standing Committee of the National People’s Congress on October 28, 2010, and became effective on July 1,
2011, and was most recently updated on December 29, 2018, has consolidated pertinent provisions for basic pension insurance, unemployment
insurance, maternity insurance, work injury insurance and basic medical insurance, and has elaborated in detail the legal obligations
and liabilities of employers who do not comply with relevant laws and regulations on social insurance. Where an employer fails to fully
pay social insurance premiums, relevant social insurance collection agency shall order it to make up for any shortfall within a prescribed
time limit, and may impose a late payment fee at the rate of 0.05% per day of the outstanding amount from the due date. If such employer
still fails to make up for the shortfalls within the prescribed time limit, the relevant administrative authorities shall impose a fine
of one to three times the outstanding amount upon such employer.



According to the Interim Measures
for Participation in the Social Insurance System by Foreigners Working within the Territory of China, which was promulgated by the Ministry
of Human Resources and Social Security of the PRC on September 6, 2011, and became effective on October 15, 2011, or the Interim Measures
for Foreigners, employers who employ foreigners shall participate in the basic pension insurance, unemployment insurance, basic medical
insurance, occupational injury insurance, and maternity insurance in accordance with the relevant law, with the social insurance premiums
to be contributed respectively by the employers and foreigner employees as required. In accordance with Interim Measures for Foreigners,
the social insurance administrative agencies shall exercise their right to supervise and examine the legal compliance of foreign employees
and employers and the employers who do not pay social insurance premiums in conformity with the laws shall be subject to the administrative
provisions provided in the Social Insurance Law and the relevant regulations and rules mentioned above.



According to the Regulations
on the Administration of Housing Provident Fund, which was promulgated by the State Counsel and became effective on April 3, 1999, and
was amended on March 24, 2002 and was partially revised on March 24, 2019 by Decision of the State Council on Revising Some Administrative
Regulations (Decree No. 710 of the State Council), housing provident fund contributions by an individual employee and housing provident
fund contributions by his or her employer shall belong to the individual employee. Registration by PRC companies at the applicable housing
provident fund management center is compulsory and a special housing provident fund account for each of the employees shall be opened
at an entrusted bank.



The employer shall timely pay
up and deposit housing provident fund contributions in full amount and late or insufficient payments shall be prohibited. Under the circumstances
where financial difficulties do exist due to which an employer is unable to pay or pay up house provident funds, permission of labor union
of the employer and approval of the local house provident funds commission must first be obtained before the employer can suspend or reduce
their payment of house provident funds. The employer shall process housing provident fund payment and deposit registrations with the housing
provident fund administration center. The minimum standard for housing provident funds is 5% of employees’ average monthly salary
of the preceding year, and such percentage rate may be uplifted by the local housing provident funds management commissions if examined
by the people’s government of same level and approved by people’s government of provincial, or autonomous region or municipality
level. With respect to companies who violate the above regulations and fail to process housing provident fund payment and deposit registrations
or open housing provident fund accounts for their employees, such companies shall be ordered by the housing provident fund administration
center to complete such procedures within a designated period. Those who fail to process their registrations within the designated period
shall be subject to a fine ranging from RMB 10,000 (approximately $1,400) to RMB 50,000 (approximately $7,100). When companies breach
these regulations and fail to pay up housing provident fund contributions in full amount as due, the housing provident fund administration
center shall order such companies to pay up within a designated period, and may further apply to the People’s Court for mandatory
enforcement against those who still fail to comply after the expiry of such period.



Regulations on Tax
in the PRC



Income Tax



In January 2008, the PRC Enterprise
Income Tax Law took effect, which was last amended by the Standing Committee of the National People’s Congress on December 29, 2018.
On December 6, 2007, the State Council enacted the Regulations for the Implementation of the Law on Enterprise Income Tax, which was recently
amended on April 23, 2019, together with the PRC Enterprise Income Tax Law, the EIT Law. Under the EIT Law, both resident enterprises
and non-resident enterprises are subject to tax in the PRC. Resident enterprises are defined as enterprises that are established in China
in accordance with PRC laws, or that are established in accordance with the laws of foreign countries but are actually or in effect controlled
within the PRC. Non-resident enterprises are defined as enterprises that are organized under the laws of foreign countries and whose “de
facto management body” is conducted outside the PRC, but have established institutions or premises in the PRC, or have no such established
institutions or premises but have income generated from inside the PRC. The EIT Law applies a uniform 25% enterprise income tax rate to
both resident enterprises and non-resident enterprises, except where tax incentives are granted to special industries and projects. However,
if non-resident enterprises have not formed permanent establishments or premises in the PRC, or if they have formed permanent establishment
or premises in the PRC but there is no actual relationship between the relevant income derived in the PRC and the established institutions
or premises set up by them, enterprise income tax is set at the rate of 20% with respect to their income sourced from inside the PRC.
According to the EIT Law and the Announcement on Issues concerning the Implementation of the Preferential Income Tax Policies regarding
High-Tech Enterprises promulgated by the SAT on June 19, 2017, enterprises qualified as “high-tech enterprises” are entitled
to a 15% enterprise income tax rate rather than the 25% uniform statutory tax rate. The preferential tax treatment continues as long as
an enterprise can retain its “high-tech enterprise” status.





45







The implementation rules define
the term “de facto management body” as the body that exercises full and substantial control and overall management over the
business, productions, personnel, accounts, and properties of an enterprise. Under the EIT Law, dividends generated from the business
of a PRC subsidiary after January 1, 2008, and payable to its foreign investor may be subject to a withholding tax rate of 10 percent
if the PRC tax authorities determine that the foreign investor is a non-resident enterprise which do not have an establishment or place
of business in the PRC, or which have such establishment or place of business but the relevant income is not effectively connected with
the establishment or place of business, to the extent such dividends are derived from sources within the PRC, unless there is a tax treaty
with China that provides for a preferential withholding tax rate. Distributions of earnings generated before January 1, 2008, are exempt
from PRC withholding tax.



In January 2009, the SAT promulgated
the Provisional Measures for the Administration of Withholding of Enterprise Income Tax for Non-resident Enterprises, or the Non-resident
Enterprises Measures, which was repealed by Announcement of the State Administration of Taxation on Issues Relating to Withholding at
Source of Income Tax of Non-resident Enterprises in December 2017. According to the new announcement, which was amended on June 15, 2018,
it shall apply to handling of matters relating to withholding at source of income tax of non-resident enterprises pursuant to the provisions
of Article 37, Article 39 and Article 40 of the Enterprise Income Tax Law. According to Article 37, Article 39 of the Enterprise Income
Tax Law, income tax over non-resident enterprise income pursuant to the provisions of the third paragraph of Article 3 shall be subject
to withholding at the source, where the payer shall act as the withholding agent. The tax amount for each payment made or due shall be
withheld by the withholding agent from the amount paid or payable. Where a withholding agent fails to withhold tax or perform tax withholding
obligations pursuant to the provisions of Article 37, the taxpayer shall pay tax at the place where the income is derived. Where the taxpayer
fails to pay tax pursuant to law, the tax authorities may demand payment of the tax amount payable, from a payer of the taxpayer with
payable tax amounts from other taxable income items in China.



On April 30, 2009, the Ministry
of Finance of the PRC, or the MOF, and the SAT jointly issued the Circular on Issues Concerning Treatment of Enterprise Income Tax in
Enterprise Restructuring Business, or Circular 59, which became effective retroactively as of January 1, 2008 and was partially revised
on January 1, 2014. By promulgating and implementing this circular, the PRC tax authorities have enhanced their scrutiny over the direct
or indirect transfer of equity interests in a PRC resident enterprise by a non-resident Enterprise.



On February 3, 2015, the SAT
issued the Announcement of the State Administration of Taxation on Several Issues Relating to Enterprise Income Tax on Indirect Transfers
of Assets by Non-resident Enterprises, or SAT Bulletin 7, which was partially abolished on December 1, 2017 and December 29, 2017. SAT
Bulletin 7 extends its tax jurisdiction to transactions involving transfer of immovable property in China and assets held under the establishment,
and placement in China, of a foreign company through the offshore transfer of a foreign intermediate holding company. SAT Bulletin 7 also
addresses transfer of the equity interest in a foreign intermediate holding company broadly. In addition, SAT Bulletin 7 introduces safe
harbor scenarios applicable to internal group restructurings. However, it also brings challenges to both the foreign transferor and transferee
of the indirect transfer as they have to assess whether the transaction should be subject to PRC tax and to file or withhold the PRC tax
accordingly.



On October 17, 2017, the SAT
issued the Announcement of the State Administration of Taxation on Issues Concerning the Withholding of Non-resident Enterprise Income
Tax at Source, or SAT Bulletin 37, which came into effect on December 1, 2017 and was revised on June 15, 2018. The SAT Bulletin 37 further
clarifies the practice and procedure of withholding of non-resident enterprise income tax and provides that:



| | ● | for the income from equity investment assets, the competent tax authority for the income tax of the invested enterprise shall be the competent tax authority, while for the income from the dividends, extra dividends and other equity investment, the competent tax authority for the income tax of the enterprise distributing the income shall be the competent tax authority;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | ● | the withholding obligator shall declare and pay the withheld tax to the competent tax authority in the place where such withholding obligator is located within seven (7) days from the date of occurrence of the withholding obligation;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | ● | where the income obtained by the withholding obligator and required to be withheld at source is in the form of dividends, extra dividends or any other equity investment gains, the date of occurrence of the obligation for withholding relevant payable tax is the date of actual payment of the dividends, extra dividends or other equity investment gains;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | ● | for the income tax required to be withheld under Article 37 of the Enterprise Income Tax Law, if the withholding obligator fails to withhold in accordance with the law or is unable to perform withholding obligation, the non-resident enterprise obtaining the income shall declare and pay the tax not withheld to the competent tax authority of the place of the occurrence of the income in accordance with Article 39 of the Enterprise Income Tax Law and complete the Form of Report on Withholding of Enterprise Income Tax of the People’s Republic of China; where the non-resident enterprise fails to declare and pay tax in accordance with Article 39 of the Enterprise Income Tax Law, the tax authority may order it to pay the tax within a specified time limit and the non-resident enterprise shall declare and pay the tax within the time limit determined by the tax authority; the non-resident enterprise that declares and pays the tax voluntarily before the tax authority orders it to pay tax within a specified time limit shall be deemed as having paid tax as scheduled;
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | ● | the competent tax authority may require the taxpayer, withholding obligator and relevant parties with knowledge of relevant information to provide the contracts and other relevant materials relating to the withholding of tax;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            



where the withholding obligator
fails to withhold the tax required to be withheld under Article 37 of the Enterprise Income Tax Law, the competent tax authority of the
place where the withholding agent is located shall order the withholding obligator to make up for the withholding of tax in accordance
with Article 23 of the Administrative Punishment Law of the People’s Republic of China and hold the withholding agent liable in
accordance with the law; if recovery of tax payment from the taxpayer is necessary, the competent tax authority of the place where the
income occurs shall implement the recovery in accordance with the law. If the place where the withholding obligator is located is different
from the place where the income occurs, the competent tax authority of the place of occurrence of the income that is responsible for recovering
the tax payment shall give notice to the competent tax authority of the place where the withholding obligator is located for verifying
relevant information. The competent tax authority of the place where the withholding agent is located shall, within five (5) working days
from the date.



46







If non-resident investors were
involved in our private equity financing, if such transactions were determined by the tax authorities to lack reasonable commercial purpose,
we and our non-resident investors may be at risk of being required to file a return and be taxed under SAT Bulletin 7 and we may be required
to expend valuable resources to comply with SAT Bulletin 7 or to establish that we should not be held liable for any obligations under
SAT Bulletin 7.



Pursuant to an Arrangement Between
the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal
Evasion with respect to Taxes on Income, or the Double Tax Avoidance Arrangement promulgated by the State Administration of Taxation on
August 21, 2006, and other applicable PRC laws, if a Hong Kong resident enterprise is determined by the competent PRC tax authority to
have satisfied the relevant conditions and requirements under such Double Tax Avoidance Arrangement and other applicable laws, the 10%
withholding tax on the dividends the Hong Kong resident enterprise receives from a PRC resident enterprise may be reduced to 5%. However,
based on the Circular on Certain Issues with Respect to the Enforcement of Dividend Provisions in Tax Treaties, or the SAT Circular 81,
issued on February 20, 2009 by the SAT, if the relevant PRC tax authorities determine, in their discretion, that a company benefits from
such reduced income tax rate due to a structure or arrangement that is primarily tax-driven, such PRC tax authorities may adjust the preferential
tax treatment.



Value-Added Tax



According to the Temporary Regulations
on Value-added Tax, which was promulgated by the State Council on December 13, 1993 and was most recently amended on November 19, 2017,
and the Detailed Implementing Rules of the Temporary Regulations on Value-added Tax, which was promulgated by the MOF on December 25,
1993 and was amended on October 28, 2011, and became effective on November 1, 2011, all taxpayers selling goods, providing processing,
repair or replacement services or importing goods within the PRC shall pay Value-Added Tax. The tax rate of 17% shall be levied on general
taxpayers selling or importing various goods and providing processing, repairing or replacement service; the applicable rate for the export
of goods and cross-border sale of services and intangible assets by domestic organizations and individuals within the scope stipulated
by the State Council shall be nil, unless otherwise stipulated. On April 4, 2018, the MOF and the SAT jointly issued the Notice of Adjustment
of Value-added Tax Rates which declared that the VAT tax rate in regard to the sale of goods, provision of processing, repairs and replacement
services and importation of goods into China shall be reduced from the previous 17% to 16% from May 1, 2018. According to the PRC VAT
Regulations, the VAT rate for sale of services and sale of intangible properties is 6% unless otherwise specified.



Furthermore, according to the
Trial Scheme for the Conversion of Business Tax to Value-added Tax, which was promulgated by the MOF and the SAT on November 16, 2011,
the PRC began to launch taxation reforms in a gradual manner from January 1, 2014, whereby the collection of value-added tax in lieu of
business tax items was implemented on a trial basis in regions showing significant radiating effects in economic development and providing
outstanding reform examples, beginning with production service industries such as transportation and certain modern service industries.



In accordance with the Circular
on Notice of Comprehensive Promotion of Conversion of Business Tax to Value-added Tax promulgated by the SAT and the MOF which took effect
on May 1, 2016, upon approval of the State Council, the pilot program of the collection of value-added tax in lieu of business tax shall
be promoted nationwide in a comprehensive manner starting May 1, 2016, and all taxpayers of business tax engaged in the building industry,
the real estate industry, the financial industry and the life service industry shall be included in the scope of the pilot program with
regard to payment of value-added tax instead of business tax. Our main business is included in the scope of the pilot program with regard
to payment of value-added tax instead of business tax.



On November 19, 2017, the State
Council promulgated the Decision of State Council on Abolition of the Provisional Regulations of the PRC on Business Tax and Revision
of the Provisional Regulations of the PRC on Value-added Tax, which took effective on the same date, to formally abolish the Provisional
Regulations of the People’s Republic of China on Business Tax and amend the Temporary Regulations on Value-added Tax accordingly.



Regulations on Foreign
Exchange



Foreign Currency
Exchange



Pursuant to the Foreign Currency
Administration Rules, as amended, and various regulations issued by SAFE and other relevant PRC government authorities, Renminbi is freely
convertible to the extent of current account items, such as trade related receipts and payments, interest and dividends. Capital account
items, such as direct equity investments, loans and repatriation of investment, unless expressly exempted by laws and regulations, still
require prior approval from SAFE or its provincial branch for conversion of Renminbi into a foreign currency, such as U.S. dollars, and
remittance of the foreign currency outside of the PRC. Payments for transactions that take place within the PRC must be made in Renminbi.
Foreign currency revenues received by PRC companies may be repatriated into China or retained outside of China in accordance with requirements
and terms specified by SAFE. Foreign exchange proceeds under the current accounts may be either retained or sold to a financial institution
engaged in settlement and sale of foreign exchange pursuant to relevant SAFE rules and regulations. For foreign exchange proceeds under
the capital accounts, approval from the SAFE is generally required for the retention or sale of such proceeds to a financial institution
engaged in settlement and sale of foreign exchange.



Pursuant to the Circular of the
SAFE on Further Improving and Adjusting Foreign Exchange Administration Policies for Direct Investment, or the SAFE Circular 59 promulgated
by SAFE on November 19, 2012, which became effective on December 17, 2012 and was further amended on May 4, 2015 and October 10, 2018
and was partially abolished on December 30, 2019, approval is not required for opening a foreign exchange account and depositing foreign
exchange into the accounts relating to the direct investments. SAFE Circular 59 also simplified foreign exchange-related registration
required for the foreign investors to acquire the equity interests of PRC companies and further improve the administration on foreign
exchange settlement for FIEs.



On February 13, 2015, the SAFE
promulgated the Circular on Simplifying and Improving the Foreign Currency Management Policy on Direct Investment, or the SAFE Circular
13, effective from June 1, 2015, which cancels the administrative approvals of foreign exchange registration of direct domestic investment
and direct overseas investment. In addition, SAFE Circular 13 simplifies the procedure of foreign exchange-related registration, under
which investors shall register with banks for direct domestic investment and direct overseas investment.



On April 10, 2020 the SAFE issued
the Notice of the SAFE on Optimizing Foreign Exchange Administration to Support the Development of Foreign-related Business, or the SAFE
Circular 8. The SAFE Circular 8 provides that under the condition that the use of the funds is genuine and compliant with current administrative
provisions on use of income relating to capital account, enterprises are allowed to use income under capital account such as capital funds,
foreign debts and overseas listings for domestic payment, without submission to the bank prior to each transaction of materials evidencing
the veracity of such payment. The bank in charge shall conduct post spot checking in accordance with the relevant requirements.



Dividend Distribution



The principal laws and regulations
regulating the dividend distribution of dividends by FIEs in the PRC include the Company Law of the PRC, as recently amended in 2018 and
Foreign Investment Law promulgated by SCNPC on March 15, 2019 and recently came into effect on January 1, 2020.





47





Wholly foreign-owned enterprises
and Sino-foreign equity joint ventures in the PRC may pay dividends only out of their accumulated profits, if any, as determined in accordance
with PRC accounting standards and regulations. Additionally, these FIEs may not pay dividends unless they set aside at least 10% of their
respective accumulated profits after tax each year, if any, to fund certain reserve funds, until such time as the accumulative amount
of such fund reaches 50% of the enterprise’s registered capital. These reserves are not distributable as cash dividends. A PRC
company shall not distribute any profits until any losses from prior fiscal years have been offset. Profits retained from prior fiscal
years may be distributed together with distributable profits from the current fiscal year. In addition, these companies also may allocate
a portion of their after-tax profits based on PRC accounting standards to employee welfare and bonus funds at their discretion.



Regulations Related
to Mergers and Acquisitions and Overseas Listings



On August 8, 2006, six PRC governmental
and regulatory agencies, including MOFCOM and the CSRC promulgated the Rules on Acquisition of Domestic Enterprises by Foreign
Investors, or the M&A Rules, governing the mergers and acquisitions of domestic enterprises by foreign investors that became effective
on September 8, 2006 and was revised on June 22, 2009. The M&A Rules, among other things, requires that offshore special purpose
vehicles that are controlled by PRC companies or individuals and that have been formed for overseas listing purposes through acquisitions
of PRC domestic interest held by such PRC companies or individuals, to obtain the approval of the CSRC prior to publicly listing their
securities on an overseas stock exchange.



On April 2, 2022, the CSRC promulgated
Provisions on Strengthening the Confidentiality and Archives Administration of Overseas Securities Issuance and Listing by Domestic Enterprises
(Draft for Comments), according to which, a domestic company that plans to, either directly or through its overseas listed entity, publicly
disclose or provide to relevant entities or individuals including securities companies, securities service providers, and overseas regulators,
documents and materials that contain state secrets or government work secrets, shall first obtain approval from competent authorities
according to law, and file with the secrecy administrative department at the same level. A domestic company that plans to, either directly
or through its overseas listed entity, publicly disclose or provide to relevant entities or individuals including securities companies,
securities service providers, and overseas regulators, other documents and materials that, if divulged, will jeopardize national security
or public interest, shall strictly fulfil relevant procedures stipulated by applicable national regulations. Archives, including working
papers, that have been produced in the Chinese mainland by securities companies and securities service providers for overseas securities
offering and listing by domestic companies shall be retained in the Chinese mainland, and, without prior approval by competent authorities,
must not be brought, mailed or otherwise transferred to outside the Chinese mainland, or transmitted to any institutions or individuals
outside the Chinese mainland through any methods including via the use of information technologies. Overseas securities regulators and
competent overseas authorities may request to investigate, including to collect evidence for investigation purpose, or inspect a domestic
company that has been listed or offered securities in an overseas market or securities companies and securities service providers that
undertake securities business for such domestic companies. Such investigation and inspection shall be conducted under a cross-border regulatory
cooperation mechanism, and the CSRC and competent authorities of the Chinese government will provide necessary assistance pursuant to
bilateral and multilateral cooperation mechanisms. Before cooperating with the investigation and inspection by, or providing documents
and materials to overseas securities regulators or other competent overseas authorities, such domestic companies, securities companies
and securities service providers shall report to the CSRC or other competent authorities. As of the date of this document, this draft
has not been formally adopted and the final version and effective date of such measures are subject to change with substantial uncertainty.



Regulations Relating
to Foreign Exchange Registration of Overseas Investment by PRC Residents



The Circular of the State Administration
of Foreign Exchange on Issues Concerning the Foreign Exchange Administration over the Overseas Investment and Financing and Round-trip
Investment by Domestic Residents via Special Purpose Vehicles, or the SAFE Circular 37, issued by SAFE and effective on July 4, 2014,
regulates foreign exchange matters in relation to the use of special purpose vehicles, or SPVs by PRC residents or entities to seek offshore
investment and financing and conduct round trip investment in China. Under Circular 37, a SPV refers to an offshore entity established
or controlled, directly or indirectly, by PRC residents or entities for the purpose of seeking offshore financing or making offshore investment,
using legitimate domestic or offshore assets or interests, while “round trip investment” refers to the direct investment in
China by PRC residents or entities through SPVs, namely, establishing foreign invested enterprises to obtain the ownership, control rights
and management rights. SAFE Circular 37 requires that, before establishing, controlling and making contribution into a SPV, PRC residents
or entities are required to complete foreign exchange registration with the SAFE or its local branch.



PRC residents or entities who
have contributed legitimate domestic or offshore interests or assets to SPVs but have yet to obtain SAFE registration before the implementation
of SAFE Circular 37 shall register their ownership interests or control in such SPVs with SAFE or its local branch. An amendment to the
registration is required if there is a material change in the registered SPV, such as any change of basic information (including change
of such PRC “resident’s name” and operation term), increases or decreases in investment amounts, transfers or exchanges
of shares, or mergers or divisions. Failure to comply with the registration procedures set forth in SAFE Circular 37, or making misrepresentation
on or failure to disclose controllers of a FIE that is established through round-trip investment, may result in restrictions on the foreign
exchange activities of the relevant FIEs, including payment of dividends and other distributions, such as proceeds from any reduction
in capital, share transfer or liquidation, to its offshore parent or affiliate, and the capital inflow from the offshore parent, and may
also subject relevant PRC residents or entities to penalties under PRC foreign exchange administration regulations. On February 13, 2015,
SAFE further promulgated the Circular on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning Direct
Investment, or SAFE Circular 13, which took effect on June 1, 2015. SAFE Circular 13 has amended SAFE Circular 37 by requiring PRC residents
or entities to register with qualified banks rather than SAFE or its local branch in connection with their establishment or control of
an offshore entity established for the purpose of overseas investment or financing.



As of the date of this annual
report, to our knowledge, all of our shareholders had registered according to SAFE Circular 37.



On March 30, 2015, the SAFE promulgated
Circular 19, which came into effect on June 1, 2015 and was partially repealed on December 30, 2019. According to Circular 19, the foreign
exchange capital of FIEs shall be subject to the Discretional Foreign Exchange Settlement. The Discretional Foreign Exchange Settlement
refers to the foreign exchange capital in the capital account of a FIE for which the rights and interests of monetary contribution has
been confirmed by the local foreign exchange bureau (or the book-entry registration of monetary contribution by the banks) can be settled
at the banks based on the actual operational needs of the FIE. The proportion of Discretional Foreign Exchange Settlement of the foreign
exchange capital of a FIE is temporarily determined to be 100%. The Renminbi converted from the foreign exchange capital will be kept
in a designated account and if a FIE needs to make further payment from such account, it still needs to provide supporting documents and
go through the review process with the banks. Circular 19 allows all foreign-invested enterprises established in China to use their foreign
exchange capitals to make equity investment and prohibits foreign-invested enterprises from, among other things, using Renminbi fund converted
from its foreign exchange capitals for expenditure beyond its business scope and providing entrusted loans or repaying loans between non-financial
enterprises.



SAFE issued the Circular on
Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts, or Circular 16, on June 9, 2016,
which became effective simultaneously. Pursuant to Circular 16, enterprises registered in the PRC may also convert their foreign debts
from foreign currency to Renminbi on a discretionary basis. Circular 16 provides an integrated standard for conversion of foreign exchange
under capital account items (including foreign currency capital and foreign debts) on a discretionary basis which applies to all enterprises
registered in the PRC. Circular 16 reiterates the principle that Renminbi converted from foreign currency-denominated capital of a company
may not be directly or indirectly used for purposes beyond its business scope or prohibited by PRC laws or regulations, while such converted
Renminbi shall not be provided as loans to its non-affiliated entities. As SAFE has not provided detailed guidelines with respect to
its interpretation or implementations, it is uncertain how these rules will be interpreted and implemented. Circular 19, Circular 16
and other related regulations may delay or limit us from using the proceeds of offshore offerings to make additional capital contributions
or loans to our PRC subsidiaries and any violations of these circulars could result in severe monetary or other penalties.





48







Regulations on
loans to and direct investment in the PRC entities by offshore holding companies



According to the Implementation
Regulations on Statistics and Supervision of Foreign Debt promulgated by SAFE on September 24, 1997 and the Interim Measures on the Management
of Foreign Debts promulgated by SAFE, the NDRC and the MOF and effective from March 1, 2003, loans by foreign companies to their subsidiaries
in China, which accordingly are FIEs, are considered foreign debt, and such loans must be registered with the local branches of the SAFE.
Under the provisions, the total amount of accumulated medium-term and long-term foreign debt and the balance of short-term debt borrowed
by a FIE is limited to the difference between the total investment and the registered capital of the foreign invested enterprise.



On January 12, 2017, the People’s
Bank of China promulgated the Circular of the People’s Bank of China on Matters relating to the Macro-prudential Management of Comprehensive
Cross-border Financing, or PBOC Circular 9, which took effect on the same date. The PBOC Circular 9 established a capital or net assets-based
constraint mechanism for cross-border financing. Under such mechanism, a company may carry out cross-border financing in Renminbi or foreign
currencies at their own discretion. The total cross-border financing of a company shall be calculated using a risk-weighted approach and
shall not exceed an upper limit. The upper limit is calculated as capital or assets multiplied by a cross-border financing leverage ratio
and multiplied by a macro-prudential regulation parameter.



In addition, according to PBOC
Circular 9, as of the date of the promulgation of PBOC Circular 9, a transition period of one year is set for foreign-invested enterprises
and during such transition period, FIEs may apply either the current cross-border financing management mode, namely the mode provided
by Implementation Rules for the Provisional Regulations on Statistics and Supervision of Foreign Debt and the Interim Provisions on the
Management of Foreign Debts, or the mode in this PBOC Circular 9 at its sole discretion. After the end of the transition period, the cross-border
financing management mode for FIEs will be determined by the People’s Bank of China and SAFE after assessment based on the overall
implementation of this PBOC Circular 9. However, although the transitional period ended on January 10, 2018, as of the date of this annual
report, neither PBOC nor SAFE has issued any new regulations regarding the appropriate means of calculating the maximum amount of foreign
debt for foreign-invested enterprises. Domestic-invested enterprises, have only been subject to the Net Assets Limit in calculating the
maximum amount of foreign debt they may hold from the date of promulgation of PBOC Circular 9.



Regulations Relating to Foreign Investment



The Guidance Catalogue of Industries for Foreign
Investment



Investment
activities in the PRC by foreign investors are governed by the Catalogue for the Encouragement of Foreign Investment Industries (2020
Edition), or the Encouragement Catalogue and the Negative List, which were both promulgated by the MOFCOM and the NDRC and each became
effective on January 27, 2021 and January 1, 2022. The Negative List stipulates the encouraged, prohibited and restricted industries for
foreign investment. The Encouragement Catalogue stipulates the encouraged industries for foreign investment. If the investment falls within
the “encouraged” category, foreign investment can be conducted through the establishment of a wholly foreign-owned enterprise.
If the investment falls within the “restricted” category, foreign investment may be conducted through the establishment of
a wholly foreign-owned enterprise if certain requirements are met or in some cases must be conducted through the establishment of a joint
venture enterprise, with varying minimum shareholdings for the Chinese party, depending on the particular industry. If the investment
falls within the “prohibited” category, foreign investment of any kind is not allowed. Any investment that occurs within an
industry not falling into any of these categories is classified as a permitted industry for foreign investment unless otherwise specifically
restricted by other PRC rules and regulations. According to the Negative List, other than E-commerce, domestic multiparty communication,
store and forward, and call center services, the permitted foreign investment in value-added telecommunications service providers may
not be more than 50%.



The Foreign Investment Law



On March 15, 2019, the National
People’s Congress approved the Foreign Investment Law, which took effect on January 1, 2020 and replaced three existing laws on
foreign investments in China, namely, the PRC Sino-foreign Equity Joint Ventures Law, the PRC Sino-foreign Cooperative Enterprises Law
and the PRC Wholly Foreign-owned Enterprises Law. The Foreign Investment Law embodies an expected PRC regulatory trend to rationalize
its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate
legal requirements for both foreign and domestic invested enterprises in China. The Foreign Investment Law establishes the basic framework
for the access to, and the promotion, protection and administration of foreign investments in view of investment protection and fair competition.



According to the Foreign Investment
Law, “foreign investment” refers to investment activities directly or indirectly conducted by one or more natural persons,
business entities, or otherwise organizations of a foreign country (collectively referred to as “foreign investor”) within
China, and the investment activities include the following situations: (i) a foreign investor, individually or collectively with other
investors, establishes a foreign-invested enterprise within China; (ii) a foreign investor acquires stock shares, equity shares, shares
in assets, or other like rights and interests of an enterprise within China; (iii) a foreign investor, individually or collectively with
other investors, invests in a new project within China; and (iv) investments in other means as provided by laws, administrative regulations,
or the State Council.



According to the Foreign Investment
Law, the State Council will publish or approve to publish the “negative list” for special administrative measures concerning
foreign investment. The Foreign Investment Law grants national treatment to FIEs, except for those FIEs that operate in industries deemed
to be either “restricted” or “prohibited” in the “negative list”. The Foreign Investment Law provides
that FIEs operating in foreign restricted industries will require market entry clearance and other approvals from relevant PRC governmental
authorities. If a foreign investor is found to invest in any prohibited industry in the “negative list”, such foreign investor
may be required to, among other aspects, cease its investment activities, dispose of its equity interests or assets within a prescribed
time limit and have its income confiscated. If the investment activity of a foreign investor is in breach of any special administrative
measure for restrictive access provided for in the “negative list”, the relevant competent department shall order the foreign
investor to make corrections and take necessary measures to meet the requirements of the special administrative measure for restrictive
access.



On December 26, 2019, the State
Council issued Implementation Regulations for the Foreign Investment Law of the PRC, or the Implementation Rules, which came into effect
on January 1, 2020, and replaced the Implementing Rules of the Sino-foreign Equity Joint Ventures Enterprises Law of the PRC, the Implementing
Rules of the Sino-foreign Co-operative Enterprises Law of the PRC and the Implementing Rules of the Wholly Foreign invested Enterprise
Law of the PRC. According to the Implementation Rules, in the event of any discrepancy between the Foreign Investment Law, the Implementation
Rules and the relevant provisions on foreign investment promulgated prior to January 1, 2020, the Foreign Investment Law and the Implementation
Rules shall prevail. The Implementation Rules also set forth that foreign investors that invest in sectors on the Negative List in which
foreign investment is restricted shall comply with special management measures with respect to, among others, shareholding and senior
management personnel qualification in the Negative List. Pursuant to the Foreign Investment Law and the Implementation Rules, the existing
foreign-invested enterprises established prior to the effective date of the Foreign Investment Law are allowed to keep their corporate
organization forms for five years from the effectiveness of the Foreign Investment Law before such existing foreign-invested enterprises
change their organization forms and organization structures in accordance with the PRC Company Law, the Partnership Enterprise Law of
the PRC and other applicable laws.



On December 27, 2020, the NDRC
and the MOFCOM promulgated the Catalog of Industries for Encouraging Foreign Investment (2020 Version), or the Encouragement Catalogue,
which became effective on January 27, 2021, replacing the previous encouragement catalogue. On December 27, 2021, the NDRC and the MOFCOM
promulgated the Special Management Measures (Negative List) for the Access of Foreign Investment (2021 Version), or the Negative List,
which became effective on January 1, 2022, replacing previous negative list. According to the Negative List and the Encouragement Catalogue,
the value-added telecommunications business that we are operating, other than call center business, falls into the restricted category.





49





On December 30, 2019, the MOFCOM
and the State Administration for Market Regulation (formerly known as the State Administration for Industry and Commerce) jointly promulgated
the Measures for Reporting of Foreign Investment Information, or the Foreign Investment Reporting Measures, which came into effect on
January 1, 2020 and replaced the Interim Administrative Measures for the Record-filing of the Establishment and Modification of Foreign-invested
Enterprises. The Foreign Investment Reporting Measures establish an online reporting system for foreign investment instead of the previous
requirement of the Ministry of Commerce of the PRC filing and/or approval procedures. Pursuant to the Foreign Investment Reporting Measures,
for foreign investment carried out directly or indirectly within the mainland China, foreign investors or foreign-invested enterprises
shall submit investment information for establishments, modifications and dissolution and annual reports of the foreign-invested enterprises
on the online. Meanwhile, the PRC establishes foreign investment security review system under which the security review shall be conducted
on foreign investments affecting or likely to affect the state security, a decision legally made on security review will be considered
as final. Furthermore, the Foreign Investment Law provides that FIEs established according to the previous PRC Sino-foreign Equity Joint
Ventures Law, the PRC Sino-foreign Cooperative Enterprises Law and the PRC Wholly Foreign-owned Enterprises Law before the Foreign Investment
Law took effect may maintain their structure and corporate governance within five years after the implementing of the Foreign Investment
Law.



In addition, the Foreign Investment
Law also provides several protective rules and principles for foreign investors and their investments in the PRC, including, among others,
that a foreign investor may freely transfer into or out of China, in Renminbi or a foreign currency, its contributions, profits, capital
gains, income from disposition of assets, royalties of intellectual property rights, indemnity or compensation lawfully acquired, and
income from liquidation, among others, within China; local governments shall abide by their commitments to the foreign investors; governments
at all levels and their departments shall enact local normative documents concerning foreign investment in compliance with laws and regulations
and shall not impair legitimate rights and interests, impose additional obligations onto FIEs, set market access restrictions and exit
conditions, or intervene with the normal production and operation activities of FIEs; except for special circumstances, in which case
statutory procedures shall be followed and fair and reasonable compensation shall be made in a timely manner, expropriation or requisition
of the investment of foreign investors is prohibited; and mandatory technology transfer is prohibited.



On December 19, 2020, the NDRC
and the MOFCOM promulgated Measures for Security Review of Foreign Investment, with an effective date of January 18, 2021. The Foreign
Investment Security Review Mechanism (the “Security Review Mechanism”) in charge of organization, coordination and guidance
of foreign investment security review is thereunder established. A working mechanism office shall be established under the NDRC and led
by the NDRC and the Ministry of Commerce to undertake routine work on the security review of foreign investment. According to the Security
Review Mechanism, foreign investment activities falling in the scope such as important cultural products and services, important information
technologies and Internet products and services, important financial services, key technologies and other important fields that concern
state security while obtaining the actual control over the enterprises invested in, a foreign investor or a party concerned in the PRC
shall take the initiative to make a declaration to the working mechanism office prior to making the investment.



Company Law



Pursuant to the PRC Company Law,
promulgated by the Standing Committee of the National People’s Congress on December 29, 1993, effective as of July 1, 1994, and
as revised on December 25, 1999, August 28, 2004, October 27, 2005, December 28, 2013 and October 26, 2018, the establishment, operation
and management of corporate entities in the PRC are governed by the PRC Company Law. The PRC Company Law defines two types of companies:
limited liability companies and companies limited by shares. Our PRC operating subsidiary is a limited liability company. Unless otherwise
stipulated in the related laws on foreign investment, foreign invested companies are also required to comply with the provisions of the
PRC Company Law.



Laws and Regulations on the Protection of Consumer
Rights and Interests



Business operators in the business
of supplying and selling manufactured goods or services to consumers, shall comply with the Law of the PRC on the Protection of Consumer
Rights and Interests, or the Consumer Rights Protection Law, promulgated by the SCNPC on October 31, 1993, and effective as of January
1, 1994, and revised on August 27, 2009 and October 25, 2013.



According to the Consumer Rights
Protection Law, business operators must ensure that the goods or services provided by them meet the requirements for safeguarding personal
and property safety. For goods and services that may endanger personal and property safety, consumers should be provided with a true description
and an explicit warning, as well as a description and indication of the proper way to use the goods or accept the services and the methods
of preventing the occurrence of a hazard. If the goods or services provided by the business operators cause personal injuries to consumers
or third parties, the business operators shall compensate the injured parties for their losses.



Laws on Contracts



On May 28, 2020, the Civil Code
of the PRC was issued by the NPC and became effective on January 1, 2021 and replaced the General Principles of the Civil Law of the PRC,
the Security Law of the PRC, the Contract Law of the PRC, the Real Right Law of the PRC, the General Rules of the Civil Law of the PRC
and several other basic civil laws in the PRC. All of our contracts are subject to the Civil Code of the PRC. Under the Civil Code of
the PRC, a natural person, legal person or other legally established organization shall have full capacity of civil right and civil conduct
in order to enter into a valid contract. Except as otherwise required by other laws and regulations, the formation, validity, performance,
modification, assignment, termination, and liability for breach of a contract are governed by the Civil Code of the PRC. A contracting
party who failed to perform or failed to fulfill its contractual obligation shall bear the responsibility of a continued duty to perform
or to provide remedies and compensation as provided by PRC laws.



Standardization Law of the People’s Republic
of China



Standardization Law of the People’s
Republic of China was passed by the fifth session of the Standing Committee of the Seventh National People’s Congress on December
29, 1988, and revised on November 4, 2017. This law is formulated for the purposes of enhancing standardization work, promoting scientific
and technological advancement, improving the quality of products and services, safeguarding personal health and life and property security,
protecting state security and ecological environmental security, raising the level of economic and social development. This law applies
to technical requirements that need to be unified for agricultural field, industrial field, service industry, social undertakings industry,
and others. Enterprises which manufacture, sell, import products or provide services that fail to meet the mandatory standards, and enterprises
which manufacture products or provide services that fail to meet the technical requirements under their publicized standardization, shall
undertake civil liabilities.





50







Regulations of the People’s Republic of China
on Certification and Accreditation



Regulations of the People’s
Republic of China on Certification and Accreditation became effective as of September 3, 2003, and was later revised on November 29, 2020.
This regulation is formulated for the purposes of standardizing certification and accreditation, improving the quality of products and
services and management standard. This regulation applies to all certification agencies, certification services and accreditation services
in the PRC, excluding certification on quality management standardization of enterprises engaging in pharmaceutical productions and/or
operations, certification on quality of laboratory animals, certification of military products, accreditation on laboratories and personnel
engaging in the calibration and testing of military products.



C. Organizational Structure



The charts below summarize our
corporate legal structure and identify our subsidiaries, the VIE and its subsidiaries:









51









|Name                                                                                                           |  | Background                                                                                                                                                                                       |  | Ownership                                            
|-------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -----------------------------------------------------
|Infobird International Limited                                                                                 |  | ● A Hong Kong company ● Incorporated on
April 21, 2020 ● A holding company                                                                                                                       |  | 100% owned by Infobird Co., Ltd                      
|Infobird Digital Technology (Beijing) Co., Ltd                                                                 |  | ● A PRC limited liability company and deemed
a wholly foreign owned enterprise, or WFOE ● Incorporated on May 20, 2020 ● Registered capital of $15,000,000 (RMB
106,392,000) ● A holding company |  | 100% owned by Infobird International Limited         
|Beijing Infobird Software Co., Ltd                                                                             |  | ● A PRC limited liability company ●
Incorporated on October 26, 2001 ● Registered capital of $2,417,947 (RMB 16,624,597)                                                                         |  | VIE of Infobird Digital Technology (Beijing) Co., Ltd
|Guiyang Infobird Cloud Computing Co., Ltd                                                                      |  | ● A PRC limited liability company ●
Incorporated on October 17, 2013 ● Registered capital of $1,777,645 (RMB 12,222,200)                                                                         |  | 90.18% owned by Beijing Infobird Software Co., Ltd   
|Anhui Xinlijia E-commerce Co., Ltd (formerly known as Anhui Infobird Software Information Technology Co., Ltd) |  | ● A PRC limited liability company ●
Incorporated on June 20, 2012 ● Registered capital of $1,454,440 (RMB 10,000,000)                                                                            |  | 99.95% owned by Beijing Infobird Software Co., Ltd   
|Shanghai Qishuo Technology
Inc.                                                                                |  | ● A PRC limited liability
company  ● Incorporated on April 10, 2014 ● Registered capital of $156,922 (RMB 1,000,000)                                                                             |  | 51% owned by Beijing Infobird
Software Co., Ltd      







D. Property, Plants and Equipment



Our principal executive office is located at Room 12A05, Block A, Boya International Center, Building 2, No.
1 Courtyard, Lize Zhongyi Road, Chaoyang District, Beijing, China 100102, where we lease two units, Room 12A05 and 12A06, consisting
of approximately 656 and 210 square meters of office space, respectively. We lease these spaces under a lease that will terminate
on March 31, 2025. We also lease an additional unit located at Room12A03B, Block A, Boya International Center, Building 2, No.
1 Courtyard, Lize Zhongyi Road, Chaoyang District, Beijing, China 100102, consisting of approximately 233 square meters of office
space under a lease that will terminate on May 31, 2023. We also lease units under four leases located at 25th Floor, Building
9, Zone C, Huaguoyuan Project, No. 1, Huaguoyuan Street, Nanming District, Guiyang City, China, 550002 ranging from approximately
115 to 612 square meters of office space under three leases that will terminate on October 7, 2023 and one lease that will terminate
on October 10, 2023.





