UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (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, 2023

OR

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

OR

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

Date of event requiring this shell company report:

For the transition period from _________ to _____________.

Commission file number: 001-40008

Sunrise New Energy Co., Ltd.

(Exact name of Registrant as Specified in its Charter)

Cayman Islands

(Jurisdiction of Incorporation or Organization)

Room 703, West Zone, R&D Building

Zibo Science and Technology Industrial Entrepreneurship Park, No. 69
Sanying Road

Zhangdian District, Zibo City, Shandong Province 

People’s Republic of China

+861082967728

(Address of Principal Executive Offices)

Haiping Hu, Chief Executive Officer

Room 703, West Zone, R&D Building

Zibo Science and Technology Industrial Entrepreneurship Park, No. 69
Sanying Road

Zhangdian District, Zibo City, Shandong Province

People’s Republic of China

+861082967728

(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
Class A ordinary share	EPOW	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 stock as of the close of the period covered by the annual report.

An aggregate of 26,141,350 Class A ordinary shares and 0 Class B ordinary shares, par value $0.0001 per share, were outstanding as of December 31, 2023.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐  No ☒

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ☐  No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted 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 and post such files). Yes ☒ No ☐

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

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. ☐

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

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

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 ☒

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. ☐

TABLE OF CONTENTS

INTRODUCTION		ii
FORWARD-LOOKING INFORMATION		iv
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	38
ITEM 4A.	UNRESOLVED STAFF COMMENTS	68
ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS	68
ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	84
ITEM 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	91
ITEM 8.	FINANCIAL INFORMATION	94
ITEM 9.	THE OFFER AND LISTING	95
ITEM 10.	ADDITIONAL INFORMATION	95
ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	102
ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	102
PART II		103
ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	103
ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	103
ITEM 15.	CONTROLS AND PROCEDURES	103
ITEM 16.	[RESERVED]	104
ITEM 16A.	AUDIT COMMITTEE FINANCIAL EXPERT	104
ITEM 16B.	CODE OF ETHICS	104
ITEM 16C.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	105
ITEM 16D.	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES	105
ITEM 16E.	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS	105
ITEM 16F.	CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT	105
ITEM 16G.	CORPORATE GOVERNANCE	106
ITEM 16H.	MINE SAFETY DISCLOSURE	106
ITEM 16I.	DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS	106
ITEM 16J.	INSIDER TRADING POLICIES	106
ITEM 16K.	CYBERSECURITY	106
PART III		107
ITEM 17.	FINANCIAL STATEMENTS	107
ITEM 18.	FINANCIAL STATEMENTS	107
ITEM 19.	EXHIBITS	107

i

INTRODUCTION

We are a holding company incorporated in the Cayman Islands with no material operations of our own. We are not a Chinese operating company. Investors of our Ordinary Shares do not own any equity interests in the VIE, but instead own shares of a Cayman Islands holding company. Unless otherwise stated, as used in this annual report and in the context of describing our operations and consolidated financial information, “we,” “us,” “Company,” “Sunrise New Energy”, or “our,” refers to Sunrise New Energy Co., Ltd., a Cayman Islands holding company, and “VIE” refers to the variable interest entity (“VIE”), Global Mentor Board (Zibo) Information Technology Co., Ltd., or SDH.

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

● “Affiliated Entities” are to Sunrise New Energy’s subsidiaries, and the VIE and its subsidiaries;

● “APP” are to our mobile application, “Shidonghui APP;”

● “China” or the “PRC” are to the People’s Republic of China;   ●       “Class A Ordinary Shares” or “Class A ordinary shares” are to Class A ordinary shares in the capital of the Company, par value $0.0001 per share;   ●       “Class B Ordinary Shares” or “Class B ordinary shares” are to Class B ordinary shares in the capital of the Company, par value $0.0001 per share;

● “Enterprise Service Client” or “Enterprise Service Clients” are to small and medium-sized enterprises that have entered into service agreements with us for customized enterprise services;

● “Expert” or “Experts” are to individual(s) qualified and certified by us to provide services to Users and Members;

● “GIOP BJ” are to Beijing Mentor Board Union Information Technology Co, Ltd., a limited liability company organized under the laws of the PRC, Zhuhai Zibo’s wholly owned subsidiary;

● “GMB HK” are to “Global Mentor Board Information Technology Limited”, Sunrise New Energy’s wholly-owned-subsidiary, a Hong Kong corporation.

● “GMB (Hangzhou)” are to Global Mentor Board (Hangzhou) Technology Co., Ltd., a limited liability company organized under the laws of the PRC, the VIE’s wholly owned subsidiary;

● “GMB (Beijing)” are to Shidong (Beijing) Information Technology Co., Ltd., a limited liability company organized under the laws of the PRC and 51% of its equity interest is owned by the VIE;

● “GMB Culture” are to Shanghai Voice of Seedling Cultural Media Co., Ltd., a limited liability company organized under the laws of the PRC and 51% of its equity interest is owned by the VIE;

● “GMB Consulting” are to Global Mentor Board (Shanghai) Enterprise Management Consulting Co. Ltd., a limited liability company organized under the laws of the PRC and 51% of its equity interest is owned by the VIE;

● “GMB Linking” are to “Linking (Shanghai) Network Technology Co., Ltd., a limited liability company organized under the laws of the PRC; the 51% of its equity interest owned by the VIE was transferred to a third party in July 2021;

ii

● “HK subsidiaries” are to GMB HK and SDH New Energy; and

● “Member” or “Members” are to individual(s) and enterprise(s) who signed up for each of our three annual membership plans: Platinum, Diamond, Protégé;

● “Mentor” or “Mentors” are to individual(s) invited by us to provide services to Users and Members;

● “PRC subsidiaries” are to GIOP BJ, Zhuhai Zibo, Zhuhai Guizhou and their respective subsidiaries.

● “shares,” “Shares,” or “Ordinary Shares” are, collectively,  to the Class A Ordinary Shares and Class B Ordinary Shares;

● “SDH” or “the VIE” are to Global Mentor Board (Zibo) Information Technology Co., Ltd, formerly known as  Global Mentor Board (Beijing) Information Technology Co., Ltd., a limited liability company organized under the laws of the PRC, which we control via a series of contractual arrangements among GIOP BJ, the VIE and shareholders of the VIE;

● “SDH Cloud” are to Global Mentor Cloud (Beijing) Education Technology Co., Ltd.; 75% of the shares of SDH Cloud are held by GIOP BJ and the remaining 25% shares are held by Beijing Yunqianyi Information Technology Co., Ltd.

● “SDH New Energy” are to SDH (HK) New Energy Tech Co., Limited, Sunrise New Energy’s wholly-owned-subsidiary, a Hong Kong corporation.

● “Sunrise Guizhou” are to Sunrise (Guizhou) New Energy Material Co., Ltd, a limited liability company organized under the laws of the PRC and 39.3519% of its equity interest is owned by Sunrise New Energy;

● “U.S.” are to the United States;

● “User” or “Users” are to registered users of our APP;

● “VIE” are to variable interest entity;

● “Zhuhai Zibo” are to Zhuhai (Zibo) Investment Co., Ltd.,  a limited liability company organized under the laws of the PRC, SDH New Energy’s wholly owned subsidiary;

● “Zhuhai Guizhou” are to Zhuhai (Guizhou) New Energy Investment Co., Ltd., a limited liability company organized under the laws of the PRC, SDH New Energy’s wholly owned subsidiary;

● “Zibo Shidong” are to Zibo Shidong Digital Technology Service Co., Ltd., a limited liability company organized under the laws of the PRC, the VIE’s wholly owned subsidiary;

As of the date of this annual report, substantially all of the Company’s business is conducted by (1) Sunrise Guizhou, a joint venture formed by the Company and certain other shareholders in 2022, and (2) SDH, the Company’s VIE entity, in the PRC, using RMB, the currency of China. Our consolidated financial statements are presented in United States dollars or US$. In this annual report, we refer to assets, obligations, commitments and liabilities in our consolidated financial statements in United States dollars or US$. These US$ references are based on the exchange rate of RMB to United States dollars, determined as of a specific date or for a specific period. Changes in the exchange rate will affect the amount of our obligations and the value of our assets in terms of United States dollars which may result in an increase or decrease in the amount of our obligations and the value of our assets, including accounts receivable.

Unless expressly indicated herein to the contrary, all references to share amounts in this annual report give retroactive effect to share consolidations, the last of which was effected on April 24, 2020.

iii

FORWARD-LOOKING INFORMATION

This annual report on Form 20-F contains ‘forward-looking statements’ within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve substantial risks and uncertainties. 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. These statements involve known and unknown risks, uncertainties and other factors that 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. These forward-looking statements include statements relating to:

● future financial and operating results, including revenues, income, expenditures, cash balances and other financial items;

● our ability to execute our growth and expansion, including our ability to meet our goals;

● current and future economic and political conditions;

● the future growth of the Chinese knowledge sharing and enterprise service industries;

● our ability to continue to operate through the VIE structure;

● our capital requirements and our ability to raise any additional funds which we may require;

● our ability to attract clients and further enhance our brand recognition;

● our ability to hire and retain qualified management personnel and key employees in order to enable us to develop our business;

● trends and competition in Chinese enterprise service and knowledge sharing industries;

● impact of the novel COVID-19 outbreak on our business operations; and

● other assumptions described in this annual report underlying or relating to any forward-looking statements.

These forward-looking statements involve various risks and uncertainties. Although we believe that our expectations expressed in these forward-looking statements are reasonable, our expectations may later be found to be incorrect. Our actual results could be materially different from our expectations. Other sections of this annual report include additional factors that could adversely impact our business and financial performance. Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time and it is not possible for our management to predict all risk factors and uncertainties, 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. You should read thoroughly this annual report and the documents that we refer to with the understanding that our actual future results may be materially different from, or worse than, what we expect. We qualify all of our forward-looking statements by these cautionary statements.

This annual report contains certain data and information that we obtained from various government and private publications. Statistical data in these publications also include projections based on a number of assumptions. The Electric Vehicle industry may not grow at the rate projected by market data, or at all. Failure of this market to grow at the projected rate may have a material and adverse effect on our business and the market price of the Class A Ordinary Shares. In addition, the rapidly evolving nature of this industry results in significant uncertainties for any projections or estimates relating to the growth prospects or future condition of our market. Furthermore, if any one or more of the assumptions underlying the market data are later found to be incorrect, actual results may differ from the projections based on these assumptions. You should not place undue reliance on these forward-looking statements.

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. You should read this annual report and the documents that we refer to in this annual report and exhibits to this annual report completely and with the understanding that our actual future results may be materially different from what we expect.

iv

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

We are a Cayman Islands holding company conducting a substantial portion of our operations in China through our PRC operating entities. Unless otherwise stated, as used in this annual report, the terms “we,” “us,” “our,” “Sunrise New Energy,” “our Company,” and the “Company” refer to Sunrise New Energy Co., Ltd., an exempted company with limited liability incorporated under the laws of the Cayman Islands; and “SDH” or “the VIE” are to Global Mentor Board (Zibo) Information Technology Co., Ltd., a limited liability company organized under the laws of the PRC, which we control via a series of contractual arrangements among GIOP BJ, SDH and shareholders of SDH (the “VIE Agreements”).

As of the date of this annual report, substantially all of our business is conducted by (1) Sunrise Guizhou, a joint venture established by Zhuhai Zibo (a wholly owned subsidiary of the Company) and certain other partners, as a limited company pursuant to PRC laws for the purpose of manufacturing and sales of graphite anode materials; and (2) SDH, the Company’s VIE entity that operates a knowledge sharing platform in China. Investors of our Ordinary Shares do not hold shares in the PRC operating entities, but instead hold shares of a Cayman Islands exempted company. Further, neither we nor our subsidiaries own any shares in the VIE. Instead, for accounting purposes, we control and receive the economic benefits of the VIE’s business operation through a series of contractual arrangements, also known as VIE Agreements, dated June 10, 2019. The VIE Agreements enable us to consolidate the financial results of the VIE and its subsidiaries in our consolidated financial statements under the generally accepted accounting principles in the United States (“U.S. GAAP”). Pursuant to the VIE Agreements, which have not been tested in a court of law, under, the assets and liabilities of the VIE are treated as our assets and liabilities and the results of operations of the VIE are treated as if they were the results of our operations. See “Item 3. Key Information — Contractual Agreements among GIOP BJ, the VIE and Its Shareholders” for a summary of these VIE Agreements.

We have relied and expect to continue to rely on the VIE Agreements to control and operate the business of the VIE. The VIE Agreements, however, may not be as effective in providing us with the necessary control over the VIE and its operations. For example, the VIE and its shareholders could breach their contractual arrangements with us by, among other things, failing to conduct their operations in an acceptable manner or taking other actions that are detrimental to our interests. If we had direct ownership of the VIE, we would be able to exercise our rights as a shareholder to effect changes in the board of directors of the VIE, which in turn could implement changes, subject to any applicable fiduciary obligations, at the management and operational level. Under the current VIE Agreements, however, we rely on the performance by the VIE and its shareholders of their respective obligations under the contracts to exercise control over the VIE. We are also subject to the risks of uncertainty about any future actions of the PRC government in this regard. Because of our corporate structure, we are subject to risks due to uncertainty of the interpretation and the application of the PRC laws and regulations, including but not limited to the validity and enforcement of the VIE Agreements. The VIE Agreements may not be effective in providing control over the VIE. We may be also subject to sanctions imposed by PRC regulatory agencies including Chinese Securities Regulatory Commission if we fail to comply with their rules and regulations. See “Risk Factors—Risks Related to Doing Business in China,” and “Risk Factors—Risks Related to Our Corporate Structure.”

As of December 31, 2023, 2022 and 2021, the VIE accounted for an aggregate of 5.48%, 8.79% and 51.21%, respectively, of our consolidated total assets, 6.54%, 13.04% and 99% respectively, of our consolidated total liabilities, and 1.46%, 1.61% and 100% respectively, of our consolidated total net revenues. See our consolidated financial statements and the related notes in this annual report.

1

We are subject to legal and operational risks associated with being based in the PRC, which could result in a material change in our PRC operating entities and the VIE’s operations and/or the value of the securities we are registering for sale, or could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of our securities to significantly decline or be worthless. PRC laws and regulations governing our current business operations are sometimes vague and uncertain. Recently, the PRC government adopted a series of regulatory actions and issued statements to regulate business operations in the PRC with little advance notice, including cracking down on illegal activities in the securities market, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. For example, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the Opinions on Severely Cracking Down on Illegal Securities Activities According to Law, or the Opinions, which were made available to the public on July 6, 2021. The Opinions emphasized the need to strengthen the administration over illegal securities activities and the need to strengthen the supervision over overseas listings by Chinese companies. As of the date of this annual report, we, our PRC subsidiaries, or the VIE and its subsidiaries have not been involved in any investigations on cybersecurity review initiated by any PRC regulatory authority, nor has any of them received any inquiry, notice, or sanction.

As confirmed by our PRC counsel, Jincheng Tongda & Neal Law Firm (“JT&N”), as of the date of this annual report, we are not subject to cybersecurity review with the Cyberspace Administration of China, or the CAC, under the Cybersecurity Review Measures that became effective on February 15, 2022, or if the draft Regulations on the Network Data Security Administration (Draft for Comments) (the “Security Administration Draft”) is enacted as proposed, since (i) as companies that engage in business-oriented consulting services and manufacturing and sales of graphite anode materials, we, our PRC subsidiaries, or the VIE and its subsidiaries, are unlikely to be classified as critical information infrastructure operators (“CIIOs”) by the PRC regulatory agencies; (ii) according to the interpretation of the relevant laws by the CAC, for online platform operators who have listed in foreign countries before the effective date of Cybersecurity Review Measures, and who are not seeking a new listing (such as a secondary or dual listing) in foreign countries, a cybersecurity review is not required; and (iii) the data processed in the business of the VIE and its subsidiaries, which is a knowledge sharing and enterprise service platform business, is unlikely to have a bearing on national security. There remains uncertainty, however, as to how the Cybersecurity Review Measures and the Security Administration Draft will be interpreted or implemented and whether the PRC regulatory agencies, including the CAC, may adopt new laws, regulations, rules, or detailed implementation and interpretation related to the Cybersecurity Review Measures and the Security Administration Draft. See “Risk Factors—Risks Relating to Doing Business in the PRC—Recent greater oversight by the CAC over data security, particularly for companies seeking to list on a foreign exchange, could adversely impact our business and our offering.”

Furthermore, on February 17, 2023, the China Securities Regulatory Commission (the “CSRC”) released the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies (the “Trial Measures”) and five supporting guidelines, which took effect on March 31, 2023. Pursuant to the Trial Measures, PRC domestic companies that seek to offer or list securities overseas, both directly and indirectly, shall complete filing procedures with the CSRC pursuant to the requirements of the Trial Measures within three working days following its submission of relevant applications or its completion of subsequent offerings. If a domestic company fails to complete required filing procedures or conceals any material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative penalties, such as an order to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties, such as warnings and fines. On the same day, the CSRC also held a press conference for the release of the Trial Measures and issued the Notice on Administration for the Filing of Overseas Offering and Listing by Domestic Companies, or the CSRC Notice, which, among others, clarifies that PRC domestic companies that have already been listed overseas before the effective date of the Trial Measures, which is March 31, 2023, shall be deemed as Existing Issuers, and Existing Issuers are not required to complete the filing procedures with the CSRC immediately, and they shall be required to file with the CSRC for any subsequent offerings. We are an Existing Issuer, based on the foregoing, and we are not, therefore, required to complete the filing procedures with the CSRC immediately, and shall be required, however, to file with the CSRC for any subsequent offerings. As of the date of this annual report, we are not aware of the Trial Measures or any other PRC laws or regulations currently in effect requiring that we obtain permission from any PRC government authority for our continued listing on the Nasdaq. However, since these statements and regulatory actions are newly published, however, official guidance and related implementation rules have not been issued. It is highly uncertain what the potential impact such modified or new laws and regulations will have on the daily business operations of our subsidiaries and the VIE, our ability to accept foreign investments, and our listing on an U.S. exchange. See “Risk Factors—Risks Relating to Doing Business in the PRC—The Trial Measures and the revised Provisions recently issued by the PRC authorities may subject us to additional compliance requirements in the future.”

2

Since 2021, the Chinese government has strengthened its anti-monopoly supervision, mainly in three aspects: (i) establishing the National Anti-Monopoly Bureau; (ii) revising and promulgating anti-monopoly laws and regulations, including: the Anti-Monopoly Law of the PRC (amended on June 24, 2022 and effective on August 1, 2022), the anti-monopoly guidelines for various industries, and the Detailed Rules for the Implementation of the Fair Competition Review System; and (iii) expanding the anti-monopoly law enforcement targeting Internet companies and large enterprises. As of the date of this annual report, the Chinese government’s recent statements and regulatory actions related to anti-monopoly concerns have not impacted our or our PRC subsidiaries, or the VIE and its subsidiaries’ ability to conduct business, our ability to accept foreign investments or issue our securities to foreign investors because neither we and our subsidiaries, nor our PRC subsidiaries, or the VIE and its subsidiaries engage in monopolistic behaviors that are subject to these statements or regulatory actions.

In addition, our Class A Ordinary Shares may be prohibited from trading on a national exchange or over-the-counter under the Holding Foreign Companies Accountable Act (the “HFCA Act”) and related regulations, if the Public Company Accounting Oversight Board (United States) (the “PCAOB”) is unable to inspect our auditor for two consecutive years beginning in 2022. On June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, and on December 29, 2022, legislation entitled “Consolidated Appropriations Act, 2023” (the “Consolidated Appropriations Act”) was signed into law, which included an identical provision of the Accelerating Holding Foreign Companies Accountable Act and amended the HFCA Act by requiring the U.S. Securities and Exchange Commission (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, thus reducing the time period for triggering the delisting of our Company and the prohibition of trading in our securities if the PCAOB is unable to inspect our accounting firm at such future time. On December 16, 2021, the PCAOB issued a report on its determinations that it was unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong, because of positions taken by PRC authorities in those jurisdictions. On December 15, 2022, the PCAOB Board determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate its previous determinations to the contrary. However, should PRC authorities obstruct or otherwise fail to facilitate the PCAOB’s access in the future, the PCAOB Board will consider the need to issue a new determination. Our auditor prior to December 16, 2022, Friedman LLP ("Friedman") and our current auditor, Marcum Asia CPAs LLP (“MarcumAsia”), are PCAOB registered public accounting firms headquartered in New York. They are subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess an auditor’s compliance with the applicable professional standards, and have been inspected by the PCAOB on a regular basis. As such, as of the date of this annual report, our listing is not affected by the HFCA Act and related regulations. See “Risk Factors—Risks Relating to Doing Business in the PRC—The Holding Foreign Companies Accountable Act and related regulations, all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB. These developments could add uncertainties to our continued listing on the Nasdaq, and Nasdaq may determine to delist our securities if the PCAOB determines that it cannot inspect or fully investigate our auditor.”

As of the date of this annual report, our Company, our subsidiaries, and the VIE have not distributed any earnings or settled any amounts owed under the VIE Agreements, nor do they have any plan to distribute earnings or settle amounts owed under the VIE Agreements in the foreseeable future. As of the date of this annual report, none of our subsidiaries or the VIE have made any dividends or distributions to our Company and our Company has not made any dividends or distributions to our shareholders. We intend to keep any future earnings to finance the expansion of our business, and we do not anticipate that any cash dividends will be paid in the foreseeable future. If we determine to pay dividends on any of our Ordinary Shares in the future, as a holding company, we will be dependent on receipt of funds from our operating entities, pursuant to the VIE Agreements.

3

The Company’s management is directly supervising cash management. Our finance department is responsible for establishing the cash management policies and procedures among our subsidiaries and departments and our PRC subsidiaries, or the VIE and its subsidiaries. Each subsidiary, department, or PRC operating entity initiates a cash request by putting forward a cash demand plan, which explains the specific amount and timing of cash requested, and submitting it to designated management members of the Company, based on the amount and the use of cash requested. The designated management member examines and approves the allocation of cash based on the sources of cash and the priorities of the needs, and submit it to the cashier specialists of our finance department for a second review. Other than the above, we currently do not have other cash management policies or procedures that dictate how funds are transferred. Prior to the completion of our initial public offering in February 2021, the sources of funding of the Company, its subsidiaries and the VIE primarily consisted of capital injections by shareholders and cash generated from operations. For the last three fiscal years, Cash transfers and transfers of other assets between Sunrise New Energy, its subsidiaries, and the VIE were as follows: (i) For the fiscal year ended December 31, 2023, the Company provided interest free loans of $400,000 to Zibo Shidong, a wholly owned subsidiary of the VIE, and received interest-free loans of $150,000 from the Company’s subsidiary, GMB HK; (ii) For the fiscal year ended December 31, 2022, the VIE provided interest-free loans of $6,188,307 to the Company’s subsidiaries, Zhuhai Zibo and Sunrise Guizhou for the construction costs related to the graphite anode business, and the Company’s subsidiary, GMB HK, provided interest-free loans of $310,000 to the Company for professional fees. (iii) For the fiscal year ended December 31, 2021, the Company transferred the proceeds from its initial public offering in the amount of $15,000,000 to its subsidiary, Zhuhai Zibo, and the VIE provided interest-free loans of $90,000 to the Company for professional fees related to the initial public offering. To the extent cash in the business is in the PRC, the funds may not be available to fund operations or for other use outside of the PRC due to interventions in or the imposition of restrictions and limitations on the ability of our Company, our subsidiaries, or the VIE by the PRC government to transfer cash. See “Risk Factors—Risks Relating to Our Corporate Structure—To the extent cash in the business is in the PRC/Hong Kong or a PRC/Hong Kong entity, the funds may not be available to fund operations or for other use outside of the PRC/Hong Kong due to interventions in or the imposition of restrictions and limitations on the ability of our Company, our subsidiaries, or the VIE by the PRC government to transfer cash.”

Permissions Required from PRC Authorities 

As of the date of this annual report, we, our PRC subsidiaries, or the VIE and its subsidiaries, (i) have received from PRC authorities material licenses, permissions, and approvals needed to engage in the businesses currently conducted in the PRC, and (ii) no such permission or approval has been denied. The licenses, permissions, and approvals, which have been successfully obtained, are: (1) business license; (2) the ICP License for our knowledge sharing and enterprise service platform business; and (3) the approval for the Construction Land Use Planning Permit, the Construction Works Planning Permit, the Construction Permit, the Pollutant Discharge License, the filing-for-record procedures with the relevant work safety administrative department, the approval for the Environmental Impact Report, the Filing for Environmental Protection Acceptance upon Completion of the Construction Project and the Filing Certificate for Fire Safety Inspection and Acceptance of Construction Project for our graphite anode material business. Besides, as of the date of this annual report, based on the progress of our relevant construction projects, we are applying for other necessary licenses or filings that are required by relevant PRC rules from time to time, such as those related to the construction completion acceptance, fire safety inspection and acceptance, work safety acceptance, environmental protection acceptance, and the processing of relevant real estate certificates, etc. We expect to complete the above procedures around October 2024. However, we cannot assure you that any of these entities will be able to receive clearance of such compliance requirements in a timely manner, or at all. Any failure of these entities to fully comply with such compliance requirements may cause our PRC subsidiaries, or the VIE and its subsidiaries to be unable to begin their new businesses or operations in the PRC, subject them to fines, relevant new businesses or operations suspension for rectification, or other sanctions. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—We may be required to obtain and maintain additional approvals, licenses or permits applicable to our business, including our graphite anode manufacturing and sales business and our knowledge share platform, which could have a material adverse impact on our business, financial conditions and results of operations.” We have been closely monitoring the development in the regulatory landscape in China, particularly regarding the requirement of approvals, including on a retrospective basis, from the CSRC, the CAC, or other PRC authorities with respect to this offering, as well as other procedures that may be imposed on us. 

4

Selected Condensed Consolidating Financial Schedule

As a holding company with no material operations of our own, we conduct our operations through Sunrise Guizhou, the VIE and its subsidiaries in the PRC. Our subsidiaries and the VIE and its subsidiaries as of the date of this annual report are described below:

Name	Date of Incorporation	Place of incorporation	Percentage of effective ownership	Principal Activities
Subsidiaries
Global Mentor Board Information Technology Limited (“GMB HK”)	March 22, 2019	HK	100%	Holding company
Beijing Mentor Board Union Information Technology Co, Ltd. (“GIOP BJ”)	June 3, 2019	PRC	100%	Holding company of GIOP BJ
Shidong Cloud (Beijing) Education Technology Co., Ltd (“Shidong Cloud”)	December 22, 2021	PRC	75%	Educational consulting
SDH (HK) New Energy Tech Co., Ltd. (“SDH New Energy”)	October 8, 2021	HK	100%	Holding company
Zhuhai (Zibo) Investment Co., Ltd. (“Zhuhai Zibo”)	October 15, 2021	PRC	100%	New energy investment
Zhuhai (Guizhou) New Energy Investment Co., Ltd. (“Zhuhai Guizhou”)	November 23, 2021	PRC	100%	New energy investment
Sunrise (Guizhou) New Energy Materials Co., Ltd.  (“Sunrise Guizhou”)	November 8, 2021	PRC	39.35%	Manufacture of lithium battery materials
Guizhou Sunrise Technology Co., Ltd. (“Sunrise Tech”)	September 1, 2011	PRC	39.35%	Manufacture of lithium battery materials
Sunrise (Guxian) New Energy Materials Co., Ltd. (“Sunrise Guxian”)	April 26, 2022	PRC	20.07%	Manufacture of lithium battery materials
Guizhou Sunrise Technology Innovation Research Co., Ltd. (“Innovation Research”)	December 13, 2022	PRC	39.35%	Research and development
Variable Interest Entity (“VIE”) and subsidiaries of VIE
Global Mentor Board (Zibo) Information Technology Co., Ltd. (“SDH” or “VIE”)	December 5, 2014	PRC	VIE	Peer-to-peer knowledge sharing and enterprise service platform provider
Global Mentor Board (Hangzhou) Technology Co., Ltd. (“GMB (Hangzhou)”)	November 1, 2017	PRC	100% by VIE	Consulting, training and tailored services provider
Global Mentor Board (Shanghai) Enterprise Management Consulting Co., Ltd. (“GMB Consulting”)	June 30, 2017	PRC	51% by VIE	Consulting services provider
Shanghai Voice of Seedling Cultural Media Co., Ltd. (“GMB Culture”)	June 22, 2017	PRC	51% by VIE	Cultural and artistic exchanges and planning, conference services provider
Shidong (Beijing) Information Technology Co., LTD. (“GMB (Beijing)”)	June 19, 2018	PRC	100% by VIE	Information technology services provider
Mentor Board Voice of Seeding (Shanghai) Cultural Technology Co., Ltd. (“GMB Technology”)	August 29, 2018	PRC	30.6% by VIE	Technical services provider
Shidong Zibo Digital Technology Co., Ltd. (“Zibo Shidong”)	October 16, 2020	PRC	100% by VIE	Technical services provider
Shidong Trading Service (Zhejiang) Co., Ltd. (“Shidong Trading”)	April 19, 2021	PRC	Deregistered in November 2022	Sale of merchandise
Shanghai Jiagui Haifeng Technology Co., Ltd. (“Jiagui Haifeng”)	November 29, 2021	PRC	Disposal in March 2023	Business incubation services provider
Shanghai Nanyu Culture Communication Co., Ltd. (“Nanyu Culture”)	July 27, 2021	PRC	Deregistered in July 2023	Enterprise information technology integration services provider
Beijing Mentor Board Health Technology Co., Ltd (“GMB Health”)	January 7, 2022	PRC	100% by VIE	Health services
Shidong Yike (Beijing) Technology Co., Ltd.	July 16, 2021	PRC	51% by VIE	Health services
Shanghai Yuantai Fengdeng Agricultural Technology Co., Ltd. (“Yuantai Fengdeng”)	March 4, 2022	PRC	Deregistered in April 2023	Agricultural technology service

5

The following tables present selected condensed consolidating financial data of Sunrise New Energy and its subsidiaries and the VIE and its subsidiaries for the fiscal years ended December 31, 2023, 2022, 2021, and balance sheet data as of December 31, 2023, 2022, and 2021.

SELECTED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS DATA

	Year ended December 31, 2023
	Parent			Subsidiaries			VIE and VIE’s subsidiaries			Inter- company elimination		Group consolidated
	(US$)
Revenues, net		-			44,394,292			656,113			-		45,050,405
Total cost and operating expenses		6,524,022			65,728,723			3,327,665			-		75,580,410
Loss from operations		(6,524,022	)		(21,334,431	)		(2,671,552	)		-		(30,530,005	)
Loss before income taxes		(6,611,490	)		(22,612,303	)		(3,697,157	)		-		(32,920,950	)
Net loss		(6,611,490	)		(22,612,303	)		(3,696,931	)		-		(32,920,724	)

	Year ended December 31, 2022
	Parent			Subsidiaries			VIE and VIE’s subsidiaries			Inter- company elimination		Group consolidated
	(US$)
Revenues, net		-			37,511,989			613,679			-		38,125,668
Total cost and operating expenses		3,586,852			39,001,736			14,346,213			-		56,934,801
Loss from operations		(3,586,852	)		(1,489,747	)		(13,732,534	)		-		(18,809,133	)
Loss before income taxes		(5,990,264	)		(1,696,242	)		(14,628,926	)		-		(22,315,432	)
Net loss		(5,990,264	)		(1,696,003	)		(15,438,135	)		-		(23,124,402	)

	Year ended December 31, 2021
	Parent			Subsidiaries			VIE and VIE’s subsidiaries			Inter- company elimination		Group consolidated
	(US$)
Revenues, net		-			-			7,409,272			-		7,409,272
Total cost and operating expenses		1,010,536			127,627			13,681,122			-		14,819,285
Loss from operations		(1,010,536	)		(127,627	)		(6,271,850	)		-		(7,410,013	)
Loss before income taxes		(3,021,789	)		(170,253	)		(5,865,989	)		107,118		(8,950,913	)
Net loss		(3,021,789	)		(170,253	)		(5,629,408	)		107,118		(8,714,332	)

6

SELECTED CONDENSED CONSOLIDATING BALANCE SHEET DATA

	As of December 31, 2023
	Parent		Subsidiaries		VIE and VIE’s subsidiaries		Inter- company elimination			Group consolidated
	(US$)
Total current assets		3,030,688		30,874,514		7,673,555		(5,762,862	)		35,815,895
Total non-current assets		14,540,000		80,084,256		4,604,379		(14,540,000	)		84,688,635
Total assets		17,570,688		110,958,770		12,277,934		(20,302,862	)		120,504,530
Total current liabilities		31,823		64,306,203		4,913,254		(5,762,862	)		63,488,418
Total non-current liabilities		-		11,684,348		-		-			11,684,348
Total liabilities		31,823		75,990,551		4,913,254		(5,762,862	)		75,172,766

	As of December 31, 2022
	Parent		Subsidiaries		VIE and VIE’s subsidiaries		Inter- company elimination			Group consolidated
	(US$)
Total current assets		7,330,103		33,642,263		9,713,750		(6,048,283	)		44,637,833
Total non-current assets		14,690,000		56,445,366		5,939,175		(14,690,000	)		62,384,541
Total assets		22,020,103		90,087,629		15,652,925		(20,738,283	)		107,022,374
Total current liabilities		15,550		27,666,520		4,389,658		(6,048,283	)		26,023,445
Total non-current liabilities		-		7,637,332		-		-			7,637,332
Total liabilities		15,550		35,303,852		4,389,658		(6,048,283	)		33,660,777

	As of December 31, 2021
	Parent		Subsidiaries		VIE and VIE’s subsidiaries		Inter- company elimination			Group consolidated
	(US$)
Total current assets		7,776,218		9,932,297		16,864,942		(227,899	)		34,345,558
Total non-current assets		17,700,060		8,244,917		13,404,549		(15,000,000	)		24,349,526
Total assets		25,476,278		18,177,214		30,269,491		(15,227,899	)		58,695,084
Total current liabilities		211,430		33,686		1,703,665		(227,899	)		1,720,882
Total non-current liabilities		-		-		-		-			-
Total liabilities		211,430		33,686		1,703,665		(227,899	)		1,720,882

7

SELECTED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS DATA

	Year ended December 31, 2023
	Parent			Subsidiaries			VIE and VIE’s subsidiaries			Inter-company elimination			Group consolidated
	(US$)
Net cash (used in) provided by operating activities		(1,516,279	)		(5,592,986	)		(423,730	)		250,000			(7,282,995	)
Net cash provided by (used in) investing activities		878,000			(7,881,035	)		-			-			(7,003,035	)
Net cash provided by (used in) financing activities		-			13,529,267			400,000			(250,000	)		13,679,267

	Year ended December 31, 2022
	Parent			Subsidiaries			VIE and VIE’s subsidiaries			Inter-company elimination			Group consolidated
	(US$)
Net cash used in operating activities		(808,226	)		(5,444,733	)		(3,320,442	)		-			(9,573,401	)
Net cash used in investing activities		-			(45,299,072	)		(6,188,307	)		5,878,307			(45,609,072	)
Net cash provided by financing activities		310,000			51,328,368			-			(5,878,307	)		45,760,061

	Year ended December 31, 2021
	Parent			Subsidiaries			VIE and VIE’s subsidiaries			Inter-company elimination			Group consolidated
	(US$)
Net cash (used in) provided by operating activities		(1,015,145	)		(6,532,445	)		2,314,408			-			(5,233,182	)
Net cash used in investing activities		(25,825,000	)		(8,244,917	)		(3,115,281	)		15,090,000			(22,095,198	)
Net cash provided by financing activities		28,249,093			17,678,168			-			(15,090,000	)		30,837,261

A. [Reserved]

B. Capitalization and Indebtedness

Not applicable.

C. Reasons for the Offer and Use of Proceeds

Not applicable.

8

D. Risk Factors 

An investment in our Ordinary Shares involves a high degree of risk. Before deciding whether to invest in our Ordinary Shares, you should consider carefully the risks described below, together with all of the other information set forth in this annual report. If any of these risks actually occurs, our business, financial condition, results of operations or cash flow could be materially and adversely affected, which could cause the trading price of our Ordinary Shares to decline, resulting in a loss of all or part of your investment. The risks described below are not the only ones that we face. Additional risks not presently known to us or that we currently deem immaterial may also affect our business. You should only consider investing in our Ordinary Shares if you can bear the risk of loss of your entire investment.

Risks Related to Our Business

Risks and uncertainties related to our business include, but are not limited to, the following:

● We have a limited operating history and are subject to the risks encountered by development-stage companies.

● We have incurred substantial losses in the past and may incur losses in the future. There is substantial doubt about our ability to continue as a going concern

● If we cannot manage our growth effectively and efficiently, our results of operations or profitability could be adversely affected.

● We may not be successful in implementing important new strategic initiatives, which may have an adverse impact on our business and financial results.

● We may be required to obtain and maintain additional approvals, licenses or permits applicable to our business, including our graphite anode manufacturing and sales business and our knowledge share platform, which could have a material adverse impact on our business, financial conditions and results of operations.

Risks Related to Our Graphite Anode Manufacturing and Sales Business

Risks and uncertainties related to our graphite anode manufacturing and sales business include, but are not limited to, the following:

● Our graphite anode manufacturing and sales joint venture may not perform as well as we expected.

● Joint venture with which we engage for developing graphite anode manufacturing and sales business presents a number of challenges that could have a material adverse effect on our business and results of operations and cash flows.

● We may not respond quickly to continued innovations.

● Complying with numerous health, safety and environmental regulations is both complex and costly.

● Sunrise Guizhou depends on a few major customers, and the loss of any of which could cause a significant decline in our revenues.

● Sunrise Guizhou faces the risk of fluctuations in the cost, availability, and quality of raw materials, which could adversely affect our results of operations.

● Price volatility of our finished goods.

● Sunrise Guizhou may need additional capital to pursue business objectives and respond to business opportunities, challenges or unforeseen circumstances, and financing may not be available on acceptable terms or at all.

9

Risks Related to Our Corporate Structure

The VIE conducts the knowledge sharing and enterprise service platform and we consolidate the financials of the VIE under the U.S. GAAP for accounting purpose only; however, the VIE Agreements have not been tested in a court of law and are subject to significant risks, as set forth in the following risk factors. For a description of these VIE Agreements, see “ITEM 4. INFORMATION ON THE COMPANY — C. Organizational Structure”.

Risks and uncertainties related to our corporate structure include, but are not limited to, the following:

● If the PRC government finds that the agreements that establish the structure for operating our businesses in China do not comply with PRC regulations relating to the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations.

● We rely on contractual arrangements with the VIE and its subsidiaries, and shareholders for our China operations, which may not be as effective in providing operational control as direct ownership.

● The contractual arrangements we have entered into with the VIE and its shareholders, and any other arrangements and transactions among related parties that we currently have or will have in future may be subject to scrutiny by the PRC tax authorities and they may determine that we owe additional taxes, which could substantially reduce our consolidated net income and the value of your investment.

● The shareholders of the VIE may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition.

● We may lose the ability to use and enjoy assets held by the VIE that are material to the operation of certain portion of our business if the VIE goes bankrupt or become subject to a dissolution or liquidation proceeding.

● As an exempted company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the Nasdaq listing standards; these practices may afford less protection to shareholders than they would enjoy if we complied fully with such corporate governance listing standards.

● As a “controlled company” under the listing rules of the NASDAQ Stock Market, we may choose to exempt our company from certain corporate governance requirements that could have an adverse effect on our public shareholders

● The dual class structure of our ordinary shares has the effect of concentrating voting control with our Chairman, and his interest may not be aligned with the interests of our other shareholders.

Risks Related to Doing Business in China

Risks and uncertainties related to doing business in China include, but are not limited to, the following:

● The Chinese government exerts substantial influence over the manner in which we must conduct our business, and may intervene or influence our operations at any time, which could result in a material change in our operations, significantly limit or completely hinder our ability to offer or continue to offer securities to investors and, and cause the value of our Class A Ordinary Shares to significantly decline or be worthless.

● Recent greater oversight by the Cyberspace Administration of China over data security, particularly for companies seeking to list on a foreign exchange, could adversely impact our business and our securities.

● The Trial Measures and the revised Provisions recently issued by the PRC authorities may subject us to additional compliance requirements in the future.

● A severe or prolonged downturn in the global or Chinese economy could materially and adversely affect our business and our financial condition.

● We face risks related to health epidemics such as the COVID-19, which significantly disrupted our operations and may continue to adversely affect our business, financial condition and results of operations.

10

● Because our business is dependent upon government policies that encourage a market-based economy, change in the political or economic climate in the PRC may impair our ability to operate profitably, if at all.

● PRC laws and regulations governing our current business operations are sometimes vague and uncertain and any changes in such laws and regulations may materially and adversely affect our business and impede our ability to continue our operations.

● Because our business is conducted in RMB and the price of our Class A Ordinary Shares is quoted in United States dollars, changes in currency conversion rates may affect the value of your investments.

● Under the PRC Enterprise Income Tax Law, or the EIT Law, we may be classified as a “resident enterprise” of China, which could result in unfavorable tax consequences to us and our non-PRC shareholders.

● There are significant uncertainties under the EIT Law relating to the withholding tax liabilities of our PRC subsidiaries, and dividends payable by our PRC subsidiaries to our offshore subsidiaries may not qualify to enjoy certain treaty benefits.

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

● Government control in currency conversion may adversely affect our financial condition, our ability to remit dividends, and the value of your investment.

● If we become directly subject to the scrutiny, criticism and negative publicity involving U.S.-listed Chinese companies, we may have to expend significant resources to investigate and resolve the matter which could harm our business operations, stock price and reputation.

● The disclosures in our reports and other filings with the SEC and our other public pronouncements are not subject to the scrutiny of any regulatory bodies in the PRC.

● The Holding Foreign Companies Accountable Act and related regulations all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB. These developments could add uncertainties to our continued listing on the Nasdaq, and Nasdaq may determine to delist our securities if the PCAOB determines that it cannot inspect or fully investigate our auditor.

● Our contractual arrangements with the VIE are governed by the laws of the PRC and we may have difficulty in enforcing any rights we may have under these contractual arrangements.

● The failure to comply with PRC regulations relating to mergers and acquisitions of domestic entities by offshore special purpose vehicles may subject us to severe fines or penalties and create other regulatory uncertainties regarding our corporate structure.

● 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 its registered capital or distribute profits to us, or may otherwise adversely affect us.

● Increases in labor costs in the PRC may adversely affect our business and our profitability.

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

11

Risks Related to Our Ordinary Shares and the Trading Market

Risks and uncertainties related to our Ordinary Shares and the trading market include, but are not limited to, the following:

● If we are a passive foreign investment company for United States federal income tax purposes for any taxable year, United States holders of our Ordinary Shares could be subject to adverse United States federal income tax consequences.

● We have identified several control deficiencies in our internal control over financial reporting. If we fail to maintain an effective system of internal controls over financial reporting, we may not be able to accurately report our financial results or prevent fraud.

● We do not intend to pay dividends for the foreseeable future.

● The market price of our Class A Ordinary Shares may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the initial public offering price.

● As a foreign private issuer, we are not subject to certain U.S. securities law disclosure requirements that apply to a domestic U.S. issuer, and are exempt from certain Nasdaq corporate governance standards applicable to U.S. issuers, which may limit the information publicly available to our investors and afford them less protection than if we were a U.S. issuer.

● If we cannot satisfy the listing requirements and other rules of Nasdaq Capital Market, our securities may be delisted, which could negatively impact the price of our securities and your ability to sell them.

Risks Related to Our Business

We have a limited operating history and are subject to the risks encountered by development-stage companies.

Our PRC operating entities have been in business since 2014 as a consulting company. In 2022, we entered into a new business, manufacturing and sales of graphite anode materials, by forming a joint venture (Sunrise Guizhou) in Guizhou Province, China. As a development-stage company, our business strategies and model are constantly being tested by the market and operating results, and we adjust the allocation of our resources accordingly. As such, our business may be subject to significant fluctuations in operating results in terms of amounts of revenues and percentages of total with respect to the business segments.

We are, and expect for the foreseeable future to be, subject to all the risks and uncertainties, inherent in a development-stage business. As a result, we must establish many functions necessary to operate a business, including expanding our managerial and administrative structure, assessing and implementing our marketing program, implementing financial systems and controls and personnel recruitment. Accordingly, you should consider our prospects in light of the costs, uncertainties, delays and difficulties frequently encountered by companies with a limited operating history. These risks and challenges are, among other things:

● we operate in industries that are or may in the future be subject to increasing regulation by various governmental agencies in China;

● we may require additional capital to develop and expand our operations which may not be available to us when we require it;

● our marketing and growth strategy may not be successful;

● our business may be subject to significant fluctuations in operating results; and

● we may not be able to attract, retain and motivate qualified professionals.

Our future growth will depend substantially on our ability to address these and the other risks described in this annual report. If we do not successfully address these risks, our business would be significantly harmed.

We have incurred substantial losses in the past and may incur losses in the future. There is substantial doubt about our ability to continue as a going concern. 

As discussed in “Note 3” to the consolidated financial statements to this annual report, we have suffered significant losses from operations resulting in a significant decrease in working capital that raises substantial doubt about our ability to continue as a going concern. Our net revenue was $45,050,405, $38,125,668 and $7,409,272 for the years ended December 31, 2023, 2022 and 2021, respectively. Our net loss was $32,920,724, $23,124,402 and $8,714,332 for the year ended December 31, 2023, 2022 and 2021, respectively. The losses during the reporting periods were mainly due to the material and negative impact of the COVID-19 pandemic on our business, and the large capital investment injected by us into the new business venture, Sunrise Guizhou, to enter into the manufacture and sales of lithium-ion power battery anode materials. Our limited history of operation makes it difficult to evaluate our future prospects.

12

In assessing its liquidity, management monitors and analyzes the Company’s cash on-hand, its ability to generate sufficient revenue sources and ability to obtain additional financial support in the future, and its operating and capital expenditure commitments.

Management’s plan to alleviate the substantial doubt about our ability to continue as a going concern as the following: working to improve our liquidity and working capital sources, mainly through cash flow from its operations, renewal of bank borrowings, equity or debt offering and borrowing from related parties. In order to fully implement our business plan and recover from continuing losses, we may also seek equity financing from outside investors. There can be no assurance that additional financing, if required, would be available on favorable terms or at all and/or that the foregoing plans and arrangements will be sufficient to fund our ongoing capital expenditures, working capital, and other requirements.

If we cannot manage our growth effectively and efficiently, our results of operations or profitability could be adversely affected.

We are expanding our operations into the graphite anode manufacturing and sales business. In April 2022, we entered into an investment agreement with certain partners to form a joint venture, Sunrise Guizhou, which is dedicated to the production of lithium-ion power battery anode materials. As of the date of this annual report, we have made substantial investment into the new venture. Such expansion has placed, and will continue to place, substantial demands on our financial, managerial, operational, technological and other resources. Our expansion has placed significant demands on us to maintain the quality of our services to ensure that our brand does not suffer as a result of any deviations, whether actual or perceived, in the quality of our services. In order to manage and support our growth, we must continue to improve our existing operational and administrative systems and our quality control, and recruit, train and retain additional qualified professionals as well as other administrative and sales and marketing personnel, particularly as we expand into new business ventures and launch new business initiatives. We may not be able to effectively and efficiently manage the growth of our operations, recruit and retain qualified personnel and integrate new expansion into our operations. As a result, our results of operations or profitability could be adversely affected.

We may not be successful in implementing important new strategic initiatives, which may have an adverse impact on our business and financial results.

There is no assurance that we will be able to implement important strategic initiatives in accordance with our expectations, which may result in an adverse impact on our business and financial results. For example, our latest strategic initiative, establishing our graphite anode manufacturing and sales joint venture, Sunrise Guizhou, is designed to create growth, improve our results of operations and drive long-term shareholders value; however, our management may lack required experience, knowledge, insight, or human and capital resources to carry out the effective implementation to expand into new spaces outside of our current focuses. As such, we may not be able to realize our expected growth, and our business and financial results will be adversely impacted.

Increasing competition within the enterprise service and knowledge sharing industries could have an impact on our business prospects.

The enterprise service and knowledge sharing are industries where new competitors can easily enter into since there are no significant barriers to entry. We also face many competitors in the knowledge sharing industry where a number of competitors have been in business longer than us. Competing companies may have significantly greater financial and other resources than we have and may offer services that are more attractive to prospective clients; increased competition would have a negative impact on both our revenues and our profit margins. 

We may be required to obtain and maintain additional approvals, licenses or permits applicable to our business, including our graphite anode manufacturing and sales business and our knowledge share platform, which could have a material adverse impact on our business, financial conditions and results of operations.

Before we develop certain new products in our graphite anode manufacturing and sales business, we must obtain a variety of approvals from local and municipal governments in the PRC for the operating of our graphite anode manufacturing and sales business. We have obtained the following in relation to our graphite anode manufacturing and sales business: construction permits, fire acceptance record certificate, sewage discharge permit, environmental impact statements, and product quality system certification, including: ISO 14001:2015, ISO 45001:2018, ISO 9001:2015, ISO 16949:2016. In addition, based on the progress of our relevant construction projects, we are applying for other necessary licenses that are required by relevant PRC rules. There is no assurance that we will be able to obtain all required licenses, permits, or approvals from government authorities. If we fail to obtain all required licenses, permits or approvals, we may be unable to expand our operations.

The operation of our knowledge sharing platform is subject to governmental supervision and regulation by the relevant PRC governmental authorities, including the Ministry of Commerce, or MOFCOM, the Ministry of Industry and Information Technology, or MIIT, the National Radio and Television Administration or NRTA, and other governmental authorities in charge of the relevant categories of services offered by us. Together, these government authorities promulgate and enforce regulations that cover many aspects of the operation of online services we provide on our APP, including entry into this online service industry, the scope of permissible business activities, licenses and permits for various business activities, and foreign investment.

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We currently hold an ICP License (the Administrative Measures on Internet Information Services, or the Internet Measures, promulgated by the State Council requires commercial internet content-related services operators to obtain a VATS (“value added telecommunications service”) License for internet content provision business, or the ICP License). Although we do not currently believe we are required to hold any other licenses, we may be required to obtain additional licenses, permits or approval, given the significant uncertainties of the interpretation and implementation of certain regulatory requirements applicable to our business. See “Regulations— Regulations Related to Online Transmission of Audio-Visual Programs.”

There are uncertainties with respect to the interpretation and implementation of existing and future laws and regulations governing our business activities. As of the date of this annual report, we (i) have received from PRC authorities the material licenses, permissions, and approvals needed to engage in the businesses currently conducted in the PRC, (ii) no such permission or approval has been denied, and (iii) based on the progress of our relevant construction projects, we are applying for other necessary licenses that are required by relevant PRC rules. However, we cannot assure you that any of these entities will be able to receive clearance of such compliance requirements in a timely manner, or at all. Any failure of these entities to fully comply with such compliance requirements may cause our PRC subsidiaries, or the VIE and its subsidiaries to be unable to begin their new businesses or operations in the PRC, subject them to fines, relevant new businesses or operations suspension for rectification, or other sanctions, which may materially and adversely affect our business, financial conditions and results of operations.

The successful operation of our online service depends upon the performance and reliability of the internet infrastructure and fixed telecommunication networks in China.

Our online service depends on the performance and reliability of the internet infrastructure in China. Almost all access to the internet is maintained through state-owned telecommunication operators under the administrative control and regulatory supervision of the MIIT. In addition, the national networks in China are connected to the internet through international gateways controlled by the PRC government. These international gateways are the only channels through which a domestic user can connect to the internet. It is unpredictable whether a more sophisticated internet infrastructure will be developed in China. We may not have access to alternative networks in the event of disruptions, failures or other problems with China’s internet infrastructure. In addition, the internet infrastructure in China may not support the demands associated with continued growth in internet usage.

We rely on China Telecommunications Corporation, or China Telecom, and China United Network Communications Group Company Limited, or China Unicom, to provide us with network services and data center hosting services. We have limited access to alternative services in the event of disruptions, failures or other problems with the fixed telecommunications networks of these companies, or if these companies otherwise fail to provide the services. Any unscheduled service interruption could damage our reputation and result in a decrease in our revenues. Furthermore, we have no control over the costs of the services provided by these telecommunication companies. If the prices that we pay for telecommunications and internet services rise significantly, our gross margins could be adversely affected. In addition, if internet access fees or other charges to internet users increase, our user traffic may decrease, which in turn may harm our revenues.

Cyber-attacks or other failures in our telecommunications or information technology systems, or those of our collaborators, third-party logistics providers, distributors or other contractors or consultants, could result in information theft, data corruption and significant disruption of our business operations.

We, our programs, our collaborators, third-party logistics providers, distributors and other contractors and consultants utilize information technology, or IT, systems and networks to process, transmit and store electronic information, including but not limited to intellectual property, proprietary business information and personal information, in connection with our business activities. Our internal IT systems and those of current and future third parties on which we rely may fail and are vulnerable to breakdown, breach, interruption or damage from cyber incidents, employee error or malfeasance, theft or misuse, sophisticated nation-state and nation-state-supported actors, unauthorized access, natural disasters, terrorism, war, telecommunication and electrical failures or other compromises. As use of digital technologies has increased, cyber incidents, including third parties gaining access to employee accounts using stolen or inferred credentials, computer malware, viruses, spamming, phishing attacks, denial-of-service attacks or other means, and deliberate attacks and attempts to gain unauthorized access to computer systems and networks, have increased in frequency, intensity, and sophistication. These threats pose a risk to the security of our, our programs’, our collaborators’, third-party logistics providers’, distributors’ and other contractors’ and consultants’ systems and networks, and the confidentiality, availability and integrity of our data. There can be no assurance that we will be successful in preventing cyber-attacks or successfully mitigating their effects. We may not be able to anticipate all types of security threats, and we may not be able to implement preventive measures effective against all such security threats. The techniques used by cyber criminals change frequently, may not be recognized until launched, and can originate from a wide variety of sources, including outside groups such as external service providers, organized crime affiliates, terrorist organizations or hostile foreign governments or agencies. Similarly, there can be no assurance that our collaborators, third-party logistics providers, distributors and other contractors and consultants will be successful in protecting our clinical and other data that is stored on their systems. Any loss of clinical trial data from our completed or ongoing clinical trials for any of our product candidates could result in delays in our development and regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Although to our knowledge we have not experienced any such material system failure or material security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of development programs and business operations.

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Any cyber-attack that leads to unauthorized access, use, or disclosure of personal information, data breach or destruction or loss of data could result in a violation of applicable U.S. and international privacy, data protection and other laws and regulations, subject us to litigation and governmental investigations, proceedings and regulatory actions by federal, state and local regulatory entities in the United States and by international regulatory entities, resulting in exposure to material civil and/or criminal liability, cause us to breach our contractual obligations, which could result in significant legal and financial exposure and reputational damages. As cyber threats continue to evolve, we may be required to incur significant additional expenses in order to implement further data protection measures or to remediate any information security vulnerability. Further, our general liability insurance and corporate risk program may not cover all potential claims to which we are exposed and may not be adequate to indemnify us for all liability that maybe imposed, which could have a material adverse effect on our business and prospects. There can be no assurance that the limitations of liability in our contracts would be enforceable or adequate or would otherwise protect us from liabilities or damages as a result of the events referenced above.

If we fail to hire, train or retain qualified managerial and other employees, our business and results of operations could be materially and adversely affected.

We place substantial reliance on the knowledge sharing and enterprise service industry experience and knowledge of our senior management team as well as their relationships with other industry participants. The loss of the services of one or more members of our senior management could hinder our ability to effectively manage our business and implement our growth strategies. Finding suitable replacements for our current senior management could be difficult, and competition for such personnel of similar experience is intense. If we fail to retain our senior management, our business and results of operations could be materially and adversely affected.

Our personnel are critical to maintaining the quality and consistency of our services, brand and reputation. It is important for us to attract qualified managerial and other employees who have experience in consulting services and are committed to our service approach. There may be a limited supply of such qualified individuals. We must hire and train qualified managerial and other employees on a timely basis to keep pace with our rapid growth while maintaining consistent quality of services across our operations. We must also provide continuous training to our managerial and other employees so that they are equipped with up-to-date knowledge of various aspects of our operations and can meet our demand for high-quality services. If we fail to do so, the quality of our services may decrease, which in turn, may cause a negative perception of our brand and adversely affect our business.

We may be involved from time to time in legal proceedings and commercial or contractual disputes, which could have a material adverse effect on our business, results of operations and financial condition.

From time to time, we may be involved in legal proceedings and commercial disputes. Such proceedings or disputes are typically claims that arise in the ordinary course of business, including, without limitation, commercial or contractual disputes, and other disputes with customers and suppliers, intellectual property matters, tax matters and employment matters. There can be no assurance that such proceedings and claims, should they arise, will not have a material adverse effect on our business, results of operations and financial condition.

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Any failure to protect our trademarks and other intellectual property rights could have a negative impact on our business.

We believe our key trademark, “Sunrise” and “晖阳,” for which we have obtained trademark protection , and 27 patents , are critical to our success. Any unauthorized use of our trademarks or other intellectual property rights could harm our competitive advantages and business. Historically, China has not protected intellectual property rights to the same extent as the United States, and infringement of intellectual property rights continues to pose a serious risk of doing business in China. Monitoring and preventing unauthorized use are difficult. The measures we take to protect our intellectual property rights may not be adequate. Furthermore, the application of laws governing intellectual property rights in China and abroad is uncertain and evolving, and could involve substantial risks to us. If we are unable to adequately protect our brand, trademarks and other intellectual property rights, we may lose these rights and our business may suffer materially.

Risks Related to Graphite Anode Manufacturing and Sales Business

Our graphite anode manufacturing and sales joint venture may not perform as well as we expected.

In 2022, Zhuhai Zibo entered into an Investment Agreement with 13 other parties to form a graphite anode manufacturing and sales joint venture, Sunrise Guizhou. As of the date of this annual report, Zhuhai Zibo has invested a total of RMB126,480,000 ($19,858,670) in Sunrise Guizhou. While we believe the joint venture could give the Company new potential growth, it may not perform as well as we expected and, as a result, could impact the Company’s financial performance.

Joint venture with which we engage for developing graphite anode manufacturing and sales business presents a number of challenges that could have a material adverse effect on our business and results of operations and cash flows.

The success of our overall development plans for our graphite anode manufacturing and sales business depends on our relationships with our joint venture partners. Transactions included in developing a joint venture typically involve a number of risks and present financial, managerial and operational challenges, including the existence of unknown potential disputes, liabilities or contingencies that arise after entering into the joint venture related to the counterparties to such joint venture. We could experience financial or other setbacks, if transactions encounter unanticipated problems due to challenges, including problems related to execution or integration. Any of these risks could reduce our revenues or increase our expenses, which could adversely affect our results of operations and cash flows.

We require cooperation from our joint venture partners to establish and operate the graphite anode manufacturing and sales business.

To successfully establish and operate the graphite anode manufacturing and sales business, in addition to capital contributions, we need our partner’s expertise in a number of areas, such as advanced technology R&D, marketing and sales. In the event that we cannot maintain our cooperative relationships with our joint venture partners, on terms favorable to us or at all, we will need to source other business partners, and we may lose access to key strategic assets, which could result in material and adverse effects on our business and results of operations.

We may not respond quickly to continued innovations in the graphene products industry.

We believe that technological advances in graphite manufacture will continue to evolve and new technologies will continue to develop. Advances in the manufacture of graphite could allow our competitors to develop products faster or produce more efficiently or at lower cost than we can. If we are unable to adapt or incorporate technological advances into our operations, our production facilities could become less competitive. Further, it may be necessary for us to incur significant expenditures to acquire any new technologies and retrofit our current processes to remain competitive.

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We must continuously invest in research and development.

To remain competitive, we must continuously invest in research and development which can be costly. Much of our technology and intellectual property portfolio is at an early stage of development, and we may not be able to continue to identify, develop, exploit, market and, in certain cases, secure regulatory approval for, innovative products in a timely manner or at all.

Risks of relationships with third parties in respect of research and development.

Although we have resources and staff dedicated to research and development, market conditions and other factors such as management efficiencies may make it required or preferable for us to enter into arrangements with third parties for the development, production and commercialization of graphite. If we are unable to negotiate favorable terms for such arrangements with respect to intellectual property or otherwise or disagreements arise between us and any partner or potential partner, our business, financial condition, and results of operations may be adversely affected. Further, there can be no assurance that any otherwise successful collaborations will generate products or intellectual property which can be commercialized or will result in any revenue or cash flow.

Government support of electric vehicles and renewable energy may be reduced.

Demand for and development of the products that incorporate our graphite products, including electric vehicles, renewable energy technologies, and power storage technologies, are significantly affected by government policies, support, and subsidies. Any reduction in government support for relevant industries or technologies may adversely affect our business.

Price volatility of our finished goods.

Whether due to the entry into the market of new manufacturers, the development of new graphite products manufacturing technologies, changes in downstream technologies, or other causes, there may be an increase in the availability of graphite products in the market relative to the demand for those products. In the event that production exceeds demand, we may not be able to negotiate favorable pricing for the sale of our products, and there is no assurance that we will maintain or achieve growth in revenue, profitability or cash flow from our graphite products.

Complying with numerous health, safety and environmental regulations is both complex and costly.

Sunrise Guizhou’s graphite manufacturing business is subject to numerous health, safety, and environmental requirements in the PRC. Such laws and regulations govern, among other matters, air emissions, wastewater discharges, solid and hazardous waste management and the use, composition, handling, distribution, and transportation of hazardous materials. Many such laws and regulations are becoming increasingly stringent (and may impose strict liability) and the cost of compliance with these requirements can be expected to increase over time. Although we believe that our operations will comply with applicable regulations, any failure to comply with these laws and regulations could result in us incurring costs and/or liabilities, including as a result of regulatory enforcement, personal injury, property damage and claims and litigation resulting from such events, which could adversely affect our results of operations and financial condition.

Industrial operations can be hazardous.

Accidents involving the mishandling of heavy equipment or hazardous substances could cause severe or critical damage or injury to property and human health. Such an event could result in civil lawsuits and/or regulatory enforcement proceedings, both of which could lead to significant liabilities. Any damage to persons, equipment or property or other disruption of our business could result in significant additional costs to replace, repair and insure assets, which could negatively affect our business, prospects, operating results and financial condition.

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Sunrise Guizhou depends on a few major customers, and the loss of any of which could cause a significant decline in our revenues.

Sunrise Guizhou’s customers are manufacturers of industrial and consumer energy storage lithium-ion batteries, such as batteries for electric vehicles and electric ships, and smart consumer electronics. For fiscal year ended December 31, 2023, Sunrise Guizhou had 23 customers. Three customers accounted for more than 10% of Sunrise Guizhou’s total sales, accounting for 38%, 25%, and 11%, respectively.

For fiscal year ended December 31, 2022, Sunrise Guizhou had 16 customers. Four customers accounted for more than 10% of Sunrise Guizhou’s total sales, accounting for 28%, 20%, 19% and 19% respectively.

If any of its key customers reduces, delays or cancels its orders for any reason, or the financial condition of any of its key customers deteriorates, Sunrise Guizhou’s business could be seriously harmed. Similarly, a failure to manufacture sufficient quantities of products to meet the demands of these customers may cause Sunrise Guizhou to lose business. Furthermore, if Sunrise Guizhou experiences difficulties in the collection of its accounts receivables from its key customers, the results of our operation may be materially and adversely affected. 

Sunrise Guizhou faces the risk of fluctuations in the cost, availability, and quality of raw materials, which could adversely affect our results of operations.

The cost, availability, and quality of the principle raw materials, such as asphalt coke, petroleum coke, needle coke, and American petroleum coke, are essential to Sunrise Guizhou’s operations. It purchases these raw materials from suppliers in China, the United States, Romania, and Indonesia, in order to meet the requirements of different customers, as well as to maintain a diversified supplier base which is beneficial to a stable supply chain. Lack of availability of raw materials, whether due to shortages in supply, delays or interruptions in processing, failure of timely delivery, or otherwise, could interrupt Sunrise Guizhou’s operations and adversely affect our financial results. If the costs of raw materials increases due to policy changes, significant market price fluctuation, or any other causes that generally cannot be controlled by Sunrise Guizhou, Sunrise Guizhou’s business and results of operations could be adversely affected.

Further, defective raw materials or raw materials with quality deficiencies could subject Sunrise Guizhou to product liability claims or legal actions, which circumstances could adversely affect Sunrise Guizhou’s financial conditions and results of operations.

Sunrise Guizhou entrusts third-party contract manufacturers for certain processes for the manufacturing of its graphite anode products.

As of the date of this annual report, Sunrise Guizhou entrusts certain processes of the manufacturing of its graphite anode products to third-party contractors, who might be unable to timely manufacture its products or produce the quantity and quality required to meet its commercial needs, or may not be able to execute our manufacturing procedures appropriately, or may not perform as agreed upon, or to produce, store and distribute its products satisfactorily. Any of the above could adversely affect the business results of operations and financial condition.

Sunrise Guizhou may need additional capital to pursue business objectives and respond to business opportunities, challenges or unforeseen circumstances, and financing may not be available on acceptable terms or at all.

As Sunrise Guizhou intends to continue to make investments to support the growth of its business, it may require additional capital to pursue its business objectives and respond to business opportunities, challenges or unforeseen circumstances, including expanding manufacturing capacities, developing new products and service offerings, increasing sales and marketing expenditures, and engage customers through expanded channels, enhancing its operating infrastructure and acquiring complementary businesses and technologies. Accordingly, Sunrise Guizhou may need to engage in equity or debt financing to secure additional funds. However, additional funds may not be available when needed, on terms that are acceptable, or at all. Repayment of any such debt may divert a substantial portion of cash flow to repay principal and interest on such debt, which would reduce the funds available for expenses, capital expenditures, acquisitions and other general corporate purposes. Sunrise Guizhou may suffer as a result of any default and foreclosure on assets pledged to secure any such financing, if the operating cash flow is insufficient to service debt obligations, which could in turn result in acceleration of obligations to repay the indebtedness and limit sources of financing.

Volatility in the credit markets may also have an adverse effect on Sunrise Guizhou’s ability to obtain debt financing. If it raises additional funds through further issuance of equity or convertible debt securities, our existing shareholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our Ordinary Shares. If Sunrise Guizhou is unable to obtain adequate financing or financing on terms satisfactory to it when required, our ability to continue to pursue our business objectives and to respond to business opportunities, challenges or unforeseen circumstances could be significantly limited, and our business, financial condition, results of operations and prospects could be adversely affected.

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Risks Related to Our Corporate Structure

We control and receive the economic benefits of the business operations of the VIE through the VIE Agreements solely because we met the conditions for consolidation of the VIE under the U.S. GAAP for accounting purpose; however, the VIE Agreements have not been tested in a court of law and are subject to significant risks, as set forth in the following risk factors. For a description of these VIE Agreements, see “ITEM 4. INFORMATION ON THE COMPANY — C. Organizational Structure”.

If the PRC government finds that the agreements that establish the structure for operating our businesses in China do not comply with PRC regulations relating to the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations.

Foreign ownership of certain parts of our businesses including the value-added telecommunications services, or the VATS, is subject to restrictions under current PRC laws and regulations. For example, the ultimate foreign equity ownership in a VATS provider may not exceed 50%. Also, for a foreign investor contemplating to acquire any equity interest in a VATS business in China, it must satisfy a number of stringent performance and operational experience requirements. In addition, to conduct any VATS business in China, foreign investors have to set up foreign-invested enterprises and obtain a relevant telecommunications business operating license. See “Regulations—Regulations Related to Foreign Investment.”

In light of the above restrictions and requirements, we currently operate our knowledge sharing and enterprise service platform through SDH, a VIE entity, through a series of contractual arrangements, as a result of which, under United States generally accepted accounting principles, the assets and liabilities of the VIE are treated as our assets and liabilities and the results of operations of the VIE are treated in all aspects as if they were the results of our operations. For a description of these contractual arrangements, see “Business—Contractual Arrangements between GIOP BJ, the VIE and Its Shareholders” and “Related Party Transactions—Contractual Arrangements with GIOP BJ, the VIE and Its Shareholders.”

In the opinion of our PRC legal counsel, Jincheng Tongda & Neal Law Firm (“JT&N”), based on its understandings of the relevant PRC laws and regulations, (i) the ownership structures of the VIE in China and GIOP BJ are not in violation of applicable PRC laws and regulations currently in effect; and (ii) each of the contracts among GIOP BJ, the VIE and its shareholders is legal, valid, binding and enforceable in accordance with its terms and applicable PRC laws. However, our PRC legal counsel has also advised us that there are substantial uncertainties regarding the interpretation and application of current or future PRC laws and regulations. Accordingly, the PRC regulatory authorities may ultimately take a view contrary to the opinion of our PRC legal counsel. 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 VIE are found to be in violation of any PRC laws or regulations, if the contractual arrangements among GIOP BJ, the VIE and its shareholders are determined to be illegal or invalid by a PRC court, arbitral tribunal or regulatory authorities, or if we or the VIE fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion to take action in dealing with such violations or failures, including:

● revoking the business and/or operating licenses of GIOP BJ or the VIE;

● discontinuing or restricting the operations of GIOP BJ or the VIE;

● imposing conditions or requirements with which we, GIOP BJ, or the VIE may not be able to comply;

● requiring us, GIOP BJ, or the VIE to restructure the relevant ownership structure or operations which may significantly impair the rights of the holders of our Ordinary Shares in the equity of the VIE;

● restricting or prohibiting our use of the proceeds from our initial public offering to finance our business and operations in China; and\or

● imposing fines.

The imposition of any of these penalties would result in a material and adverse effect on our ability to conduct our business. In addition, it is unclear what impact the PRC government actions would have on us and on our ability to consolidate the financial results of the VIE in our consolidated financial statements, if the PRC government authorities were to find our legal structure and contractual arrangements to be in violation of PRC laws and regulations. If the imposition of any of these government actions causes us to lose our right to direct the activities of the VIE or our right to receive substantially all of the economic benefits and residual returns from the VIE and we are not able to restructure our ownership structure and operations in a satisfactory manner, we would no longer be able to consolidate the financial results of the VIE in our consolidated financial statements. Either of these results, or any other significant penalties that might be imposed on us in this event, would have a material adverse effect on our financial condition and results of operations.

We rely on contractual arrangements with the VIE and its subsidiaries, and shareholders for our China operations, which may not be as effective in providing operational control as direct ownership.

We have relied and expect to continue to rely on contractual arrangements with the VIE, its subsidiaries and shareholders to operate our business in China. For a description of these contractual arrangements, see “Business—Contractual Arrangements between GIOP BJ, the VIE and Its Shareholders” and “Related Party Transactions— Contractual Arrangements with GIOP BJ, the VIE and Its Shareholders.” These contractual arrangements may not be as effective in providing us with control over the VIE and its subsidiaries as direct ownership. We have no direct or indirect equity interests in the VIE or any of its subsidiaries.

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If we had direct ownership of the VIE and its subsidiaries, we would be able to exercise our rights as a shareholder to effect changes in the board of directors of the VIE and its subsidiaries, which in turn could effect changes, subject to any applicable fiduciary obligations, at the management level. But under the current contractual arrangements, as a legal matter, if the VIE or any of its subsidiaries and shareholders fails to perform their obligations under these contractual arrangements, we may have to incur substantial costs and resources to enforce such arrangements and rely on legal remedies under PRC law, including seeking specific performance or injunctive relief and claiming damages, which may not be effective. For example, if the shareholders of the VIE were to refuse to transfer their equity interest in the VIE to us or our designee when we exercise the call option pursuant to these 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 fulfill their contractual obligations.

Many of these contractual arrangements are governed by PRC law and provide for the resolution of disputes through arbitration in the PRC. Accordingly, these contracts would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. The legal environment in the PRC is not as developed as in some other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements. In the event we are unable to enforce these contractual arrangements, we may not be able to exert effective control over our affiliated entities, and our ability to conduct our business may be negatively affected.

The contractual arrangements we have entered into with the VIE and its shareholders, and any other arrangements and transactions among related parties that we currently have or will have in future may be subject to scrutiny by the PRC tax authorities and they may determine that we owe additional taxes, which could substantially reduce our consolidated net income 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. 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 its tax liabilities without reducing GIOP BJ’s 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.

Because we are a Cayman Islands holding company and conduct a knowledge sharing platform through the VIE in China, if we fail to comply with applicable PRC law, we could be subject to severe penalties and our business could be adversely affected.

We are a Cayman Islands holding company and operate a substantial portion of our business through the VIE in China through VIE Agreements, as a result of which, under United States generally accepted accounting principles, the assets and liabilities of the VIE are treated as our assets and liabilities and the results of operations of the VIE are treated in all respects as if they were the results of our operations. There are uncertainties regarding the interpretation and application of PRC laws, rules and regulations, including but not limited to the laws, rules and regulations governing the validity and enforcement of the VIE Agreements between GIOP BJ and the VIE.

The Provisions Regarding Mergers and Acquisitions of Domestic Projects by Foreign Investors (the “M&A Rules”) requires an overseas special purpose vehicle that are controlled by PRC companies or individuals formed for the purpose of seeking a public listing on an overseas stock exchange through acquisitions of PRC domestic companies using shares of such special purpose vehicle or held by its shareholders as considerations to obtain the approval of the China Securities Regulatory Commission, or the CSRC, prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange. However, the application of the M&A Rules remains unclear. If CSRC approval is required, it is uncertain whether it would be possible for us to obtain the approval. Any failure to obtain or delay in obtaining CSRC approval for such an offering would subject us to sanctions imposed by the CSRC and other PRC regulatory agencies.

Furthermore, on July 10, 2021, the Cyberspace Administration of China (“CAC”) publicly issued the Measures for Cybersecurity Censorship (Revised Draft for Comments) aiming to, upon its enactment, replace the existing Measures for Cybersecurity Censorship. The draft measures extend the scope of cybersecurity reviews to data processing operators engaging in data processing activities that affect or may affect national security, including listing in a foreign country. If the enacted version of the draft measures mandates clearance of cybersecurity review and other specific actions to be completed by companies, we face uncertainties as to whether such clearance is required for our offerings and whether such clearance can be timely obtained, or at all.

If GIOP BJ, the VIE or their ownership structure or the VIE Agreements are determined to be in violation of any existing or future PRC laws, rules or regulations, or GIOP BJ or the VIE 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 of GIOP BJ or the VIE;

● discontinuing or restricting the operations of GIOP BJ or the VIE;

● imposing conditions or requirements with which we, GIOP BJ, or the VIE may not be able to comply;

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● requiring us, GIOP BJ, or the VIE to restructure the relevant ownership structure or operations which may significantly impair the rights of the holders of our ordinary shares in the equity of the VIE; and\or 

● imposing fines.

We cannot assure you that the PRC courts or regulatory authorities may not determine that our corporate structure and VIE Agreements violate PRC laws, rules or regulations. If the PRC courts or regulatory authorities determine that our contractual arrangements are in violation of applicable PRC laws, rules or regulations, the VIE Agreements will become invalid or unenforceable, and the VIE will not be treated as VIE entities and we will not be entitled to treat the VIE’s assets, liabilities and results of operations as our assets, liabilities and results of operations, which could effectively eliminate the assets, revenue and net income of the VIE from our balance sheet, which would most likely require us to cease conducting our business and would result in the delisting of our Class A Ordinary Shares from the Nasdaq Capital Market and a significant impairment in the market value of our Class A Ordinary Shares.

The shareholders of the VIE may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition.

Almost all of our beneficiary owners hold equity interests in the VIE. They may have conflicts of interest with us. Conflicts of interest may arise between the dual roles of them who are both shareholders of our Company and shareholders of SDH, the VIE. These shareholders may breach, or cause the VIE to breach, or refuse to renew, the existing contractual arrangements we have with them and SDH, which would have a material and adverse effect on our ability to effectively control the VIE and receive economic benefits from it. 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, except that we could exercise our purchase option under the exclusive option agreements with these shareholders to request them to transfer all of their equity interests in the VIE to a PRC entity or individual designated by us, to the extent permitted by PRC law. If we cannot resolve any conflicts of interest or disputes between us and those individuals, we would have to rely on legal proceedings, which may materially disrupt our business. There is also substantial uncertainty as to the outcome of any such legal proceeding.

Uncertainties exist with respect to the interpretation and implementation of the Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations.  

On March 15, 2019, the National People’s Congress approved the Foreign Investment Law, which has come into effect on January 1, 2020 and replaced the trio of existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary regulations. 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 investments. However, since it is relatively new, uncertainties still exist in relation to its interpretation and implementation. For instance, under the Foreign Investment Law, “foreign investment’’ refers to the investment activities directly or indirectly conducted by foreign individuals, enterprises or other entities in China. Though it does not explicitly classify VIE Agreements as a form of foreign investment, there is no assurance that operation conducted by foreign investors or foreign-invested enterprises via contractual arrangement would not be interpreted as a type of indirect foreign investment activities under the definition in the future. In addition, the definition contains a catch-all provision which includes investments made by foreign investors through means stipulated in laws or administrative regulations or other methods prescribed by the State Council. Therefore, it still leaves leeway for future laws, administrative regulations or provisions promulgated by the Stale Council to provide for VIE Agreements as a form of foreign investment. In any of these cases, it will be uncertain whether the VIE Agreements will be deemed to be in violation of the market access requirements for foreign investment under the PRC laws and regulations. Furthermore, if future laws, administrative regulations or provisions prescribed by the State Council mandate further actions to be taken by companies with respect to existing VIE Agreements, 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, corporate governance and business operations.

The dual class structure of our ordinary shares has the effect of concentrating voting control with our Chairman, and his interest may not be aligned with the interests of our other shareholders.

We have adopted a dual-class voting structure, consisting of Class A Ordinary Shares and Class B Ordinary Shares. Under this structure, holders of Class A Ordinary Shares are entitled to one vote per Class A Ordinary Share, and holders of Class B Ordinary Shares are entitled to twenty votes per Class B Ordinary Share, which may cause the holders of Class B Ordinary Shares to have an unbalanced, higher concentration of voting power. As of the date of this annual report, Haping Hu, our CEO and chairman of the board of directors, beneficially owns 1,573,189, or 8.04% of our issued Class A Ordinary Shares, and 6,567,272, or 100%, of our issued Class B Ordinary Shares, representing approximately 88.07% of the voting rights in our Company. As a result, until such time as Haiping Hu’s voting power is below 50%, he, as the controlling shareholder, has substantial influence over our business, including decisions regarding mergers, consolidations and the sale of all or substantially all of our assets, election of directors, and other significant corporate actions. He may take actions that are not in our best interest or in the best interest of other shareholders. These corporate actions may be taken even if they are opposed by other shareholders. Further, such concentration of voting power may discourage, prevent, or delay the consummation of change of control transactions that shareholders may consider favorable, including transactions in which shareholders might otherwise receive a premium for their shares. Future issuances of Class B Ordinary Shares may also be dilutive to the holders of Class A Ordinary Shares. As a result, the market price of our Class A Ordinary Shares could be adversely affected.

21

As a “controlled company” under the listing rules of the NASDAQ Stock Market, we may choose to exempt our company from certain corporate governance requirements that could have an adverse effect on our public shareholders.

As of the date of this annual report, Haiping Hu, our CEO and chairman of the board of directors, beneficially owns the majority of the voting power of our outstanding Ordinary Shares. Under NASDAQ Listing Rules, a company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including the requirement that a majority of our directors be independent, as defined in the NASDAQ Listing Rules, and the requirement that our compensation and nominating and corporate governance committees consist entirely of independent directors. Although we do not intend to rely on the “controlled company” exemption under the Nasdaq listing rules, we could elect to rely on this exemption in the future if we meet certain disclosure requirements. If we elect to rely on the “controlled company” exemption, a majority of the members of our board of directors might not be independent directors and our nominating and corporate governance and compensation committees might not consist entirely of independent directors. Accordingly, during any time while we remain a controlled company relying on the exemption and during any transition period following a time when we are no longer a controlled company, you would not have the same protections afforded to shareholders of companies that are subject to all of the NASDAQ Stock Market corporate governance requirements. Our status as a controlled company could cause our Class A Ordinary Share to look less attractive to certain investors or otherwise harm our trading price.

We may lose the ability to use and enjoy assets held by the VIE that are material to the operation of certain portion of our business if the VIE goes bankrupt or become subject to a dissolution or liquidation proceeding.

As part of our contractual arrangements with the VIE, the VIE and its subsidiaries hold certain assets that are material to the operation of certain portion of our business, including intellectual property and licenses. If the VIE goes bankrupt and all or part of its 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. Under the contractual arrangements, the VIE may not, in any manner, sell, transfer, mortgage or dispose of their assets or legal or beneficial interests in the business without our prior consent. If the VIE undergoes a voluntary or involuntary liquidation proceeding, independent third-party creditors may claim rights to some or all of these assets, thereby hindering our ability to operate our business, which could materially and adversely affect our business, financial condition and results of operations.

Because we are a Cayman Islands exempted company and all of our business is conducted in the PRC, you may be unable to bring an action against us or our officers and directors or to enforce any judgment you may obtain.

We are incorporated in the Cayman Islands and conduct our operations primarily in China. Substantially all of our assets are located outside of the United States. In addition, the majority of our directors and officers reside outside of 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 we have violated your rights, either under United States federal or state securities laws or otherwise, or if you have a claim against us. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of China may not permit you to enforce a judgment against our assets or the assets of our directors and officers.

The SEC, the U.S. Department of Justice and other U.S. authorities may also have difficulties in bringing and enforcing actions against us or our directors or executive officers in the PRC. The SEC has stated that there are significant legal and other obstacles to obtaining information needed for investigations or litigation in China. China has recently adopted a revised securities law, and Article 177 of which provides, among other things, that no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the territory of the PRC. Accordingly, without governmental approval in China, no entity or individual in China may provide documents and information relating to securities business activities to overseas regulators when it is under direct investigation or evidence discovery conducted by overseas regulators, which could present significant legal and other obstacles to obtaining information needed for investigations and litigation conducted in China.

As an exempted company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the Nasdaq listing standards; these practices may afford less protection to shareholders than they would enjoy if we complied fully with such corporate governance listing standards.

As a Cayman Islands exempted company listed on the Nasdaq Stock Market, we are subject to the Nasdaq listing standards. However, the Nasdaq Stock Market Rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Currently, we rely on home country practice with respect to certain aspects of our corporate governance. See “Item 16G. Corporate Governance.” Our shareholders may be afforded less protection than they would otherwise enjoy under the Nasdaq listing standards applicable to U.S. domestic issuers given our reliance on the home country practice exception.

22

Risks Related to Doing Business in China

The Chinese government exerts substantial influence over the manner in which we must conduct our business, and may intervene or influence our operations at any time, which could result in a material change in our operations, significantly limit or completely hinder our ability to offer or continue to offer securities to investors and, and cause the value of our Class A Ordinary Shares to significantly decline or be worthless.

The Chinese government has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. Our ability to operate in China may be harmed by changes in its laws and regulations, including those relating to taxation, environmental regulations, land use rights, property and other matters. The central or local governments of these jurisdictions 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. Accordingly, government actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions in China or particular regions thereof, and could require us to divest ourselves of any interest we then hold in Chinese properties.

Furthermore, given recent statements by the Chinese government indicating an intent to exert more oversight and control over offerings that are conducted overseas, although we are currently not required to obtain permission from any of the PRC federal or local government authorities and have not received any denial to list on the U.S. exchange, it is uncertain when and whether we will be required to obtain permission from the PRC government to list on U.S. exchanges in the future, and even when such permission is obtained, whether it will be denied or rescinded, which could significantly limit or completely hinder our ability to offer or continue to offer our securities to investors and cause the value of our securities to significantly decline or be worthless.

Recent greater oversight by the Cyberspace Administration of China over data security, particularly for companies seeking to list on a foreign exchange, could adversely impact our business and our securities.

On December 28, 2021, 13 governmental departments of the PRC, including the Cyberspace Administration of China, or the CAC, issued the Cybersecurity Review Measures, which became effective on February 15, 2022. The Cybersecurity Review Measures provide that, in addition to critical information infrastructure operators (“CIIOs”) that intend to purchase Internet products and services, online platform operators engaging in data processing activities that affect or may affect national security must be subject to cybersecurity review by the Cybersecurity Review Office of the PRC. According to the Cybersecurity Review Measures, a cybersecurity review assesses potential national security risks that may be brought about by any procurement, data processing, or overseas listing. The Cybersecurity Review Measures require that an online platform operator which possesses the personal information of at least one million users must apply for a cybersecurity review by the CAC if it intends to be listed in foreign countries.

On November 14, 2021, the CAC published draft Regulations on the Network Data Security Administration (Draft for Comments) (the “Security Administration Draft”), which provides that data processing operators engaging in data processing activities that affect or may affect national security must be subject to network data security review by the relevant Cyberspace Administration of the PRC. According to the Security Administration Draft, data processing operators who possess personal data of at least one million users or collect data that affects or may affect national security must be subject to network data security review by the relevant Cyberspace Administration of the PRC. The deadline for public comments on the Security Administration Draft was December 13, 2021.

As confirmed by our PRC counsel, JT&N, as of the date of this annual report, we are not subject to cybersecurity review with the CAC, under the Cybersecurity Review Measures that became effective on February 15, 2022, or if the Security Administration Draft is enacted as proposed, since (i) as companies that engage in business-oriented consulting services and manufacturing and sales of graphite anode materials, we, our PRC subsidiaries, or the VIE and its subsidiaries are unlikely to be classified as CIIOs by the PRC regulatory agencies; (ii) according to the interpretation of the relevant laws by the CAC, for online platform operators who have listed in foreign countries before the effective date of Cybersecurity Review Measures, and who are not seeking a new listing (such as a secondary or dual listing) in foreign countries, a cybersecurity review is not required; and (iii) the data processed in the business of the VIE and its subsidiaries, which is knowledge sharing and enterprise service platform business, is unlikely to have a bearing on national security. There remains uncertainty, however, as to how the Cybersecurity Review Measures and the Security Administration Draft will be interpreted or implemented and whether the PRC regulatory agencies, including the CAC, may adopt new laws, regulations, rules, or detailed implementation and interpretation related to the Cybersecurity Review Measures and the Security Administration Draft. However, there remains uncertainty, as to how the Cybersecurity Review Measures and the Security Administration Draft will be interpreted or implemented by the authorities and whether the PRC regulatory agencies, including the CAC, may adopt new laws, regulations, rules, or detailed implementation and interpretation related to the Cybersecurity Review Measures and the Security Administration Draft in the future. If any such new laws, regulations, rules, or implementation and interpretation come into effect, we will take all reasonable measures and actions to comply with and to mitigate any adverse effect of such new laws, regulations, rules, or implementation and interpretation on us. We cannot guarantee, however, that we will not be subject to cybersecurity review and network data security review in the future. During such reviews, if required, our operations could be suspended or experience other disruptions. Further, cybersecurity review and network data security review could also result in negative publicity with respect to our Company and diversion of our managerial and financial resources, which could materially and adversely affect our business, financial conditions, and results of operations.

23

The Trial Measures and the revised Provisions recently issued by the PRC authorities may subject us to additional compliance requirements in the future.

On February 17, 2023, the CSRC promulgated the Trial Measures and five supporting guidelines, which took effect on March 31, 2023. Pursuant to the Trial Measures, PRC domestic companies that seek to offer or list securities overseas, both directly and indirectly, shall complete filing procedures with the CSRC pursuant to the requirements of the Trial Measures within three working days following its submission of relevant applications or its completion of subsequent offerings. If a domestic company fails to complete required filing procedures or conceals any material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative penalties, such as an order to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties, such as warnings and fines. On the same day, the CSRC also held a press conference for the release of the Trial Measures and issued the Notice on Administration for the Filing of Overseas Offering and Listing by Domestic Companies, or the CSRC Notice, which, among others, clarifies that PRC domestic companies that have already been listed overseas before the effective date of the Trial Measures, which is March 31, 2023, shall be deemed as Existing Issuers, and Existing Issuers are not required to complete the filing procedures with the CSRC immediately, and they shall be required to file with the CSRC for any subsequent offerings. We are an Existing Issuer, based on the foregoing, and we are not, therefore, required to complete the filing procedures with the CSRC immediately, and shall be required, however, to file with the CSRC for any subsequent offerings.

On February 24, 2023, the CSRC, together with the MOF, the National Administration of State Secrets Protection and National Archives Administration of China, revised the Provisions on Strengthening Confidentiality and Archives Administration for Overseas Securities Offering and Listing, which were issued by the CSRC and National Administration of State Secrets Protection and National Archives Administration of China in 2009, or the Provisions. The revised Provisions were issued under the title the “Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies,” and came into effect on March 31, 2023, together with the Trial Measures. One of the major revisions to the revised Provisions is expanding their application to cover indirect overseas offering and listing, as is consistent with the Trial Measures. The revised Provisions require that, among other things, (i) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals or entities, including securities companies, securities service providers, and overseas regulators, any documents and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level; and (ii) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals and entities, including securities companies, securities service providers, and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations. Any failure or perceived failure by our Company, our subsidiaries or the VIE and its subsidiaries to comply with the above confidentiality and archives administration requirements under the revised Provisions and other PRC laws and regulations may result in the relevant entities being held legally liable by competent authorities, and referred to the judicial organ to be investigated for criminal liability if suspected of committing a crime. See “Regulations—Regulations Related to Mergers and Acquisitions and Overseas Listings.”

The Trial Measures and the revised Provisions that recently issued by the PRC authorities may subject us to additional compliance requirements in the future, as there are still uncertainties regarding the interpretation and implementation of such regulatory guidance, and we cannot assure you that we will be able to comply with all the new regulatory requirements of the Trial Measures, the revised Provisions, or any future implementing rules on a timely basis, or at all. Any failure by us to fully comply with the new regulatory requirements, including but not limited to the failure to complete the filing procedures with the CSRC if required, may significantly limit or completely hinder our ability to offer or continue to offer our Class A Ordinary Shares, cause significant disruption to our business operations, and severely damage our reputation, which would materially and adversely affect our financial condition and results of operations and cause our Class A Ordinary Shares to significantly decline in value or become worthless.

24

A severe or prolonged downturn in the global or Chinese economy could materially and adversely affect our business and our financial condition.

Although the Chinese economy expanded well in the last two decades, the rapid growth of the Chinese economy has slowed down since 2012, and there is considerable uncertainty over the long-term effects of the expansionary monetary and fiscal policies adopted by the People’s Bank of China and financial authorities of some of the world’s leading economies, including the United States and China. There have been concerns over unrest and terrorist threats in the Middle East, Europe and Africa, which have resulted in volatility in oil and other markets. There have also been concerns on the relationship among China and other Asian countries, which may result in or intensify potential conflicts in relation to territorial disputes. Economic conditions in China are sensitive to global economic conditions, as well as changes in domestic economic and political policies and the expected or perceived overall economic growth rate in China. Any severe or prolonged slowdown in the global or Chinese economy may materially and adversely affect our business, results of operations and financial condition.

We face risks related to health epidemics such as the COVID-19, which significantly disrupted our operations and may continue to adversely affect our business, financial condition and results of operations.

Our knowledge sharing and enterprise services business was significantly disrupted and may continue be materially and adversely affected by health epidemics such as the COVID-19 pandemic and other outbreaks affecting the PRC. Our business operations depend on China’s overall economy and demand for our service and products, which could be disrupted by health epidemics. In fiscal years 2022 and 2021, due to the government imposed restrictions and lock-downs that were intended to contain the spread of the COVID-19 pandemic, we were prevented from arranging many of our offline activities, resulting in cancellations or postponements of study tours, forums and sponsorship advertising events, which materially and adversely impacted the performance of our knowledge sharing business. For fiscal year 2021, revenues generated from the core business of our knowledge sharing platform (member services, enterprise services and online services) decreased by approximately 76%, compared to the same period of fiscal year 2020. For the year ended December 31, 2022, the revenues generated from the core services of our knowledge sharing platform (member services, enterprise services and online services) decreased by approximately 95%, compared to that of fiscal year 2021. Although the PRC government relaxed its COVID-19 restrictions since December 2022, and although in fiscal year 2022, the Company transitioned its core business from knowledge sharing and enterprise services to graphite anode material sales, which was not materially impacted by the COVID-19 pandemic, there still remains a possibility of further outbreaks of COVID-19 variants or other adverse public health developments in China would likely have a material adverse effect on our business operations as such outbreak or other development could significantly impact the Chinese economy and our industry, disrupt our operations and adversely affect our business, financial condition and results of operations.

Because our business is dependent upon government policies that encourage a market-based economy, change in the political or economic climate in the PRC may impair our ability to operate profitably, if at all.

Although the PRC government has been pursuing a number of economic reform policies for more than two decades, the PRC government continues to exercise significant control over economic growth in the PRC. Because of the nature of our business, we are dependent upon the PRC government pursuing policies that encourage private ownership of businesses. We cannot assure you that the PRC government will pursue policies favoring a market-oriented economy or that existing policies will not be significantly altered, especially in the event of a change in leadership, social or political disruption, or other circumstances affecting political, economic and social life in the PRC.

25

PRC laws and regulations governing our current business operations are sometimes vague and uncertain and any changes in such laws and regulations may materially and adversely affect our business and impede our ability to continue our operations.

There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations including, but not limited to, the laws and regulations governing our business and the enforcement and performance of our arrangements with customers in certain circumstances. The laws and regulations are sometimes vague and may be subject to future changes, and their official interpretation and enforcement may involve substantial uncertainty. In fact, the PRC legal system is evolving rapidly, and the interpretations of many laws, regulations and rules may contain inconsistencies and enforcement of these laws, regulations and rules involves uncertainties. The effectiveness and interpretation of newly enacted laws or regulations, including amendments to existing laws and regulations, may be delayed, and our business may be affected if we rely on laws and regulations which are subsequently adopted or interpreted in a manner different from our understanding of these laws and regulations. New laws and regulations that affect existing and proposed future businesses may also be applied retroactively. Furthermore, if China adopts more stringent standards with respect to environmental protection or social issues, which are increasingly becoming the focus globally, we may incur increased compliance cost or become subject to additional restrictions in our operations. We cannot predict what effect the interpretation of existing or new PRC laws or regulations may have on our business.

From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. Since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy in the PRC legal system than in more developed legal systems. Furthermore, the PRC legal system is based in part on government policies and internal rules (some of which are not published in a timely manner or at all) that may have retroactive effect. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation. Such uncertainties, including uncertainties over the scope and effect of our contractual, property (including intellectual property) and procedural rights, and any failure to respond to changes in the regulatory environment in China could materially and adversely affect our business and impede our ability to continue our operations.