52







We also lease other spaces that
we do not view to be material to our business. We believe that our facilities are adequate to meet our needs for the immediate future,
and that, should it be needed, suitable additional space will be available on commercially reasonable terms to accommodate any such expansion
of our operations.



We were also in the process
of constructing a cloud computing facility in Guiyang, China, which has been postponed due to the time needed to negotiate with
various vendors and to obtain various government permits, particularly due to the impacts of COVID-19. The facility is expected
to have two buildings consisting of approximately 43,000 square meters in total, which is expected to house our cloud and BPO services
operations and also fulfill the purposes of offices, research centers, logistics and employee dormitories. This facility is intended
to replace our current facilities in Guiyang and some of our facilities in Beijing and Hefei, China, which are currently leased.
We have completed demolition, underground structure and design. In June 2020, we obtained the Guiyang Provincial Enterprise Investment
Project Filing Certificate. Due to further delays of the project related to local governments’ limitation of economic activities
in response to the resurgence of COVID-19 variants, we recorded impairment loss of $2.0 million of our construction in progress
for the year ended December 31, 2021, as we were unable to estimate when we will obtain the permits to start construction and we
will continue leasing our facilities for expansion needs.







ITEM 4A. UNRESOLVED STAFF COMMENTS



None.





ITEM 5.  
OPERATING AND FINANCIAL REVIEW AND PROSPECTS



You
should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated
financial statements and the related notes included elsewhere in this annual report on Form 20-F. This discussion and other parts of
this annual report on Form 20-F may contain forward-looking statements based upon current beliefs, plans and expectations that involve
risks, uncertainties and assumptions. Our actual results and the timing of selected events may differ materially from those anticipated
in these forward-looking statements as a result of various factors, including those set forth under “Item 3. Key Information-D.
Risk Factors” or in other parts of this annual report on Form 20-F. You should carefully read the “Risk Factors” section
of this annual report on Form 20-F in “Item 3. Key Information—D. Risk Factors” to gain an understanding of the important
factors that could cause actual results to differ materially from our forward-looking statements.



A.    Operating results



Overview



We are a software-as-a-service,
or SaaS, provider of innovative AI-powered, or artificial intelligence enabled, customer engagement solutions in China. Leveraging self-developed
cloud-native architecture, AI and machine learning capabilities, patented Voice over Internet Protocol, or VoIP, application technologies,
no-code development platform, and in-depth industry expertise, we primarily provide holistic software solutions to help our corporate
clients proactively deliver and manage end-to-end customer engagement activities at all stages of the sales process including pre-sales
and sales activities and post-sales customer support. We also offer AI-powered cloud-based sales force management software including intelligent
quality inspection and intelligent training software to help our clients monitor, benchmark and improve the performances of agents. We
empower our clients with our business value-driven solutions to increase revenue, reduce cost, and enhance customer service quality and
customer satisfaction. We currently specialize in corporate clients in the finance industry and also cover a broad array of other industries,
including the education, public services, healthcare and consumer products industries. We believe we are one of the leading and long-standing
domestic SaaS providers in serving large enterprises in the finance industry in customer engagement with over 10 years of experience.
We offer a comprehensive portfolio of customer engagement SaaS solutions that are highly intelligent, customizable and with proof of stability
and security at scale with concurrence of over 10,000 agents. We continue to innovate by developing technologies that enable us to deliver
a series of solutions and services which address the evolving and changing needs of our corporate clientele.



On
December 2, 2021, we completed a 51% acquisition of Shanghai Qishuo Technology Inc., or Shanghai Qishuo, a PRC limited liability company
and a SaaS provider of big data analysis to retail stores aimed at operation improvement, for approximately $1.3 million (RMB 8.6 million).
Shanghai Qishuo is a fast-growing provider of consumer product and retail store digitalization solutions. Before the acquisition, its
business was mainly focused on shoes and footwear retail stores digital operation transformation. Shanghai Qishuo gained experience in
this market through serving leading clothing brands in China. ShanghaiQishuo leveraged its deep
understanding of retail clothing and footwearstore operations to develop its main product, “Retail Rubik’s Cube”,
which empowers clients by digital means to better understand and improve their stores’ performance.





We generate revenues primarily
from providing standard and customized cloud-based SaaS, BPO services, software development and other technical services. For the
years ended December 31, 2021, 2020, and 2019, total revenues were approximately $9.6 million, $14.5 million, and $18.2 million,
respectively. Our gross profit was approximately $2.3 million, $9.8 million, and $10.3 million for the years ended December 31,
2021, 2020, and 2019, respectively. Our net (loss) or income was approximately $(14.2) million, $4.1 million, and $5.1 million
for the years ended December 31, 2021, 2020, and 2019, respectively.





Our current emphasis and goals
primarily include execution of business strategies, improvement of cost structure, and product and service performance, among others.





53







COVID-19



In December 2019, COVID-19 surfaced
in Wuhan, China and spread rapidly over the globe, including China and the United States. The World Health Organization declared a global
emergency on January 30, 2020 with respect to the outbreak, and thereafter virtually all countries in North America, Europe and Asia initiated
travel restrictions, closed borders and instituted social distancing directives, including “shelter-in-place” directives.
Despite the ongoing COVID-19 pandemic, we were able to resume normal business operations in the third quarter of fiscal year 2020. However,
COVID-19 variants again began affecting certain regions of China in the third quarter of 2021. We then closed our office again in Shanghai
in April 2022 (which remain closed as of the date of this annual report), and the majority of the employees at our Beijing offices are
working from home while such offices remain open as of the date of this annual report, as required by relevant PRC regulatory authorities.
Our other offices in China remain open and employees are currently working onsite as of the date of this annual report.



To date, COVID-19 has had certain
adverse impacts on our operations and revenue growth. Some of our customers has been affected by COVID-19 and requested additional time
to pay us, which required us to record additional allowances of $2.3 million for the year ended December 31, 2021. We will continue to
monitor collections from 2021 and beyond. Our construction progress in Guiyang has been further delayed due to the temporary postponement
of certain activities by local government authorities to slow the spread of COVID-19. As a result, for the year ended December 31, 2021,
we recorded an impairment of approximately $2.4 million through the delay of our construction progress and land use rights from our subsidiary,
Infobird Guiyang. In addition, due to reduced profit projections as a result of the resurgence of COVID-19 in China in the first quarter
of 2022 that caused lock-downs in various places in China, we recorded additional impairment on our intangible assets of $1.3 million
for the year ended December 31, 2021 as the carrying value of our long-lived assets exceed the future cashflows expected to be generated
from the assets.



For a detailed description of the
risks associated with COVID-19, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—We
face risks related to natural disasters, health epidemics and other outbreaks, specifically the coronavirus, which could significantly
disrupt our operations.” Because of the significant uncertainties surrounding the COVID-19 pandemic, the extent of the business
disruptions and the related financial impacts cannot be reasonably estimated at this time.



Key Factors that Affect Operating Results



Our management team monitors the
following key operating metrics:



Our
revenue is affected by the number of average monthly paid user accounts our customers subscribed to and the average revenue per user
account





Paid
user accounts are the number of active accounts that our customers subscribed to based on contracts which specify a fixed fee per user
account per specified period. Average monthly paid user accounts are the sum of the numbers of paid user accounts per month divided by
twelve months for the years ended. Average monthly paid user accounts is the operating metric that we utilize rather than paid user accounts.
Standard cloud-based services and BPO services accounted for approximately 44.1%, 21.7% and 22.1% of our total revenues for the years
ended December 31, 2021, 2020 and 2019, respectively. As part of our strategic plan, we are focusing on marketing our standard cloud-based
services and BPO services where we typically can charge higher prices for our new products and in order to reduce our dependence on larger
customers. For the years ended December 31, 2021, 2020 and 2019, we had 4,890, 5414 and 4,208 paid user accounts for our standard cloud
based services and BPO services. Average revenue per user account is our total revenue, divided by average monthly paid user accounts.
The average revenue per user account were $868, $581, $957 for the years ended December 31, 2021, 2020 and 2019, respectively. In order
to stay competitive during the COVID-19 pandemic and maintain continuing partnerships with our existing customers, we offered lower prices
to our existing standard cloud-based services customers who renewed service contracts during the year ended December 31, 2020 and who
committed to higher volume usage. Therefore we have higher user accounts for 2020 but lower revenue per user account.   Our pricing
went back to higher levels in 2021 resulting in higher average revenue per user account for the year ended December 31, 2021.





Our ability to compete effectively



Our business and results of operations
depend on our ability to compete effectively in the industry in which we operate. Our competitive position may be affected by, among other
things, the scope of our products, the quality of our solutions and our ability to customize our products to meet customers’ business
needs. We believe that our proprietary technologies and research and development capabilities help us to develop products tailored to
our customers and we are able to retain and develop business with existing customers and to attract new customers. However, if are unable
to keep up with our product development or innovation, we might not be able to develop new customers or expand our business effectively.
In addition, we are subject to competition from within our industry. Increased competition could materially and adversely affect our business
and results of operations.





54







The
PRC economy



Although the PRC economy
has grown in recent years, the pace of growth has slowed in recent years, and rate of growth may not continue in the future. According
to the PRC National Bureau of Statistics, the annual rate of growth in the PRC declined from 7.7% in 2013 to 2.3% in 2020. Although
the rate of growth increased to 8.1% in 2021 due to temporary recovery from COVID-19, the resurgence of COVID-19 variants in early
2022 and a further slowdown in overall economic growth, an economic downturn or recession or other adverse economic developments
in the PRC may materially reduce the purchase power of the consumers of our products and lead to the decrease of demand for our
products and services and may have a material and adverse effect on our business.





In December 2019, COVID-19
surfaced in Wuhan, China and spread rapidly over the globe, including China and the United States. The pandemic has resulted in
quarantines, travel restrictions, and the temporary closure of stores and facilities in China and elsewhere. Substantially all
of our revenue is concentrated in China. Consequently, the COVID-19 pandemic has materially and adversely affected our business
operations, financial condition and operating results for 2021.   For a detailed description of the risks associated
with COVID-19, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—We
face risks related to natural disasters, health epidemics and other outbreaks, specifically the coronavirus, which could significantly
disrupt our operations.”







The PRC government



Our PRC entities are incorporated,
and their operations and assets are located, in China. Accordingly, our results of operations, financial condition and prospects are affected
by China’s regulation conditions in the following factors: (a) economic policies and initiatives undertaken by the PRC government;
(b) changes in the Chinese or regional business or regulatory environment affecting the purchase power of consumers of our products; and
(c) changes in Chinese government policy affecting our industry. Unfavorable changes could affect demand for products that we sell and
for products that we provide and could materially and adversely affect the results of operations.



Key Components of Our Results of Operations



Revenues consist of revenues from
customized and standard cloud-based services, business processing outsourcing services, software development and others.



Revenue from customized cloud-based
services



We provide customized
cloud-based customer engagement services which includes customized SaaS, voice/data plan, which includes telecommunication usage
such as telephone calls and messaging that our customers can subscribe for, and technical support. The provision of customized SaaS,
voice/data plan and technical support is considered as one performance obligation as the services provided are not distinct within
the context of the contract whereas the customers can only obtain benefit when the services are provided together. We use monthly
utilization records based on the number of user accounts subscribed for by customers, an output measure, to recognize revenue over
time as there is simultaneous consumption and delivery of services.



Revenue from standard cloud-based
services



We also provide standard cloud-based
solutions that provide customers the right to access our software through the internet. Our cloud-based solutions represent a series of
services such as calling, voice recording and technical support. These services are made available to the customer continuously throughout
the contractual period, however, the extent to which the customer uses the services may vary at the customers’ discretion. The standard
cloud-based services are considered to have one single performance obligation. We use monthly utilization records based on the number
of user accounts subscribed for by customers, an output measure, to recognize revenue over time as there is simultaneous consumption and
delivery of services. We also have some contracts with customers where the customer subscribes for a fix number of user accounts over
certain contract periods, therefore the customers receive and consume the benefits of the cloud services throughout the subscription period
so revenue is recognized ratably over the contractual subscription period in which the services are delivered, beginning on the date the
service is made available to the customers. Contract performance periods generally are one year, and pursuant to the contracts, full payments
are generally collected in advance, with payment to be made within three months after execution of the contract. Contracts generally do
not contain significant financing components or variable consideration.







55







Revenue from BPO services



Revenue from BPO services is generated
from assisting customers to operate the call centers services. Customers using these services are not permitted to take possession of
our software and physical resources and the contract is for a defined period, where customers pay a monthly service fee. These services
are considered as one performance obligation as the customers does not obtain benefit for each separate services. Revenues are recognized
over time over contractual period using the time elapsed output method as BPO services are provided. Contract performance periods generally
are one year, and pursuant to the contracts, full payments for several months of services are generally collected in advance. Contracts
generally do not contain significant financing components or variable consideration.



Revenue from business integration
solution services



Since 2020, we provide business
integration solution services to our customers and expect to expand our customer base from such services and develop the customers to
become subscribers to SaaS services with software upgrades and continued services once they become more familiar with our products. The
services include sales of our software license or development of customized software to fit the customers’ need and sales of hardware
integrated with our software.



-
Revenue from software development



We also generate revenue from business
integration solution services including (1) standard software and (2) customized software developed per customers’ specifications.
Contract terms from each software development contract generally do not contain significant financing components or variable consideration.



Standard software is developed and offered as standard
cloud-based services. We sold the license for standard software because some customers show obvious preference of software licensing over
software-as-a-service, for reasons such as concerns about the safety of cloud-based services and potential higher price of subscription
in total compared with one-time on-premise fee. Therefore, as part of our sales and market strategy, we offer licenses for our standard
software to allow the customers to first start utilizing our products in their daily operation and then aim to evolve them to become subscribers
with our standard cloud-based services to enjoy benefits of software upgrades and continued services. Licenses for standard software provide
the customer with a right to use the software. Standard software licenses are typically made available to customers with immediate access
to the software. We recognize revenue for these standard software licenses at the point in time when the customer has access and thus
control over the software.







Customized software is software
developed catering to the needs of specific customers who require initial customization or development of new solutions before
subscription to our cloud-based services. For example, we have entered into a two-stage agreement to provide services to a
municipal government agency to first develop an information technology system and customize and configure our cloud call center
into the IT system, and then provide cloud-based services and charge subscription fees. Because the customized software we developed
are to solve certain business pain points in a certain scenario within or across industries, once developed, we plan to further
apply them in serving other customers that share similar needs and business models. We aim to replicate our initial customization
and development and achieve economies of scale after we deliver our products to more customers within the same industry. Contract
terms are generally less than one year. The design, development, and installation of the customized software is considered as one
performance obligation as these promises are not separately identifiable as the customers do not obtain benefits from these services
on its own. Our software development service contracts are generally recognized at a point in time when customer accepted the customized
software with satisfactory testing result.







56







-
Revenue from sales of hardware with software integration



We are responsible for providing
hardware procurement, software design and implementation, installation and maintenance service in order to fulfill the contract. Design,
integration and installation of hardware and software are considered as one performance obligation, as the customer does not benefit from
each individual service on its own stand, but instead is benefited by our provision of these services as a whole. For contracts that we
have no alternative use of the customized system without incurring significant additional costs and when we have right to payment for
performance completed, we recognize revenue over time based on measurement of progress towards completion using output methods when we
could appropriately measure the customization progress towards completion by reaching certain milestones specified in contracts. For other
contracts for which we are only entitled to payment after completion and inspection of the project, revenue is recognized at a point in
time after completion of software implementation and hardware installation, and the transfer of control to the customer.



Certain business integration solution
services contracts also require us to provide post-contract services, or PCS, which include maintenance and technical support. The provision
of maintenance and technical support is considered one single performance obligation because maintenance and technical support are not
distinct within the context of the contract. We are obligated to provide a single, continuous, integrated service throughout the
contract term. As such, we allocate the contract price between revenue from business integration solution services and provision of PCS,
using the expected cost plus margin approach. The expected cost plus margin approach requires us to forecast the expected costs of satisfying
the performance obligation and then add a reasonable margin for that good or service. Revenue allocated to PCS is deferred and recognized
on a straight-line basis over the estimated period PCS are expected to be provided. For the years ended December 31, 2021, 2020 and 2019,
approximately $0.1 million, $0.3 million and $0 were allocated to PCS, respectively.



For
contracts that involved third party service providers, we assess if we control the goods and services before they were transferred to
the customer or if our responsibility is merely to facilitate the provision of goods and service to the customer. For products and goods
that were directly shipped from the vendor to the customer and the vendor is responsible for providing services including installing,
set up and warranty services after completion of the project, we record revenue from these contracts on a net basis when the services
are provided and controlled by the third party service provider.

Professional services
and other revenues



We also generate revenue from data
analysis services and other professional services. The service revenue from data analysis services and other professional services is
recognized over time as services are performed and delivered to customers. Contract performance periods generally range from month to
month, completion of service (software license) to one year, and payment terms are generally prepaid to 30 days. Contracts generally do
not contain significant financing components or variable consideration.



Revenue categories are summarized
as follows:



|                                       |  | For the Years Ended December 31, |           | 2021 Change |  | For the Years Ended December 31, |      | 2020  Change
|-------------------------------------- |  | -------------------------------- | --------- | ----------- |  | -------------------------------- | ---- | ------------
|                                       |  | 2021                             |           | %           |  | 2020                             |      | %           
|                                       |  |                                  |           |             |  |                                  |      |             
|Standard cloud-based services          |  | $                                | 1,982,328 |             |  |                                  | 20.6 | %           
|Customized cloud-based services        |  |                                  | —         |             |  |                                  | —    |             
|BPO services                           |  |                                  | 2,261,998 |             |  |                                  | 23.5 | %           
|Business integration solution services |  |                                  | 4,076,446 |             |  |                                  | 42.3 | %           
|Other revenues                         |  |                                  | 1,320,308 |             |  |                                  | 13.6 | %           
|Total operating revenues               |  |                                  | 9,641,080 |             |  |                                  | 100  | %           





57







Cost of revenues



Cost of revenues consists primarily
of costs (including salaries, social insurance and benefits) for employees involved with our operations and products and services support,
third party service fees including cloud and data usage, hosting fees, software development fees and amortization and depreciation expenses
associated with our capitalized software, platform system and hardware. Cost of revenues also include outsourcing contracted customer
service representatives, customer surveys and allocated share costs, primarily including facilities, information technology and security
costs.



Cost of revenues from revenue categories
are summarized as follows:



|                                             |  | For the Years Ended  December 31, |           | 2021  Change |  | For the Years Ended   December 31, |           | 2020  Change
|-------------------------------------------- |  | --------------------------------- | --------- | ------------ |  | ---------------------------------- | --------- | ------------
|                                             |  | 2021                              |           | 2020         |  | %                                  |           | 2020        
|                                             |  |                                   |           |              |  |                                    |           |             
|Standard and customized cloud-based services |  | $                                 | 844,146   |              |  | $                                  | 1,916,920 |             
|BPO services                                 |  |                                   | 2,164,245 |              |  |                                    | 1,476,919 |             
|Business integration solution services*      |  |                                   | 3,118,545 |              |  |                                    | 511,092   |             
|Other revenues**                             |  |                                   | 1,246,716 |              |  |                                    | 813,162   |             
|Total cost of revenues                       |  | $                                 | 7,373,652 |              |  | $                                  | 4,718,093 |             

*includes $58,498 costs from related party

** includes $292,489 cost from related party



Operating expenses



Our operating expenses consist
of selling expenses, general and administrative expenses, and research and development expenses.



Selling expenses consist of personnel
costs (including salaries, social insurance, and benefits), office and travel expenses for employees associated with our sales and marketing
organizations, and costs of marketing activities. Marketing activities include both online and offline marketing initiatives, including
digital advertising, such as search engines, paid social, email and product marketing, content marketing, web marketing and optimization.
We focus our sales and marketing efforts on generating awareness of our services and products, establishing and promoting our brand, and
cultivating a community of customers.





General and administrative
expenses consist primarily of rent, office expenses and personnel costs (including salaries, social insurance, and benefits) for
our executive, finance, legal, human resources, and other administrative employees. In addition, general and administrative expenses
include amortization expense from land used rights and bad debt expenses.





Research and development expenses
consist primarily of salaries and other compensation-related expenses for our research and product development personnel, as well as office
rental, depreciation, amortization and related expenses for our research and product development team. We focus our research and development
efforts on the continued development of our services and products, including the development and deployment of new features and functionality
and enhancements to our software architecture and integration across our services and products.





58







Impact of Foreign Currency Fluctuation



See “Item 3. Key Information—D.
Risk Factors—Risks Related to Doing Business in China—Fluctuations in exchange rates could have a material and adverse effect
on our results of operations and the value of your investment.” and “Item 11. Quantitative and Qualitative Disclosures About
Market Risk-Foreign Exchange Risk.”



Results of Operations



Comparison of Years Ended December 31, 2021 and
2020 and Comparison of Years Ended December 31, 2020 and 2019



|                                    |  | For the Years Ended December 31, |             | 2021 Change |  | For the Years Ended December 31, |            | 2020 Change
|----------------------------------- |  | -------------------------------- | ----------- | ----------- |  | -------------------------------- | ---------- | -----------
|                                    |  | 2021                             |             | 2020        |  | %                                |            | 2020       
|                                    |  |                                  |             |             |  |                                  |            |            
|Revenues                            |  | $                                | 9,641,080   |             |  | $                                | 14,532,941 |            
|Cost of revenues                    |  |                                  | 7,373,652   |             |  |                                  | 4,718,093  |            
|Gross profit                        |  |                                  | 2,267,428   |             |  |                                  | 9,814,848  |            
|Selling expenses                    |  |                                  | 3,828,835   |             |  |                                  | 1,837,768  |            
|General and administrative expenses |  |                                  | 5,950,329   |             |  |                                  | 1,712,034  |            
|Research and development expenses   |  |                                  | 3,269,680   |             |  |                                  | 1,897,349  |            
|Long-lived assets impairment        |  |                                  | 3,692,047   |             |  |                                  | —          |            
|(Loss) Income from operations       |  |                                  | (14,473,463 | )           |  |                                  | 4,367,697  |            
|Other income (expense), net         |  |                                  | 371,608     |             |  |                                  | (21,466    | )          
|Provision for income taxes          |  |                                  | 124,058     |             |  |                                  | 286,071    |            
|Net (Loss) income                   |  | $                                | (14,225,913 | )           |  | $                                | 4,060,160  |            





Comparison of Years Ended December 31, 2021 and
December 31, 2020



Total revenues decreased by approximately
$4.9 million, or 33.7%, to approximately $9.6 million for the year ended December 31, 2021 from approximately $14.5 million for the year
ended December 31, 2020. The decrease was due to the expiration of customized cloud-based services contract and telecommunications services
contract with China Guangfa Bank on June 30, 2020 of approximately $5.0 million and decrease in business integration solution services
of approximately $1.3 million offset by increase in standard cloud services of approximately $0.5 million, increase in BPO services of
approximately $0.5 million and other revenue of approximately $0.3 million.





Customized cloud-based services
revenue decreased by approximately $5.0 million, or 100.0%, to approximately $0 for the year ended December 31, 2021 compared to
approximately $5.0 million for the same period in 2020. For the years ended December 31, 2021 and 2020, our standard cloud-based
services revenue increased by approximately $0.5 million, or 41.5%, to approximately $2.0 million for the year ended December 31,
2021 compared to approximately $1.4 million for the same period in 2020. Standard cloud-based services revenue represented approximately
20.6% and 9.7% of our total revenues for the years ended December 31, 2021 and 2020, respectively. As we focused our business from
customized cloud-based services to standard cloud-based services in 2021 as standard cloud-based services require no customization
efforts and can therefore enable SaaS providers to quickly expand client bases as well as penetrate the market. We devoted research
and development resources into, and successfully launched, several intelligent standard cloud-based services, including intelligent
training and intelligent marketing. Our sales and marketing team has also been developing customers from multiple large- to medium-sized
companies in finance, healthcare, and retail industries.







59







BPO service fees increased by approximately
$0.5 million, or 29.5%, to approximately $2.3 million for the year ended December 31, 2021 compared to approximately $1.7 million for
the same period in 2020, representing approximately 23.5% and 12.0% of our total revenues for the years ended December 31, 2021 and 2020,
respectively. The average monthly paid user accounts for BPO services increased to 178 for the year ended December 31, 2021 from 160 for
the year ended December 31, 2020 due to new applications as mentioned above.



We began generating revenue
from business integration solution services in 2020 which includes 1) software development and 2) hardware software integration services
for our customers. The customers that engage with our business integration solution services may subsequently purchase our cloud-based
services, which would lead to an increase in standard cloud-based services revenue.



Revenue
from business integration solution services amounted to approximately $4.1 million and $5.4 million for the years ended December 31, 2021
and 2020, representing approximately 42.3% and 37.1% of our total revenue for the years ended December 31, 2021 and 2020, respectively.
In 2020,we mainly focused on software development
in order to increase our client base with our products since some customers show great interest of our products yet have preferences of
software licensing over SaaS service or needs of customized software development as of now, but with potential to become subscribers to
our SaaS services with software upgrades and continued services once they are more familiar with our products. We began generating revenue
from hardware software integration solution services in 2021. We are responsible for providing hardware procurement, software design and
implementation, installation and maintenance service in order to fulfill the contract. We expect to develop and expand our customer base
from business integration solution services, and develop our existing customer to become subscribers to our SaaS services with software
upgrades and continued services once they are more familiar with our products.



One of our business
integration services contracts in 2021 that we use third party service provider to providing services including provision of
hardware, installation, set up and warranty services after completion of project. The products were directly shipped to the customer
from third party service provider and the third party service provider also provides installation and warranty services. Since we do
not control the services, we accounted the revenue on the net basis. Gross revenue amounted to $2,676,759 and we recognized $187,373
as net revenue, net of costs of $2,492,386.





Some of the business integration
solution services contract also requires us to provide PCS, which include maintenance and technical support. Revenue allocated to PCS
is deferred and recognized on a straight-line basis over the estimated period PCS are expected to be provided. For the years ended December
31, 2021 and 2020, approximately $138,188, and $51,000 were allocated to PCS, respectively.



Other revenues amounted to approximately
$1.3 million and $1.0 million for the years ended December 31, 2021 and 2020, respectively, representing approximately 13.6% and 6.8%
of our total revenues for the years ended December 31, 2021 and 2020, respectively. Other revenues, which consist of data analysis and
other technical consulting services which we will continue to provide to our customers on as needed basis.



Cost of Revenues



Total cost of revenues increased
by approximately $2.7 million, or 56.3%, to approximately $7.4 million for the year ended December 31, 2021 from approximately $4.7 million
for the year ended December 31, 2020.



Cost
of revenues incurred by standard cloud-based services decreased by approximately $1.1 million, or 56.0%, for the year ended December
31, 2021 compared to the same period in 2020. The significant decrease was in line with the decrease of our revenue due to the expiration
of our service contracts with our major customer China Guangfa Bank for the year ended December 31, 2020. As a result, our cloud and
data usage decreased accordingly.





60











Cost of revenue for BPO
services increased by approximately $0.7 million, or 46.5%, for the year ended December 31, 2021 compared to the same period in
2020. The increase was in line with the increase of BPO services revenue. As of December 31, 2021, we had a total of 173 customer
service representatives to serve our clients compared to 206 customer services representatives as of December 31, 2020. The number
of customer services representatives are adjusted periodically based on our business needs. The increase was also due to the
increase of salary rate and employee benefit from the year ended December 31, 2020 to the year ended December 31, 2021.



Cost of business integration solution
increased by approximately $2.6 million, or 510.2%, for the year ended December 31, 2021 compared to the same period in 2020. The increase
was mainly attributed to the increase hardware for our business integration services.



Cost of other revenues decreased
by approximately $0.4 million, or 53.3%, for the year ended December 31, 2021 compared to the same period in 2020. The increase was in
line with increase in revenue.



Gross Profit



Our gross profit from our major
revenue categories are summarized as follows:



|                                             |  | For the Year Ended December 31, 2021 |           | For the Year Ended December 31, 2020 |  | Change |           | Percentage   Change
|-------------------------------------------- |  | ------------------------------------ | --------- | ------------------------------------ |  | ------ | --------- | -------------------
|                                             |  |                                      |           |                                      |  |        |           |                    
|Standard and customized cloud-based services |  |                                      |           |                                      |  |        |           |                    
|Gross profit                                 |  | $                                    | 1,138,181 |                                      |  | $      | 4,489,017 |                    
|Gross margin                                 |  |                                      | 57.4      | %                                    |  |        | 70.1      | %                  
|                                             |  |                                      |           |                                      |  |        |           |                    
|BPO services                                 |  |                                      |           |                                      |  |        |           |                    
|Gross profit                                 |  | $                                    | 97,753    |                                      |  | $      | 270,391   |                    
|Gross margin                                 |  |                                      | 4.3       | %                                    |  |        | 15.5      | %                  
|                                             |  |                                      |           |                                      |  |        |           |                    
|Business integration solution services       |  |                                      |           |                                      |  |        |           |                    
|Gross profit                                 |  | $                                    | 957,903   |                                      |  |        | 4,881,675 |                    
|Gross margin                                 |  |                                      | 23.5      | %                                    |  |        | 90.5      | %                  
|                                             |  |                                      |           |                                      |  |        |           |                    
|Other services                               |  |                                      |           |                                      |  |        |           |                    
|Gross profit                                 |  | $                                    | 73,591    |                                      |  | $      | 173,765   |                    
|Gross margin                                 |  |                                      | 5.6       | %                                    |  |        | 17.6      | %                  
|                                             |  |                                      |           |                                      |  |        |           |                    
|Total                                        |  |                                      |           |                                      |  |        |           |                    
|Gross profit                                 |  | $                                    | 2,267,428 |                                      |  | $      | 9,814,848 |                    
|Gross margin                                 |  |                                      | 23.5      | %                                    |  |        | 67.5      | %                  





Our gross profit decreased
by approximately $7.5 million, or 76.9%, to approximately $2.3 million for the year ended December 31, 2021 from approximately
$9.8 million for the year ended December 31, 2020. For the years ended December 31, 2021 and 2020, our overall gross margin was
approximately 23.5% and 67.5%, respectively. The decrease of the gross margin for our cloud services was primarily caused by the
expiration of our service contracts with our major customer China Guangfa Bank which has a higher margin. Our gross margin for
BPO services decreased and was due to higher costs for outsourced services representatives. The decrease of gross margin of business
integration solutions services was primarily caused by hardware costs which lowers the overall project margins. For one of our
business integration services contracts in 2021 that we use a third party service provider to provide services, including provision
of hardware, installation, set up and warranty services after completion of project, we accounted the revenue on the net basis.
Gross revenue amounted to $2,676,759 and we recognized $187,373 as net revenue net of costs of $2,492,386. If the contract was
recognized on a gross basis, our gross margin for business integration services would be 14.6% representing an 8.9 percentage point
decrease and our overall gross margin would be 18.7%, representing a 4.8 percentage point decrease.







61







Operating Expenses





During the year ended December 31,
2021, we incurred a total of approximately $16.7 million operating expenses, an increase of approximately $11.3 million, or
207.3%, as compared to a total of approximately $5.4 million during the year ended December 31, 2020.





Selling expenses increased by approximately
$2.0 million, or 108.3%, to approximately $3.8 million for the year ended December 31, 2021 from approximately $1.8 million for the year
ended December 31, 2020. The increase of approximately $0.8 million was mainly due to an expansion in our sales team which we hired additional
sales to develop business in digital sales and promotion expense by approximately $0.8 million. The increase was also attributable to
an approximate $0.4 million increase in other selling expenses such as travel, training etc.





General and administrative
expenses increased by approximately $4.2 million, or 247.6%, to approximately $6.0 million for the year ended December 31, 2021
from approximately $1.5 million for the year ended December 31, 2020. The increase was mainly attributable to an approximate $0.8
million increase in amortization expense as we completed and placed more self-developed internal-used software into service. The
increase was also due to additional bad debt allowance of approximately $2.3 million due to impact from COVID-19. The increase
was also attributable to an approximate $0.5 million increase in professional fees, as we continue the process of becoming a publicly
traded company and other office expenses of approximately $0.5 million.





Research and development expenses
increased by approximately $1.4 million, or 72.3%, to approximately $3.3 million for the year ended December 31, 2021 from approximately
$1.9 million for the year ended December 31, 2020. The increase was mainly due to the increase of approximately $0.8 million associated
with project planning in preliminary stage in our product development cycle in accordance with ASC 350-40. During the initial planning
and resource allocation stage of product development, we expensed all costs incurred for research and development activities and while
we entered the product development stage, all related costs were capitalized. We had several new products in development as of December
31, 2021 which primarily related to our artificial intelligent training and marketing. We initiated the planning and resource allocations
and determined performance requirements and initial design stages of the products and all related costs were expensed in accordance with
ASC 350-40.



We also followed ASC 985-20 and
expensed all cost incurred in conjunction with software development to research and development expense until technological feasibility
is established using either the detail design approach or working model approach. For the years ended December 31, 2021 and 2020, we incurred
nil and approximately $0.1 million in development, respectively, cost that were expensed before technological feasibility achieved.



Impairment of long lived assets





Our construction progress
in Guiyang has been further delayed due to the temporary postponement of certain activities by local government authorities to
slow the spread of COVID-19. As a result, for the year ended December 31, 2021, we recorded an impairment of approximately $2.4
million through the delay of our construction progress and land use rights from our subsidiary, Infobird Guiyang. In addition,
due to reduced profit projections as a result of the resurgence of COVID-19 in China in the first quarter of 2022 that caused lock-downs
in various places in China, we recorded additional impairment on our intangible assets of $1.3 million for the year ended December
31, 2021 as the carrying value of our long-lived assets exceed the future cashflows expected to be generated from the assets.





Other income (expense), net



Total other income or (expenses),
net were approximately $0.3 million and $(21,000) for the years ended December 31, 2021 and 2020, respectively.



Interest income remained consistent
for the years ended December 31, 2021 and 2020 as it amounted to approximately $9,000 and $7,000 for the years ended December 31, 2021
and 2020, respectively. Interest income consists of bank interest income.



Interest expense increased to
approximately $0.3 million for the year ended December 31, 2021 from approximately $0.2 million for the year ended December 31, 2020
as due to we borrowed more bank loans in 2021. Our loan balance was approximately $4.5 million as of December 31, 2021 compared to
$3.1 million as of December 31, 2020. In addition, our new loans bears higher interest rate then our old loans, our weighted average
interest rate for 2021 loans was 4.7% compared to 4.9% in 2020.









62









Other income included cash
received from government grant and VAT credits and government subsidies as we applied for, and received, more government subsidies
for new technology for our effort to promote local technology and economic growth. Other income increased to approximately $0.7
million for the year ended December 31, 2021 from approximately $0.2 million for the year ended December 31, 2020. The increase
was mainly attributable to approximately $0.5 million of special government grant for successfully listing our shares on a public
exchange.





Provision for income taxes



We recorded income
tax expense of approximately $0.1 million for the year ended December 31, 2021 compared to income tax expense of
approximately $0.3 million for the year ended December 31, 2020. The approximate $0.2 million decrease was primarily due to
decrease in current income taxes of approximately $88,000 due to decrease in taxable income. The decrease is also due to
approximately $74,000 of deferred income taxes due to decrease in valuation allowance provided to deferred tax assets
resulting from reversal of deferred tax liability.









Our net income decreased
by approximately $18.3 million, or 450.4%, to approximately $(14.2) million net loss for the year ended December 31, 2021, from
approximately $4.1 million for the year ended December 31, 2020. Such change was the result of the combination of the changes as
discussed above.







Comparison of Years Ended December 31, 2020 and
December 31, 2019



Total revenues decreased by approximately
$3.7 million, or 20.4%, to approximately $14.5 million for the year ended December 31, 2020 from approximately $18.2 million for the year
ended December 31, 2019. The decrease was mainly due to the negative impact of the COVID-19 pandemic on our business operations, as our
customers have been negatively impacted by office closures and reductions in customer service activities and we had to comply with the
temporary closure of facilities in the first quarter of 2020, and the expiration of our customized cloud-based services contract and telecommunications
services contract with China Guangfa Bank on June 30, 2020 and December 31, 2020, respectively. The decrease from the total revenues was
offset by increase in revenue from new customers in the finance industry as well as other industries such as healthcare and information
technology services. The change for each revenue stream was as follows:



For the years ended December 31,
2020 and 2019, our standard cloud-based services revenue decreased by approximately $0.6 million, or 30.6%, to approximately $1.4 million
for the year ended December 31, 2020 compared to approximately $2.0 million for the same period in 2019. Standard cloud-based services
revenue represented approximately 9.7% and 11.1% of our total revenues for the years ended December 31, 2020 and 2019, respectively. The
average monthly paid user accounts for standard cloud-based services increased to 5,254 for the year ended December 31, 2020 from 4,027
for the year ended December 31, 2019. In order to stay competitive during the COVID-19 pandemic and maintain continuing partnerships with
our existing customers, we offered volume discounts to our existing standard cloud-based services customers who renewed service contracts
during the year ended December 31, 2020 and who committed to higher volume usage. As such, we have seen customer usage increase since
March 2020 as well as our revenue from standard cloud-based services. Our goal was primarily to generate cash flow for the year ended
December 31, 2020 instead of optimizing profits. As the pandemic is currently largely under control in China, we believe our pricing will
gradually resume to normal levels for existing customers with less discounts while new customers are based on full price. In addition,
we plan to shift the focus of our business from customized cloud-based services to standard cloud-based services in 2021 as standard cloud-based
services require no customization efforts and can therefore enable SaaS providers to quickly expand client bases as well as penetrate
the market. We devoted research and development resources into, and successfully launched, several intelligent standard cloud-based services,
including intelligent quality inspection and AI Chatbots in 2019. Our sales and marketing team has also been developing customers from
multiple large- to medium-sized companies in finance, healthcare, and retail industries. In addition, some top banks have invited us to
conduct proof-of-concept tests to provide our standard cloud-based services, which is the first step before entering into a service agreement.
In 2021 and beyond, we expect our revenues will not be largely solely driven from a single major customer, and we expect our standard
cloud-based services will constitute the major portion of our fiscal year 2021 revenue as compared to customized cloud-based services.





63







Customized cloud-based services
revenue decreased by approximately $7.9 million, or 61.1%, to approximately $5.0 million for the year ended December 31, 2020 compared
to approximately $12.9 million for the same period in 2019. The decrease was due to expiration of customized cloud-based services contract
with our major customer China Guangfa bank on June 30, 2020, resulted in decrease of 4,032 average monthly paid user accounts being subscribed
by China Guangfa Bank to 3,021 for the year ended December 31, 2020 from 7,053 for the year ended December 31, 2019, representing an approximate
57.2% decrease. For the years ended December 31, 2020 and 2019, customized cloud-based services revenue represented approximately 34.4%
and 70.5% of our total revenues, respectively. Currently, China Guangfa Bank’s internal telemarketing strategy is to increase its
internal IT capabilities. Therefore, China Guangfa Bank no longer procures such services from a third-party provider, including us, which
affects the services we provide to China Guangfa Bank. Due to our long-lasting relationship with China Guangfa Bank, we have been actively
communicating with China Guangfa Bank to explore cooperative opportunities involving our standard cloud-based services in other business
lines. In addition, we have entered into agreements with new customers who have customization needs to provide our software development
services in the first stage and to provide customized cloud-based services on a subscription basis after the completion and delivery of
the software that we developed as discussed below.



BPO service fees decreased by approximately
$0.3 million, or 13.0%, to approximately $1.7 million for the year ended December 31, 2020 compared to approximately $2.0 million for
the same period in 2019, representing approximately 12.0% and 11.0% of our total revenues for the years ended December 31, 2020 and 2019,
respectively. The average monthly paid user accounts for BPO services decreased to 160 for the year ended December 31, 2020 from 181 for
the year ended December 31, 2019 due to decreased usage as a result of impact from the COVID-19 pandemic.



Revenue from software development pertaining to cloud-based
services amounted to approximately $5.4 million and $0.3 million for the years ended December 31, 2020 and 2019, representing approximately
37.1% and 1.5% of our total revenue for the years ended December 31, 2020 and 2019, respectively. The increase was mainly due to our sales
and marketing strategy to quickly increase our client base with our products, and some of them show great interest of our products yet
have preferences of software licensing over SaaS service or needs of customized software development as of now, but with potential to
become subscribers to our SaaS services with software upgrades and continued services once they are more familiar with our products.



Standard software is developed and offered as standard
cloud-based services. During the digital transformation in China, more companies expressed growing acceptance of the concept of SaaS,
or software-as-a-service, services. However, some of our newly acquired customers show preference of software licensing over software-as-a-service,
for reasons such as concerns about safety of cloud-based services and potential higher price of subscription in total compared with one-time
on-premise fee. Therefore, we offer licenses for our standard software to allow the customers to first start utilizing our products in
their daily operation and then aim to evolve them to become subscribers with our standard cloud-based services to enjoy benefits of software
upgrades and continued services.



Customized software is
software developed catering to the needs of specific customers who require initial customization or development of new
solutions before subscription to our cloud-based services. For example, we have entered into a two-stage agreement to
provide services to a municipal government agency to first develop an information technology system and customize and
configure our cloud call center into the IT system, and then provide cloud-based services and charge subscription fees.
Because the customized software we developed are to solve certain business pain points in a certain scenario within or across
industries, once developed, we plan to further apply them in serving other customers that share similar needs and business
models. We aim to replicate our initial customization and development and achieve economies of scale after we deliver our
products to more customers within the same industry.



Other revenues amounted to approximately
$1.0 million and $1.1 million for the years ended December 31, 2020 and 2019, respectively, representing approximately 6.8% and 6.0% of
our total revenues for the years ended December 31, 2020 and 2019, respectively. Due to the COVID-19 pandemic, our customers have further
reduced non-essential projects which lead to our revenue decrease. As we focus our operations on cloud-based SaaS, we expect other revenues,
which consist of data analysis and other technical consulting services, will continue to decrease and represent an insignificant portion
of our total revenues.