For example, on July 6, 2021, the General Office of the Communist Party of China Central Committee and the General Office of the State Council jointly issued an announcement to crack down on illegal activities in the securities market and promote the high-quality development of the capital market, which, among other things, requires the relevant governmental authorities to strengthen cross-border oversight of law-enforcement and judicial cooperation, to enhance supervision over China-based companies listed overseas, and to establish and improve the system of extraterritorial application of the PRC securities laws. Since this announcement is relatively new, uncertainties still exist in relation to how soon legislative or administrative regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any, and the potential impact such modified or new laws and regulations will have on companies like us.

26

Because our business is conducted in RMB and the price of our Class A Ordinary Shares is quoted in United States dollars, changes in currency conversion rates may affect the value of your investments.

Our business is conducted in the PRC, our books and records are maintained in RMB, which is the currency of the PRC, and the financial statements that we file with the SEC and provide to our shareholders are presented in United States dollars. Changes in the exchange rate between the RMB and dollar affect the value of our assets and the results of our operations in United States dollars. The value of the RMB against the United States dollar and other currencies may fluctuate and is affected by, among other things, changes in the PRC’s political and economic conditions and perceived changes in the economy of the PRC and the United States. Any significant revaluation of the RMB may materially and adversely affect our cash flows, revenue and financial condition.

Under the PRC Enterprise Income Tax Law, or the EIT Law, we may be classified as a “resident enterprise” of China, which could result in unfavorable tax consequences to us and our non-PRC shareholders.

The EIT Law and its implementing rules provide that enterprises established outside of China whose “de facto management bodies” are located in China are considered “resident enterprises” under PRC tax laws. The implementing rules promulgated under the EIT Law define the term “de facto management bodies” as a management body which substantially manages, or has control over the business, personnel, finance and assets of an enterprise. In April 2009, the State Administration of Taxation, or SAT, 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 SAT 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 bodies” of a PRC-controlled enterprise that is incorporated offshore is located in China. Although this circular 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 SAT’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 SAT Circular 82, a Chinese-controlled offshore incorporated enterprise will be regarded as a PRC tax resident by virtue of having a “de facto management body” in China and will be subject to PRC enterprise income tax on its worldwide income only if all of the following criteria are met: (i) the places where senior management and senior management departments that are responsible for daily production, operation and management of the enterprise perform their duties are mainly located within the territory of China; (ii) financial decisions (such as money borrowing, lending, financing and financial risk management) and personnel decisions (such as appointment, dismissal, salary and wages) are made or need to be made by organizations or persons located within the territory of China; (iii) main property, accounting books, corporate seal, the board of directors and files of the minutes of shareholders’ meetings of the enterprise are located or preserved within the territory of China; and (iv) one half (or more) of the directors or senior management staff having the right to vote habitually reside within the territory of China.

We believe that Sunrise New Energy is not a resident enterprise for PRC tax purpose. Sunrise New Energy is not controlled by a PRC enterprise or PRC enterprise group and we do not meet some of the conditions outlined in the immediately preceding paragraph. For example, as a holding company, the key assets and records of Sunrise New Energy, including the resolutions and meeting minutes of our board of directors and the resolutions and meeting minutes of our shareholders, are located and maintained outside the PRC. In addition, we are not aware of any offshore holding companies with a corporate structure similar to ours that has been deemed a PRC “resident enterprise” by the PRC tax authorities. However, as the tax residency status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body”.

If we are deemed as a PRC “resident enterprise” by PRC tax authorities, we will be subject to PRC enterprise income tax on our worldwide income at a uniform tax rate of 25%, although dividends distributed to us from our existing PRC subsidiaries and any other PRC subsidiaries which we may establish from time to time could be exempt from the PRC dividend withholding tax due to our PRC “resident recipient” status. This could have a material and adverse effect on our overall effective tax rate, our income tax expenses and our net income. Furthermore, dividends, if any, paid to our shareholders may be decreased as a result of the decrease in distributable profits. In addition, if we were considered a PRC “resident enterprise”, any dividends we pay to our non-PRC investors, and the gains realized from the transfer of our Ordinary Shares may be considered income derived from sources within the PRC and be subject to PRC tax, at a rate of 10% in the case of non-PRC enterprises or 20% in the case of non-PRC individuals (in each case, subject to the provisions of any applicable tax treaty). It is unclear whether holders of our Ordinary Shares would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that we are treated as a PRC resident enterprise. This could have a material and adverse effect on the value of your investment in us and the price of our Ordinary Shares.

27

There are significant uncertainties under the EIT Law relating to the withholding tax liabilities of our PRC subsidiaries, and dividends payable by our PRC subsidiaries to our offshore subsidiaries may not qualify to enjoy certain treaty benefits.

Under the EIT Law and its implementation rules, the profits of a foreign invested enterprise generated through operations, which are distributed to its immediate holding company outside the PRC, will be subject to a withholding tax rate of 10%. Pursuant to the Arrangement between the Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, or the Double Tax Avoidance Arrangement, a withholding tax rate of 10% may be lowered to 5% if the PRC enterprise is at least 25% held by a Hong Kong enterprise for at least 12 consecutive months prior to distribution of the dividends and is determined by the relevant PRC tax authority to have satisfied other conditions and requirements under the Double Tax Avoidance Arrangement and other applicable PRC laws.

However, based on the Circular on Certain Issues with Respect to the Enforcement of Dividend Provisions in Tax Treaties, or the SAT Circular 81, which became effective on February 20, 2009, 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. According to Circular on Several Issues regarding the “Beneficial Owner” in Tax Treaties, which became effective as of April 1, 2018, when determining an applicant’s status as the “beneficial owner” regarding tax treatments in connection with dividends, interests, or royalties in the tax treaties, several factors will be taken into account. Such factors include whether the business operated by the applicant constitutes actual business activities, and whether the counterparty country or region to the tax treaties does not levy any tax, grant tax exemption on relevant incomes, or levy tax at an extremely low rate. This circular further requires any applicant who intends to be proved of being the “beneficial owner” to file relevant documents with the relevant tax authorities. Our PRC subsidiaries is wholly owned by their respective HK based parent companies. However, we cannot assure you that our determination regarding our qualification to enjoy the preferential tax treatment will not be challenged by the relevant PRC tax authority or we will be able to complete the necessary filings with the relevant PRC tax authority and enjoy the preferential withholding tax rate of 5% under the Double Tax Avoidance Arrangement with respect to dividends to be paid by our PRC subsidiaries to our HK subsidiaries, in which case, we would be subject to the higher withdrawing tax rate of 10% on dividends received.

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

We are an offshore holding company conducting our operations in China through Sunrise Guizhou, the VIE and its subsidiaries. We may make loans to Sunrise Guizhou, the VIE and its subsidiaries, or we may make additional capital contributions to our PRC subsidiaries. Any capital contributions or loans that we, as an offshore entity, make to our PRC subsidiaries, are subject to PRC regulations. For example, loans to our PRC subsidiaries cannot exceed statutory limits and are subject to foreign exchange loan registrations. Our capital contributions to our PRC subsidiaries must be registered with the MOFCOM or its local counterpart. For more details, see “Regulation—Regulations Related to Foreign Debt.” and “Regulation—Regulations Related to Foreign Exchange.”

In light of the various requirements imposed by of 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 government registrations or obtain the necessary government approvals or filings on a timely basis, if at all, with respect to future loans by us to our PRC subsidiaries or the VIE or with respect to future capital contributions by us to our PRC subsidiaries. If we fail to complete such registrations or obtain such approvals on a timely basis or at all, our ability to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

Government control in currency conversion may adversely affect our financial condition, our ability to remit dividends, and 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 out of China. We receive substantially all of our revenues in Renminbi. Under our current corporate structure, our Cayman Islands holding company may rely on dividend payments from our PRC subsidiaries to fund any cash and financing requirements we may have.

Under existing PRC foreign exchange regulations, Renminbi cannot be freely converted into any foreign currency, and conversion and remittance of foreign currencies are subject to PRC foreign exchange regulations. It cannot be guaranteed that under a certain exchange rate, we will have sufficient foreign exchange to meet our foreign exchange requirements. Under the current PRC foreign exchange control system, foreign exchange transactions under the current account conducted by us, including the payment of dividends, do not require advance approval from SAFE, but we are required to present documentary evidence of such transactions and conduct such transactions at designated foreign exchange banks within China that have the licenses to carry out foreign exchange business. Foreign exchange transactions under the capital account conducted by us, however, must be approved in advance by SAFE.

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Under existing foreign exchange regulations, we will be able to pay dividends in foreign currencies without prior approval from SAFE by complying with certain procedural requirements. However, we cannot assure you that these foreign exchange policies regarding payment of dividends in foreign currencies will continue in the future.

In fact, in light of the flood of capital outflows of China in 2016 due to the weakening Renminbi, the PRC government has imposed more restrictive foreign exchange policies and stepped up scrutiny of major outbound capital movement including overseas direct investment. More restrictions and substantial vetting process are put in place by SAFE to regulate cross-border transactions falling under the capital account. If any of our shareholders regulated by such policies fails to satisfy the applicable overseas direct investment filing or approval requirement timely or at all, it may be subject to penalties from the relevant PRC authorities. The PRC government may at its discretion further restrict access in the future to foreign currencies for current account transactions. 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, including holders of the Ordinary Shares. Our capital expenditure plans and our business, operating results and financial condition may be materially and adversely affected.

If we become directly subject to the scrutiny, criticism and negative publicity involving U.S.-listed Chinese companies, we may have to expend significant resources to investigate and resolve the matter which could harm our business operations, stock price and reputation.

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, such as the SEC. Much of the scrutiny, criticism and negative publicity has centered on financial and accounting irregularities and mistakes, a lack of effective internal controls over financial accounting, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations of fraud. As a result of the scrutiny, criticism and negative publicity, the publicly traded stock of many U.S. listed Chinese companies sharply 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, our business and our stock price. 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 will be costly and time consuming and distract our management from growing our business. If such allegations are not proven to be groundless, we and our business operations will be severely affected and you could sustain a significant decline in the value of our stock.

The disclosures in our reports and other filings with the SEC and our other public pronouncements may be subject to the scrutiny of any regulatory bodies in the PRC.

We are regulated by the SEC and our reports and other filings with the SEC are subject to SEC review in accordance with the rules and regulations promulgated by the SEC under the Securities Act and the Exchange Act. Our SEC reports and other disclosures and public pronouncements are not subject to the review or scrutiny of any PRC regulatory authority. For example, the disclosure in our SEC reports and other filings are not subject to the review by the CSRC, a PRC regulator that is responsible for oversight of the capital markets in China. However, on February 17, 2023, with the approval of the State Council, the CSRC released the Trial Measures and five supporting guidelines, which took effect on March 31, 2023. According to the Trial Measures, PRC domestic companies that seek to offer or list securities overseas, both directly and indirectly, should fulfill the filing procedures and submit relevant documents, including the prospectus and other listing documents submitted to overseas regulatory authorities, to the CSRC. However, as the laws and regulations are relatively new, substantial uncertainties exist with respect to its interpretation and implementation regarding such laws and regulations. It is not clear how the CSRC may review and scrutinize these listing documents and we cannot assure you whether and how such scrutiny may affect our listing on an U.S. exchange.

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The Holding Foreign Companies Accountable Act and related regulations all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB. These developments could add uncertainties to our continued listing on the Nasdaq, and Nasdaq may determine to delist our securities if the PCAOB determines that it cannot inspect or fully investigate our auditor.

On April 21, 2020, SEC Chairman Jay Clayton and PCAOB Chairman William D. Duhnke III, along with other senior SEC staff, released a joint statement highlighting the risks associated with investing in companies based in or have substantial operations in emerging markets including China. 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 “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 December 18, 2020, the “Holding Foreign Companies Accountable Act” was signed by President Donald Trump and became law. This legislation requires certain issuers of securities to establish that they are not owned or controlled by a foreign government. Specifically, an issuer must make this certification if the PCAOB is unable to audit specified reports because the issuer has retained a foreign public accounting firm not subject to inspection by the PCAOB. Furthermore, if the PCAOB is unable to inspect the issuer’s public accounting firm for three consecutive years beginning in 2021, the issuer’s securities are banned from trade on a national exchange or through other methods.

On June 22, 2021, the U.S. Senate passed the “Accelerating Holding Foreign Companies Accountable Act”, which proposed to decrease the number of non-inspection years for foreign companies to comply with PCAOB audits from three to two years, thus reducing the time period before their securities may be prohibited from trading or delisted.

On December 16, 2021, the PCAOB issued a report on its determinations that the Board was unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong, a Special Administrative Region of the People’s Republic of China (PRC), because of positions taken by PRC authorities in those jurisdictions (the “Determination”). The Board made these determinations pursuant to PCAOB Rule 6100, which provides a framework for how the PCAOB fulfills its responsibilities under the Holding Foreign Companies Accountable Act (HFCAA).

On August 26, 2022, the CSRC, the MOF, and the PCAOB signed a Protocol, governing inspections and investigations of audit firms based in mainland China and Hong Kong. Pursuant to the fact sheet with respect to the Protocol disclosed by the SEC, the PCAOB shall have independent discretion to select any issuer audits for inspection or investigation and has the unfettered ability to transfer information to the SEC.

On December 15, 2022, the PCAOB Board determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate its previous determinations to the contrary. However, should PRC authorities obstruct or otherwise fail to facilitate the PCAOB’s access in the future, the PCAOB Board will consider the need to issue a new determination.

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On December 29, 2022, the provisions of the Accelerating Holding Foreign Companies Accountable Act were signed into law by President Biden as part of the Consolidated Appropriations Act, amending the HFCAA and requiring the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchange if its auditor is not subject to PCAOB inspections for two consecutive years instead of three consecutive years. The PCAOB continues to demand complete access in mainland China and Hong Kong moving forward and has resumed regular inspections in early 2023 and beyond, as well as to continue pursuing ongoing investigations and initiate new investigations as needed. The PCAOB has also indicated that it will act immediately to issue new determinations with the HFCAA, if needed.   

Our auditor prior to December 16, 2022, Friedman and our current auditor, MarcumAsia, are headquartered in Manhattan, New York and registered with the PCAOB. Our auditors are 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, and have been inspected by the PCAOB on a regular basis. Neither Friedman nor MarcumAsia is subject to the determinations announced by the PCAOB on December 16, 2021. As such, as of the date of this annual report, our listing is not affected by the Holding Foreign Companies Accountable Act and related regulations. However, the recent developments would add uncertainties to our continued listing 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 related to the audit of our financial statements. Furthermore, there is a risk that our auditor cannot be inspected by the PCAOB in the future. The lack of inspection could cause trading in our securities to be prohibited under the Holding Foreign Companies Accountable Act, and, as a result, Nasdaq may determine to delist our securities, which may cause the value of our securities to decline or become worthless.

The failure to comply with PRC regulations relating to mergers and acquisitions of domestic entities by offshore special purpose vehicles may subject us to severe fines or penalties and create other regulatory uncertainties regarding our corporate structure.

On August 8, 2006, MOFCOM, joined by the CSRC, the State-owned Assets Supervision and Administration Commission of the State Council, the SAT, the State Administration for Industry and Commerce (the “SAIC”, currently known as the PRC State Administration for Market Regulation, or the SAMR), and State Administration of Foreign Exchange (“SAFE”), jointly promulgated regulations entitled the Provisions Regarding Mergers and Acquisitions of Domestic Entities by Foreign Investors (the “M&A Rules”), which took effect as of September 8, 2006, and as amended on June 22, 2009. These regulations, among other things, have certain provisions that require offshore special purpose vehicles formed for the purpose of acquiring PRC domestic companies and controlled directly or indirectly by PRC individuals and companies, to obtain the approval of MOFCOM prior to engaging in such acquisitions and to obtain the approval of the CSRC prior to publicly listing their securities on an overseas stock market. On September 21, 2006, the CSRC published on its official website a notice specifying the documents and materials that are required to be submitted for obtaining CSRC approval. The application of the M&A Rules with respect to our corporate structure remains unclear, with no current consensus existing among leading PRC law firms regarding the scope and applicability of the M&A Rules. 

If the CSRC, MOFCOM, or another PRC regulatory agency determines that government approval was required for the VIE arrangement between GIOP BJ and the VIE, or if prior CSRC approval for overseas financings is required and not obtained, we may face severe regulatory actions or other sanctions from MOFCOM, the CSRC or other PRC regulatory agencies. In such event, these regulatory agencies may impose fines or other penalties on our operations in the PRC, limit our operating privileges in the PRC, delay or restrict the repatriation of the proceeds from overseas financings into the PRC, restrict or prohibit payment or remittance of dividends to us or take other actions that could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our Class A Ordinary Shares. The CSRC or other PRC regulatory agencies may also take actions requiring us, or making it advisable for us, to delay or cancel overseas financings, to restructure our current corporate structure, or to seek regulatory approvals that may be difficult or costly to obtain.

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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 its registered capital or distribute profits to us, or may otherwise adversely affect us.

On July 4, 2014, SAFE issued the Circular on Issues Concerning Foreign Exchange Control over the Overseas Investment and Financing and Round-trip Investment by Domestic Residents via Special Purpose Vehicles, or SAFE Circular 37, which became effective as of July 4, 2014 and has replaced the Notice on Relevant Issues Concerning Foreign Exchange Administration for Domestic Residents’ Financing and Roundtrip Investment Through Offshore Special Purpose Vehicles (“SAFE Circular 75”). According to SAFE Circular 37, prior registration with the local SAFE branch is required for PRC residents, including PRC individuals and PRC corporate entities as well as foreign individuals that are deemed as PRC residents for foreign exchange administration purpose, in connection with their direct or indirect contribution of domestic assets or interests to offshore companies, known as SPVs. SAFE Circular 37 further requires amendment to the SAFE registrations in the event of any changes with respect to the basic information of the offshore special purpose vehicle, such as change of a PRC individual shareholder, name and operation term, or any significant changes with respect to the offshore special purpose vehicle, such as increase or decrease of capital contribution, share transfer or exchange, or mergers or divisions. 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. In February 2015, SAFE promulgated a Notice on Further Simplifying and Improving Foreign Exchange Administration Policy on Direct Investment, or SAFE Notice 13, effective June 2015. Under SAFE Notice 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 SAFE. The qualified banks will directly examine the applications and accept registrations under the supervision of SAFE.

In addition to SAFE Circular 37 and SAFE Notice 13, our ability to conduct foreign exchange activities in China may be subject to the interpretation and enforcement of the Implementation Rules of the Administrative Measures for Individual Foreign Exchange promulgated by SAFE in January 2007 (as amended and supplemented, the “Individual Foreign Exchange Rules”). Under the Individual Foreign Exchange Rules, any PRC individual seeking to make a direct investment overseas or engage in the issuance or trading of negotiable securities or derivatives overseas must make the appropriate registrations in accordance with SAFE provisions, the failure of which may subject such PRC individual to warnings, fines or other liabilities.

All of our shareholders who are subject to the SAFE Circular 37 and Individual Foreign Exchange Rules have completed the initial registrations with the qualified banks as required by the regulations. However, we may not be informed of the identities of all the PRC residents holding direct or indirect interest in our company, and we have no control over any of our beneficial owners. Thus, we cannot provide any assurance that our current or future PRC resident beneficial owners will comply with our request to make or obtain any applicable registrations or continuously comply with all registration procedures set forth in these SAFE regulations. Such failure or inability of our PRC residents beneficial owners to comply with these SAFE regulations may subject us or our PRC residents beneficial owners to fines and legal sanctions, restrict our cross-border investment activities, or limit our PRC subsidiaries’ ability to distribute dividends to, or obtain foreign-exchange-dominated loans from, our company, or prevent us from being able to make distributions or pay dividends, as a result of which our business operations and our ability to distribute profits to you could be materially adversely affected.

Our contractual arrangements with the VIE are governed by the laws of the PRC and we may have difficulty in enforcing any rights we may have under these contractual arrangements.

As all of our contractual arrangements with the VIE are governed by the PRC laws and provide for the resolution of disputes through arbitration in the PRC, they would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. Disputes arising from these contractual arrangements between us and the VIE will be resolved through arbitration in China, although these disputes do not include claims arising under the United States federal securities law and thus do not prevent you from pursuing claims under the United States federal securities law. The legal environment in the PRC is not as developed as in the United States. As a result, uncertainties in the PRC legal system could further limit our ability to enforce these contractual arrangements, through arbitration, litigation and other legal proceedings remain in China, which could limit our ability to enforce these contractual arrangements and exert effective control over the VIE. Furthermore, these contracts may not be enforceable in China if PRC government authorities or courts take a view that such contracts contravene PRC laws and regulations or are otherwise not enforceable for public policy reasons. In the event we are unable to enforce these contractual arrangements, we may not be able to exert effective control over the VIE, and our ability to conduct our business may be materially and adversely affected.

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Increases in labor costs in the PRC may adversely affect our business and our profitability.

China’s economy has experienced increases in labor costs in recent years, which is expected to continue to grow. The average wage level for our employees has also increased in recent years. We expect that our labor costs, including wages and employee benefits, will continue to increase. Unless we are able to pass on these increased labor costs to our customers by increasing prices for our products or services, our profitability and results of operations may be materially and adversely affected.

In addition, we have been subject to stricter regulatory requirements in terms of entering into labor contracts with our employees and paying various statutory employee benefits, including pensions, housing fund, medical insurance, work-related injury insurance, unemployment insurance and childbearing insurance to designated government agencies for the benefits of our employees. Pursuant to the PRC Labor Contract Law, or the Labor Contract Law, that became effective in January 2008 and its implementing rules that became effective in September 2008 and its amendments that became effective in July 2013, employers are subject to stricter requirements in terms of signing labor contracts, minimum wages, paying remuneration, determining the term of employees’ probation and unilaterally terminating labor contracts. In the event that we decide to terminate some of our employees or otherwise change our employment or labor practices, the Labor Contract Law and its implementation rules may limit our ability to effect those changes in a desirable or cost-effective manner, which could adversely affect our business and results of operations.

As the interpretation and implementation of labor-related laws and regulations are still evolving, we cannot assure you that our employment practice does not and will not violate labor-related laws and regulations in China, which may subject us to labor disputes or government investigations. If we are deemed to have violated relevant labor laws and regulations, we could be required to provide additional compensation to our employees and our business, financial condition and results of operations could be materially and adversely affected.

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

The SEC, the U.S. Department of Justice and other U.S. authorities may also have difficulties in bringing and enforcing actions against us or our directors or executive officers in the PRC. The SEC has stated that there are significant legal and other obstacles to obtaining information needed for investigations or litigation in China. Although the 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 cooperation with the securities regulatory authorities in Hong Kong or other jurisdictions may not be efficient in the absence of mutual and practical cooperation mechanism. Furthermore, China has recently adopted a revised securities law that became effective on March 1, 2020, Article 177 of which provides, among other things, that no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the territory of the PRC. Accordingly, without governmental approval in China, no entity or individual in China may provide documents and information relating to securities business activities to overseas regulators when it is under direct investigation or evidence discovery conducted by overseas regulators. While detailed interpretation of or implementation rules under Article 177 have yet to be promulgated, it could present significant legal and other obstacles to obtaining information needed for investigations and litigation conducted outside of China, which may further increase difficulties faced by you in protecting your interests.

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Risks Related to Our Ordinary Shares and the Trading Market

If we are a passive foreign investment company for United States federal income tax purposes for any taxable year, United States holders of our Ordinary Shares could be subject to adverse United States federal income tax consequences.

A non-United States corporation will be a passive foreign investment company, or PFIC, for United States federal income tax purposes for any taxable year if either (i) at least 75% of its gross income for such taxable year is 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 or are held for the production of passive income. Based on the current and anticipated value of our assets and the composition of our income and assets, we do not expect to be a PFIC for United States federal income tax purposes for our current taxable year or in the foreseeable future. However, the determination of whether or not we are a PFIC according to the PFIC rules is made on an annual basis and will depend on the composition of our income and assets and the value of our assets from time to time. Therefore, changes in the composition of our income or assets or the value of our assets may cause us to become a PFIC. The determination of the value of our assets (including goodwill not reflected on our balance sheet) may be based, in part, on the quarterly market value of our Ordinary Shares, which is subject to change and may be volatile. It is possible that, for any subsequent year, more than 50% of our assets may be assets which produce passive income. We will make this determination following the end of any particular tax year.

Although the U.S. tax law with regards to VIEs is unclear, we are treating the VIE as being owned by us for United States federal income tax purposes, not only because we control their management decisions, but also because we are entitled to the economic benefits associated with the VIE, and as a result, we are treating the VIE as our wholly-owned subsidiary for U.S. federal income tax purposes. For purposes of the PFIC analysis, in general, according to Section 1297(c) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), a non-U.S. corporation is deemed to own its pro rata share of the gross income and assets of any entity in which it is considered to own at least 25% of the equity by value. Although our Company does not technically own any stock in the VIE there are numerous factors that give rise to a strong conclusion that its control of management decisions, the entitlement to economic benefits associated with the VIE, and the inclusion of the VIE as part of the consolidated group (Under Accounting Standards Codification (ASC) Topic 810, “Consolidation,” VIEs are generally consolidated with other related entities under common control) is so akin to our Company holding a stock interest in the VIE that it is reasonable and consistent to consider our Company’s interest in the VIE as a deemed stock interest. Therefore, the income and assets of the VIE should be included in the determination of whether or not we are a PFIC in any taxable year. It is important to emphasize that there is little to no guidance other than the statute itself (Internal Revenue Code Section 1297(c)) and analogous portions of the code, treasury regulations and other accepted authorities and as such it is possible for the IRS to challenge the argument that the look through rule would apply in this case, especially since the statute explicitly says “stock”.

The classification of certain of our income as active or passive, and certain of our assets as producing active or passive income, and hence whether we are or will become a PFIC, depends on the interpretation of certain United States Treasury Regulations as well as certain IRS guidance relating to the classification of assets as producing active or passive income. Such regulations and guidance are potentially subject to different interpretations. If due to different interpretations of such regulations and guidance the percentage of our passive income or the percentage of our assets treated as producing passive income increases, we may be a PFIC in one or more taxable years.

If we are a PFIC for any taxable year during which a United States person holds Ordinary Shares, certain adverse United States federal income tax consequences could apply to such United States person.

For a more detailed discussion of the application of the PFIC rules to us and the consequences to U.S. taxpayers if we were or are determined to be a PFIC, see “Taxation—U.S. Federal Income Taxation—Passive Foreign Investment Company.”

U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISERS ABOUT THE PFIC RULES, THE POTENTIAL APPLICABILITY OF THESE RULES TO THE COMPANY CURRENTLY AND IN THE FUTURE, AND THEIR FILING OBLIGATIONS IF THE COMPANY IS A PFIC. 

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We have identified several material weaknesses in our internal control over financial reporting. If we fail to maintain an effective system of internal controls over financial reporting, we may not be able to accurately report our financial results or prevent fraud.

The Securities and Exchange Commission, as required by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules requiring every public company to include a management report on such company’s internal controls over financial reporting in its annual report, which contains management’s assessment of the effectiveness of the company’s internal controls over financial reporting. In addition, an independent registered public accounting firm must attest to and report on management’s assessment of the effectiveness of the company’s internal controls over financial reporting when the Company no longer qualifies as an emerging company. Our reporting obligations as a public company place a significant strain on our management, operational and financial resources and systems for the foreseeable future.

Since we are an emerging company, our independent registered public accounting firm has not conducted an audit of our internal control over financial reporting. During the course of preparing our consolidated financial statements as of and for the years ended December 31, 2023, we identified material weaknesses and other control deficiencies in our internal control over financial reporting. Many of the deficiencies noted below were communicated to us from our independent registered public accounting firm as observations, which stemmed from their audit. The material weaknesses identified included: (1) a lack of formal internal controls policies over financial closing and reporting processes, which may increase risk of error, fraud, misstatement of financial reporting, or even non-compliance with related regulations for a U.S. listed Group; (2) a lack of accounting staff and resources with appropriate knowledge of U.S. GAAP and SEC reporting and compliance requirements, and accounting policies and procedures manual that covers U.S. GAAP and SEC financial reporting requirements to complete relate US GAAP and SEC reporting; (3) a lack of ability to account for complex financial and equity instruments; and (4) a lack of appropriately restricted to privileged level access to employees. As a result of the above, our management has concluded that, as of December 31, 2023, our disclosure controls and procedures were not effective.

We are taking a number of measures to tackle the control deficiencies identified, including: (i) hiring more qualified accounting personnel with relevant U.S. GAAP and SEC reporting experience and qualifications to strengthen the financial reporting function and to set up a financial and system control framework; (ii) implementing regular and continuous U.S. GAAP accounting and financial reporting training programs for our accounting and financial reporting personnel; (iii) preparing a comprehensive accounting policies and procedures manual that covers financial closing and reporting processes, U.S. GAAP and SEC financial reporting requirements, and ensuring that accounting personnel are familiar with and follow the manual; and (iv) Reinforcing the implementation of IT authorization limits matrix and segregation of duties systems to ensure the appropriateness of all approvals, authorizations, and confirmations granted. 

Effective internal controls over financial reporting are necessary for us to produce reliable financial reports and are important to help prevent fraud. As a result, our failure to achieve and maintain effective internal controls over financial reporting could result in the loss of investor confidence in the reliability of our financial statements, which in turn could harm our business and negatively impact the trading price of our Ordinary Shares. Furthermore, we anticipate that we will incur considerable costs and devote significant management time and efforts and other resources to comply with Section 404 of the Sarbanes-Oxley Act.

We do not intend to pay dividends for the foreseeable future.

We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future. As a result, you may only receive a return on your investment in our Ordinary Shares if the market price of our Ordinary Shares increases. 

The market price of our Class A Ordinary Shares may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the initial public offering price.

The market price of our Class A Ordinary Shares may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:

● actual or anticipated fluctuations in our revenue and other operating results;

● the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;

● actions of securities analysts who initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors;

● announcements by us or our competitors of significant products or features, technical innovations, acquisitions, strategic partnerships, joint ventures, or capital commitments;

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● price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole;

● lawsuits threatened or filed against us; and

● other events or factors, including those resulting from war or incidents of terrorism, or responses to these events.

In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. Stock prices of many companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In the past, shareholders have filed securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business, and adversely affect our business.

As a foreign private issuer, we are not subject to certain U.S. securities law disclosure requirements that apply to a domestic U.S. issuer, and are exempt from certain Nasdaq corporate governance standards applicable to U.S. issuers, which may limit the information publicly available to our investors and afford them less protection than if we were a U.S. issuer.

As a Cayman Islands company listed on the Nasdaq Global Select Market, we are subject to the Nasdaq Stock Market listing standards (“Nasdaq Rules”). However, 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 Rules. We currently follow home country practice in lieu of the requirements under the Nasdaq Rules with respect to certain corporate governance standards. For example, based on home country practice, we are not required to seek shareholder approval for issuance of 20% or more of our outstanding ordinary shares or voting power in a private offering (as defined by Nasdaq Rules). Accordingly, our shareholders may not be provided with the benefits of certain corporate governance requirements of the Nasdaq Rules. Please see ITEM 16.G. CORPORATE GOVERNANCE for further details.

Further, as a foreign private issuer we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act and therefore there may be less publicly available information about us than if we were a U.S. domestic issuer. We are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including:

● the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K;

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

● 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 the selective disclosure rules by issuers of material non-public information under Regulation FD.

We are required to file an annual report on Form 20-F within four months of the end of each fiscal year. However, the information we are required to file with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or information that would be made available to you were you investing in a U.S. domestic issuer.

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Anti-takeover provisions in our memorandum and articles of association may discourage, delay or prevent a change in control.

Some provisions in our memorandum and articles of association, may discourage, delay or prevent a change in control of our company or management that shareholders may consider favorable, including, among other things, the following:

● provisions that permit our board of directors by resolution to issue classes of shares with preferred, deferred or other special rights or restrictions as the board of directors determine in their discretion, without any further vote or action by our shareholders. If issued, the rights, preferences, designations and limitations of any class of preferred shares could operate to the disadvantage of the outstanding ordinary shares the holders of which would not have any pre-emption rights in respect of such an issue of preferred shares. Such terms could include, among others, preferences as to dividends and distributions on liquidation, or could be used to prevent possible corporate takeovers;

● provisions that restrict the ability of our shareholders holding in aggregate less than thirty percent (30%) of the outstanding voting shares in the company to call general meetings or annual general meetings and to include matters for consideration at shareholder meetings; and

● provisions that prevent shareholders holding in aggregate less than ten percent (10%) of the outstanding voting shares in the company to requisition general meetings of the Company.

If we cannot satisfy the listing requirements and other rules of Nasdaq Capital Market, our securities may be delisted, which could negatively impact the price of our securities and your ability to sell them.

In order to maintain our listing on the Nasdaq Capital Market, we are required to comply with certain rules of Nasdaq Capital Market, including those regarding minimum stockholders’ equity, minimum share price and certain corporate governance requirements. Even if we initially meet the listing requirements and other applicable rules of the Nasdaq Capital Market, we may not be able to continue to satisfy these requirements and applicable rules. If we are unable to satisfy the Nasdaq Capital Market criteria for maintaining our listing, our securities could be subject to delisting.

If the Nasdaq Capital Market delists our securities from trading, we could face significant consequences, including:

● a limited availability for market quotations for our securities;

● reduced liquidity with respect to our securities;

● a determination that our Class A Ordinary Shares are a “penny stock,” which will require brokers trading in our Class A 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 Class A Ordinary Shares;

● limited amount of news and analyst coverage; and

● a decreased ability to issue additional securities or obtain additional financing in the future.

You may be unable to call, requisition or present proposals before general meetings.

Cayman Islands law 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 and have been provided for in the amended articles and memorandum of association of the Company, subject to the restrictions described therein. General meetings may be convened on the written requisition of one or more of the shareholders entitled to attend and vote at our general meetings who (together) hold not less than ten percent of the rights to vote at such general meetings.

To the extent that shareholders hold in aggregate less than thirty percent (30%) of the outstanding voting shares in the Company, they cannot: (a) call general meetings or annual general meetings; and (b) include matters for consideration at shareholder meetings.

A shareholder may give notice to the Company of business proposed to be brought before an annual general meeting provided that such notice of proposal of business must be delivered to, or mailed and received at the principal executive offices of the Company not less than ninety (90) days and not more than one hundred and twenty (120) days prior to the one-year anniversary of the preceding year’s annual general meeting; provided, however, that if the date of the annual general meeting is more than thirty (30) days before or more than sixty (60) days after such anniversary date, such notice by the Member, to be timely, must be so delivered, or so mailed and received, not later than the ninetieth (90th) day prior to such annual general meeting or, if later, the tenth (10th) day following the day on which “public disclosure” of the date of such meeting was first made by the Company.

The dual-class structure of our ordinary shares may adversely affect the trading market and price for our Class A Ordinary Shares.

We have adopted a dual-class share voting structure. Several shareholder advisory firms have announced their opposition to the use of multiple class structures. As a result, the dual class structure of our ordinary shares may cause shareholder advisory firms to publish negative commentary about our corporate governance practices or otherwise seek to cause us to change our capital structure. Any actions or publications by shareholder advisory firms critical of our corporate governance practices or capital structure could also adversely affect the value of our Class A Ordinary Shares. Furthermore, our Class A Ordinary Shares may be excluded from certain stock indices as a result of our disparate voting stock structure, which structure may adversely affect the trading market and price for our Class A Ordinary Shares.

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ITEM 4. INFORMATION ON THE COMPANY 

A. History and Development of the Company 

We are a holding company incorporated in the Cayman Islands. As a holding company with no material operations of our own, we primarily operate our businesses through PRC operating entities. In 2022, Sunrise Guizhou was established by our wholly owned subsidiary, Zhuhai Zibo, and certain other joint venture partners, as a limited company pursuant to PRC laws, for the purpose of manufacturing and sales of graphite anode materials. Zhuhai Zibo currently owns a 39.35% equity interest in Sunrise Guizhou, but has the power to cast a majority of votes at the meeting of the board of directors and governs the financial and operating policies of Sunrise Guizhou under an agreement among the shareholders. We operate a knowledge sharing platform through the VIE, of which we do not own any equity interest; rather we consolidate the VIE via a series of contractual arrangements between GIOP BJ and the VIE. The VIE (formerly known as Beijing Huatai Yihe Co., Ltd.) was established in 2014 as a limited company pursuant to PRC laws for the purpose of providing corporate consulting services.

The VIE established a wholly owned subsidiary, GMB Hangzhou, on November 1, 2017, pursuant to PRC laws.

In 2017 and 2018, the VIE also established three subsidiaries pursuant to PRC laws, which were GMB (Beijing), GMB Culture, and GMB Consulting. The VIE owns 51% of the equity interest of each of these three subsidiaries. Additionally, GMB Culture has a subsidiary, Mentor Board Voice of Seeding (Shanghai) Cultural Technology Co., Ltd., and owns 60% of its equity interest.

On February 22, 2019, the holding company, Sunrise New Energy Co., Ltd. (then known as Global Internet of People, Inc.), was incorporated as an exempted company with limited liability under the laws of the Cayman Islands. Sunrise New Energy Co., Ltd. owns 100% of GMB HK, a Hong Kong company incorporated on March 22, 2019.

On June 3, 2019, GIOP BJ was incorporated pursuant to PRC laws as a wholly foreign owned enterprise. GMB HK holds 100% of the equity interest in GIOP BJ. On August 26, 2022, GMB HK transferred its equity interest in GIOP BJ to Zhuhai Zibo, and GIOP BJ became a wholly owned subsidiary of Zhuhai Zibo.

On October 15, 2020, the VIE established another wholly owned subsidiary, Zibo Shidong, pursuant to PRC laws. See “Item 4C. Organizational Structure for a chart of our current structure.”

On February 11, 2021, the Company closed its initial public offering (“IPO”). The ordinary shares of par value US$0.0001 each in the capital of the Company commenced trading on The Nasdaq Capital Market under the ticker symbol “SDH” on February 9, 2021.

On October 8, 2021, the Company established a wholly-owned-subsidiary, SDH New Energy, pursuant to Hong Kong laws.

On October 15, 2021, SDH New Energy established a wholly-owned-subsidiary, Zhuhai Zibo, pursuant to PRC laws.

On November 23, 2021, SDH New Energy established a wholly-owned-subsidiary, Zhuhai Guizhou, pursuant to PRC laws.

On January 7, 2022, the VIE established Beijing Mentor Board Health Technology Co., Ltd (“GMB Health”) pursuant to PRC laws. The VIE owns 100% of the equity interest of GMB Health. Additionally, on December 8, 2023, GMB Health acquired a subsidiary, Shidong Yike (Beijing) Technology Co., Ltd., and owns 51% of its equity interest.

On April 2, 2022, Zhuhai Zibo entered into an investment agreement (the “Agreement”) with certain parties to form Sunrise Guizhou, a joint venture (the “JV”) dedicated to the production of high-grade lithium-ion power battery anode materials. Pursuant to the Agreement, Zhuhai Zibo owned 51% equity interest in the JV. The Agreement and related transactions were approved by Sunrise New Energy’s shareholders at an extraordinary general meeting of shareholders held on April 1, 2022.

On June 13, 2022, Zhuhai Zibo and the other thirteen founding shareholders of Sunrise Guizhou (the “Original Shareholders”) entered into an investment agreement (the “Investment Agreement”) with Guizhou Province New Kinetic Industry Development Fund Partnership (the “Investor”). Pursuant to the Investment Agreement, the Investor invested RMB 200 million in Sunrise in exchange for 22.8395% of Sunrise Guizhou’s equity interest (the “Capital Increase”), and the Original Shareholders have agreed to waive their pre-emptive rights and accept the Investor as a new shareholder of Sunrise. As a result of the Capital Increase, each Original Shareholder’s equity interest in Sunrise was reduced by the same ratio. Zhuhai Zibo’s equity share in Sunrise Guizhou was reduced from 51% to 39.3519%. On April 12, 2022, Zhuhai Zibo entered into an “Agreement of Action in Concert” with twelve of the thirteen Original Shareholders, who agreed to act in concert with Zhuhai Zibo in matters relating to the corporate governance of Sunrise, including voting on shareholder proposals and nominating directors of Sunrise Guizhou. The Agreement of Action in Concert ensures that Zhuhai Zibo controls 74.0743% of Sunrise Guizhou’s voting rights after the Capital Increase took effect pursuant to the Investment Agreement.

On July 11, 2022, the Company relocated its principal executive offices from Room 208, Building 1, No. 28 Houtun Road, Haidian District, Beijing, PRC, to Room 703, West Zone, R&D Building, Zibo Science and Technology Industrial Entrepreneurship Park, No. 69 Sanying Road, Zhangdian District, Zibo City, Shandong Province, PRC.

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On August 5, 2022, at the 2022 annual general meeting of shareholders of the Company, the shareholders of the Company approved to change the Company’s name from Global Internet of People, Inc. to Sunrise New Energy Co., Ltd. The name change of the Company became effective on August 10, 2022. In conjunction with the name change, the Company’s Ordinary Shares of par value US$0.0001 each began trading on the NASDAQ Capital Market under the new ticker symbol “EPOW” as of the opening of trading on August 15, 2022.

On February 8, 2024, at the 2023 annual general meeting of shareholders of Company, the shareholders approved a re-designation and re-classification of the Company’s Ordinary Shares into Class A Ordinary Shares and Class B Ordinary Shares. See “Item 10. ADDITIONAL INFORMATION” of this annual report for further details.

Pursuant to PRC laws, each entity formed under PRC law shall have certain business scopes as submitted to the Administration of Industry and Commerce or its local counterpart. Pursuant to specific business scopes, approval by the relevant competent regulatory agencies may be required prior to commencement of business operations. As such, GIOP BJ’s business scope is to primarily engage in the following: technology development, technology promotion, technology transfer, technical consultation, technical services; sales of self-developed products; business management consulting; corporate planning; conference services, organization of cultural and artistic exchange activities (excluding commercial performances); economic and trade consulting. Since the sole business of GIOP BJ is to provide the VIE with technical support, consulting services and other management services relating to its day-to-day business operations and management in exchange for a service fee approximately equal to the VIE’s earnings before corporate income tax, i.e., the VIE’s revenue after deduction of operating costs, expenses and other taxes, subject to adjustment based on services rendered and the VIE’s operation needs, such business scope is necessary and appropriate under PRC laws. the VIE, on the other hand, is also able to, pursuant to its business scope, provide a platform for our Members to obtain practical corporate guidance, financing sources, resource joining, assistance with corporate emergencies, support with public listings and other mutual assistance services.

We consolidate the VIE through contractual arrangements, which are described under “Business — Contractual Arrangements between GIOP BJ, the VIE and Its Shareholders.” Sunrise New Energy is a holdings company with no business operation other than holding the shares in GMB HK, which is also a pass-through entity with no business operation.

Our principal executive offices are located at Room 703, West Zone, R&D Building, Zibo Science and Technology Industrial Entrepreneurship Park, No. 69 Sanying Road, Zhangdian District, Zibo City, Shandong Province, PRC, and our phone number is +86 10-82967728. Our registered office in the Cayman Islands is located at Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman, KY1-1111, Cayman Islands, and the phone number of our registered office is +1 345 945 3901. We maintain a corporate website at https://www.sunrisenewenergy.com/.

Investor inquiries should be directed to us at the address and telephone number of our principal executive offices set forth above. Our agent for service of process in the United States is Cogency Global Inc., 122 East 42nd Street, 18th Floor, New York, NY 10168.

The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC using its EDGAR system.

See “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Capital Expenditures” for a discussion of our capital expenditures.

B. Business Overview

We are a Cayman Islands holding company conducting a substantial portion of our operations in China through our PRC operating entities. Unless otherwise stated, as used in this annual report, the term’s “we,” “us,” “our,” “Sunrise New Energy,” “our Company,” and the “Company” refer to Sunrise New Energy Co., Ltd., an exempted company limited by shares incorporated under the laws of the Cayman Islands; and “SDH” or “the VIE” are to Global Mentor Board (Zibo) Information Technology Co., Ltd., a limited liability company organized under the laws of the PRC, which we control via a series of contractual arrangements among GIOP BJ, SDH and shareholders of SDH (the “VIE Agreements”).

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As of the date of this annual report, substantially all of our business is conducted by (1) Sunrise Guizhou, a joint venture formed by Zhuhai Zibo (a wholly owned subsidiary of the Company) and certain other partners, as a limited company pursuant to PRC laws for the purpose of manufacturing and sales of graphite anode materials, and (2) SDH, the Company’s VIE entity that operates a knowledge sharing platform in China. Investors of our Ordinary Shares do not hold shares in the PRC operating entities, but instead hold shares of a Cayman Islands company. Further, neither we nor our subsidiaries own any shares in the VIE. For accounting purposes, we control and receive the economic benefits of the VIE’s business operation through the VIE Agreements, each of which are dated June 10, 2019, and which enable us to consolidate the financial results of the VIE and its subsidiaries in our consolidated financial statements under U.S. GAAP. See “Item 3. Key Information — Contractual Agreements among GIOP BJ, SDH the VIE and Its Shareholders” for more details.

The VIE, or SDH, started as a consulting company providing enterprise services to small and medium-sized enterprises in the PRC in December 2014, and launched a peer-to-peer knowledge sharing and enterprise service platform in May 2016. Since then, the VIE has been operating a knowledge sharing platform and provided services both online, via a mobile application “Shidonghui App” (the “APP”), and offline, through local offices directly operated by us in Beijing, Shanghai, Zibo and Guizhou in China.

Beginning in fiscal year 2022, we started transitioning our core business from knowledge sharing and enterprise services to sales of graphite anode material products. In April 2022, we entered into the graphite anode material manufacturing and sales business through a joint venture, Sunrise Guizhou, of which we currently own 39.35% through our wholly owned subsidiary, Zhuhai Zibo. We consolidate Sunrise Guizhou’s financials because we own a majority of seats on its board of directors and control its financial and operating policies pursuant to an agreement among its funding shareholders. Sunrise Guizhou is located at Yilong New District, Xingyi City, Qian Southwest State, Guizhou Province, China. The land use of Sunrise Guizhou’s graphite anode manufacturing site is approximately 294,452.6 square meters, which Sunrise Guizhou purchased in March 2022 for approximately $6.6 million. Sunrise Guizhou began construction of the manufacturing plant in April 2022, and the first and second phase construction of (30,000 tons annual manufacturing capacity) of the manufacturing plant has been completed. The third phase of construction of the manufacturing plant (20,000 tons annual manufacturing capacity) was approved by the board of the directors of the Company in March 2023, and is under construction.

Graphite anode materials are essential components used in fast-charging batteries, energy storage batteries, electric vehicle power batteries, and long-cycle high-power batteries. The market is driven primarily by demand for Li-ion batteries that require anode materials. We believe that a significant driver for Li-ion batteries is their use in electric vehicles (EVs) and in grid-storage applications. According to a research report published by Goldman Sachs on February 10, 2023, entitled “Electric vehicles are forecast to be half of global car sales by 2035”, EV sales is expected to soar to about 73 million units in 2040, up from around 2 million in 2020. The percentage of EVs in worldwide car sales, meanwhile, is expected to rise to 61% from 2% during that time-span, and EV sales are anticipated to be well over 80% in many developed countries in 2040. The International Energy Agency (“IEA”)’s Net Zero by 2050 Roadmap predicts that 2 billion battery electric, plug-in hybrid and fuel-cell electric light-duty vehicles are needed by that year to reach net zero emission. A typical Li-ion High-Energy (100 Ah) cell of around 3,400g requires over 650g of graphite and each EV contains approximately 70kg of graphite. The Company sees this as a major growth driver for the graphite anode industry. Sunrise Guizhou’s products are critical to the transition to a more sustainable, resilient and environmentally friendly future. We believe that the sales for Sunrise Guizhou’s graphite anode material products will continue to grow.

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Our Past Performance

We generated net revenue of $45,050,405 and $38,125,668, $7,409,272 for the fiscal years 2023, 2022 and 2021, respectively. For fiscal year 2023, net revenue increased by $6,924,737, or 18.16%, which increase was mainly driven by the sale of graphite anode material products. For fiscal year 2022, net revenue increased by $30,716,396, or 415%, which increase was mainly driven by the sale of graphite anode material products. Beginning in fiscal year 2022, sales of graphite anode material products became a major revenue source, while revenue from knowledge sharing and enterprise services business accounted for a small portion of the total revenue. We expect this trend to continue as we continue to develop our graphite anode material business.

Our revenues for fiscal years 2023 and 2022 were derived from the following sources:

REVENUES, NET	2023		2022
Graphite anode business	$	44,384,004	$	37,580,677
Peer-to-peer knowledge sharing and enterprise business		666,401		544,991
Member services		-		106,724
Enterprise services
-Comprehensive tailored services		10,784		153,658
-Sponsorship advertising services		-		-
-Consulting services		471,978		9,645
Online services		7,827		2,100
Other revenues		175,812		272,864
Revenues, net	$	45,050,405	$	38,125,668

For fiscal year 2023, revenue from the sale of graphite anode material products was $44,384,004, which accounted for 98.52% of our total revenues, and revenue from knowledge sharing and enterprise business was 666,401, which accounted for approximately 1% of our total revenue.

For fiscal year 2022, revenue from the sale of graphite anode material products was $37,580,677, which accounted for 99% of our total revenues, and revenue from the knowledge sharing and enterprise services business was $544,991, which was a 93% decline from fiscal 2021 and accounted for only 1% of our total revenues. The decline of this business was due to the material negative impact of the large-scale COVID-19 lockdowns in China, during which time the normal business operations were seriously disrupted, as the VIE relied on in-person networking and meetings in order to both conduct and promote many aspects of this business.

Graphite Anode Material Manufacturing and Sales Business

In April 2022, we entered into the graphite anode material manufacturing and sales business through a joint venture, Sunrise Guizhou, of which we currently own 39.35% through our wholly owned subsidiary, Zhuhai Zibo. Sunrise Guizhou is located at Yilong New District, Xingyi City, Qian Southwest State, Guizhou Province, China. The land use of Sunrise Guizhou’s graphite anode manufacturing site is approximately 294,452.6 square meters. Sunrise Guizhou purchased the site in March 2022 for approximately $6.6 million. Sunrise Guizhou began construction of the manufacturing plant in April 2022, and the first and second phases of construction of (30,000 tons annual manufacturing capacity) of the manufacturing plant has been completed. The third phase of construction of the manufacturing plant (20,000 tons annual manufacturing capacity) was approved by the board of the directors of the Company in March 2023, and is currently under construction.

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Products

Sunrise Guizhou’s products include various artificial graphite anode material products. Artificial graphite is made of petroleum coke, needle coke and pitch coke as the main material, and formed after crushing, shaping, granulation and graphitization. The performance, features and uses of Sunrise Guizhou’s products are as follows:

Type	Product Image	Medium Particle Size (um)	Designed Capacity (mAh/g)	Compaction (g/cc)	Features	Uses
Cost-effective artificial graphite		15.5±2.5	340-348	1.50-1.60	Excellent comprehensive performance, long cycle, cost-effective	Power batteries and energy storage batteries;  cell of soft pack, square aluminum shell, and cylindrical batteries
Volumetric artificial graphite		16.5±2.5	348-355	1.60-1.65	High energy density and comprehensive performance	Multiple long-cycle square, cylindrical, polymer batteries
Multiplier rate artificial graphite		13.5±3.0	347-353	1.55-1.63	Excellent comprehensive performance, long cycle, good rate performance	Power anode material, cell of soft pack, square aluminum shell, and cylindrical batteries
High capacity and high compaction artificial graphite		16.0±2.0	353-358	1.63-1.68	High energy density, excellent comprehensive performance	Power anode material, cell of soft pack, square aluminum shell, and cylindrical batteries
Volumetric artificial graphite		13.5±3.0	350-355	1.60-1.65	High energy density and comprehensive performance	Multiple long-cycle square, cylindrical, polymer batteries
High capacity and rate artificial graphite		12.5±3.0	349-354	1.58 -1.65	High energy density and power performance, long cycle life	Multiple long cycle square and polymer batteries
Cost-effective long-cycle artificial graphite		11.0±2.5	340-345	1.45-1.55	Excellent comprehensive performance, long cycle, cost-effective	Energy storage anode material, cell of soft pack, square aluminum shell, and cylindrical batteries
Higher energy density artificial graphite		13.5±2.0	355-360	1.65-1.70	High energy density, good rate performance	Power batteries and energy storage batteries;  cell of soft pack, square aluminum shell, and cylindrical batteries
EV fast charging artificial graphite		12.0±2.5	≥350	1.50-1.60	High energy density, good rate performance,long cycle	Power batteries and energy storage batteries;  cell of soft pack, square aluminum shell, and cylindrical batteries
Higher energy density and long cycle artificial graphite		11.0±2.0	350-355	1.55-1.60	High energy density,long cycle	Energy storage anode material, cell of soft pack, square aluminum shell, and cylindrical batteries
High temperature performance and long cycle artificial graphite		11.0±2.0	≥350	1.55-1.60	Low swelling,High temperature performance and long cycle	Energy storage anode material, cell of soft pack, square aluminum shell, and cylindrical batteries

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Direct Sales Channel

Sunrise Guizhou markets its graphite anode products through a direct sales channel, through its sales department, which consists of five experienced employees who report directly to the CEO of Sunrise Guizhou. The CEO of Sunrise Guizhou has more than 20 years of experience in the lithium-ion battery material industry, and has accumulated extensive business connections in this industry. The initial step to develop relationships with a potential customer is making a targeted sales pitch, and if a potential customer responds to the sales pitch or shows interest in the products, Sunrise Guizhou then goes through the qualification process in order to become a supplier. The qualification process usually consists of the following steps: (1) Sunrise Guizhou sends out samples of its graphite anode to the potential customer, (2) the potential customer conducts preliminary tests to evaluate the sample products, (3) if the sample products pass the initial evaluations, the next step is generally a small commercial order placed by the potential customer to verify the product quality on a commercial scale, and (4) the potential customers often send an engineering team to visit Sunrise Guizhou’s R&D center and quality control department, to further assess the quality and performance of Sunrise Guizhou’s products. If Sunrise Guizhou successfully passes each of the above validation steps, the potential customer usually starts negotiating a supplier agreement with Sunrise Guizhou.

Customers

For fiscal year 2023 and 2022, Sunrise Guizhou had 23 and 16 customers, respectively. Sunrise Guizhou’s customers are manufacturers of industrial and consumer energy storage lithium-ion batteries, such as batteries for electric vehicles and electric ships, and smart consumer electronics. The vast majority of Sunrise Guizhou’s customers are Chinese companies, and some of them are large well-known companies, including the following:

● BYD Company Limited is one of the world’s largest automobile manufacturing and sales companies, with global sales of more than 3 million vehicles in 2023, of which 1.6 million were electric vehicles. BYD is a listed company in Hong Kong and Shenzhen, with a total market value of more than 585 billion yuan (82 billion USD).;

● Contemporary Amperex Technology Co. Limited (CATL) is the world’s largest battery manufacturer. CATL has ranked first globally for seven consecutive years, according to SNE Research, a South Korean battery and energy research company, which recently released global EV battery consumption volume data in 2023. CATL’s EV battery consumption volume reached 259.7GWh, with an increase of 40.8% compared to 2022 and a market share as high as 36.8%, nearly 21% ahead of the second.

● Jiangsu Pylontech Battery Co., Ltd., a leading energy storage lithium battery manufacturer in China, whose products are mainly exported to Europe and the United States.

● Hangzhou Narada Power Technology Co., Ltd., one of China’s leading battery energy storage system suppliers, whose products are mainly exported to Europe and the United States.

● Xiamen Hithium Energy Storage Technology Co., Ltd.: a company dedicated to industrial and commercial energy storage batteries.

For the fiscal year ended December 31, 2023, three customers accounted for more than 10% of Sunrise Guizhou’s total sales, with each accounting for 38%, 25% and 11% of the total sales, respectively. For the fiscal year ended December 31, 2022, four customers accounted for more than 10% of Sunrise Guizhou’s total sales, with each accounting for 28%, 20%, 19% and 19% of the total sales, respectively. As Sunrise Guizhou grows its customers bases, it is expected that the concentration of sales will diminish in the future. See “Risk Factors—Risks Related to Our Business—Sunrise Guizhou depends on a few major customers with whom it does not enter into long-term contracts, the loss of any of which could cause a significant decline in its revenues.”

Raw Materials and Suppliers

Sunrise Guizhou sources raw materials, including asphalt coke, petroleum coke, needle coke, and American petroleum coke, from suppliers in China, the United States, Romania, and Indonesia, to diversify its raw material origins and stabilize its supply chain. Sunrise Guizhou selects suppliers based on many criteria including but not limited to: quality, production site, production process, delivery cycle, and price. As there are a variety of options for supplies, and the technical demand of preparing most of the raw materials are relatively low, Sunrise Guizhou does not anticipate difficulties in obtaining raw materials. Sunrise Guizhou purchases raw materials on a per purchase order basis. The prices for these raw materials are nevertheless subject to market forces largely beyond our control, including energy costs, market demand, economy trend, and freight costs. The prices for raw materials have fluctuated in the past, and may fluctuate significantly in the future. See “Risk Factors—Risks Related to Our Business—Sunrise Guizhou faces the risk of fluctuations in the cost, availability, and quality of raw materials, which could adversely affect our results of operations.” The costs of raw materials accounted for 29% of the total costs of production for fiscal year 2023, and no supplier accounted for more than 10% of Sunrise Guizhou’s total costs for raw materials. The costs of raw materials accounted for 34% of the total costs of production for fiscal year 2022, and two suppliers accounted for more than 10% of Sunrise Guizhou’s total costs for raw materials.

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Third-party Contract Manufacturers

Sunrise Guizhou entrusts third-party contract manufacturers for the graphitization processes of the manufacturing of its graphite anode products. Sunrise Guizhou implements a rigorous process for selecting third-party contract manufacturers. Sunrise Guizhou strictly evaluates various factors, including the production capacity, quality control management, environmental qualifications, and key customers of its contract manufacturers. Sunrise Guizhou regularly sends its technical team and quality control team to the facilities of the contract manufacturers for on-site supervision, guidance and quality control. Sunrise Guizhou issues a detailed quantitative scoring table for each contract manufacturer every month to evaluate their performance. As of the date of this annual report, Sunrise Guizhou contracts with 34 third-party contract manufacturers in China.

Industry and Competition

At present, lithium batteries are widely used in new energy vehicles, energy storage, electric ships, and smart homes, and the boundaries of use continue to expand, resulting in a trillion-dollar market. According to the “Lithium-ion Battery Market Size, Share & Trends Analysis Report By Product (Lithium Cobalt Oxide, Lithium Iron Phosphate, Lithium Nickel Cobalt Aluminum Oxide), by Application (Automotive, Consumer Electronics), Region, and Segment Forecasts, 2024 - 2030” published by Grand View Research in November 2023, the global lithium-ion battery market size was estimated at USD 54.4 billion in 2023 and is projected to grow at a compound annual growth rate (CAGR) of 20.3% from 2024 to 2030. Global registration of electric vehicles (EVs) is anticipated to increase significantly over the forecast period. We believe that the lithium-ion battery industry is witnessing unprecedented growth, fueled by pivotal roles these batteries play in addressing both environmental concerns and the need for reliable energy storage solutions in automotive sector. This trend is expected to reshape the energy landscape, with lithium-ion batteries at the forefront of powering a cleaner and more sustainable future for transportation. Lithium-ion batteries are also utilized for providing backup power supply for commercial buildings, data centers, and institutions. Also, lithium-ion battery is preferred for energy storage in residential solar PV systems. These factors are expected to boost the growth of energy storage applications over the forecast period. In addition, lithium-ion batteries are used in numerous industrial applications, such as power tools, cordless tools, marine equipment & machinery, agricultural machinery, industrial automation systems, aviation, military & defense, electronics, civil infrastructure, and oil & gas.

As of the date of this annual report. Sunrise Guizhou’s main competitors are lithium-ion battery anode material manufacturers such as BTR New Energy, Hitachi Chem, Shanshan Tech, Mitsubishi Chem, Zichen Tech.

Intellectual Property

Sunrise Guizhou has built a portfolio of intellectual property and plans to continue to invest in research and development. Sunrise Guizhou’s success depends, in part, on its ability to protect its intellectual property. To accomplish this, Sunrise Guizhou relies on a combination of patents, trade secrets, including employee and third-party nondisclosure agreements, trademarks, and other contractual rights to establish and protect proprietary rights in intellectual property. As of the date of this annual report, Sunrise Guizhou has 27 authorized patents (26 in China and one in Japan), and 34 in the various phases of their applications (32 in China, one in the US, and one in South Korea). In addition, Sunrise Guizhou owns 5 registered trademarks. Set forth below is a detailed description of its authorized patents:

	Country	Patent No	Patent Name	Publication Date	Type	Validity Period
1	PRC	ZL 2017 1 1155250.2	A lithium-ion battery, silicon-carbon negative electrode material used and preparation method thereof	20-Nov-17	invention patents	20 years
2	PRC	ZL 2017 2 1552539.3	A system for intermittent coking to produce negative electrode coke	20-Nov-17	utility model patents	10 years
3	PRC	ZL 2018 1 683803. 1	Production device for multi-stage series continuous heating, coating and granulation of negative electrode materials	17-Oct-18	utility model patents	10 years
4	PRC	ZL2022 1 0339329.5	A kind of sulfur and phosphorus co-doped hard carbon composite material and its preparation method	1-Apr-22	invention patents	20 years
5	PRC	ZL2022 1 0386246. 1	A high first efficiency hard carbon composite material and its preparation method	13-Apr-22	invention patents	20 years
6	PRC	ZL 20221 0396110.9	A fast ion conductor-coated silicon-carbon composite material and its preparation method	15-Apr-22	invention patents	20 years
7	PRC	ZL 2022 1 0400775.2	A kind of preparation method of lithium-ion battery negative electrode material	17-Apr-22	invention patents	20 years

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	Country	Patent No	Patent Name	Publication Date	Type	Validity Period
8	PRC	ZL2022 1 0400796.4	A high energy density fast charging graphite composite material and its preparation method	17-Apr-22	invention patents	20 years
9	PRC	ZL 2022 1 0400774.8	A sulfur-containing fast ion conductor-coated graphite composite material and its preparation method	17-Apr-22	invention patents	20 years
10	PRC	ZL 2022 1 0400788.X	A long-life fast-charging lithium-ion battery negative electrode material and its preparation method	17-Apr-22	invention patents	20 years
11	PRC	ZL 2022 1 0401382.3	A long-life and high-efficiency hard carbon composite material and its preparation method	18-Apr-22	invention patents	20 years
12	PRC	ZL 202210741 488	A method for preparing porous silver-coated hard carbon composite materials by magnetron sputtering	28-Jun-22	invention patents	20 years
13	PRC	ZL 2022108 518691	A method for preparing hard carbon composite materials used in sodium-ion batteries	20-Jul-22	invention patents	20 years
14	PRC	ZL 202210851 672	A high first efficiency and high energy density negative electrode material and its preparation method	20-Jul-22	invention patents	20 years
15	PRC	ZL 202210867 413	A preparation method of mesophase carbon microsphere-silicon carbon composite negative electrode material	22-Jul-22	invention patents	20 years
16	PRC	ZL 202210879 637	A preparation method of high energy density fast charging graphite anode material	25-Jul-22	invention patents	20 years
17	PRC	ZL 202210917 627	A method for preparing copper phosphide/phosphorus/carbon nanotube co-doped hard carbon composite materials	1-Aug-22	invention patents	20 years
18	PRC	ZL 202210916 309	A template method to prepare magnesium-doped hollow silicon-carbon composite materials and its preparation method	1-Aug-22	invention patents	20 years
19	PRC	ZL 202211281 335	A method for preparing high-energy-density fast-charging lithium-ion battery negative electrode materials	19-Oct-22	invention patents	20 years
20	PRC	ZL 202211328 460	A method for preparing high first efficiency graphite composite materials	26-Oct-22	invention patents	20 years
21	PRC	ZL 202211376 694	A high energy density composite negative electrode material and its preparation method	4-Nov-22	invention patents	20 years
22	PRC	ZL 20221138 45496	A high energy density graphite composite material and its preparation method	7-Nov-22	invention patents	20 years
23	PRC	ZL 202211419 886	A preparation method of aluminum and rare earth co-coated graphite negative electrode composite material	14-Nov-22	invention patents	20 years
24	PRC	ZL 20221142 72063	A method for preparing negative electrode materials for long-cycle lithium-ion batteries	15-Nov-22	invention patents	20 years
25	PRC	ZL 202211427 111	Preparation method of high energy density fast charging negative electrode material	15-Nov-22	invention patents	20 years
26	PRC	ZL 20221143 80072	A hard carbon composite material for lithium-ion batteries and its preparation method	16-Nov-22	invention patents	20 years
27	JPN	2022- 170556	The invention relates to a preparation method of anode material for lithium ion battery	26-Oct-22	invention patents	20 years

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Knowledge Sharing and Enterprise Service Business

The VIE, or SDH, started as a consulting company providing enterprise services to small and medium-sized enterprises in the PRC in December 2014, and launched a peer-to-peer knowledge sharing and enterprise service platform in May 2016. Since then, the VIE has been operating a knowledge sharing platform and provided services both online, via a mobile application “Shidonghui App” (the “APP”), and offline, through local offices in Beijing, Shanghai, Hangzhou, Zibo and Guizhou in China.

Knowledge Sharing and Enterprise Service Platform Ecosystem

Users and Members

Users

The APP is available in the PRC and elsewhere in the world where potential Users can access on the internet the http hyper-link provided for downloading/installing the APP on their mobile devices; anyone over the age of 18, with a mobile phone (IOS or Android) can download the APP and complete an online registration process to become a User. Currently, although the VIE does not charge any fee to register for the APP, the VIE does require Users to obtain a verification code via their mobile devices to register. Additionally, Users must agree to the Terms of Use in the form of a user agreement, which can be completed and submitted to us on the APP. As of April 30, 2024, the VIE had approximately 519,700 APP Users. 

Members

Members can choose from three annual membership plans: Platinum, Diamond, and Protégé. Members enjoy services included in their respective membership plans. SDH did not have any Members for fiscal year 2022 and 2023. The following table presents the annual membership fees:

Membership Tiers	Annual Membership Fee
Platinum	RMB 16,800 (approximately US$2,435)
Diamond	RMB 98,000 (approximately US$14,203)
Protégé	RMB 500,000 (approximately US$72,464)

Mentors and Experts

Mentors

Mentors are leaders in their respective professional fields, all of them enjoy strong social influence due to their professional achievements and social status in China. The majority of Mentors are successful well-known entrepreneurs, executive officers of public companies, PE/VC partners, doctors, and artists, in a wide range of industries including academia, health care, financial service, energy, technology, manufacturing, etc. As of April 30, 2024, the VIE had 745 Mentors, and all of them were hand-picked and invited by our management to join our platform.

Experts

Experts are skilled and qualified in their specialized fields to provide advice and guidance to Users. Persons can become Experts through a certification process either on the APP or in-person at the VIE’s local offices and centers. The certification process consists of three steps: (1) an applicant is required to demonstrate his or her expertise and qualifications by submitting an application along with supporting documents such as resume, publications, and school transcripts; (2) our team reviews and verifies the applicant’s qualifications and background information, based on which we make a determination on whether to approve the application; and (3) the VIE enters into a service agreement with the approved applicant. As of April 30, 2024, the VIE had 1,928 Experts.

Service Agreements with Mentors and Experts

Each of the Mentors and Experts, as a service provider on our platform, must enter into a service agreement with us that governs the rights and obligations of each party. The term of the service agreement is open and can be terminated by either party without any cause, and the services they provide to our Users and Members must be given exclusively on our platform, either online or offline, for which the fees generated are shared between the VIE and the providers, usually at a 30/70 split, that is, we receive 30% and providers receive 70% of the fees. Under certain circumstances where providers generate additional fees such as registering new members, the providers will be entitled to a larger percentage of the fees generated, as decided between the parties on a case-by-case basis.

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Enterprise Service Consultants

The VIE has a professional consulting team with seven full-time employees, who have at least five years of experience in their respective fields of professions, including finance, capital markets, marketing, public relations, sales, etc. The majority of our team previously worked in the technology or finance industries. See “Consulting” below.

Enterprise Service Clients

The majority of the Enterprise Service Clients are small and medium-sized enterprises located in the following provinces: Zhejiang, Shanxi, Guangdong, Shandong and Liaoning, as well as Shanghai City. For the fiscal year ended December 31, 2023, or 2022, no client accounted for more than 10% of our revenues.

Services

Member Service

The chart below summarizes the services Members receive:

Membership Tier	Service
Platinum	seven organized activities (study tours and forums) per year
Diamond	seven organized activities (study tours and forum) per year, during which a Member may enjoy special seating assigned only to Diamond Members, and make presentations and sales pitches of his or her business, products and services
Protégé	seven organized activities (study tours and forum) per year, during which a Member may enjoy special seating assigned only to Protégé Members, make presentations and sales pitches of his or her business, products and services, and communicate with Mentors and Experts in person at such activities

During each of the study tours and forums, a number of Mentors and Experts, along with other business leaders, are invited to attend, give speeches and host discussion sessions at these activities. The VIE compensates the attending Mentors and Experts with fees ranging from RMB5,000 (approximately US$725) to RMB20,000 (approximately US$2,899) depending on factors such as the size of the audience, the location of the activity and qualifications of the attending Mentors and Experts. For fiscal year 2023, SDH did not generate any revenue from Membership Service.

Study Tours

Beginning in 2016, the VIE started organizing study tours for our Members. The study tours are designed to provide trainings on real world business skills for entrepreneurs and executives. Each study tour generally lasts two days, in which a day and a half are dedicated to classroom style lecturing and discussions, while the remaining half day is spent on visiting the headquarters or facilities of successful enterprises. All participants are responsible for their own food, traveling and living accommodations throughout the study tours. The VIE did not offer any study tours in 2022 and 2023.

Forums

The VIE organizes large-scale forums (with more than 1,000 attendees) that last two to three days. The purpose of the forums is to share business intelligence with small and medium-sized enterprises and help them develop business plans and strategies. The themes of the forums are usually related to interpretation of newly published governmental policies, sharing of industry opportunities and perspectives on corporate transformation and growth. The VIE did not hold large-scale forums in 2022 and 2023.

Enterprise Services

In addition to providing services to Users and Members, the VIE has been providing customized enterprise service to small and medium-sized enterprises in the PRC since its inception in 2014. Enterprise service is an integral part of its platform, and a number of the Enterprise Service Clients are also Members and Users. For fiscal year 2023, 2022 and 2021, enterprise services generated $482,762, $163,303, and $4,751,819 in revenues, respectively.

Below are the three main enterprise services we provide:

Comprehensive Tailored Services

Comprehensive tailored services are geared towards small and medium-sized businesses, to provide tailored packaged services, including conference and salon organizations, booth exhibition services, guidance by Mentors and Experts, and other value-added services, for the purpose of promoting and growing their businesses. Clients are required to enter into service agreements with us, which are individually negotiated based on the services and resources we provide. For 2023, the comprehensive enterprise services generated revenue in the amount of US$10,784 from 15 clients. For 2022, the comprehensive enterprise services generated revenue in the amount of US$153,658 from 7 clients. For 2021, the comprehensive enterprise services generated revenue in the amount of US$1,433,847 from 80 clients.

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Consulting

A team of professional consultants provides enterprise consulting services and develops strategies and solutions for corporate reorganization, product promotion and marketing, industry supply chain integration, corporate governance, financing and capital structure, etc. The consulting services are customized to meet each client’s specific needs and requirements. The fees and payment structures are based on the specifics of the services we provide, such as the time and efforts required, the duration of the service, and are usually in the range of RMB20,000 (approximately US$2,973) to RMB80,000 (approximately US$11,894) for a one-time service charge, or monthly fees in the amounts of RMB10,000 (approximately US$1,487) to RMB20,000 (approximately US$2,973) for continued services. For fiscal years 2023, 2022 and 2021, consulting generated $471,978, $9,645, and $1,583,583 in revenues, respectively.

Sponsorship Advertising

Sponsorship advertising is a special form of advertising, generally referring to a publicity strategy adopted by enterprises in order to enhance their corporate and product image, as well as brand awareness and influence. The VIE provides sponsorship advertising services for enterprise clients at various events, such as forums and study tours, in the following forms:

● The VIE displays the names and logos of the sponsor enterprises on the background and display boards.

● The representatives of the sponsor enterprises are assigned to the VIP seating areas with name tags displaying their company names and logos.

● The sponsor enterprises enjoy a certain number of tickets for an event, which can be used for sale or as gifts to their customers.

● The names and logos of the sponsor company are displayed in the related advertisements and promotional materials for an event.

● The VIE uses products exclusively provided by the sponsor enterprise for an event.

● The names and logos of the sponsor enterprise may also be displayed in programs and videos the VIE produces, such as “Haiping’s Meeting Room.”

The fees we charge for sponsorship advertising is in the range of RMB500,000 (approximately US$74,337) to RMB2,000,000 (approximately US$297,349) per engagement, depending on several specific factors, such as the number of the participants, the location, and popularity of an event. For fiscal years 2023 and 2022, sponsorship advertising service did not generate any revenues.

Sale of Merchandise

In late 2019, the VIE started procuring and offering merchandise for sale through its platform to clients and the general public. The afore-mentioned merchandise included Chinese tea, red wine, wellness products, gift cards, and others. Some of the merchandise for sale was obtained from Members and enterprise service clients through exchange for collection of membership fees and consulting fees. Such exchanges were non-routine and made at our discretion, based on a number of factors, including but not limited to, the market trend and demand for such merchandise, the profit margin expected to be realized from the sale of such merchandise, and the credit-worthiness of and the relationship with these clients. Other types of merchandise were sourced and purchased from customers directly at preferred prices or from third parties, based on our knowledge of current market trends and demand generated from our platform. For fiscal years 2023, 2022 and 2021, the VIE generated $nil, $3,165 and $ $2,104,766 in revenue from sale of merchandises, respectively.

In fiscal 2022, due to deteriorating consumer demand and market conditions, the Company did not procure any merchandise and wrote down the cost of inventories of the merchandises to the estimated net realizable value, which was $nil, resulting in $2,711,158 impairment.  In fiscal year 2023, the VIE discontinued the sale of merchandise.

Online Service

The VIE provides Users two services on the APP: (1) Question and Answer (Q&A) Sessions and (2) Online Streaming of Courses and Programs. In addition, our APP has a community building function that facilitates relationship building on our platform. For example, our APP allows Users to share their “moments,” such as pictures and videos of their life experiences, via instant messaging, with other Users on the APP. Users may also “like” and/or comment on other User’s “moments.” In addition, Users may establish their own communities by creating and inviting other Users to join his or her group. For fiscal years 2023, 2022 and 2021, the VIE generated $7,827, $2,100 and $40,391 in revenue from online service, respectively.

The APP

The APP was launched in May 2016, and runs on both IOS and Android devices. The VIE strives to provide Users superb experiences on the APP and has established an in-house Information Technology team of eight employees dedicated to the development and support of our system. To date, the VIE has registered 37 computer software copyrights with the Copyright Protection Centre of China (CPCC), in connection with the development of the APP. As of April 30, 2024, the APP has been downloaded by approximately 519,700 Users. The number of average monthly active Users was approximately 230 in 2023 and approximately 495 in 2022.

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Questions and Answers (Q &A) Session

Mentors and Experts, as providers, are available to answer questions and share valuable personalized guidance and advice in a wide range of fields, including business management, health care, beauty, financial services, education, etc. Through a Q&A session, a User can submit questions on our APP to a chosen provider, who are listed on the APP under their specializing sectors, and receive a response within 72-hours. When a User submits a question on our APP, our customer service representatives and the chosen provider receive a text notification from our system immediately. Upon receipt of the text notification, a provider is required to respond within 72-hours, although most of the time the responses are provided in a much shorter time frame. If the response is delayed or unsatisfactory to the User, he or she may notify our customer service representatives who will contact the provider to follow-up with the User.

Users must purchase top-up credits on the APP to pay for Q&A sessions. Providers set their own fees for Q&A sessions. At present, the average fee for a Q&A session is RMB31 (approximately US$4.38), which translates to 31 APP top-up credits. After each session concludes, credits are automatically awarded to the provider’s APP account and can be used for services on our APP or converted to RMB and paid out to the provider’s bank account linked with our APP. When submitting a question in a Q&A session, a User can also choose to share the Q&A session on the APP for a fee of one to five credits and earn credits when other Users access the shared Q&A session. The credits earned from the shared Q&A sessions are to be split 50/50 between the Users and us. 

Online Streaming of Video & Audio Courses and Programs

The VIE provides video and audio courses and programs on the APP for on-demand and live streaming. At present, the APP has approximately 4,829 audio and 5,289 video courses and programs available for streaming. The majority of the courses and programs are business-oriented, which cover subjects such as entrepreneurship development, financial service, corporate governance, team management, marketing strategy, etc. We also provide some focused courses and programs that target special audience groups, such as parent-child education for new parents, and business school selection programs for graduate students.

Other Services

Member activities, including study tours and forums, are also open to non-members, who pays a fixed fee of RMB3,000 (approximately US$424) for each activity. Fees are usually collected on site on the date of each activity. Other than member activities, the Company provides health services, such as comprehensive health management consulting solutions for high-net-worth individuals and families, which were charged fixed fees ranging from RMB 1,000 (approximately $141) to RMB 14,000 (approximately $1,977), according to the types of health services provided. For fiscal years 2023, 2022 and 2021, the VIE generated fees from other services in the amount of $175,812, $269,699, and $13,965, respectively.

Regulations

This section sets forth a summary of the principal PRC laws and regulations relevant to our business and operations in China.

Regulations Related to Internet Information Services

Among all of the applicable laws and regulations, the Telecommunications Regulations of the PRC, or the Telecom Regulations, promulgated by the PRC State Council on September 25, 2000 and most recently amended on February 6, 2016, is the primary governing law, which sets out the general framework for the provision of telecommunications services by domestic PRC companies. Under the Telecom Regulations, telecommunications service providers are required to procure operating licenses prior to their commencement of operations. The Telecom Regulations distinguish “basic telecommunications services” from VATS. VATS are defined as telecommunications and information services provided through public networks. The Telecom Catalogue was issued as an attachment to the Telecom Regulations to categorize telecommunications services as either basic or value-added. In February 2003, December 2015, and June 2019, the Telecom Catalogue was updated respectively, categorizing information services provided via fixed network, mobile network among others, as VATS.

The Administrative Measures on Telecommunications Business Operating Licenses was promulgated by the Ministry of Industry and Information Technology on March 1, 2009 and most recently amended on July 3, 2017, which set forth more specific provisions regarding the types of licenses required to operate VATS, the qualifications and procedures for obtaining such licenses and the administration and supervision of such licenses. Under these regulations, a commercial operator of VATS must first obtain a VATS License, from the MIIT or its provincial level counterparts, otherwise such operator might be subject to sanctions including corrective orders and warnings from the competent administration authority, fines and confiscation of illegal gains and, in the case of significant infringements, the websites may be ordered to close.

In September 2000, the State Council promulgated the Administrative Measures on Internet Information Services, or the Internet Measures, which was most recently amended on January 8, 2011. Under the Internet Measures, commercial internet content-related services operators shall obtain a VATS License for internet content provision business, or the ICP License, from the relevant government authorities before engaging in any commercial internet content-related services operations within China.

The VIE obtained the ICP License on July 2, 2019, which will remain effective for 5 years.

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Regulations Related to Foreign Investment

Regulations Related to Foreign Investment in Telecommunications

In June 2018 the MOFCOM and the NDRC promulgated the Special Management Measures (Negative List) for the Access of Foreign Investment, or the Negative List, which was most recently amended on December 27, 2021 and effective on January 1, 2022. The value-added telecommunications services (except for e-commerce, domestic conferencing, store-and-forward, and call center services), or the VATS, fall within the Negative List.

Pursuant to the Provisions on Administration of Foreign-Invested Telecommunications Enterprises promulgated by the State Council in December 2001 and most recently amended in March 29, 2022, or the FITE Regulations, the ultimate foreign equity ownership in a VATS provider may not exceed 50%. Moreover, for a foreign investor contemplating to acquire any equity interest in a VATS business in China, it must satisfy a number of stringent performance and operational experience requirements, including demonstrating good track records and experience in operating VATS business overseas.

In July 2006, Ministry of Information Industry, or the MII (the predecessor of the MIIT), released the Notice on Strengthening the Administration of Foreign Investment in and the Operation of Value-added Telecommunications Business, or the MII Notice, which requires foreign investors to set up foreign-invested enterprises and obtain a relevant telecommunications business operating license, to conduct any VATS business in China. Furthermore, under the MII Notice, domestic telecommunication enterprises may not rent, transfer or sell a telecommunications business operating license to foreign investors in any form, nor may they provide any resources, premises, facilities and other assistance in any form to foreign investors for their illegal operation of any telecommunications business in China. In addition, under the MII Notice, the relevant trademarks and domain names used by a foreign-invested VATS operator shall be legally owned by that operator (or its shareholders).

The Company engages in business activities that are VATS, and in light of the above restrictions and requirements, the Company relies on contractual arrangements between GIOP BJ and the VIE to operate its business in China.

Foreign Investment Law

On March 15, 2019, the National People’s Congress approved the Foreign Investment Law of the PRC, or the Foreign Investment Law, which came into effect on January 1, 2020 and replaced the trio of existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law of the PRC, the Sino-foreign Cooperative Joint Venture Enterprise Law of the PRC and the Wholly Foreign-invested Enterprise Law of the PRC, together with their implementation rules and ancillary regulations. The organization form, organization and activities of foreign-invested enterprises shall be governed, among others, by the PRC Company Law and the PRC Partnership Enterprise Law. Foreign-invested enterprises established before the implementation of the Foreign Investment Law may retain the original business organization and so on within five years after the implementation of this Law.

The Foreign Investment Law is formulated to further expand opening-up, vigorously promote foreign investment and protect the legitimate rights and interests of foreign investors. According to the Foreign Investment Law, foreign investments are entitled to pre-entry national treatment and are subject to negative list management system. The pre-entry national treatment means that the treatment given to foreign investors and their investments at the stage of investment access shall not be less favorable than that of domestic investors and their investments. The negative list management system means that the state implements special administrative measures for access of foreign investment in specific fields. The Foreign Investment Law does not mention the relevant concept and regulatory regime of VIE structures. However, since it is relatively new, uncertainties still exist in relation to its interpretation and implementation. See “Risk Factors—Risks Related to Our Corporate Structure—Uncertainties exist with respect to the interpretation and implementation of the newly enacted PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations.”

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Foreign investors’ investment, earnings and other legitimate rights and interests within the territory of China shall be protected in accordance with the law, and all national policies on supporting the development of enterprises shall equally apply to foreign-invested enterprises. Among others, the state guarantees that foreign-invested enterprises participate in the formulation of standards in an equal manner and that foreign-invested enterprises participate in government procurement activities through fair competition in accordance with the law. Further, the state shall not expropriate any foreign investment except under special circumstances. In special circumstances, the state may levy or expropriate the investment of foreign investors in accordance with the law for the needs of the public interest. The expropriation and requisition shall be conducted in accordance with legal procedures and timely and reasonable compensation shall be given. In carrying out business activities, foreign-invested enterprises shall comply with relevant provisions on labor protection. 

The Implementation Regulations of Foreign Investment Law of the PRC, adopted by the State Council on December 26, 2019 and came into effect on January 1, 2020, provides implementing measures and detailed rules to ensure the effective implementation of the Foreign Investment Law.

Regulations Related to Mobile Internet Applications Information Services

In addition to the telecommunications regulations and other regulations above, mobile Internet applications and application stores are specifically regulated by the Administrative Provisions on Mobile Internet Applications Information Services, or the App Provisions, which were promulgated by the Cyberspace Administration of China, or the CAC, on June 14, 2022, and became effective on August 1, 2022. Pursuant to the App Provisions, application information service providers shall obtain the relevant qualifications prescribed by laws and regulations, strictly implement their information security management responsibilities and carry out certain duties, including establishing and completing user information security protection mechanism and information content inspection and management mechanisms, protect users’ right to know and to choose in the process of usage, and to record and preserve users’ daily usage information for at least 60 days. Furthermore, internet application store service providers and internet application information service providers shall sign service agreements to determinate both sides’ rights and obligations.

In addition, on December 16, 2016, the MIIT promulgated the Interim Measures on the Administration of Pre-Installation and Distribution of Applications for Mobile Smart Terminals, or the App Interim Measures, which took effect on July 1, 2017. The App Interim Measures requires, among others, that internet information service providers must ensure that a mobile application, as well as its ancillary resource files, configuration files and user data can be uninstalled by a user on a convenient basis, unless it is a basic function software, which refers to a software that supports the normal functioning of hardware and operating system of a mobile smart device.

Neither the App Provisions nor the App Interim Measures, however, has further clarified the scope of “information services,” neither do they specify what “relevant qualification(s)” that an app owner/operator must obtain. In practice, operational activities of a company conducted through an app is currently subject to the supervisions of local departments of the Information Communications Administration, and often, the local departments differentiate the operational activities conducted through websites and through apps.

To comply with these laws and regulations, the VIE obtained the ICP License on July 2, 2019, which will remain effective for 5 years, we have also adopted and implemented strict information security policies and measures to protect our cyber security systems and customer information.

Regulations Related to Online Transmission of Audio-Visual Programs

On April 13, 2005, the State Council promulgated the Certain Decisions on the Entry of the Non-state-owned Capital into the Cultural Industry. On July 6, 2005, five PRC governmental authorities, including the Ministry of Culture, or the MOC, the State Administration of Radio, Film and Television, or the SARFT (the predecessor of the National Radio and Television Administration, or NRTA), the General Administration of Press and Publication, or the GAPP, the China Securities Regulatory Commission, or the CSRC and the MOFCOM, jointly adopted the Several Opinions on Canvassing Foreign Investment into the Cultural Sector. Under these provisions, non-state owned capital and foreign investors are prohibited from engaging in the business of distributing audio-visual programs through information networks.

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To further regulate the provision of audio-visual program services to the public via the internet, including through mobile networks, within the territory of the PRC, the SARFT and the MIIT jointly promulgated the Administrative Provisions on Internet Audio-Visual Program Service, or the Audio-Visual Program Provisions, on December 20, 2007, which took effect on January 31, 2008 and subsequently amended on August 28, 2015. Pursuant to the Audio-Visual Program Provisions, Internet audio-visual program services refer to activities of making, redacting and integrating audio-visual programs, providing them to the general public via the Internet, and providing platforms for uploading and spreading audio-visual programs. Providers of internet audio-visual program services are required to obtain the Audio-Visual License issued by SARFT, or complete certain registration procedures with SARFT. In general, providers of internet audio-visual program services must be either state-owned or state-controlled entities, and the business to be carried out by such providers must satisfy the overall planning and guidance catalog for internet audio-visual program service determined by SARFT. The VIE is neither state-owned nor state-controlled, therefore it is unlikely that it will be able to obtain the Audio-Visual License if required to do so. Whoever engages in Internet audio-visual program service without the license or registration, the competent authorities shall give it/him an admonition and order it/him to correct, and may impose a fine of not more than RMB30,000 (approximately US$4,348); if the circumstances are serious, a punishment shall be imposed in accordance with the provision of Article 47 of the Radio and Television Administration Regulation.

On May 21, 2008, SARFT issued a Notice on Relevant Issues Concerning Application and Approval of License for the Online Transmission of Audio-Visual Programs, as amended on August 28, 2015, which further set out detailed provisions concerning the application and approval process regarding the Audio-Visual License. Further, on March 31, 2009, SARFT promulgated the Notice on Strengthening the Administration of the Content of Internet Audio-Visual Programs, which reiterates the pre-approval requirements for the audio-visual programs transmitted via the internet, including through mobile networks, where applicable, and prohibits certain types of internet audio-visual programs containing violence, pornography, gambling, terrorism, superstition or other similarly prohibited elements.

On March 17, 2010, the SARFT issued the Internet Audio-visual Program Services Categories (Provisional), or the Provisional Categories, as amended on March 10, 2017. According to the Provisional Categories, there are four categories of internet audio-visual program services which are further divided into seventeen sub-categories. The third sub-category to the second category covers the making and editing of certain specialized audio-visual programs concerning, among other things, finance and educational content, and broadcasting such content to the general public online. However, there are still significant uncertainties relating to the interpretation and implementation of the Audio-Visual Program Provisions, in particular, the scope of “internet audio-visual programs”.

On March 16, 2018, the SAPPRFT issued the Notice on Further Regulating the Transmission Order of Internet Audio-Visual Programs, which requires that, among others, audio-visual platforms shall: (i) not produce or transmit programs intended to parody or denigrate classic works, (ii) not re-edit, re-dub, re-caption or otherwise

On July 22, 2019, in the Beijing Municipal Radio and Television Bureau’s Q&A section of its official website, the Bureau responded to an inquiry submitted by an online education service provider, and confirmed that the offering of online audio and video courses or programs on websites or mobile applications for the purpose of improving the professional qualifications/skills of target audiences, does not fall into the activities regulated by the PRC Administrative Provisions on Internet Audio-Visual Program Services; therefore, the service provider is not required to obtain an Audio-Visual License. Currently, all of our online content on our APP are educational and training video and audio courses targeting specific groups of audiences, such as small and medium enterprise owners and graduate students, who use our online courses and programs to improve their professional qualifications and skills. Accordingly, based on the Bureau’s published interpretation, we believe we are not required to obtain an Audio-Visual License. However, given the significant uncertainties of the interpretation and implementation of Internet related regulations in the PRC, we cannot assure you that the competent PRC authorities will not ultimately take a view contrary to our opinion. See “Risk Factors—Risks Related to Our Business— We may be required to obtain and maintain additional approvals, licenses or permits applicable to our business, including our graphite anode manufacturing and sales business and our knowledge share platform, which could have a material adverse impact on our business, financial conditions and results of operations.”

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Regulations Related to Information Security

Internet content in China is regulated and restricted from a state security standpoint. The Standing Committee of the National People’s Congress, or the SCNPC, enacted the Decisions on the Maintenance of Internet Security on December 28, 2000, which was amended on August 27, 2009, that may subject persons to criminal liabilities in China for any attempt to: (i) gain improper entry to a computer or system of strategic importance; (ii) disseminate politically disruptive information; (iii) leak state secrets; (iv) spread false commercial information or (v) infringe upon intellectual property rights. In 1997, Ministry of Public Security, or the MPS, issued the Administration Measures on the Security Protection of Computer Information Network with International Connections, which were amended by the State Council on January 8, 2011 and prohibit using the Internet in ways which, among others, result in a leakage of state secrets or a spread of socially destabilizing content. The MPS has supervision and inspection powers in this regard, and relevant local security bureaus may also have jurisdiction. On December 13, 2005, the MPS promulgated Regulations on Technological Measures for Internet Security Protection, or the Internet Protection Measures, which took effect on March 1, 2006 and requires internet service providers to take proper measures including anti-virus, data back-up and other related measures, to keep records of certain information about its users (including user registration information, log-in and log-out time, IP address, content and time of posts by users) for at least 60 days, and to detect illegal information, stop transmission of such information, and keep relevant records. If an ICP License holder violates these measures, the PRC government may revoke its ICP License and shut down its websites.

In November 2016, the SCNPC promulgated the Cyber Security Law of the PRC, or the Cyber Security Law, which became effective on June 1, 2017 and requires network operators to perform certain functions related to cyber security protection and the strengthening of network information management. For instance, under the Cyber Security Law, network operators of key information infrastructure shall store within the territory of the PRC all the personal information and important data collected and produced within the territory of PRC and their purchase of network products and services that may affect national securities shall be subject to national cybersecurity review. On April 13, 2020, the CAC and other 11 Commissions, Ministries and Administrations, jointly issued the Measures for Cybersecurity Review, which took effect on June 1, 2020, to provide for more detailed rules regarding cybersecurity review requirements.

On March 13, 2019, the SAMR and the CAC jointly promulgated the Announcement on the Implementation of App Security Certification, or the Implementation Announcement, according to which, the China Cyber Security Review Technology and Certification Center shall be responsible for app security certification work, and app operators are encouraged to undergo such security certification voluntarily; search engines, app stores, among others, are encouraged to clearly mark and give priority to recommend certified apps. As an attachment to the Implementation Announcement, the Implementation Rules of App Security Certification, which came into effect on March 15, 2019, stipulated specific certification procedures, post-certification supervision and management of app security certifications.

On June 10, 2021, the SCNPR promulgated the Data Security Law of the PRC, or the Data Security Law, which took effect on September 1, 2021. Under the Data Security Law, data refers to any record of information that is kept electronically or otherwise, and data processing includes the collection, storage, use, processing, transmission, provision, and disclosure of data. Pursuant to the Data Security Law, any individual or entity shall only collect data in a legitimate and proper manner. A data security review mechanism will be established by the State, and any data processing activity that endangers or may endanger national security shall be subject to national security review. The security management for the cross-border transfer of important data collected and produced during operation by CIIOs or other data processors within the territory of the PRC shall be subject to the Cyber Security Law and other regulations and rules that promulgated by the CAC and the State Council. In case of any non-compliance under the Data Security Law, a data processor may be ordered to make corrections, and under certain serious circumstances, such as severe data divulgence, may be subject to penalties, including the revocation of business license or other permits.

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On December 28, 2021, 13 PRC authorities, including the NDRC, the MOFCOM, the MIIT, the CAC, and several other authorities jointly promulgated the revised Cybersecurity Review Measures, which came into effect on February 15, 2022. The Cybersecurity Review Measures provide that, in addition to CIIOs that intend to purchase Internet products and services, online platform operators engaging in data processing activities that affect or may affect national security must be subject to cybersecurity review by the Cybersecurity Review Office of the PRC. According to the Cybersecurity Review Measures, a cybersecurity review assesses potential national security risks that may be brought about by any procurement, data processing, or overseas listing. The Cybersecurity Review Measures require that an online platform operator which possesses the personal information of at least one million users must apply for a cybersecurity review by the CAC if it intends to be listed in foreign countries.

To comply with these laws and regulations, we have adopted security policies and measures to protect our cyber system and customer information.

Regulations Related to Internet Privacy Protection

Pursuant to the Internet Protection Measures, Internet services providers are prohibited from unauthorized disclosure of users’ information to any third parties unless such disclosure is required by the laws and regulations. They are further required to establish management systems and take technological measures to safeguard the freedom and secrecy of the users’ correspondences.

On December 28, 2012, the SCNPC promulgated the Decision on Strengthening Network Information Protection, which took into effect on the same date, to enhance the legal protection of information security and privacy on the internet. On July 16, 2013, the MIIT promulgated the Provisions on Protection of Personal Information of Telecommunication and Internet Users, which took into effect on September 1, 2013, to regulate the collection and use of users’ personal information in the provision of telecommunication services and internet information services in China and the personal information includes a user’s name, birth date, identification card number, address, phone number, account name, password and other information that can be used independently or in combination with other information for identifying a user.