Cost of Revenues



Total cost of revenues decreased
by approximately $3.3 million, or 40.9%, to approximately $4.7 million for the year ended December 31, 2020 from approximately $8.0 million
for the year ended December 31, 2019.



Cost
of revenues incurred by standard and customized cloud-based services decreased significantly by approximately $3.2 million, or 62.6%,
for the year ended December 31, 2020 compared to the same period in 2019. The significant decrease was in line with the decrease of our
revenue which had been adversely affected by the COVID-19 pandemic and expiration of our service contracts with our major customer China
Guangfa Bank for the year ended December 31, 2020. As a result, our cloud and data usage decreased accordingly.



Cost of revenue for BPO services
decreased by approximately $0.3 million, or 16.7%, for the year ended December 31, 2020 compared to the same period in 2019. The decrease
was in line with the decrease of BPO services revenue which had been adversely affected by the COVID-19 pandemic for the year ended December
31, 2020. As of December 31, 2020, we had a total of 206 customer service representatives to serve our clients compared to 174 customer
services representatives as of December 31, 2019. The number of customer services representatives are adjusted periodically based on our
business needs.



Cost of software development
increased by approximately $0.5 million, or 1,726.6%, for the year ended December 31, 2020 compared to the same period in 2019. The increase
was mainly attributed to the increase of an approximate $0.5 million in cost of employee and third party contractor costs incurred for
our customized software development.



Cost of other revenues decreased
by approximately $0.3 million, or 23.5%, for the year ended December 31, 2020 compared to the same period in 2019. The decrease was in
line with the decrease in other revenues as we focused more on our cloud-based SaaS operations.







64







Gross Profit



Our gross profit from our major
revenue categories are summarized as follows:



|                                             |  | For the Year Ended December 31, 2020 |           | For the Year Ended December 31, 2019 |  | Change |            | Percentage   Change
|-------------------------------------------- |  | ------------------------------------ | --------- | ------------------------------------ |  | ------ | ---------- | -------------------
|Standard and customized cloud-based services |  |                                      |           |                                      |  |        |            |                    
|Gross profit                                 |  | $                                    | 4,489,017 |                                      |  | $      | 9,762,464  |                    
|Gross margin                                 |  |                                      | 70.1      | %                                    |  |        | 65.6       | %                  
|BPO services                                 |  |                                      |           |                                      |  |        |            |                    
|Gross profit                                 |  | $                                    | 270,391   |                                      |  | $      | 233,926    |                    
|Gross margin                                 |  |                                      | 15.5      | %                                    |  |        | 11.7       | %                  
|Software development                         |  |                                      |           |                                      |  |        |            |                    
|Gross profit                                 |  |                                      | 4,881,675 |                                      |  |        | 239,819    |                    
|Gross margin                                 |  |                                      | 90.5      | %                                    |  |        | 89.6       | %                  
|Other services                               |  |                                      |           |                                      |  |        |            |                    
|Gross profit                                 |  | $                                    | 173,765   |                                      |  | $      | 24,934     |                    
|Gross margin                                 |  |                                      | 17.6      | %                                    |  |        | 2.3        | %                  
|Total                                        |  |                                      |           |                                      |  |        |            |                    
|Gross profit                                 |  | $                                    | 9,814,848 |                                      |  | $      | 10,261,143 |                    
|Gross margin                                 |  |                                      | 67.5      | %                                    |  |        | 56.2       | %                  



Our
gross profit decreased by approximately $0.4 million, or 4.3%, to approximately $9.8 million for the year ended December 31, 2020 from
approximately $10.3 million for the year ended December 31, 2019. The decrease of the gross profit was primarily caused by the negative
impact from the COVID-19 pandemic on our business operations, and expiration of our service contracts with our major customer China Guangfa
Bank. For the years ended December 31, 2020 and 2019, our overall gross margin was approximately 67.5% and 56.2%, respectively, representing
an 11.3% increase. The increase of gross margin was primarily caused by the increase of revenue from software development which possesses
higher gross margin compare to other revenue streams.



Operating Expenses



During the year ended December 31,
2020, we incurred a total of approximately $5.4 million operating expenses, an increase of approximately $1.2 million, or 29.0%,
as compared to a total of approximately $4.2 million during the year ended December 31, 2019.



Selling expenses increased by approximately
$0.3 million, or 19.9%, to approximately $1.8 million for the year ended December 31, 2020 from approximately $1.5 million for the year
ended December 31, 2019. The increase was mainly due to an increase in sales executive’s salary and benefit expense by approximately
$0.1 million. The increase was also attributable to an approximate $0.2 million increase in service expense as we allocate more resource
to hire outside contractor to effectively promote and market our products.



General and administrative expenses
increased by approximately $0.5 million, or 43.6%, to approximately $1.7 million for the year ended December 31, 2020 from approximately
$1.2 million for the year ended December 31, 2019. The increase was mainly attributable to an approximate $0.2 million increase in professional
fees, as we continue the process of becoming a publicly traded company in the United States. The increase was also
attributable to an approximate $0.3 million increase in amortization expense as we completed and placed more self-developed internal-used
software into service. The increase was offset by approximately $0.1 million decrease in varies expense including office, travel and other
expense.



Research and development expenses
increased by approximately $0.4 million, or 26.8%, to approximately $1.9 million for the year ended December 31, 2020 from approximately
$1.5 million for the year ended December 31, 2019. The increase was mainly due to the increase of approximately $0.3 million associated
with project planning in preliminary stage in our product development cycle in accordance with ASC 350-40. During the initial planning
and resource allocation stage of product development, we expensed all costs incurred for research and development activities and while
we entered the product development stage, all related costs were capitalized. We had several new products in development as of December
31, 2020 which primarily related to our artificial intelligence customer services applications solutions including intelligent omni-channel
customer service and AI voice Chabot and AI text Chabot. We initiated the planning and resource allocations and determined performance
requirements and initial design stages of the products and all related costs were expensed in accordance with ASC 350-40.



We also followed ASC 985-20 and
expensed all cost incurred in conjunction with software development to research and development expense until technological feasibility
is established using either the detail design approach or working model approach. For the year ended December 31, 2020, we incurred approximately
$0.1 million in development cost that were expensed before technological feasibility achieved.



Other income (expense), net



Total other expenses, net were
approximately $21,000 and $264,000 for the years ended December 31, 2020 and 2019, respectively.





65







Interest income remained consistent
for the years ended December 31, 2020 and 2019 as it amounted to approximately $7,000 and $9,000 for the years ended December 31, 2020
and 2019, respectively. Interest income consists of bank interest income.



Interest expense decreased to approximately
$0.2 million for the year ended December 31, 2020 from approximately $0.4 million for the year ended December 31, 2019 as we did not incurred
interest expense from our related party loan which was repaid in October 2019 for the year ended December 31, 2020 compared to approximately
$0.2 million interest incurred from related party loan for the same period in 2019. The decrease was also attributable to renewal of our
loans from Bank of Beijing in March and April 2020 with a lower interest rate from 4.8% to 5.0% as compared to interest rate of 5.2% on
our loans from Bank of Beijing that were renewed in April 2019.





Other income included cash received
from government grant and VAT credits. Other income increased to approximately $185,000 for the year ended December 31, 2020 from approximately
$146,000 for the year ended December 31, 2019. The increase of mainly attributable to increase of government subsidies as we applied for,
and received, more government subsidies for new technology for our effort to promote local technology and economic growth.



Provision for income taxes



We recorded income tax expense
of approximately $0.3 million for the year ended December 31, 2020 compared to income tax expense of approximately $0.7 million for the
year ended December 31, 2019. The approximate $0.4 million decrease is primarily due to decrease of income before income taxes of approximately
$1.4 million to $4.4 million for the year ended December 31, 2020 from approximately $5.8 million for the year ended December 31, 2019.
In addition, the decrease was also attribute to decrease of provision for deferred income tax of approximately $0.2 million to approximately
$0.2 million for the year ended December 31, 2020 from approximately $0.4 million for the year ended December 31, 2019, as we incurred
more amortization expense from capitalized software development cost for the year ended December 31, 2020 compared to the same period
in 2019.



Net income



Our net income decreased by approximately
$1.0 million, or 20.4%, to approximately $4.1 million for the year ended December 31, 2020, from approximately $5.1 million for the year
ended December 31, 2019. Such change was the result of the combination of the changes as discussed above.



B.     Liquidity and capital resources



In assessing our liquidity, we
monitor and analyze our cash on-hand and our operating expenditure commitments. Our liquidity needs are to meet our working capital requirements
and operating expense obligations. To date, we have financed our operations primarily through cash flows from operations, short-term borrowing
from banks and related parties and proceeds from our initial public offering.





As of December 31, 2021,
we had cash of$6.3 million which primarily consists of cash on hand and bank deposits, which are unrestricted as to withdrawal
and use and are deposited with banks in China and Hong Kong. We also had $7.1 million in short term investment which are investment
in wealth management products which can be redeemed upon three months’ notice. Our working capital was approximately $8.1
million at December 31, 2021, approximately $1.4 million of which was deferred revenue which we expect to realize and do not expect
to make any significant refund based on historical experience. Therefore, the Company’s working capital excluding deferred
revenue was approximately $9.5 million. Our management believes that we will require a minimum of approximately $7.0 million over
the next twelve months to operate at our current level, either from revenues or funding. Given our expected expenditures in the
foreseeable future, together with our cash flow from the financing activities, we have comprehensively considered our available
sources of funds as follows:





| | ● | financial support and credit
guarantee from related parties; and
| | - | ----------------------------------------------------------------
| |   |                                                                 
| | ● | additional equity or debt financing.                            



Based on the above considerations,
our board of directors is of the belief that we are able to obtain sufficient funds to meet our working capital requirements and debt
obligations as they become due over the next twelve (12) months.



Although we consolidate the results
of the VIE and its subsidiaries, we only have access to cash balances or future earnings of the VIE and its subsidiaries
through our Contractual Arrangements with the VIE.



Current foreign exchange and other
regulations in the PRC may restrict our PRC entities in their ability to transfer their net assets to us and our subsidiaries in the Cayman
Islands and Hong Kong. However, these restrictions will likely have no impact on the ability of these PRC entities to transfer funds to
us as we have no present plans to declare dividends as we plan to retain our retained earnings to continue to grow our business. In addition,
these restrictions will likely have no impact on our ability to meet our cash obligations as all of our current cash obligations are due
within the PRC.





66







As of December 31, 2021, we had
the following bank loans outstanding:





|Bank
    Name                         |  | Maturities |                                                                          | Interest
    Rate |  | Collateral/Guarantee |                                                        | December
    31, 2021
|------------------------------------- |  | ---------- | ------------------------------------------------------------------------ | ----------------- |  | -------------------- | ------------------------------------------------------ | ---------------------
|Bank
    of Beijing                   |  |            | February
                                            and March 2022  (1) |                   |  |                      | 4.8%
                                            - 5.0 | %                    
|Shanghai
    Pudong  Development Bank |  |            | February
                                            2022 (2)            |                   |  |                      | 4.4                                                    | %                    
|BOC
    Fullerton Bank                |  |            | February
                                            2024 (3)            |                   |  |                      | 8.5                                                    | %                    
|China
    Merchants Bank              |  |            | March
                                            2022 (4)               |                   |  |                      | 3.4                                                    | %                    
|Total                                 |  |            |                                                                          |                   |  |                      |                                                        |                      



(1) In March 2020, we renewed
our line of credit for a two-year period. In March and April 2020, we renewed two loan contracts with Bank of Beijing under the line
of credit to obtain loans in a total amount of approximately $3.1 million (RMB 20,000,000) for operation purposes. The loans bear
interest rates ranging from 4.8% to 5.0% with the maturity dates in March and April 2021.



In February and March 2021,
we renewed the two loan contracts with Bank of Beijing to obtain loans in a total amount of approximately $3.1 million (RMB 20,000,000)
for operation purposes. The loans bear interest rate of 4.8% with the maturity dates in February and March 2022. Both loans were
repaid in March 2022. On March 3, 2022, we renewed the line of credit for two years and obtained a $3.1 million (RMB 20,000,000)
loan with a one year term and interest rate of 4.5% which is due in March 2023.





(2) In February 2021, we
entered into a loan agreement with Shanghai Pudong Development Bank in the amount of RMB 3,000,000 (approximately $0.5 million) due
in February 2022. The loan was repaid in February 2022 and was not renewed.



(3) In February 2021, we
obtained a line of credit from BOC Fullerton Bank in the amount of RMB 2,000,000 (approximately $0.3 million) which expires in
February 2026. We entered into a loan agreement in the same amount which is due in February 2024. We borrowed $0.3 million and
repaid approximately $0.1 million for the year ended December 31, 2021.



(4)
In March 2021, we obtained a line of credit from China Merchants Bank in the amount of RMB 5,000,000 (approximately $0.8 million) to
be due in March 2023. We are able to issue bankers acceptance
notes under the line of credit, which can be endorsed and assigned to vendors as payments for purchases. We paid interest at stated rate
under the line of credit and transferred the bankers acceptance notes to our subsidiaries Infobird Guiyang and Infobird Anhui where the
subsidiaries exchanged the notes for cash, We repaid the line of credit in March 2022, and we are currently in the process of applying
for a cash loan under the line of credit.











The following summarizes
the key components of our cash flows for the years ended December 31, 2021, 2020, and 2019:



|                                                    |  | For the Years Ended December 31,
|--------------------------------------------------- |  | --------------------------------
|                                                    |  | 2021                            
|Net cash (used in) provided by operating activities |  | $                               
|Net cash used in investing activities               |  |                                 
|Net cash (used in) provided by financing activities |  |                                 
|Effect of exchange rate change                      |  |                                 
|Net change in cash                                  |  | $                               





67











Operating activities





Net cash used by operating
activities was approximately $7.5 million for the year ended December 31, 2021 and was primarily attributable to net loss of approximately
$14.2 million and various non-cash items of approximately $7.9 million, such as depreciation and amortization expense, provision
for allowance for doubtful accounts, impairment of long lived assets, share based compensation and deferred tax expense. The cash
outflow was also attributable to the increase of accounts receivable of approximately $4.4 million as we finished a few projects
in December 2021 and the corresponding increase of accounts payable of approximately $3.9 million to vendors.





Net cash provided by operating
activities was approximately $1.5 million for the year ended December 31, 2020 and was primarily attributable to net income of approximately
$4.1 million and various non-cash items of approximately $0.9 million, such as depreciation and amortization expense, provision for allowance
for doubtful accounts, and deferred tax expense. The cash inflow was also attributable to the increase of deferred revenue of approximately
$0.2 million and the increase of taxes payable of approximately $0.1 million. Cash inflow was offset by the increase of accounts receivables
of approximately $1.7 million as our revenue increased in the last quarter of 2020 compared to 2019 due to recovery from the pandemic;
the increase of prepayment of approximately $1.3 million as we acquired software development services
from third party andby the decrease of accounts payables of approximately $0.7 million.



Net cash provided by operating
activities was approximately $6.3 million for the year ended December 31, 2019 and was primarily attributable to net income of approximately
$5.1 million and various non-cash items of approximately $0.6 million, such as depreciation and amortization expense, provision for allowance
for doubtful accounts, and deferred tax expense. The cash inflow was also attributable to the decrease of accounts receivables of approximately
$1.4 million as we have taken more measures to collect outstanding balances.



Cash inflow was offset by the decrease
of deferred revenue of approximately $0.8 million as we granted more credit sales to existing customers and the decrease of accounts payable
of approximately $0.1 million as we have more operating cash flow to pay off our liabilities.



Investing activities



Net cash used in investing activities
was approximately $10.4 million for the year ended December 31, 2021 and was primarily attributable to approximately $2.0 million of salary
and benefits payment on capitalized software, approximately $0.1 million of payments office equipment and software. We also purchased
$15.0 million of short term investments and redeemed approximately $8.1 million. Our short term investments are mainly wealth management
products with underlying in bonds and equity funds. The investments can be redeemed upon three months’ notice and their carrying
values approximate their fair values.



Net cash used in investing
activities was approximately $3.2 million for the year ended December 31, 2020 and was primarily attributable to approximately $1.7 million
of developing software and approximately $1.6 million for purchasing software.



Net cash used in investing activities
was approximately $2.0 million for the year ended December 31, 2019 and was primarily attributable to approximately $1.5 million of salary
and benefits payment on capitalized software and approximately $0.6 million payment on equipment and construction in progress.





Financing activities





Net cash provided by financing
activities was approximately $22.3 million for the year ended December 31, 2021 and was primarily attributable to the proceeds
from our initial public offering which amounted to $22.8 million, of which $600,000 was placed in escrow and will be released to
us in April 2023, net of approximately $1.3 million in payments of offering costs. We also borrowed approximately $4.6 million
in bank loans and made repayment of approximately $3.2 million.







68







Net cash used in financing activities
was approximately $0.2 million for the year ended December 31, 2020 and was a result of approximately $0.2 million payment of offering
cost.



Net cash used in financing activities
was approximately $3.4 million for the year ended December 31, 2019 and was primarily attributable to approximately $1.3 million in repayment
to related parties, approximately $1.8 million payment of acquisition of noncontrolling interests, payments of deferred offering costs
of approximately $0.4 million and repayment of short-term bank loans of approximately $2.9 million, offset by proceeds received from short-term
bank loans of approximately $2.9 million.



Commitments and Contingencies



Capital expenditures



Our capital expenditures were incurred
primarily in connection with payment of property and equipment and software. Our capital expenditures were approximately $2.1 million,
$3.2 million and $2.1 million for the years ended December 31, 2021, 2020, and 2019, respectively. We intend to fund our future capital
expenditures with our existing cash balance, cash generated from operating activities, bank loans and net proceeds from our initial public
offering.



Lease commitments



We entered into various
non-cancellable operating lease agreements for offices and employee dormitories for the year ended December 31, 2021. Our commitment
for leases under the remaining operating leases as of December 31, 2021 for the next five years is as follows:



|As of December 31, 2021           |  | Lease liabilities |         | Short term lease |  | Total
|--------------------------------- |  | ----------------- | ------- | ---------------- |  | -----
|2022                              |  | $                 | 190,228 |                  |  | $    
|2023                              |  |                   | 127,262 |                  |  |      
|Thereafter                        |  |                   |        |                  |  |      
|Total undiscounted lease payments |  | $                 | 317,490 |                  |  | $    
|Less imputed interest             |  |                   | (36,397 | )                |  |      
|Total lease liabilities           |  | $                 | 281,093 |                  |  | $    



Contingencies



From time to time, we are party
to certain legal proceedings, as well as certain asserted and un-asserted claims. Amounts accrued, as well as the total amount of reasonably
possible losses with respect to such matters, individually and in the aggregate, are not deemed to be material to the consolidated financial
statements.



On July 20, 2012, Infobird Anhui
signed a leasing agreement with Hefei Shushan Economic Development District Management Committee, or Hefei Shushan, to lease certain properties
in the industry park managed by Hefei Shushan. A supplemental agreement was subsequently signed on August 6, 2012 which amended the term
of the lease and provided certain incentives and subsidies to Infobird Anhui. In June 2019, Hefei Shushan filed a lawsuit in Shushan District
People’s Court against Infobird Anhui claiming the incentives and subsidies provided to Infobird Anhui was indeed a loan and Infobird
Anhui was in default of loan contract of approximately $0.9 million (RMB 6,400,000). On August 1, 2019, Shushan District People’s
Court issued a civil judgment against Hefei Shushan. Hefei Shushan subsequently filed an appeal in Anhui Province Hefei City Intermediary
People’s Court. The Court ruled against Hefei Shushan on December 3, 2019. The case was concluded and no contingent loss was recorded
on our consolidated financial statements.





69









Critical Accounting Policies and Estimates



Our financial statements and accompanying
notes have been prepared in accordance with U.S. GAAP. The preparation of these financial statements and accompanying notes requires us
to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure
of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that are believed
to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets
and liabilities that are not readily apparent from other sources. We have identified certain accounting policies that are significant
to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition
and results of operation. Critical accounting policies are those that are most important to the portrayal of our financial conditions
and results of operations and require management’s difficult, subjective, or complex judgment, often as a result of the need to
make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates
are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting
the estimate may differ significantly from management’s current judgments. While our significant accounting policies are more fully
described in note 2 to our consolidated financial statements included elsewhere in this registration statement, we believe the following
critical accounting policies involve the most significant estimates and judgments used in the preparation of our financial statements.



Use of Estimates and Assumptions



The preparation of consolidated
financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements
and the reported amounts of revenues and expenses during the periods presented. Significant accounting estimates reflected in our consolidated
financial statements include the useful lives of plant and equipment and intangible assets, capitalized development costs, impairment
of long-lived assets, allowance for doubtful accounts, revenue recognition, allowance for deferred tax assets and uncertain tax position.
Actual results could differ from these estimates.



Business
combination

The purchase price of an acquired
company is allocated between tangible and intangible assets acquired and liabilities assumed from the acquired business based on their
estimated fair values, with the residual of the purchase price recorded as goodwill. Transaction costs associated with business combinations
are expensed as incurred, and are included in general and administrative expenses in our consolidated statements of operations. The results
of operations of the acquired business are included in our operating results from the date of acquisition.

On
December 2, 2021, we completed a 51% acquisition of Shanghai Qishuo, a PRC limited liability company and a SaaS provider of big data analysis
to retail stores aimed at operation improvement, for approximately $1.3 million (RMB 8.6 million).The fair value of total net
assets of Shanghai Qishuo was approximately $0.3 million and fair value of noncontrolling interest amounted to approximately $1.0
million with the residual of the purchase price of approximately $2.9 million was recorded as goodwill.

As of
December 31, 2021, we believe, as a result of the qualitative assessment, that it is more likely than not that the fair value of
the reporting unit is higher than its carrying amount.



Revenue Recognition



In May 2014, the Financial Accounting
Standards Board, or FASB, issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”, or ASU 2014-09. ASU
2014-09 requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or
services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and
permits the use of either the retrospective or cumulative effect transition method. We adopted Topic 606 on January 1, 2018 using the
modified retrospective transition method, and the adoption did not have a material impact on our consolidated financial statements.





70







We recognize revenue which represents
the transfer of goods and services to customers in an amount that reflects the consideration to which we expect to be entitled in such
exchange. We identify contractual performance obligations and determines whether revenue should be recognized at a point in time or over
time, based on when control of goods and services are provided to customers.



We use a five-step model
to recognize revenue from customer contracts. The five-step model requires us to (i) identify the contract with the customer; (ii) identify
the performance obligations in the contract; (iii) determine the transaction price, including variable consideration to the extent that
it is probable that a significant future reversal will not occur; (iv) allocate the transaction price to the respective performance obligations
in the contract; and (v) recognize revenue when (or as) we satisfy the performance obligation.



We derive our revenues from sales
contracts with our customers with revenues being recognized upon performance of services. Our contracts with customers generally do not
include a general right of return relative to the delivered products or services. We applied practical expedient when sales taxes were
collected from customers, meaning sales tax is recorded net of revenue, instead of cost of revenue, which are subsequently remitted to
governmental authorities and are excluded from the transaction price.



Revenue recognition policies for
each type of revenue stream are as follow:



Revenue from customized cloud-based
services



We generate revenue from customized
cloud-based customer engagement software which includes customized SaaS, voice/data plan, which includes telecommunication usage such
as telephone calls and messaging that our customers can subscribe for, and technical support. The provision of customized SaaS, voice/data
plan and technical support is considered as one performance obligation as the services provided are not distinct within the context of
the contract whereas the customer can only obtain benefit when the services are provided together. We use monthly utilization records
based on the number of user accounts subscribed for by customers, an output measure, to recognize revenue over time as there is simultaneous
consumption and delivery of services.



Revenue from standard cloud-based
services



We provide standard cloud-based
solutions that provide customers the right to access our software through the internet. Our cloud-based solutions represent a series of
services such as calling, voice recording and technical support. These services are made available to the customer continuously throughout
the contractual period, however, the extent to which the customer uses the services may vary at the customers’ discretion. The standard
cloud-based services are considered to have one single performance obligation. We use monthly utilization records based on the number
of user accounts subscribed for by customers, an output measure, to recognize revenue over time as there is simultaneous consumption and
delivery of services. We also had some contracts with customers where the customer subscribes for a fixed number of user accounts over
certain periods as specified in the contracts, therefore the customer receives and consumes the benefits of the cloud services throughout
the contract periods so revenue is recognized ratably over the contractual period that the services are delivered, beginning on the date
the service is made available to the customers. Contract performance periods generally are one year, and pursuant to the contracts, full
payments are generally collected in advance, with payment to be made within three months after execution of the contract. Contracts generally
do not contain significant financing components or variable consideration



Revenue from BPO services



Revenue from BPO services is generated
from assisting customers to operate the call centers services. Customers using these services are not permitted to take possession of
our software and physical resources and the contract is for a defined period, where customers pay a monthly service fee. These services
are considered as one performance obligation as the customers does not obtain benefit for each separate services. Revenues are recognized
over time over contractual period using the time elapsed output method as BPO services are provided. Contract performance periods generally
are one year, and pursuant to the contracts, full payments for several months of services are generally collected in advance. Contracts
generally do not contain significant financing components or variable consideration.





71







Revenue from business integration
solution services



Since 2020, we provide business
integration solution services to our customers and expect to expand our customer base from such services and develop the customers to
become subscribers to SaaS services with software upgrades and continued services once they become more familiar with our products. The
services include sales of our software license or development of customized software to fit the customers’ need and sales of hardware
integrated with our software.



-
Revenue from software development



We also generate revenue from business
integration solution services including (1) standard software and (2) customized software developed per customers’ specifications.
Contract terms from each software development contract generally do not contain significant financing components or variable consideration.



Standard software is developed and offered as standard
cloud-based services. We sold the license for standard software because some customers show obvious preference of software licensing over
software-as-a-service, for reasons such as concerns about the safety of cloud-based services and potential higher price of subscription
in total compared with one-time on-premise fee. Therefore, as part of our sales and market strategy, we offer licenses for our standard
software to allow the customers to first start utilizing our products in their daily operation and then aim to evolve them to become subscribers
with our standard cloud-based services to enjoy benefits of software upgrades and continued services. Licenses for standard software provide
the customer with a right to use the software. Standard software licenses are typically made available to customers with immediate access
to the software. We recognize revenue for these standard software licenses at the point in time when the customer has access and thus
control over the software.





Customized software is software
developed catering to the needs of specific customers who require initial customization or development of new solutions before
subscription to our cloud-based services. For example, we have entered into a two-stage agreement to provide services to a
municipal government agency to first develop an information technology system and customize and configure our cloud call center
into the IT system, and then provide cloud-based services and charge subscription fees. Because the customized software we developed
are to solve certain business pain points in a certain scenario within or across industries, once developed, we plan to further
apply them in serving other customers that share similar needs and business models. We aim to replicate our initial customization
and development and achieve economies of scale after we deliver our products to more customers within the same industry. Contract
terms are generally less than one year. The design, development, and installation of the customized software is considered as one
performance obligation as these promises are not separately identifiable as the customers do not obtain benefits from these services
on its own. Our software development service contracts are generally recognized at a point in time when customer accepted the customized
software with satisfactory testing result.





-
Revenue from sales of hardware with software integration



We are responsible for providing
hardware procurement, software design and implementation, installation and maintenance service in order to fulfill the contract. Design,
integration and installation of hardware and software are considered as one performance obligation, as the customer does not benefit from
each individual service on its own stand, but instead is benefited by our provision of these services as a whole. For contracts that we
have no alternative use of the customized system without incurring significant additional costs and when we have right to payment for
performance completed, we recognize revenue over time based on measurement of progress towards completion using output methods when we
could appropriately measure the customization progress towards completion by reaching certain milestones specified in contracts. For other
contracts for which we are only entitled to payment after completion and inspection of the project, revenue is recognized at a point in
time after completion of software implementation and hardware installation, and the transfer of control to the customer.





72







Certain business integration solution
services contracts also require us to provide PCS, which include maintenance and technical support. The provision of maintenance and technical
support is considered one single performance obligation because maintenance and technical support are not distinct within the context
of the contract. We are obligated to provide a single, continuous, integrated service throughout the contract term. As such, we allocate
the contract price between revenue from business integration solution services and provision of PCS, using the expected cost plus margin
approach. The expected cost plus margin approach requires us to forecast the expected costs of satisfying the performance obligation and
then add a reasonable margin for that good or service. Revenue allocated to PCS is deferred and recognized on a straight-line basis over
the estimated period PCS are expected to be provided. For the years ended December 31, 2021, 2020 and 2019, approximately $0.1 million,
$0.3 million and $0 were allocated to PCS, respectively.



For
contracts that involved third party service providers, we assess if we control the goods and services before they were transferred to
the customer or if our responsibility is merely to facilitate the provision of goods and service to the customer. For products and goods
that were directly shipped from the vendor to the customer and the vendor is responsible for providing services including installing,
set up and warranty services after completion of the project, we record revenue from these contracts on a net basis when the services
are provided by the third party service provider.

Professional services
and other revenues



We also generate revenue from data
analysis services and other professional services where a separate contract is entered into with the customer when the customer needs
the product or services.



The service revenue from data analysis
service is recognized based on the service performed, an output measure, over the contractual period.



Other professional services consists
primarily of technical consulting services. We recognize revenue ratably over the contractual period as the customer simultaneously receives
and consumes the benefits as we perform.



Contract performance periods generally
range from month to month, completion of service to one year, and payment terms are generally prepaid to 30 days. Contracts generally
do not contain significant financing components or variable consideration.



Contract balances



We record receivables related to
revenue when we have an unconditional right to invoice and receive payment.



We invoice our customers for our
services on a monthly basis. Deferred revenue consists primarily of customer billings made in advance of performance obligations being
satisfied and revenue being recognized. Our disaggregated revenue streams are summarized and disclosed in note 17 of our notes to the
consolidated financial statements.



Cost of revenues



Cost of revenues consists primarily
of personnel costs (including salaries, social insurance and benefits) for employees involved with our operations and products and services
support, third party service fees including cloud and data usage, hosting fees, and amortization and depreciation expenses associated
with our capitalized software, platform system and hardware. In addition, cost of revenues also include outsourcing contracted customer
service representatives, customer surveys and allocated share costs, primarily including facilities, information technology and security
costs.



Accounts receivable, net



Accounts receivable include trade
accounts due from customers. Accounts are considered overdue after thirty (30) days. In establishing the required allowance for doubtful
accounts, management considers historical collection experience, aging of the receivables, the economic environment, industry trend analysis,
and the credit history and financial conditions of the customers. We review our receivables on a regular basis to determine if the bad
debt allowance is adequate, and adjust the allowance when necessary. Delinquent account balances are written off against allowance for
doubtful accounts after management has determined that the likelihood of collection is not probable.





73







Intangible assets



Our intangible assets with definite
useful lives primarily consist of licensed software, capitalized development costs, platform system, and land-use rights. We amortize
our intangible assets with definite useful lives over their estimated useful lives and reviews these assets for impairment. We typically
amortize our intangible assets with definite useful lives on a straight-line basis over the shorter of the contractual terms or the estimated
useful lives.



Capitalized development costs



We follow the provisions of ASC
350-40, “Internal Use Software”, to capitalize certain direct development costs associated with internal-used software. ASC
350-40 provides guidance on capitalization of the costs incurred for computer software developed or obtained for internal use. We expense
all costs incurred during the preliminary project stage of development and capitalize costs incurred during the application development
stage. Costs incurred relating to upgrades and enhancements to the application are capitalized if it is determined that these upgrades
or enhancements add additional functionality to the application. Development costs cease capitalization upon completion of all substantial
testing when the software is substantially complete and ready for its intended use and are amortized on a straight-line basis over the
estimated useful life, which is generally five years. Amortization of internal-use software begins when the software is ready for its
intended use. We evaluate the useful lives of these assets on an annual basis and test for impairment whenever events or changes in circumstances
occur that could impact the recoverability of these assets.



If,
after the development of internal-use software is completed, we decide to market the software, proceeds received from the license of the
computer software, net of direct incremental costs of marketing, such as commissions, software reproduction costs, warranty and service
obligations, and installation costs, shall be applied against the carrying amount of that software. For the years ended December 31, 2021,
2020, and 2019, we applied nil against carrying amount
of capitalized software that was subsequently sold to customers as the software were fully amortized.



Land use rights



All land in the PRC is owned by
the government. However, the government grants “land use rights.” The land use rights are for 40 years and expire in 2055.
We amortize the land use rights over the forty-year term of the land use rights on a straight-line basis. The carrying value of the land
use rights was reduced by government grant received when the conditions stipulated under the grant were fulfilled.



On June 3, 2015, Infobird Guiyang
signed a cloud computing development agreement with the local Guiyang government to promote development of the local cloud computing industry.
We obtained 40-year land use rights in Guiyang, China for 9,760.8 square meters of land for approximately $4.7 million (RMB 32,532,746)
through public bidding. The land is for building of technology related infrastructure only. In return, the Guiyang government will subsidize
the cost of land through a form of cash grant in the amount of approximately $4.5 million (RMB 31,068,626). We received such grant in
2015. The grant was given to promote the local cloud computing industry, there are no services to perform on our part, and the grant was
given without restriction. The only condition is that the land use right acquired was to be used for the cloud computing industry only.



Impairment for long-lived assets



Long-lived assets, including
property and equipment and intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances
(such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying value
of an asset may not be recoverable. We assess the recoverability of the assets based on the undiscounted future cash flows the assets
are expected to generate and recognize an impairment loss when estimated undiscounted future cash flows expected to result from the use
of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. If an impairment
is identified, we would reduce the carrying amount of the asset to its estimated fair value based on a discounted cash flows approach
or, when available and appropriate, to comparable market values. As of December 31, 2021, approximately $3.3 million impairment of long-lived
assets was recognized including $0.4 million of land use right, $2.0 million of construction-in-progress due to further delays of the
project related to local governments’ limitation of economic activities in response to the resurgence of COVID-19 variants and we
recorded additional impairment on our intangible assets of $1.3 million for the year ended December 31, 2021 as the carrying value of
our long-lived assets exceed the future cashflows expected to be generated from the assets.





74







Research and development



Research and development expenses
include salaries and other compensation-related expenses to our research and product development personnel, as well as office rental,
depreciation, amortization and related expenses for our research and product development team. We recognize software development costs
in accordance with ASC 350-40 “Software—internal use software”. We expense all costs that are incurred in connection
with the planning and implementation phases of development, and costs that are associated with maintenance of the existing websites or
software for internal use. Certain costs associated with developing internal-use software are capitalized when such costs are incurred
within the application development stage of software development.



We also follow the provisions of FASB ASC 985-20,
Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed (“ASC 985-20”). ASC 985-20 requires
that software development costs incurred in conjunction with product development be charged to research and development expense until
technological feasibility is established using either the detail design approach or working model approach. Thereafter, until the product
is released for sale, software development costs should be capitalized and reported at the lower of unamortized cost or net realizable
value of the related product. For the years ended December 31, 2021, 2020, and 2019, no software costs were capitalized due to the short
timing between technological feasibility and release of software.



Share-based Compensation



We accounted for share-based
compensation awards in accordance with FASB ASC Topic 718, “Compensation – Stock Compensation”, amended by ASU 2018-07.
Under FASB ASC Topic 718, share-based compensation granted to non-employees has been determined as the fair value of the consideration
received or the fair value of equity instrument issued, whichever is more reliably measured and is recognized as an expense as the goods
or services are received.  We granted 14,000 ordinary shares to two consulting firms based on grant date fair value of approximately
$150,000 to be amortized over stated services period.



Leases



We adopted FASB ASU 2016-02, “Leases” (Topic
842) for the year ended December 31, 2021, and elected the practical expedients that does not require us to reassess: (1) whether
any expired or existing contracts are, or contain, leases, (2) lease classification for any expired or existing leases and (3) initial
direct costs for any expired or existing leases. For lease terms of twelve months or fewer, a lessee is permitted to make an accounting
policy election not to recognize lease assets and liabilities. We also adopted the practical expedient that allows lessees to treat the
lease and non-lease components of a lease as a single lease component. Upon adoption, we recognized approximately $.0.3 million right
of use, or ROU, assets and same amount of lease liabilities based on the present value of the future minimum rental payments of leases,
using an incremental borrowing rate of 4.75% based on the duration of lease terms.



Operating lease ROU assets and lease liabilities are
recognized at the adoption date or the commencement date, whichever is earlier, based on the present value of lease payments over the
lease term. Since the implicit rate for our leases is not readily determinable, we used the incremental borrowing rate based on the information
available at the commencement date in determining the present value of lease payments. The incremental borrowing rate is the rate of interest
that we would have to pay to borrow, on a collateralized basis, an amount equal to the lease payments, in a similar economic environment
and over a similar term.



Lease terms used to calculate the present value of lease
payments generally do not include any options to extend, renew, or terminate the lease, as we did not have reasonable certainty at lease
inception that these options will be exercised. We generally consider the economic life of operating lease ROU assets to be comparable
to the useful life of similar owned assets. We elected the short-term lease exception, therefore operating lease ROU assets and liabilities
do not include leases with a lease term of twelve months or less. Our leases generally do not provide a residual guarantee. The operating
lease ROU asset also excludes lease incentives. Lease expense is recognized on a straight-line basis over the lease term.



We reviewed the impairment of our ROU assets
consistent with the approach applied for our other long-lived assets. We reviewed the recoverability of our long-lived assets when events
or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible
impairment is based on our ability to recover the carrying value of the asset from the expected undiscounted future pre-tax cash flows
of the related operations. We elected to include the carrying amount of operating lease liabilities in any
tested asset group and include the associated operating lease payments in the undiscounted future pre-tax
cashflows.





75









Income taxes



We account for current income taxes
in accordance with the laws of the relevant tax authorities. The charge for taxation is based on the results for the fiscal year as adjusted
for items, which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by
the balance sheet date.



Deferred taxes are accounted for
using the asset and liability method in respect of temporary differences arising from differences between the carrying amount of assets
and liabilities in the consolidated financial statements and the corresponding tax basis used in the computation of assessable tax profit.
In principle, deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized to the
extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilized. Deferred
tax is calculated using tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred
tax is charged or credited in the income statement, except when it is related to items credited or charged directly to equity, in which
case the deferred tax is also dealt with in equity. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided
for in accordance with the laws of the relevant taxing authorities. We present deferred tax assets and liabilities as noncurrent in the
balance sheet based on an analysis of each taxpaying component within a jurisdiction.



An uncertain tax position is recognized
as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax
examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being
realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. No penalties
and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. PRC tax returns
filed in 2019 are subject to examination by any applicable tax authorities.



Recent Accounting Pronouncements



See note 2 of our notes to the
consolidated financial statements for a discussion of recently issued accounting standards.

C.  Research and development, patents and licenses, etc.



Research and Development



We invest significant resources
in research and development—not only to support our existing business and enhance our service and product offerings—but also
to incubate new technological breakthroughs and business initiatives. As of December 31, 2021, our research and development team consisted
of 131 personnel, including software engineers and internet technology specialists, which accounted for approximately 33.5% of our total
employees. We have invested significant resources to maintain our technological advantages and intend to continue to extensively invest
in our research and development capabilities. For the years ended December 31, 2021, 2020 and 2019, our research and development expenses
amounted to approximately $3.3 million, $1.9 million and $1.5 million, respectively.



Our Technologies



Our key technologies include the following:



| | ● | Cloud-native
                                architecture.We believe we are one of the first SaaS companies in the customer engagement industry
                                in China that uses cloud-native architecture throughout the lifecycle of our software. Due to the self-developed
                                cloud-native architecture, our products have flexible scale-out capabilities, high tolerance of failures
                                and default, and support ultra-large-scale concurrence capabilities.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ● | AI and machine learning
capabilities.Our software is capable of conducting multiple rounds of free conversation with customers, analyzing the context
for better understanding, and automatically capturing key words and recognizing the intentions of customers. We use self-developed NLP,
licensed ASR and TTS.                                                                                                                                                                                                                           





76







| | ● | Patented VoIP technologies.Our patented VoIP technologies feature self-developed intelligent routing, multi-voice coding support and multi-endpoint access
support. The intelligent routing and multi-voice coding support enable us to provide the most optimal voice transmission quality by monitoring
network fluctuation to deploy voice routing notes and adjusting voice coding based on the latest status of network bandwidth. In addition,
our patented VoIP technologies are able to provide multi-endpoint access supports to mobile applications, computer software, website,
session initiation protocol, or SIP, soft-phone and hard-phone, and simultaneously, support multi-endpoint software’s SDK and API,
making it easily integrated to third-party software.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | ● | Self-developed cloud-based
no-code development platform.Our self-developed cloud-based no-code development platform allows us to quickly develop new SaaS,
customize and package our SaaS to meet market demand. Our no-code development platform fundamentally changes how our software engineers
develop new products. It is a “middle platform” where our software engineers write codes and algorithms to generate microservice
modules, further integrate the modules to generate microservice packages, and store such pre-programmed modules and packages. The microservice
module is the smallest unit that a client can use, and the microservice package is the smallest unit that a client can subscribe. All
of our modules and packages are configurable, sharable, and scalable. Our software engineers can easily modify the parameters of the
pre-programmed microservice modules and packages and use drag-and-drop tools to configure the modules and packages to create new or customized
software. Therefore, our no-code development platform has significantly shortened the time required to develop new products compared
to the traditional way of going through the complete lifecycle of software development from designing and coding every time. We have
built a database of microservice modules and packages that cover the recurring issues throughout the years serving our clients and continuously
enhance existing modules and add new modules to respond to newly emerged market opportunities.



Intellectual Property



Our success and future revenue
growth depend, in part, on our ability to protect our intellectual property. We rely primarily on patent, copyright, trademark and trade
secret laws, as well as confidentiality procedures, to protect our proprietary technologies and processes.



We believe that the core of our
business is comprised of our proprietary technologies, including our patented VoIP and other internet technologies and software copyrights.
As a result, we strive to maintain a robust intellectual property portfolio. Our success and future revenue growth may depend, in part,
on our ability to protect our intellectual property as products and services that are material to our operating results incorporate patented
technology.



We have pursued rights in intellectual
property since our founding and we focus our intellectual property efforts in China. Our patent strategy is designed to provide a balance
between the need for coverage in our strategic market and the need to maintain reasonable costs.