On December 29, 2011, the MIIT promulgated the Several Provisions on Regulation of the Order of Internet Information Service Market, which took into effect on March 15, 2012. The Provisions stipulate that without the consent of users, internet information service providers shall not collect information relevant to the users that can lead to the recognition of the identity of the users independently or in combination with other information, nor shall they provide the information to others, unless otherwise provided by laws and administrative regulations.

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, or the Interpretations, which took into effect on June 1, 2017. The Interpretations clarify several concepts regarding the crime of “infringement of citizens’ personal information” stipulated by Article 253A of the Criminal Law of the PRC, including “citizen’s personal information”, “provision”, and “unlawful acquisition”. Also, the Interpretations specify the standards for determining “serious circumstances” and “particularly serious circumstances” of this crime.

On January 23, 2019, the CAC, the MIIT, the MPS and the SAMR jointly issued the Notice on Special Governance of Illegal Collection and Use of Personal Information via Apps, which restates the requirement of legal collection and use of personal information, encourages app operators to conduct security certifications, and encourages search engines and app stores to clearly mark and recommend those certified apps.

On November 28, 2019, the CAC, MIIT, 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 “not publishing rules on the collection and usage of personal information” and “not providing privacy rules.”

On May 28, 2020, the NPC adopted the Civil Code of the PRC, or the Civil Code, which became effective on January 1, 2021 and abolished the General Rules of the Civil Law of the PRC. Pursuant to the Civil Code, the collection, storage, use, process, transmission, provision and disclosure of personal information should follow the principles of legitimacy, properness and necessity.

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On March 12, 2021, the CAC, the MIIT, the MPS and the SAMR jointly promulgated the Regulations on the Scope of Necessary Personal Information for Common Types of Mobile Internet Apps, which will become effective on May 1, 2021. According to these regulations, an app may not refuse a user from using its basic functional services if the user disagrees to provide unnecessary personal information. In particular, basic functional services of job hunting and recruitment applications are the “exchange of job hunting and recruitment information,” and the necessary personal information includes mobile phone numbers of registered users and resumes provided by job seekers. Additionally, the regulations also apply to mini programs, which are apps developed and based on open platform interfaces and available to users without installation.

On August 20, 2021, the SCNPC adopted the Personal Information Protection Law of the PRC, or the PIP Law, which took effect on November 1, 2021. The PIP Law includes the basic rules for personal information processing, the rules for cross-border provision of personal information, the rights of individuals in personal information processing activities, the obligations of personal information processors, and the legal responsibilities for illegal collection, processing, and use of personal information. As the first systematic and comprehensive law specifically for the protection of personal information in the PRC, the PIP Law provides, among others, that (i) an individual’s consent shall be obtained to use sensitive personal information, such as biometric characteristics and individual location tracking, (ii) personal information operators using sensitive personal information shall notify individuals of the necessity of such use and impact on the individual’s rights, and (iii) where personal information operators reject an individual’s request to exercise his or her rights, the individual may file a lawsuit with a People’s Court.

To comply with these laws and regulations, we have required our customers to consent to our collecting and using of their personal information in order to receive our services, and established information security systems to protect customers’ privacy.

Regulations Related to Consumer Rights Protection

The Consumer Rights and Interests Protection Law of the PRC, or the Consumer Protection Law, promulgated by the SCNPC on October 31, 1993 and most recently amended on October 25, 2013 (effective as of March 15, 2014), and the Online Trading Measures issued by the SAIC on January 26, 2014 (effective as of March 15, 2014), set out the obligations of business operators and the rights and interests of the customers. For example, business operators must guarantee the quality, function, usage, term of validity, personal or property safety requirement of the goods and services and provide customers with authentic information about the goods and services. Consumer whose legitimate rights and interests are harmed in the purchase of goods or receipt of services rendered through an online trading platform may seek compensation from the seller or the service provider.

On March 15, 2021, the SAMR promulgated the Measures for the Supervision and Administration of Online Trading, or New Online Trading Measures, which will come into effect on May 1, 2021 and replace the above original Online Trading Measure. The New Online Trading Measures also apply to all online commerce business conducted through information networks in general, with particular emphasis on transactions through online social networking and online live streaming. Under the New Online Trading Measures, online trading operators shall perform relevant compliance obligations, such as registration with the SAMR, protection of customers’ personal information and fair competition.

Additionally, the Civil Code, which became effective on January 1, 2021 and replaced the Tort Liability Law of the PRC, provides that both internet users and internet service providers may be liable for the wrongful acts of users who infringe the lawful rights of other parties. If an internet user utilizes internet services to commit a tortious act, the party whose rights are infringed may request the internet service provider to take measures, such as removing or blocking the content, or disabling the links thereto, to prevent or stop the infringement. If the internet service provider does not take necessary measures after receiving such notice, it shall be jointly liable for any further damages suffered by the rights holder. Furthermore, if an internet service provider fails to take necessary measures when it knows that an internet user utilizes its internet services to infringe the lawful rights and interests of other parties, it shall be jointly liable with the internet user for damages resulting from the infringement.

Regulations Related to Intellectual Property Rights

Copyright

The Copyright Law of the PRC, or the Copyright Law, which took effect on June 1, 1991, was amended in 2001, 2010 and 2020. The latest version will come into effect on June 1, 2021. Under the currently effective Copyright Law and its implementing regulations adopted in 2002 and amended in 2011 and 2013, Chinese citizens, legal persons, or other organizations will, whether published or not, enjoy copyright provides that Chinese citizens, legal persons, or other organizations shall, whether published or not, own copyright in their copyrightable works, which include, among others, works of literature, art, natural science, social science, engineering technology and computer software. Copyright owners enjoy certain legal rights, including right of publication, right of authorship and right of reproduction. The Copyright Law extends copyright protection to Internet activities, products disseminated over the Internet and software products. In addition, the Copyright Law provides for a voluntary registration system administered by the China Copyright Protection Center, or the CPCC. According to the Copyright Law, an infringer of the copyrights shall be subject to various civil liabilities, which include ceasing infringement activities, apologizing to the copyright owners and compensating the loss of copyright owner. Infringers of copyright may also subject to fines and/or administrative or criminal liabilities in severe situations.

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Pursuant to the Computer Software Copyright Protection Regulations promulgated by the State Council in 1991 and amended in 2001, 2011 and 2013 respectively, Chinese citizens, legal persons and other organizations shall enjoy copyright on software they develop, regardless of whether the software is released publicly. Software copyright commences from the date on which the development of the software is completed. The protection period for software copyright of a legal person or other organizations shall be 50 years, concluding on December 31 of the 50th year after the software’s initial release. The software copyright owner may go through the registration formalities with a software registration authority recognized by the State Council’s copyright administrative department. The software copyright owner may authorize others to exercise that copyright, and is entitled to receive remuneration.

Trademark

Trademarks are protected by the Trademark Law of the PRC, which was adopted in 1982 and subsequently amended in 1993, 2001, 2013 and 2019 as well as by the Implementation Regulations of the PRC Trademark Law adopted by the State Council in 1983 and as most recently amended on April 29, 2014. The Trademark Office under the SAIC handles trademark registrations. The Trademark Office grants a 10-year term to registered trademarks and the term may be renewed for another 10-year period upon request by the trademark owner. A trademark registrant may license its registered trademarks to another party by entering into trademark license agreements, which must be filed with the Trademark Office for its record. As with patents, the Trademark Law has adopted a first-to-file principle with respect to trademark registration. If a trademark applied for is identical or similar to another trademark which has already been registered or subject to a preliminary examination and approval for use on the same or similar kinds of products or services, such trademark application may be rejected. Any person applying for the registration of a trademark may not injure existing trademark rights first obtained by others, nor may any person register in advance a trademark that has already been used by another party and has already gained a “sufficient degree of reputation” through such party’s use.

Patent

Patents in the PRC are principally protected under the Patent Law of the PRC (2020 Revision) and its Implementation Rules (2010 Revision), collectively the Patent Laws. According to the Patent Laws, patents in the PRC are classified into three categories, namely, inventions, utility models and designs. The protection period of a patent right is ten (10) years for utility models, fifteen (15) years for designs, and twenty (20) years for inventions upon the date of application. The Patent Administration Office under the State Council is responsible for receiving, reviewing and approving patent applications. After a patent right is granted for an invention or utility model, except otherwise provided for in the Patent Laws, no entity or individual may, without the permission of the patent owner, exploit the patent, that is, manufacture, use, offer to sell, sell or import the patented product, or use the patented method, or use, offer to sell, sell or import any product which is a direct result of the use of the patented method, 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, manufacture, offer to sell, sell, or import any product containing the patented design for production or business purposes.

Domain name

The domain names are protected under the Administrative Measures on the Internet Domain Names, or the Domain Name Measures, which was promulgated by the MIIT and became effective in November 2017. The MIIT is the major regulatory body responsible for the administration of the PRC internet domain names, under supervision of which China Internet Network Information Center, or the CNNIC, is responsible for the daily administration of CN domain names and PRC domain names. Pursuant to the Domain Name Measures, the registration of domain names adopts the “first to file” principle and the registrant shall complete the registration via the domain name registration service institutions. In the event of a domain name dispute, the disputed parties may lodge a complaint to the designated domain name dispute resolution institution to trigger the domain name dispute resolution procedure in accordance with the CNNIC Measures on Resolution of the Domain Name Disputes, file a suit to the People’s Court, or initiate an arbitration procedure.

Regulations Related to Foreign Exchange

The principal regulations governing foreign currency exchange in China are the Foreign Exchange Administration Regulations, promulgated by the State Council in 1996 and most recently amended in 2008. Under the 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 State Administration of Foreign Exchange or SAFE by complying with certain procedural requirements. By contrast, approval from or registration with appropriate governmental 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 foreign currency-denominated loans.

In November 2012, SAFE promulgated the Circular of Further Improving and Adjusting Foreign Exchange Administration Policies on Foreign Direct Investment, or SAFE Circular 59, which was most recently amended in 2015 and substantially amends and simplifies the current foreign exchange procedures. Pursuant to SAFE Circular 59, the opening of various special purpose foreign exchange accounts, such as pre-establishment expenses accounts, foreign exchange capital accounts, and guarantee accounts, the reinvestment of Renminbi proceeds derived by foreign investors in China, and remittance of foreign exchange profits and dividends by a foreign-invested enterprise to its foreign shareholders no longer require the approval or verification of SAFE, and multiple capital accounts for the same entity may be opened in different provinces, which was not possible previously.

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In February 2015, SAFE promulgated the Notice on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning Direct Investment, or SAFE Circular 13, pursuant to which, instead of applying for approval regarding foreign exchange registrations of foreign direct investment and overseas direct investment from SAFE, entities and individuals may apply for such foreign exchange registrations from qualified banks. The qualified banks, under the supervision of SAFE, may directly review the applications and conduct the registration.

In March 2015, SAFE issued the Circular of the State Administration of Foreign Exchange on Reforming the Administration of Foreign Exchange Settlement of Capital of Foreign-invested Enterprises, or SAFE Circular 19. Pursuant to SAFE Circular 19, a foreign-invested enterprise may, according to its actual business needs, settle with a bank the portion of the foreign exchange capital in its capital account for which the relevant foreign exchange administration has confirmed monetary capital contribution rights and interests (or for which the bank has registered the injection of the monetary capital contribution into the account). In addition, for the time being, foreign-invested enterprises are allowed to settle 100% of their foreign exchange capital on a discretionary basis. A foreign-invested enterprise shall truthfully use its capital for its own operational purposes within the scope of business. Where an ordinary foreign-invested enterprise makes domestic equity investment with the amount of foreign exchanges settled, the invested enterprise must first go through domestic re-investment registration and open a corresponding account for foreign exchange settlement pending payment with the foreign exchange administration or the bank at the place where it is registered.

In June 2016, SAFE promulgated the Circular on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts, or SAFE Circular 16, pursuant to which, in addition to foreign currency capital, enterprises registered in China may also convert their foreign debts, as well as repatriated fund raised through overseas listing, from foreign currency to Renminbi on a discretional basis. SAFE Circular 16 also reiterates that the use of capital so converted shall follow “the principle of authenticity and self-use” within the business scope of the enterprise. According to SAFE Circular 16, the Renminbi funds so converted shall not be used for the purposes of, whether directly or indirectly, (i) paying expenditures beyond the business scope of the enterprises or prohibited by laws and regulations; (ii) making securities investment or other investments (except for banks’ principal-secured products); (iii) granting loans to non-affiliated enterprises, except as expressly permitted in the business license; and (iv) purchasing non-self-used real estate (except for the foreign-invested real estate enterprises).

In January 2017, SAFE promulgated the Circular on Further Improving Reform of Foreign Exchange Administration and Optimizing Genuineness and Compliance Verification, or SAFE Circular 3, which stipulates several capital control measures with respect to the outbound remittance of profit from domestic entities to offshore entities, including (i) under the principle of genuine transaction, banks shall check board resolutions regarding profit distribution, the original version of tax filing records, and audited financial statements; and (ii) domestic entities shall hold income to account for previous years’ losses before remitting the profits. Further, pursuant to SAFE Circular 3, domestic entities shall make detailed explanations of the sources of capital and utilization arrangements, and provide board resolutions, contracts and other proof when completing the registration procedures in connection with an outbound investment.

On October 23, 2019, SAFE issued the Circular of the State Administration of Foreign Exchange on Further Promoting the Facilitation of Cross-border Trade and Investment, or SAFE Circular 28, which allows non-investment foreign-invested enterprises to make domestic equity investment with their capital funds in accordance with the law under the premise that such investment does not violate the existing special administrative measures (negative list) for foreign investment and the project invested in China is authentic and compliant. Pursuant to SAFE Circular 28, upon receiving the payment of consideration from a foreign investor for the equity transfer under foreign direct investment, the domestic transferor, with relevant registration certificates, can process the formalities for account opening, fund receipt, and foreign exchange settlement and use directly at the bank. The foreign investor’s deposit remitted from overseas or transferred from domestic accounts can be directly used for its lawful domestic capital contribution as well as domestic and overseas payment after the transaction is concluded.

On April 10, 2020, SAFE issued the Circular on Optimizing Administration of Foreign Exchange to Support the Development of Foreign-related Business, or SAFE Circular 8, pursuant to which, eligible enterprises are allowed to use the income under capital account, from such sources as capital funds, foreign debt and overseas listing, for domestic payment without having to provide supporting authentication materials to the banks for every transaction in advance, but the use of funds shall be true and compliant as well as conform to the existing administration regulations regarding use of income under capital account. The concerned bank shall conduct spot checking in accordance with the relevant requirements.

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Regulations Related to Dividend Distribution

The principal regulations governing the distribution of dividends paid by the wholly foreign owned subsidiaries of the Company (the “WFOEs”) include the Company Law of PRC, which applies to both PRC domestic companies and foreign-invested companies, and the Foreign Investment Law and its implementing rules, which apply to foreign-invested companies. Under these regulations, WFOEs in China may pay dividends only out of their accumulated profits, if any, as determined in accordance with PRC accounting standards and regulations. In addition, WFOEs in China are required to set aside at least 10% of its after-tax profits based on PRC accounting standards each year to its general reserves until its cumulative total reserve funds reaches 50% of its registered capital. These reserve funds, however, may not be distributed as cash dividends.

Regulations Related to Foreign Exchange Registration of Offshore Investment by PRC Residents

In July 2014, SAFE issued the Circular of the State Administration of Foreign Exchange on Issues concerning Foreign Exchange Administration over the Overseas Investment and Financing and Round-trip Investment by Domestic Residents via Special Purpose Vehicles, or SAFE Circular 37 which was most recently amended on June 15, 2018 and has replaced the Notice on Relevant Issues Concerning Foreign Exchange Administration for Domestic Residents’ Financing and Roundtrip Investment Through Offshore Special Purpose Vehicles (known as Circular 75). SAFE Circular 37 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 or conduct round trip investment in China. Under SAFE Circular 37, an 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. Circular 37 requires that, before making contribution into an SPV, PRC residents or entities are required to complete foreign exchange registration with SAFE or its local branch.

In February 2015, SAFE promulgated the SAFE Circular 13. SAFE Circular 13 has amended SAFE Circular 37 by requiring PRC residents or entities to register with qualified banks instead of SAFE or its local branch in connection with their establishment of an SPV.

In addition, pursuant to SAFE Circular 37, an amendment to registration or subsequent filing with qualified banks by such PRC resident is also required if there is a material change with respect to the capital of the offshore company, such as any change of basic information (including change of such PRC residents, change of name and operation term of the SPV), increases or decreases in investment amount, transfers or exchanges of shares, or mergers or divisions. Failure to comply with the registration requirements as set forth in SAFE Circular 37 and SAFE Circular 13, misrepresent on or failure to disclose controllers of foreign-invested enterprises that are established by round-trip investment may result in bans on the foreign exchange activities of the relevant onshore company, including the payment of dividends and other distributions to its offshore parent or affiliates, and may also subject relevant PRC residents to penalties under the Foreign Exchange Administration Regulations of the PRC.

Regulations Related to Foreign Debt

As an offshore holding company, we may make additional capital contributions to WFOEs subject to approval from the local department of commerce and the SAFE, with no limitation on the amount of capital contributions. We may also make loans to WFOEs subject to the approval from SAFE or its local office and the limitation on the amount of loans.

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By means of making loans, WFOEs are subject to the relevant PRC laws and regulation relating to foreign debts. On January 8, 2003, the State Development Planning Commission, SAFE, and Ministry of Finance, or MOF, jointly promulgated the Circular on the Interim Provisions on the Management of Foreign Debts, or the Foreign Debts Provisions, which became effective on March 1, 2003, and was partially abolished on May 10, 2015. Pursuant to Foreign Debts Provisions, the total amount of foreign loans received by a foreign-invested company shall not exceed the difference between the total investment in projects as approved by the MOFCOM or its local counterpart and the amount of registered capital of such foreign-invested company. In addition, on January 12, 2017, the People’s Bank of China, or PBOC, issued the Circular on Full-Coverage Macro-Prudent Management of Cross-Border Financing, or the PBOC Circular 9, which sets out the statutory upper limit on the foreign debts for PRC non-financial entities, including both foreign-invested companies and domestic-invested companies, and the macro-prudential adjustment parameter is 1. Pursuant to the PBOC Circular 9, the foreign debt upper limit for both foreign-invested companies and domestic-invested companies is calculated as twice the net asset of such companies. As to net assets, the companies shall take the net assets value stated in their latest audited financial statement. On March 11, 2020, the PBOC and SAFE promulgated the Circular of the People’s Bank of China and the State Administration of Foreign Exchange on Adjusting the Macro-prudential Regulation Parameter for Full-covered Cross-border Financing, which provides that based on the current macro economy and international balance of payments, the macro-prudential regulation parameter as set forth in the PBOC Circular 9 is updated from 1 to 1.25.

The PBOC Circular 9 does not supersede the Foreign Debts Provisions. It provides a one-year transitional period from January 11, 2017, for foreign-invested companies, during which foreign-invested companies, such as WFOEs, could adopt their calculation method of foreign debt upper limit based on either the Foreign Debts Provisions or the PBOC Circular 9. The transitional period ended on January 11, 2018. Upon its expiry, pursuant to the PBOC Circular 9, PBOC and SAFE shall reevaluate the calculation method for foreign-invested companies and determine what the applicable calculation method would be. As of the date of this annual report, neither the PBOC nor SAFE has promulgated and made public any further rules, regulations, notices, or circulars in this regard.

Regulations Related to Tax

Enterprise Income Tax

On March 16, 2007, the SCNPC promulgated the EIT Law, which was recently amended on December 29, 2018. On December 6, 2007, the State Council enacted the Regulations for the Implementation of the Enterprise Income Tax Law, which was amended on April 23, 2019. Under the EIT Law and relevant implementation regulations, both resident enterprises and non-resident enterprises are subject to the enterprise income tax so long as their income is generated within the territory of 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 from within the PRC. “Non-resident enterprises” are defined as enterprises that are organized under the laws of foreign countries and whose actual management 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. Under the EIT Law and relevant implementing regulations, a uniform corporate income tax rate of 25% is applied. 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, however, enterprise income tax is set at the rate of 10% with respect to their income sourced from inside the PRC.

The EIT Law and its implementation rules permit certain “high and new technology enterprises strongly supported by the state” that independently own core intellectual property and meet statutory criteria, to enjoy a reduced 15% enterprise income tax rate.

According to the Administrative Rules for the Certification of High Tech Enterprises, effective on January 1, 2008 and amended on January 29, 2016 (effective as of January 1, 2016), for each entity accredited as High Tech Enterprise, such status is valid for three years if it meets the qualifications for High Tech Enterprise on a continuing basis during such period.

Value-Added Tax (“VAT”)

The Provisional Regulations of the PRC on Value-added Tax was promulgated by the State Council on December 13, 1993, and most recently amended on November 19, 2017. The Detailed Rules for the Implementation of the Provisional Regulations of the PRC on Value-added Tax (Revised in 2011) were promulgated by the MOF on December 25, 1993, and were recently amended on October 28, 2011 (collectively with the VAT Regulations, the VAT Law). On April 4, 2018, MOF and SAT jointly promulgated the Circular on Adjustment of Value-Added Tax Rates, or MOF and SAT Circular 32. On March 20, 2019, MOF, SAT and General Administration of Customs, or GAC, jointly issued a Circular on Relevant Polices for Deepening Value-added Tax Reform, or MOF, SAT and GAC Circular 39, which became effective from April 1, 2019. According to the abovementioned laws and circulars, all enterprises and individuals engaged in the sale of goods, the provision of processing, repair and replacement services, sales of services, intangible assets, real property and the importation of goods within the territory of the PRC are the taxpayers of VAT. The VAT tax rates generally applicable are simplified as 13%, 9%, 6% and 0%, and the VAT tax rate applicable to the small-scale taxpayers is 3%.

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Withholding Tax

The Enterprise Income Tax Law of the PRC provides that since January 1, 2008, an income tax rate of 10% will normally be applicable to dividends declared to non-PRC resident investors 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.

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 Incomes, or the Double Tax Avoidance Arrangement, 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%. 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, however, 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. According to the Circular on Several Questions regarding the “Beneficial Owner” in Tax Treaties, which was issued on February 3, 2018, by the SAT and took effect on April 1, 2018, when determining the applicant’s status of the “beneficial owner” regarding tax treatments in connection with dividends, interests or royalties in the tax treaties, several factors, including without limitation, whether the applicant is obligated to pay more than 50% of his or her income in 12 months to residents in third country or region, whether the business operated by the applicant constitutes the actual business activities, and whether the counterparty country or region to the tax treaties does not levy any tax or grant tax exemption on relevant incomes or levy tax at an extremely low rate, will be taken into account, and it will be analyzed according to the actual circumstances of the specific cases. This circular further provides that applicants who intend to prove his or her status of the “beneficial owner” shall submit the relevant documents to the relevant tax bureau according to the Announcement on Issuing the Measures for the Administration of Non-Resident Taxpayers’ Enjoyment of the Treatment under Tax Agreements.

Tax on Indirect Transfer

On February 3, 2015, the SAT issued the Circular on Issues of Enterprise Income Tax on Indirect Transfers of Assets by Non-PRC Resident Enterprises, or SAT Circular 7. Pursuant to SAT Circular 7, an “indirect transfer” of assets, including equity interests in a PRC resident enterprise, by non-PRC resident enterprises, may be re-characterized and treated as a direct transfer of PRC taxable assets, if such arrangement does not have a reasonable commercial purpose and was established for the purpose of avoiding payment of PRC enterprise income tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax. When determining whether there is a “reasonable commercial purpose” of the transaction arrangement, features to be taken into consideration include, inter alia, whether the main value of the equity interest of the relevant offshore enterprise derives directly or indirectly from PRC taxable assets; whether the assets of the relevant offshore enterprise mainly consist of direct or indirect investment in China or if its income is mainly derived from China; and whether the offshore enterprise and its subsidiaries directly or indirectly holding PRC taxable assets have real commercial nature which is evidenced by their actual function and risk exposure. According to SAT Circular 7, where the transferee fails to withhold any or sufficient tax, the transferor shall declare and pay such tax to the tax authority by itself within the statutory time limit. Late payment of applicable tax will subject the transferor to default interest. SAT Circular 7 does not apply to transactions of sale of shares by investors through a public stock exchange where such shares were acquired on a public stock exchange. On October 17, 2017, the SAT issued the Circular on Issues of Tax Withholding regarding Non-PRC Resident Enterprise Income Tax, or SAT Circular 37, which further elaborates the relevant implemental rules regarding the calculation, reporting and payment obligations of the withholding tax by the non-resident enterprises. Nonetheless, there remain uncertainties as to the interpretation and application of SAT Circular 7. SAT Circular 7 may be determined by the tax authorities to be applicable to our offshore transactions or sale of our shares or those of our offshore subsidiaries where non-resident enterprises, being the transferors, were involved.

Regulations Related to Employment and Social Welfare

Employment

The Labor Law of the PRC, which was promulgated on July 5, 1994, effective since January 1, 1995, and most recently amended on December 29, 2018, the Labor Contract Law of the PRC, which was promulgated on June 29, 2007, and amended on December 28, 2012, and the Implementation Regulations of the Labor Contract Law of the PRC, which was promulgated on September 18, 2008, are the principal regulations that govern employment and labor matters in the PRC. Under the above regulations, labor contracts shall be concluded in writing if labor relationships are to be or have been established between employers and the employees. 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, wages may not be lower than the local minimum wage. Employers must establish a system for labor safety and sanitation, strictly abide by state standards, and provide relevant education to its employees. Employees are also required to work in safe and sanitary conditions.

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Social Insurance and Housing Fund

Under the Social Insurance Law of the PRC that was promulgated by the SCNPC on October 28, 2010, and came into force as of July 1, 2011, and was most recently amended on December 29, 2018 (also the effective date), together with other laws and regulations, employers are required to pay basic pension insurance, unemployment insurance, basic medical insurance, employment injury insurance, maternity insurance, and other social insurance for its employees at specified percentages of the salaries of the employees, up to a maximum amount specified by the local government regulations from time to time. When 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.

In accordance with the Regulations on the Management of Housing Fund which was promulgated by the State Council in 1999 and most recently amended in March 2019 (which became effective as of March 24^th 2019), employers must register at the designated administrative centers and open bank accounts for depositing employees’ housing funds. Employer and employee are also required to pay and deposit housing funds, with an amount no less than 5% of the monthly average salary of the employee in the preceding year in full and on time.

Regulations Related to Mergers and Acquisitions and Overseas Listings

On August 8, 2006, six PRC governmental and regulatory agencies, including MOFCOM and the China Securities Regulatory Commission, or 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 amended on June 22, 2009. The M&A Rules, among other things, requires that offshore SPVs 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.

Our PRC counsel has advised us that, based on its understanding of current PRC laws, rules, and regulations, and the M&A Rules, the CSRC approval is not required in the context of this offering because: (i) our PRC subsidiaries were established by means of direct investment rather than by mergers with or acquisitions of any PRC domestic companies as defined under the M&A Rules, and (ii) no explicit provision in the M&A Rules classifies the respective contractual arrangements among GIOP BJ, SDH and its shareholders as a type of acquisition transaction falling under the M&A Rules. Notwithstanding the above opinion, our PRC counsel has further advised us that uncertainties still exist as to how the M&A Rules will be interpreted and implemented and its opinions summarized above are subject to any new laws, rules, and regulations or detailed implementations and interpretations in any form relating to the M&A Rules. If the CSRC or other PRC regulatory agencies subsequently determine that prior CSRC approval was required, we may face regulatory actions or other sanctions from the CSRC or other PRC regulatory agencies. See “Risk Factors—Risks Related to Doing Business in China—The failure to comply with PRC regulations relating to mergers and acquisitions of domestic entities by offshore special purpose vehicles may subject us to severe fines or penalties and create other regulatory uncertainties regarding our corporate structure.”

On February 17, 2023, the CSRC released the Trial Measures and five supporting guidelines, which took effect on March 31, 2023. Pursuant to the Trial Measures, PRC domestic companies that seek to offer or list securities overseas, both directly and indirectly, shall complete filing procedures with the CSRC pursuant to the requirements of the Trial Measures within three working days following its submission of relevant applications or its completion of subsequent offerings. If a domestic company fails to complete required filing procedures or conceals any material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative penalties, such as an order to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties, such as warnings and fines.

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The Trial Measures outline the circumstances where domestic companies are prohibited from offering and listing securities overseas, if such overseas offering and listing made by domestic companies (i) are explicitly prohibited by laws; (ii) may endanger national security as determined by relevant competent departments under the State Council; (iii) involve criminal offenses that disrupting PRC economy such as corruption, bribery, embezzlement, or misappropriation of property by such domestic company, the controlling shareholder, and/or actual controller in the recent three years; (iv) involve such domestic company in investigations for suspicion of criminal offenses or major violations of laws and regulations; or (v) involve material ownership disputes over the shares held by the controlling shareholder or by other shareholders that are controlled by the controlling shareholder and/or actual controller. We believe that our listing on Nasdaq does not fall under the circumstance that such overseas listing is prohibited by the Trial Measures.

On the same day, the CSRC also held a press conference for the release of the Trial Measures and issued the CSRC Notice, which, among others, clarifies that PRC domestic companies that have already been listed overseas before the effective date of the Trial Measures, which is March 31, 2023, shall be deemed as Existing Issuers, and Existing Issuers are not required to complete the filing procedures with the CSRC immediately, and they shall be required to file with the CSRC for any subsequent offerings. We are an Existing Issuer, based on the foregoing, we are not required to complete the filing procedures with the CSRC immediately, and shall be required to file with the CSRC for any subsequent offerings.

On February 24, 2023, the CSRC, together with the MOF, the National Administration of State Secrets Protection and National Archives Administration of China, revised the Provisions, which were issued by the CSRC and National Administration of State Secrets Protection and National Archives Administration of China in 2009. The revised Provisions were issued under the title the “Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies,” and came into effect on March 31, 2023, together with the Trial Measures. One of the major revisions to the revised Provisions is expanding their application to cover indirect overseas offering and listing, as is consistent with the Trial Measures. The revised Provisions require that, among other things, (i) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals or entities, including securities companies, securities service providers, and overseas regulators, any documents and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level; and (ii) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals and entities, including securities companies, securities service providers, and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations. Any failure or perceived failure by our Company, our subsidiaries or the VIE and its subsidiaries to comply with the above confidentiality and archives administration requirements under the revised Provisions and other PRC laws and regulations may result in the relevant entities being held legally liable by competent authorities, and referred to the judicial organ to be investigated for criminal liability if suspected of committing a crime.

The Trial Measures and the revised Provisions that recently issued by the PRC authorities may subject us to additional compliance requirements in the future. See “Risk Factors — Risks Related to Doing Business in China — The Trial Measures and the revised Provisions recently issued by the PRC authorities may subject us to additional compliance requirements in the future.”

The following section sets forth a summary of the principal PRC laws and regulations relevant to graphite anode material manufacturing and sales business operations in China.

Industrial Polices

Foreign investors and foreign-invested enterprises investing in the PRC shall comply with the Catalog of Industries for Encouraging Foreign Investment (2022 edition), which was promulgated by the National Development and Reform Commission (the “NDRC”) and the Ministry of Commerce (the “MOFCOM”) on October 26, 2022 and took effect on January 1, 2023. Pursuant to the Catalog, the development and production of lithium-ion batteries falls within the scope of industries in which foreign investment is encouraged.

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According to the Guiding Catalog for Industrial Restructuring, which was promulgated by the NDRC on December 2, 2005, with the latest amendment on December 30, 2021, and was effective on December 30, 2021, new batteries such as lithium-ion batteries, and lithium-ion batteries use intermediate phase Anode materials such as carbon microspheres and silicon carbon fall into the state-encouraged industries.

According to the Guiding Catalog for Key Products and Services for Strategic Emerging Industries promulgated by the NDRC on January 25, 2017, high-power graphite electrodes, graphite for negative electrodes of lithium-ion batteries, mesocarbon microspheres, Synthetic diamond etc. are key products and services for strategic emerging industries.

According to the Guiding Opinions on Accelerating the Development of New Energy Storage jointly promulgated by the NDRC and the National Energy Administration on July 15, 2021, the PRC will strive to build a clean, low-carbon, safe and efficient energy system, and seek to drive down the cost and advance the commercial-scale application of more mature new energy storage technologies such as lithium-ion batteries, in an effort to achieve carbon peak and carbon neutrality.

In order to encourage and guide the technological progress and normative development of lithium-ion battery industry, the Ministry of Industry and Information Technology (the “MIIT”) enacted the Conditions on the Standardization of Lithium Battery Industry (the “Standardization Conditions”) on August 31, 2015, which was latest amended on December 10, 2021, and provides guidance for all types of upstream and downstream manufacturers in the lithium-ion battery industry, including negative electrode materials, on their production scale and process technology, product quality and performance, comprehensive utilization of resources and environmental protection and safety management, etc. However, the Standardization Conditions is not pre-emptive and mandatory for administrative approval.

The MIIT further enacted the Management Measures of Standardization Announcement of Lithium Battery Industry according to the Standardization Conditions on January 16, 2019, which was latest amended on December 10, 2021, and provides that the responsible departments of industry and information technology in each province, autonomous region and municipality directly under the central government are responsible for the acceptance, verification and submission of announcement applications for lithium battery industry enterprise in the region, and for supervising and checking the implementation of the Standardization Conditions. 

Regulations Related to Production Safety

According to the Production Safety Law of the PRC (the “Production Safety Law”)latest amended by the Standing Committee of the National People’s Congress (the “SCNPC”) on June 10, 2021 and came into effect on September 1, 2021, an enterprise shall (i) provide production safety conditions as stipulated in the Production Safety Law and other relevant laws, administrative regulations, national and industry standards, (ii) establish a comprehensive production safety accountability system and production safety rules, and (iii) develop production safety standards to ensure production safety. Any entity that fails to provide required production safety conditions is prohibited from engaging in production activities. The person-in-charge of an enterprise shall be fully responsible for the safety of production of the enterprise. An enterprise having more than 100 employees shall establish a production safety management institution or be equipped with dedicated production safety management personnel.

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According to the Measures for the Supervision and Administration of “Three Simultaneities” for the Safety Facilities of Construction Projects promulgated by the former State Administration of Work Safety (currently known as the Ministry of Emergency Management) on December 14, 2010 and amended on April 2, 2015, the safety facilities in a newly built, reconstructed or expanded construction project must be designed, constructed and put into use in production simultaneously with the main body of the project. The enterprises shall demonstrate and pre-assess the safety conditions of its construction projects, make a safety design chapter, submit to the relevant work safety administrative department for examination or filing, and apply to the work safety administrative department for the completion and acceptance or the filing of its projects. If an enterprise violates the relevant requirements, it may be warned and be ordered to make corrections within a specified time limit. Failure to make correction within the specified time limit may result in the enterprise being ordered to discontinue the construction process or suspend its production and business operation for rectification, and being imposed a fine.

On July 5, 2022, Sunrise Guizhou completed the filing-for-record procedures with local work safety administrative department for its construction of the first phase of the manufacturing plant.

Regulations Related to Product Quality

According to the Product Quality Law of the PRC (the “Product Quality Law”), promulgated on February 22, 1993 and last amended on December 29, 2018 by the SCNPC, producers and sellers shall establish a sound internal product quality control system and strictly adhere to a job responsibility system in relation to quality standards and quality liabilities together with implementing corresponding examination and inspection measures. The counterfeiting or imitation of quality marks such as certification marks is prohibited; falsifying the place of origin of product, and falsifying or imitating the name or address of another factory is prohibited; adulteration of, or mixing of improper elements with products under manufacturing or on sale, passing off the sham as the genuine or passing off the inferior as the superior is prohibited. Any manufacturer or seller who violates the Product Quality Law may be subject to (i) administrative penalties including suspension of production or sale, ordered correction of illegal activities, confiscation of products subject to illegal production or sale, imposition of fines, confiscation of illegal gains and, in severe cases, revocation of business license; and (ii) criminal liabilities if the illegal activity constitutes crime.

As of the date of this annual report, Sunrise Guizhou has passed the ISO14001, ISO45001, ISO9001 and IATF16949 quality management system certification for its development and manufacturing of graphite anode materials for lithium-ion batteries.

Regulations Related to Real Properties

Land

Pursuant to the Land Administration Law of the PRC, which became effective from 1 January 1987 and was last amended on 26 August 2019, and the Regulation on the Implementation of the Land Administration Law of the PRC, which became effective from 1 February1991 and was last amended on 2 July 2021, issues related to the ownership of land, land use right, the overall planning of land use, the protection of cultivated land and the construction land in the PRC are all subject to the supervision of the above laws and regulations.

Property Rights

Pursuant to the Civil Code of the PRC, civil relationships arising from the possession and the use of property (including ownership, usufructuary right, security rights to the property and possession) are subject to the law, of which a holder of the land use right of the construction land enjoys the rights to possess, use and seek proceeds from the state-owned land as prescribed by the laws and the rights to build buildings, structures and their accessory facilities on such land. A mortgage can be set up on the land use right of the construction land, buildings and other land affiliated items as prescribed by the laws.

Construction Under Progress

Pursuant to the Law of Urban and Rural Planning of the PRC, which became effective from 1 January 2008 and was last amended on 23 April 2019, Construction Law of the PRC, which became effective from 1 March 1998 and was last amended on 23 April 2019, Administrative Measures for Construction Permits of Construction Projects, which became effective on 25 October 2014 and was last amended on 30 March 2021 and the Regulations on the Administration of Construction Project Quality, which became effective from 30 January 2000 and was last amended on 23 April 2019, construction activities carried out in the preoccupied areas of cities, towns and villages and in areas subject to planning control due to the needs of urban and rural construction and development shall comply with the relevant requirements of the Law of Urban and Rural Planning of the PRC, under which the construction enterprises shall obtain the Construction Land Use Planning Permit and Construction Works Planning Permit from the competent urban and rural planning department of the City and County People’s Government and apply for the Construction Permit with the competent housing and urban-rural department of the People’s Government above county level at places where the construction projects are located before construction commences as prescribed by the laws. Upon receiving the completion report of the construction project, the construction enterprise shall organize the acceptance inspection by the relevant design, construction and supervision enterprises.

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Sunrise Guizhou obtained the Construction Land Use Planning Permit for construction projects in March 2022 and December 2023, Construction Works Planning Permit from local urban and rural planning department for construction projects in March 2022, June 2023 and November 2023, and obtained Construction Permit from local housing and urban-rural department for construction projects in March and April 2022 .

Regulations Related to Environmental Protection

According to the Environmental Protection Law of the PRC (the “Environmental Protection Law”) promulgated by the SCNPC on December 26, 1989 and last amended on April 24, 2014, any entity that discharges or will discharge pollutants in the course of operation or other activities must implement effective environmental protection measures to control and properly handle of hazardous substances such as waste gas, waste water, waste residues, dust, malodorous gases, radioactive substances, noise, vibration and electromagnetic radiation generated in the course of such activities. The State implements a pollutant discharge permit management system in accordance with the law. According to the Environmental Protection Law and the Regulations on the Administration of Pollutant Discharge Licensing, which was promulgated by the State Council on January 24, 2021 and came into effect on March 1, 2021, enterprises, business units and other producers and operators that implement the pollutant discharge licensing management shall discharge pollutants according to the requirements of the pollutant discharge license, and shall not discharge pollutants without obtaining the pollutant discharge license. The competent environmental protection authorities impose various administrative penalties on individuals or enterprises in violation of the Environmental Protection Law, for example, if an entity discharges pollutant in violation of the pollutant discharge standards or volume control requirement, the entity would be subject to administrative penalties, including order to suspend business for rectification, and even order to terminate or close down business under severe circumstances.

Pursuant to the Regulations on the Administration of Environmental Protection of Construction Projects promulgated by the State Council on November 29, 1998 and amended on July 16, 2017 and the Interim Measures for Environmental Protection Acceptance Examination Upon Completion of Construction Projects promulgated by the former Ministry of Environmental Protection on November 20, 2017, the PRC implements a system to appraise the environmental impact of construction projects. The construction entity shall submit an environmental impact report or an environmental impact statement for approval prior to the commencement of the construction project, or an environmental impact registration form as required by the environmental protection administrative department of the State Council for record. In addition, after the completion of a construction project for which an environmental impact report or an environmental impact statement has been prepared, the construction entity shall, in accordance with the standards and procedures prescribed by the competent administrative department of environmental protection under the State Council, conduct acceptance checks on the supporting environmental protection facilities and prepare an acceptance report. For construction projects that are constructed in phases or put into production or use in phases, the corresponding environmental protection facilities shall be inspected and accepted in phases. The construction project can only be put into production or use after the completed supporting environmental protection facilities have passed the acceptance inspection. Facilities that have not been carried out or have not passed the acceptance examination shall not be put into production or use.

According to the Environmental Protection Tax Law of the PRC promulgated by the SCNPC on December 25, 2016, amended on October 26, 2018 and implemented on the same day, and the Regulations for the Implementation of the Environmental Protection Tax Law of the PRC came into effective on January 1, 2018, (i) enterprises, public institutions and other producers and operators that directly discharge pollutants to the environment within the territory of the PRC and other sea areas under the jurisdiction of the PRC are taxpayers of environmental pollution tax, and shall pay environmental pollution tax in accordance with the aforementioned laws and regulations, (ii) the Administrative Regulations on the Collection and Use of Pollutant Discharge Fees was repealed and no more pollutant discharge fees shall be collected.

On February 25, 2022 and December 12, 2023, Sunrise Guizhou obtained the approval for the Environmental Impact Report for its construction of the first phase of the manufacturing plant. On April 25, 2022, Sunrise Guizhou obtained the Pollutant Discharge License, which will remain effective for 5 years. On January 5, 2024, Sunrise Guizhou submitted the Filing for Environmental Protection Acceptance upon Completion of the Construction Project.

Regulations Related to Fire Control

According to the Fire Control Law of the PRC promulgated by the SCNPC on April 29, 1998 and last amended on April 29, 2021, the fire control design and construction of a construction project shall comply with the national fire control technical standards for construction projects. Upon completion of construction of a development project which is required to apply for fire safety inspection and acceptance as stipulated by the housing and urban-rural development authority of the State Council, the developer shall apply to the housing and urban-rural development authority for fire safety inspection and acceptance. For development projects other than those stipulated in the preceding paragraph, the developer shall complete filing formalities with the housing and urban-rural development authority following the inspection and acceptance, the housing and urban-rural development department shall conduct spot check. Where a development project which is required by law to undergo fire safety inspection and acceptance does not undergo fire safety inspection and acceptance, or does not pass fire safety inspection and acceptance, the project shall not be put into use; the use of other development projects which do not pass inspection in spot checks carried out pursuant to the law shall be suspended.

On March 16, 2023, Sunrise Guizhou obtained the Filing Certificate for Fire Safety Inspection and Acceptance of Construction Project from local urban and rural development authority for its construction of the first phase of the manufacturing plant.

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C. Organizational Structure

The following diagram illustrates our current corporate structure, which includes our significant subsidiaries as of the date of this annual report: 

 

Contractual Arrangements among GIOP BJ, the VIE and Its Shareholders

Neither we nor our subsidiaries own any equity interest in the VIE. GIOP BJ, the VIE and its shareholders entered into a series of contractual arrangements, also known as VIE Agreements, in June 2019. Pursuant to the VIE Agreements, for accounting purposes only, we are the primary beneficiary of the VIE to the extent that we consolidate the financial results of the VIE in our consolidated statements under U.S. GAAP.

Each of the VIE Agreements is described in detail below:

Exclusive Technical and Consulting Services Agreement

Pursuant to the Exclusive Technical and Consulting Services Agreement between the VIE and GIOP BJ (the “Exclusive Service Agreement”), GIOP BJ provides the VIE with technical support, consulting services, business support and other management services relating to its day-to-day business operations and management, on an exclusive basis, utilizing its advantages in technology, human resources, and information. For services rendered to the VIE by GIOP BJ under the Exclusive Service Agreement, GIOP BJ is entitled to collect a service fee approximately equal to the VIE’s earnings before corporate income tax, i.e., the VIE’s revenue after deduction of operating costs, expenses and other taxes, subject to adjustment based on services rendered and the VIE’s operation needs.

This agreement became effective on June 10, 2019 and will remain effective unless otherwise terminated as required by laws or regulations, or by relevant governmental or regulatory authorities. Nevertheless, this agreement shall be terminated after all the equity interest in the VIE held by its shareholders and/or all the assets of the VIE have been legally transferred to GIOP BJ and/or its designee in accordance with the Exclusive Option Agreement.

The CEO of GIOP BJ, Mr. Haiping Hu, is currently managing the VIE pursuant to the terms of the Exclusive Service Agreement. The Exclusive Service Agreement does not prohibit related party transactions. The Company’s audit committee is required to review and approve in advance any related party transactions, including transactions involving GIOP BJ or the VIE.

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Equity Pledge Agreement

Under the Equity Pledge Agreement between GIOP BJ, and shareholders of the VIE, together holding 100% of the shares of the VIE (the “VIE Shareholders”), the VIE Shareholders pledged all of their equity interests in the VIE to GIOP BJ to guarantee the performance of the VIE’s obligations under the Exclusive Service Agreement. Under the terms of the Equity Pledge Agreement, in the event that the VIE or the VIE Shareholders breach their respective contractual obligations under the Exclusive Service Agreement, GIOP BJ, as pledgee, will be entitled to certain rights, including, but not limited to, the right to collect dividends generated by the pledged equity interests. The VIE Shareholders also agreed that upon occurrence of any event of default, as set forth in the Equity Pledge Agreement, GIOP BJ is entitled to dispose of the pledged equity interests in accordance with applicable PRC laws. The VIE Shareholders further agreed not to dispose of the pledged equity interests or take any actions that would prejudice GIOP BJ’s interests without the prior written consent of GIOP BJ.

The Equity Pledge Agreement is effective until: (1) the secured debt in the scope of pledge is cleared off; and (2) Pledgers transfer all the pledged equity interests to Pledgees according to the Exclusive Option Agreement, or other entity or individual designated by it.

The purposes of the Equity Pledge Agreement are to (1) guarantee the performance of the VIE’s obligations under the Exclusive Service Agreement; (2) make sure the VIE Shareholders do not transfer or assign the pledged equity interests, or create or allow any encumbrance that would prejudice GIOP BJ’s interests without GIOP BJ’s prior written consent. In the event the VIE breaches its contractual obligations under the Exclusive Service Agreement, GIOP BJ will be entitled to dispose of the pledged equity interests.

Exclusive Option Agreement

Under the Exclusive Option Agreement, the VIE Shareholders irrevocably granted GIOP BJ (or its designee) an exclusive option to purchase, to the extent permitted under PRC law, once or at multiple times, at any time, part or all of their equity interests in the VIE or the assets of the VIE. The option price to be paid by GIOP BJ to each shareholder of the VIE is RMB10 (approximately US$1.47) or the minimum amount to the extent permitted under PRC law at the time when such transfer occurs.

Under the Exclusive Option Agreement, GIOP BJ may at any time under any circumstances, purchase, or have its designee purchase, at its discretion, to the extent permitted under PRC law, all or part of the VIE Shareholders’ equity interests in the VIE or the assets of the VIE. The Exclusive Option Agreement, together with the Equity Pledge Agreement, the Exclusive Service Agreement, and Powers of Attorney, enable GIOP BJ to exercise effective control over the VIE.

The Exclusive Option Agreement remains effective until all the equity or assets of the VIE is legally transferred under the name of GIOP BJ and/or other entity or individual designated by it, or unilaterally terminated by GIOP BJ with a 30-day written notice.

Powers of Attorney

Under each of the Powers of Attorney, the VIE Shareholders authorized GIOP BJ to act on their behalf as their exclusive agent and attorney with respect to all rights as shareholders, including, but not limited to: (a) attending shareholders’ meetings; (b) exercising all the shareholder’s rights, including voting, that shareholders are entitled to under the laws of China and the Articles of Association, including, but not limited to, the sale or transfer or pledge or disposition of shares in part or in whole; and (c) designating and appointing on behalf of shareholders the legal representative, the executive director, supervisor, the chief executive officer, and other senior management members of the VIE.

The Powers of Attorney are irrevocable and continuously valid from the date of execution of the Powers of Attorney, so long as the VIE Shareholders own the equity interests of the VIE.

Spousal Consent

Pursuant to the Spousal Consent, each spouse of the individual shareholders of the VIE irrevocably agreed that the equity interest in the VIE held by their respective spouses would be disposed of pursuant to the Equity Pledge Agreement, the Exclusive Option Agreement, and the Powers of Attorney. Each spouse of the shareholders agreed not to assert any rights over the equity interest in the VIE held by their respective spouses. In addition, in the event that any spouse obtains any equity interest in the VIE through the respective shareholder for any reason, he or she agreed to be bound by the contractual arrangements.

D.  Property, Plants and Equipment 

I. The VIE currently maintains offices in Beijing and Shanghai in the PRC. The total office space is 1,205 square meters including both leased and owned properties. The VIE leases 567 square meters of office space under a non-cancelable operating lease agreement with expiration dates through December 31, 2023. Operating lease expense amounted to $17,653, $270,254, and $244,045 for the years ended December 31, 2023, 2022, and 2021, respectively. In December 2019, the Company signed property purchase agreements to acquire four properties in Beijing with approximately an aggregate of 638 square meters of office space for a total consideration of US$2,991,492. The Company paid US$1,204,094 as a prepayment during the year ended December 31, 2019 and paid the rest of the consideration of US$1,787,398 and acquired the ownership of the properties in May 2020.

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II. Sunrise Guizhou maintains the below corporate office space and manufacturing properties in China.

The following table sets forth the location, approximate size, primary use and lease term of major facilities:

Location	Approximate Gross Land Area in Square Meters		Primary Use (Gross Floor Area in Square Meters)	Lease or Own
Yilong New Area, Qianxinan Prefecture, Guizhou Province,China		294,453	Office (3,434), Manufacturing (24,879) staff dormitory (4,919)	own

Future minimum lease payments under non-cancellable operating leases as of December 31, 2023 was nil.

ITEM 4.A. UNRESOLVED STAFF COMMENTS 

None.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS   

The following discussion of the Company’s financial condition and results of operations is based upon and should be read in conjunction with the Company’s consolidated financial statements and their related notes included elsewhere in this annual report. This annual report contains forward-looking statements. See “Forward-Looking Information” in this annual report. In evaluating our business, you should carefully consider the information provided under the caption “Item 3. Key Information—D. Risk Factors” in this annual report. The Company cautions you that its businesses and financial performance are subject to substantial risks and uncertainties.

Overview

The VIE, or SDH, started operating as a consulting company providing enterprise services to small and medium-sized enterprises in the PRC in December 2014, and launched its peer-to-peer knowledge sharing and enterprise service platform in May 2016. Since then, SDH has been operating a knowledge sharing platform and providing services, both on-line, via the mobile application “Shidonghui App” (the “APP”), and off-line, through its local offices in Beijing, Shanghai, Hangzhou, Zibo and Guizhou in China. 

Beginning in fiscal year 2022, we commenced the transition of our core business from knowledge sharing and enterprise services to sales of graphite anode material products. In April 2022, the Company entered into the graphite anode material manufacturing and sales business through a joint venture, Sunrise Guizhou, of which the Company currently owns 39.35% through its wholly owned subsidiary, Zhuhai Zibo. The Company consolidates Sunrise Guizhou’s financials because it owns a majority of seats on its board of directors and controls its financial and operating policies pursuant to an agreement among its funding shareholders. Sunrise Guizhou is located at Yilong New District, Xingyi City, Qian Southwest State, Guizhou Province, China. The land use of Sunrise Guizhou’s graphite anode manufacturing site is approximately 294,453 square meters. Sunrise Guizhou began construction of the manufacturing plant in April 2022, and the first and second phase construction of (30,000 tons annual manufacturing capacity) of the manufacturing plant has been completed. The third phase of construction of the manufacturing plant (20,000 tons annual manufacturing capacity) was approved by the board of the directors of the Company in March 2023, and is under construction.

Impact from COVID-19

In early January of 2020, a novel coronavirus (“COVID-19”) outbreak took place in Wuhan, China. Subsequently, it spread rapidly to Asia and other parts of the world. The COVID-19 outbreak resulted in widespread economic disruptions in China, as well as stringent government measures by the Chinese government to contain its transmissions including quarantines, travel restrictions, and temporary closures of non-essential businesses in China and elsewhere from 2020 to 2022.

Essentially all the Company’s revenues are generated in China. Consequently, the results of operations and financial performances of the Company, particularly, SDH’s knowledge sharing and enterprise services business was affected materially for the years ended December 31, 2022, 2021 and 2020. Due to the government restrictions, SDH was prevented from arranging offline activities, resulting in cancellations or postponements of study tours, forums and sponsorship advertising events. On the other hand, Sunrise Guizhou’s graphite anode material manufacturing and sales business in Guizhou Province were not severely impacted by the COVID-19, primarily due to its relatively remote location.

On May 5, 2023, the World Health Organization declared that COVID-19 is now an established and ongoing health issue which no longer constitutes a public health emergency of international concern. Going forward, we do not expect that COVID-19 will impact our results of operation materially. However, the VIE’s knowledge sharing and enterprise consulting services business had declined substantially due to the overall impact of COVID-19 on the market and economy, and we do not expect this business to fully recover. Further, the extent of the impact of COVID-19 on the Company’s future financial results will be dependent on future developments such as the length and severity of COVID-19, the potential resurgence of COVID-19, future government actions in response to COVID-19 and the overall impact of COVID-19 on the global economy and capital markets, among many other factors, all of which remain uncertain.

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Results of Operations

The following table summarizes the results of the Company’s operations during the years ended December 31, 2023, 2022 and 2021, respectively, and provides information regarding the dollar and percentage increase or decrease during such periods. 

	For the years ended December 31,
	2023			2022			2021
REVENUES, NET
Products	$	44,384,004		$	37,583,844		$	2,104,767
Service		666,401			541,824			5,304,505
Total revenues		45,050,405			38,125,668			7,409,272
COSTS OF REVENUES
Products		57,172,626			38,299,090			2,063,296
Service		281,030			1,176,956			1,823,358
Total cost of revenues		57,453,656			39,476,046			3,886,654
GROSS (LOSS) PROFIT		(12,403,251	)		(1,350,378	)		3,522,618
OPERATING EXPENSES
Selling expenses		742,167			1,075,980			946,775
General and administrative expenses		13,040,038			12,678,873			7,834,291
Research and development expenses		1,193,082			1,053,882			2,151,565
Impairment of intangible assets		3,151,467			2,650,020			-
Total operating expenses		18,126,754			17,458,755			10,932,631
LOSS FROM OPERATIONS		(30,530,005	)		(18,809,133	)		(7,410,013	)
OTHER (EXPENSES) INCOME
Investment losses		(1,170,974	)		(3,566,561	)		(2,118,453	)
Interest (expense) income, net		(2,162,109	)		(27,128	)		173,173
Other income, net		942,138			87,390			404,380
Total other expenses		(2,390,945	)		(3,506,299	)		(1,540,900	)
LOSS BEFORE INCOME TAXES		(32,920,950	)		(22,315,432	)		(8,950,913	)
Income taxes (benefit) provision		(226	)		808,970			(236,581	)
NET LOSS		(32,920,724	)		(23,124,402	)		(8,714,332	)
Less: net loss attributable to non-controlling interests		(8,688,144	)		(487,780	)		(311,072	)
NET LOSS ATTRIBUTABLE TO SUNRISE NEW ENERGY CO., LTD. ORDINARY SHAREHOLDERS	$	(24,232,580	)	$	(22,636,622	)		(8,403,260	)
OTHER COMPREHENSIVE (LOSS) INCOME
Foreign currency translation adjustment		(1,165,807	)		(5,123,964	)		700,316
TOTAL COMPREHENSIVE LOSS		(34,086,531	)		(28,248,366	)		(8,014,016	)
Less: comprehensive loss attributable to non-controlling interests		(9,220,222	)		(2,107,480	)		(321,522	)
COMPREHENSIVE LOSS ATTRIBUTABLE TO ORIDNARY SHAREHOLDERS OF SUNRISE NEW ENERGY CO., LTD.	$	(24,866,309	)	$	(26,140,886	)		(7,692,494	)
LOSS PER SHARE
Basic and diluted - Class A and Class B ordinary shares	$	(1.08	)	$	(0.98	)	$	(0.36	)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
Basic and diluted - Class A and Class B ordinary shares		25,622,195			24,820,313			23,638,751

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Year Ended December 31, 2023 Compared to Year Ended December 31, 2022

Revenues, net

Revenues for the years ended December 31, 2023 and 2022 were derived from the following sources:

	For the year ended December 31,
	2023		%			2022		%			Change		%
Graphite anode material business	$	44,384,004		98.52	%	$	37,580,677		98.57	%	$	6,803,327		18.10	%
Peer-to-peer knowledge sharing and enterprise business		666,401		1.48	%		544,991		1.43	%		121,410		22.28	%
Revenues, net	$	45,050,405		100.00	%	$	38,125,668		100.00	%	$	6,924,737		18.16	%

Revenues increased by $6,924,737, or 18.16%, from $38,125,668 for the year ended December 31, 2022, to $45,050,405 for the year ended December 31, 2023. Revenues from graphite anode material sales business accounted for 98.52% of net revenues for year ended December 31, 2023, as compared to 98.57% for the year ended December 31, 2022. Revenue from peer-to-peer knowledge sharing and enterprise business accounted for 1.48% and 1.43% of net revenues for the years ended December 31, 2023 and 2022, respectively.

Revenues from graphite anode material sales

The Company’s products include various artificial graphite anode material products. Artificial graphite is made of petroleum coke, needle coke and pitch coke as the main material, and formed after crushing, shaping, granulation and graphitization. The Company markets its graphite anode products through a direct sales channel, through its sales department consists of five experienced employees, who report directly to the CEO of the Company. The Company’s customers were manufacturers of industrial and consumer energy storage lithium-ion batteries, such as batteries for electric vehicles and electric ships, and smart consumer electronics.

Revenues increased by $6,803,327, or 18.10%, from $37,580,677 for the year ended December 31, 2022, to $44,384,004 for the year ended December 31, 2023. For the year ended December 31, 2023, the Company had supplied products to 23 customers for 12,513 tons, as compared to 16 customers for 6,225 tons for year ended December 31, 2022. In the meantime, the average selling price of the graphite anode materials decreased by RMB 16,000 per ton, or 39% from RMB 41,000 per ton for the year ended December 31, 2022 to RMB 25,000 per ton for the year ended December 31, 2023.

Revenues from peer-to-peer knowledge sharing and enterprise business

Revenues from peer-to-peer knowledge sharing and enterprise business increased by $121,410, or 22.28%, from $544,991 for the year ended December 31, 2022, to $666,401 for the year ended December 31, 2023. During the outbreak of the COVID-19, SDH was not able to offer offline activities.

The revenue increase of peer-to-peer knowledge sharing and enterprise business for the year ended December 31, 2023 was brought by consulting services. SDH provides consulting services to small and medium-sized enterprises to develop strategies and solutions for the following: corporate reorganization, product promotion and marketing, industry supply chain integration, corporate governance, financing and capital structure, etc. Revenues from consulting services increased by $462,333, or 4,793.50% from $9,645 for the year ended December 31, 2022, to $471,978 for the year ended December 31, 2023, primarily due to the fact that SDH provided more consultation services associated with initial public offering. The increase was offset by $346,650 revenue decrease in member services, comprehensive tailored services and other services as the Chinese economy and capital markets did not recovered from the impact of COVID-19.

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Costs of revenues

The following table sets forth the breakdown of the cost of revenues for the years ended December 31, 2023 and 2022:

	For the years ended December 31,										Change
	2023		%			2022		%			Amount			%
Service costs	$	281,030		0.49	%	$	1,176,956		2.98	%	$	(895,926	)		(76.12	)%
Cost of goods sold		57,172,626		99.51	%		38,299,090		97.02	%		18,873,536			49.28	%
Total costs of revenues		57,453,656		100.00	%		39,476,046		100.00	%		17,977,610			45.54	%

Service costs

The service costs primarily include (1) the cost of holding activities, such as venue rental fees, conference equipment fees, (2) professional and consulting fees paid to third parties for the activities; (3) the fees paid to Mentors and Experts; (4) labor costs; and (5) amortization cost of copyright. Service costs decreased by $895,926, or 76.12% for the year ended December 31, 2023 compared to same period in 2022, mainly due to the decrease of $757,675 in amortization of copyright that had been fully impaired as of December 31, 2022.

Cost of goods sold

The cost of goods sold increased by $18,873,536, or 49.28%, from $38,299,090 for the year ended December 31, 2022, to $57,172,626 for the year ended December 31, 2023. The increase of the cost of goods sold was mainly due to the expansion of the graphite anode materials sales business. In the meantime, the average cost per ton of the graphite anode materials decreased by $2,162 per ton, or 35.14% from $6,152 per ton for the year ended December 31, 2022 to $3,991 per ton for the year ended December 31, 2023, which offset the volume increase. Moreover, a $7,238,819 impairment of inventory of graphite anode material was recorded at the lower of cost and net realizable value due to decreasing sales prices.  

Gross loss

As a result of the foregoing, the Company reported a gross loss of $12,403,251 for the year ended December 31, 2023 and a negative gross margin. The negative gross margin was due to the $12,788,622 gross loss of the graphite anode material sales business due to the manufacturing overcapacity and high level of competition. As a result, the raw material costs and graphitization outsourcing cost did not decrease proportionately to the decrease in the sales prices of graphite anode material. In the meantime, a $7,238,819 impairment of inventory of graphite anode material was recorded at the lower of cost and net realizable value due to decreasing sales prices. The gross loss was partially set off by a gross profit of $385,371 from the peer-to-peer knowledge sharing and enterprise business.

Operating expenses

The following table sets forth the breakdown of the operating expenses for the years ended December 31, 2023 and 2022:

	For the years ended December 31,										Change
	2023		%			2022		%			Amount			%
Selling expenses	$	742,167		4.09	%		1,075,980		6.16	%		(333,813	)		(31.02	)%
General and administrative expenses		13,040,038		71.94	%		12,678,873		72.62	%		361,165			2.85	%
Research and development expenses		1,193,082		6.58	%		1,053,882		6.04	%		139,200			13.21	%
Impairment of intangible assets		3,151,467		17.39	%		2,650,020		15.18	%		501,447			18.92	%
Total costs and operating expenses		18,126,754		100.00	%		17,458,755		100.00	%		667,999			3.83	%

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Selling expenses

The selling expenses decreased by $333,813 or 31.02%, from $1,075,980 for the year ended December 31, 2022 to $742,167 for the year ended December 31, 2023. Such decrease was primarily due to a decrease in labor costs of $184,992 and in consulting fees of $116,877, stemming from the decreased operation of the peer-to-peer knowledge sharing and enterprise business.

General and administrative expenses

The general and administrative expenses increased by $361,165, or 2.85%, from $12,678,873 for the year ended December 31, 2022 to $13,040,038 for the year ended December 31, 2023. Such increase was primarily due to (1) an increase in bad debt expenses of $1,297,639, which was mainly due to the negative impact of COVID-19 on the financial condition of the debtors in the peer-to-peer knowledge sharing and enterprise service business; and (2) an increase of $475,910 in tax on property and land use rights on Company’s warehouses for manufacturing graphite anode materials, which were offset by (1) a decrease in professional fee of $193,499; (2) a decrease in insurance fee of $445,757 due to the fact that the Company did not renew the insurance policy for its management; (3) a decrease in rental fee of $283,345 for the peer-to-peer knowledge sharing and enterprise business; and (4) a decrease in share-based compensation of $560,314 as 25% of the restricted shares vested on the grant day August 26, 2022 and the remaining 75% would vested within three years with equal yearly installments from 2022 to 2025.

Research and development expenses

Research and development expenses increased by $139,200 or 13.21%, from $1,053,882 for the year ended December 31, 2022 to $1,193,082 for the year ended December 31, 2023. Research and development expenses for the year ended December 31, 2023 and 2022 were mainly associated with the research development activities of graphite anode material business, including technology service, technical service, purchasing laboratory chemical material collaterals.

Impairment of intangible assets

Impairment of intangible assets increased by $501,447, or 18.92%, from $2,650,020 for the year ended December 31, 2022 to $3,151,467 for the year ended December 31, 2023. The impaired intangible assets for the year ended December 31, 2023 were associated with the copyrights of graphite anode material business. The Company reviewed its copyright of graphite anode material business for impairment as the copyrights became obsolete for manufacturing. It indicated that the carrying amount of copyrights might no longer be recoverable as of December 31, 2023. The impaired intangible assets for the year ended December 31, 2022 were associated with the copyrights of course videos purchased from a third party. The peer-to-peer knowledge sharing and enterprise service business was adversely affected by COVID-19 for the year ended December 31, 2022. The Company’s online service was $2,100 for the year ended December 31, 2022. The Company reviewed its copyright of course videos for impairment in the event of the adverse change to market conditions that would impact the future use of such copyright. Such review indicated that the carrying amount of an asset might no longer be recoverable as of December 31, 2022.

Other expenses, net

The total net other expenses were $2,390,945 for the year ended December 31, 2023. Such expenses for the year ended December 31, 2023 primarily consisted of investment loss of $1,170,974 and interest expense of $2,162,109, which was partially offset by the other income of $942,138. Investment loss of $1,170,974 was mainly attributed to the impairment loss of $1,450,381 on long-term investments that do not have readily determinable fair values. Interest expense was mainly attributable to various means of debt financing on the graphite anode material sales business. Other income of $942,138 was mainly $380,164 for government subsidy and $390,714 for wasted residual sales.

The total net of other expenses was $3,506,299 for the year ended December 31, 2022 primarily consisted of the investment loss of $3,618,847 which was mainly attributed by the investment loss in a trust fund of $2,625,349 and impairment loss of $979,426 on long-term investment.

Income taxes provision

Cayman Islands

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, after execution, brought within the jurisdiction of the Cayman Islands. No stamp duty is payable in the Cayman Islands on the issue of shares by, or any transfers of shares of, Cayman Islands companies (except those which hold interests in land in the Cayman Islands). There are no exchange control regulations or currency restrictions in the Cayman Islands.

Payments of dividends and capital in respect of our Ordinary Shares will not be subject to taxation in the Cayman Islands and no withholding will be required on the payment of a dividend or capital to any holder of our Ordinary Shares, as the case may be, nor will gains derived from the disposal of our Ordinary Shares be subject to Cayman Islands income or corporation tax. 

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Hong Kong

In accordance with the relevant tax laws and regulations of Hong Kong, a company registered in Hong Kong is subject to income taxes within Hong Kong at the applicable tax rate on taxable income. From year of assessment of 2019/2020 onwards, Hong Kong profit tax rates are 8.25% on assessable profits up to HK$2,000,000, and 16.5% on any part of assessable profits over HK$2,000,000. However, the Company’s HK subsidiary did not generate any assessable profits arising in or derived from Hong Kong for the fiscal years ended December 31, 2023, 2022 and 2021, and accordingly no provision for Hong Kong profits tax has been made for these periods.

China

The Company’s subsidiaries are incorporated in the PRC, and are subject to the PRC Enterprise Income Tax Laws (“EIT Laws”) with the statutory income tax rate of 25% with the following exceptions.

In accordance with the implementation rules of EIT Laws, a qualified “High and New Technology Enterprise” (“HNTE”) is eligible for a preferential tax rate of 15%. The HNTE certificate is effective for a period of three years. An entity could re-apply for the HNTE certificate when the prior certificate expires. SDH is eligible to enjoy a preferential tax rate of 15% from 2021 to 2023 to the extent it has taxable income under the EIT Law.

For qualified small and low-profit enterprises, from January 1, 2021 to December 31, 2021, 12.5% of the first RMB 1.0 million of the assessable profit before tax is subject to preferential tax rate of 20% and the 50% of the assessable profit before tax exceeding RMB 1.0 million but not exceeding RMB 3.0 million is subject to preferential tax rate of 20%. From January 1, 2022 to December 31, 2022, 12.5% of the first RMB 1.0 million of the assessable profit before tax is subject to preferential tax rate of 20% and the 25% of the assessable profit before tax exceeding RMB 1.0 million but not exceeding RMB 3.0 million is subject to preferential tax rate of 20%. From January 1, 2023 to December 31, 2027, 25% of the first RMB 3.0 million of the assessable profit before tax is subject to the tax rate of 20%. For the years ended December 31, 2021, 2022 and 2023, some PRC subsidiaries are qualified small and low-profit enterprises as defined, and thus are eligible for the above preferential tax rates for small and low-profit enterprises. 

Net loss

As a result of the foregoing, the Company reported a net loss of $32,920,724 for the year ended December 31, 2023, compared to $23,124,402 for the year ended December 31, 2022.

Net loss attributable to non-controlling interest

Non-controlling interests are recognized to reflect the portion of their equity that is not attributable, directly or indirectly, to the Company as the controlling shareholder. As of December 31, 2023, for the Company’s consolidated subsidiaries, the VIE and VIE’ s subsidiaries, non-controlling interests represent: a) a non-controlling shareholder’s 49% ownership interest in GMB (Beijing), GMB Consulting and Shidong Yike; b) a non-controlling shareholder’s 37.81% ownership interest in Sunrise Guizhou; c) a non-controlling shareholder’s 49% ownership interest in GMB Culture, which has a subsidiary called GMB Technology; and d) a non-controlling shareholder’s 25% ownership interest in Shidong Cloud, and 40% ownership interest in Shidong Trading.

Net loss attributable to the ordinary shareholders

Net loss attributable to the ordinary shareholders was $24,232,580 for the year ended December 31, 2023, compared to $22,636,622 for the year ended December 31, 2022.

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Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

Revenues, net

Revenues for the years ended December 31, 2022 and 2021 were derived from the following sources:

	For the year ended December 31,
	2022		%			2021		%			Change			%
Graphite anode material business	$	37,580,677		98.57	%	$	-		-		$	37,580,677			100.00	%
Peer-to-peer knowledge sharing and enterprise business
Member services		106,724		0.28	%		498,330		6.73	%		(391,606	)		(78.58	)%
Enterprise service
-Comprehensive tailored services		153,658		0.40	%		1,433,847		19.35	%		(1,280,189	)		(89.28	)%
-Sponsorship advertising services		-		-			1,734,390		23.41	%		(1,734,390	)		(100.00	)%
-Consulting services		9,645		0.03	%		1,583,583		21.37	%		(1,573,938	)		(99.39	)%
Online services		2,100		0.01	%		40,391		0.55	%		(38,291	)		(94.80	)%
Sales of merchandises		3,165		0.01	%		2,104,766		28.41	%		(2,101,601	)		(99.85	)%
Other services		269,699		0.71	%		13,965		0.18	%		255,734			1,831.25	%
Revenues, net	$	38,125,668		100.00	%	$	7,409,272		100.00	%	$	30,716,396			414.57	%

Revenues increased by $30,716,396, or 414.57%, from $7,409,272 for the year ended December 31, 2021, to $38,125,668 for the year ended December 31, 2022. Revenues from graphite anode material business accounted for 98.57% of net revenues for year ended December 31, 2022, as compared to nil for year ended December 31, 2021. Revenue from peer-to-peer knowledge sharing and enterprise business accounted for 1.43% and 100% of net revenues for the years ended December 31, 2022 and 2021, respectively. The change was primarily attributable to the launch of graphite anode materials business and offset by the shrink of peer-to-peer knowledge sharing and enterprise service revenue due to the impact of COVID-19 for the year ended December 31, 2022.

Revenues from graphite anode material sales

The Company’s products include various artificial graphite anode material products. Artificial graphite is made of petroleum coke, needle coke and pitch coke as the main material, and formed after crushing, shaping, granulation and graphitization. The Company markets its graphite anode products through a direct sales channel, through its sales department consists of five experienced employees, who report directly to the CEO of the Company, who has more than 20 years of experience in the lithium-ion battery material industry, and has accumulated extensive business connections in this industry.

For the year ended December 31, 2022, the Company had supplied products to 16 customers. The Company’s customers were manufacturers of industrial and consumer energy storage lithium-ion batteries, such as batteries for electric vehicles and electric ships, and smart consumer electronics. For the year ended December 31, 2022, four customers accounted for more than 10% of the Company’s total sales, accounting for 28.43%, 19.54%, 19.30% and 18.87% of the total sales, respectively. As the Company grows its customers bases, it is expected that the concentration of the sales will diminish in the future.

Revenues from member services

SDH offers three tiers of membership services, Platinum, Diamond and Protégé, which differ in membership fees as well as the level of the services provided. Members pay a fixed fee for exchange of the right to participate in seven activities, including study tours and forums, within a typically one-year membership period.

Revenues from member services decreased by $391,606, or 78.58%, from $498,330 for the year ended December 31, 2021, to $106,724 for the year ended December 31, 2022. As the outbreak of the COVID-19, SDH was prevented from offering large offline activities, which resulted in a decreased demand for member services.

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Revenues from comprehensive tailored services

There are four major categories of SDH’s comprehensive tailored services. The following table presents the type of tailored services as well as their respective prices:

Type of comprehensive tailored services	Pricing
Conference and salon organization	RMB50,000 (approximately US$7,434)
Booth exhibition services	RMB50,000 (approximately US$7,434)
On-site mentors’ guidance	RMB50,000-100,000 (approximately US$7,434-US$14,867)
Other additional services	RMB10,000-200,000 (approximately US$1,487 -US$29,735)

Revenues from comprehensive tailored services decreased by $1,280,189, or 89.28%, from $1,433,847 for the year ended December 31, 2021, to $153,658 for the year ended December 31, 2022. Due to the impact of COVID-19, the comprehensive tailored service revenues from individual customers and some of the enterprise customers became unstable, and the accounts receivable of these customers also became harder to collect. In addition, due to the continuous government restrictions on public gatherings in 2022, the demand for comprehensive tailored services for large conferences and salon organizations decreased.

Revenues from sponsorship advertising service

Sponsorship advertising is a special form of advertising, generally referring to a publicity strategy adopted by enterprises in order to enhance their corporate and product image, as well as brand awareness and influence. SDH provides sponsorship advertising services for enterprise clients at events SDH holds, such as forums and study tours.

Revenues from sponsorship advertising services decreased by $1,734,390, or 100% from $1,734,390 for the year ended December 31, 2021, to $nil for the year ended December 31, 2022, primarily due to the fact that offline forums and study tours were canceled due to the continuous government restrictions on public gatherings.

Revenues from consulting services

SDH provides consulting services to small and medium-sized enterprises to develop strategies and solutions for the following: corporate reorganization, product promotion and marketing, industry supply chain integration, corporate governance, financing and capital structure, etc. Revenues from consulting services decreased by $1,573,938, or 99.39% from $1,583,583 for the year ended December 31, 2021, to $9,645 for the year ended December 31, 2022, primarily due to the fact that small forums and salons were canceled due to the continuous government restrictions on public gatherings.

Revenues from online services

SDH provides two types of online services to the Company’s APP Users, which are questions and answers (Q&A) sessions with chosen Mentors or Experts and online streaming of courses and programs. Top-up credits are paid by Users through SDH’s APP, using which Users can purchase the online services.

Revenue from online services were immaterial in terms of amount and percentage of the net revenues for the years ended December 31, 2021 and 2022.

Revenues from sales of merchandises

Revenues from the sale of merchandise decreased by $2,101,601, or 99.85% from $2,104,766 for the year ended December 31, 2021 to $3,165 for the year ended December 31, 2022. The decrease was primarily due to the fact that SDH had not organized trade conferences facilitating the sales of merchandise due to the continuous government restrictions on public gatherings.

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Costs of revenues

The following table sets forth the breakdown of the cost of revenues for the years ended December 31, 2022 and 2021:

	For the years ended December 31,										Change
	2022		%			2021		%			Amount			%
Service costs	$	1,176,956		2.98	%	$	1,823,358		46.91	%	$	(646,402	)		(35.45	)%
Cost of goods sold		38,299,090		97.02	%		2,063,296		53.09	%		36,235,794			1,756.21	%
Total costs of revenues		39,476,046		100.00	%		3,886,654		100.00	%		35,589,392			915.68	%

Service costs

The service costs primarily include (1) the cost of holding activities, such as venue rental fees, conference equipment fees, (2) professional and consulting fees paid to third parties for the activities; (3) the fees paid to Mentors and Experts; (4) labor costs; and (5) amortization cost of copyright. Service costs decreased by $646,402, or 35.45% for the year ended December 31, 2022 compared to same period in 2021, mainly due to the decrease of $540,641 in service fee and consultant fee, which was mainly because the Company held fewer small conferences due to the government limitation on the scale of conferences in COVID-19.

Cost of goods sold

The cost of goods sold were $38,299,090 and $2,063,296 for the years ended December 31, 2022 and 2021, respectively. The significant increase of the cost of goods sold was due to the expansion of the graphite anode materials business, which was launched in 2022. In addition, $2,711,158 impairment on inventory, including health service gift cards, learning course gift cards, Chinese tea, latex pillows and health care products which was in exchange of collection of account receivables and deferred revenue due from the customers, was recoded due to the adverse effect of COVID-19 on peer-to-peer knowledge sharing and enterprise business.

Gross (loss) profit

As a result of the foregoing, the Company reported a gross loss of $1,350,378 for the year ended December 31, 2022. The negative gross margin was due to $3,344,511 gross loss on peer-to-peer knowledge sharing and enterprise business. For the year ended December 31, 2022, $2,711,158 impairment on inventory was recorded due to the adverse effect of COVID-19 and the Company maintained the necessary cost to operate peer-to-peer knowledge sharing and enterprise business. The gross loss was partially set off by a gross profit of $1,994,133 for graphite anode material sales business.

Operating expenses

The following table sets forth the breakdown of the operating expenses for the years ended December 31, 2022 and 2021:

	For the years ended December 31,										Change
	2022		%			2021		%			Amount			%
Selling expenses	$	1,075,980		6.16	%		946,775		8.66	%		129,205			13.65	%
General and administrative expenses		12,678,873		72.62	%		7,834,291		71.66	%		4,844,582			61.84	%
Research and development expenses		1,053,882		6.04	%		2,151,565		19.68	%		(1,097,683	)		(51.02	)%
Impairment of intangible assets		2,650,020		15.18	%		-		-	%		2,650,020			100	%
Total costs and operating expenses		17,458,755		100.00	%		10,932,631		100.00	%		6,526,124			59.69	%

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Selling expenses

The selling expenses increased by $129,205 or 13.65%, from $946,775 for the year ended December 31, 2021 to $1,075,980 for the year ended December 31, 2022. Such increase was primarily due to (1) an increase of travel expenses of $51,662 and entertainment expenses of $35,357, which was mainly due to increasing needs for marketing activities to the launch of graphite anode materials business; and (2) an increase of $39,301 of share-based compensation, as the Company adopted the 2022 Stock Incentive Plan for the grant of restricted share units to sales employees.

General and administrative expenses

The general and administrative expenses increased by $4,844,582, or 61.84%, from $7,834,291 for the year ended December 31, 2021 to $12,678,873 for the year ended December 31, 2022. Such increase was primarily due to (1) an increase of bad debt expenses of $ $364,346, which was mainly due to the fact that as the Company experienced a slow-down in the collection of accounts receivable resulting from impact from COVID-19 for the year ended December 31, 2022 on peer-to-peer knowledge sharing and enterprise service business; (2) an increases of $1,191,284 due to outsourced labor that due to the launch of graphite anode material business in August 2022, as the Company recruited factory workers and security personnel from labor outsourcing companies; and (3) an increase of $2,674,292 of share-based compensation as the Company adopted the 2022 Stock Incentive Plan for the grant of restricted share units to employees, directors and non-employees to provide incentive for their services.

Research and development expenses

Research and development expenses decreased by $1,097,683 or 51.02%, from $2,151,565 for the year ended December 31, 2021 to $1,053,882 for the year ended December 31, 2022. Research and development expenses for the year ended December 31, 2022 was mainly associated with the research development activities of graphite anode material business, including technology service, technical service, purchasing laboratory chemical material collaterals, while in the year ended December 31, 2021, as SDH hired more personnel to update and support the mobile application, or the APP, to meet Users’ increasing needs.

Impairment of intangible assets

Impairment of intangible assets increased from $nil for the year ended December 31, 2021 to $2,650,020 for the year ended December 31, 2022. The impaired intangible assets for the year ended December 31, 2022 were associated with the copyrights of course videos purchased from a third party including but not limited to course videos which cover subjects such as entrepreneurship development, financial service, corporate governance, team management, marketing strategy and etc. The peer-to-peer knowledge sharing and enterprise service business was adversely affected by COVID-19 for the year ended December 31, 2022. The Company online service was $2,100 for the year ended December 31, 2022.The Company reviewed its copyright of course videos for impairment in the event of the adverse change to market conditions that would impact the future use of the copyrights. It indicated that the carrying amount of an asset might no longer be recoverable as of December 31, 2022.

Other expenses (income), net

The total net other expenses were $3,506,299 for the year ended December 31, 2022, and was $1,540,900 for the year ended December 31, 2021. The net of other expenses for the year ended December 31, 2022 was primarily consisted of the investment loss of $3,618,847 which was mainly attributed by the investment loss in a trust fund of $2,625,349 and impairment loss of $979,426 on long-term investment. The net of other expenses for the year ended December 31, 2021 primarily consisted of the investment loss of $2,118,453, which was mainly attributed to the investment loss in a trust fund of $2,038,395, which was partially offset by the government subsidies of $413,422.

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Income taxes provision

Cayman Islands

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, after execution, brought within the jurisdiction of the Cayman Islands. No stamp duty is payable in the Cayman Islands on the issue of shares by, or any transfers of shares of, Cayman Islands companies (except those which hold interests in land in the Cayman Islands). There are no exchange control regulations or currency restrictions in the Cayman Islands.

Payments of dividends and capital in respect of our Ordinary Shares will not be subject to taxation in the Cayman Islands and no withholding will be required on the payment of a dividend or capital to any holder of our Ordinary Shares, as the case may be, nor will gains derived from the disposal of our Ordinary Shares be subject to Cayman Islands income or corporation tax.

Hong Kong

In accordance with the relevant tax laws and regulations of Hong Kong, a company registered in Hong Kong is subject to income taxes within Hong Kong at the applicable tax rate on taxable income. From year of assessment of 2019/2020 onwards, Hong Kong profit tax rates are 8.25% on assessable profits up to HK$2,000,000, and 16.5% on any part of assessable profits over HK$2,000,000. However, the Company’s HK subsidiary did not generate any assessable profits arising in or derived from Hong Kong for the fiscal years ended December 31, 2022, 2021 and 2020, and accordingly no provision for Hong Kong profits tax has been made in these periods.

China

The Company’s subsidiaries are incorporated in the PRC, and are subject to the PRC Enterprise Income Tax Laws (“EIT Laws”) with the statutory income tax rate of 25% with the following exceptions.

In accordance with the implementation rules of EIT Laws, a qualified “High and New Technology Enterprise” (“HNTE”) is eligible for a preferential tax rate of 15%. The HNTE certificate is effective for a period of three years. An entity could re-apply for the HNTE certificate when the prior certificate expires. SDH obtained its HNTE certificate on October 25, 2017, and renewed in 2021. Therefore, SDH is eligible to enjoy a preferential tax rate of 15% from 2017 to 2023 to the extent it has taxable income under the EIT Law.

For qualified small and thin-profit enterprises, the annual taxable income up to RMB 1 million (inclusive) is subject to an effective EIT rate of 2.5% from 1 January 2021 to 31 December 2022; where the annual taxable income exceeds RMB 1 million but does not exceed RMB 3 million (inclusive), the amount in excess of RMB 1 million is subject to an effective EIT rate of 5% from 1 January 2022 to 31 December 2024. GMB Consulting was eligible to enjoy a preferential tax rate of 5% from 2018 to 2021. Shidong Health was eligible to enjoy a preferential tax rate of 2.5% in 2022.

The PRC income taxes expense was $808,970 for the year ended December 31, 2022, primarily generated by the changes in valuation allowance. The income tax benefit was $236,581 for the year ended December 31, 2021.

Net loss

As a result of the foregoing, the Company reported a net loss of $23,124,402 for the year ended December 31, 2022, compared to $8,403,260 for the year ended December 31, 2021.

Net loss attributable to non-controlling interest

Non-controlling interests are recognized to reflect the portion of their equity that is not attributable, directly or indirectly, to the Company as the controlling shareholder. As of December 32, 2022, for the Company’s consolidated subsidiaries, VIE and VIE’ s subsidiaries, non-controlling interests represent: a) a minority shareholder’s 49% ownership interest in GMB (Beijing), GMB Consulting, Nanyu Culture and Jiagui Haifeng; b) a minority shareholder’s 37.81% ownership interest in Sunrise Guizhou; c) a minority shareholder’s 49% ownership interest in GMB Culture, which has a subsidiary called GMB Technology; and d) a minority shareholder’s 25% ownership interest in Shidong Cloud, and 40% ownership interest in Shidong Trading.

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Net loss attributable to the shareholders

Net loss attributable to the shareholders was $22,636,622 for the year ended December 31, 2022, compared to $8,403,260 for the year ended December 31, 2021.

Liquidity and Capital Resources

As reflected in the consolidated financial statements, the Company incurred net losses of $32,920,724, $23,124,402 and $8,714,332 for the years ended December 31 2023, 2022 and 2021, respectively. Net cash used in operating activities were $7,282,995, $9,573,401 and $5,233,182 for the years ended December 31, 2023, 2022 and 2021, respectively. The working capital deficit was $27,672,523 as of December 31, 2023. Total cash, cash equivalents and restricted cash decreased by $673,350 and $10,322,198 for the years ended December 31, 2023 and 2022, respectively.

These adverse conditions and events raised substantial doubt about the Company’s ability to continue as a going concern. For the next 12 months from the issuance date of this report, the Company plans to continue implementing various measures to boost revenue and controlling the cost and expenses. Beginning in fiscal year 2022, the Company has started to transit its core business from knowledge sharing and enterprise services to sales of graphite anode material products. In assessing its liquidity, management monitors and analyzes the Company’s cash on-hand, its ability to generate sufficient revenue sources and ability to obtain additional financial support in the future, and its operating and capital expenditure commitments. The Company intends to finance its future working capital requirements and capital expenditures from financing activities for the cash shortfalls and the negative operating cash flows. The Company expects continued capital financing through debt or equity issuances to support its working capital requirements.

As of December 31, 2023, the Company had cash of $1,395,945. The management believes that it would be able to make borrowings from banks based on past experiences and the Company’s good credit history when necessary. As of December 31, 2023, the Company had available line of credit from each of Shanghai Pudong Development Bank Co., Ltd. (“SPD Bank”) and Post Savings Bank of China (“Post Bank”) for RMB8,540,000 and RMB1,700,000, approximately $1,202,834 and $239,440, respectively.

On May 16, 2023, Sunrise Guizhou entered into a credit facility agreement with China Everbright Bank (“Everbright Bank”) to obtain revolving fund up to RMB 100,000,000, approximately $14,084,705, for a term from June 1, 2023 to May 31, 2024. As of December 31, 2023, the Company had been able to utilize the line of credit for RMB 50,000,000 (approximately $7,042,353) with interest rates from 2% to 4.5% which would mature from June 4, 2024 to September 25, 2024, collateralized by the pledge of land use right of Sunrise Tech for RMB 50,000,000. The remaining unused RMB 50,000,000 line of credit will be available to the Company if additional collateral with adequate value is acknowledged by Everbright Bank.

On January 30, 2024, Sunrise Guizhou entered into a discounted commercial bill financing arrangement with Industrial and Commercial Bank of China Xingyi Branch (“ICBC”) for a contractual term from January 30, 2024 to January 30, 2025. The Company obtained the commercial bills from customers and subsequently discounted these commercial bills in ICBC. In the event of a default by the customers who do not pay the due commercial bills to ICBC, ICBC will have recourses against the Company.

On March 8, 2024, Sunrise Guizhou obtained bank loan of RMB100,000,000, approximately $14,084,705, from China Construction Bank (“CCB”) Qianxinan Branch for a term from March 8, 2024 to March 8, 2026.

Currently, the Company is working to improve its liquidity and capital sources primarily through cash flows from operation, debt financing, and financial support from its principal shareholder. In order to fully implement its business plans and sustain continued growth, the Company may also seek equity financing from outside investors when necessary.

The Company can make no assurances that required financings will be available for the amounts needed, or on terms commercially acceptable to the Company, if at all. If one or all of these events does not occur or subsequent capital raises are insufficient to bridge financial and liquidity shortfall, there would likely be a material adverse effect on the Company and its consolidated financial statements.

The consolidated financial statements have been prepared assuming that the Company will continue as a going concern and, accordingly, do not include any adjustments that might result from the outcome of this uncertainty.

If the Company experiences an adverse operating environment or incurred unanticipated capital expenditure requirements, or if the Company accelerates its growth, then additional financing may be required. No assurance can be given, however, that additional financing, if required, would be on favorable terms or available at all. Such financing may include the use of additional debt or the sale of additional equity securities. Any financing which involves the sale of equity securities or instruments that are convertible into equity securities could result in immediate and possibly significant dilutions to the existing shareholders.

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Substantially all of the Company’s operations are conducted in the PRC and all of the revenues and the vast majority of expenses, cash and cash equivalents are denominated in RMB. As of December 31, 2023, 89.61% of cash, cash equivalents and restricted cash were held in China, and held by its subsidiaries, VIE and VIE’s subsidiaries and denominated in Renminbi, while 10.39% of cash, cash equivalents and restricted cash were held in Hong Kong by EPOW, SDH New Energy and GMB HK in US dollars. Although the Company consolidates the results of the VIE and its subsidiaries, the Company only has access to the assets or earnings of the VIE and their subsidiaries through the contractual arrangements with the VIE and its shareholders. See “Business — Contractual Arrangements between GIOP BJ, SDH and Its Shareholders.” 

A majority of the future revenues are likely to continue to be in the form of Renminbi. Under existing PRC foreign exchange regulations, Renminbi may be converted into foreign exchange for current account items, including profit distributions, interest payments and trade-and service-related foreign exchange transactions, can be made in foreign currencies without prior SAFE approval as long as certain routine procedural requirements are fulfilled. Therefore, PRC subsidiaries are allowed to pay dividends in foreign currencies to the Company without prior SAFE approval by following certain routine procedural requirements. However, approval from or registration with competent government authorities is required where the 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. The PRC government may at its discretion restrict access to foreign currencies for current account transactions in the future.

As of December 31, 2023, the followings were outstanding balances of cash and cash equivalents and restricted cash in each jurisdiction:

	Cash and cash equivalents		Restricted cash		Total
PRC	$	1,019,713	$	2,224,722	$	3,244,435
Hong Kong		28,501		-		28,501
Cayman Islands		347,731		-		347,731
Total	$	1,395,945	$	2,224,722	$	3,620,667

Cash Flows

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

	For the years ended December 31,
	2023			2022			2021
Net cash used in operating activities	$	(7,282,995	)	$	(9,573,401	)	$	(5,233,182	)
Net cash used in investing activities		(7,003,035	)		(45,609,072	)		(22,095,198	)
Net cash provided by financing activities		13,679,267			45,760,061			30,837,261
Effect of foreign exchange rate on cash and cash equivalents		(66,587	)		(899,786	)		141,322
Net (decrease) increase in cash and cash equivalents	$	(673,350	)	$	(10,322,198	)	$	3,650,203

Operating Activities 

Net cash used in operating activities amounted to $7,282,995 for the year ended December 31, 2023. It was primarily due to the following: a) net loss of $32,920,724, adjusted by depreciation and amortization of $3,953,328, share-based compensation of $2,145,801, interest expenses of $575,075, investment losses of $1,170,974, bad debt expense of $3,428,033, impairment of inventory of $7,238,819, impairment of intangible assets of $3,151,467, and amortization of finance lease right-of-use asset of $338,627; increased by b) prepaid expenses and other current assets of $6,157,166 due to decrease on tax prepayment of $2,495,656 and advance to supplier of $2,314,788; c) accounts payable of $6,133,132 for finished goods and raw materials of graphite anode business; offset by d) accounts receivable of $4,074,715 due to sales of graphite anode products; and e) inventories of $5,095,430 for raw materials, work in progress and finished goods of the graphite anode sales business.

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Net cash used in operating activities amounted to $9,573,401 for the year ended December 31, 2022. It was primarily due to the following: a) a net loss of $23,124,402, adjusted by depreciation and amortization of $2,062,499, share-based compensation of $2,729,969, deferred tax expenses of $807,412, interest expenses of $213,823, investment losses of $3,618,847, bad debt expense of $2,887,754, impairment on inventory of $2,711,158, impairment on intangible assets of $2,650,020, amortization of land use rights of $126,042 and amortization of operating lease right-of-use asset of $213,063; decreased by b) account receivable of $1,734,486, notes receivable of $899,481 due to sales of graphite anode products; c) inventories of $18,747,772 finished goods and purchased raw materials of graphite anode; d) prepaid expenses and other current assets of $2,894,690 due to increase on tax prepayment of $4,345,304 offset by decrease on prepaid expenses of 2,251,169; increased by d) account payable of $12,661,801 and notes payable of $ 4,014,213 for payables to vendors of graphite business; and e) deferred government subsidy of $2,973,491 due to relocation bonus received from the government of Zibo City, Shandong Province, PRC.

Net cash used in operating activities amounted to $5,233,182 for the year ended December 31, 2021. It was primarily due to the following: a) a net loss of $8,714,332, adjusted by depreciation and amortization of $988,672, deferred tax benefits of $232,363, investment losses of $2,118,453, bad debt expense of $3,847,426 and amortization of operating lease right-of-use asset of $90,320; b) decrease in income tax payable of $3,696,654 due to the payment of income tax; c) increase in prepaid expenses and other current assets of $678,288 due to increase of prepayment for service fee of $1,054,240; d) increase of inventories of $331,491 and right-of-use asset of $211,213; e) and partially offset by decrease in accounts receivable of $1,729,006. 

Investing Activities

Net cash used in investing activities amounted to $7,003,035 for the year ended December 31, 2023. It was primarily due to the following: a) purchase of plant, property and equipment of $5,472,778; b) consideration installment paid for the prior year’s asset acquisition of $706,125, and c) prepayment for finance lease right-of-use assets of $1,029,195 and deposit paid for finance lease of $655,990, both of which were associated with a finance lease contract for graphite anode material manufacturing facilities; offset by d) redemption of the short-term investment Viner Total Investment Fund for a cash collection of $878,000.

Net cash used in investing activities amounted to $45,609,072 for the year ended December 31, 2022. It was primarily due to the following: a) purchase of plant, property and equipment of $43,714,195; and b) consideration paid for an asset acquisition of $1,486,746.