We believe our rights to patents, copyrights, trademarks and other intellectual property rights serve to distinguish
and protect our products from infringement and contribute to our competitive advantages. As of December 31, 2021, we had rights
to 19 patents, 52 software copyrights, 1 artwork copyright, 41 registered trademarks and 27 domain names in the PRC and 3
registered trademarks outside of the PRC.



We cannot assure you that any patents
or copyrights will be issued from any of our pending applications. In addition, any rights granted under any of our existing or future
patents, copyrights or trademarks may not provide meaningful protection or any commercial advantage to us. With respect to our other proprietary
rights, it may be possible for third parties to copy or otherwise obtain and use proprietary technology without authorization or to develop
similar technology independently. We may in the future initiate claims or litigation against third parties to determine the validity and
scope of proprietary rights of others. In addition, we may in the future initiate litigation to enforce our intellectual property rights
or to protect our trade secrets. Additional information about the risks relating to our intellectual property is provided under “Item
3. Key Information—D. Risk Factors—Risks Related to Intellectual Property.”



D. Trend information



Other than as described elsewhere
in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have
a material effect on our net sales or revenues, income from continuing operations, profitability, liquidity or capital resources, or that
would cause our reported financial information not necessarily to be indicative of future operating results or financial condition.



E. Critical Accounting Estimates



See “Critical Accounting Policies
and Estimates” above.





77







ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND
EMPLOYEES



A. Directors and Senior Management



The following table sets forth
information regarding our directors and executive officers as of the date of this annual report. Unless otherwise stated, the business
address for our directors and executive officers is that of our principal executive offices at Room 12A05, Block A, Boya International
Center, Building 2, No. 1 Courtyard, Lize Zhongyi Road, Chaoyang District, Beijing, China 100102.



|Name                   |  | Age |  | Position                                                      
|---------------------- |  | --- |  | --------------------------------------------------------------
|Yimin Wu               |  | 55  |  | Chairman of the Board of Directors
and Chief Executive Officer
|Lianfang
Zhou          |  | 44  |  | Chief Financial Officer                                       
|Chunhsiang
Chen        |  | 60  |  | Chief Technology Officer and
Vice President                   
|Hsiaochien
Tseng*      |  | 50  |  | Executive
Vice President                                      
|Dongliang
Jiang        |  | 56  |  | Director                                                      
|Hanbin
Xiao            |  | 51  |  | Director                                                      
|Harry D.
Schulman(1)   |  | 70  |  | Independent Director                                          
|Feng Liu(1)(2)         |  | 53  |  | Independent Director                                          
|Zhixiong
Wang(1)(2)(3) |  | 58  |  | Independent Director                                          
|Xuan Li(3)             |  | 55  |  | Independent Director                                          



(1) Member of audit committee.

(2) Member of compensation committee.

(3) Member of nomination and governance committee.





*Mr. Tseng resigned in June 2021.



Yimin
Wuhas served as a member of our board of directors since March 2020, the chairman of our board of directors since June 2020,
and our chief executive officer since May 2020. Mr. Wu founded Infobird Beijing, the VIE, in October 2001 and has served as the chairman
of the board of directors and chief executive officer of Infobird Beijing since such time. Mr. Wu is also a shareholder of Infobird Beijing.
From August 1990 to March 1993, Mr. Wu served as software engineer of the Software Center of Tsinghua University and was sent to the
United States to co-develop HP_UX operating system at HP, Inc., an American multinational information technology company. From April
1993 to May 2000, Mr. Wu served as general manager of Beijing Jing Zhou Computers, Co., Ltd., a company responsible for marketing and
developing interactive voice response systems. From July 2000 to October 2001, Mr. Wu served as general manager of Beijing Jing Zhou
Rong Hua Internet Technology, Co., Ltd., a company responsible for developing middleware for call centers. Mr. Wu received a Bachelor’s
Degree and a Master’s Degree in Computer Sciences from Tsinghua University.



Lianfang
Zhouhas served as our chief financial officer since May 2020 and as the finance director of Infobird Beijing since May 2020.
Mrs. Zhou also served as the finance manager of Infobird Beijing from February 2010 to April 2020. With over 10 years of services at
Infobird Beijing, Mrs. Zhou is profoundly experienced and familiar with the general management and operation of the finance and accounting
department. From September 2004 to July 2008, Mrs. Zhou served as head of accounting of Beijing Saishuo Technology Co., Ltd., a software
development company that specializes in port services. From August 2008 to December 2009, Mrs. Zhou served as head of accounting of Beijing
Lianhe Lida Investment Co., Ltd., a property management services company. Mrs. Zhou holds the intermediate accountant qualification certificate
issued by the Ministry of Finance of the PRC. Mrs. Zhou received a Bachelor’s Degree in Accounting from Renmin University of China.



Chunhsiang
Chenhas served as our chief technology officer and vice president since May 2020 and as the vice president of Infobird Beijing
since April 2012. From June 1990 to February 1993, Mr. Chen served as advisory programmer of International Business Machines Corporation,
during which he participated in the design and development of Multiple Protocol Transport Network. From February 1993 to September 1996,
Mr. Chen served as an associate professor in the Information Education Department of the National Taiwan Normal University. Mr. Chen
founded GenNet Technology Co., Ltd., an information technology company, in June 1993 and served as its president until March 2012. Mr.
Chen received a Bachelor’s Degree in Computer Sciences from the National Chiao Tung University and a Master’s Degree and
Doctoral Degree in Computer Sciences from Northwestern University.



Hsiaochien
Tsengserved as our executive vice president from May 2020 to June 2021 and as the executive vice president of Infobird Beijing
from January 2020 to June 2021. From March 2010 to September 2018, Mr. Tseng served as sales director of the Credit Card Center of China
Guangfa Bank where he integrated and managed online and offline sales channels, established overall and regional sales strategies, and
constructed training systems to significantly increase the client base. From October 2018 to January 2020, Mr. Tseng served as senior
vice president of Hua Tuo Digital Technology Group Co., Ltd., a financial informational technology company, and was responsible for building
platforms for credit card sales and services, such as the payment aggregation platform, the installment payment platform, and the benefits
platform. Prior to that, Mr. Tseng accumulated experience in sales and marketing of credit cards while serving as the head of the business
development department of Far Eastern International Bank Co., Ltd. (TWSE: 2881) from January 2001 to November 2007 and as the head of
the sales department of Fubon Financial Holding Co., Ltd. (TWSE: 2881; LSE: FBND), a financial investment holding company, from November
2007 to March 2010. Mr. Tseng received a Bachelor’s Degree in Information Management from Fu Jen Catholic University and a Master’s
Degree in Business Administration from San Diego State University.



Dongliang Jianghas
served as a member of our board of directors since June 2020 and as a director of Infobird Beijing since October 2001. Mr. Jiang is also
a shareholder of Infobird Beijing. Mr. Jiang founded Anhui Laolinju Internet Technology Co., Ltd., a fresh food e-commerce platform, in
October 2016 and has served as chief executive officer since such time. From March 2001 to September 2016, Mr. Jiang served as vice president
of Infobird Beijing, during which he was responsible for constructing the sales and marketing team. He successfully led the sales and
marketing team to initially acquire several large and reputable clients. Prior to that, Mr. Jiang served as manager of Bioute International
Engineering and Development Co., Ltd., a road construction company, from September 1885 to March 2001, and as associate researcher of
Research Institute of Highway Ministry of Transport from October 1990 to August 1995. Mr. Jiang received a Bachelor’s Degree in
Hydraulic Engineering from Tsinghua University and a Master’s Degree in Civil Engineering from Zhejiang University.





78







Hanbin Xiaohas served
as a member of our board of directors since June 2020. Mr. Xiao has served as general manager of Jiangxi Yurun Lida Equity Investment
Management Co., Ltd., or Lida Equity Investment, since October 2014, where he was responsible for screening, due diligence, negotiation,
and post-investment management of target companies. Mr. Xiao has led the team of Lida Equity Investment to complete several transactions.
Mr. Xiao has also served as a member of the board of directors of several investment targets of Lida Equity Investment, including Shanghai
Kuiyue Electronic Technology Co., Ltd., Shanghai Shengzhi Photoelectric Technology Co., Ltd., Beijing Sanwei Xin’an Technology Development
Co., Ltd., and Wenzhou Fanbo Laser Co., Ltd. Mr. Jiang received a Bachelor’s Degree in Electronic Engineering from Jiangxi Science
and Technology Normal University.



Harry D. Schulman,
a U.S. citizen, has served as a member of our board of directors since June 2020. Mr. Schulman has served as the chief executive officer
of HairClinical LLC, a consumer product company, since November 2016, a director nominee of Hezhong International (Holding) Limited, an
online peer-to-peer lending company, from August 2018 to June 2020, and a director of CDT Environmental Technology Investment Holdings
Limited, a waste treatment company, since March 2020. From April 2018 to November 2018, he also served as a director of Q.E.P. Co., Inc.,
a worldwide manufacturer, marketer and distributor of a broad line of flooring tools and accessories for the home improvement market.
Since 2008, he has also served as President of HDS Consulting, LLC. From August 2008 to June 2010, he served as a director and chairman
of the audit committee of Hancock Fabrics, Inc., a specialty retailer of crafts and fabrics. From February 2008 to July 2014, he served
as the operating partner of Baird Capital Partners, a private equity and venture capital firm, during which he served on the board and
advisory board of various companies Baird Capital Partners have invested in, including Backyard Leisure, a BCP Fund IV portfolio company,
Amoena GmbH, New Vitality LLC and Eckler’s LLC. Prior to that, Mr. Schulman held various senior management roles in Applica Incorporated
(NYSE: APN), a manufacturer and distributor of a broad range of household appliances, from January 1989 to January 2007, including vice
president (1989-1993), chief financial officer (1989-1998), executive vice president (1994-1998), chief operating officer (1998-2004)
and president and chief executive officer (2004-2007). Mr. Schulman received a Bachelor’s Degree in Business Administration-Accounting
from the University of Dayton and a Master’s Degree in International Business from the University of Miami, Florida.



Feng Liuhas served
as a member of our board of directors since June 2020. Mr. Liu has served as the chairman of the board of directors of China Convoy (Beijing)
Information Technology Group Co., Ltd., a one-stop service provider for Chinese students and volunteers abroad, since July 2016. In July
2018, Mr. Liu also led the team to build the Center for International Exchange Personnel and the International Talent Entrepreneurship
Center in Chaoyang District, Beijing, aiming to gather talents with charitable activities. Since December 2016 and July 2017, respectively,
he has also served as the founder and managing director of two funds under China Children and Teenagers’ Fund. From November 2006
to June 2010, Mr. Liu served as chief executive officer of Shizun (Beijing) Electronic Technology Co., Ltd., during which he introduced
advanced video compression technologies into the Chinese market. From June 2010 to August 2012, Mr. Liu served as the chairman of the
board of directors of Beijing Zhong Guang Xing Qiao Media Technology Co., Ltd., a company that focuses on carrying out over-the-top television
services, which are services that focus on the delivery of television content via the internet. From October 2013 to May 2016 and from
October 2015 to May 2016, Mr. Liu served as the chairman of the board of directors of two media companies, Overseas Chinese Culture Media
Co., Ltd. and Qiaowang Network Technology Co., Ltd., where Mr. Liu led the team to provide Chinese culture television services, aiming
to provide television services to the Chinese community and to promote cultural exchange around the globe. Mr. Liu received a Bachelor’s
Degree in Composition from China Conservatory of Music and a Master’s Degree in Business Administration from New York Institute
of Technology.



Zhixiong Wanghas
served as a member of our board of directors since June 2020. Mr. Wang founded Ningbo Play Capital Investment Management Co., Ltd., a
private equity firm, in July 2017. Mr. Wang has also served as a member of the board of directors of Beijing Lion-Mark Information Interactive
Ltd. since June 2010. From November 2006 to January 2010, Mr. Wang served as managing director of the China Office of International Game
Technology (NYSE: IGT), a multinational gaming company. Prior to that, Mr. Wang served multiple roles in various industries from January
1988 to June 2006, including assistant professor of Beijing Machinery Institute (1988-1991), analyst of Euro-American Group Plc., Cal
Futures (1991-1994), China analyst of Far Eastern Economic Review, Dow Jones & Co. in Hong Kong (1994-1995), senior consultant of
Claydon Gescher Associates Ltd (1995-1998), senior vice president of MIH Asia (1998-2001), and managing director of Celestial Movie Channel
(China) (2002-2006) Mr. Wang received a Bachelor’s Degree in Computer Science and Technology from Tsinghua University and a Master’s
Degree in Artificial Intelligence Management from University of Aeronautics &Astronautics.



Xuan Lihas served
as a member of our board of directors since June 2020. Mr. Li has served as chief executive officer of IntelliCredit Co., Ltd since September
2013. IntelliCredit Co., Ltd is one of the companies accredited by People’s Bank of China (Central Bank) to prepare for obtaining
Consumer Credit Reporting Agency licenses. From October 2002 to April 2005, Mr. Li served as domain expert in the credit bureau of People’s
Bank of China. From April 2005 to September 2007, Mr. Li served as director of Technology and Operations of Greater China of Experian
Plc., a multinational consumer credit reporting company. From April 2008 to October 2009, Mr. Li served as the China Head of RCM Capital
Management LLC, an affiliate of Allianz Global Investors Fund Management LLC. From October 2009 to September 2013, Mr. Li served as chief
executive officer of IntelliTrust Company, an anti-fraud software development company. Mr. Li received a Bachelor’s Degree in Computer
Science and Technology from Tsinghua University and a Doctoral Degree in Management Science from Rutgers, The State University of New
Jersey.



Family Relationships



There are no family relationships
between our directors or executive officers.





79







B. Compensation



Employment Agreements, Director Agreements and
Indemnification Agreements



We have entered into employment
agreements with each of our executive officers, pursuant to which such individuals initially agreed to serve as our executive officers
until May 24, 2021. Such terms have been automatically extended for twelve-month periods, and will continue to be so automatically extended,
unless the agreements are terminated in accordance with their terms. We may terminate the employment for cause at any time for certain
acts, such as conviction or plea of guilty to a felony or any crime involving moral turpitude, negligent or dishonest acts to our detriment,
or misconduct or a failure to perform agreed duties. We may also terminate the employment without cause at any time upon 60 days’
advance written notice. Each executive officer may resign at any time upon 60 days’ advance written notice.



Each executive officer has agreed
to hold, both during and after the termination or expiry of his employment agreement, in strict confidence and not to use, except as required
in the performance of his duties in connection with the employment or pursuant to applicable law, any of our confidential or proprietary
information or the confidential or proprietary information of any third party received by us and for which we have confidential obligations.
Each executive officer has also agreed to disclose in confidence to us all inventions, designs and trade secrets which he conceives, develops
or reduces to practice during his employment with us and to assign all right, title and interest in them to us, and assist us in obtaining
and enforcing patents, copyrights and other legal rights for these inventions, designs and trade secrets.



In addition, each executive officer
has agreed to be bound by non-competition and non-solicitation restrictions during the term of the employment and for one year following
the last date of employment. Specifically, each executive officer has agreed not to: (i) engage or assist others in engaging in any business
or enterprise that is competitive with our business, (ii) solicit, divert or take away the business of our clients, customers or business
partners, or (iii) solicit, induce or attempt to induce any employee or independent contractor to terminate his or her employment or engagement
with us. The employment agreements also contain other customary terms and provisions.



We have also entered into indemnification
agreements with each of our executive officers and directors. Under these agreements, we have agreed to indemnify our directors and executive
officers against certain liabilities and expenses incurred by such persons in connection with claims made by reason of their being a director
or officer of our company.



We have also entered into director
agreements with each of our directors which agreements set forth the terms and provisions of their engagement.



Compensation of Director
and Executive Officers



For the year ended December
31, 2021, we paid an aggregate of approximately RMB 3.7 million ($0.6 million) in cash to our directors and executive
officers. We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our
directors and executive officers.





80







Equity Awards



We have not granted any equity
awards to our directors or executive officers during the calendar year ended December 31, 2021.



Incentive Compensation



We do not maintain any cash incentive
or bonus programs and did not maintain any such programs during the year ended December 31, 2021.



C. Board Practices



Board of Directors



Duties of Directors





Under Cayman Islands law, our board
of directors has the powers necessary for managing, and for directing and supervising, our business affairs. The functions and powers
of our board of directors include, among others:



| | ● | convening shareholders’
annual and extraordinary general meetings and reporting its work to shareholders at such meetings;
| | - | --------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                           
| | ● | declaring dividends and distributions;                                                                                    
| |   |                                                                                                                           
| | ● | appointing officers and determining
the term of office of the officers;                                                   
| |   |                                                                                                                           
| | ● | exercising the borrowing powers
of our company and mortgaging the property of our company; and                            
| |   |                                                                                                                           
| | ● | approving the transfer of shares
in our company, including the registration of such shares in our share register.         



Under
Cayman Islands law, all of our directors owe fiduciary duties to our company, including a duty of loyalty, a duty to act honestly
and a duty to act in what they consider in good faith to be in our best interests. Our directors must also exercise their powers only
for a proper purpose. Our directors also have a duty to exercise the skill they actually possess and such care and diligence that a reasonably
prudent person would exercise in comparable circumstances. In fulfilling their duty of care to us, our directors must ensure compliance
with our memorandum and articles of association, as amended from time to time. Our company has the right to seek damages if a duty owed
by any of our directors is breached.





81







Composition of our Board of Directors



Our board of directors currently
consists of seven directors. Our board of directors has determined that each of Harry D. Schulman, Feng Liu, Zhixiong Wang and Xuan Li
is an “independent director” as defined under the Nasdaq rules. Our board of directors is composed of a majority of independent
directors. A director is not required to hold any of our shares to qualify to serve as a director. Pursuant to our amended and restated
memorandum and articles of association, each director will serve until his successor is duly elected or appointed or his earlier resignation
or removal.



Committees of our Board of Directors



Our board of directors has established
an audit committee, a compensation committee and a nomination and governance committee, which have the responsibilities and authority
necessary to comply with applicable Nasdaq and SEC rules. The audit committee is comprised of Harry D. Schulman, Feng Liu and Zhixiong
Wang. The compensation committee is comprised of Feng Liu and Zhixiong Wang. The nomination and governance committee is comprised of Zhixiong
Wang and Xuan Li.



Audit Committee



Harry
D. Schulman, Feng Liu and Zhixiong Wang serve as members of the audit committee. Harry D. Schulman serves as the chair of the audit committee.
The audit committee members satisfy the independence requirements of the Nasdaq rules and the independence standards of Rule 10A-3 under
the Exchange Act. Our board of directors has determined that Harry D. Schulman possesses accounting or related financial management experience
that qualifies him as an “audit committee financial expert” as defined by the rules and regulations of the SEC and Nasdaq.
The audit committee will oversee our accounting and financial reporting processes and the audits of our financial statements. The audit
committee will be responsible for, among other things:



| | ● | appointing the independent
    auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independent auditors;                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                           
| | ● | reviewing with the independent
    auditors any audit problems or difficulties and management’s response;                                                                                 
| |   |                                                                                                                                                                                           
| | ● | discussing the annual audited
    financial statements with management and the independent auditors;                                                                                      
| |   |                                                                                                                                                                                           
| | ● | reviewing the adequacy
    and effectiveness of our accounting and internal control policies and procedures and any steps taken to monitor and control major
    financial risk exposures;
| |   |                                                                                                                                                                                           
| | ● | reviewing and approving
    all proposed related party transactions;                                                                                                                      
| |   |                                                                                                                                                                                           
| | ● | meeting separately and
    periodically with management and the independent auditors; and                                                                                                 
| |   |                                                                                                                                                                                           
| | ● | monitoring compliance with
    our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance.                 



Compensation
Committee



Feng Liu and Zhixiong Wang serve
as members of the compensation committee. Feng Liu serves as the chair of the compensation committee. The compensation committee members
satisfy the independence requirements of the Nasdaq rules and the independence standards of Rule 10A-3 under the Exchange Act. The compensation
committee will assist our board of directors in reviewing and approving the compensation structure, including all forms of compensation,
relating to our directors and executive officers. Our chief executive officer shall not be present during voting or deliberations regarding
his or her compensation. The compensation committee will be responsible for, among other things:



| | ● | reviewing and making recommendations to our board of directors regarding the salaries and other compensation of our executive officers;                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                              
| | ● | reviewing and making recommendations to our board of directors regarding compensation of our directors;                                                                      
| |   |                                                                                                                                                                              
| | ● | reviewing and approving, or making recommendations to our board of directors, regarding, equity incentive plans, compensation plans and similar programs or arrangements; and
| |   |                                                                                                                                                                              
| | ● | selecting, at its discretion, compensation consultants, legal counsel and other advisors.                                                                                    



Nomination
and Governance Committee



Zhixiong Wang and Xuan Li serve
as members of the nomination and governance committee. Zhixiong Wang serves as the chair of the nomination and governance committee. The
nomination and governance committee members satisfy the independence requirements of the Nasdaq rules and the independence standards of
Rule 10A-3 under the Exchange Act. The nomination and governance committee will assist our board of directors in selecting individuals
qualified to become our directors and in determining the composition of our board of directors and its committees. The nomination and
governance committee will be responsible for, among other things:



| | ● | recommending nominees to our
board of directors for election or re-election to our board of directors and for appointment to fill any vacancy on our board of directors;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                         
| | ● | reviewing periodically the
composition of our board of directors and its committees;                                                                                    
| |   |                                                                                                                                                                         
| | ● | recommending directors to serve
as members of the committees of our board of directors;                                                                                 
| |   |                                                                                                                                                                         
| | ● | reviewing and recommending
corporate governance principles applicable to us; and                                                                                        
| |   |                                                                                                                                                                         
| | ● | overseeing evaluations of our
board of directors, individual directors and the committees of our board of directors.                                                    





82







D. Employees



As of December 31, 2021, we had
391 employees, all of which were full-time employees located in China.



None of our employees are represented
by a labor union or covered by a collective bargaining agreement. We have never experienced any employment related work stoppages, and
we consider our relations with our employees to be good.



E. Share Ownership







The following table sets forth
information with respect to the beneficial ownership of our ordinary shares as of May 9, 2022 for:







| | ● | each beneficial owner of 5%
or more of our outstanding ordinary shares;
| | - | -----------------------------------------------------------------------
| |   |                                                                        
| | ● | each of our directors and executive
officers; and                      
| |   |                                                                        
| | ● | all of our directors and executive
officers as a group.                





Beneficial ownership
is determined in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons
who possess sole or shared voting power or investment power with respect to those securities and include ordinary shares issuable
upon the exercise of options that are immediately exercisable or exercisable within 60 days of the date of this annual report.
Percentage ownership calculations are based on 5,093,315 ordinary shares outstanding as of May 9, 2022.



Except as otherwise indicated,
all of the shares reflected in the table are ordinary shares and all persons listed below have sole voting and investment power with respect
to the shares beneficially owned by them, subject to applicable community property laws. The information is not necessarily indicative
of beneficial ownership for any other purpose.



Except as otherwise indicated in
the table below, addresses of our directors, executive officers and named beneficial owners are in care of Infobird Co., Ltd, Room 12A05,
Block A, Boya International Center, Building 2, No. 1 Courtyard, Lize Zhongyi Road, Chaoyang District, Beijing, China 100102.



|Name
                                          of Beneficial Owners |  | Number
of Shares Beneficially Owned |           | Percentage
of Shares   Beneficially Owned
|------------------------------------------------------------------- |  | ----------------------------------- | --------- | -----------------------------------------
|5%
or Greater Shareholders:                                         |  |                                     |           |                                          
|CRservices
Limited(1)                                               |  |                                     | 1,451,818 |                                          
|CRExperience
Limited(2)                                             |  |                                     | 420,831   |                                          
|Orbitchannel
Limited(3)                                             |  |                                     | 353,765   |                                          
|OmniConnect
Limited(4)                                              |  |                                     | 324,353   |                                          
|Directors
and Executive Officers:                                   |  |                                     |           |                                          
|Yimin
Wu(5)                                                         |  |                                     | 1,451,818 |                                          
|Lianfang
Zhou                                                       |  |                                     | —         |                                          
|Chunhsiang
Chen                                                     |  |                                     | —         |                                          
|Hsiaochien
Tseng                                                    |  |                                     | —         |                                          
|Dongliang
Jiang(6)                                                  |  |                                     | 353,765   |                                          
|Hanbin
Xiao                                                         |  |                                     | —         |                                          
|Harry
D. Schulman                                                   |  |                                     | —         |                                          
|Feng
Liu                                                            |  |                                     | —         |                                          
|Zhixiong
Wang                                                       |  |                                     | —         |                                          
|Xuan
Li                                                             |  |                                     | —         |                                          
|All
directors and executive officers as a group (10 persons)        |  |                                     | 1,805,583 |                                          





| | (1) | The registered address of
CRservices Limited, a Republic of Seychelles company, is 306 Victoria House, Victoria, Mahé, Seychelles. Yimin Wu, our chief executive
officer and chairman of our board of directors, is the sole director and shareholder of CRservices Limited and may be deemed to hold
voting and dispositive power over the ordinary shares held by CRservices Limited.       
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                               
| | (2) | The registered address of
CRExperience Limited, a Republic of Seychelles company, is 306 Victoria House, Victoria, Mahé, Seychelles. Weimin Wu, a shareholder
of Infobird Beijing and the brother of Yimin Wu, is the sole director of and a shareholder of CRExperience Limited and may be deemed
to hold voting and dispositive power over the ordinary shares held by CRExperience Limited.
| |     |                                                                                                                                                                                                                                                                                                                                                                                               
| | (3) | The registered address of
Orbitchannel Limited, a Republic of Seychelles company, is 306 Victoria House, Victoria, Mahé, Seychelles. Dongliang Jiang, one
of our directors, is the sole director and shareholder of Orbitchannel Limited and may be deemed to hold voting and dispositive power
over the ordinary shares held by Orbitchannel Limited.                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                               
| | (4) | The registered address of
OmniConnect Limited, a Republic of Seychelles company, is 306 Victoria House, Victoria, Mahé, Seychelles. Bing Weng, a director
and shareholder of Infobird Beijing, is the sole director and shareholder of OmniConnect Limited and may be deemed to hold voting and
dispositive power over the ordinary shares held by OmniConnect Limited.                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                               
| | (5) | Represents 1,451,818 ordinary
shares held directly by CRservices Limited. Yimin Wu, our chief executive officer and chairman of our board of directors, is the sole
director and shareholder of CRservices Limited. See footnote (1) above.                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                               
| | (6) | Represents 353,765 ordinary
shares held directly by Orbitchannel Limited. Dongliang Jiang, one of our directors, is the sole director and shareholder of Orbitchannel
Limited and may be deemed to hold voting and dispositive power over the ordinary shares held by Orbitchannel Limited. See footnote (3)
above.                                                                           





83









ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS



A. Major Shareholders



Please refer to Item 6.E.
“Directors, Senior Management and Employees—Share Ownership.”



B. Related Party Transactions



During
the last three years, we have engaged in the following transactions with our directors, executive officers or holders of more than 5%
of our outstanding share capital and their affiliates, which we refer to as our related parties:





As
of December 31, 2021, 2020, and 2019, we owed a certain related party the following amount as a result of a short-term loan. Outstanding
balances on short-term loan - related party consisted of the following as of December 31, 2021, 2020, and 2019:



|Lender Name |  | Relationship       |  | Maturities    |  | Interest Rate |  | Collateral/Guarantee |     | December 31, 2021 |  | December 31, 2020 |   | December 31, 2019
|----------- |  | ------------------ |  | ------------- |  | ------------- |  | -------------------- | --- | ----------------- |  | ----------------- | - | -----------------
|Qing Tang*  |  | Spouse of Yimin Wu |  | Due on demand |  | 18% (Annual)  |  |                      | N/A |                   |  | $                 | — |                  



*In July 2016, Infobird Beijing
signed two loan contracts with a related party, Qing Tang, the spouse of Yimin Wu, to obtain loans for a total of approximately $1.3 million
(RMB 8,800,000) for operation purposes. The loans bore a 1.5% monthly interest rate (18% annual interest rate) and were due on demand.
By October 2019, the principal of the loans were fully repaid.



Interest expense pertaining to
the above short-term loan - related party for the years ended December 31, 2021, 2020, and 2019 amounted to $0, $0, and $176,354, respectively.



As of December 31, 2021, 2020,
and 2019, we owed certain related parties the following amounts as a result of interest from the loan mentioned above. Such amounts are
included in the consolidated financial statements as interest payable - related party. See note 12 of the notes to the consolidated financial
statements included elsewhere in this annual report.



|Name of Related Party |  | Relationship       |  | Nature                                                         |  | December 31, 2021 |   | December 31, 2020 |  | December 31, 2019
|--------------------- |  | ------------------ |  | -------------------------------------------------------------- |  | ----------------- | - | ----------------- |  | -----------------
|Qing Tang             |  | Spouse of Yimin Wu |  | Interest payable - Interest incurred from loan described above |  | $                 | — |                   |  | $                



In July 2016, Infobird Beijing
signed two loan contracts with a related party, Qing Tang, the spouse of Yimin Wu, to obtain loans for a total of approximately $1.3
million (RMB 8,800,000) for operation purposes. The loans bore a 1.5% monthly interest rate (18% annual interest rate) and were due on
demand. By October 2019, the principal of the loans were fully repaid.



Interest expense pertaining to
the above short-term loan - related party for the years ended December 31, 2021, 2020, and 2019 amounted to $0, $0, and $176,354, respectively.



Interest payable of $574,065 was
fully paid during the year ended December 31, 2021.



Qing Tang, the spouse of Yimin
Wu, chairman of our board of directors and our chief executive officer, has provided real estate property as collateral of approximately
$3.2 million (RMB 22,000,000) with Beijing SMEs Credit Re-guarantee Co., Ltd. to secure a guarantee with Bank of Beijing for the line
of credit in the amount of approximately $2.9 million (RMB 20,000,000). See notes 11 and 12 of the notes to the consolidated financial
statements included elsewhere in this annual report.



Yimin Wu also provided a personal guarantee for our
loan from China Merchants Bank during the contract period. See note 11 of the notes to the consolidated financial statements included
elsewhere in this annual report for details.



Yimin Wu and Qing Tang also provided
personal guarantees for our loan from BOC Fullerton Bank during the contract period. See note 11 of the notes to the consolidated financial
statements included elsewhere in this annual report for details.





For the year ended December
31, 2021, we had cost of revenue from a related party of $350,987, which was from Mashangyou Technology Co., ltd, whose legal representative
is a 3.18% shareholder of Infobird Beijing. See note 12 of the notes to the consolidated financial statements included elsewhere
in this annual report.









84







Contractual Arrangements with the VIE and its Shareholders



See “Item 4. Information
on the Company—A. History and Development of the Company.”



Policies and Procedures for Related Party Transactions



Our board of directors has created
an audit committee which is tasked with review and approval of all related party transactions.



Employment Agreements, Director Agreements and
Indemnification Agreements



We have entered into employment
agreements with each of our executive officers pursuant to which such individuals agreed to serve as our executive officers.



We have also entered into indemnification
agreements with each of our executive officers and directors. Under these agreements, we have agreed to indemnify our directors and executive
officers against certain liabilities and expenses incurred by such persons in connection with claims made by reason of their being a director
or officer of our company.



We have also entered into director
agreements with each of our directors which agreements set forth the terms and provisions of their engagement.



C. Interests of Experts and Counsel



Not applicable.





85







ITEM 8. FINANCIAL INFORMATION



A. Consolidated Statements and Other Financial Information



See “Item 18. Financial
Statements” for our audited consolidated financial statements filed as part of this annual report.



A.7 Legal Proceedings



We are not currently a party to
any legal or arbitration proceedings, including those relating to bankruptcy, receivership or similar proceedings and those involving
any third party, nor any governmental proceedings pending or known to be contemplated, that in the opinion of our management would have
a material adverse effect on our business or that may have, or have had in the recent past, significant effects on our financial position
or profitability. However, from time to time, we may be involved in legal proceedings or be subject to claims arising out of our operations.
Amounts accrued, as well as the total amount of reasonably possible losses with respect to such matters, individually and in the aggregate,
are not deemed to be material to the consolidated financial statements.



A.8 Dividend Policy



We have never declared or paid
a dividend, and we do not anticipate declaring or paying dividends in the foreseeable future. We intend to retain all available funds
and any future earnings to fund the development and expansion of our business.



We are a holding company incorporated
in the Cayman Islands. We may rely on dividends from our subsidiaries in China for our cash requirements, including any payment of dividends
to our shareholders. PRC and Hong Kong regulations may restrict the ability of our PRC and Hong Kong subsidiaries to pay dividends to
us.



B. Significant Changes



We have not experienced any significant
changes since the date of our audited consolidated financial statements included in this annual report.



ITEM 9. THE OFFER AND LISTING



A. Offering and Listing Details



Our ordinary shares have been listed
on the Nasdaq Capital Market under the symbol “IFBD” since April 20, 2021. Prior to that date, there was no public trading
market for our ordinary shares.



B. Plan of Distribution



Not applicable.



C. Markets



Our ordinary shares have been listed
on the Nasdaq Capital Market since April 20, 2021 under the symbol “IFBD”.



D. Selling Shareholders



Not applicable.



E. Dilution



Not applicable.



F. Expenses of the Issue



Not applicable.





86







ITEM 10. ADDITIONAL INFORMATION



A. Share Capital



Not applicable.



B. Memorandum and Articles of Association



We are an exempted company incorporated
with limited liability under the laws of the Cayman Islands and our affairs are governed by:



| | ● | Memorandum and Articles of
Association;                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                            
| | ● | The Companies Act (2021 Revision)
(as amended) of the Caymans Islands, which is referred to as the Companies Act below; and
| |   |                                                                                                                            
| | ● | Common law of the Cayman Islands.                                                                                          





Our authorized share capital
is 10,000,000 ordinary shares with a par value of $0.005 per ordinary share.





We have included summaries of material
provisions of our amended and restated memorandum and articles of association insofar as they relate to the material terms of our share
capital. The summaries do not purport to be complete and are qualified in their entirety by reference to our amended and restated memorandum
and articles of association, which is filed as Exhibit 1.1 to this annual report.



Ordinary Shares



All of our outstanding ordinary
shares are fully paid and non-assessable.



Issuance of Shares and Changes to Capital



Our board of directors has general
and unconditional authority to allot, grant options over, offer or otherwise deal with or dispose of any unissued shares in our capital
without the approval of our shareholders (whether forming part of the original or any increased share capital), either at a premium or
at par, with or without preferred, deferred or other special rights or restrictions, whether in regard to dividend, voting, return of
capital or otherwise and to such persons, on such terms and conditions, and at such times as the directors may decide, but so that no
share shall be issued at a discount, except in accordance with the provisions of the Companies Act. We will not issue bearer shares.



We may, subject to the provisions
of the Companies Act, our amended and restated memorandum and articles of association, the SEC and Nasdaq, from time to time by shareholders
resolution passed by a simple majority of the voting rights entitled to vote at a general meeting: increase our capital by such sum, to
be divided into shares of such amounts, as the relevant resolution shall prescribe; consolidate and divide all or any of our share capital
into shares of larger amount than our existing shares; convert all or any of our paid up shares into stock and reconvert that stock into
paid up shares of any denomination; sub-divide our existing shares, or any of them, into shares of smaller amounts than is fixed pursuant
to our amended and restated memorandum and articles of association; and cancel any shares which at the date of the passing of the resolution
have not been taken or agreed to be taken by any person, and diminish the amount of our share capital by the amount of the shares so cancelled.



We may also, subject to the provisions
of the Companies Act, our amended and restated memorandum and articles of association, the SEC and Nasdaq: issue shares on terms that
they are to be redeemed or are liable to be redeemed; purchase our own shares (including any redeemable shares); and make a payment in
respect of the redemption or purchase of our own shares in any manner authorized by the Companies Act, including out of our capital.



Dividends



Subject to the Companies Act, our
shareholders may, by resolution passed by a simple majority of the voting rights entitled to vote at the general meeting, declare dividends
(including interim dividends) to be paid to our shareholders but no dividend shall be declared in excess of the amount recommended by
our board of directors. Dividends may be declared and paid out of funds lawfully available to us. Except as otherwise provided by the
rights attached to shares, all dividends shall be declared and paid according to the amounts paid up on the shares on which the dividend
is paid. All dividends shall be paid in proportion to the number of ordinary shares a shareholder holds during any portion or portions
of the period in respect of which the dividend is paid; but, if any share is issued on terms providing that it shall rank for dividend
as from a particular date, that share shall rank for dividend accordingly. Our board of directors may also declare and pay dividends out
of the share premium account or any other fund or account which can be authorized for this purpose in accordance with the Companies Act.





87







In addition, our board of directors
may resolve to capitalize any undivided profits not required for paying any preferential dividend (whether or not they are available for
distribution) or any sum standing to the credit of our share premium account or capital redemption reserve; appropriate the sum resolved
to be capitalized to the shareholders who would have been entitled to it if it were distributed by way of dividend and in the same proportions
and apply such sum on their behalf either in or towards paying up the amounts, if any, for the time being unpaid on any shares held by
them respectively, or in paying up in full unissued shares or debentures of a nominal amount equal to such sum, and allot the shares or
debentures credited as fully paid to those shareholders, or as they may direct, in those proportions, or partly in one way and partly
in the other; resolve that any shares so allotted to any shareholder in respect of a holding by him/her of any partly-paid shares rank
for dividend, so long as such shares remain partly paid, only to the extent that such partly paid shares rank for dividend; make such
provision by the issue of fractional certificates or by payment in cash or otherwise as they determine in the case of shares or debentures
becoming distributable in fractions; and authorize any person to enter on behalf of all our shareholders concerned in an agreement with
us providing for the allotment of them respectively, credited as fully paid, of any shares or debentures to which they may be entitled
upon such capitalization, any agreement made under such authority being binding on all such shareholders.





Voting and Meetings



As a condition of admission to
a shareholders’ meeting, a shareholder must be duly registered as our shareholder at the applicable record date for that meeting
and all calls or installments then payable by such shareholder to us in respect of our ordinary shares must have been paid. Subject to
any special rights or restrictions as to voting then attached to any shares, at any general meeting every shareholder who is present in
person or by proxy (or, in the case of a shareholder being a corporation, by its duly authorized representative not being himself or herself
a shareholder entitled to vote) shall have one vote per share.



As a Cayman Islands exempted company,
we are not obliged by the Companies Act to call annual general meetings; however, our amended and restated memorandum and articles of
association provide that in each year, other than the year in which our amended and restated memorandum and articles of association was
adopted, we will hold an annual general meeting of shareholders at a time determined by our board of directors, provided that if we are
not required to hold an annual general meeting by Cayman Islands law or Nasdaq rules, we may choose not to do so. Also, we may, but are
not required to (unless required by Cayman Islands law), in each year hold any other extraordinary general meeting.



The Companies Act provides shareholders
with only limited rights to requisition a general meeting, and does not provide shareholders with any right to put any proposal before
a general meeting. However, these rights may be provided in a company’s articles of association. Our amended and restated memorandum
and articles of association provide that upon the requisition of shareholders representing not less than two-thirds of the voting rights
entitled to vote at general meetings, our board will convene an extraordinary general meeting and put the resolutions so requisitioned
to a vote at such meeting. However, shareholders may propose only ordinary resolutions to be put to a vote at such meeting and shall have
no right to propose resolutions with respect to the election, appointment or removal of directors or with respect to the size of the board.
Our amended and restated memorandum and articles of association provide no other right to put any proposals before annual general meetings
or extraordinary general meetings. Subject to regulatory requirements, our annual general meeting and any extraordinary general meetings
must be called by not less than ten (10) clear days’ notice prior to the relevant shareholders meeting and convened by a notice
discussed below. Alternatively, upon the prior consent of all holders entitled to attend and vote (with regards to an annual general meeting),
and the holders of 95% in par value of the shares entitled to attend and vote (with regard to an extraordinary general meeting), that
meeting may be convened by a shorter notice and in a manner deemed appropriate by those holders.



We will give notice of each general
meeting of shareholders by publication on our website and in any other manner that we may be required to follow in order to comply with
Cayman Islands law, Nasdaq and SEC requirements. The holders of registered shares may be convened for a shareholders’ meeting by
means of letters sent to the addresses of those shareholders as registered in our shareholders’ register, or, subject to certain
statutory requirements, by electronic means. We will observe the statutory minimum convening notice period for a general meeting of shareholders.



A quorum for a general meeting
consists of any one or more persons holding or representing by proxy not less than one-third (or 33 1/3%) of our total issued voting shares
entitled to vote upon the business to be transacted.



A resolution put to the vote of
the meeting shall be decided on a poll. An ordinary resolution to be passed by the shareholders requires the affirmative vote of a simple
majority of the votes cast by, or on behalf of, the shareholders entitled to vote present in person or by proxy and voting at the meeting.
A special resolution requires the affirmative vote of no less than two-thirds of the votes cast by the shareholders entitled to vote who
are present in person or by proxy at a general meeting (except for certain matters described below which require an affirmative vote of
two-thirds). Both ordinary resolutions and special resolutions may also be passed by a unanimous written resolution signed by all the
shareholders of our company, as permitted by the Companies Act and our amended and restated memorandum and articles of association.



Our amended and restated memorandum
and articles of association provide that the affirmative vote of no less than two-thirds of votes cast by the shareholders entitled to
vote who are present in person or by proxy at a general meeting shall be required to approve any amendments to any provisions of our amended
and restated memorandum and articles of association that relate to or have an impact upon the procedures regarding the election, appointment,
or removal of directors and the size of the board.





88







Transfers of Shares



Subject to any applicable restrictions
set forth in our amended and restated memorandum and articles of association, any of our shareholders may transfer all or a portion of
their ordinary shares by an instrument of transfer in the usual or common form or in the form prescribed by Nasdaq or in any other form
which our board of directors may approve. Our board of directors may, in its absolute discretion, refuse to register a transfer of any
share that is not a fully paid up share to a person of whom it does not approve, or any share issued under any share incentive scheme
for employees upon which a restriction on transfer imposed thereby still subsists, and it may also, without prejudice to the foregoing
generality, refuse to register a transfer of any share to more than four joint holders or a transfer of any share that is not a fully
paid up share on which we have a lien. Our board of directors may also decline to register any transfer of any registered share unless:
a fee of such maximum sum as Nasdaq may determine to be payable or such lesser sum as the board of directors may from time to time require
is paid to us in respect thereof; the instrument of transfer is in respect of only one class of shares; the ordinary shares transferred
are fully paid and free of any lien; the instrument of transfer is lodged at the registered office or such other place (i.e., our transfer
agent) at which the register of shareholders is kept, accompanied by any relevant share certificate(s) and/or such other evidence as the
board of directors may reasonably require to show the right of the transferor to make the transfer; and if applicable, the instrument
of transfer is duly and properly stamped.