Net cash used in investing activities amounted to $22,095,198 for the year ended December 31, 2021. It was primarily due to the following: a) prepayment for land use right, construction and equipment of $8,244,917; b) purchase of short-term investments of $8,000,000; c) interest-bearing loans to third party of 2,825,359; d) and purchase of long-term investments of $2,289,945. 

Financing Activities

Net cash provided by financing activities amounted to $13,679,267 for the year ended December 31, 2023, representing proceeds from a) proceeds from short-term and long-term loan for $7,061,249 and $4,236,750, respectively; b) proceeds from the debt financing from sale and leaseback contracts, net of issuance cost, of $4,825,658 and c) loans from related parties of 3,867,883; offset by d) repayment on the debt financing from sale and leaseback contracts of $4,782,564; e) repayment on finance lease liabilities of $1,282,358 associated with a finance lease contract for graphite anode material manufacturing facilities.

Net cash provided by financing activities amounted to $45,760,061 for the year ended December 31, 2022, representing proceeds from the debt financing from sale and leaseback contracts, net of issuance cost, of $8,827,701 and capital contributions from the non-controlling shareholders of $ 37,024,594.

Net cash provided by financing activities amounted to $30,837,261 for the year ended December 31, 2021, representing issuance of Ordinary Shares in connection with IPO, net of issuance cost of $27,504,639 and capital contributions from the non-controlling shareholders of $3,332,622.

Trend Information

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

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Off-Balance Sheet Arrangements

The Company did not have any off-balance sheet arrangements as of December 31, 2023.

Contingencies

The Company may be involved in various legal proceedings, claims and other disputes arising from the commercial operations, projects, employees and other matters which, in general, are subject to uncertainties and in which the outcomes are not predictable. The Company determines whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. Although the outcomes of these legal proceedings cannot be predicted, the Company does not believe these actions, in the aggregate, will have a material adverse impact on its financial position, results of operations or liquidity. As of December 31, 2023, the Company did not have material litigations or lawsuits against them.

Inflation

Inflation does not materially affect the Company’s business or the results of its operations.

Seasonality

The nature of the Company’s business does not appear to be affected by seasonal variations.

Critical Accounting Estimates

The Company prepares the consolidated financial statements in accordance with U.S. GAAP. These accounting principles require the Company to make judgments, estimates and assumptions on the reported amounts of assets and liabilities at the end of each fiscal period, and the reported amounts of revenues and expenses during each fiscal period. The Company continually evaluate these judgments and estimates based on the own historical experience, knowledge and assessment of current business and other conditions, the expectations regarding the future based on available information and assumptions that the Company believe to be reasonable.

The selection of critical accounting policies, the judgments and other uncertainties affecting application of those policies and the sensitivity of reported results to changes in conditions and assumptions are factors that should be considered when reviewing the Company’s financial statements. Our critical accounting policies and practices include the following: (i) revenue recognition, (ii) lease, (iii) asset acquisition, (iv) income taxes and (v) the accretion to the redemption value of redeemable non-controlling interests. For further information on these accounting policies, see note 2 to our consolidated financial statements included elsewhere in this annual report.

We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations. Such critical estimates are discussed below.

Allowance for credit loss

Accounts receivables mainly represent amounts due from clients in the ordinary course of business and are recorded net of allowance for doubtful accounts.

On January 1, 2023, the Company adopted ASC 326 Financial Instruments – Credit Losses (“ASC 326”) using the modified retrospective approach through a cumulative-effect adjustment to the accumulated deficit. Upon adoption, the Company changed its impairment model to utilize a current expected credit losses model in place of the incurred loss methodology for financial instruments measured at amortized cost. The Company had not recorded an adjustment to the opening accumulated deficit as of January 1, 2023 due to immaterial cumulative impact of adopting ASC 326.

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The Company used an expected credit loss model for the impairment of financial instruments mentioned above as of period ends. For the allowance of the accounts receivable, the Company believes the aging of accounts receivable is a reasonable parameter to estimate expected credit loss, and determines expected credit losses for accounts receivables using an aging schedule as of period ends. The expected credit loss rates under each aging schedule were developed on the basis of the average historical loss rates from previous years, and adjusted to reflect the effects of those differences in current conditions and forecasted changes. The Company measured the expected credit losses of accounts receivable on a collective basis. When an accounts receivable does not share risk characteristics with other accounts receivables, management will evaluate such accounts receivable for expected credit loss on an individual basis. Doubtful accounts balances are written off and deducted from allowance for credit loss, when receivables are deemed uncollectible, after all collection efforts have been exhausted and the potential for recovery is considered remote. The allowance was $8,016,322, and $8,047,527 as of December 31, 2023 and 2022, respectively.

Impairment of inventories

The cost of inventories is calculated using the weighted average method. Inventory shall be measured at the lower of cost and net realizable value. Net realizable value is estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. When evidence exists that the net realizable value of inventory is lower than its cost, the difference shall be recognized as a loss in earnings in the period in which it occurs. The impairment of inventories provided for lower of cost and net realizable value was $7,238,819, $2,711,158 and $nil for the years ended December 31, 2023, 2022 and 2021, respectively.

Impairment of long-term investments

For other equity investments that do not have readily determinable fair values and over which the Company has neither significant influence nor control through investments in common stock or in-substance common stock, the Company accounts for these investments at cost minus any impairment, if necessary.

The Company continually reviews its investments in equity investees to determine whether a decline in fair value below the carrying value is other than temporary. The primary factors the Company considers in its determination are the length of time that the fair value of the investment is below the Company’s carrying value; the financial condition, operating performance and the prospects of the equity investee. If the decline in fair value is deemed to be other than temporary, the carrying value of the equity investee is written down to fair value. Impairment charges for long-term investments were $1,450,381, $979,426 and $nil recorded in the Company’s consolidated statements of operations and comprehensive loss for the years ended December 31, 2023, 2022 and 2021, respectively.

Impairment of long-lived assets

Long-lived assets, including plant, property and equipment, intangible asset, land use rights and finance lease right-of-use assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset or asset group may not be recoverable. When these events occur, the Company measures impairment by comparing the carrying value of the long-lived assets or assets group to the estimated undiscounted future cash flows expected to result from the use of the assets or asset group and their eventual disposition. If the sum of the expected undiscounted cash flow is less than the carrying amount of the assets or assets group, the Company would recognize an impairment loss based on the fair value of the assets or assets group, which is the excess of carrying amount over the fair value of the assets, using the expected future discounted cash flows. Impairments charges for long-lived assets were $3,151,467, $2,650,020 and $nil recorded in the Company’s consolidated statements of operations and comprehensive loss for the years ended December 31, 2023, 2022 and 2021, respectively.

Valuation allowance on deferred tax assets

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. Valuation allowance on deferred tax assets were $10,605,326 and $3,936,504 as of December 31, 2023 and 2022, respectively.

Accretion to the redemption value of redeemable non-controlling interests

On June 13, 2022, New Kinetic Partnership subscribed 22.8395% of the preferred shares of Sunrise Guizhou, at total cash consideration of RMB200,000,000, approximately $29,467,667. The preferred shares held by the non-controlling shareholder of Sunrise Guizhou could be redeemed by the non-controlling shareholder upon the occurrence of certain events that are not solely within the control of the Company, Due to the probability of being redeemed, the Company adjusts the carrying amount of the mezzanine equity to equal the redemption value at the end of each reporting period as if it was the redemption date for the redeemable non-controlling interest. These shares are accounted for as redeemable non-controlling interests. The redeemable non-controlling interests will be recorded at redemption value. The Company accounts for the changes in accretion to the redemption value in accordance with ASC 480, Distinguishing Liabilities from Equity. Accretion on redeemable non-controlling interest were $3,314,857, $1,760,662 and nil for the years ended December 31, 2023, 2022 and 2021, respectively.

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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES 

A. Directors and Executive Officers 

The following table sets forth information regarding our directors and executive officers as of the date of this annual report.

Directors and Executive Officers	Age	Position/Title
Haiping Hu	56	Chief Executive Officer (“CEO”), Chairman of the Board of Director
Chao Liu	43	Chief Financial Officer (“CFO”), Director
Xiang Luo	53	Independent Director
Jian Pei	56	Independent Director
Xin Zhang	35	Independent Director

Mr. Haiping Hu has been our CEO and Chairman since February 2019, and he has served as CEO and Chairman of the VIE since December 2014. From August 2004 to January 2018, he was CEO and Vice Chairman of Shanshan Holdings Co., Ltd, which is mainly engaged in the production of lithium-ion battery parts, such as lithium-ion capacitors, battery pack, and charging pile, and providing new energy services such as new energy vehicle operation and energy management services, etc. From January 1996 to July 2004, he served as Vice President of Shanshan Group Co., Ltd. Since 2002, Shanshan Holdings Co., Ltd. has ranked among the top 500 Chinese companies in successive years. Mr. Hu holds a bachelor’s degree in Chemical Automation and a master’s degree in Chemical Engineering from Zhejiang University. Nicknamed “General Hu Haiping on Horseback,” Mr. Hu has more than 20 years of experience as founder and executive, and is a well-known entrepreneur in China.

Ms. Chao Liu has served as our CFO since February 2019, and as the CFO of the VIE since January 2016. She has also served as our director since June 8, 2023. From June 2012 to June 2015, she was the head of the accounting department of Beijing Meanfang Institute of Physics and Technology, which is engaged in manufacturing gas instruments that are widely used in petrochemical, cement, chemical fertilizer, agriculture, military, medical, environmental protection, scientific research and other fields, Beijing Meanfang Spectrum Technology Co., Ltd., which is engaged in manufacturing and selling spectrum instruments, and Beijing Zhongchuang Technology Co., Ltd., which is engaged in providing interactive marketing technology solutions for brand customers and advertising agents. From May 2008 to December 2015, she was the comptroller of Beijing Hongri Dongsheng Decoration Co., Ltd., which provides decoration services to customers and Beijing Sunshine Season Network Technology Company, which provides network maintenance services to its customers. From November 2003 to November 2014, she served as supervisor of the accounting department of Beijing Haixinyuan Food Co., Ltd. which is engaged in the manufacture and sale of cold candies, pastries and cold drinks and Beijing Haixinyuan Guest House Co., Ltd., which provides hoteling services to its customers. Ms. Liu studied finance at Beijing Language and Culture University and graduated in January 2016. She has a strong understanding of international accounting and tax policies.

Mr. Xiang Luo was appointed as our director on March 11, 2022. Mr. Luo holds a PhD in Business Administration from Bulacan State University in Philippines, and has over twenty years of experience working at various senior positions at the United Nations and other international organizations, including the International Economic Development Council. Since June 2020, Mr. Luo has served as the co-chair of Global Steering Committee of Carbon Neutral Action (GSCCNA), an international non-governmental organization that provides strategic advice on special purpose financing, green technical and systematic solutions to achieving the Sustainable Development Goals (SDG) under the United Nations’ sustainable development agenda and climate change planning. From November 2014 to December 2019, Mr. Lou served as the head of the China Office of the United Nations Office for Project Services (UNOPS), responsible for the overall coordination of strategic planning, project financing and management, team capacity building, public advocacy, risk management and performance evaluation, of various projects.

Dr. Jian Pei was appointed as our director on May 30, 2022. He has served as a professor at the College of Chemistry and Molecular Engineering of Peking University, China, since April 2001. Dr. Pei received his undergraduate degree in 1989 and Ph.D. degree in 1995, majoring in Chemistry, from Peking University in 1995. After the completion of his postdoctoral work at the National University of Singapore in July 1997, he joined the Institute of Materials Research and Engineering in Singapore and served as a research associate from November 1997 to August 2001. From June 1998 to January 2000, Dr. Pei was a visiting scholar at the Institute of Polymer and Organic Solids, University of California at Santa Barbra. Dr. Pei is a receiver of the Changjiang Scholar award, an academic award given to an individual in higher education by the Ministry of Education of the People’s Republic of China. Dr. Pei’s research focuses on the development of organic semiconducting materials for application in optoelectronics.

Mr. Xin Zhang has served as our director since February 8, 2024. He has served as the Director of Risk Control at Albamen Capital Partners since June 2020. Mr. Xin Zhang served as the Risk Control Manager at CPE Capital Partners (London/ Paris) from March 2017 to May 2020, and served as the Head of Investment Team (UK) at CGN Europe Energy (London/Paris) from January 2013 to January 2017. Mr. Xin Zhang holds a Bachelor of Science from Zhejiang University in PRC, an MBA from the Freeman School of Business, Tulane University in USA, and a Master in Finance from the London Business School in London, UK.

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Board Diversity

The table below provides certain information regarding the diversity of our board of directors as of the date of this annual report.

Board Diversity Matrix
Country of Principal Executive Offices	China
Foreign Private Issuer		Yes
Disclosure Prohibited under Home Country Law		No
Total Number of Directors		5

	Female	Male	Non- Binary	Did Not Disclose Gender
Part I: Gender Identity
Directors	1	4	0	0
Part II: Demographic Background
Underrepresented Individual in Home Country Jurisdiction		0
LGBTQ+		0
Did Not Disclose Demographic Background		0

Family Relationships

None of our directors or executive officers has a family relationship as defined in Item 401 of Regulation S-K.

B. Compensation of Directors and Executive Officers 

The following table sets forth certain information with respect to compensation for the year ended December 31, 2023, earned by or paid to our chief executive officers.

Summary Compensation Table

Name and Principal Position	Year		Salary (US$)		Bonus (US$)		Stock Awards (US$)		Option Awards (US$)	Non-Equity Incentive Plan Compensation	Deferred Compensation Earnings	Other	Total (US$)
Haiping Hu		2023		43,506		582		931,315						975,403
CEO of the Company and the VIE
Chao Liu		2023		36,463		6,038		96,250						138,751
CFO and Director of the Company and the VIE
Chenming Qi (3)		2023		33,117										33,117
Chief Operating Officer
Haiwei Zuo (1)		2023		43,506		71,768		105,875						221,149
Director of the Company
Jian Pei		2023		0				25,000						24,063
Director of the Company
Xiang Luo		2023		0				25,000						24,063
Director of the Company
Ligang Lu (2)		2023		0				30,000						28,875
Director of the Company

(1) Mr. Haiwei Zuo resigned from the board of directors on June 8, 2023.

(2) Mr. Ligang Lu resigned from the board of directors on December 19, 2023.

(3) Mr. Chenming Qi resigned from his position as the COO on June 8, 2023.

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2022 Share Incentive Plan

Our board of directors adopted the 2022 Stock Incentive Plan (the “2022 Plan”) in July 2022, effective as of July 11, 2022, to attract and retain the best available personnel, provide additional incentives to employees, directors and consultants and promote the success of our business. Under the 2022 Plan, the maximum aggregate number of shares that may be issued pursuant to all awards shall be 3,679,200 Class A Ordinary Shares.

As of the date of this annual report, we issued 1,613,350 Class A Ordinary Shares to qualified persons under the 2022 Plan.

The following describes the principal terms of the 2022 Plan.

Types of awards

The 2022 Plan permits the awards of cash, restricted stock units, share options, or any similar securities with a value derived from the value of or related to the Class A Ordinary Shares and/or returns thereon.

Plan Administration

Our board of directors or a committee of one or more members of the board of directors administers the 2022 Plan. The committee or the full board of directors, as applicable, will determine the participants to receive awards, the type and number of awards to be granted to each participant, and the terms and conditions of each award grant.

Award Agreement

Each awards granted under the 2022 Plan is evidenced by an award agreement that sets forth terms, conditions and limitations, which may include the provisions applicable in the event of the grantee’s employment or service terminates, and our authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind the award.

Eligibility

We may grant awards to our employees, directors and consultants of our Company, and other individuals, as determined by the plan administrator.

Vesting Schedule

In general, the plan administrator determines the vesting schedule, which is specified in the award agreement.

Exercise of Options

The plan administrator determines the exercise price for each award, which is stated in the award agreement.

2024 Share Incentive Plan 

Our board of directors and shareholders adopted the 2024 Stock Incentive Plan (the “2024 Plan”) in February 2024, to attract and retain the best available personnel, provide additional incentives to employees, directors and consultants and promote the success of our business. Under the 2024 Plan, the maximum aggregate number of shares that may be issued pursuant to all awards shall be 2,613,000 Class A Ordinary Shares.

As of the date of this annual report, we have not issued any awards under the 2024 Plan.

The following describes the principal terms of the 2024 Plan.

Types of awards

The 2024 Plan permits the awards of cash, restricted stock units, share options, or any similar securities with a value derived from the value of or related to the Class A Ordinary Shares and/or returns thereon.

Plan Administration

Our board of directors or a committee of one or more members of the board of directors administers the 2024 Plan. The committee or the full board of directors, as applicable, will determine the participants to receive awards, the type and number of awards to be granted to each participant, and the terms and conditions of each award grant. 

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Award Agreement

Each award granted under the 2024 Plan is evidenced by an award agreement that sets forth terms, conditions and limitations, which may include the provisions applicable in the event of the grantee’s employment or service terminates, and our authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind the award.

Eligibility

We may grant awards to our employees, directors and consultants of our Company, and other individuals, as determined by the plan administrator.

Vesting Schedule

In general, the plan administrator determines the vesting schedule, which is specified in the award agreement.

Exercise of Options

The plan administrator determines the exercise price for each award, which is stated in the award agreement.

Agreements with Named Executive Officers

We enter into employment agreements with our executive officers. Pursuant to employment agreements, we agree to employ each of our executive officers for a specified time period, which will be renewed upon both parties’ agreement thirty days before the end of the current employment term. We may terminate the employment for cause, at any time, without notice or remuneration, for certain acts of the executive officer, including but not limited to the commitments of any serious or persistent breach or non-observance of the terms and conditions of the employment, conviction of a criminal offense, willful disobedience of a lawful and reasonable order, fraud or dishonesty, receipt of bribery, or severe neglect of his or her duties. An executive officer may terminate his or her employment at any time with a two-month prior written notice. Each executive officer has agreed to hold, both during and after the employment agreement expires, in strict confidence and not to use or disclose to any person, corporation or other entity without written consent, any confidential information.

C. Board Practices 

Board of Directors

Our board of directors consists of five directors.

Duties of Directors

As a matter of Cayman Islands law, a director owes three types of duties to the company: (i) statutory duties, (ii) fiduciary duties, and (iii) common law duties. The Companies Act (Revised) of the Cayman Islands (the “Companies Act”) imposes a number of statutory duties on a director. A Cayman Islands director’s fiduciary duties are not codified, however the courts of the Cayman Islands have held that a director owes the following fiduciary duties (a) a duty to act in what the director bona fide considers to be in the best interests of the company, (b) a duty to exercise their powers for the purposes they were conferred, (c) a duty to avoid fettering his or her discretion in the future and (d) a duty to avoid conflicts of interest and of duty. The common law duties owed by a director are those to act with skill, care and diligence that may reasonably be expected of a person carrying out the same functions as are carried out by that director in relation to the company and, also, to act with the skill, care and diligence in keeping with a standard of care commensurate with any particular skill they have which enables them to meet a higher standard than a director without those skills. In fulfilling their duty of care to us, our directors must ensure compliance with our amended articles of association, as amended and restated from time to time. We have the right to seek damages where certain duties owed by any of our directors are breached.

Terms of Directors and Executive Officers

Each of our directors holds office until a successor has been duly elected and qualified unless the director was appointed by the board of directors, in which case such director holds office until the next following annual meeting of shareholders at which time such director is eligible for reelection. All of our executive officers are appointed by and serve at the discretion of our board of directors.

Qualification

There is currently no shareholding qualification for directors.

Insider Participation Concerning Executive Compensation

Our board of directors, which was comprised of five directors, with the assistance of the Compensation Committee, makes all determinations regarding executive officer compensation.

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Committees of the Board of Directors

We have established three committees under the board of directors: the audit committee, the compensation committee and the corporate governance and nominating committee, and adopt a charter for each of the committees. Each committee’s members and functions are described below. 

Audit Committee. Our audit committee, formed upon the closing of our IPO, consists of Mr. Xin Zhang, Mr. Xiang Luo and Mr. Jian Pei, with Mr. Xin Zhang serving as the chairman of our audit committee. We have determined that Mr. Xin Zhang, Mr. Xiang Luo and Mr. Jian Pei satisfy the “independence” requirements of Section 5605(a)(2) of the Nasdaq Listing Rules and Rule 10A-3 under the Securities Exchange Act. Prior to our IPO, our board also determined that Xin Zhang qualifies as an audit committee financial expert within the meaning of the SEC rules or possesses financial sophistication within the meaning of the Nasdaq Listing Rules. The audit committee oversees our accounting and financial reporting processes and the audits of the financial statements of our company. The audit committee is responsible for, among other things:

● selecting 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;

● reviewing and approving all proposed related-party transactions, as defined in Item 404 of Regulation S-K under the Securities Act;

● discussing the annual audited financial statements with management and the independent auditors;

● reviewing major issues as to the adequacy of our internal controls and any special audit steps adopted in light of material control deficiencies;

● annually reviewing and reassessing the adequacy of our audit committee charter;

● such other matters that are specifically delegated to our audit committee by our board of directors from time to time;

● meeting separately and periodically with management and the independent auditors; and

● reporting regularly to the full board of directors.

Compensation Committee. Our compensation committee, formed upon the closing of our IPO, consists of Mr. Xiang Luo, Mr. Xin Zhang and Mr. Jian Pei. Mr. Xin Zhang is the chairman of our compensation committee. The compensation committee assists the board in reviewing and approving the compensation structure, including all forms of compensation, relating to our directors and executive officers. Our chief executive officer may not be present at any committee meeting during which his compensation is deliberated. The compensation committee is responsible for, among other things:

● reviewing and recommending to the board with respect to the total compensation package for our chief executive officer;

● approving and overseeing the total compensation package for our executives other than the chief executive officer;

● reviewing and making recommendations to the board with respect to the compensation of our directors; and

● reviewing periodically and approving any long-term incentive compensation or equity plans, programs or similar arrangements, annual bonuses, employee pension and welfare benefit plans.

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Corporate Governance and Nominating Committee. Our corporate governance and nominating committee, formed upon the closing of our IPO, consists of Mr. Xin Zhang and Mr. Jian Pei. Mr. Xiang Luo is the chairman of our corporate governance and nominating committee. The nominating and corporate governance committee assists the board of directors in selecting individuals qualified to become our directors and in determining the composition of the board and its committees. The nominating and corporate governance committee is responsible for, among other things: 

● identifying and recommending to the board nominees for election or re-election to the board, or for appointment to fill any vacancy;

● reviewing annually with the board the current composition of the board in light of the characteristics of independence, skills, experience and availability of service to us;

● identifying and recommending to the board the names of directors to serve as members of the audit committee and the compensation committee, as well as the corporate governance and nominating committee itself;

● advising the board periodically with respect to significant developments in the law and practice of corporate governance as well as our compliance with applicable laws and regulations, and making recommendations to the board on all matters of corporate governance and on any corrective action to be taken; and

● monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance.

D. Employees 

SDH had 96, 48, and 25 full-time employees as of December 31, 2021, 2022 and 2023, respectively.  As of April 30, 2024, we had 25 full-time employees. SDH had 10, 12 and 3 employees located in Zibo, Beijing and Shanghai, respectively. The following table sets forth the numbers of our employees by areas of business as of April 30, 2024:

Department	Number of Employees
Senior Management		5
Human Resources & Administration		5
Sales & Marketing		1
Business & Consulting		1
Customer Service		1
Information Technology		1
Research & Development		6
Finance		5
Total		25

Sunrise Guizhou had 264, 273 and 229 employees as of April 30, 2024, and December 31, 2023 and 2022 respectively. The following table sets forth the numbers of Sunrise Guizhou’s employees by areas of business as of April 30, 2024.

Department	Number of Employees
Senior Management		3
Human Resources & Administration		10
Research & Development		38
Manufacturing & Equipment		125
Quality Control		27
Warehouse & Operation		28
Engineering & Construction		10
Supply Chain		5
Information Technology		4
Sales & Marketing		14
Total		264

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Generally, we enter into standard employment contracts with our officers, managers, and other employees. According to these contracts, all of our employees are prohibited from engaging in any other employment during the period of their employment with us. None of our employees is a member of a labor union and we consider our relationship with our employees to be good.

E. Share Ownership 

Except as specifically noted, the following table sets forth information with respect to the beneficial ownership of our Ordinary Shares as of the date of this annual report by:

● each of our directors and executive officers; and

● each of our principal shareholders who beneficially own more than 5% of our total outstanding Ordinary Shares.

The calculations in the table below are based on 26,141,350 Ordinary Shares outstanding as of the date of this annual report, including 19,574,078 Class A Ordinary Shares and 6,567,272 Class B Ordinary Shares.

Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, we have included shares that the person has the right to acquire within 60 days, including through the exercise of any option, warrant or other right or the conversion of any other security. These shares, however, are not included in the computation of the percentage ownership of any other person.

Name and Address of Beneficial Owner*	Class A Ordinary Shares Beneficially Owned *		Class B Ordinary Shares Beneficially Owned *		Total Ordinary Shares Beneficially Owned *		% of Total Ordinary Shares		% of Aggregate Voting Power
Director and Executive Officers:
Haiping Hu (1)		1,573,189		6,567,272		8,140,461		31.14		88.07
Chao Liu		100,000				100,000		<1		0.07
Jian Pei		25,000				25,000		<1		0.02
Xiang Luo		25,000				25,000		<1		0.02
Directors and Executive Officers as a group (4 persons)		1,723,189		6,567,272		8,290,461		31.71		88.17
5% Beneficial Owners**
GMB Wisdom Sharing Platform Co., Ltd. (1)		605,589		6,567,272		7,172,861		27.44		87.43
GMB Culture Communication Co., Ltd. (2)		2,607,077				2,607,077		9.97		1.73
GMB Resource Services Co., Ltd (3)		2,481,486				2,481,486		9.49		1.64

* Unless otherwise indicated, the business address of each of the individuals is Room 703, West Zone, R&D Building, Zibo Science and Technology Industrial Entrepreneurship Park, No. 69, Sanying Road, Zhangdian District, Zibo City, Shandong Province, The PRC.

** The principal office of each of the 5% beneficial owners are located at Start Chambers, Wickham’s Cay II, P.O. Box 2221, Road Town, Tortola, British Virgin Islands.

(1) Haiping Hu, our CEO and chairman of the Board, beneficially owns 7,172,861 Ordinary Shares held through his 100% ownership of GMB Wisdom Sharing Platform Co., LTD, including 605,589 Class A Ordinary Shares and 6,567,272 Class B Ordinary Shares, and 967,600 Class A Ordinary Shares held directly.

(2) Representing 2,607,077 Class A Ordinary Shares held by GMB Culture Communication Co., Ltd, a British Virgin Islands company. Ertao Zhao, Yidong Zhang, Xiaoli Chen serve as the directors of GMB Culture Communication Co., Ltd. and share the dispositive and voting power of the shares held by GMB Culture.

(3) Representing 2,481,486 Class A Ordinary Shares Held by GMB Resource Services Co., Ltd., a British Virgin Islands company. Chenming Qi and Cunyou Li, Jinhai Ying, Gesheng Fei, each of whom serves as a director of GMB Resource Services Co., share the dispositive and voting power of the shares held by GMB Resources.

We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company.

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ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. Major Shareholders

See “Item 6. Directors, Senior Management and Employees—E. Share Ownership.”

B. Related Party Transactions

Contractual Arrangements between GIOP BJ and SDH

See “Item 4. Information on the Company—C. Organizational Structure.”

Material Transactions with Related Parties

Our jurisdiction of organization prescribes certain procedures for related party transactions with directors, and our articles of association mandate that directors with a direct or indirect personal interest in any transaction that conflicts with the Company’s interest shall make that interest known and recorded in the board minutes and shall not participate in discussing or voting on such transaction

The following is a list of related parties which the Company had transactions with:

(a)	Ningbo Zhuhai Investment Co., Ltd. (“Zhuhai Investment”), a company controlled by Mr. Haiping Hu.
(b)	Bally, Corp. (“Bally”), a company controlled by Mr. Haiping Hu.
(c)	Mr. Xuanming Wang, General Manager and legal representative of GMB (Hangzhou).
(d)	Mr. Haiwei Zuo, Vice Chairman of the Board, 7.49% shareholder of GMB (Beijing).
(e)	Shanghai Hui Yang Investment Co., 9.6451% shareholder of Sunrise Guizhou and controlled by immediate family members of Mr. Haiping Hu.
(f)	Shidong (Suzhou) Investment Co., Ltd., a company of which Mr. Haiping Hu is the CEO.
(g)	Mr. Shousheng Guo, Director, 3.00% shareholder of GMB (Beijing).
(h)	Mr. Wenwu Zhang, Director of Sunrise Guizhou.
(i)	Mr. Chenming Qi, General Manager, Director and 3.00% shareholder of GIOP BJ; Director of GMB (Hangzhou).
(j)	Ms. Jing Ji, CEO of and 46% shareholder of GMB Technology.
(k)	Haicheng Shenhe, 9.6451% shareholder of Sunrise Guizhou.
(l)	Ms. Chao Liu, Chief Financial Officer of the Company.

(m)	GMB Internet Technology Co., Ltd., one of the shareholders of the Company.
(n)	GMB Business Communication Co., Ltd. one of the shareholders of the Company.
(o)	GMB Enterprise Cooperation Development Co., Ltd., one of the shareholders of the Company.
(p)	GMB Information Technology Co., Ltd., one of the shareholders of the Company.
(q)	GMB Wisdom Sharing Platform Co., Ltd., one of the shareholders of the Company.
(r)	GMB Technology Co., Ltd., one of the shareholders of the Company.
(s)	GMB Project Incubation Services Co., Ltd., one of the shareholders of the Company.
(t)	Guizhou Yilong New Area Industrial Development and Investment Co., Ltd., 3.0864% shareholder of Sunrise Guizhou.
(u)	Ms. Fangfei Liu, spouse of Mr. Haiping Hu.
(v)	Mr. Huiyu Du, the legal representative of Sunrise Guizhou.
(w)	Beijing Huatai Zhonghe Venture Capital Center (Limited Partnership) (“Huatai Zhonghe”), controlled by Mr. Shousheng Guo

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a. Due from related parties

As of December 31, 2023, 2022 and 2021, the balances of amount due from related parties were as follows:

		As of December 31,
		2023		2022		2021
Due from related parties
Bally		$	5,172	$	5,168	$	5,168
Zhuhai Investment			-		-		25,534
Mr. Xuanming Wang			-		20,102		26,664
Mr. Shousheng Guo	(2)		100,000		-		-
Mr. Haiwei Zuo			-		-		7,912
Mr. Wenwu Zhang	(1)		330,991		337,420		-
Ms. Chao Liu	(2)		141,024		-		-
Shidong (Suzhou) Investment Co., Ltd.			39,437		37,332		-
Others			700		-		-
Total		$	617,324	$	400,022	$	65,278

(1) The balance as of December 31, 2023 and 2022 represented the prepaid acquisition consideration to purchase Mr. Wenwu Zhang’s equity in Haicheng Shenhe.

(2) The staff advance balances as of December 31, 2023 had been repaid by May 15, 2024.

b. Due to related parties

As of December 31, 2023, 2022 and 2021, the balances of amounts due to related parties were as follows:

		As of December 31,
		2023		2022		2021
Due to related parties
Mr. Haiping Hu		$	903,789	$	2,872	$	-
Mr. Chenming Qi			5,476		9,189		-
Ms. Jing Ji			19,543		19,923		-
Shanghai HuiYang Investment Co.	(1)		800,785		738,128		-
Haicheng Shenhe			451,871		50,395		-
Zhuhai Investment	(2)		2,183,911		64,643		-
Huatai Zhonghe			98,593		-		-
Others			197		-		-
Total		$	4,464,165	$	885,150	$	-

(1) The balance as of December 31, 2023 mainly represented the loans from Shanghai HuiYang Investment Co., with the annual interest rate of 4.35% and was initially due on August 13, 2023 and extended to December 31, 2024.

(2) The balance as of December 31, 2023 represented the loans from Zhuhai Investment, with the annual interest rate of 8% and was initially due on December 31, 2023 and extended to December 31, 2024.

c. Deferred revenue -related parties

As of December 31, 2023, 2022 and 2021, the balances of deferred revenue of related parties were as follows:

		As of December 31,
		2023		2022		2021
Deferred revenue of related parties
Shanghai Hui Yang Investment Co.	(1)	$	340,850	$	347,471	$	-
Total		$	340,850	$	347,471	$	-

(1) The balance as of December 31, 2023 and 2022 represented the advance from the related party for tailored services.

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d. Related party transactions

Related party purchase

The Company rented office spaces from Zhuhai Investment. For the years ended December 31, 2023, 2022 and 2021, total rental fee to Zhuhai Investment were $nil, $118,475 and $103,411, respectively.

The Company purchased raw materials for graphite anode material manufacturing from Haicheng Shenhe. For the years ended December 31, 2023, 2022 and 2021, total purchases were $221,207, $1,031,043 and $nil, respectively.

Related party sales

The Company sold titanium for $205 to Mr. Shousheng Guo for the year ended December 31, 2022.

The Company sold medical wine for $666 to Zhuhai Investment for the year ended December 31, 2021.

e. Related party guarantee

On August 4, 2022, Sunrise Guizhou entered into a line of credit financing contract with Bank of Guizhou for revolving credit of RMB 20,000,000, approximately $2,816,941, for a term from August 4, 2022 to August 3, 2023. The line of credit was in various means including bank loans, commercial note and letter of credit. As of December 31, 2023, the undue commercial notes issued to the vendors were RMB 26,532,265, approximately $3,736,991. The Company deposited RMB 14,034,196, approximately $1,976,675, as restricted cash in the designated bank accounts in Bank of Guizhou to secure the commercial notes. Pursuant to the contract, Mr. Haiping Hu and Guizhou Yilong New Area Industrial Development and Investment Co., Ltd., the non-controlling shareholder of Sunrise Guizhou, were the guarantor of the unsecured commercial notes for RMB 12,498,069, approximately $1,760,316 as of December 31, 2023.

On September 22, 2022, Sunrise Guizhou entered into a financing contract into an eighteen-month loan with Far East to obtain a loan of RMB 20,000,000, approximately $2,816,941, for a term from September 22, 2022 to March 21, 2024; On November 4, 2022, Sunrise Guizhou entered a sales and leaseback financing contract into a three-year financing with Ronghe to obtain an amount of RMB 40,000,000, approximately $5,633,882, for a term from November 10, 2022 to November 9, 2025; On February 7, 2023, Sunrise Guizhou entered a sales and leaseback financing contract into a two-year financing with Zhongguancun to obtain an amount of RMB 20,000,000, approximately $2,816,941, for a term from February 7, 2023 to February 6, 2025; On October 27, 2023, Sunrise Guizhou entered into a sales and leaseback financing contract for a two-year financing with Guomao for RMB 15,000,000, approximately $2,112,706, for a term from October 27, 2023 to October 26, 2025. Pursuant to these financing contracts, Mr. Haiping Hu, CEO and Chairman of the Board of Director, was the guarantor for the debts.

In July 2022, Sunrise Guizhou entered into purchase agreements with original shareholders of Sunrise to acquire 100% of Sunrise Tech’s assets and equity ownership for a gross consideration of RMB 40,000,000 (approximately $5,743,331), among of which RMB10,000,000 and RMB 5,000,000, approximately $1,486,746 and $706,125, were paid in July 2022 and August 2023, respectively. The unpaid consideration RMB 25,000,000 (approximately $3,521,176) will be paid in installments from 2024 to 2026. The consideration payable is guaranteed by Mr. Haiping Hu.

On May 16, 2023, Sunrise Guizhou entered into a credit facility agreement with Everbright Bank to obtain revolving fund up to RMB 100,000,000, approximately $14,084,705, for a term from June 1, 2023 to May 31, 2024. As of December 31, 2023, the Company had been able to utilize the line of credit for RMB 50,000,000 (approximately $7,042,353) with interest rates from 2% to 4.5% which would mature from June 4, 2024 to September 25, 2024, collateralized by the pledge of land use right of Sunrise Tech for RMB 50,000,000. This credit loan was guaranteed by Mr. Haiping Hu, CEO and Chairman of the Board of Director, Ms. Fangfei Liu, spouse of Mr. Haiping Hu and Ms. Huiyu Du, the legal representative of Sunrise Guizhou.

On January 18, 2023, Sunrise Guizhou entered into a credit facility agreement with Post Bank to obtain revolving fund up to RMB 30,000,000, approximately $4,225,412, for a term from January 19, 2023 to January 18, 2031. As of December 31, 2023, the Company had utilized the line of credit with Post Bank for RMB 28,300,000, approximately $3,985,972, which would mature from July 2023 to April 2024. In March 2024, the Company early repaid the long-term loan. This credit loan was guaranteed by Mr. Haiping Hu.

On June 13, 2023, Sunrise Guizhou entered into a finance lease agreement with Chongqing Xingyu Finance Lease Co., Ltd. to obtain graphite anode materials production facilities. The principal of the contract was RMB 29,257,844, approximately $4,120,881, with a nominal interest rate of 5.8%. This finance lease payment was guaranteed by Mr. Haiping Hu and Ms. Fangfei Liu.

On October 26, 2023, Sunrise Guizhou entered into a three-year debt arrangement with SPD Bank to obtain line of credit up to RMB 50,000,000, approximately $7,042,353, for a term from November 17, 2023 to November 17, 2026. The Company pledged its intellectual property and patent for the line of credit. Sunrise Guizhou utilized the line of credit by issuing banker’s acceptance note up to RMB 20,000,000, approximately $2,816,941 from SPD. Pursuant to the banker’s acceptance note contract, the Company was obliged to deposit fifty percent of the note payable amount issued as restricted cash in the designated bank account in SPD Bank. Therefore, the line of credit for issuance of acceptance note was RMB 10,000,000, approximately $ 1,408,471. As of December 31, 2023, the banker’s acceptance note was RMB 2,920,000, approximately $411,273 and the deposit for commercial note issuance was RMB 1,460,000, approximately $205,637. Other than the pledge of the Company’s intellectual property and patents, the unsecured amount of banker’s acceptance note, which was RMB 1,460,000 (approximately $205,636) was also guaranteed by Mr. Haiping Hu.

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C. Interests of Experts and Counsel 

Not applicable.

ITEM 8.  FINANCIAL INFORMATION 

A. Consolidated Statements and Other Financial Information 

See Item 18 for our audited consolidated financial statements.

Legal Proceedings

We are not currently involved in any material legal or administrative proceedings. From time to time, we may be subject to various legal or administrative claims and proceedings arising in the ordinary course of business. Such legal or administrative claims and proceedings, even if without merit, could result in the expenditure of financial and management resources and potentially result in civil liability for damages.

Dividend Policy

We do not have any present plan to pay any cash dividends on our Ordinary Shares in the foreseeable future. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business.

We are a holding company incorporated in the Cayman Islands. We rely principally on dividends from our PRC subsidiaries for our cash requirements, including any payment of dividends to our shareholders. PRC regulations may restrict the ability of our PRC subsidiaries to pay dividends to us.

Our board of directors has discretion as to whether to distribute dividends, subject to certain requirements of Cayman Islands law. Under Cayman Islands law, a Cayman Islands company may pay a dividend out of either profit or share premium account, provided that in no circumstances may a dividend be paid if this would result in the company being unable to pay its debts as they fall due in the ordinary course of business. Even if our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that our board of directors may deem relevant.

B. Significant Changes 

Except as disclosed elsewhere in this annual report, we have not experienced any significant changes since the date of our audited consolidated financial statements included in this annual report.

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ITEM 9.  THE OFFER AND LISTING 

A. Offering and Listing Details 

Our Class A Ordinary Shares are listed on the Nasdaq Capital Market.

B. Plan of Distribution 

Not applicable.

C. Markets 

Our Class A Ordinary Shares are listed on the NASDAQ Capital Market under the new ticker symbol “EPOW”.

D. Selling Shareholders 

Not applicable.

E. Dilution 

Not applicable.

F. Expenses of the Issue 

Not applicable.

ITEM 10. ADDITIONAL INFORMATION 

A. Share Capital 

On February 8, 2024, the Company held its annual general meeting of shareholders, at which the shareholders approved that:

(a) the authorised share capital of the Company be increased from US$50,000 divided into 500,000,000 ordinary shares of par value US$0.0001 each to US$500,000 divided into 5,000,000,000 ordinary shares of par value US$0.0001 each (the “Share Capital Increase”); and

(b) immediately following the Share Capital Increase being effected, the Company re-designate and re-classify its authorised share capital as follows (the “Share Capital Reorganisation”):

i. each ordinary share in issue immediately following the Share Capital Increase each be re designated and re-classified into one Class A Ordinary Share of par value US$0.0001 each;

ii. 1,500,000,000 of the remaining authorised but unissued ordinary Shares each be re designated and re-classified into one Class B Ordinary Share of par value US$0.0001 each; and

iii. each of the remaining authorised but unissued ordinary Shares each be re-designated and re-classified into one Class A Ordinary Share of par value US$0.0001 each; and

On a show of hands at a general meeting every shareholder who is present in person and every person representing a shareholder by proxy shall have one vote. On a poll held at a general meeting, every shareholder who is present in person and every person representing a shareholder by proxy shall have one vote for each Class A Ordinary Share and 20 votes for every Class B Ordinary Share of which he or the person represented by proxy is the holder.

At the option of the holder thereof or upon the transfer of such Class B Ordinary Shares to any person that is not an affiliate of the holder of such shares, into one fully paid and non-assessable Class A Ordinary Shares. 

For further information, please refer to our current reports on Form 6-K filed with the SEC on January 5, 2024 and February 12, 2024, which are incorporated herein by reference.

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B. Memorandum and Articles of Association  

We are a Cayman Islands exempted company with limited liability and our affairs are governed by our amended and restated memorandum and articles of association (the “Memorandum and Articles”), the Companies Act, the common law of the Cayman Islands, our corporate governance documents and rules and regulations of the stock exchange on which our shares are traded. The Memorandum and Articles is filed herein as Exhibit 1.1 to this annual report and is hereby incorporated by reference into this annual report. You may refer to Exhibit 2.3 for a detailed disclosure of description of our securities registered under Section 12 of the Exchange Act of 1934, as amended, of the Memorandum and Articles. 

As of the date of this annual report, our authorized share capital is US$500,000 divided into 3,500,000,000 Class A Ordinary Share of par value US$0.0001 each and 1,500,000,000 Class B Ordinary Share of par value US$0.0001 each. All of our issued and outstanding Ordinary Shares are fully paid and non-assessable. Our Ordinary Shares are issued in registered form, and are issued when registered in our register of members. Unless the board of directors determine otherwise, each holder of our Ordinary Shares will not receive a certificate in respect of such Ordinary Shares. Our shareholders who are non-residents of the Cayman Islands may freely hold and vote their Ordinary Shares. We may not issue shares or warrants to bearer. 

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,” “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions” or elsewhere in this annual report.

D. Exchange Controls 

See “Item 4. Information on the Company—B. Business Overview—Regulation— Regulations Relating to Foreign Exchange.”

E. Taxation 

The following summary of the Cayman Islands, PRC and U.S. federal income tax considerations of an investment in the 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 considerations relating to an investment in the Ordinary Shares, such as the tax considerations 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.

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 or holders of our Ordinary Shares levied by the government of the Cayman Islands, except for stamp duties which may be applicable on instruments executed in, or after execution brought within the jurisdiction of the Cayman Islands. The Cayman Islands are 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.

Payments of dividends and capital in respect of Ordinary Shares will not be subject to taxation in the Cayman Islands and no Cayman Islands withholding will be required on the payment of a dividend or capital to any holder of Ordinary Shares, nor will gains derived from the disposal of Ordinary Shares be subject to Cayman Islands income or corporation tax.

As an exempted company, the Company has received a tax exemption certificate from the Financial Secretary of the Cayman Islands pursuant to the Tax Concessions Law (Revised) of the Cayman Islands, containing an undertaking that in the event of any change to the foregoing, the Company, for a period of twenty years from the date of the grant of the undertaking (such date of grant being 1 August 2019), will not be chargeable to tax in the Cayman Islands on its income or its capital gains arising in the Cayman Islands or elsewhere.

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People’s Republic of China Taxation

Enterprise Income Tax and Withholding Tax

We are a holding company incorporated in the Cayman Islands and we gain substantial income by way of dividends paid to us from our PRC subsidiaries. The EIT Law and its implementation rules provide that China-sourced income of foreign enterprises, such as dividends paid by a PRC subsidiary to its equity holders that are non-resident enterprises, will normally be subject to PRC withholding tax at a rate of 10%, unless any such foreign investor’s jurisdiction of incorporation has a tax treaty with China that provides for a preferential tax rate or a tax exemption.

Under the EIT Law, an enterprise established outside of China with a “de facto management body” within China is considered a “resident enterprise,” which means that it is treated in a manner similar to a Chinese enterprise for enterprise income tax purposes. Although the implementation rules of the EIT Law define “de facto management body” as a managing body that actually, comprehensively manage and control the production and operation, staff, accounting, property and other aspects of an enterprise, the only official guidance for this definition currently available is set forth in SAT Circular 82, which provides guidance on the determination of the tax residence status of a Chinese-controlled offshore incorporated enterprise. Although this circular 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 SAT’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 SAT Circular 82 (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), a Chinese-controlled offshore incorporated enterprise will be regarded as a PRC tax resident by virtue of having a “de facto management body” in China and will be subject to PRC enterprise income tax on its worldwide income only if all of the following criteria are met: (i) the places where senior management and senior management departments that are responsible for daily production, operation and management of the enterprise perform their duties are mainly located within the territory of China; (ii) financial decisions (such as money borrowing, lending, financing and financial risk management) and personnel decisions (such as appointment, dismissal and salary and wages) are made or need to be made by organizations or persons located within the territory of China; (iii) main property, accounting books, corporate seal, the board of directors and files of the minutes of shareholders’ meetings of the enterprise are located or preserved within the territory of China; and (iv) half (or more) of the directors or senior management staff having the right to vote habitually reside within the territory of China.

We believe that Sunrise New Energy is not a resident enterprise for PRC tax purpose. Sunrise New Energy is not controlled by a PRC enterprise or PRC enterprise group and we do not meet some of the conditions outlined in the immediately preceding paragraph. For example, as a holding company, the key assets and records of Sunrise New Energy, including the resolutions and meeting minutes of our board of directors and the resolutions and meeting minutes of our shareholders, are located and maintained outside the PRC. In addition, we are not aware of any offshore holding companies with a corporate structure similar to ours that has been deemed a PRC “resident enterprise” by the PRC tax authorities. However, as the tax residency status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body” as applicable to our offshore entities, we will continue to monitor our tax status.

If the PRC tax authorities determine that Sunrise New Energy is a PRC resident enterprise for enterprise income tax purposes, we would be subject to PRC enterprise income on our worldwide income at the rate of 25%. Furthermore, we may be required to withhold a 10% withholding tax from dividends we pay to our shareholders that are non-resident enterprises. In addition, non-resident enterprise shareholders may be subject to a 10% PRC withholding tax on gains realized on the sale or other disposition of our ordinary shares, if such income is treated as sourced from within the PRC. It is unclear whether our non-PRC individual shareholders would be subject to any PRC tax on dividends or gains obtained by such non-PRC individual shareholders in the event we are determined to be a PRC resident enterprise. If any PRC tax were to apply to dividends or gains realized by non-PRC individuals, it would generally apply at a rate of 20% unless a reduced rate is available under an applicable tax treaty. However, it is also unclear whether non-PRC shareholders of the Company would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that Sunrise New Energy is treated as a PRC resident enterprise. 