If our board of directors refuse
to register a transfer, they are required, within one month after the date on which the instrument of transfer was lodged, to send to
each of the transferor and the transferee notice of such refusal.



Liquidation



Subject to any special rights,
privileges or restrictions as to the distribution of available surplus assets on liquidation applicable to any class or classes of shares
(1) if we are wound up and the assets available for distribution among our shareholders are more than sufficient to repay the whole of
the capital paid up at the commencement of the winding up, the excess shall be distributed pari passu among our shareholders in proportion
to the amount paid up at the commencement of the winding up on the shares held by them, respectively, and (2) if we are wound up and the
assets available for distribution among our shareholders as such are insufficient to repay the whole of the paid-up capital, those assets
shall be distributed so that, as nearly as may be, the losses shall be borne by our shareholders in proportion to the capital paid up,
or which ought to have been paid up, at the commencement of the winding up on the shares held by them, respectively.



If we are wound up, the liquidator may with the sanction
of a special resolution and any other sanction required by the Companies Act, divide among our shareholders in specie the whole or any
part of our assets and may, for such purpose, value any assets and determine how such division shall be carried out as between the shareholders
or different classes of shareholders. The liquidator may also, with the sanction of a special resolution, vest any part of these assets
in trustees upon such trusts for the benefit of our shareholders as the liquidator shall think fit, but so that no shareholder will be
compelled to accept any assets, shares or other securities upon which there is a liability.



Anti-Takeover Provisions



Some provisions of our amended
and restated memorandum and articles of association may discourage, delay or prevent a change of control of our company or management
that shareholders may consider favorable, including provisions that authorize our board of directors to issue preferred shares in one
or more series and to designate the price, rights, preferences, privileges and restrictions of such preferred shares without any further
vote or action by our shareholders.



Inspection of Books and Records



Holders of ordinary shares have
no general right under Cayman Islands law to inspect or obtain copies of our list of shareholders or our corporate records (other than
the memorandum and articles of association). Our directors have discretion under our amended and restated memorandum and articles of association
to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged
to make them available to our shareholders unless required by the Companies Act or other applicable law or authorized by the directors
or by ordinary resolution.



Register of Shareholders



Under Cayman Islands law, we must
keep a register of shareholders that includes: the names and addresses of the shareholders, a statement of the shares held by each member,
and of the amount paid or agreed to be considered as paid, on the shares of each member; the date on which the name of any person was
entered on the register as a member; and the date on which any person ceased to be a member.





89









Exempted Company



We are an exempted company with
limited liability under the Companies Act. The Companies Act distinguishes between ordinary resident companies and exempted companies.
Any company that is registered in the Cayman Islands but conducts business mainly outside of the Cayman Islands may apply to be registered
as an exempted company. An exempted company:



| | ● | does not have to file an annual return of its shareholders
with the Registrar of Companies;           
| | - | ------------------------------------------------------------------------------------------------------
| |   |                                                                                                       
| | ● | is not required to open its register of members for inspection;                                       
| |   |                                                                                                       
| | ● | does not have to hold an annual general meeting;                                                      
| |   |                                                                                                       
| | ● | may issue shares with no par value;                                                                   
| |   |                                                                                                       
| | ● | may obtain an undertaking against the imposition of any
future taxation;                              
| |   |                                                                                                       
| | ● | may register by way of continuation in another jurisdiction
and be deregistered in the Cayman Islands;
| |   |                                                                                                       
| | ● | may register as a limited duration company; and                                                       
| |   |                                                                                                       
| | ● | may register as a segregated portfolio company.                                                       



“Limited liability”
means that the liability of each shareholder is limited to the amount unpaid by the shareholder on the shares of the company (except in
exceptional circumstances, such as involving fraud, the establishment of an agency relationship or an illegal or improper purpose or other
circumstances in which a court may be prepared to pierce or lift the corporate veil).



Preferred Shares



Our board of directors is empowered
to designate and issue from time to time one or more classes or series of preferred shares and to fix and determine the relative rights,
preferences, designations, qualifications, privileges, options, conversion rights, limitations and other special or relative rights of
each such class or series so authorized. Such action could adversely affect the voting power and other rights of the holders of our ordinary
shares or could have the effect of discouraging any attempt by a person or group to obtain control of us.



C. Material Contracts



We
have not entered into any material contracts other than in the ordinary course of business and other than those described in “Item
4. Information on the Company” or elsewhere in this annual report on Form 20-F.



D. Exchange Controls



See “Item
4. Information on the Company—B. Business Overview—Regulations—Regulations on Foreign Exchange-Foreign Currency Exchange”
and “Dividend Distribution.”



E. Taxation



The following summary of the material
Cayman Islands, PRC and U.S. federal income tax consequences of an investment in our ordinary shares is based upon laws and relevant interpretations
thereof in effect as of the date of this annual report, all of which are subject to change. This summary does not deal with all possible
tax consequences relating to an investment in our ordinary shares, such as the tax consequences under U.S. state and local tax laws or
under the tax laws of jurisdictions other than the Cayman Islands, the People’s Republic of China and the United States.





Material U.S. Federal Income Tax Considerations
for U.S. Holders



The following discussion describes
the material U.S. federal income tax consequences relating to the ownership and disposition of our ordinary shares by U.S. Holders (as
defined below). This discussion applies to U.S. Holders that purchase our ordinary shares and hold such ordinary shares as capital assets.
This discussion is based on the U.S. Internal Revenue Code of 1986, as amended, U.S. Treasury regulations promulgated thereunder and administrative
and judicial interpretations thereof, all as in effect on the date hereof and all of which are subject to change, possibly with retroactive
effect. This discussion does not address all of the U.S. federal income tax consequences that may be relevant to specific U.S. Holders
in light of their particular circumstances or to U.S. Holders subject to special treatment under U.S. federal income tax law (such as
certain financial institutions, insurance companies, dealers or traders in securities or other persons that generally mark their securities
to market for U.S. federal income tax purposes, tax-exempt entities or governmental organizations, retirement plans, regulated investment
companies, real estate investment trusts, grantor trusts, brokers, dealers or traders in securities, commodities, currencies or notional
principal contracts, certain former citizens or long-term residents of the United States, persons who hold our ordinary shares as part
of a “straddle,” “hedge,” “conversion transaction,” “synthetic security” or integrated
investment, persons that have a “functional currency” other than the U.S. dollar, persons that own directly, indirectly or
through attribution 10% or more of the voting power of our ordinary shares, corporations that accumulate earnings to avoid U.S. federal
income tax, partnerships and other pass-through entities, and investors in such pass-through entities). This discussion does not address
any U.S. state or local or non-U.S. tax consequences or any U.S. federal estate, gift or alternative minimum tax consequences.





90







As used in this discussion, the
term “U.S. Holder” means a beneficial owner of our ordinary shares who is, for U.S. federal income tax purposes, (i) an individual
who is a citizen or resident of the United States, (ii) a corporation (or entity treated as a corporation for U.S. federal income tax
purposes) created or organized in or under the laws of the United States, any state thereof, or the District of Columbia, (iii) an estate
the income of which is subject to U.S. federal income tax regardless of its source or (iv) a trust (x) with respect to which a court within
the United States is able to exercise primary supervision over its administration and one or more United States persons have the authority
to control all of its substantial decisions or (y) that has elected under applicable U.S. Treasury regulations to be treated as a domestic
trust for U.S. federal income tax purposes.



If an entity treated as a partnership
for U.S. federal income tax purposes holds our ordinary shares, the U.S. federal income tax consequences relating to an investment in
such ordinary shares will depend in part upon the status and activities of such entity and the particular partner. Any such entity should
consult its own tax advisor regarding the U.S. federal income tax consequences applicable to it and its partners of the purchase, ownership
and disposition of our ordinary shares.



Persons considering an investment
in our ordinary shares should consult their own tax advisors as to the particular tax consequences applicable to them relating to the
purchase, ownership and disposition of our ordinary shares including the applicability of U.S. federal, state and local tax laws and non-U.S.
tax laws.



Passive Foreign Investment Company Consequences



In general, a corporation organized
outside the United States will be treated as a PFIC for any taxable year in which either (i) at least 75% of its gross income is “passive
income”, or the PFIC income test, or (ii) on average at least 50% of its assets, determined on a quarterly basis, are assets that
produce passive income or are held for the production of passive income, or the PFIC asset test. Passive income for this purpose generally
includes, among other things, dividends, interest, royalties, rents, and gains from the sale or exchange of property that gives rise to
passive income. Assets that produce or are held for the production of passive income generally include cash, even if held as working capital
or raised in a public offering, marketable securities, and other assets that may produce passive income. Generally, in determining whether
a non-U.S. corporation is a PFIC, a proportionate share of the income and assets of each corporation in which it owns, directly or indirectly,
at least a 25% interest (by value) is taken into account.



Although PFIC status is determined
on an annual basis and generally cannot be determined until the end of a taxable year,based
on the nature of our current and expected income and the current and expected value and composition of our assets, we do not presently
expect to be a PFIC for our current taxable year or the foreseeable future. However, there
can be no assurance given in this regard because the determination of whether we are or will become a PFIC is a fact-intensive inquiry
made on an annual basis that depends, in part, upon the composition of our income and assets. In addition, there can be no assurance that
the IRS will agree with our conclusion or that the IRS would not successfully challenge our position.



If we are a PFIC in any taxable
year during which a U.S. Holder owns our ordinary shares, the U.S. Holder could be liable for additional taxes and interest chargesunder the “PFIC excess distribution regime” upon (i) a distribution paid during a taxable year that is greater than
125% of the average annual distributions paid in the three preceding taxable years, or,if
shorter,the U.S. Holder’sholding period
for our ordinary shares, and (ii) any gain recognized on a sale, exchange or other disposition, including a pledge, of our ordinary shares,
whether or not we continue to be a PFIC. Under the PFIC excess distribution regime, the tax on such distribution or gain would be determined
by allocating the distribution or gain ratably over the U.S. Holder’sholding period
for our ordinary shares. The amount allocated to the current taxable year (i.e., the year in which the distribution occurs or the gain
is recognized) and any year prior to the first taxable year in which we are a PFIC will be taxed as ordinary income earned in the current
taxable year. The amount allocated to other taxable years will be taxed at the highest marginalrates in effectfor individuals or corporations, as applicable, to ordinary income
for each such taxable year,and an interest charge,generally applicable to underpayments of tax, will be added to the tax.



If we are a PFIC for any year during
which a U.S. Holder holds our ordinary shares, we must generally continue to be treated as a PFIC by that holder for all succeeding years
during which the U.S. Holder holds such ordinary shares, unless we cease to meet the requirements for PFIC status and the U.S. Holder
makes a “deemed sale” election with respect to our ordinary shares. If the election is made, the U.S. Holder will be deemed
to sell our ordinary shares it holds at their fair market value on the last day of the last taxable year in which we qualified as a PFIC,
and any gain recognized from such deemed sale would be taxed under the PFIC excess distribution regime. After the deemed sale election,
the U.S. Holder’s ordinary shares would not be treated as shares of a PFIC unless we subsequently become a PFIC.





91







If we are a PFIC for any taxable
year during which a U.S. Holder holds our ordinary shares and one of our non-United States subsidiaries is also a PFIC (i.e., a lower-tier
PFIC), such U.S. Holder would be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC and would be
taxed under the PFIC excess distribution regime on distributions by the lower-tier PFIC and on gain from the disposition of shares of
the lower-tier PFIC even though such U.S. Holder would not receive the proceeds of those distributions or dispositions. Any of our non-United
States subsidiaries that have elected to be disregarded as entities separate from us or as partnerships for U.S. federal income tax purposes
would not be corporations under U.S. federal income tax law and accordingly, cannot be classified as lower-tier PFICs. However, non-United
States subsidiaries that have not made the election may be classified as a lower-tier PFIC if we are a PFIC during your holding period
and the subsidiary meets the PFIC income test or PFIC asset test. Each U.S. Holder is advised to consult its tax advisors regarding the
application of the PFIC rules to any of our non-United States subsidiaries.



If we are a PFIC, a U.S. Holder
will not be subject to tax under the PFIC excess distribution regime on distributions or gain recognized on our ordinary shares if a valid
“mark-to-market” election is made by the U.S. Holder for our ordinary shares. An electing U.S. Holder generally would take
into account as ordinary income each year, the excess of the fair market value of our ordinary shares held at the end of such taxable
year over the adjusted tax basis of such ordinary shares. The U.S. Holder would also take into account, as an ordinary loss each year,
the excess of the adjusted tax basis of such ordinary shares over their fair market value at the end of the taxable year, but only to
the extent of the excess of amounts previously included in income over ordinary losses deducted as a result of the mark-to-market election.
The U.S. Holder’s tax basis in our ordinary shares would be adjusted to reflect any income or loss recognized as a result of the
mark-to-market election. Any gain from a sale, exchange or other disposition of our ordinary shares in any taxable year in which we are
a PFIC would be treated as ordinary income and any loss from such sale, exchange or other disposition would be treated first as ordinary
loss (to the extent of any net mark-to-market gains previously included in income) and thereafter as capital loss. If, after having been
a PFIC for a taxable year, we cease to be classified as a PFIC because we no longer meet the PFIC income or PFIC asset test, the U.S.
Holder would not be required to take into account any latent gain or loss in the manner described above and any gain or loss recognized
on the sale or exchange of the ordinary shares would be classified as a capital gain or loss.



A mark-to-market election is available
to a U.S. Holder only for “marketable stock.” Generally, stock will be considered marketable stock if it is “regularly
traded” on a “qualified exchange” within the meaning of applicable U.S. Treasury regulations. A class of stock is regularly
traded during any calendar year during which such class of stock is traded, other than in de minimis quantities, on at least fifteen (15)
days during each calendar quarter.



Our ordinary shares will be marketable
stock as long as they remain listed on the Nasdaq Capital Market and are regularly traded. A mark-to-market election will not apply to
the ordinary shares for any taxable year during which we are not a PFIC, but will remain in effect with respect to any subsequent taxable
year in which we become a PFIC. Such election will not apply to any of our non-U.S. subsidiaries. Accordingly, a U.S. Holder may continue
to be subject to tax under the PFIC excess distribution regime with respect to any lower-tier PFICs notwithstanding the U.S. Holder’s
mark-to-market election for the ordinary shares.



The Cayman Islands currently have
no form of income, corporate or capital gains tax and no estate duty, inheritance tax or gift tax. There are currently no Cayman Islands’
taxes or duties of any nature on gains realized on a sale, exchange, conversion, transfer or redemption of the ordinary shares. Payments
of dividends and capital in respect of the ordinary shares will not be subject to taxation in the Cayman Islands and no withholding will
be required on the payment of interest and principal or a dividend or capital to any holder of the ordinary shares, nor will gains derived
from the disposal of the ordinary shares be subject to Cayman Islands income or corporation tax as the Cayman Islands currently have no
form of income or corporation taxes.



The tax consequences that would
apply if we are a PFIC would also be different from those described above if a U.S. Holder were able to make a valid qualified electing
fund, or QEF, election. As we do not expect to provide U.S. Holders with the information necessary for a U.S. Holder to make a QEF election,
prospective investors should assume that a QEF election will not be available.



The U.S. federal income tax
rules relating to PFICs are very complex. Prospective U.S. investors are strongly urged to consult their own tax advisors with respect
to the impact of PFIC status on the purchase, ownership and disposition of our ordinary shares, the consequences to them of an investment
in a PFIC, any elections available with respect to the ordinary shares and the IRS information reporting obligations with respect to the
purchase, ownership and disposition of ordinary shares of a PFIC.



Distributions



Subject to the discussion above
under “— Passive Foreign Investment Company Consequences,” a U.S. Holder that receives a distribution with respect to
our ordinary shares generally will be required to include the gross amount of such distribution in gross income as a dividend when actually
or constructively received to the extent of the U.S. Holder’s pro rata share of our current and/or accumulated earnings and profits
(as determined under U.S. federal income tax principles). To the extent a distribution received by a U.S. Holder is not a dividend because
it exceeds the U.S. Holder’s pro rata share of our current and accumulated earnings and profits, it will be treated first as a tax-free
return of capital and reduce (but not below zero) the adjusted tax basis of the U.S. Holder’s ordinary shares. To the extent the
distribution exceeds the adjusted tax basis of the U.S. Holder’s ordinary shares, the remainder will be taxed as capital gain. Because
we may not account for our earnings and profits in accordance with U.S. federal income tax principles, U.S. Holders should expect all
distributions to be reported to them as dividends.



Distributions on our ordinary
shares that are treated as dividends generally will constitute income from sources outside the United States for foreign tax credit purposes
and generally will constitute passive category income. Such dividends will not be eligible for the “dividends received’’
deduction generally allowed to corporate shareholders with respect to dividends received from U.S. corporations. Dividends paid by a
“qualified foreign corporation’’ to certain non-corporate U.S. Holders may be are eligible for taxation at a reduced
capital gains rate rather than the marginal tax rates generally applicable to ordinary income provided that a holding period requirement
(more than sixty (60) days of ownership, without protection from the risk of loss, during the 121-day period beginning sixty (60) days
before the ex-dividend date) and certain other requirements are met. Each U.S. Holder is advised to consult its tax advisors regarding
the availability of the reduced tax rate on dividends to its particular circumstances.
However, if we are a PFIC for the taxable year in which the dividend is paid or the preceding taxable year (see discussion above under
“— Passive Foreign Investment Company Consequences’’), we will not be treated as a qualified foreign corporation,
and therefore the reduced capital gains tax rate described above will not apply.





92







Dividends
will be included in a U.S. Holder’s income on the date of the depositary’s receipt of the dividend. The amount of any dividend
income paid in Cayman Islands dollars will be the U.S. dollar amount calculated by reference to the exchange rate in effect on the date
of receipt, regardless of whether the payment is in fact converted into U.S. dollars. If the dividend is converted into U.S. dollars
on the date of receipt, a U.S. Holder should not be required to recognize foreign currency gain or loss in respect to the dividend income.
A U.S. Holder may have foreign currency gain or loss if the dividend is converted into U.S. dollars after the date of receipt.



A non-United States corporation
(other than a corporation that is classified as a PFIC for the taxable year in which the dividend is paid or the preceding taxable year)
generally will be considered to be a qualified foreign corporation with respect to any dividend it pays on ordinary shares that are readily
tradable on an established securities market in the United States.



Sale, Exchange or Other Disposition of Our Ordinary
Shares



Subject to the discussion above
under “— Passive Foreign Investment Company Consequences,’’ a U.S. Holder generally will recognize capital gain
or loss for U.S. federal income tax purposes upon the sale, exchange or other disposition of our ordinary shares in an amount equal to
the difference, if any, between the amount realized (i.e., the amount of cash plus the fair market value of any property received) on
the sale, exchange or other disposition and such U.S. Holder’s adjusted tax basis in the ordinary shares. Such capital gain or loss
generally will be long-term capital gain taxable at a reduced rate for non-corporate U.S. Holders or long-term capital loss if, on the
date of sale, exchange or other disposition, the ordinary shares were held by the U.S. Holder for more than one year. Any capital gain
of a non-corporate U.S. Holder that is not long-term capital gain is taxed at ordinary income rates. The deductibility of capital losses
is subject to limitations. Any gain or loss recognized from the sale or other disposition of our ordinary shares will generally be gain
or loss from sources within the United States for U.S. foreign tax credit purposes.



Medicare Tax



Certain U.S. Holders that are individuals,
estates or trusts and whose income exceeds certain thresholds generally are subject to a 3.8% tax on all or a portion of their net investment
income, which may include their gross dividend income and net gains from the disposition of our ordinary shares. If you are a United States
person that is an individual, estate or trust, you are encouraged to consult your tax advisors regarding the applicability of this Medicare
tax to your income and gains in respect of your investment in our ordinary shares.



Information Reporting and Backup Withholding



U.S. Holders may be required to
file certain U.S. information reporting returns with the IRS with respect to an investment in our ordinary shares, including, among others,
IRS Form 8938 (Statement of Specified Foreign Financial Assets). As described above under “Passive Foreign Investment Company Consequences”,
each U.S. Holder who is a shareholder of a PFIC must file an annual report containing certain information. U.S. Holders paying more than
$100,000 for our ordinary shares may be required to file IRS Form 926 (Return by a U.S. Transferor of Property to a Foreign Corporation)
reporting this payment. Substantial penalties may be imposed upon a U.S. Holder that fails to comply with the required information reporting.



Dividends on and proceeds from
the sale or other disposition of our ordinary shares may be reported to the IRS unless the U.S. Holder establishes a basis for exemption.
Backup withholding may apply to amounts subject to reporting if the holder (i) fails to provide an accurate U.S. taxpayer identification
number or otherwise establish a basis for exemption, or (ii) is described in certain other categories of persons. However, U.S. Holders
that are corporations generally are excluded from these information reporting and backup withholding tax rules.



Backup withholding is not an additional
tax. Any amounts withheld under the backup withholding rules generally will be allowed as a refund or a credit against a U.S. Holder’s
U.S. federal income tax liability if the required information is furnished by the U.S. Holder on a timely basis to the IRS.



U.S. Holders should consult their
own tax advisors regarding the backup withholding tax and information reporting rules.



EACH PROSPECTIVE INVESTOR IS
URGED TO CONSULT ITS OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES TO IT OF AN INVESTMENT IN OUR ORDINARY SHARES IN LIGHT OF THE INVESTOR’S
OWN CIRCUMSTANCES.



Prospective investors should consult
their professional advisers on the possible tax consequences of buying, holding or selling any ordinary shares under the laws of their
country of citizenship, residence or domicile.



The following is a discussion on
certain Cayman Islands income tax consequences of an investment in the ordinary shares. The discussion is a general summary of present
law, which is subject to prospective and retroactive change. It is not intended as tax advice, does not consider any investor’s
particular circumstances, and does not consider tax consequences other than those arising under Cayman Islands law.



Cayman Islands Taxation



The Cayman Islands currently levies
no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance
tax or estate duty. There are no other taxes likely to be material to us levied by the government of the Cayman Islands except for stamp
duties which may be applicable on instruments executed in, or brought within the jurisdiction of the Cayman Islands. The Cayman Islands
is not party to any double tax treaties that are applicable to any payments made to or by our company. There are no exchange control regulations
or currency restrictions in the Cayman Islands.







93







PRC Taxation





Under
the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside China with “de facto management
body” within China is considered a resident enterprise. The implementation rules define the term “de facto management
body” as the body that exercises full and substantial control and overall management over the business, productions, personnel,
accounts and properties of an enterprise. In April 2009, the State Administration of Taxation issued the Circular on Issues Concerning
the Identification of Chinese-Controlled Overseas Registered Enterprises as Resident Enterprises in Accordance With the Actual
Standards of Organizational Management, known as Circular 82, which has been revised by the Decision of the State Administration
of Taxation on Issuing the Lists of Invalid and Abolished Tax Departmental Rules and Taxation Normative Documents on December
29, 2017 and by the Decision of the State Council on Cancellation and Delegation of a Batch of Administrative Examination and
Approval Items on November 8, 2013. Circular 82 has provided certain specific criteria for determining whether the “de facto
management body” of a PRC-controlled enterprise that is incorporated offshore is located in China. The STA issued Chinese-Controlled
Offshore Incorporated Resident Enterprises Income Tax Regulation, or the Bulletin 45, which took effect on September 1, 2011 and
was most recently amended on June 15, 2018, to provide more guidance on the implementation of Circular 82 and to clarify the reporting
and filing obligations of Chinese-controlled offshore incorporated resident enterprises. Bulletin 45 also provides procedures
and administrative details for the determination of resident status and administration of post-determination matters. Although
Circular 82 only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled
by PRC individuals or foreigners, the criteria set forth in the circular may reflect the State Administration of Taxation’s
general position on how the “de facto management body” text should be applied in determining the tax resident status
of all offshore enterprises. According to Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a
PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “de facto management body” in
China only if all of the following conditions are met: (i) the places where the senior management and senior management departments
responsible for the daily production, operation and management of the enterprise perform their duties are mainly located within
the territory of the PRC ; (ii) decisions relating to the enterprise’s financial matters (such as money borrowing,
lending, financing and financial risk management) and human resource matters (such as appointment, dismissal and salary and wages)
are made or are subject to approval by organizations or personnel in China; (iii) the enterprise’s primary assets,
accounting books and records, company seals, and board and shareholder resolutions, are located or maintained in China; and
(iv) at least 50% of voting board members or senior executives habitually reside in China.



According to the Enterprise
Income Tax Law and the Announcement on Issues concerning the Implementation of the Preferential Income Tax Policies regarding High-Tech
Enterprises promulgated by the SAT on June 19, 2017, enterprises qualified as “high-tech enterprises” are entitled
to a 15% enterprise income tax rate rather than the 25% uniform statutory tax rate. The preferential tax treatment continues as
long as an enterprise can retain its “high-tech enterprise” status. Under the Implementation Rules, a “de facto
management body” is defined as a body that has material and overall management and control over the manufacturing and business
operations, personnel and human resources, finances and properties of an enterprise.





See note 13 of the notes to the
consolidated financial statements included elsewhere in this annual report for a discussion of taxation.



F. Dividends and Paying Agents



Not applicable.



G. Statement by Experts



Not applicable.



H. Documents on Display



We previously filed with the SEC
our registration statement on Form F-1 (Registration No. 333-251234), as amended, including the prospectus contained therein, to register
our ordinary shares in relation to our initial public offering. As a “foreign private issuer,” we are subject to periodic
reporting and other informational requirements of the Exchange Act that are applicable to foreign private issuers, and under those requirements
file reports and other information with the SEC, including annual reports on Form 20-F and reports on Form 6-K. Specifically, we are required
to file annually a Form 20-F no later than four months after the close of each fiscal year.



You may review a copy of the registration
statement, including exhibits and any schedule filed therewith, and any other reports or other information, and obtain copies of such
materials at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation
of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains a website at http://www.sec.gov that contains reports,
proxy and information statements and other information regarding issuers, like us, that file electronically with the SEC.



We maintain a website at http://www.infobird.com.
Information contained on, or that can be accessed through, our website is not a part of, and shall not be incorporated by reference into,
this annual report.



I. Subsidiary Information



For information on our subsidiaries,
see “Item 4. Information on the Company—A. History and Development of the Company and C. Organizational Structure”,
note 1 to our consolidated financial statements included in “Item 18. Financial Statements” and Exhibit 8.1 to this annual
report.





94







ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



Inflation risk



Inflationary factors, such as increases
in personnel and overhead costs, could impair our operating results. Although we do not believe that inflation has had a material impact
on our financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on our ability
to maintain current levels of gross margin and operating expenses as a percentage of sales revenue if the revenues do not increase with
such increased costs.



Interest Rate Risk



We are exposed to interest rate
risk while we have short-term bank loans outstanding. Although interest rates for our short-term loans are typically fixed for the terms
of the loans, the terms are typically twelve (12) months and interest rates are subject to change upon renewal.



Credit Risk



Credit risk is controlled by the
application of credit approvals, limits and monitoring procedures. We manage credit risk through in-house research and analysis of the
Chinese economy and the underlying obligors and transaction structures. We identify credit risk collectively based on industry, geography
and customer type. In measuring the credit risk of our sales to our customers, we mainly reflect the “probability of default”
by the customer on its contractual obligations and consider the current financial position of the customer and the current and likely
future exposures to the customer.



Liquidity Risk



We are also exposed to liquidity
risk, which is risk that we will be unable to provide sufficient capital resources and liquidity to meet our commitments and business
needs. Liquidity risk is controlled by the application of financial position analysis and monitoring procedures. When necessary, we will
turn to other financial institutions and related parties to obtain short-term funding to cover any liquidity shortage.



Foreign Exchange Risk



While our reporting currency is
the U.S. dollar, almost all of our consolidated revenues and consolidated costs and expenses are denominated in RMB. All of our assets
are denominated in RMB. As a result, we are exposed to foreign exchange risk as our revenues and results of operations may be affected
by fluctuations in the exchange rate between the U.S. dollar and RMB. If the RMB depreciates against the U.S. dollar, the value of our
RMB revenues, earnings and assets as expressed in our U.S. dollar financial statements will decline. We have not entered into any hedging
transactions in an effort to reduce our exposure to foreign exchange risk.



ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES



A. Debt Securities



Not applicable.



B. Warrants and Rights



Not applicable.



C. Other Securities



Not applicable.



D. American Depositary Shares



Not applicable.





95











PART II



ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES



None.



ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND
USE OF PROCEEDS



Material Modifications to the Rights of Security Holders



See “Item 10. Additional
Information—B. Memorandum and Articles of Association” for a description of the rights of securities holders, which remain
unchanged.



Use of Proceeds



The following “Use of
Proceeds” information relates to the registration statement on Form F-1, as amended (File No. 333- 251234), in relation to our
initial public offering, which was declared effective by the SEC on March 31, 2021. In April 2021, we completed our initial public offering
in which we issued and sold an aggregate of 1,250,000 ordinary shares, and in June 2021, we issued and sold 25,000 ordinary shares pursuant
to the partial exercise of the underwriter’s over-allotment option in connection with our initial public offering, resulting in
net proceeds to us of approximately $22.9 million, including the $600,000 that was placed in an escrow account, net of underwriting discounts
and commissions and expenses associated with our initial public offering paid or payable by us. WestPark Capital, Inc. acted as the representative
of the underwriters for our initial public offering. We have used net proceeds from our initial public offering for strengthening sales
and marketing, research and development, and general corporate purposes, including the expenses we spent to become, and maintain our
status as, a publicly listed company in the United States.





We received net proceeds
of approximately $22.9 million from our initial public offering, including the $600,000 that was placed in an escrow account mentioned
below, and the partial exercise of the underwriter’s over-allotment option. Our expenses incurred and paid to others in connection
with the issuance and distribution of our ordinary shares in our initial public offering totaled approximately $4.7 million, which
included approximately $1,785,000 for underwriting discounts and commissions. Net proceeds in the amount of $600,000 were also
placed in an escrow account for 24-months following the closing of our initial public offering.





ITEM 15. CONTROLS AND PROCEDURES



Disclosure Controls and Procedures



Under
the supervision and with the participation of our management, including our chief executive officer and our chief financial officer,
we carried out an evaluation of the effectiveness of our disclosure controls and procedures, which is defined in Rules 13a-15(e) and
15d-15(e) of the Exchange Act, as of the end of the period covered by this annual report. Based upon that evaluation, our management,
with the participation of our chief executive officer and chief financial officer, has concluded that, due to the material weaknesses
described below under “Management’s Annual Report on Internal Control Over Financial Reporting”, as of the end of the
period covered by this annual report, our disclosure controls and procedures were not effective in ensuring that the information required
to be disclosed by us in this annual report is recorded, processed, summarized and reported to them for assessment, and required disclosure
is made within the time period specified in the rules and forms of the SEC.



Management’s Annual Report on Internal Control
Over Financial Reporting



Our management is responsible for
establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting, as defined
in Rules 13a-15(f) and 15d-15(f) of the Exchange Act, is a process designed by, or under the supervision of, our chief executive officer
and our chief financial officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that:





| | ● | pertain to the maintenance
    of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | provide reasonable assurance
    that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
    principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and our
    board of directors; and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | provide reasonable assurance
    regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material
    effect on our financial statements.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







Internal control over financial
reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal
control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns
resulting from human failures. Internal control over financial reporting can also be circumvented by collusion or improper override. Because
of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control
over financial reporting. However, these inherent limitations are known features of the financial reporting process, and it is possible
to design into the process safeguards to reduce, though not eliminate, this risk.





96







Our
management assessed the effectiveness of our internal control over financial reporting as of December 31, 2021. In making its assessment,
management used the criteria described in Internal Control-Integrated Framework(2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO). Based on its assessment, management has concluded that our internal control over financial reporting
was ineffective as of December 31, 2021 based on the material weaknesses described below. A “material weakness” is a deficiency,
or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material
misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.







In the course of auditing our consolidated
financial statements for year ended December 31, 2021, eight material weaknesses were identified in our internal control over financial
reporting, as defined in the standards established by the Public Company Accounting Oversight Board of the United States. A “material
weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable
possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected
on a timely basis.



The material weaknesses identified
relate to (i) a lack of accounting staff and resources with appropriate knowledge of generally accepted accounting principles in the United
States (“U.S. GAAP”) and SEC reporting and compliance requirements. The other material weakness related to the absence of
policies and procedures and related risk mitigations surrounding our IT policies and procedures, including (ii) deficiencies in third
party vendor management, (iii) deficiencies in backup management and recovery management, (iv) deficiencies in user accounts management,
(v) lack of segregation of duties and monitoring of privileged accounts, (vi) deficiencies in monitoring access to systems and data, (vii)
deficiencies in password management and (viii) deficiencies in vulnerability assessment and patch management.









We are currently in the process
of remediating the material weaknesses described above and we intend to continue implementing the following measures, among others, to
remediate the material weaknesses. We plan to:



| | 1. | improve our reporting process by actively hiring more qualified accounting
personnel;
| | -- | -------------------------------------------------------------------------------------



| | 2. | prepare a systematic policies and procedures manual for our IT processes in order to develop enhanced risk assessment procedures and controls related to changes in IT systems;                       
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                       
| | 3. | regularly conduct internal evaluation for IT-related departments and all IT staff;                                                                                                                    
| |    |                                                                                                                                                                                                       
| | 4. | regularly conduct network security training for IT employees to provide employees with security awareness;                                                                                            
| |    |                                                                                                                                                                                                       
| | 5. | establish a qualification assessment procedure for third-party service providers;                                                                                                                     
| |    |                                                                                                                                                                                                       
| | 6. | improve demand analysis and detailed design/specification of new IT projects. All new IT projects undergo user acceptance testing and implementation approval;                                        
| |    |                                                                                                                                                                                                       
| | 7. | ensure system and information security, strictly control the approval of system permissions and review them regularly, enforce password complexity policies, and regularly audit and analyze logs; and
| |    |                                                                                                                                                                                                       
| | 8. | enforce and monitor IT standard procedures and safety management specifications.                                                                                                                      



As we were in the process
of implementing such remedial measures as of December 31, 2021, our management concluded that the material weaknesses had not been fully
remediated and that such material weaknesses still existed.



We are fully committed to continuing
to implement measures to remediate our material weaknesses and significant deficiencies in our internal control over financial reporting.
However, we cannot assure you that we will remediate our material weaknesses and significant deficiencies in a timely manner.  See
above and “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—If we fail to implement and maintain
an effective system of internal control, we may be unable to accurately report our operating results, meet our reporting obligations or
prevent fraud.”





Attestation Report of the Registered Public Accounting
Firm



This annual report does not include
an attestation report of our independent registered public accounting firm due to an exemption established by the rules of the SEC for
emerging growth companies.



As a company with less than $1.07
billion in revenue for our last fiscal year, we qualify as an “emerging growth company” pursuant to the JOBS Act. An emerging
growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public
companies. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of
2002, in the assessment of the emerging growth company’s internal control over financial reporting. We may take advantage of such
exemption until the last day of our fiscal year following the fifth anniversary of the date of the first sale of our ordinary shares pursuant
to our initial public offering. However, if certain events occur before the end of such five-year period, including if we become a “large
accelerated filer,” our annual gross revenues exceed $1.07 billion or we issue more than $1.0 billion of non-convertible debt in
any three-year period, we will cease to be an emerging growth company before the end of such five-year period.





97







Changes in Internal Control Over Financial Reporting









Other than as described above,
there were no changes in our internal controls over financial reporting identified in connection with the evaluation required by Rules 13a-15
or 15d-15 of the Exchange Act that occurred during the period covered by this annual report that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.





98









ITEM 16. [RESERVED]



ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT



Our board of directors has determined
that Mr. Harry D. Schulman, an independent director, under the standards set forth under the Nasdaq Capital Market corporate governance
requirements and Rule 10A-3 under the Exchange Act, and the chair of our audit committee, is an audit committee financial expert.



ITEM 16B. CODE OF ETHICS



We have adopted a Code of Business
Conduct and Ethics applicable to all of our directors and employees, including our principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar functions, which is a “code of ethics” as defined
in Item 16B of Form 20-F promulgated by the SEC and as required by the Nasdaq rules. The full text of the Code of Business Conduct and
Ethics is posted on our website at http://www.infobird.com. Information contained on, or that can be accessed through, our website does
not constitute a part of this annual report and is not incorporated by reference herein. We will provide a copy of the Code of Business
Conduct and Ethics without charge upon request by mail or by telephone. If we make any amendment to the Code of Business Conduct and Ethics
or grant any waivers, including any implicit waiver, from a provision of the Code of Business Conduct and Ethics, we will disclose the
nature of such amendment or waiver on our website to the extent required by the rules and regulations of the SEC.



ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES



The following table sets forth
the aggregate fees by categories specified below in connection with certain professional services rendered by our principal external auditor,
for the periods indicated.





|                   |  | For the year ended December 31,
|------------------ |  | -------------------------------
|                   |  | 2021                           
|Audit fees (1)     |  | $                              
|Audit-related fees |  |                                
|Tax fees           |  |                                
|Total              |  | $                              





|(1) | “Audit
    fees” represents the aggregate fees billed for each of the fiscal years listed for professional services rendered by our principal
    accounting firm for the audit of our annual financial statements or services that are normally provided by the auditors in connection
    with statutory and regulatory filings or engagements.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





The policy of our audit committee
is to pre-approve all audit and non-audit services including audit services, audit-related services, tax services and other services as
described above.



ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES



Not applicable.



ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
PURCHASERS



Not applicable.





99







ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT



Not applicable.



ITEM 16G. CORPORATE GOVERNANCE



As a Cayman Islands company listed
on the Nasdaq Capital Market, we are subject to the Nasdaq corporate governance listing standards. The Nasdaq rules permit a foreign private
issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in the Cayman
Islands, which is our home country, may differ significantly from the Nasdaq corporate governance listing standards. Currently, we do
not plan to rely on home country practices with respect to our corporate governance. However, if we choose to follow home country practices
in the future, our shareholders may be afforded less protection than they otherwise would enjoy under the Nasdaq corporate governance
listing standards applicable to U.S. domestic issuers.



ITEM 16H. MINE SAFETY DISCLOSURE



Not applicable.



ITEM 16I. Disclosure Regarding
Foreign Jurisdictions that Prevent Inspections.



Not applicable.





100











PART III



ITEM 17. FINANCIAL STATEMENTS



We have elected to provide financial
statements pursuant to Item 18.



ITEM 18. FINANCIAL STATEMENTS



The consolidated financial statements
of Infobird Co., Ltd and its subsidiaries are included at the end of this annual report.



ITEM 19. EXHIBITS



EXHIBIT INDEX





|Exhibit
    Number |  | Description
    of Exhibit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1.1                |  | Amended
    and Restated Memorandum and Articles of Association (incorporated by reference to Exhibit 3.2 of Amendment No. 2 to our Registration
    Statement on Form F-1 (File No. 333-251234) filed with the Securities and Exchange Commission on January 29, 2021)                                                                                                                                                                                                                                                                                                                 
|1.2*               |  | Second Amended and Restated Memorandum and Articles of Association                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|2.1                |  | Specimen
    certificate evidencing ordinary shares (incorporated by reference to Exhibit 4.1 of Amendment No. 3 to our Registration Statement
    on Form F-1 (File No. 333-251234)) filed with the Securities and Exchange Commission on January 12, 2021)                                                                                                                                                                                                                                                                                                                            
|2.2                |  | Form
    of Representative’s Warrant (incorporated by reference to Exhibit 4.2 of Amendment No. 3 to our Registration Statement on Form
    F-1 (File No. 333-251234) filed with the Securities and Exchange Commission on March 15, 2021)                                                                                                                                                                                                                                                                                                                                              
|2.3                |  | Description
    of Securities (incorporated herein by reference to the section titled “Description of Share Capital and Governing Documents”
    in the Registrant’s registration statement on Form F-1 (File No. 333-251234)), originally filed with the Securities and Exchange
    Commission on December 9, 2020, as amended, including any form of prospectus contained therein pursuant to Rule 424(b) under the
    Securities Act of 1933 and (ii) the Registrant’s registration statement on Form 8-A, filed with the Securities and Exchange
    Commission on March 30, 2021)
|4.1                |  | Unofficial
    English Translation of Exclusive Business Cooperation Agreement by and between Infobird Digital Technology (Beijing) Co., Ltd and
    Beijing Infobird Software Co., Ltd, dated as of May 27, 2020 (incorporated by reference to Exhibit 10.1 of our Registration Statement
    on Form F-1 (File No. 333-251234) filed with the Securities and Exchange Commission on December 9, 2020)                                                                                                                                                                                 
|4.2                |  | Unofficial
    English Translations of Exclusive Option Agreements by and among Infobird Digital Technology (Beijing) Co., Ltd, Beijing Infobird
    Software Co., Ltd and the shareholders of Beijing Infobird Software Co., Ltd, dated as of May 27, 2020 (incorporated by reference
    to Exhibit 10.2 of our Registration Statement on Form F-1 (File No. 333-251234) filed with the Securities and Exchange Commission
    on December 9, 2020)                                                                                                                                   
|4.3                |  | Unofficial
    English Translations of Equity Interest Pledge Agreements by and among Infobird Digital Technology (Beijing) Co., Ltd, Beijing Infobird
    Software Co., Ltd and the shareholders of Beijing Infobird Software Co., Ltd, dated as of May 27, 2020 (incorporated by reference
    to Exhibit 10.3 of our Registration Statement on Form F-1 (File No. 333-251234) filed with the Securities and Exchange Commission
    on December 9, 2020)                                                                                                                             
|4.4                |  | Unofficial
    English Translations of Shareholders’ Powers of Attorney, dated as of May 27, 2020 (incorporated by reference to Exhibit 10.4
    of our Registration Statement on Form F-1 (File No. 333-251234) filed with the Securities and Exchange Commission on December 9,
    2020)                                                                                                                                                                                                                                                                                             
|4.5                |  | Unofficial
    English Translations of Spousal Consent Letters, dated as of May 27, 2020 (incorporated by reference to Exhibit 10.5 of our Registration
    Statement on Form F-1 (File No. 333-251234) filed with the Securities and Exchange Commission on December 9, 2020)                                                                                                                                                                                                                                                                                                          
|4.6                |  | Form
    of Indemnification Escrow Agreement (incorporated by reference to Exhibit 10.6 of Amendment No. 3 to our Registration Statement on
    Form F-1 (File No. 333-251234) filed with the Securities and Exchange Commission on March 15, 2021)                                                                                                                                                                                                                                                                                                                                     
|4.7                |  | Form
    of Indemnification Agreement between the registrant and its officers and directors (incorporated by reference to Exhibit 10.7 of
    our Registration Statement on Form F-1 (File No. 333-251234) filed with the Securities and Exchange Commission on December 9, 2020)                                                                                                                                                                                                                                                                                                       
|4.8                |  | Form
    of Director Agreement between the registrant and its directors (incorporated by reference to Exhibit 10.8 of our Registration Statement
    on Form F-1 (File No. 333-251234) filed with the Securities and Exchange Commission on December 9, 2020)                                                                                                                                                                                                                                                                                                                           
|4.9                |  | Form
    of Independent Director Agreement between the registrant and certain of its independent directors (incorporated by reference to Exhibit
    10.9 of our Registration Statement on Form F-1 (File No. 333-251234) filed with the Securities and Exchange Commission on December
    9, 2020)                                                                                                                                                                                                                                                                                    
|4.10               |  | Form
    of Independent Director Agreement by and between the registrant and its U.S. independent director, Harry D. Schulman (incorporated
    by reference to Exhibit 10.10 of our Registration Statement on Form F-1 (File No. 333-251234) filed with the Securities and Exchange
    Commission on December 9, 2020)                                                                                                                                                                                                                                                                
|4.11               |  | Form
    of Independent Director Agreement by and between the registrant and Zhixiong Wang (incorporated by reference to Exhibit 10.22 of
    Amendment No. 1 to our Registration Statement on Form F-1 (File No. 333-251234) filed with the Securities and Exchange Commission
    on January 12, 2021)                                                                                                                                                                                                                                                                                
|4.12               |  | Form
    of Employment Agreement between the registrant and its directors (incorporated by reference to Exhibit 10.11 of our Registration
    Statement on Form F-1 (File No. 333-251234) filed with the Securities and Exchange Commission on December 9, 2020)                                                                                                                                                                                                                                                                                                                        
|4.13               |  | Employment
    Agreement, by and between Yimin Wu and the registrant, dated as of May 25, 2020 (incorporated by reference to Exhibit 10.12 of our
    Registration Statement on Form F-1 (File No. 333-251234) filed with the Securities and Exchange Commission on December 9, 2020)                                                                                                                                                                                                                                                                                                   
|4.14               |  | Employment
    Agreement, by and between Lianfang Zhou and the registrant, dated as of May 25, 2020 (incorporated by reference to Exhibit 10.13
    of our Registration Statement on Form F-1 (File No. 333-251234) filed with the Securities and Exchange Commission on December 9,
    2020)                                                                                                                                                                                                                                                                                          
|4.15               |  | Employment
    Agreement, by and between Chunhsiang Chen and the registrant, dated as of May 25, 2020 (incorporated by reference to Exhibit 10.14
    of our Registration Statement on Form F-1 (File No. 333-251234) filed with the Securities and Exchange Commission on December 9,
    2020)                                                                                                                                                                                                                                                                                        





101

















|4.16     |  | Employment
    Agreement, by and between Hsiaochien Tseng and the registrant, dated as of May 25, 2020 (incorporated by reference to Exhibit 10.15
    of our Registration Statement on Form F-1 (File No. 333-251234) filed with the Securities and Exchange Commission on December 9,
    2020)  
|-------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.17#    |  | Unofficial English Translation of Beijing House Lease Contract, by and among Beijing Infobird Software Co., Ltd, and Beijing Dingqiao Property Management Co., Ltd                                                                                                                                 
|4.18#    |  | Unofficial English Translation of Beijing House Lease Contract, by and among Beijing Infobird Software Co., Ltd, Wang Tao, and Wang Yong, dated as of March 11, 2021                                                                                                                               
|4.19#    |  | Unofficial English Translation of Office Lease Contract, by and between Guiyang Infobird Cloud Computing Co., Ltd and Qin Huaxiang dated as of March 10, 2022                                                                                                                                      
|4.20#    |  | Unofficial English Translation of Office Lease Contract, by and between Guiyang Infobird Cloud Computing Co., Ltd and Wang Haihong                                                                                                                                                                 
|4.21#    |  | Unofficial English Translation of Office Lease Contract, by and between Guiyang Infobird Cloud Computing Co., Ltd and Yang Xiaokang                                                                                                                                                                
|4.22#    |  | Unofficial English Translation of Office Lease Contract, by and between Guiyang Infobird Cloud Computing Co., Ltd and Zhang Zhihua, dated as of March 10, 2022                                                                                                                                     
|4.23     |  | Amendment to Independent Director Agreement by and between the registrant and its U.S. independent director, Harry D. Schulman (incorporated by reference to Exhibit 4.23 of our Annual Report on Form 20-F (file No. 001-40301) filed with the Securities and Exchange Commission on May 14, 2021)
|4.24#    |  | Amendment Number 1 to Independent Director Agreement by and between the registrant and Zhixiong Wang, dated as of April 25, 2022                                                                                                                                                                   
|4.25#    |  | Amendment Number 1 to Independent Director Agreement by and between the registrant and Xuan Li, dated as of April 25, 2022                                                                                                                                                                         
|4.26#    |  | Amendment Number 1 to Independent Director Agreement by and between the registrant and Feng Liu, dated as of April 25, 2022                                                                                                                                                                        
|8.1#     |  | List of Subsidiaries                                                                                                                                                                                                                                                                               
|11.1     |  | Code
    of Business Conduct and Ethics (incorporated by reference to Exhibit 99.1 of Amendment No. 1 to our Registration Statement on Form
    F-1 (File No. 333-251234) filed with the Securities and Exchange Commission on January 12, 2021)                                                   
|12.1**   |  | CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                        
|12.2**   |  | CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                        
|13.1**   |  | CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                        
|13.2**   |  | CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                        
|101.INS# |  | Inline XBRL Instance Document                                                                                                                                                                                                                                                                      
|101.SCH# |  | Inline XBRL Taxonomy Extension
    Schema Document                                                                                                                                                                                                                                                 
|101.CAL# |  | Inline XBRL Taxonomy Extension
    Calculation Linkbase Document                                                                                                                                                                                                                                   
|101.DEF# |  | Inline XBRL Taxonomy Extension
    Definition Linkbase Document                                                                                                                                                                                                                                    
|101.LAB# |  | Inline XBRL Taxonomy Extension
    Label Linkbase Document                                                                                                                                                                                                                                         
|101.PRE# |  | Inline XBRL Taxonomy Extension
    Presentation Linkbase Document                                                                                                                                                                                                                                  
|104*     |  | Cover Page Interactive
    Data File                                                                                                                                                                                                                                                               



|*  | Filed herewith.                                                                                                        
|-- | -----------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                        
|** | Furnished herewith.                                                                                                    
|   |                                                                                                                        
|#  | Previously filed with the Annual Report on Form 20-F filed with the Securities and Exchange Commission on May 16, 2022.





102













SIGNATURES



The registrant hereby certifies that it meets
all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Amendment No.
1 to the annual report on its behalf.





| | INFOBIRD CO., LTD
| | -----------------
| |                  
| | By:              
| |                  
| |                  





Date: October 21, 2022









103











INFOBIRD CO., LTD AND SUBSIDIARIES



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS





|                                                                                                                           |  | page
|-------------------------------------------------------------------------------------------------------------------------- |  | ----
|Report of Independent
Registered Public Accounting Firm (PCAOB ID: 711)                                                    |  | F-2 
|Consolidated Balance Sheets as of December 31, 2021 and 2020                                                               |  | F-3 
|Consolidated
Statements of Operations and Comprehensive Income (Loss) for the Years Ended December 31, 2021, 2020 and 2019 |  | F-4 
|Consolidated Statements of Changes in Equity                                                                               |  | F-5 
|Consolidated Statements of Cash Flows for the Years Ended December 31, 2021, 2020 and 2019                                 |  | F-6 
|Notes to Consolidated Financial Statements                                                                                 |  | F-7 





F-1

















REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors and

Shareholders of Infobird Co., Ltd



Opinion on the Financial Statements



We have audited the accompanying consolidated
balance sheets of Infobird Co., Ltd and Subsidiaries (collectively, the “Company”) as of December 31, 2021 and 2020, and the
related consolidated statements of operations and comprehensive income (loss), changes in equity, and cash flows for each of the years
in the three-year period ended December 31, 2021, and the related notes (collectively referred to as the financial statements). In our
opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December
31, 2021 and 2020, and the results of its operations and cash flows for each of the years in the three-year period ended December 31,
2021, in conformity with accounting principles generally accepted in the United States of America.



Basis for Opinion



These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.



We conducted our audits in accordance
with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were
we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an
understanding of internal control over financial reporting, but not for the purpose ofexpressing
an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.



Our audits included performing procedures
to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.



/s/ Friedman LLP



We have served as the Company’s auditor since 2019.



New York, New York



May 16, 2022, except for Notes 15 and 19
which are dated October 21, 2022



711















F-2









INFOBIRD CO., LTD AND SUBSIDIARIES



CONSOLIDATED BALANCE SHEETS



|                                                                                                                                                                             |  | December
31, |             | December
31,
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ----------- | ------------
|                                                                                                                                                                             |  | 2021         |             | 2020        
|                                                                                                                                                                             |  |              |             |             
|ASSETS                                                                                                                                                                      
|CURRENT
ASSETS                                                                                                                                                               |  |              |             |             
|Cash                                                                                                                                                                         |  | $            | 6,293,415   |             
|Accounts
receivable, net                                                                                                                                                     |  |              | 6,337,730   |             
|Other
receivables, net                                                                                                                                                       |  |              | 133,266     |             
|Prepayments                                                                                                                                                                  |  |              | 511,385     |             
|Short-term
investment                                                                                                                                                        |  |              | 7,091,939   |             
|Total
current assets                                                                                                                                                         |  |              | 20,367,735  |             
|                                                                                                                                                                             |  |              |             |             
|OTHER
ASSETS                                                                                                                                                                 |  |              |             |             
|Property
and equipment, net                                                                                                                                                  |  |              | 254,591     |             
|Right-of-use
assets                                                                                                                                                          |  |              | 292,743     |             
|Long-term
deposits, net                                                                                                                                                      |  |              | 175,085     |             
|Intangible
assets, net                                                                                                                                                       |  |              | 4,778,481   |             
|Deferred
tax assets                                                                                                                                                          |  |              | —           |             
|Deferred
offering cost                                                                                                                                                       |  |              | —           |             
|Escrow                                                                                                                                                                       |  |              | 600,000     |             
|Goodwill                                                                                                                                                                     |  |              | 2,009,769   |             
|Total
other assets                                                                                                                                                           |  |              | 8,110,669   |             
|                                                                                                                                                                             |  |              |             |             
|Total
assets                                                                                                                                                                 |  | $            | 28,478,404  |             
|                                                                                                                                                                             |  |              |             |             
|LIABILITIES
AND SHAREHOLDERS’ EQUITY                                                                                                                                        
|                                                                                                                                                                             |  |              |             |             
|CURRENT
LIABILITIES                                                                                                                                                          |  |              |             |             
|Accounts
payable                                                                                                                                                             |  | $            | 4,530,740   |             
|Bank
loans - current                                                                                                                                                         |  |              | 4,496,883   |             
|Interest
payable- related party                                                                                                                                              |  |              | —           |             
|Other
payables and accrued liabilities                                                                                                                                       |  |              | 947,976     |             
|Deferred
revenue                                                                                                                                                             |  |              | 1,405,374   |             
|Taxes
payable                                                                                                                                                                |  |              | 701,873     |             
|Lease
liabilities - current                                                                                                                                                  |  |              | 185,146     |             
|Total
current liabilities                                                                                                                                                    |  |              | 12,267,992  |             
|                                                                                                                                                                             |  |              |             |             
|OTHER
LIABILITIES                                                                                                                                                            |  |              |             |             
|Deferred
tax liabilities                                                                                                                                                     |  |              | 81,992      |             
|Bank
loans - noncurrent                                                                                                                                                      |  |              | 131,603     |             
|Lease
liabilities - noncurrent                                                                                                                                               |  |              | 95,947      |             
|Total
other liabilities                                                                                                                                                      |  |              | 309,542     |             
|                                                                                                                                                                             |  |              |             |             
|Total
liabilities                                                                                                                                                            |  |              | 12,577,534  |             
|                                                                                                                                                                             |  |              |             |             
|COMMITMENTS
AND CONTINGENCIES SHAREHOLDERS’ EQUITY                                                                                                                           |  |              |             |             
|Ordinary
shares, $0.005 par value, 10,000,000 shares authorized, 5,093,315 and 3,800,000 issued and outstanding as of December 31,
2021 and December 31, 2020, respectively* |  |              | 25,467      |             
|Additional
paid-in capital                                                                                                                                                   |  |              | 26,783,333  |             
|Statutory
reserves                                                                                                                                                           |  |              | 449,136     |             
|(Accumulated
deficits) Retained earnings                                                                                                                                     |  |              | (12,799,436 | )           
|Accumulated
other comprehensive income                                                                                                                                       |  |              | 592,218     |             
|Total
shareholders’ equity attributable to Infobird Co., Ltd                                                                                                                 |  |              | 15,050,718  |             
|                                                                                                                                                                             |  |              |             |             
|Noncontrolling
interests                                                                                                                                                     |  |              | 850,152     |             
|Total
equity                                                                                                                                                                 |  |              | 15,900,870  |             
|                                                                                                                                                                             |  |              |             |             
|Total
liabilities and equity                                                                                                                                                 |  | $            | 28,478,404  |             



* Retroactively restated to reflect the Company’s 1-for-5
share consolidation effective on September 9, 2022 (the “Share Consolidation”).







The accompanying notes are an integral part of these
consolidated financial statements.





F-3











INFOBIRD CO., LTD AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
INCOME (LOSS)





|                                                                                                                     |  | For the Years Ended
|-------------------------------------------------------------------------------------------------------------------- |  | -------------------
|                                                                                                                     |  | December 31,       
|                                                                                                                     |  | 2021               
|                                                                                                                     |  |                    
|REVENUES                                                                                                             |  | $                  
|COST OF REVENUES( includes cost of
    revenues from related party of $350,987 for the year ended December 31, 2021) |  |                    
|                                                                                                                     |  |                    
|GROSS PROFIT                                                                                                         |  |                    
|                                                                                                                     |  |                    
|OPERATING EXPENSES:                                                                                                  |  |                    
|Selling                                                                                                              |  |                    
|General and administrative                                                                                           |  |                    
|Research and development                                                                                             |  |                    
|Long-live assets impairment                                                                                          |  |                    
|Total operating expenses                                                                                             |  |                    
|                                                                                                                     |  |                    
|(LOSS) INCOME FROM OPERATIONS                                                                                        |  |                    
|                                                                                                                     |  |                    
|OTHER INCOME (EXPENSE)                                                                                               |  |                    
|Interest income                                                                                                      |  |                    
|Interest expense                                                                                                     |  |                    
|Other income, net                                                                                                    |  |                    
|Total other income (expense), net                                                                                    |  |                    
|                                                                                                                     |  |                    
|(LOSS) INCOME BEFORE INCOME TAXES                                                                                    |  |                    
|                                                                                                                     |  |                    
|PROVISION FOR OF INCOME TAXES                                                                                        |  |                    
|                                                                                                                     |  |                    
|NET (LOSS) INCOME                                                                                                    |  |                    
|                                                                                                                     |  |                    
|Less: Net (loss) income attributable
    to noncontrolling interest                                                  |  |                    
|                                                                                                                     |  |                    
|NET (LOSS) INCOME ATTRIBUTABLE TO
    INFOBIRD CO.,LTD                                                               |  | $                  
|                                                                                                                     |  |                    
|NET (LOSS) INCOME                                                                                                    |  |                    
|                                                                                                                     |  |                    
|FOREIGN CURRENCY TRANSLATION ADJUSTMENT                                                                              |  |                    
|                                                                                                                     |  |                    
|TOTAL COMPREHENSIVE (LOSS) INCOME                                                                                    |  |                    
|                                                                                                                     |  |                    
|Less: Comprehensive (loss) income
    attributable to noncontrolling interests                                       |  |                    
|                                                                                                                     |  |                    
|COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE
    TO INFOBIRD CO., LTD                                                    |  | $                  
|                                                                                                                     |  |                    
|WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES*                                                                          |  |                    
|Basic and diluted                                                                                                    |  |                    
|                                                                                                                     |  |                    
|(LOSS) EARNINGS PER SHARE*                                                                                           |  |                    
|Basic and diluted                                                                                                    |  | $                  



* Retroactively restated to reflect the Share Consolidation.





The accompanying notes are an integral part of these
consolidated financial statements.





F-4







INFOBIRD CO., LTD AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY







|                                                                                                       |  |                 |           |           |  |            |        | Retained earnings     |  | Accumulated   |            |                |  |          
|------------------------------------------------------------------------------------------------------ |  | --------------- | --------- | --------- |  | ---------- | ------ | --------------------- |  | ------------- | ---------- | -------------- |  | ---------
|                                                                                                       |  |                 |           |           |  | Additional |        | (accumulated deficit) |  | other         |            |                |  |          
|                                                                                                       |  | Ordinary shares |           | paid-in   |  | Statutory  |        |                       |  | comprehensive |            | Noncontrolling |  |          
|                                                                                                       |  | Shares*         |           | Par value |  | capital    |        | reserves              |  | Unrestricted  |            | income (loss)  |  | interests
|BALANCE, January 1, 2019                                                                               |  |                 | 3,800,000 |           |  | $          | 19,000 |                       |  | $             | 7,537,243  |                |  | $        
|Acquisition of additional Non-controlling interest                                                     |  |                 | —         |           |  |            | —      |                       |  |               | (1,685,154 | )              |  |          
|Net income attributable to Infobird Co., Ltd                                                           |  |                 | —         |           |  |            | —      |                       |  |               | —          |                |  |          
|Net income attributable to noncontrolling interests                                                    |  |                 | —         |           |  |            | —      |                       |  |               | —          |                |  |          
|Statutory reserve                                                                                      |  |                 | —         |           |  |            | —      |                       |  |               | —          |                |  |          
|Foreign currency translation adjustment                                                                |  |                 | —         |           |  |            | —      |                       |  |               | —          |                |  |          
|BALANCE, December 31, 2019                                                                             |  |                 | 3,800,000 |           |  | $          | 19,000 |                       |  | $             | 5,852,089  |                |  | $        
|Net income attributable to Infobird Co., Ltd                                                           |  |                 | —         |           |  |            | —      |                       |  |               | —          |                |  |          
|Net income attributable to noncontrolling interests                                                    |  |                 | —         |           |  |            | —      |                       |  |               | —          |                |  |          
|Statutory reserve                                                                                      |  |                 | —         |           |  |            | —      |                       |  |               | —          |                |  |          
|Foreign currency translation adjustment                                                                |  |                 | —         |           |  |            | —      |                       |  |               | —          |                |  |          
|BALANCE, December 31, 2020                                                                             |  |                 | 3,800,000 |           |  | $          | 19,000 |                       |  | $             | 5,852,089  |                |  | $        
|Net loss attributable to Infobird Co., Ltd                                                             |  |                 | —         |           |  |            | —      |                       |  |               | —          |                |  |          
|Net loss attributable to noncontrolling interests                                                      |  |                 | —         |           |  |            | —      |                       |  |               | —          |                |  |          
|Issuance of ordinary shares and warrants in initial
    public offerings, net of issuance costs        |  |                 | 1,275,000 |           |  |            | 6,375  |                       |  |               | 20,790,869 |                |  |          
|Statutory reserve                                                                                      |  |                 | —         |           |  |            | —      |                       |  |               | —          |                |  |          
|Noncontrolling interest from acquisition                                                               |  |                 | —         |           |  |            | —      |                       |  |               | —          |                |  |          
|Share-based compensations for consulting services                                                      |  |                 | 14,000    |           |  |            | 70     |                       |  |               | 140,397    |                |  |          
|Additional ordinary shares of round up adjustment due
    to retroactive effect of Share Consolidation |  |                 | 4,315     |           |  |            | 22     |                       |  |               | (22        | )              |  |          
|Foreign currency translation adjustment                                                                |  |                 | —         |           |  |            | —      |                       |  |               | —          |                |  |          
|BALANCE, December 31, 2021                                                                             |  |                 | 5,093,315 |           |  | $          | 25,467 |                       |  | $             | 26,783,333 |                |  | $        





* Retroactively restated to reflect the Share Consolidation.



The accompanying notes are an integral part of these
consolidated financial statements.





F-5







INFOBIRD CO., LTD AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOW





|                                                                                             |  | For
    the Years Ended
|-------------------------------------------------------------------------------------------- |  | -----------------------
|                                                                                             |  | December
    31,       
|                                                                                             |  | 2021                   
|                                                                                             |  |                        
|CASH
    FLOWS FROM OPERATING ACTIVITIES:                                                    |  |                        
|Net
    income                                                                               |  | $                      
|Adjustments to reconcile net income to net cash provided by operating activities:            |  |                        
|Depreciation                                                                                 |  |                        
|Amortization                                                                                 |  |                        
|Amortization
    of other income from deferred grant                                         |  |                        
|Gain
    on short term investment                                                            |  |                        
|Provision
    for doubtful accounts                                                          |  |                        
|Long
    live assets impairment                                                              |  |                        
|Loss
    on disposal of equipment                                                            |  |                        
|Deferred
    taxes expense                                                                   |  |                        
|Amortization
    of ROU                                                                      |  |                        
|Long-live
    assets impairment                                                              |  |                        
|Stock-base
    compensations for consulting service                                          |  |                        
|Provision
    for warranty reserve                                                           |  |                        
|Change
    in operating assets and liabilities                                               |  |                        
|Accounts
    receivable                                                                      |  |                        
|Other
    receivables                                                                        |  |                        
|Prepayments                                                                                  |  |                        
|Long-term
    deposits                                                                       |  |                        
|Accounts
    payable                                                                         |  |                        
|Deferred
    revenue                                                                         |  |                        
|Other
    payables and accrued liabilities                                                   |  |                        
|Interest
    payable- related party                                                          |  |                        
|Operating
    lease liability                                                                |  |                        
|Taxes
    payable                                                                            |  |                        
|Net
    cash provided by (used in) operating activities                                      |  |                        
|                                                                                             |  |                        
|CASH
    FLOWS FROM INVESTING ACTIVITIES:                                                    |  |                        
|Purchase
    of equipment                                                                    |  |                        
|Purchase
    of software                                                                     |  |                        
|Payments
    for construction in progress                                                    |  |                        
|Costs
    to obtain and develop software                                                     |  |                        
|Proceeds
    from sales of equipment                                                         |  |                        
|Purchase
    of short-term investment                                                        |  |                        
|Proceeds
    for sale of short-term investment                                               |  |                        
|Payment
    for Qishuo acquisition net of cash acquired                                      |  |                        
|Net
    cash used in investing activities                                                    |  |                        
|                                                                                             |  |                        
|CASH
    FLOWS FROM FINANCING ACTIVITIES:                                                    |  |                        
|Net
    proceeds from issuance of ordinary shares in initial public offering                 |  |                        
|Payments
    of offering costs                                                               |  |                        
|Proceeds
    from bank loans                                                                 |  |                        
|Repayment
    for bank loans                                                                 |  |                        
|Repayment
    for short term loan - related party                                            |  |                        
|Payment
    of acquisition of noncontrolling interest                                        |  |                        
|Proceed
    from IPO placed in escrow                                                        |  |                        
|Net
    cash (used in) provided by financing activities                                      |  |                        
|                                                                                             |  |                        
|EFFECT
    OF EXCHANGE RATE CHANGES                                                          |  |                        
|                                                                                             |  |                        
|NET
    CHANGE IN CASH                                                                       |  |                        
|                                                                                             |  |                        
|CASH,
    beginning of year                                                                  |  |                        
|                                                                                             |  |                        
|CASH,
    end of year                                                                        |  | $                      
|                                                                                             |  |                        
|SUPPLEMENTAL
    CASH FLOW INFORMATION:                                                      |  |                        
|Cash
    paid for income tax                                                                 |  | $                      
|Cash
    paid for interest                                                                   |  | $                      
|                                                                                             |  |                        
|NON-CASH
    INVESTING AND FINANCING ACTIVITIES:                                             |  |                        
|Deferred
    initial offering costs net against additional paid-in capital                   |  | $                      
|Purchase
    of equipment with prepayment                                                    |  | $                      
|Operating
    lease right-of-use assets obtained in exchange for operating lease liabilities |  | $                      



The accompanying notes are an integral part of these
consolidated financial statements.





F-6











INFOBIRD CO., LTD AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



(In U.S. dollars, unless stated otherwise)



Note 1 – Nature of business and organization



Infobird Co., Ltd (“Infobird Cayman” or
the “Company”) is a holding company incorporated on March 26, 2020 under the laws of the Cayman Islands. The Company has no
substantive operations other than holding all of the outstanding share capital of Infobird International Limited (“Infobird HK”)
established under the laws of Hong Kong on April 21, 2020.



Infobird HK is also a holding company holding all
of the outstanding equity of Infobird Digital Technology (Beijing) Co., Ltd (“Infobird WFOE”) which was established on May
20, 2020 under the laws of the People’s Republic of China (“PRC” or “China”).



The Company, through its variable interest entity
(“VIE”), Beijing Infobird Software Co., Ltd (“Infobird Beijing”), a PRC limited liability company established
on October 26, 2001, and through its subsidiaries, is a software-as-a-service (“SaaS”) provider of innovative AI-powered (artificial
intelligence enabled) customer engagement solutions in China. The Company primarily provides standard and customized customer relationship
management cloud-based services, such as SaaS, and business process outsourcing (“BPO”), services to its clients.





On October 17, 2013, Infobird Beijing established
its 90.18% owned subsidiary, Guiyang Infobird Cloud Computing Co., Ltd (“Infobird Guiyang”), a PRC limited liability
company. Infobird Guiyang also engages in software development and mainly provides BPO services to its customers. On June 20, 2012,
Infobird Beijing established a 99.95% owned subsidiary, Anhui Xinlijia E-commerce Co., Ltd (formerly known as Anhui Infobird Software
Information Technology Co., Ltd) (“Infobird Anhui”), a PRC limited liability company. Infobird Anhui also engages in
software development and mainly provides cloud services and technology solutions to customers.





On May 27, 2020, Infobird Cayman completed a reorganization
of entities under common control of its then existing shareholders, who collectively owned all of the equity interests of Infobird Cayman
prior to the reorganization. Infobird Cayman and Infobird HK were established as the holding companies of Infobird WFOE. Infobird WFOE
is the primary beneficiary for accounting purposes of Infobird Beijing and its subsidiaries. All of these entities are under common control
which results in the consolidation of Infobird Beijing and subsidiaries which have been accounted for as a reorganization of entities
under common control at carrying value. Infobird WFOE is deemed to have a controlling financial interest and be the primary beneficiary
for accounting purposes of Infobird Beijing because it has both of the following characteristics: (1) the power to direct activities
at Infobird Beijing that most significantly impact such entity’s economic performance, and (2) the right to receive benefits from
Infobird Beijing that could potentially be significant to such entity. The consolidated financial statements are prepared on the basis
as if the reorganization became effective as of the beginning of the first period presented in the accompanying consolidated financial
statements of Infobird Cayman.



On December
2, 2021, Infobird Beijing completed its 51% acquisition of Shanghai Qishuo Technology Inc. (“Shanghai Qishuo”), a PRC limited
liability company and a SaaS provider of big data analysis to retail stores aimed at operation improvement, for approximately $1.3 million
(RMB 8.6 million). Shanghai Qishuo is a fast-growing provider of consumer product and retail store digitalization solutions.



The accompanying consolidated financial statements
reflect the activities of Infobird Cayman and each of the following entities:





|Name                                                                                                                              |  | Background                                                                                                                                                                                           |  | Ownership                       
|--------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------
|Infobird  International
Limited (“Infobird HK”)                                                                                   |  | ● A Hong Kong company
 ● Incorporated on April 21, 2020  ● A holding company                                                                                                                         |  | 100% owned by Infobird Cayman   
|Infobird Digital Technology
(Beijing) Co., Ltd (“Infobird WFOE”)                                                                  |  | ● A PRC limited liability
company and deemed a wholly foreign  owned enterprise (“WFOE”)  ● Incorporated on May 20, 2020  ●
Registered capital of $15,000,000 (RMB 106,392,000)  ● A holding company |  | 100% owned by Infobird HK       
|Beijing Infobird Software Co.,
Ltd (“Infobird Beijing”)                                                                           |  | ● A PRC limited liability
company  ● Incorporated on October 26, 2001  ● Registered capital of $2,417,947 (RMB 16,624,597)  ● Software
developing that provides software as a service (SaaS)         |  | VIE of Infobird WFOE            
|Guiyang Infobird Cloud Computing
Co., Ltd  (“Infobird Guiyang”)                                                                   |  | ● A PRC limited liability
company  ● Incorporated on October 17, 2013  ● Registered capital of $1,777,645 (RMB 12,222,200)  ● Software
developing that provides software as a service (SaaS)         |  | 90.18% owned by Infobird Beijing
|Anhui Xinlijia E-commerce Co., Ltd (formerly known as Anhui
Infobird Software Information Technology Co., Ltd) (“Infobird Anhui”) |  | ● A PRC limited liability
company  ● Incorporated on June 20, 2012  ● Registered capital of $1,454,440 (RMB 10,000,000)  ● Software
developing that provides software as a service (SaaS)            |  | 99.95% owned by Infobird Beijing
|Shanghai Qishuo Technology
Inc. (“Shanghai Qishuo”)                                                                               |  | ● A PRC limited liability
company  ● Incorporated on April 10, 2014 ● Registered capital of $156,922 (RMB 1,000,000)  ● Software
developing that provides software as a service (SaaS)               |  | 51% owned by Infobird Beijing   







F-7











Contractual Arrangements









Due to legal restrictions on foreign ownership and
investment in, among other areas, the development and operation of information technology in China, including cloud computing and big
data analytics, the Company operates its businesses in which foreign investment is restricted or prohibited in the PRC through certain
PRC domestic companies. Neither the Company nor its subsidiaries own any equity interest in Infobird Beijing. As such, Infobird Beijing
is controlled through contractual arrangements in lieu of direct equity ownership by the Company or any of its subsidiaries. Such contractual
arrangements consist of a series of three agreements, along with shareholders’ powers of attorney (“POAs”) and spousal
consent letters (collectively the “Contractual Arrangements”, which were signed on May 27, 2020).



The significant terms of the Contractual Arrangements
are as follows:



Exclusive Business Cooperation Agreement



Pursuant to the exclusive business cooperation agreement
between Infobird WFOE and Infobird Beijing, Infobird WFOE has the exclusive right to provide Infobird Beijing with technical support services,
consulting services and other services, including technical support and training, business management consultation, consultation, collection
and research of technology and market information, marketing and promotion services, customer order management and customer services,
lease equipment or properties, provide legitimate rights to use software license, provide deployment, maintenances and upgrade of software,
design installation, daily management, maintenance and updating network system, hardware and database, and other services requested by
Infobird Beijing from time to time to the extent permitted under PRC law. In exchange, Infobird WFOE is entitled to a service fee that
equals to all of the consolidated net income. The service fee may be adjusted by Infobird WFOE based on the actual scope of services rendered
by Infobird WFOE and the operational needs and expanding demands of Infobird Beijing. Pursuant to the exclusive business cooperation agreement,
the service fees may be adjusted based on the actual scope of services rendered by Infobird WFOE and the operational needs of Infobird
Beijing.



The exclusive business cooperation agreement remains
in effect unless terminated in accordance with the following provision of the agreement or terminated in writing by Infobird WFOE.



During the term of the exclusive business cooperation
agreement, Infobird WFOE and Infobird Beijing shall renew the operation term prior to the expiration thereof so as to enable the exclusive
business cooperation agreement to remain effective. The exclusive business cooperation agreement shall be terminated upon the expiration
of the operation term of either Infobird WFOE or Infobird Beijing if the application for renewal of the operation term is not approved
by relevant government authorities. If an application for renewal of the operation term is not approved, according to the PRC Company
Law, the expiration of the operation term may lead to the dissolution and cancellation of such PRC company.





F-8











Exclusive Option Agreements



Pursuant to the exclusive option agreements among
Infobird WFOE, Infobird Beijing and the shareholders who collectively owned all of Infobird Beijing, such shareholders jointly and severally
grant Infobird WFOE an option to purchase their equity interests in Infobird Beijing. The purchase price shall be the lowest price then
permitted under applicable PRC laws. Infobird WFOE or its designated person may exercise such option at any time to purchase all or part
of the equity interests in Infobird Beijing until it has acquired all equity interests of Infobird Beijing, which is irrevocable during
the term of the agreements.



The exclusive option agreements remains in effect
until all equity interest held by shareholders in Infobird Beijing has been transferred or assigned to Infobird WFOE and/or any other
person designated by the Infobird WFOE in accordance with such agreement.



Equity Interest Pledge Agreements



Pursuant to the equity interest pledge agreements,
among Infobird WFOE, Infobird Beijing, and the shareholders who collectively owned all of Infobird Beijing, such shareholders pledge all
of the equity interests in Infobird Beijing to Infobird WFOE as collateral to secure the obligations of Infobird Beijing under the exclusive
business cooperation agreement and exclusive option agreements. These shareholders are prohibited from transferring the pledged equity
interests without the prior consent of Infobird WFOE unless transferring the equity interests to Infobird WFOE or its designated person
in accordance to the exclusive option agreements.





The equity interest pledge agreements shall
come into force the date on which the pledged interests are recorded, which is within three (3) days after signing of the agreements
on May 27, 2020, under Infobird Beijing’s register of shareholders and are registered with the competent Administration for
Market Regulation of Infobird Beijing until all of the obligations to Infobird WFOE have been fulfilled completely by Infobird
Beijing. Nineteen shareholders of Infobird Beijing have registered the pledges of equity interest with the competent Civil Code
of the PRC and Infobird Beijing intends to register the pledge of equity interest of one shareholder with the competent Administration
for Market Regulation once practicable.





Shareholders’ Powers of Attorney (“POAs”)



Pursuant to the shareholders’ POAs, the shareholders
of Infobird Beijing give Infobird WFOE an irrevocable proxy to act on their behalf on all matters pertaining to Infobird Beijing and to
exercise all of their rights as shareholders of Infobird Beijing, including the (i) right to attend shareholders meeting; (ii) to exercise
voting rights and all of the other rights including but not limited to the sale or transfer or pledge or disposition of the shares held
in part or in whole; and (iii) designate and appoint on behalf of the shareholder the legal representative, the directors, supervisors,
the chief executive officer and other senior management members of Infobird Beijing, and to sign transfer documents and any other documents
in relation to the fulfillment of the obligations under the exclusive option agreements and the equity interest pledge agreements. The
shareholders’ POAs shall remain in effect while the shareholders of Infobird Beijing hold the equity interests in Infobird Beijing.



Spousal Consent Letters



Pursuant to the spousal consent letters, the spouses
of the shareholders of Infobird Beijing commit that they have no right to make any assertions in connection with the equity interests
of Infobird Beijing, which are held by the shareholders. In the event that the spouses obtain any equity interests of Infobird Beijing,
which are held by the shareholders, for any reasons, the spouses of the shareholders shall be bound by the exclusive option agreement,
the equity interest pledge agreement, the shareholder POA and the exclusive business cooperation agreement and comply with the obligations
thereunder as a shareholder of Infobird Beijing. The letters are irrevocable and shall not be withdrawn without the consent of Infobird
WFOE.





F-9











Based on the foregoing contractual arrangements, which
grant Infobird WFOE effective control of Infobird Beijing and subsidiaries and enable Infobird WFOE to receive all of their expected residual
returns, the Company accounts for Infobird Beijing as a VIE. Accordingly, the Company consolidates the accounts of Infobird Beijing and
subsidiaries for the periods presented herein, in accordance with Regulation S-X-3A-02 promulgated by the Securities Exchange Commission
(“SEC”), and Accounting Standards Codification (“ASC”) 810-10, Consolidation.



Note 2 – Summary of significant accounting policies





Liquidity



In assessing liquidity, the Company monitors
and analyzes cash on-hand and operating expenditure commitments. The Company’s liquidity needs are to meet working capital
requirements and operating expense obligations.



Historically, the Company finances its
operations through internally generated cash, short-term loans and payable from related parties and equity financing. As of December
31, 2021, the Company had approximately $6.3 million 6,293,415
in cash which primarily consists of cash on hand and bank deposits, which are unrestricted as to withdrawal and use and are
deposited with banks in China and Hong Kong. The Company also had $7.1 million 7,091,939 in short term investment which are
investment in wealth management products which can be redeemed upon three months’ notice. The Company’s working capital
was approximately $8.1 million at December 31, 2021, approximately $1.4 million of which was deferred revenue which the Company
expects to realize and the Company does not expect to make any significant refund based on historical experience. Therefore, the
Company’s working capital excluding deferred revenue was approximately $9.5 million. The Company will require a minimum of
approximately $7.0 million over the next twelve months to operate at its current level, either from revenues or funding.



If the Company is unable to realize its assets
within the normal operating cycle of a twelve (12) month period, the Company may have to consider supplementing its available sources
of funds through the following sources:



| | ● | other available sources of financing from PRC banks and other financial institutions; and
| | - | -----------------------------------------------------------------------------------------
| |   |                                                                                          
| | ● | financial support from the Company’s related parties and shareholders.                   





Based on the above considerations, the Company’s
management is of the opinion that it has sufficient funds to meet the Company’s working capital requirements and debt obligations
as they become due over the next twelve (12) months.







Basis of presentation



The accompanying consolidated financial statements
have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”)
for information pursuant to the rules and regulations of the SEC.



Principles of consolidation



The consolidated financial statements include
the financial statements of the Company and its subsidiaries, which include the wholly-foreign owned enterprise and VIE over which the
Company exercises control and, when applicable, entities for which the Company has a controlling financial interest or is the primary
beneficiary for accounting purposes. Infobird WFOE is deemed to have a controlling financial interest and be the primary beneficiary
for accounting purposes of Infobird Beijing because it has both of the following characteristics: (1) the power to direct activities
at Infobird Beijing that most significantly impact such entity’s economic performance, and (2) the right to receive benefits from
Infobird Beijing that could potentially be significant to such entity. All transactions and balances among the Company and its subsidiaries
have been eliminated upon consolidation.



Use of estimates and assumptions



The preparation of consolidated financial statements
in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts
of revenues and expenses during the periods presented. Significant accounting estimates reflected in the Company’s consolidated
financial statements include the useful lives of property and equipment and intangible assets, software development costs, impairment
of long-lived assets, allowance for doubtful accounts, revenue recognition, share-based compensation, allowance for deferred tax assets
and uncertain tax position. The inputs into the Company’s judgments and estimates consider the economic implications of COVID-19
on the Company’s critical and significant accounting estimates. Actual results could differ from these estimates.



Foreign currency translation and transaction



The reporting currency of the Company is the U.S.
dollar. The Company in China conducts its businesses in the local currency, Renminbi (RMB), as its functional currency. Assets and liabilities
are translated at the noon buying rate in the City of New York for cable transfers of RMB as certified for customs purposes by the Federal
Reserve Bank of New York at the end of the period. The statement of income accounts are translated at the average translation rates and
the equity accounts are translated at historical rates. Translation adjustments resulting from this process are included in accumulated
other comprehensive income (loss). Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated
in a currency other than the functional currency are included in the results of operations as incurred.



Translation adjustments included in accumulated other
comprehensive income (loss) amounted to $592,218 and $494,046 as of December 31, 2021 and 2020, respectively. The balance sheet amounts,
with the exception of equity at December 31, 2021 and 2020 were translated at 6.3726 RMB and 6.5250 RMB, respectively. The equity accounts
were stated at their historical rate. The average translation rates applied to statement of income accounts for the years ended December
31, 2021, 2020, and 2019 were 6.4508 RMB, 6.9042 RMB, and 6.9081 RMB to $1.00, respectively. Cash flows are also translated at average
translation rates for the periods, therefore, amounts reported on the statements of cash flows will not necessarily agree with changes
in the corresponding balances on the consolidated balance sheets.





F-10











Cash



Cash consists of cash on hand, demand deposits and
time deposits placed with banks or other financial institutions and have original maturities of less than three (3) months.



Accounts receivable, net



Accounts receivable include trade accounts due from
customers. Accounts are considered overdue after thirty (30) days from payment due date. In establishing the required allowance for doubtful
accounts, management considers historical collection experience, aging of the receivables, the economic environment, industry trend analysis,
and the credit history and financial conditions of the customers. Management reviews its receivables on a regular basis to determine if
the bad debt allowance is adequate, and adjusts the allowance when necessary. Delinquent account balances are written off against allowance
for doubtful accounts after management has determined that the likelihood of collection is not probable. As of December 31, 2021 and 2020,
allowance for doubtful accounts were $2,478,341 and $123,890, respectively.







Other receivables, net



Other receivables primarily include advances to employees
and other deposits. Management regularly reviews the aging of receivables and changes in payment trends and records allowances when management
believes collection of amounts due are at risk. Accounts considered uncollectable are written off against allowances after exhaustive
efforts at collection are made. As of December 31, 2021 and 2020, allowance for doubtful accounts were $7,761 and $40,437, respectively.



Prepayments



Prepayments are cash deposited or advanced to suppliers
for future service rendering. The amounts are refundable and bear no interest. For any advances to suppliers determined by management
that such advances will not be in receipts or refundable, the Company will recognize an allowance account to reserve such balances. Management
reviews its advances to suppliers on a regular basis to determine if the allowance is adequate, and adjusts the allowance when necessary.
Delinquent account balances are written off against allowance for doubtful accounts after management has determined that the likelihood
of collection is not probable. Management continues to evaluate the reasonableness of the valuation allowance policy and update it if
necessary. As of December 31, 2021 and 2020, no allowance for the doubtful accounts were deemed necessary.



Short term investments



Short-term investments are investments in
wealth management product with underlying in bonds offered by private entities and other equity products. The investments can be
redeemed upon three months’ notice and their carrying values approximate their fair values. The gain (loss) from sale of any
investments and fair value change are recognized in the statements of income and comprehensive income. Gain from short term
investments for the years ended December 31, 2021, 2020 and 2019 amounted to $165,713,
nil 0 and nil, 0 respectively.



Escrow



In connection with the closing of the Company’s initial public offering
in April 2021, $600,000 of the net proceeds received from the initial public offering was deposited in an escrow account, and the Company
is restricted to withdraw therefrom, for twenty-four months after the closing date of the initial public offering.



Long-term deposits



Long-term deposits primarily included rental deposits,
and deposits made by the Company to vendors to secure the service contract. The deposits are generally more than one year and the amounts
are refundable and bear no interest. For any deposits determined by management that such deposit will not be in receipts or refundable,
the Company will recognize an allowance account to reserve such balances. Management reviews the long- term deposits on a regular basis
to determine if the allowance is adequate, and adjusts the allowance when necessary. Delinquent account balances are written off against
allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. Management continues
to evaluate the reasonableness of the valuation allowance policy and update it if necessary. As of December 31, 2021 and 2020, allowance
for doubtful accounts were $63,083 and $61,609, respectively.





F-11











Property and equipment, net



Property and equipment are stated at cost less accumulated
depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The estimated useful
lives are as follows:





|                                         |  | Useful Life                                                    
|---------------------------------------- |  | ---------------------------------------------------------------
|Leasehold improvements                   |  | Shorter
of the remaining lease  terms or estimated useful lives
|Electronic devices                       |  | 3-5 years                                                      
|Office equipment, fixtures and furniture |  | 3-5 years                                                      
|Automobile                               |  | 3-5 years                                                      
|Computer and network equipment           |  | 3-5 years                                                      





The cost and related accumulated depreciation of assets
sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the consolidated statements of income and
comprehensive income. Expenditures for maintenance and repairs are charged to earnings as incurred, while additions, renewals and betterments,
which are expected to extend the useful life of assets, are capitalized. The Company also re-evaluates the periods of depreciation to
determine whether subsequent events and circumstances warrant revised estimates of useful lives.



Construction-in-progress represents contractor and
labor costs, design fees and inspection fees in connection with the construction of the Company’s building for a cloud computing
facility in Guiyang, China. As a result of delay due to impact of COVID-19, the Company impaired the full amount of construction in progress.
See Note 7 for details.



Intangible assets



The Company’s intangible assets with definite
useful lives primarily consist of licensed software, capitalized development costs, platform system, and land-use rights. The Company
amortizes its intangible assets with definite useful lives over their estimated useful lives and reviews these assets for impairment.
The Company typically amortizes its intangible assets with definite useful lives on a straight-line basis over the shorter of the contractual
terms or the estimated useful lives.



Intangible assets are stated at cost less accumulated
amortization. Amortization is computed using the straight-line method over the estimated useful lives of the assets. The estimated useful
lives are as follows:





|                             |  | Useful Life
|---------------------------- |  | -----------
|Licensed software            |  | 5years     
|Capitalized development cost |  | 5years     
|Platform development         |  | 5years     
|Customer relationship        |  | 4 years    
|Land use right               |  | 40years    





Capitalized development costs



The Company follows the provisions of ASC 350-40,
“Internal Use Software”, to capitalize certain direct development costs associated with internal-used software. ASC 350-40
provides guidance on capitalization of the costs incurred for computer software developed or obtained for internal use. The Company expenses
all costs incurred during the preliminary project stage of its development, and capitalizes costs incurred during the application development
stage. Costs incurred relating to upgrades and enhancements to the application are capitalized if it is determined that these upgrades
or enhancements add additional functionality to the application. Development costs cease capitalization upon completion of all substantial
testing when the software is substantially complete and ready for its intended use and are amortized on a straight-line basis over the
estimated useful life, which is generally five years. Amortization of internal-use software begins when the software is ready for its
intended use. Management evaluates the useful lives of these assets on an annual basis and tests for impairment whenever events or changes
in circumstances occur that could impact the recoverability of these assets.





F-12











If, after the development of internal-use software
is completed, the Company decides to market the software, proceeds received from the license of the computer software, net of direct
incremental costs of marketing, such as commissions, software reproduction costs, warranty and service obligations, and installation
costs, shall be applied against the carrying amount of that software. For the years ended December 31, 2021, 2020 and 2019, the
Company applied nil against carrying amount of capitalized software that was subsequently sold to customers as the software were fully
amortized.



Land use rights



All land in the PRC is owned by the government. However,
the government grants “land use rights.” This land use rights are for 40 years and expire in 2055. The Company amortizes the
land use rights over the forty-year term of the land use rights on a straight-line basis. The carrying value of the land use rights was
reduced by government grant received when the conditions stipulated under the grant were fulfilled. As a result of delay due to impact
of COVID-19, the Company recorded impairment of approximately $0.4 million and the balance is reduced to $0 at December 31, 2021. See
Note 8 for details.



Impairment for long-lived assets



Long-lived assets, including property and
equipment and intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances (such as a
significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying value of
an asset may not be recoverable. The Company assesses the recoverability of the assets based on the undiscounted future cash flows
the assets are expected to generate and recognize an impairment loss when estimated undiscounted future cash flows expected to
result from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value
of the asset. If an impairment is identified, the Company would reduce the carrying amount of the asset to its estimated fair value
based on a discounted cash flows approach or, when available and appropriate, to comparable market values. As of December 31, 2021
and 2020, approximately $3.7
million and nil 0
impairment of long-lived assets was recognized including approximately $2.0
million of construction-in-progress, $0.4
million of land use rights due to continuing delay of construction as impacted by COVID -19 and the Company recorded additional
impairment on our intangible assets of $1.3 million for the year ended December 31, 2021 as the carrying value of our long-lived
assets exceed future cashflows expected to be generated from the assets.



Business combination



The purchase price of an acquired company is allocated
between tangible and intangible assets acquired and liabilities assumed from the acquired business based on their estimated fair values,
with the residual of the purchase price recorded as goodwill. Transaction costs associated with business combinations are expensed as
incurred, and are included in general and administrative expenses in the Company’s consolidated statements of operations. The results
of operations of the acquired business are included in the Company’s operating results from the date of acquisition.



Goodwill



Goodwill represents the excess of the consideration
paid of an acquisition over the fair value of the net identifiable assets of the acquired subsidiaries at the date of acquisition. Goodwill
is not amortized and is tested for impairment at least annually, more often when circumstances indicate impairment may have occurred.
Goodwill is carried at cost less accumulated impairment losses. If impairment exists, goodwill is immediately written off to its fair
value and the loss is recognized in the consolidated statements of operations and comprehensive loss. Impairment losses on goodwill are
not reversed.



The Company reviews the carrying value of intangible
assets not subject to amortization, including goodwill, to determine whether impairment may exist annually or more frequently if events
and circumstances indicate that it is more likely than not that an impairment has occurred. The Company has the option to assess qualitative
factors to determine whether it is necessary to perform further impairment testing in accordance with ASC 350-20, as amended by ASU 2017-04.
If the Company believes, as a result of the qualitative assessment, that it is more likely than not that the fair value of the reporting
unit is less than its carrying amount, then the impairment test described below is required. The Company compares the fair values of each
reporting unit to its carrying amount, including goodwill. If the fair value of each reporting unit exceeds its carrying amount, goodwill
is not considered to be impaired. If the carrying amount of a reporting unit exceeds its fair value, impairment is recognized for the
difference, limited to the amount of goodwill recognized for the reporting unit. Estimating fair value is performed by utilizing various
valuation techniques, with the primary technique being a discounted cash flow.





F-13











Fair value measurement



The accounting standard regarding fair value of financial
instruments and related fair value measurements defines financial instruments and requires disclosure of the fair value of financial instruments
held by the Company.



The accounting standards define fair value, establish
a three-level valuation hierarchy for disclosures of fair value measurement and enhance disclosure requirements for fair value measures.
The three levels are defined as follow:





| | ● | Level 1 inputs to the valuation
methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | Level 2 inputs to the valuation
methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets
or liability, either directly or indirectly, for substantially the full term of the financial instruments.
| | ● | Level 3 inputs to the valuation
methodology are unobservable and significant to the fair value.                                                                                                                                                                                 





Financial instruments included in current assets and
current liabilities are reported in the consolidated balance sheets at face value or cost, which approximate fair value because of the
short period of time between the origination of such instruments and their expected realization and their current market rates of interest.



Deferred offering costs



Deferred offering costs consist primarily of expenses
paid to attorneys, consultants, underwriters, and other parties related to the Company’s initial public offering. The balance will
be offset with the proceeds received after the close of the offering.



Government Grants



Government grants primarily consist of financial grants
received from local governments for operating a business in their jurisdictions and compliance with specific policies promoted by the
local governments. There are no defined rules and regulations to govern the criteria necessary for companies to receive such benefits,
and the amount of financial subsidy is determined at the discretion of the relevant government authorities. Government grants of non-operating
nature and with no further conditions to be met are recorded as non-operating income in “Other income, net” when received.
The government grants are related to acquisition of assets. The grants are recorded as “deferred government grants” included
in the accrued expenses and other current liabilities line item in the consolidated balance sheets when received. Once the Company fulfills
the conditions stipulated under the grant, the grant amount is deducted from the carrying amount of the asset with a corresponding reduction
in the deferred government grant balance.



Noncontrolling Interests



The Company’s noncontrolling interests represent
the minority shareholders’ ownership interests related to the Company’s subsidiaries, including 0.05% for Infobird Anhui for
the years ended December 31, 2021 and 2020, 9.82% for Infobird Guiyang for the years ended December 31, 2021 and 2020 and 49% for Shanghai
Qishuo for the year ended December 31, 2021. The Company repurchased 18.18% of noncontrolling interests in Infobird Guiyang in 2019, resulting
in noncontrolling interests of 9.82% for Infobird Guiyang for the year ended December 31, 2019. Excess of payment made to noncontrolling
shareholders over carrying value of the entity is recorded as reduction in additional paid in capital. The noncontrolling interests are
presented in the consolidated balance sheets, separately from equity attributable to the shareholders of the Company. Noncontrolling interests
in the results of the Company are presented on the consolidated statement of operations as allocations of the total income or loss for
the year between noncontrolling interests holders and the shareholders of the Company.





F-14











Noncontrolling interests consist of the following:





|                 |  | December 31, |         | December 31,
|---------------- |  | ------------ | ------- | ------------
|                 |  | 2021         |         | 2020        
|                 |  |              |         |             
|Infobird Guiyang |  | $            | (73,283 | )           
|Infobird Anhui   |  |              | (12     | )           
|Shanghai Qishuo  |  |              | 923,447 |             
|Total            |  | $            | 850,152 |             





Revenue recognition



The Company recognized its revenue under Accounting
Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers (ASC 606). The Company recognizes revenue which represents
the transfer of goods and services to customers in an amount that reflects the consideration to which the Company expects to be entitled
in such exchange. The Company identifies contractual performance obligations and determines whether revenue should be recognized at a
point in time or over time, based on when control of goods and services are provided to customers.



The Company’s contracts with customers generally
do not include a general right of return relative to the delivered products or services.



The Company applied practical expedient when sales
taxes were collected from customers, meaning sales tax is recorded net of revenue, instead of cost of revenue, which are subsequently
remitted to governmental authorities and are excluded from the transaction price.



Revenues are generated from (1) customized cloud-based
services, (2) standard cloud-based services, (3) BPO services, (4) software development, and (5) professional services and other.



(1) Revenue from customized cloud-based services



The Company derives its customized cloud-based revenues
from subscription services which are comprised of subscription fee from granting customers’ access to the customized SaaS, voice/data
plan, which includes telecommunication usage such as telephone calls and messaging that our customers can subscribe for, and technical
support. The provision of customized SaaS, voice/data plan and technical support is considered as one performance obligation as the services
provided are not distinct within the context of the contract whereas the customer can only obtain benefit when the services are provided
together. The Company uses monthly utilization records based on the number of user accounts subscribed for by customers, an output measure,
to recognize revenue over time as there is simultaneous consumption and delivery of services.



The Company has entered into contracts with China
Guangfa Bank where the amounts charged per user account were fixed and determinable, and the specific terms of the contracts were agreed
to by the Company and China Guangfa Bank. Contract performance periods are generally fifteen months, and payment terms are generally a
specified percentage prepaid based on estimated usage, and the remaining to be billed monthly based on actual usage. Contracts generally
do not contain significant financing components or variable consideration.



(2) Revenue from standard cloud-based services



The Company also derives its standard cloud-based
revenues from subscription services which are comprised of subscription fee from granting customers access to its software through the
internet. The Company’s standard cloud-based solutions represent a series of services such as calling, voice recording and technical
support. These services are made available to the customer continuously throughout the contractual period, however, the extent to which
the customer uses the services may vary at the customers’ discretion. The standard cloud-based services are considered to have one
single performance obligation. The Company uses monthly utilization records based on the number of user accounts subscribed for by customers,
an output measure, to recognize revenue over time as there is simultaneous consumption and delivery of services.





F-15











The Company also enters into contracts with customers
where the customers pay a fixed fee to access a fixed number of user accounts over the subscription period as specified in the contracts;
therefore, the customers receive and consume the benefits of the cloud services throughout the subscription period so revenue is recognized
ratably over the contractual subscription period that the services are delivered, beginning on the date the service is made available
to the customers.



Contract performance periods generally are one year,
and pursuant to the contracts, full payments are generally collected in advance, with payment to be made within three months after execution
of the contract. Contracts generally do not contain significant financing components or variable consideration.



(3) Revenue from BPO services



The Company provides BPO services to operate the call
centers for its customers. Customers using these services are not permitted to take possession of the Company’s software and the
contract term is for a defined period, where customers pay a monthly service fee. These services are considered as one performance obligation
as the customers do not obtain benefit for each separate service. Revenues are recognized over time over contractual period using the
time elapsed output method as BPO services are provided.



Contract performance periods generally are one year,
and pursuant to the contracts, full payments for several months of services are generally collected in advance. Contracts generally do
not contain significant financing components or variable consideration.



(4) Business Integration Solution Services Revenue



Since 2020, the Company provides business integration
solution services to its customers and expects to expand its customer base from such services and develop the customers to become subscribers
to SaaS services with software upgrades and continued services once they become more familiar with the Company’s products. The services
include sale of the Company’s software license or development of customized software to fit the customers’ need and sales
of hardware integrated with the Company’s software.



| | - | Revenue from software development
| | - | ---------------------------------



The Company generates revenue from development and
sale of software license including (1) standard software and (2) customized software developed per customers’ specifications. Contract
terms from each software development contract generally do not contain significant financing components or variable consideration.



Standard software are developed and offered as standard
cloud-based services. The Company sold the license for standard software because some customers show obvious preference of software licensing
over software-as-a-service, for reasons such as concerns about the safety of cloud-based services and potential higher price of subscription
in total compared with one-time on-premise fee. Therefore, as part of the Company’s sales and market strategy, it offers licenses
for its standard software to allow the customers to first start utilizing its products in their daily operation and then aim to evolve
them to become subscribers with its standard cloud-based services to enjoy benefits of software upgrades and continued services. Licenses
for standard software provide the customer with a right to use the software. Standard software licenses are typically made available to
customers with immediate access to the software. The Company recognizes revenue for these standard software licenses at the point in time
when the customer has access and thus control over the software.





F-16













Customized software is software developed catering
to the needs of specific customers who require initial customization or development of new solutions before subscription to our
cloud-based services. For example, the Company has entered into a two-stage agreement to provide services to a municipal government
agency to first develop an information technology system and customize and configure its cloud call center into the IT system,
and then provide cloud-based services and charge subscription fees. Because the customized software the Company developed are to
solve certain business pain points in a certain scenario within or across industries, once developed, it plans to further apply
them in serving other customers that share similar needs and business models. The Company aims to replicate its initial customization
and development and achieve economies of scale after it delivers its products to more customers within the same industry. Contract
terms are generally less than one year. The design, development, and installation of the customized software is considered as one
performance obligation as these promises are not separately identifiable as the customers do not obtain benefits from these services
on its own. The Company’s software development service contracts are generally recognized at a point in time when customer
accepted the customized software with satisfactory testing result.







| | - | Revenue from sales of hardware with software integration
| | - | --------------------------------------------------------



The Company is responsible for providing hardware
procurement, software design and implementation, installation and maintenance service in order to fulfill the contract. Design, integration
and installation of hardware and software are considered as one performance obligation, as the customer does not benefit from each individual
service on its own stand, but instead is benefited by the provision of these services as a whole. For contracts that the Company have
no alternative use of the customized system without incurring significant additional costs and when the Company has right to payment for
performance completed, the Company recognized revenue over time based on measurement of progress towards completion using output methods
when it could appropriately measure the customization progress towards completion by reaching certain milestones specified in contracts.
For other contracts that the Company is only entitled to payment after completion and inspection of project, revenue is recognized at
a point in time after completion of software implementation and hardware installation, and the transfer of control to the customer.



Certain business integration solution services contracts
also require the Company to provide post-contract services (“PCS”) which include maintenance and technical support. The provision
of maintenance and technical support is considered one single performance obligation because maintenance and technical support are not
distinct within the context of the contract. The Company is obligated to provide a single, continuous, integrated service throughout
the contract term. As such, the Company allocates the contract price between revenue from business integration solution services and provision
of PCS, using the expected cost plus margin approach. The expected cost plus margin approach requires the Company to forecast the expected
costs of satisfying the performance obligation and then add a reasonable margin for that good or service. Revenue allocated to PCS is
deferred and recognized on a straight-line basis over the estimated period PCS are expected to be provided. For the years ended December
31, 2021, 2020 and 2019, approximately $0.1 million, $0.3 million and $0 were allocated to PCS, respectively.



For contracts that involved third party service providers, the Company
assesses if the Company controls the goods and services before they were transferred to the customer or if the Company’s responsibility
is merely to facilitate the provision of goods and service to the customer. For products and goods that were directly shipped from the
vendor to the customer and the vendor is responsible for providing services including installing, set up and warranty services after completion
of the project, the Company records revenue from these contracts on a net basis when the services are provided and controlled by the third
party service provider.



(5) Professional services and other revenues



The Company also generates revenue from data analysis
services and other professional services where a separate contract is entered into with the customer when the customer needs the product
or services.



The service revenue from data analysis service is
recognized based on the service performed, an output measure, over the contractual period.



Other professional services consists primarily of
technical consulting services. The Company recognizes revenue ratably over the contractual period as the customer simultaneously receives
and consumes the benefits as the Company performs.





F-17











Contract performance periods generally range from
month to month, completion of service to one year, and payment terms are generally prepaid to 30 days. Contracts generally do not contain
significant financing components or variable consideration.



Contract balances



The Company records receivables related to revenue
when it has an unconditional right to invoice and receive payment.



The Company invoices its customers for its services
on a monthly basis. Deferred revenue consists primarily of customer billings made in advance of performance obligations being satisfied
and revenue being recognized. The Company’s disaggregated revenue streams are summarized and disclosed in Note 17.



Cost of revenues



Cost of revenues consists primarily of personnel costs
(including salaries, social insurance and benefits) for employees involved with the Company’s operations and product support; third
party service fees including cloud and data usage, hosting fees and amortization and depreciation expenses associated with capitalized
software, platform system and hardware. In addition, cost of revenues also include cost of hardware, outsourcing contracted customer service
representatives, customer surveys, contracted software development costs and allocated shared costs, primarily including facilities, information
technology and security costs.



Warranty



The Company generally provides limited warranties
for work performed under its business integration solution contracts. At the time a sale is recognized, the Company records estimated
future warranty costs under ASC 460. Such estimated costs for warranties are estimated at completion and these warrants are not service
warranties separately sold by the Company. Generally, the estimated claim rates of warranty are based on actual warranty experience or
Company’s best estimate. As of December 31, 2021 and 2020,   accrued warranty liability amounted to $14,530 and nil 0  is
classified in the caption “other payables and accrued liabilities” in the accompanying consolidated balance sheets.



Advertising costs



Advertising costs amounted to $890,988, $65,059 and
$62,501 for the years ended December 31, 2021, 2020 and 2019 respectively. Advertising costs are expensed as incurred and included in
selling expenses.



Leases



The Company adopted FASB ASU 2016-02, “Leases” (Topic 842)
for the year ended December 31, 2021, and elected the practical expedients that does not require the Company to reassess: (1) whether
any expired or existing contracts are, or contain, leases, (2) lease classification for any expired or existing leases and (3) initial
direct costs for any expired or existing leases. For lease terms of twelve months or fewer, a lessee is permitted to make an accounting
policy election not to recognize lease assets and liabilities. The Company also adopted the practical expedient that allows lessees to
treat the lease and non-lease components of a lease as a single lease component. Upon adoption, the Company recognized approximately $0.3
million right of use (“ROU”) assets and same amount of lease liabilities based on the present value of the future minimum
rental payments of leases, using an incremental borrowing rate of 4.8% based on the duration of lease terms.



Operating lease ROU assets and lease liabilities are recognized at the
adoption date or the commencement date, whichever is earlier, based on the present value of lease payments over the lease term. Since
the implicit rate for the Company’s leases is not readily determinable, the Company use its incremental borrowing rate based on
the information available at the commencement date in determining the present value of lease payments. The incremental borrowing rate
is the rate of interest that the Company would have to pay to borrow, on a collateralized basis, an amount equal to the lease payments,
in a similar economic environment and over a similar term.





F-18











Lease terms used to calculate the present value of lease payments generally
do not include any options to extend, renew, or terminate the lease, as the Company does not have reasonable certainty at lease inception
that these options will be exercised. The Company generally considers the economic life of its operating lease ROU assets to be comparable
to the useful life of similar owned assets. The Company has elected the short-term lease exception, therefore operating lease ROU assets
and liabilities do not include leases with a lease term of twelve months or less. Its leases generally do not provide a residual guarantee.
The operating lease ROU asset also excludes lease incentives. Lease expense is recognized on a straight-line basis over the lease term.



The Company reviews the impairment of its ROU assets consistent with the
approach applied for its other long-lived assets. The Company reviews the recoverability of its long-lived assets when events or changes
in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment
is based on its ability to recover the carrying value of the asset from the expected undiscounted future pre-tax cash flows of the related
operations. The Company has elected to include the carrying amount of operating lease liabilities in any tested asset group and include
the associated operating lease payments in the undiscounted future pre-tax cashflows.







Research and development



Research and development expenses include salaries
and other compensation-related expenses to the Company’s research and product development personnel, as well as office rental, depreciation,
amortization and related expenses for the Company’s research and product development team. The Company recognizes software development
costs in accordance with ASC 350-40 “Software—internal use software”. The Company expenses all costs that are incurred
in connection with the planning and implementation phases of development, and costs that are associated with maintenance of the existing
websites or software for internal use. Certain costs associated with developing internal-use software are capitalized when such costs
are incurred within the application development stage of software development.



The Company also follows the provisions of FASB ASC
985-20, Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed (“ASC 985-20”). ASC 985-20
requires that software development costs incurred in conjunction with product development be charged to research and development expense
until technological feasibility is established using either the detail design approach or working model approach. Thereafter, until the
product is released for sale, software development costs should be capitalized and reported at the lower of unamortized cost or net realizable
value of the related product. For the years ended December 31, 2021, 2020 and 2019, no software costs were capitalized due to the short
timing between technological feasibility and release of software.



Share-based Compensation



The Company accounts for share-based compensation
awards in accordance with FASB ASC Topic 718, “Compensation – Stock Compensation”, which requires that share-based payment
transactions with employees be measured based on the grant-date fair value of the equity instrument issued and recognized as compensation
expense over the requisite service period. The Company accounts for share-based compensation awards to non-employees in accordance with
FASB ASC Topic 718 amended by ASU 2018-07. Under FASB ASC Topic 718, share-based compensation granted to non-employees has been determined
as the fair value of the consideration received or the fair value of equity instrument issued, whichever is more reliably measured and
is recognized as an expense as the goods or services are received.



Value added taxes



Revenue represents the invoiced value of service,
net of value added tax (“VAT”). The VAT is based on gross sales price and VAT rates range up to 6%, depending on the type
of service provided. Entities that are VAT general taxpayers are allowed to offset qualified input VAT paid to suppliers against their
output VAT liabilities. Net VAT balance between input VAT and output VAT is recorded in tax payable. All of the VAT returns filed by the
Company’s subsidiaries in China have been and remain subject to examination by the tax authorities for five years from the date
of filing.





F-19











Income taxes



The Company accounts for current income taxes in accordance
with the laws of the relevant tax authorities. The charge for taxation is based on the results for the fiscal year as adjusted for items
which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance
sheet date.



Deferred taxes are accounted for using the asset and
liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in
the consolidated financial statements and the corresponding tax basis used in the computation of assessable tax profit. In principle,
deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized to the extent that it
is probable that taxable profit will be available against which deductible temporary differences can be utilized. Deferred tax is calculated
using tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax is charged
or credited in the income statement, except when it is related to items credited or charged directly to equity, in which case the deferred
tax is also dealt with in equity. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance
with the laws of the relevant taxing authorities. The Company presents deferred tax assets and liabilities as noncurrent in the balance
sheet based on an analysis of each taxpaying component within a jurisdiction.



An uncertain tax position is recognized as a benefit
only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination
being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized
on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. No penalties and
interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. PRC tax returns filed
in 2021 and 2020 are subject to examination by any applicable tax authorities.



Comprehensive income (loss)



Comprehensive income (loss) consists of two components,
net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) refers to revenue, expenses, gains and losses
that under GAAP are recorded as an element of equity but are excluded from net income. Other comprehensive income (loss) consists of a
foreign currency translation adjustment resulting from the Company not using the U.S. dollar as its functional currencies.



Earnings per share



The Company computes earnings per share (“EPS”)
in accordance with ASC 260, “Earnings per Share”. ASC 260 requires companies to present basic and diluted EPS. Basic EPS
is measured as net income divided by the weighted average ordinary shares outstanding for the period. Diluted EPS presents the dilutive
effect on a per share basis of the potential ordinary shares (e.g., convertible securities, options and warrants) as if they had been
converted at the beginning of the periods presented, or issuance date, if later. Potential ordinary shares that have an anti-dilutive
effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. For
the years ended December 31, 2021, 2020 and 2019, there were no dilutive shares.



Warrants



The Company accounts for warrants as either equity-classified
or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance
in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing
Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers
whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480,
and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed
to the Company’s own ordinary shares and whether the warrant holders could potentially require “net cash settlement”
in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires
the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while
the warrants are outstanding.





F-20











For issued or modified warrants that meet all of the
criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time
of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to
be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair
value of the warrants are recognized as a non-cash gain or loss on the statements of operations. The Company evaluated its warrants and
determined the warrants are indexed to the Company’s own stock as the warrants do not contain any exercise contingencies, the
warrants’ settlement amount equals the difference between the fair value of the Company’s common stock price and the warrant
contract strike price and the only variables which could affect the settlement amount would be inputs to the fair value for a fixed-for-fixed
option on equity shares. The Company also analyzed ASC 815-40-25 to determine whether the warrant contracts should be classified in stockholders’
equity in the Company’s statements of financial condition and concluded that the warrant contracts meet all of the criteria for
classification as equity as the Company is not require to net settle. Based on this analysis, the Company determined the warrant contracts
should be classified as equity.



Employee benefits



The full-time employees of the Company are entitled
to staff welfare benefits including medical care, housing fund, pension benefits, unemployment insurance and other welfare, which are
PRC government mandated defined contribution plans. The Company is required to accrue for these benefits based on certain percentages
of the employees’ respective salaries, subject to certain ceilings, in accordance with the relevant PRC regulations, and make cash
contributions to the state-sponsored plans out of the amounts accrued. Total expenses for the plans were $971,772, $805,603 and $918,696
for the years ended December 31, 2021, 2020 and 2019, respectively.



Statutory reserves





Pursuant to the laws applicable to the PRC,
PRC entities must make appropriations from after-tax profit to the non-distributable “statutory surplus reserve fund”.
Subject to certain cumulative limits, the “statutory surplus reserve fund” requires annual appropriations of 10% of
after-tax profit until the aggregated appropriations reach 50% of the registered capital (as determined under accounting principles
generally accepted in the PRC (“PRC GAAP”) at each year-end). If the Company has accumulated loss from prior periods,
the Company is able to use the current period net income after tax to offset against the accumulate loss.





Segment reporting



ASC 280, “Segment Reporting”, establishes
standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure
as well as information about geographical areas, business segments and major customers in financial statements for detailing the Company’s
business segments.



Recently issued accounting pronouncements



In May 2019, the FASB issued ASU 2019-05, which is
an update to ASU Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments, which introduced the expected credit losses methodology for the measurement of credit losses on financial assets measured
at amortized cost basis, replacing the previous incurred loss methodology. The amendments in Update 2016-13 added Topic 326, Financial
Instruments—Credit Losses, and made several consequential amendments to the Codification. Update 2016-13 also modified the accounting
for available-for-sale debt securities, which must be individually assessed for credit losses when fair value is less than the amortized
cost basis, in accordance with Subtopic 326-30, Financial Instruments— Credit Losses—Available-for-Sale Debt Securities. The
amendments in this ASU address those stakeholders’ concerns by providing an option to irrevocably elect the fair value option for
certain financial assets previously measured at amortized cost basis. For those entities, the targeted transition relief will increase
comparability of financial statement information by providing an option to align measurement methodologies for similar financial assets.
Furthermore, the targeted transition relief also may reduce the costs for some entities to comply with the amendments in Update 2016-13
while still providing financial statement users with decision-useful information. ASU 2019-05 is effective for the Company for annual
and interim reporting periods beginning January 1, 2023 after FASB delayed the effective date for non-public companies with ASU 2019-10.
The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures.





F-21











In December 2019, the FASB issued ASU 2019-12, “Income
Taxes (Topic 740): Simplifying the Accounting for Income Taxes”. The amendments in this Update simplify the accounting for income
taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and
simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. For public business entities, the amendments
in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. For all
other entities, the amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years
beginning after December 15, 2022. Early adoption of the amendments is permitted, including adoption in any interim period for (i) public
business entities for periods for which financial statements have not yet been issued and (ii) all other entities for periods for which
financial statements have not yet been made available for issuance. An entity that elects to early adopt the amendments in an interim
period should reflect any adjustments as of the beginning of the annual period that includes that interim period. Additionally, an entity
that elects early adoption must adopt all the amendments in the same period. The adoption of this standard did not have a material impact
on the Company’s consolidated financial statements.



In October 2020, the FASB issued ASU 2020-08, “Codification
Improvements to Subtopic 310-20, Receivables—Nonrefundable Fees and Other Costs”. The amendments in this Update represent
changes to clarify the Codification. The amendments make the Codification easier to understand and easier to apply by eliminating inconsistencies
and providing clarifications. ASU 2020-08 is effective for the Company for annual and interim reporting periods beginning January 1, 2021.
Early adoption was permitted, including adoption in an interim period. All entities should apply the amendments in this Update on a prospective
basis as of the beginning of the period of adoption for existing or newly purchased callable debt securities. These amendments do not
change the effective dates for Update 2017-08. The adoption of this standard did not have a material impact on the Company’s consolidated
financial statements.



In October 2020, the FASB issued ASU 2020-10, “Codification
Improvements to Subtopic 205-10, presentation of financial statements”. The amendments in this Update improve the codification by
ensuring that all guidance that requires or provides an option for an entity to provide information in the notes to financial statements
is codified in the disclosure section of the codification. That reduce the likelihood that the disclosure requirement would be missed.
The amendments also clarify guidance so that an entity can apply the guidance more consistently. ASU 2020-10 is effective for the Company
for annual and interim reporting periods beginning January 1, 2022. Early application of the amendments is permitted for any annual or
interim period for which financial statements are available to be issued. The amendments in this Update should be applied retrospectively.
An entity should apply the amendments at the beginning of the period that includes the adoption date. The Company does not expect the
adoption of this new standard will have a material impact on the Company’s consolidated financial statements and related disclosures.



Except as mentioned above, the Company does not believe
other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s
consolidated balance sheets, statements of income and comprehensive income and statements of cash flows.



Note 3 – Variable interest entity



On May 27, 2020, Infobird WFOE entered into the Contractual
Arrangements with Infobird Beijing. The significant terms of these Contractual Arrangements are summarized in “Note 1 – Nature
of business and organization” above. As a result, the Company classifies Infobird Beijing as a VIE which should be consolidated
based on the structure as described in Note 1.





F-22











A VIE is an entity that has either a total equity
investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support, or
whose equity investors lack the characteristics of a controlling financial interest, such as through voting rights, right to receive
the expected residual returns of the entity or obligation to absorb the expected losses of the entity. The variable interest holder,
if any, that has a controlling financial interest in a VIE is deemed to be the primary beneficiary for accounting purposes and
must consolidate the VIE. Infobird WFOE is deemed to have a controlling financial interest and be the primary beneficiary for accounting
purposes of Infobird Beijing because it has both of the following characteristics:





| | (1) | The power to direct activities
at Infobird Beijing that most significantly impact such entity’s economic performance, and
| | --- | -------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                          
| | (2) | The right to receive benefits
from Infobird Beijing that could potentially be significant to such entity.                





Pursuant to the Contractual Arrangements, Infobird
Beijing pays service fees equal to all of its net income to Infobird WFOE. The Contractual Arrangements are designed so that Infobird
Beijing operates for the benefit of Infobird WFOE and ultimately, the Company.



Under the Contractual Arrangements, the Company has
the power to direct activities of the VIEs and can have assets transferred out of the VIEs. Therefore, the Company considers that there
is no asset in the VIEs that can be used only to settle obligations of the VIEs, except for registered capital and PRC statutory reserves,
if any. As the VIEs are incorporated as limited liability companies under the Company Law of the PRC, creditors of the VIEs do not have
recourse to the general credit of the Company for any of the liabilities of the VIEs.



Accordingly, the accounts of Infobird Beijing are
consolidated in the accompanying consolidated financial statements. In addition, its financial positions and results of operations are
included in the Company’s consolidated financial statements.



The carrying amount of the VIEs’ consolidated
assets and liabilities are as follows:





|                      |  | December
    31, 2021 |             | December 31,
    2020
|--------------------- |  | --------------------- | ----------- | ---------------------
|                      |  |                       |             |                      
|Current
    assets    |  | $                     | 8,777,215   |                      
|Other
    assets      |  |                       | 7,573,750   |                      
|Total
    assets      |  |                       | 16,350,965  |                      
|Total
    liabilities |  |                       | (21,063,981 | )                    
|Net
    assets        |  | $                     | (4,713,016) |                      



|                                       |  | December 31, 2021 |            | December 31, 2020
|-------------------------------------- |  | ----------------- | ---------- | -----------------
|                                       |  |                   |            |                  
|Current liabilities:                   |  |                   |            |                  
|Accounts payable                       |  | $                 | 500,742    |                  
|Bank loans - current                   |  |                   | 4,496,883  |                  
|Interest payable – related party       |  |                   | —          |                  
|Other payables and accrued liabilities |  |                   | 947,980    |                  
|Other payable - intercompany           |  |                   | 11,023,791 |                  
|Deferred revenue                       |  |                   | 2,218,458  |                  
|Lease liabilities                      |  |                   | 185,145    |                  
|Taxes payable                          |  |                   | 1,381,440  |                  
|Total current liabilities              |  |                   | 20,754,439 |                  
|Deferred tax liabilities               |  |                   | 81,992     |                  
|Bank loans - noncurrent                |  |                   | 131,603    |                  
|Lease liabilities - noncurrent         |  |                   | 95,947     |                  
|Total liabilities                      |  | $                 | 21,063,981 |                  





F-23













The summarized operating results of the VIEs are as
follows:





|                              |  | For the year ended December 31, 2021 |             | For the year ended December 31, 2020 |  | For the year ended December 31, 2019
|----------------------------- |  | ------------------------------------ | ----------- | ------------------------------------ |  | ------------------------------------
|                              |  |                                      |             |                                      |  |                                     
|Operating revenues*           |  | $                                    | 9,984,064   |                                      |  | $                                   
|Gross profit                  |  |                                      | 2,520,414   |                                      |  |                                     
|Income (loss) from operations |  |                                      | (13,932,990 | )                                    |  |                                     
|Net income (loss)             |  | $                                    | (13,836,367 | )                                    |  | $                                   





*Includes $342,984 intercompany revenue to Infobird WFOE.













Note 4 — Business combination



Acquisition of Shanghai Qishuo:





On December
2, 2021, Infobird Beijing completed its 51% acquisition of Shanghai Qishuo, a PRC limited liability company and a SaaS provider of big
data analysis to retail stores aimed at operation improvement, for approximately $1.3 million (RMB 8.6 million). Shanghai Qishuo is a
fast-growing provider of consumer product and retail store digitalization solutions. Before the acquisition, its business was mainly focused
on shoes and footwear retail stores digital operation transformation. Shanghai Qishuo is experienced in this market through serving leading
clothing brands in China and has leveraged its deep understanding of retail clothing
and footwearstore operations.



The acquisition of Shanghai Qishuo will enable the
Company to further penetrate the consumer product and retail industries. The synergy of Shanghai Qishuo and the Company’s other
subsidiaries will allow the Company to combine industry-specific experiences and products to optimize the Company’s standardized
products and offer additional innovative solutions for real business problems.



The Company’s acquisition of Shanghai Qishuo was accounted for as
business combination in accordance with ASC 805. The Company then allocated the fair value of consideration of Shanghai Guoyu based upon
the fair value of the identifiable assets acquired and liabilities assumed on the acquisition date. The Company estimated the fair values
of the assets acquired and liabilities assumed at the acquisition date in accordance with the Business Combination standard issued by
the FASB with the valuation methodologies using level 3 inputs, except for other current assets and current liabilities were valued using
the cost approach. Management of the Company is responsible for determining the fair value of assets acquired, liabilities assumed and
intangible assets identified as of the acquisition date and considered a number of factors including valuations from independent appraisers.
Acquisition-related costs incurred for the acquisitions are not material and have been expensed as incurred in general and administrative
expense.



The following table summarizes the fair value of the identifiable assets
acquired and liabilities assumed on the acquisition date, which represents the net purchase price allocation on the date of the acquisition
of Shanghai Qishuo based on valuation performed by an independent valuation firm engaged by the Company and translated the fair value
from RMB to USD using the exchange rate on December 2, 2021 at the rate of USD 1.00 to RMB 6.38.





|                                                  |  | Fair Value
|------------------------------------------------- |  | ----------
|Consideration paid                                |  | $         
|Fair value of noncontrolling interest             |  |           
|Less: fair value of net assets of Shanghai Qishuo |  |           
|Cash                                              |  |           
|Other current assets                              |  |           
|Fixed assets                                      |  |           
|Intangibles – customer relationship               |  |           
|Other current liabilities                         |  |           
|Total fair value of net assets                    |  |           
|Goodwill as of acquisition date                   |  | $         





F-24











Customer relationship, including the customer list in the retail industry
which will be revenue driver for Shanghai Qishuo has a fair value of approximately $172,514 and estimated finite useful life of 4 years
from the acquisition.



Approximately $2.0 million of goodwill arising from the acquisition is
mainly attributable to the excess of the consideration paid over the fair value of the net assets acquired that cannot be recognized separately
as identifiable assets under U.S. GAAP, and comprise (a) the assembled work force and (b) the expected but unidentifiable
business growth as a result of the synergy resulting from the acquisition.



The amounts of revenue and net loss that resulted
from the acquisition and were included in the consolidated statements of operations and comprehensive income (loss) during the year ended
December 31, 2021 were $8,792 and $(99,613), respectively.



Pro forma results of operations for the acquisition
for the year ended December 31, 2021 were immaterial.



Note 5 — Short term investments



Short term investments consist of the following:





|                       |  | Carrying Value at December 31, 2021 |           | Fair Value Measurement at December 31, 2021 |  |        
|---------------------- |  | ----------------------------------- | --------- | ------------------------------------------- |  | -------
|                       |  |                                     |           | Level 1                                     |  | Level 2
|Short term investments |  | $                                   | 7,091,939 |                                             |  | $      



Short-term investments are investments
in wealth management product with underlying in bonds offered by private entities and other equityand
debt products. The investments can be redeemed upon three months’ notice and their carrying
values approximate their fair values. Gain from short term investments for the year ended December 31, 2021 amounted to $165,713. There
were no short term investments for the years ended December 31, 2020 and 2019.



Note 6 – Accounts receivable,
net



Accounts receivable, net consist of the following:





|                                |  | December 31, 2021 |            | December 31, 2020
|------------------------------- |  | ----------------- | ---------- | -----------------
|                                |  |                   |            |                  
|Accounts receivable             |  | $                 | 8,816,071  |                  
|Allowance for doubtful accounts |  |                   | (2,478,341 | )                
|Total accounts receivable, net  |  | $                 | 6,337,730  |                  





Movements of allowance for doubtful accounts are as follows:





|                     |  | December 31, 2021 |           | December 31, 2020
|-------------------- |  | ----------------- | --------- | -----------------
|                     |  |                   |           |                  
|Beginning balance    |  | $                 | 123,890   |                  
|Addition             |  |                   | 2,440,018 |                  
|Reversal             |  |                   | (117,040  | )                
|Exchange rate effect |  |                   | 31,473    |                  
|Ending balance       |  | $                 | 2,478,341 |                  





F-25













Note 7 – Property and equipment, net



Property and equipment consist of the following:





|                                                |  | December 31, 2021 |           | December 31, 2020
|----------------------------------------------- |  | ----------------- | --------- | -----------------
|                                                |  |                   |           |                  
|Electronic devices                              |  | $                 | 86,371    |                  
|Office equipment, fixtures and furniture        |  |                   | 237,217   |                  
|Automobile                                      |  |                   | 60,352    |                  
|Computer and network equipment                  |  |                   | 403,410   |                  
|Leasehold improvement                           |  |                   | 418,261   |                  
|Construction in progress*                       |  |                   | —         |                  
|Subtotal                                        |  |                   | 1,205,611 |                  
|Less: accumulated depreciation and amortization |  |                   | (951,020  | )                
|Total                                           |  | $                 | 254,591   |                  





Depreciation expense for the years ended December
31, 2021, 2020 and 2019, amounted to $96,212, $84,249 and $119,461, respectively. In 2019, the Company disposed of $28,142 of electronic
equipment with accumulated depreciation of $27,298 for gross proceeds of $539 resulting in a loss on disposal of equipment of $305.



Construction-in-progress consists of the Guiyang Longdongbao
Project (the cloud computing facility in Guiyang) and the Company completed the initial stage of the project, which included demolition,
underground structure and design. The Company is currently in negotiation with various contractors for the construction of the facility
and was in the progress of obtaining various government permits for the start of construction. Due to further delays of the project related
to local governments’ limitation of economic activities in response to the resurgence of COVID-19 variants, the Company recorded
impairment loss of $2.0 million of its construction in progress for the year ended December 31, 2021.



Note 8 – Intangible assets, net



The Company’s intangible assets with definite
useful lives primarily consist of licensed software, capitalized development costs, platform system, and land use rights. The following
table summarizes the components of acquired intangible asset balances as of December 31, 2021 and 2020:





|                                          |  | December 31, 2021 |            | December 31, 2020
|----------------------------------------- |  | ----------------- | ---------- | -----------------
|                                          |  |                   |            |                  
|Licensed software                         |  | $                 | 2,899,801  |                  
|Capitalized development costs             |  |                   | 6,079,463  |                  
|Platform system                           |  |                   | 44,880     |                  
|Customer relationships                    |  |                   | 172,614    |                  
|Land use rights*                          |  |                   | —          |                  
|Less: accumulated amortization            |  |                   | (3,095,844 | )                
|Less: impairment for capitalized software |  |                   | (1,322,433 | )                
|Intangible assets, net                    |  | $                 | 4,778,481  |                  





|* | On June 3, 2015, Infobird Guiyang signed a cloud computing
  development agreement with the local Guiyang government to promote development of the local cloud computing industry. See
  construction in progress in Note 7. The Company obtained land use rights in Guiyang, China for 9,760.8 square meters of land for
  approximately $4.7 million (RMB 32,532,746) through public bidding. The land is for building of technology related infrastructure
  only. In return, the Guiyang government will subsidize the cost of land through a form of cash grant in the amount of approximately
  $4.5 million (RMB 31,068,626). The Company received such grant in 2015. The grant was given to promote the local cloud computing
  industry, there are no services to perform on the part of the Company and the grant was given without restriction. The only
  condition is that the land use right acquired was to be used for the cloud computing industry only. The Company recorded the grant
  as a reduction of the related land use rights. For the year ended December 31, 2021, the Company recorded impairment loss of $0.4
  million of land use rights as a result of project delay, see Note 7 for details.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





F-26











Amortization expense for the years ended December
31, 2021, 2020 and 2019 amounted to $ 959,589, $397,744 and $84,068 respectively.





Amortization expense of capitalized development
costs was $838,291, $361,353 and $77,119 during the years ended December 31, 2021, 2020 and 2019, respectively. The carrying value
of capitalized development costs at December 31, 2021, 2020 and 2019 was $3,443,642, $3,468,617 and $1,852,648, respectively. The
Company recorded impairment on capitalized development cost of $1.3 million for the year ended December 31, 2021 as the carrying
value of our long-lived assets exceed future cashflows expected to be generated as a result of reduced profit projection due to
resurgence of COVID-19 in first quarter of 2022 that caused business interruption for our customers.



The estimated amortization is as follows:





|Twelve months ending December 31, |  | Estimated amortization expense
|--------------------------------- |  | ------------------------------
|                                  |  |                               
|2022                              |  |                               
|2023                              |  |                               
|2024                              |  |                               
|2025                              |  |                               
|2026                              |  |                               
|Thereafter                        |  |                               
|Total                             |  |                               





Note 9 — Goodwill



Goodwill represents the excess of the consideration
paid of an acquisition over the fair value of the net identifiable assets of the acquired subsidiaries at the date of acquisition. Goodwill
is not amortized and is tested for impairment at least annually, more often when circumstances indicate impairment may have occurred.
The following table summarizes the components of acquired goodwill balances as of:





|December 31, 2020                            |  | December 31, 2021 |           | December 31, 2020
|-------------------------------------------- |  | ----------------- | --------- | -----------------
|Goodwill from Shanghai Qishuo acquisition(a) |  |                   | 2,009,769 |                  





| | (a) | See Note 4 for details.
| | --- | -----------------------



Note 10 – Other payables and accrued liabilities



Other payables   and accrued liabilities
consist of the following:





|                                             |  | December 31, 2021 |         | December 31, 2020
|-------------------------------------------- |  | ----------------- | ------- | -----------------
|                                             |  |                   |         |                  
|Salary payables                              |  | $                 | 846,761 |                  
|Employee reimbursement and benefit payables  |  |                   | 63,586  |                  
|Professional fees payable                    |  |                   | —       |                  
|Other miscellaneous payables                 |  |                   | 23,099  |                  
|Warranty liability                           |  |                   | 14,530  |                  
|Total other payables and accrued liabilities |  | $                 | 947,976 |                  





F-27













Note 11 – Bank loans



Outstanding balances on bank loans consisted of the following:





|Bank Name                        |  | Maturities                                                                                                     |  | Interest rate |            | Collateral/Guarantee |  | December 31, 2021                                        |  | December 31, 2020
|-------------------------------- |  | -------------------------------------------------------------------------------------------------------------- |  | ------------- | ---------- | -------------------- |  | -------------------------------------------------------- |  | -----------------
|                                 |  |                                                                                                                |  |               |            |                      |  |                                                          |  |                  
|Bank of Beijing                  |  | May, June, and July 2019 (1) and April 2020 (2)   and March and April 2021 (3)
and February and March 2022 (4) |  |               | 4.8% - 5.0 | %                    |  | Guarantee by Beijing SMEs Credit Re-guarantee Co., Ltd*  |  | $                
|Shanghai Pudong Development Bank |  | February  2022 (5)                                                                                             |  |               | 4.4        | %                    |  | N/A                                                      |  |                  
|BOC Fullerton Bank               |  | February 2024 (6)                                                                                              |  |               | 8.5        | %                    |  | ***                                                      |  |                  
|China Merchants Bank             |  | March 2022 (7)                                                                                                 |  |               | 3.4        | %                    |  | Guarantee by Beijing SMEs Credit Re-guarantee Co., Ltd** |  |                  
|Total                            |  |                                                                                                                |  |               |            |                      |  |                                                          |  |                  
|                                 |  |                                                                                                                |  |               |            |                      |  | Noncurrent                                               |  |                  
|                                 |  |                                                                                                                |  |               |            |                      |  | Current                                                  |  | $                



|* | Beijing SMEs Credit Re-guarantee Co., Ltd is a financial
  services company and provides credit re-guarantee business and short-term capital operation to small and medium enterprises. In
  addition, Qing Tang, the spouse of Yimin Wu, the Company’s Chairman of the Board of Directors and Chief Executive Officer, has
  provided real estate property as collateral of approximately $3.1 million (RMB 20,000,000) with Beijing SMEs Credit Re-guarantee
  Co., Ltd to secure the guarantee with Bank of Beijing.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|** | Beijing Zhong Guan Chun Technology Finance Guarantee Co., Ltd is a financial services company and provides credit guarantee business
and short-term capital operation to small business. Yimin Wu also provided a personal guarantee for the loan during the contract period.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|*** | Yimin Wu and Qing Tang provided personal guarantees for the loan during the contract period.
|--- | --------------------------------------------------------------------------------------------





The Company incurred approximately $83,000 and $72,000
of guarantee fees during the years ended December 31, 2021 and 2020.



(1) In May 2018, Infobird Beijing entered into a two-year
line of credit agreement with Bank of Beijing pursuant to which Infobird Beijing may borrow up to approximately $2.9 million (RMB 20,000,000)
for operation purposes. The line of credit entitles Infobird Beijing to enter into separate loan contracts under the line of credit. From
May 2018 to July 2018, Infobird Beijing signed loan contracts with Bank of Beijing to obtain loans in a total amount of approximately
$3.1 million (RMB 20,000,000) for operation purposes. The loans bore an interest rate of 5.7% with the maturity dates in May, June, and
July 2019.   The Company fully repaid the loans in March 2019.



(2) In April 2019, Infobird Beijing renewed
two loan contracts with Bank of Beijing to obtain loans in a total amount of approximately $2.9 million (RMB 20,000,000) for operation
purposes. The loans bore an interest rate of 5.2% with the maturity date in April 2020 and were renewed as stated below.



(3) In March 2020, Infobird Beijing renewed the line
of credit for a two-year period. In March and April 2020, Infobird Beijing renewed the two loan contracts with Bank of Beijing to obtain
loans in a total amount of approximately $3.1 million (RMB 20,000,000) for operation purposes. The loans bear interest rates ranging from
4.8% to 5.0% with the maturity dates in March and April 2021 and were renewed as stated below.





F-28











(4) In February and March 2021, Infobird Beijing
renewed the two loan contracts with Bank of Beijing to obtain loans in a total amount of approximately $3.1 million (RMB 20,000,000)
for operation purposes. The loans bear interest rate of 4.8% with the maturity dates in February and March 2022. The loans were
repaid in March 2022. On March 3, 2022, the Company renewed the line of credit for two years and obtained a $3.1 million (RMB 20,
000,000) loan with one year term and interest rate of 5.0% due in March 2023.





(5) In February 2021, the Company entered into a
loan agreement with Shanghai Pudong Development Bank in the amount of RMB 3,000,000 (approximately $0.5 million) due in February
2022. The loan was repaid in February 2022 and was not renewed.



(6) In February 2021, the Company obtained a line
of credit from BOC Fullerton Bank in the amount of RMB 2,000,000 (approximately $0.3 million) which expires in February 2026. The Company
entered into a loan agreement in the same amount which is due in February 2024 with monthly repayment amount of approximately $9,700.
The Company borrowed $0.3 million and repaid approximately $0.1 million for the year ended December 31, 2021.



(7)
In March 2021, the Company obtained a line of credit from China Merchants Bank in the amount of RMB 5,000,000 (approximately $0.8million) to be due in March 2023.Under
the line of credit, the Company is able to issue bankers acceptance notes, which can be endorsed and assigned to vendors as payments
for purchases. The Company paid interest at stated rate under the line of credit and transferred the bankers acceptance notes to its
subsidiaries Infobird Guiyang and Infobird Anhui where the subsidiaries exchanged the notes for cash. The Company repaid the line of
credit in March 2022 and is currently in the process of applying for a cash loan under the line of credit.





Interest expense pertaining to the above bank loans
for the years ended December 31, 2021, 2020 and 2019 amounted to $234,628, $141,880 and $162,566 respectively.



Note 12 – Related party balances and transactions



Interest payable – related party





|Name of Related Party |  | Relationship       |  | Nature                                                        |  | December 31, 2021 |   | December 31, 2020
|--------------------- |  | ------------------ |  | ------------------------------------------------------------- |  | ----------------- | - | -----------------
|                      |  |                    |  |                                                               |  |                   |   |                  
|Qing Tang             |  | Spouse of Yimin Wu |  | Interest payable -Interest incurred from loan described below |  | $                 | — |                  







In July 2016, Infobird Beijing signed two loan contracts
with a related party, Qing Tang, the spouse of Yimin Wu, to obtain loans for a total of approximately $1.3 million (RMB 8,800,000) for
operation purposes. The loans bore a 1.5% monthly interest rate (18% annual interest rate) and were due on demand. By October 2019, the
principal of the loans were fully repaid.



Interest expense pertaining to the above short-term
loan - related party for the years ended December 31, 2021, 2020 and 2019 amounted to $0, $0 and $176,354, respectively.



Interest payable of $574,065 was fully paid during
the year ended December 31, 2021.



Loan Guarantee – related party



Qing Tang, the spouse of Yimin Wu, has provided real
estate property as collateral of approximately $3.2 million (RMB 22,000,000) with Beijing SMEs Credit Re-guarantee Co., Ltd to secure
a guarantee with Bank of Beijing for the line of credit in the amount of approximately $3.0 million (RMB 20,000,000). See Note 11 for
more details.



For
the year ended December 31, 2021, the Company had cost of revenues from related party of $350,987, which was from Mashangyou Technology
Co., ltd, whose legal representative is a 3.18% shareholder of Infobird Beijing.



Yimin Wu also provided a personal guarantee for the
Company’s loan from China Merchants Bank during the contract period. See note 11 for details.



Yimin Wu and Qing Tang also provided personal
guarantees for the Company’s loan from BOC Fullerton Bank during the contract period. See note 11 for details.





F-29











Note 13 – Taxes



Income tax



Cayman Islands



Under the current laws of the Cayman Islands, the
Company is not subject to tax on income or capital gain. Additionally, upon payments of dividends to the shareholders, no Cayman Islands
withholding tax will be imposed.



Hong Kong



Infobird HK is incorporated in Hong Kong and is subject
to Hong Kong Profits Tax on the taxable income as reported in its statutory financial statements adjusted in accordance with relevant
Hong Kong tax laws. The applicable tax rate is 16.5% in Hong Kong. The Company did not make any provisions for Hong Kong profit tax as
there were no assessable profits derived from or earned in Hong Kong since inception. Under Hong Kong tax law, Infobird HK is exempted
from income tax on its foreign-derived income and there are no withholding taxes in Hong Kong on remittance of dividends.



PRC





Infobird WFOE, Infobird Beijing, Infobird Anhui,
Infobird Guiyang and Shanghai Qishuo are governed by the income tax laws of the PRC and the income tax provision in respect to
operations in the PRC is calculated at the applicable tax rates on the taxable income for the periods based on existing legislation,
interpretations and practices in respect thereof. Under the Enterprise Income Tax Laws of the PRC (the “EIT Laws”),
domestic enterprises and Foreign Investment Enterprises (the “FIE”) are usually subject to a unified 25% enterprise
income tax rate while preferential tax rates, tax holidays and even tax exemption may be granted on case-by-case basis. EIT grants
preferential tax treatment to certain High and New Technology Enterprises (“HNTEs”). Under this preferential tax treatment,
HNTEs are entitled to an income tax rate of 15%, subject to a requirement that they re-apply for HNTE status every three years.
Infobird Beijing maintained the “high-tech enterprise” tax status which is validated until July 2023, which reduced
its statutory income tax rate to 15%. Infobird Guiyang qualifies for 15% preferential income tax rate for enterprises whose core
business is one of the industrial projects listed in the Catalogue of Encouraged Industries in western regions of China.





In addition, 75% of research and development expenses
of Infobird Beijing, Infobird Anhui, Infobird Guiyang,and Qishuo are subject to additional deduction from pre-tax income while such deduction
cannot exceed the total amount of pre-tax income.



Tax savings for the years ended December 31, 2021,
2020 and 2019 amounted to $(1,353,778), $825,784 and $814,256 respectively, with the 10% preferential tax rate reduction and additional deduction
of 75% of research and development expenses.



The Company’s basic and diluted earnings
per shares would have been lower by $0.25, $0.20, and $0.20 per share for the years ended December 31, 2021, 2020 and 2019 respectively,
without the preferential tax rate reduction and research and development expenses reduction.



Income tax expenses for the years ended December
31, 2021, 2020 and 2019 amounted to $124,058,
$286,071
and $673,034,
respectively.





Significant components of the provision for income
taxes are as follows:





|                           |  | For the year ended December 31, 2021 |         | For the year ended December 31, 2020 |  | For the year ended December 31, 2019
|-------------------------- |  | ------------------------------------ | ------- | ------------------------------------ |  | ------------------------------------
|                           |  |                                      |         |                                      |  |                                     
|Current                    |  | $                                    | —       |                                      |  | $                                   
|Deferred                   |  |                                      | 124,058 |                                      |  |                                     
|Provision for income taxes |  | $                                    | 124,058 |                                      |  | $                                   





F-30















The following table reconciles China statutory rates
to the Company’s effective tax rate:





|                                                   |  | For the year ended |       | For the year ended |  | For the year ended
|-------------------------------------------------- |  | ------------------ | ----- | ------------------ |  | ------------------
|                                                   |  | December 31, 2021  |       | December 31, 2020  |  | December 31, 2019 
|                                                   |  |                    |       |                    |  |                   
|China statutory income tax rate                    |  |                    | 25    | %                  |  |                   
|Preferential tax rate reduction                    |  |                    | (9.7  | )%                 |  |                   
|75% of research and development expenses deduction |  |                    | 0.1   | %                  |  |                   
|Tax rate difference outside of PRC                 |  |                    | (1.3  | )%                 |  |                   
|Change in valuation allowance                      |  |                    | (16.5 | )%                 |  |                   
|Permanent difference                               |  |                    | 1.5   | %                  |  |                   
|Effective tax rate                                 |  |                    | (0.9  | )%                 |  |                   





Deferred tax assets and liabilities – China



Significant components of deferred tax assets and
liabilities were as follows:



|                                                                    |  | December 31, |            | December 31,
|------------------------------------------------------------------- |  | ------------ | ---------- | ------------
|Deferred tax assets:                                                |  | 2021         |            | 2020        
|                                                                    |  |              |            |             
|Allowance for doubtful account                                      |  | $            | 379,566    |             
|Net operating loss carryforward                                     |  |              | 2,258,401  |             
|Long-lived assets impairment                                        |  |              | 560,604    |             
|Deferred tax assets                                                 |  |              | 3,198,571  |             
|Deferred tax liabilities:                                           |  |              |            |             
|Recognition of intangible assets arising from business combinations |  |              | (22,917    | )           
|Capitalized development costs                                       |  |              | (724,353   | )           
|Change in valuation allowance                                       |  |              | (2,533,293 | )           
|Deferred tax assets (liabilities), net                              |  | $            | (81,992    | )           
|                                                                    |  |              |            |             
|Noncurrent deferred tax assets                                      |  | $            |           |             
|Noncurrent deferred tax liabilities                                 |  |              | (81,992    | )           
|Deferred tax (liabilities) assets, net                              |  | $            | (81,992    | )           







The Company had net operating loss (NOL) carryforward
of approximately $15.0 million from the Company’s PRC and Hong Kong subsidiaries as of December 31, 2021 and approximately
$3.6 million from Infobird Guiyang as of December 31, 2020. In addition, the Company had approximately $2.5 million and $0.2 million
of allowance for doubtful accounts held at its PRC subsidiaries as of December 31, 2021 and 2020, respectively. As the Company
believes it is more likely than not that its PRC and Hong Kong operations will not be able to fully utilize its deferred tax assets
related to the net operating loss carryforwards in the PRC and Hong Kong, and allowance for doubtful accounts in the PRC, the Company
provided 100% allowance on deferred tax assets net of deferred tax liabilities of approximately $2.5 million related to PRC and
Hong Kong subsidiaries at December 31, 2021.







F-31











The Company recognized deferred tax liabilities related
to the excess of the intangible assets reporting basis over its income tax basis as a result of capitalized development costs. The deferred
tax liabilities will reverse as the intangible assets are amortized for financial statement reporting purposes.



Uncertain tax positions



The Company evaluates each uncertain tax position
(including the potential application of interest and penalties) based on the technical merits, and measures the unrecognized benefits
associated with the tax positions. As of December 31, 2021 and 2020, the Company did not have any significant unrecognized uncertain tax
positions. The Company did not incur interest and penalties tax for the years ended December 31, 2021, 2020, and 2019. The Company does
not anticipate any significant increases or decreases in unrecognized tax benefits in the next twelve (12) months from December 31, 2021.



Value added tax



All of the Company’s service revenues that are
earned and received in the PRC are subject to a Chinese VAT at a rate of 6% of the gross proceeds or at a rate approved by the Chinese
local government.



Taxes payable consisted of the following:





|                     |  | December 31, 2021 |         | December 31, 2020
|-------------------- |  | ----------------- | ------- | -----------------
|                     |  |                   |         |                  
|VAT taxes payable    |  | $                 | 485,016 |                  
|Income taxes payable |  |                   | 205,477 |                  
|Other taxes payable  |  |                   | 11,380  |                  
|Total                |  | $                 | 701,873 |                  





Note 14 – Concentration of risk



Credit risk



Financial instruments that potentially subject
the Company to significant concentrations of credit risk consist primarily of cash in bank. As of December 31, 2021 and 2020,
$2,597,037   and $1,679,934 were deposited with financial institutions located in the PRC, respectively. Deposit insurance
system in China only insured each depositor at one bank for a maximum of approximately $77,000 (RMB 500,000). As of December 31,
2021 and 2020, $1,859,021 and $1,326,797 are over the China deposit insurance limit which is not covered by insurance,
respectively. The Hong Kong Deposit Protection Board pays compensation up to a limit of HKD 500,000
(approximately USD 64,000) if the bank with which an individual/a company hold its eligible deposit fails. As of December 31,
2021, cash balance of $3,693,725 was maintained at financial institutions in Hong Kong, of which $3,565,513 was subject to credit
risk.





HK$500,000 (approximately $64,000) of the Company’s
short term investment in Hong Kong is protected by the Investor Compensation Fund. Approximately $7.0 million of the Company’s investment
is subject to credit risk.





The Company is also exposed to risk from its accounts
receivable and other receivables. These assets are subjected to credit evaluations. An allowance has been made for estimated unrecoverable
amounts which have been determined by reference to past default experience and the current economic environment.



A majority of the Company’s expense transactions
are denominated in RMB and a significant portion of the Company and its subsidiaries’ assets and liabilities are denominated in
RMB. RMB is not freely convertible into foreign currencies. In the PRC, certain foreign exchange transactions are required by law to be
transacted only by authorized financial institutions at exchange rates set by the People’s Bank of China (“PBOC”). Remittances
in currencies other than RMB by the Company in China must be processed through the PBOC or other China foreign exchange regulatory bodies
which require certain supporting documentation in order to affect the remittance.





F-32













The Company’s functional currency is the
RMB, and its financial statements are presented in U.S. dollars. The RMB appreciated by 2.3% from December 31, 2020 to December 31,
2021. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the RMB and
the U.S. dollar in the future. The change in the value of the RMB relative to the U.S. dollar may affect the Company’s
financial results reported in the U.S. dollar terms without giving effect to any underlying changes in its business or results of
operations. Currently, the Company’s assets, liabilities, revenues and costs are denominated in RMB.



To the extent that the Company needs to convert U.S.
dollars into RMB for capital expenditures and working capital and other business purposes, appreciation of RMB against U.S. dollar would
have an adverse effect on the RMB amount the Company would receive from the conversion. Conversely, if the Company decides to convert
RMB into U.S. dollar for the purpose of making payments for dividends, strategic acquisition or investments or other business purposes,
appreciation of U.S. dollar against RMB would have a negative effect on the U.S. dollar amount available to the Company.



Customer concentration risk



For the year ended December 31, 2021, four
customers accounted for 20.9%, 11.8%, 10.4% and 10.6% of the Company’s total revenues.   For the year ended December
31, 2020, two customers accounted for 34.8% and 13.2% of the Company’s total revenues.   For the year ended December 31,
2019, one customer, China Guangfa Bank accounted for 77.3% of the Company’s total revenues.



As of December 31, 2021, four customers accounted
for 34.7%, 22.7%, 17.1% and 14.7% of the total balance of accounts receivable.   As of December 31, 2020, three customers accounted
for 50.8%, 19.9%, and 10.9% of the total balance of accounts receivable.



Vendor concentration risk



For the year ended December 31, 2021, three vendors
accounted for 38.4%, 15.0% and 11.9% of the Company’s total purchases. For the year ended December 31, 2020, two vendors accounted
for 19.1% and 10.9% of the Company’s total purchases, respectively. For the year ended December 31, 2019, three vendors accounted
for 16.0%, 13.1% and 10.3% of the Company’s total purchases, respectively.



As of December 31, 2021, two vendors accounted for
73.4% and 23.1% of the total balance of accounts payable, respectively. As of December 31, 2020, three vendors accounted for 38.7%, 22.1%
and 14.7% of the total balance of accounts payable, respectively.



Note 15 – Equity



Ordinary shares



Infobird Cayman was established under the
laws of the Cayman Islands on March 26, 2020. On September 9, 2022, the Company effected
the 1-for-5 Share Consolidation of its ordinary shares pursuant to the Company’s second amended and restated memorandum
and articles of association.The Company has retroactively restated all share and per share data for all of the periods
presented pursuant to ASC 260 to reflect the Share Consolidation. Prior to September 9, 2022, the authorized number of ordinary
shares was 50,000,000 (pre-Share Consolidation) shares with a par value of $0.001 (pre-Share Consolidation) per ordinary share,
and 19,000,000 (pre-Share Consolidation) ordinary shares were issued on March 26, 2020. As a result, the Company had 10,000,000
authorized ordinary shares, par value $0.005 per share, of which 5,093,315, 3,800,000 and 3,800,000 shares were issued and outstanding
as of December 31, 2021, 2020 and 2019, respectively.



On April 22, 2021, the Company completed its initial
public offering (“IPO”) of 1,250,000 ordinary shares, par value $0.005 per share, and on June 8, 2021, issued 25,000 ordinary
shares pursuant to the underwriter’s partial exercise of its over-allotment option in connection with the IPO, at a public offering
price of $20.00 per share, which resulted in net proceeds to the Company of approximately $20.8 million after deducting underwriting
discounts and commissions and other expenses.



During the year ended December 31, 2021, the Company
granted 14,000 ordinary shares to two consulting firms based on grant date fair value of $150,600 to be amortized over stated services
period.





F-33







As a result, 5,093,315 ordinary shares
were issued and outstanding as of December 31, 2021.





Warrants



In connection with the IPO, on April 22, 2021,
the Company issued warrants to purchase 125,000 ordinary shares at $20.00 per share, are exercisable upon issuance and will expire on
March 31, 2026 which is five years from the effective of the registration statement. As of December 31, 2021, the Company had warrants
to purchase 125,000 ordinary shares outstanding with an exercise price of $20.00 per share and remaining lives of 4.25 years.



The Company’s outstanding warrants are classified as equity since they qualify for exception from derivative
accounting as they are considered to be indexed to the Company’s own stock and require net share settlement. The fair value of the
warrants of approximately $1.3 million is valued based on the Black-Scholes-Merton model and is recorded as additional paid-in capital
from common stock based on the relative fair value of net proceeds received using the following assumptions:



|Annual dividend yield   |  |  |      |  
|----------------------- |  |  | ----- | -
|Expected life (years)   |  |  | 5.0   |  
|Risk-free interest rate |  |  | 0.92  | %
|Expected volatility     |  |  | 95.15 | %



Following is a summary of the status of warrants outstanding
and exercisable as of December 31, 2021:





|                                                  |  | Warrants |  | Weighted Average Exercise
    Price
|------------------------------------------------- |  | -------- |  | -----------------------------------
|Warrants
    outstanding, as of December 31, 2018 |  |          |  | —                                  
|Issued                                            |  |          |  | —                                  
|Exercised                                         |  |          |  | —                                  
|Expired                                           |  |          |  | —                                  
|Warrants
    outstanding, as of December 31, 2019 |  |          |  | —                                  
|Issued                                            |  |          |  | —                                  
|Exercised                                         |  |          |  | —                                  
|Expired                                           |  |          |  | —                                  
|Warrants
    outstanding, as of December 31, 2020 |  |          |  | —                                  
|Issued                                            |  |          |  | 125,000                            
|Exercised                                         |  |          |  | —                                  
|Expired                                           |  |          |  | —                                  
|                                                  |  |          |  |                                    
|Warrants
    outstanding, as of December 31, 2021 |  |          |  | 125,000                            
|                                                  |  |          |  |                                    
|Warrants
    exercisable, as of December 31, 2021 |  |          |  | 125,000                            





Share-based compensation



During the year ended December 31, 2021, the Company
granted 14,000 ordinary shares to two consulting firms based on grant date fair value of $150,600 to be amortized over stated services
period. Share based compensation for the year ended December 31, 2021 amounted to $140,467. The Company recognized $140,467 of stock
compensation expenses, remaining $10,133 is to be amortized over remaining contract period till January 6, 2022. There was no share based
compensation in 2020 and 2019.



Acquisition of noncontrolling interests



In August 2019,   Infobird Beijing acquired
an additional 18.18% of noncontrolling interests in Infobird Guiyang for approximately $1.8 million (RMB 12,360,000). The acquisition
increased Infobird Beijing’s controlling interest in Infobird Guiyang from 72.00% to 90.18%. The excess of the price paid over the
carrying value of noncontrolling interests, $1,685,154, was recorded as a reduction of the Company’s paid-in capital.



Restricted assets



The Company’s ability to pay dividends is
primarily dependent on the Company receiving distributions of funds from its subsidiaries. Relevant PRC statutory laws and
regulations permit payments of dividends by Infobird WFOE, Infobird Beijing, Infobird Anhui, Infobird Guiyang and Qishuo
(collectively “Infobird PRC entities”)   only out of their retained earnings, if any, as determined in
accordance with PRC accounting standards and regulations. The results of operations reflected in the accompanying consolidated
financial statements prepared in accordance with U.S. GAAP differ from those reflected in the statutory financial statements of
Infobird PRC entities.







F-34







Infobird PRC entities are required to set aside at
least 10% of their after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of
its registered capital. In addition, Infobird PRC entities may allocate a portion of its after-tax profits based on PRC accounting standards
to enterprise expansion fund and staff bonus and welfare fund at its discretion. Infobird PRC entities may allocate a portion of its after-tax
profits based on PRC accounting standards to a discretionary surplus fund at its discretion. The statutory reserve funds and the discretionary
funds are not distributable as cash dividends. Remittance of dividends by a wholly foreign-owned company out of China is subject to examination
by the banks designated by State Administration of Foreign Exchange.



As a result of the foregoing restrictions, Infobird
PRC entities are restricted in their ability to transfer their assets to the Company. Foreign exchange and other regulation in the PRC
may further restrict Infobird PRC entities from transferring funds to the Company in the form of dividends, loans and advances. As of
December 31, 2021 and 2020, amounts restricted are the paid-in-capital, registered capital and statutory reserves of Infobird PRC entities,
which amounted to $15.7   million and $6.3 million, respectively.



Statutory reserves



During the years ended December 31, 2021, 2020 and
2019, Infobird PRC entities collectively attributed $11,587, $405,771 and $31,778 of retained earnings for their statutory reserves, respectively.



Note 16 – Lease



The Company determines if a contract contains a lease
at inception. US GAAP requires that the Company’s leases be evaluated and classified as operating or finance leases for financial
reporting purposes. The classification evaluation begins at the commencement date and the lease term used in the evaluation includes the
non-cancellable period for which the Company has the right to use the underlying asset, together with renewal option periods when
the exercise of the renewal option is reasonably certain and failure to exercise such option which result in an economic penalty. All
of the Company’s real estate leases are classified as operating leases.  The leases generally do not contain options to extend
at the time of expiration and the weighted average remaining lease terms are 1.59 years.



The Company entered into various non-cancellable
operating lease agreements for offices and employee dormitories for the year ended December 31, 2021. Upon adoption of FASB ASU 2016-02,
the Company recognized approximately $0.4 million right of use (“ROU”) assets and same amount of lease liabilities based
on the present value of the future minimum rental payments of leases, using a discount rate of
4.6% based on duration of lease terms. The Company’s lease agreements do not contain any material residual value guarantees
or material restrictive covenants. The Company’s lease liabilities under the remaining operating leases as of December 31, 2021
for the next five years is as follows:







|                                      |  | December
    31, 2021
|------------------------------------- |  | ---------------------
|2022                                  |  |                      
|2023                                  |  |                      
|Thereafter                            |  |                      
|Total
    undiscounted lease payments |  |                      
|Less
    imputed interest             |  |                      
|Total
    lease liabilities           |  |                      

Rent expense for the years ended December 31, 2021, 2020 and 2019 was $563,831, $437,814 and $398,563 respectively.





F-35











Note 17 – Commitments and contingencies







Contingencies



From time to time, the Company is party to certain
legal proceedings, as well as certain asserted and un-asserted claims. Amounts accrued, as well as the total amount of reasonably possible
losses with respect to such matters, individually and in the aggregate, are not deemed to be material to the consolidated financial statements.



On July 20, 2012, Infobird Anhui signed a leasing
agreement with Hefei Shushan Economic Development District Management Committee (the “Plaintiff”) to lease certain properties
in the industry park managed by the Plaintiff. A supplemental agreement was subsequently signed on August 6, 2012 which amended the term
of the lease and provided certain incentives and subsidies to Infobird Anhui. In June 2019, the Plaintiff filed a lawsuit in Shushan District
People’s Court against Infobird Anhui claiming the incentives and subsidy provided to Infobird Anhui was indeed a loan and Infobird
Anhui was in default of loan contract of approximately $0.9 million (RMB 6,400,000). On August 1, 2019, Shushan District People’s
Court issued a civil judgment against the Plaintiff. The Plaintiff subsequently filed an appeal in Anhui Province Hefei City Intermediary
People’s Court. The Court ruled against the Plaintiff on December 3, 2019. The case was concluded and no contingent loss was recorded
on the Company’s financial statements.







Variable interest entity structure



In the opinion of management, (i) the corporate structure
of the Company is in compliance with existing PRC laws and regulations; (ii) the Contractual Arrangements are valid and binding, and do
not result in any violation of PRC laws or regulations currently in effect; and (iii) the business operations of Infobird WFOE and the
VIEs are in compliance with existing PRC laws and regulations in all material respects.







However, there are substantial uncertainties regarding
the interpretation and application of current and future PRC laws and regulations. Accordingly, the Company cannot be assured that PRC
regulatory authorities will not ultimately take a contrary view to the foregoing opinion of its management. If the current corporate structure
of the Company or the Contractual Arrangements is found to be in violation of any existing or future PRC laws and regulations, the Company
may be required to restructure its corporate structure and operations in the PRC to comply with changing and new PRC laws and regulations.
In the opinion of management, the likelihood of loss in respect of the Company’s current corporate structure or the Contractual
Arrangements is remote based on current facts and circumstances.



COVID-19



In March 2020, the World Health Organization declared
COVID-19 a pandemic. The pandemic has resulted in quarantines, travel restrictions, and the temporary
closure of stores and facilities in China and elsewhere. Given the rapidly expanding nature of the COVID-19 pandemic, and because
substantially all of the Company’s business operations and workforce are concentrated in China, the Company’s business, results
of operations, and financial condition have been adversely affected for the year ended December 31, 2021. The impact of COVID-19 on the
macroeconomic outlook of China and any business disruption due to further resurgence of COVID-19 may have adverse financial impacts for
the Company beyond 2021 and cannot be reasonably estimated at this time.



Note 18 – Segment information and revenue
analysis



The Company follows ASC 280, Segment Reporting, which
requires that companies disclose segment data based on how management makes decisions about allocating resources to each segment and evaluating
their performances. The Company has one reporting segment. The Company’s chief operating decision maker has been identified as the
chief executive officer, who reviews consolidated results when making decisions about allocating resources and assessing performance of
the Company and hence the Company has only one reportable segment. The Company does not distinguish between markets or segments for the
purpose of internal reporting. The Company’s long-lived assets are substantially all located in the PRC and all of the Company’s
revenues are derived from the PRC.





F-36











Disaggregated information of revenues by business
lines are as follows:





|                                |  | For the year ended December 31,
|------------------------------- |  | -------------------------------
|                                |  | 2021                           
|                                |  |                                
|Standard cloud-based services   |  | $                              
|Customized cloud-based services |  |                                
|BPO services                    |  |                                
|Business integration services   |  |                                
|Other revenues                  |  |                                
|Total revenues                  |  | $                              







Note 19 – Subsequent Events





The Company evaluated all events and transactions that occurred
after December 31, 2021 up through October 21, 2022, the date the Company issued these consolidated financial statements.





On September 9, 2022,
the Company effected the 1-for-5 Share Consolidation of its ordinary shares pursuant to the Company’s second amended
and restated memorandum and articles of association. The Company has retroactively restated all share and per share
data for all of the periods presented pursuant to ASC 260 to reflect the Share Consolidation.





Note 20 – Condensed unaudited
financial information of the parent company



The Company performed a test on the restricted net
assets of consolidated subsidiary in accordance with Securities and Exchange Commission Regulation S-X Rule 4-08(e)(3), “General
Notes to Financial Statements” and concluded that it was applicable for the Company to disclose the financial statements for Infobird
Co., Ltd, the parent company.



The subsidiary did not pay any dividend to the Company
for the years presented. For the purpose of presenting parent only financial information, the Company records its investment in its subsidiary
under the equity method of accounting. Such investment is presented on the separate condensed balance sheets of the Company as “Investment
in subsidiary” and the income of the subsidiary is presented as “share of income of subsidiary”. Certain information
and footnote disclosures generally included in financial statements prepared in accordance with U.S. GAAP have been condensed and omitted.



The Company did not have significant capital and other
commitments, long-term obligations, or guarantees as of December 31, 2021, 2020 and 2019.





F-37











INFOBIRD CO., LTD



BALANCE SHEETS



|                                                                                                                                                                                                                                                                     |  | December
31, 2021 |             | December
31, 2020
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ----------- | -----------------
|ASSETS                                                                                                                                                                                                                                                               |  |                   |             |                  
|CURRENT
ASSETS                                                                                                                                                                                                                                                       |  |                   |             |                  
|Cash                                                                                                                                                                                                                                                                 |  | $                 | 2,623,916   |                  
|Prepayments                                                                                                                                                                                                                                                          |  |                   | 20,000      |                  
|Due
from subsidiaries                                                                                                                                                                                                                                                |  |                   | 10,999,973  |                  
|Short-term
investment                                                                                                                                                                                                                                                |  |                   | 7,091,939   |                  
|Total
current assets                                                                                                                                                                                                                                                 |  |                   | 20,735,828  |                  
|                                                                                                                                                                                                                                                                     |  |                   |             |                  
|OTHER
ASSETS                                                                                                                                                                                                                                                         |  |                   |             |                  
|Escrow                                                                                                                                                                                                                                                               |  |                   | 600,000     |                  
|Investment
in subsidiaries                                                                                                                                                                                                                                           |  |                   | —           |                  
|Total
other assets                                                                                                                                                                                                                                                   |  |                   | 600,000     |                  
|                                                                                                                                                                                                                                                                     |  |                   |             |                  
|Total
assets                                                                                                                                                                                                                                                         |  | $                 | 21,335,828  |                  
|                                                                                                                                                                                                                                                                     |  |                   |             |                  
|LIABILITIES
AND EQUITY                                                                                                                                                                                                                                               | 
|                                                                                                                                                                                                                                                                     |  |                   |             |                  
|LIABILITIES                                                                                                                                                                                                                                                          |  |                   |             |                  
|Deficit
of investment in subsidiaries                                                                                                                                                                                                                                |  | $                 | 6,285,110   |                  
|                                                                                                                                                                                                                                                                     |  |                   |             |                  
|COMMITMENTS
AND CONTINGENCIES                                                                                                                                                                                                                                        |  |                   |             |                  
|                                                                                                                                                                                                                                                                     |  |                   |             |                  
|EQUITY                                                                                                                                                                                                                                                               |  |                   |             |                  
|Ordinary
                                            shares, $0.005 par value, 10,000,000 shares authorized, 5,093,315 and 3,800,000 issued
                                            and outstanding as of December 31, 2021 and December 31, 2020, respectively* |  |                   | 25,467      |                  
|Additional
paid-in capital                                                                                                                                                                                                                                           |  |                   | 26,783,333  |                  
|Statutory
reserves                                                                                                                                                                                                                                                   |  |                   | 449,136     |                  
|(Accumulated
deficits) Retained earnings                                                                                                                                                                                                                             |  |                   | (12,799,436 | )                
|Accumulated
other comprehensive income                                                                                                                                                                                                                               |  |                   | 592,218     |                  
|Total
equity                                                                                                                                                                                                                                                         |  |                   | 15,050,718  |                  
|                                                                                                                                                                                                                                                                     |  |                   |             |                  
|Total
liabilities and equity                                                                                                                                                                                                                                         |  | $                 | 21,335,828  |                  



* Retroactively restated
to reflect the Share Consolidation.







F-38



















INFOBIRD CO., LTD



STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)



|                                        |  | For
the years ended December 31,
|--------------------------------------- |  | --------------------------------
|                                        |  | 2021                            
|General
and administrative expenses     |  | $                               
|Other
Income, net                       |  |                                 
|                                        |  |                                 
|Equity
of losses in subsidiaries        |  |                                 
|Net(loss)income                         |  |                                 
|Foreign
currency translation adjustment |  |                                 
|Comprehensive
(loss) income             |  | $                               





F-39













INFOBIRD CO., LTD



STATEMENTS OF CASH FLOWS



|                                                                            |  | For
the years ended December 31,
|--------------------------------------------------------------------------- |  | --------------------------------
|                                                                            |  | 2021                            
|CASH
FLOWS FROM OPERATING ACTIVITIES:                                       |  |                                 
|Net
loss                                                                    |  | $                               
|Adjustments
to reconcile net loss to net cash used in operating activities: |  |                                 
|Gain
from short-term investment                                             |  |                                 
|Equity
loss (income) of subsidiaries                                        |  |                                 
|Share-based
compensation                                                    |  |                                 
|Change
in operating assets and liabilities                                  |  |                                 
|Prepayments                                                                 |  |                                 
|Due
from subsidiaries                                                       |  |                                 
|Net
cash used in operating activities                                       |  |                                 
|                                                                            |  |                                 
|CASH
FLOWS FROM INVESTING ACTIVITIES:                                       |  |                                 
|Purchase
of short-term investment                                           |  |                                 
|Short-term
investment                                                       |  |                                 
|Net
cash used in investing activities                                       |  |                                 
|                                                                            |  |                                 
|CASH
FLOWS FROM FINANCING ACTIVITIES:                                       |  |                                 
|Proceed
from IPO                                                            |  |                                 
|Payment
of offering cost                                                    |  |                                 
|Proceed
from IPO placed in escrow                                           |  |                                 
|Net
cash provided by financing activities                                   |  |                                 
|                                                                            |  |                                 
|CHANGES
IN CASH                                                             |  |                                 
|                                                                            |  |                                 
|CASH,
beginning of year                                                     |  |                                 
|                                                                            |  |                                 
|CASH,
end of year                                                           |  | $                               





****



F-40