See “Risk Factors — Risks Related to Doing Business in China — Under the PRC Enterprise Income Tax Law, or the EIT Law, we may be classified as a “resident enterprise” of China, which could result in unfavorable tax consequences to us and our non-PRC shareholders.”

Value-added Tax

According to the VAT Laws, MOF and SAT Circular 32 (the Circular of the Ministry of Finance and the State Administration of Taxation on Adjustment of Value-Added Tax Rates), and MOF, SAT and GAC Circular 39 (the Announcement on Policies for Deepening the VAT Reform), all enterprises and individuals engaged in the sale of goods, the provision of processing, repair and replacement services, sales of services, intangible assets, real property and the importation of goods within the territory of the PRC are the taxpayers of VAT. The VAT tax rates generally applicable are simplified as 13%, 9%, 6% and 0%, and the VAT tax rate of 3% is applicable to small-scale taxpayers. The VAT tax rates applicable to our PRC subsidiaries and consolidated affiliates are as follows: 13% on graphite anode material sales for Sunrise Guizhou; 6% on services for the VIE, GMB (Hangzhou) and Mentor Board Voice of Seeding (Shanghai) Cultural Technology Co., Ltd.; 3% for small-scale taxpayers including GMB (Beijing), GMB Culture, GMB Consulting and GMB Linking and GIOP BJ.

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United States Federal Income Tax Considerations

The following does not address the tax consequences to any particular investor or to persons in special tax situations such as:

● banks;

● financial institutions;

● insurance companies;

● regulated investment companies;

● real estate investment trusts;

● broker-dealers;

● persons that elect to mark their securities to market;

● U.S. expatriates or former long-term residents of the U.S.;

● governments or agencies or instrumentalities thereof;

● tax-exempt entities;

● persons liable for alternative minimum tax;

● persons holding our Ordinary Shares as part of a straddle, hedging, conversion or integrated transaction;

● persons that actually or constructively own 10% or more of our voting power or value (including by reason of owning our Ordinary Shares);

● persons who acquired our Ordinary Shares pursuant to the exercise of any employee share option or otherwise as compensation;

● persons holding our Ordinary Shares through partnerships or other pass-through entities;

● beneficiaries of a Trust holding our Ordinary Shares; or

● persons holding our Ordinary Shares through a Trust.

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Material Tax Consequences Applicable to U.S. Holders of Our Ordinary Shares

The following sets forth the material U.S. federal income tax consequences related to the ownership and disposition of our Ordinary Shares. This description does not deal with all possible tax consequences relating to ownership and disposition of our Ordinary Shares or U.S. tax laws, other than the U.S. federal income tax laws, such as the tax consequences under non-U.S. tax laws, state, local and other tax laws.

The following brief description applies only to U.S. Holders (defined below) that hold Ordinary Shares as capital assets and that have the U.S. dollar as their functional currency. This brief description is based on the federal income tax laws of the United States in effect as of the date of this annual report and on U.S. Treasury regulations in effect or, in some cases, proposed, as of the date of this annual report, as well as judicial and administrative interpretations thereof available on or before such date. All of the foregoing authorities are subject to change, which change could apply retroactively and could affect the tax consequences described below.

The brief description below of the U.S. federal income tax consequences to “U.S. Holders” will apply to you if you are a beneficial owner of Ordinary Shares and you are, for U.S. federal income tax purposes,

● an individual who is a citizen or resident of the United States;

● a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) organized under the laws of the United States, any state thereof or the District of Columbia;

● an estate whose income is subject to U.S. federal income taxation regardless of its source; or

● a trust that (1) is subject to the primary supervision of a court within the United States and the control of one or more U.S. persons for all substantial decisions or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.

If a partnership (or other entities treated as a partnership for United States federal income tax purposes) is a beneficial owner of our Ordinary Shares, the tax treatment of a partner in the partnership will depend upon the status of the partner and the activities of the partnership. Partnerships and partners of a partnership holding our Ordinary Shares are urged to consult their tax advisors regarding an investment in our Ordinary Shares.

An individual is considered a resident of the U.S. for federal income tax purposes if he or she meets either the “Green Card Test” or the “Substantial Presence Test” described as follows:

The Green Card Test: You are a lawful permanent resident of the United States, at any time, if you have been given the privilege, according to the immigration laws of the United States, of residing permanently in the United States as an immigrant. You generally have this status if the U.S. Citizenship and Immigration Services issued you an alien registration card, Form I-551, also known as a “green card.”

The Substantial Presence Test: If an alien is present in the United States on at least 31 days of the current calendar year, he or she will (absent an applicable exception) be classified as a resident alien if the sum of the following equals 183 days or more (See §7701(b)(3)(A) of the Internal Revenue Code and related Treasury Regulations):

1. The actual days in the United States in the current year; plus

2. One-third of his or her days in the United States in the immediately preceding year; plus

3. One-sixth of his or her days in the United States in the second preceding year.

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Taxation of Dividends and Other Distributions on our Ordinary Shares

Subject to the passive foreign investment company (PFIC) rules (defined below) discussed below, the gross amount of distributions made by us to you with respect to the Ordinary Shares (including the amount of any taxes withheld therefrom) will generally be includable in your gross income as dividend income on the date of receipt by you, but only to the extent that the distribution is paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). With respect to corporate U.S. Holders, the dividends will not be eligible for the dividends-received deduction allowed to corporations in respect of dividends received from other U.S. corporations.

With respect to non-corporate U.S. Holders, including individual U.S. Holders, dividends will be taxed at the lower capital gains rate applicable to qualified dividend income, provided that (1) the Ordinary Shares are readily tradable on an established securities market in the United States, or we are eligible for the benefits of an approved qualifying income tax treaty with the United States that includes an exchange of information program, (2) we are not a PFIC (defined below) for either our taxable year in which the dividend is paid or the preceding taxable year, and (3) certain holding period requirements are met. Because there is no income tax treaty between the United States and the Cayman Islands, clause (1) above can be satisfied only if the Ordinary Shares are readily tradable on an established securities market in the United States. Under U.S. Internal Revenue Service authority, Ordinary Shares are considered for purpose of clause (1) above to be readily tradable on an established securities market in the United States if they are listed on certain exchanges, which presently include the Nasdaq. You are urged to consult your tax advisors regarding the availability of the lower rate for dividends paid with respect to our Ordinary Shares, including the effects of any change in law after the date of this annual report.

Dividends will constitute foreign source income for foreign tax credit limitation purposes. If the dividends are taxed as qualified dividend income (as discussed above), the amount of the dividend taken into account for purposes of calculating the foreign tax credit limitation will be limited to the gross amount of the dividend, multiplied by the reduced rate divided by the highest rate of tax normally applicable to dividends. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, dividends distributed by us with respect to our Ordinary Shares will constitute “passive category income” but could, in the case of certain U.S. Holders, constitute “general category income.”

To the extent that the amount of the distribution exceeds our current and accumulated earnings and profits (as determined under U.S. federal income tax principles), it will be treated first as a tax-free return of your tax basis in your Ordinary Shares, and to the extent the amount of the distribution exceeds your tax basis, the excess will be taxed as capital gain. We do not intend to calculate our earnings and profits under U.S. federal income tax principles. Therefore, a U.S. Holder should expect that a distribution will be treated as a dividend even if that distribution would otherwise be treated as a non-taxable return of capital or as capital gain under the rules described above.

Taxation of Dispositions of Ordinary Shares

Subject to the passive foreign investment company rules discussed below, you will recognize taxable gain or loss on any sale, exchange or other taxable disposition of a share equal to the difference between the amount realized (in U.S. dollars) for the share and your tax basis (in U.S. dollars) in the Ordinary Shares. The gain or loss will be capital gain or loss. If you are a non-corporate U.S. Holder, including an individual U.S. Holder, who has held the Ordinary Shares for more than one year, you will generally be eligible for reduced tax rates. The deductibility of capital losses is subject to limitations. Any such gain or loss that you recognize will generally be treated as United States source income or loss for foreign tax credit limitation purposes which will generally limit the availability of foreign tax credits.

Passive Foreign Investment Company Considerations

A non-U.S. corporation, such as our company, will be classified as a PFIC for U.S. federal income tax purposes for any taxable year if, applying applicable look-through rules, either (i) 75% or more of its gross income for such year consists of certain types of “passive” income or (ii) 50% or more of the value of its assets (generally determined on the basis of a quarterly average) during such year is attributable to assets that produce or are held for the production of passive income (the “asset test”). For this purpose, cash and assets readily convertible into cash are categorized as passive assets and the company’s goodwill and other unbooked intangibles not reflected on its balance sheet are taken into account. Passive income generally includes, among other things, dividends, interest, income equivalent to interest, rents, royalties, and gains from the disposition of passive assets. We will be treated as owning a proportionate share of the assets and earning a proportionate share of the income of any other corporation in which we own, directly or indirectly, 25% or more (by value) of the stock.

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Based upon our current and projected income and assets, including the proceeds we received from our initial public offering and the value of our Ordinary Shares, we do not 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 for any taxable year is a factual determination made annually that will depend, in part, upon the composition and classification of our income and assets. Furthermore, fluctuations in the market price of our Ordinary Shares may cause us to be classified as a PFIC for the current or future taxable years because the value of our assets for purposes of the asset test, including the value of our goodwill and other unbooked intangibles, may be determined by reference to the market price of our Ordinary Shares from time to time (which may be volatile). In addition, 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. Under circumstances where our revenue from activities that produce passive income significantly increases relative to our revenue from activities that produce non-passive income, or where we determine not to deploy significant amounts of cash for active purposes, our risk of becoming classified as a PFIC may substantially increase.

If we are a PFIC for any year during which a U.S. Holder holds our Ordinary Shares, we generally will continue to be treated as a PFIC for all succeeding years during which such U.S. Holder holds our Ordinary Shares, unless we were to cease to be a PFIC and the U.S. Holder were to make a “deemed sale” election with respect to the Ordinary Shares.

Information Reporting and Backup Withholding

Dividend payments with respect to our Ordinary Shares and proceeds from the sale, exchange or redemption of our Ordinary Shares may be subject to information reporting to the U.S. Internal Revenue Service and possible U.S. backup withholding under Section 3406 of the US Internal Revenue Code with at a current flat rate of 24%. Backup withholding will not apply, however, to a U.S. Holder who furnishes a correct taxpayer identification number and makes any other required certification on U.S. Internal Revenue Service Form W-9 or who is otherwise exempt from backup withholding. U.S. Holders who are required to establish their exempt status generally must provide such certification on U.S. Internal Revenue Service Form W-9. U.S. Holders are urged to consult their tax advisors regarding the application of the U.S. information reporting and backup withholding rules.

Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against your U.S. federal income tax liability, and you may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the U.S. Internal Revenue Service and furnishing any required information. We do not intend to withhold taxes for individual shareholders. However, transactions effected through certain brokers or other intermediaries may be subject to withholding taxes (including backup withholding), and such brokers or intermediaries may be required by law to withhold such taxes.

Under the Hiring Incentives to Restore Employment Act of 2010, certain U.S. Holders are required to report information relating to our Ordinary Shares, subject to certain exceptions (including an exception for Ordinary Shares held in accounts maintained by certain financial institutions), by attaching a complete Internal Revenue Service Form 8938, Statement of Specified Foreign Financial Assets, with their tax return for each year in which they hold Ordinary Shares. Failure to report such information could result in substantial penalties.

F. Dividends and Paying Agents 

Not applicable.

G. Statement by Experts 

Not applicable.

H. Documents on Display 

We previously filed with the SEC registration statement on Form F-1 (File Number 333-233745), as amended, to register our Class A Ordinary Shares in relation to our initial public offering, which was completed on February 11, 2021.

We are subject to periodic reporting and other informational requirements of the Exchange Act as applicable to foreign private issuers. Accordingly, we are required to file reports, including annual reports on Form 20-F, and other information with the SEC. All information filed with the SEC can be obtained over the internet at the SEC’s website at www.sec.gov or inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information regarding the Washington, D.C. Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a web site at www.sec.gov that contains reports, proxy and information statements, and other information regarding registrants that make electronic filings with the SEC using its EDGAR system. As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of quarterly reports and proxy statements, and officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.

I. Subsidiary Information 

For a listing of our subsidiaries, see “Item 4C.  Organizational Structure” for a chart of our current structure.

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ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 

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 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 it 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.

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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

On February 8, 2024, our shareholders approved the re-designation and re-classification of the Ordinary Shares into Class A Ordinary Shares and Class B Ordinary Shares. See “Item 10. Additional Information” for a description of the rights of securities holders.

Use of Proceeds

The following “Use of Proceeds” information relates to the registration statement on Form F-1, as amended (File Number: 333-233745) in relation to the initial public offering of 6,720,000 Ordinary Shares at an initial public offering price of $4.00 per Ordinary Share. Our initial public offering closed on February 11, 2021. The registration statement was declared effective by the SEC on February 5, 2021. ViewTrade Securities, Inc. was the representative of the underwriters for our initial public offering. On February 19, 2021, Network 1 Financial Securities, Inc. exercised the over-allotment option in full to purchase an additional 1,008,000 Ordinary Shares.

We received net proceeds of approximately $24.61 million, after deducting underwriting discounts and estimated offering expenses payable by us. The total expense incurred for our Company’s account in connection with our initial public offering was approximately $2.28 million, which included approximately $2.02 million in underwriting discounts for the initial public offering and approximately $0.26 million in other costs and expenses for our initial public offering. None of the transaction expenses included payments to directors or officers of our Company or their associates, persons owning more than 10% or more of our equity securities or our affiliates. None of the net proceeds we received from the initial public offering were paid, directly or indirectly, to any of our directors or officers or their associates, persons owning 10% or more of our equity securities or our affiliates. As of the date of this annual report, we have used $10.76 million from our initial public offering as the registered capital for our newly established JV, Sunrise Guizhou. We intend to use the remaining proceeds from our initial public offering as disclosed in our registration statement on Form F-1. Our management, however, will have significant flexibility and discretion to apply the net proceeds from our initial public offering. If an unforeseen event occurs or business conditions change, we may use the proceeds of this offering differently than as disclosed previously.

ITEM 15. CONTROLS AND PROCEDURES 

Disclosure Controls and Procedures

As of December 31, 2023, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). There are inherent limitations to the effectiveness of any disclosure controls and procedures system, including the possibility of human error and circumventing or overriding them. Even if effective, disclosure controls and procedures can provide only reasonable assurance of achieving their control objectives.

Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of December 31, 2023 and as of the date that the evaluation of the effectiveness of our disclosure controls and procedures was completed, failed to provide reasonable assurance that the information we are required to disclose in the reports we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management to allow timely decisions regarding required disclosures.

103

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act. Our management conducted an assessment of the effectiveness of our internal control over financial reporting based on the criteria set forth in “Internal Control - Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In the course of preparing our consolidated financial statements for the year ended December 31, 2023, we identified material weaknesses and other control deficiencies in our internal control over financial reporting as of December 31, 2023. The material weaknesses identified included: (1) a lack of formal internal controls policies over financial closing and reporting processes, which may increase risk of error, fraud, misstatement of financial reporting, or even non-compliance with related regulations for a U.S. listed Group; (2) a lack of accounting staff and resources with appropriate knowledge of U.S. GAAP and SEC reporting and compliance requirements, and accounting policies and procedures manual that covers U.S. GAAP and SEC financial reporting requirements to complete relate US GAAP and SEC reporting; (3) a lack of ability to account for complex financial and equity instruments; and (4) a lack of appropriately restricted to privileged level access to employees. Based on this evaluation, our management has concluded that our internal control over financial reporting was not effective as of December 31, 2023.

We are taking a number of measures to tackle the control deficiencies identified, including: (i) hiring more qualified accounting personnel with relevant U.S. GAAP and SEC reporting experience and qualifications to strengthen the financial reporting function and to set up a financial and system control framework; (ii) implementing regular and continuous U.S. GAAP accounting and financial reporting training programs for our accounting and financial reporting personnel; (iii) preparing a comprehensive accounting policies and procedures manual that covers financial closing and reporting processes, U.S. GAAP and SEC financial reporting requirements, and ensuring that accounting personnel are familiar with and follow the manual; and (iv) Reinforcing the implementation of IT authorization limits matrix and segregation of duties systems to ensure the appropriateness of all approvals, authorizations, and confirmations granted.

However, we cannot assure you that we will remediate our control deficiencies in a timely manner. The process of designing and implementing an effective financial reporting system is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a financial reporting system that is adequate to satisfy our reporting obligation. See “Item 3. Key Information—D. Risk Factors—We have identified several control deficiencies in our internal control over financial reporting. If we fail to maintain an effective system of internal controls over financial reporting, we may not be able to accurately report our financial results or prevent fraud.” Additionally, we cannot assure you that we have identified all, or that we will not in the future have additional, material weaknesses.

Attestation Report of the Registered Public Accounting Firm

As a company with less than $1.235 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. This annual report on Form 20-F does not include an attestation report of our registered public accounting firm because we are an emerging growth company.

Changes in Internal Control

Other than as described above, there were no changes in our internal controls over financial reporting that occurred during the period covered by this annual report on Form 20-F that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 16. [RESERVED]

Not applicable.

ITEM 16.A. AUDIT COMMITTEE FINANCIAL EXPERT 

Our board of directors determined that Mr. Xin Zhang, chairman of our audit committee and an independent director (under the standards set forth in Nasdaq Stock Market Rule 5605(a)(2) and Rule 10A-3 under the Exchange Act), is an audit committee financial expert.

ITEM 16.B. CODE OF ETHICS 

Our board of directors adopted a code of business conduct and ethics that applies to all of our directors, officers, employees, including certain provisions that specifically apply to our principal executive officer, principal financial officer or controller and any other persons who perform similar functions for us. A copy of our code of business conduct and ethics can be accessed at http://sdh365.com/IR/.

104

ITEM 16.C. 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 independent registered public accounting firm, for the periods indicated.

	Year Ended December 31,
Services	2023		2022
	US$		US$
Audit fees(1)		381,100		338,400
Total		381,100		338,400

Note:

(1) “Audit fees” means the aggregate fees billed for professional services rendered by our principal accounting firm for the audit of our annual financial statements and the review of our comparative interim financial statements.

The policy of our audit committee is to pre-approve all audit services provided by MarcumAsia and Friedman LLP, our independent registered public accounting firm as described above.

ITEM 16.D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not applicable.

ITEM 16.E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

None.

ITEM 16.F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

There has been no change in independent accountants for our Company during the two most recent fiscal years or any subsequent interim period except as previously reported in our Form 6-K filed with the SEC on December 23, 2022. There have been no disagreements of the type required to be disclosed by Item 16F(b).

105

ITEM 16.G. CORPORATE GOVERNANCE

As a Cayman Islands company listed on the Nasdaq Capital Market, we are subject to the Nasdaq Capital Market corporate governance listing standards. Certain corporate governance practices in the Cayman Islands, which is our home country, may differ significantly from the Nasdaq Capital Market corporate governance listing standards. NASDAQ Listing Rule 5615(a)(3)(A) permits foreign private issuers like us to follow their home country practice in lieu of the requirements of Listing Rule 5600 Series with the exception of those Listing Rules which are required to be followed pursuant to the provisions of Listing Rule 5615(a)(3).

NASDAQ Listing Rule 5635 generally provides that shareholder approval is required of U.S. domestic companies listed on the NASDAQ prior to issuance (or potential issuance) of securities (i) equaling 20% or more of the company’s common stock or voting power in connection with the acquisition of the stock or assets of another company or for less than the greater of market or book value in transactions other than public offerings, (ii) resulting in a change of control of the company, or (iii) which is being issued pursuant to a stock option or purchase plan to be established or materially amended or other equity compensation arrangement made or materially amended. The laws of Cayman Islands do not require shareholder approval prior to any of the foregoing types of issuances.

NASDAQ Listing Rule 5640 provides rules relating to voting rights of companies listed on NASDAQ, and specifies that a company cannot create a new class of security that votes at a higher rate than an existing class of securities or take any other action that has the effect of restricting or reducing the voting rights of an existing class of securities. The laws of Cayman Islands do not prohibit the creation of a new class of securities that votes at a higher rate than an existing class of securities or take any other action that has the effect of restricting or reducing the voting rights of an existing class of securities.

The Board of Directors of the Company elected to follow the Company’s home country rules in lieu of NASDAQ Listing Rule 5635 and 5640. The Company, therefore, is neither required to obtain shareholder approval prior to entering into a transaction with the potential to issue securities nor subject to the voting rights rules under NASDAQ Listing Rule 5640. 

Other than those described above, there are no significant differences between our corporate governance practices and those followed by U.S. domestic companies under Nasdaq Capital Market corporate governance listing standards.

ITEM 16.H. MINE SAFETY DISCLOSURE

Not applicable.

ITEM 16.I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

ITEM 16.J. INSIDER TRADING POLICIES

Our board of directors has adopted an insider trading policy governing the purchase, sale, and other dispositions of our securities by directors, senior management and employees. A copy of our insider trading policy is included as an exhibit to this annual report.

ITEM 16.K. CYBERSECURITY

We have established cybersecurity risk management to identify, assess, and mitigate cybersecurity risks alongside other business risks. The process is in alignment with our strategic objectives and risk appetite. We may engage assessors, consultants, auditors, or other third parties to enhance our cyber security risk management processes. Any cybersecurity incidents are closely monitored for their potential impact on our business strategy, operations, and financial condition. As of the date of this annual report, we have not experienced any cybersecurity incidents that have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition. We continuously adapt our business strategy to enhance resilience, strengthen defenses and ensure the sustainability of our operations.

106

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 Sunrise New Energy Co., Ltd. are included at the end of this annual report.

ITEM 19. EXHIBITS

Exhibit Number	Description
1.1*	Second Amended and Restated Memorandum and Articles of Association
2.1	Registrant’s Specimen Certificate for Ordinary Shares (incorporated herein by reference to Exhibit 4.1 to our registration statement on Form F-1 (File No. 333-233745), as amended)
2.2	Form of Underwriting Agreement (incorporated herein by reference to Exhibit 4.2 to the registration statement on Form F-1 (File No. 333-233745), as amended, filed with the Securities and Exchange Commission on February 3, 2021)
2.3*	Description of Securities
4.1	Form of Employment Agreement by and between executive officers and the Registrant (incorporated herein by reference to Exhibit 10.1 to our registration statement on Form F-1 (File No. 333-233745), as amended)
4.2	Form of Indemnification Agreement by and between executive officers, directors and the Registrant (incorporated herein by reference to Exhibit 10.2 to our registration statement on Form F-1 (File No. 333-233745), as amended)
4.4	Equity Pledge Agreement dated June 10, 2019, by and among GIOP BJ, SDH, and shareholders of SDH (incorporated herein by reference to Exhibit 10.3 to our registration statement on Form F-1 (File No. 333-233745), as amended)
4.5	Exclusive Technical and Consulting Services Agreement, dated June 10, 2019, by and between GIOP BJ and SDH (incorporated herein by reference to Exhibit 10.5 to our registration statement on Form F-1 (File No. 333-233745), as amended)
4.6	Form of Power of Attorney, by and among GIOP BJ, SDH, and shareholders of SDH (incorporated herein by reference to Exhibit 10.6 to our registration statement on Form F-1 (File No. 333-233745), as amended)
4.7	Form of Spousal Consent, by and among GIOP BJ, SDH, and certain spouses of shareholders of SDH (incorporated herein by reference to Exhibit 10.7 to our registration statement on Form F-1 (File No. 333-233745), as amended)
4.9	Exclusive Option Agreement, dated June 10, 2019, by and among GIOP BJ, SDH, and shareholders of SDH (incorporated herein by reference to Exhibit 10.4 to our registration statement on Form F-1 (File No. 333-233745), as amended)
4.10	Strategic Cooperation Agreement, dated May 30, 2016, by and between Beijing Winning at the Frontlines Cultural Exchange Co., Ltd. and GMB (Beijing) (incorporated herein by reference to Exhibit 10.8 to our registration statement on Form F-1 (File No. 333-233745), as amended)
4.11	Copyright Authorization Agreement, dated May 30, 2016 by and between Beijing Winning at the Frontlines Cultural Exchange Co., Ltd. and GMB (Beijing) (incorporated herein by reference to Exhibit 10.9 to our registration statement on Form F-1 (File No. 333-233745), as amended)
4.12	Investment Agreement, dated April 2, 2022, by and among Zhuhai (Zibo) Investment Co., Ltd and other parties (incorporated herein by reference to Exhibit 4.13 to our annual report on Form 20-F (File No. 001-40008), filed with the SEC on May 2, 2022)
4.13	State-owned Construction Land Right Use Assignment, dated December 24, 2021, by and between Natural Resources Bureau of Qianxinan Prefecture, Yilong New District Branch and Sunrise (Guizhou) New Energy Materials Co., Ltd. (incorporated herein by reference to Exhibit 4.14 to our annual report on Form 20-F (File No. 001-40008), filed with the SEC on May 2, 2022)

107

4.14	Investment Agreement, dated April 11, 2021, by and among Global Mentor Board (Beijing) Information Technology Co, Ltd., Beijing Tax Star Technology Co., Ltd., Beijing Zhitong Zhenye Technology Co., Ltd., and Li Jiyou (incorporated herein by reference to Exhibit 4.16 to our annual report on Form 20-F (File No. 001-40008), filed with the SEC on May 2, 2022)
4.15	Shenzhen Jiazhong Innovation Investment Enterprise (Limited Partnership) Partnership Agreement, dated June 1, 2021, by and among Global Mentor Board (Beijing) Information Technology Co., Ltd and other parties (incorporated herein by reference to Exhibit 4.18 to our annual report on Form 20-F (File No. 001-40008), filed with the SEC on May 2, 2022)
4.16	Agreement of Action in Concert, dated April 12, 2022, among Zhuhai Zibo and twelve original shareholders of Sunrise Guizhou (incorporated herein by reference to Exhibit 10.2 to our report on Form 6-K, filed with the SEC on June 23, 2022)
4.17	Purchase Agreement, dated July 2, 2022, between Sunrise Guizhou and former shareholders of Sunrise Tech (formerly known as Anlong Hengrui Graphite Material Co., Ltd.) (incorporated herein by reference to Exhibit 4.20 to our annual report on Form 20-F, filed with the SEC on May 16, 2023)
4.18	Sales and leaseback contract, dated September 22, 2022, between Sunrise Guizhou and Far East International Financial Leasing Co., Ltd. (incorporated herein by reference to Exhibit 4.21 to our annual report on Form 20-F, filed with the SEC on May 16, 2023)
4.19	Sales and leaseback contract, dated November 4, 2022, between Sunrise Guizhou and China Power Investment Ronghe Financial Leasing Co., Ltd. (incorporated herein by reference to Exhibit 4.22 to our annual report on Form 20-F, filed with the SEC on May 16, 2023)
4.20*	English translation of Working Capital Loan Contract (RMB 100 million) between Sunrise (Guizhou) New Energy Materials Co., Ltd. and China Construction Bank Co., Ltd. Qianxinan Prefecture Branch, dated March 8, 2024
4.21*	English translation of Comprehensive Credit Agreement (RMB 100 million) between Sunrise (Guizhou) New Energy Materials Co., Ltd. and Guiyang Branch of China Everbright Bank Co., Lt, dated May 16, 2023
4.22*	English translation of Lease Sale Contract (RMB 15M) between Sunrise (Guizhou) New Energy Materials Co., Ltd. and Xiamen Guomao Chuangcheng Financial Leasing Co., dated October 26, 2023
4.23*	English Translation of Sale and Leasback Agreement between Sunrise (Guizhou) New Energy Materials Co., Ltd. and Zhongguancun Technology Leasing Co., Ltd.., dated February 7, 20
4.24*	English translation of loan Contract of Small Business Credit (RMB 30M) between Sunrise (Guizhou) New Energy Materials Co., Ltd. and Posal Savings Bank of China, dated January 8, 2023
8.1*	Principal subsidiaries and consolidated affiliated entities of the Registrant
11.1	Code of Business Conduct and Ethics of the Registrant (incorporated herein by reference to Exhibit 99.1 to our registration statement on Form F-1 (File No. 333-233745), as amended)
11.2	Insider Trading Policy
12.1*	Certification by the Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
12.2*	Certification by the Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
13.1**	Certification by the Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
13.2**	Certification by the Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
15.1*	Consent of Jincheng Tongda & Neal Law Firm
15.2*	Consent of Marcum Asia CPAs LLP
15.3*	Consent of Friedman LLP
97.1*	Clawback Policy
101.*	The following financial statements from the Company’s Annual Report on Form 20-F for the fiscal year ended December 31, 2023, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations and Comprehensive Income (Loss), (iii) Consolidated Statements of Changes in Equity, (iv) Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags
104.*	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed herewith.

** Furnished herewith.

108

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 annual report on its behalf.

Sunrise New Energy Co., Ltd.
By:	/s/ Haiping Hu
Name:	Haiping Hu
Title:	Chairman, Chief Executive Officer, and Director
Date	May 15, 2024

109

SUNRISE NEW ENERGY CO., LTD.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

TABLE OF CONTENTS

Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm (Marcum Asia CPAs LLP PCAOB ID: 5395)	F-2
Report of Independent Registered Public Accounting Firm (Friedman LLP PCAOB ID: 711)	F-3
Consolidated Balance Sheets as of December 31, 2023 and 2022	F-4
Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2023, 2022 and 2021	F-5
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2023, 2022 and 2021	F-6
Consolidated Statements of Cash Flows for the Years Ended December 31, 2023, 2022 and 2021	F-7
Notes to Consolidated Financial Statements	F-8

F-1

Report of Independent Registered Public Accounting Firm 

To the Board of Directors and Shareholders of

Sunrise New Energy Co., Ltd.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Sunrise New Energy Co., Ltd. and its subsidiaries (collectively, the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive loss, changes in equity, and cash flows for each of the two years ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We also have audited the adjustments to the 2021 consolidated financial statements to retrospectively apply the change in accounting related to the share re-designation as described in Note 21. In our opinion, such adjustments are appropriate and have been properly applied. However, we were not engaged to audit, review, or apply any procedures to the 2021 consolidated financial statements of the Company other than with respect to such adjustments, accordingly, we do not express an opinion or any other form of assurance on the 2021 consolidated financial statements taken as a whole.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 3, the Company has a significant working capital deficiency, has incurred significant recurring operating losses and negative cash flows from operating activities and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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 audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Marcum Asia CPAs LLP

Marcum Asia CPAs LLP

We have served as the Company’s auditor since 2018. (such date takes into account the acquisition of certain assets of Friedman LLP by Marcum Asia CPAs LLP effective September 1, 2022)

New York, New York

May 15, 2024

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Sunrise New Energy Co., Ltd.

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of operations and comprehensive loss, changes in equity, and cash flows of Sunrise New Energy Co., Ltd.(formerly known as Global Internet of People, Inc.) and its subsidiaries (collectively, the “Company”) for the year in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the results of its operations of the Company and its cash flows for the year in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America.

We were not engaged to audit, review, or apply any procedures to the adjustments to retrospectively apply the change in accounting related to the share re-designation as described in Note 21 and, accordingly, we do not express an opinion or any other form of assurance about whether such adjustments are appropriate and have been properly applied. Those adjustments were audited by other auditors.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. 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 audit 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 consolidated 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 audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit 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 consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ Friedman LLP

New York, New York

May 2, 2022

We served as the Company’s auditor from 2018 to 2022.

F-3

SUNRISE NEW ENERGY CO., LTD.

CONSOLIDATED BALANCE SHEETS

	As of December 31,
	2023			2022
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	1,395,945		$	1,655,549
Restricted cash		2,224,722			2,638,468
Accounts receivable, net		8,936,315			5,167,701
Notes receivable		835,090			868,679
Inventories, net		15,843,546			18,330,516
Due from related parties		617,324			400,022
Short-term investment		-			3,336,256
Prepaid expenses and other current assets		5,962,953			12,240,642
TOTAL CURRENT ASSETS		35,815,895			44,637,833
NON-CURRENT ASSETS
Long term prepayments and other non-current assets		1,524,494			3,850,985
Plant, property and equipment, net		65,561,251			41,468,383
Land use rights, net		9,673,696			10,083,242
Intangible assets, net		80,940			3,962,650
Long-term investments, net		1,879,986			3,019,281
Finance lease right-of-use assets		5,968,268			-
TOTAL NON-CURRENT ASSETS		84,688,635			62,384,541
TOTAL ASSETS		120,504,530			107,022,374
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable		33,872,581			12,259,772
Note payable		4,148,265			3,876,748
Short-term loan		7,042,353			-
Deferred revenue		349,314			347,231
Deferred revenue - related parties		340,850			347,471
Deferred government subsidy		2,816,941			2,871,665
Due to related parties		4,464,165			885,150
Income taxes payable		501,372			506,638
Finance lease liabilities, current		2,610,633			-
Long-term loan, current		478,880			-
Long-term payable, current		4,710,644			3,706,628
Consideration payable, current		591,369			582,381
Accrued expenses and other current liabilities		1,561,051			639,761
TOTAL CURRENT LIABILITIES		63,488,418			26,023,445
NON-CURRENT LIABILITIES
Long-term loan, non-current		3,507,092			-
Finance lease liabilities, non-current		2,295,339			-
Long term payable, non-current		2,983,062			4,078,843
Consideration payable, non-current		2,703,528			3,358,906
Deferred tax liabilities, net		195,327			199,583
TOTAL NON-CURRENT LIABILITIES		11,684,348			7,637,332
TOTAL LIABILITES		75,172,766			33,660,777
COMMITMENTS AND CONTINGENCIES (Note 23)
MEZZANINE EQUITY
Redeemable non-controlling interests		34,543,186			31,228,329
EQUITY
Class A ordinary shares* (3,500,000,000 shares authorized; $0.0001 par value, 19,574,078 and 18,794,278 shares issued and outstanding as of December 31, 2023 and 2022, respectively)		1,957			1,879
Class B ordinary shares* (1,500,000,000 shares authorized; $0.0001 par value, 6,567,272 shares issued and outstanding as of December 31, 2023 and 2022)		657			657
Additional paid-in capital		32,620,568			33,789,702
Statutory reserves		2,477,940			2,477,940
Accumulated deficits		(30,467,027	)		(6,234,447	)
Accumulated other comprehensive loss		(1,989,087	)		(1,355,358	)
TOTAL SHAREHOLDERS’ EQUITY ATTRIBUTABLE TO SUNRISE NEW ENERGY CO., LTD. ORDINARY SHAREHOLDERS		2,645,008			28,680,373
Non-controlling interests		8,143,570			13,452,895
TOTAL EQUITY		10,788,578			42,133,268
TOTAL LIABILITIES, MEZZANINE EQUITY AND TOTAL EQUITY	$	120,504,530		$	107,022,374

* Retrospectively restated for effect of share re-designation on April 8, 2024 (see Note 21).

The accompanying notes are an integral part of these consolidated financial statements.

F-4

SUNRISE NEW ENERGY CO., LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

	For the years ended December 31,
	2023			2022			2021
REVENUES, NET
Products	$	44,384,004		$	37,583,844		$	2,104,767
Service		666,401			541,824			5,304,505
Total revenues		45,050,405			38,125,668			7,409,272
COSTS OF REVENUES
Products		57,172,626			38,299,090			2,063,296
Service		281,030			1,176,956			1,823,358
Total cost of revenues		57,453,656			39,476,046			3,886,654
GROSS (LOSS) PROFIT		(12,403,251	)		(1,350,378	)		3,522,618
OPERATING EXPENSES
Selling expenses		742,167			1,075,980			946,775
General and administrative expenses		13,040,038			12,678,873			7,834,291
Research and development expenses		1,193,082			1,053,882			2,151,565
Impairment of intangible assets		3,151,467			2,650,020			-
Total operating expenses		18,126,754			17,458,755			10,932,631
LOSS FROM OPERATIONS		(30,530,005	)		(18,809,133	)		(7,410,013	)
OTHER (EXPENSES) INCOME
Investment losses		(1,170,974	)		(3,566,561	)		(2,118,453	)
Interest (expense) income, net		(2,162,109	)		(27,128	)		173,173
Other income, net		942,138			87,390			404,380
Total other expenses		(2,390,945	)		(3,506,299	)		(1,540,900	)
LOSS BEFORE INCOME TAXES		(32,920,950	)		(22,315,432	)		(8,950,913	)
Income taxes (benefit) provision		(226	)		808,970			(236,581	)
NET LOSS		(32,920,724	)		(23,124,402	)		(8,714,332	)
Less: net loss attributable to non-controlling interests		(8,688,144	)		(487,780	)		(311,072	)
NET LOSS ATTRIBUTABLE TO SUNRISE NEW ENERGY CO., LTD. ORDINARY SHAREHOLDERS	$	(24,232,580	)	$	(22,636,622	)		(8,403,260	)
OTHER COMPREHENSIVE (LOSS) INCOME
Foreign currency translation adjustment		(1,165,807	)		(5,123,964	)		700,316
TOTAL COMPREHENSIVE LOSS		(34,086,531	)		(28,248,366	)		(8,014,016	)
Less: comprehensive loss attributable to non-controlling interests		(9,220,222	)		(2,107,480	)		(321,522	)
COMPREHENSIVE LOSS ATTRIBUTABLE TO ORIDNARY SHAREHOLDERS OF SUNRISE NEW ENERGY CO., LTD.	$	(24,866,309	)	$	(26,140,886	)		(7,692,494	)
LOSS PER SHARE
Basic and diluted - Class A and Class B ordinary shares	$	(1.08	)	$	(0.98	)	$	(0.36	)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
Basic and diluted - Class A and Class B ordinary shares		25,622,195			24,820,313			23,638,751

The accompanying notes are an integral part of these consolidated financial statements.

F-5

SUNRISE NEW ENERGY CO., LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

	Ordinary shares*														Retained			Accumulated			Total equity
	Class A ordinary shares				Class B ordinary shares				Additional paid-in			Statutory			earnings (Accumulated			other Comprehensive			attributable to Ordinary			Non- Controlling			Total
	Shares		Amount		Shares		Amount		capital			reserves			deficits)			income (loss)			shareholders			interests			equity
Balance as of January 1, 2021		10,232,728	$	1,023		6,567,272	$	657	$	4,462,177		$	2,473,797		$	25,663,240		$	1,438,140		$	34,039,034		$	111,150		$	34,150,184
Issued shares of ordinary shares, net of offering cost		7,728,000		773		-		-		27,504,639			-			-			-			27,505,412			-			27,505,412
Capital contributions from non-controlling interests		-		-		-		-		-			-			-			-			-			3,332,622			3,332,622
Net loss		-		-		-		-		-			-			(8,403,260	)		-			(8,403,260	)		(311,072	)		(8,714,332	)
Statutory reserves		-		-		-		-		-			(13	)		13			-			-			-			-
Disposal of subsidiary		-		-		-		-		-			17			(17	)		-			-			(2,642	)		(2,642	)
Foreign currency translation adjustment		-		-		-		-		-			-			-			710,766			710,766			(7,808	)		702,958
Balance as of December 31, 2021		17,960,728	$	1,796		6,567,272	$	657	$	31,966,816		$	2,473,801		$	17,259,976		$	2,148,906		$	53,851,952		$	3,122,250		$	56,974,202
Capital contributions from non-controlling interests		-		-		-		-		-			-			-			-			-			12,438,125			12,438,125
Accretion to the redemption value of redeemable non-controlling interests		-		-		-		-		(907,000	)		-			(853,662	)		-			(1,760,662	)		-			(1,760,662	)
Net loss		-		-		-		-		-			-			(22,636,622	)		-			(22,636,622	)		(487,780	)		(23,124,402	)
Statutory reserves		-		-		-		-		-			4,139			(4,139	)		-			-			-			-
Share-based compensation		-		-		-		-		2,729,969									-			2,729,969			-			2,729,969
Settlement for vested shares		833,550		83		-		-		(83	)		-			-			-			-			-			-
Foreign currency translation adjustment		-		-		-		-		-			-			-			(3,504,264	)		(3,504,264	)		(1,619,700	)		(5,123,964	)
Balance as of December 31, 2022		18,794,278	$	1,879		6,567,272	$	657	$	33,789,702		$	2,477,940		$	(6,234,447	)	$	(1,355,358	)	$	28,680,373		$	13,452,895		$	42,133,268
Capital contributions from non-controlling interests		-		-		-		-		-			-			-			-			-			3,910,897			3,910,897
Accretion to the redemption value of redeemable non-controlling interests		-		-		-		-		(3,314,857	)		-			-			-			(3,314,857	)		-			(3,314,857	)
Net loss		-		-		-		-					-			(24,232,580	)		-			(24,232,580	)		(8,688,144	)		(32,920,724	)
Share-based compensation		-		-		-		-		2,145,801			-			-			-			2,145,801			-			2,145,801
Settlement for vested shares		779,800		78		-		-		(78	)		-			-			-			-			-			-
Foreign currency translation adjustment		-		-		-		-		-			-			-			(633,729	)		(633,729	)		(532,078	)		(1,165,807	)
Balance as of December 31, 2023		19,574,078	$	1,957		6,567,272	$	657	$	32,620,568		$	2,477,940		$	(30,467,027	)	$	(1,989,087	)	$	2,645,008		$	8,143,570		$	10,788,578

* Retrospectively restated for effect of share re-designation on April 8, 2024 (see Note 21).

The accompanying notes are an integral part of these consolidated financial statements.

F-6

SUNRISE NEW ENERGY CO., LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the years ended December 31,
	2023			2022			2021
Cash flows from operating activities
Net loss	$	(32,920,724	)	$	(23,124,402	)	$	(8,714,332	)
Adjusted to reconcile net loss to cash used in operating activities
Depreciation and amortization		3,953,328			2,062,499			988,672
Amortization of land use right		217,977			126,042			-
Share-based compensation		2,145,801			2,729,969			-
Deferred tax (benefits) expenses		(454	)		807,412			(232,363	)
Interest expense		575,075			213,823			-
Investment losses		1,170,974			3,618,847			2,118,453
Bad debt expense		3,428,033			2,887,754			3,847,426
Impairment of inventory		7,238,819			2,711,158			-
Impairment of intangible assets		3,151,467			2,650,020			-
Amortization of finance lease right-of-use assets		338,627			213,063			90,320
Changes in operating assets and liabilities:
Accounts receivable		(4,074,715	)		(1,734,486	)		1,729,006
Note receivable		17,080			(899,481	)		-
Due from related parties		(225,160	)		(376,080	)		110,184
Operating lease liabilities		-			(94,381	)		31,145
Inventories		(5,095,430	)		(18,747,772	)		(331,491	)
Prepaid expenses and other current assets		6,157,166			(2,894,690	)		(678,288	)
Accounts payable		6,133,132			12,661,801			-
Notes payable		63,504			4,014,213			-
Income taxes payable		-			-			(3,696,654	)
Deferred revenue		8,724			549,274			(75,857	)
Operating lease liabilities		-			-			(211,213	)
Due to related parties		(295,728	)		100,053			-
Deferred government subsidy		-			2,973,491			-
Accrued expenses and other current liabilities		729,509			(21,528	)		(208,190	)
Net cash used in operating activities		(7,282,995	)		(9,573,401	)		(5,233,182	)
Cash flows from investing activities
Purchase of plant, property and equipment		(5,472,778	)		(43,714,195	)		(1,372,634	)
Prepayment for finance lease right-of-use assets		(1,029,195	)		-			-
Deposit paid for finance lease		(655,990	)		-			-
Purchase of land use right		-			(197,554	)		(6,947,051	)
Purchase of intangible assets		-			(174,895	)		-
Loans to third parties		(16,947	)		(35,682	)		(2,825,359	)
Prepaid for investment		-			-			(650,909	)
Purchase of long-term investments		-			-			(2,289,945	)
Purchase of short-term investments		-			-			(8,000,000	)
Redemption of short-term investment		878,000			-			-
Consideration paid for asset acquisition		(706,125	)		(1,486,746	)		-
Disposal of subsidiary		-			-			(9,300	)
Net cash used in investing activities		(7,003,035	)		(45,609,072	)		(22,095,198	)
Cash flows from financing activities
Proceeds from short-term loan		7,061,249			-			-
Proceeds from long-term loan		4,236,750			-			-
Repayment on long-term loan		(240,082	)		-			-
Proceeds from long term payable, net of issuance cost		4,825,658			8,827,701			-
Repayment on long term payable		(4,782,564	)		(887,788	)		-
Proceeds from short-term borrowings from third parties		2,118,375			-			-
Repayments on short-term borrowings to third parties		(2,118,375	)		-			-
Loans from related parties		3,867,883			795,554			-
Repayment on loans from related parties		(155,347	)		-			-
Repayment on finance lease liabilities		(1,282,358	)		-			-
Proceeds from issuance of ordinary shares in connection with initial public offering, net of issuance cost		-			-			27,504,639
Proceeds from capital contributions by non-controlling shareholders		148,078			37,024,594			3,332,622
Net cash provided by financing activities		13,679,267			45,760,061			30,837,261
Effect of foreign exchange rate on cash and cash equivalents		(66,587	)		(899,786	)		141,322
Net (decrease) increase in cash and cash equivalents		(673,350	)		(10,322,198	)		3,650,203
Cash, cash equivalents and restricted cash, beginning of year		4,294,017			14,616,215			10,966,012
Cash, cash equivalents and restricted cash, end of year	$	3,620,667		$	4,294,017		$	14,616,215
Cash, cash equivalents and restricted cash, end of year		3,620,667			4,294,017			14,616,215
Less: restricted cash		2,224,722			2,638,468			700,060
Cash and cash equivalents, end of year		1,395,945			1,655,549			13,916,155
Supplemental disclosure of cash flow information
Cash paid for income tax	$	42		$	564,335		$	3,699,180
Cash paid for interest	$	1,377,302			-			-
Supplemental non cash transactions
Operating lease right-of-use assets obtained in exchange of operating lease liabilities		-			-		$	311,638
Finance lease right-of-use assets obtained in exchange of finance lease liabilities	$	5,457,510			-			-
Inventories obtained in exchange for accounts receivable		-			-		$	155,003
Plant, property and equipment obtained from account payable	$	15,771,926		$	2,544,488			-
Plant, property and equipment obtained from capital contribution by non-controlling shareholders	$	3,762,819			-			-
Intangible assets obtained from capital contribution by non-controlling shareholders		-		$	4,881,198			-

The accompanying notes are an integral part of these consolidated financial statements.

F-7

SUNRISE NEW ENERGY CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION AND BUSINESS DESCRIPTION

Sunrise New Energy Co., Ltd. (“EPOW”), previously known as Global Internet of People, Inc., or GIOP, is an exempted company with limited liability incorporated under the laws of the Cayman Islands on February 22, 2019. It is a holding company with no business operation.

On March 22, 2019, EPOW incorporated Global Mentor Board Information Technology Limited (“GMB HK”), a limited liability company formed in accordance with laws and regulations of Hong Kong. GMB HK is currently not engaging in any active business and is merely acting as a holding company of Beijing Mentor Board Union Information Technology Co, Ltd. (“GIOP BJ”). GIOP BJ was incorporated by GMB HK as a Foreign Enterprise in China on June 3, 2019.

GIOP BJ incorporated Global Mentor Board (Zibo) Information Technology Co., Ltd. (“SDH”, formerly known as Global Mentor Board (Beijing) Information Technology Co., Ltd.) and Shidong Cloud (Beijing) Education Technology Co., Ltd. (“Shidong Cloud”) on December 5, 2014 and December 22, 2021, respectively.

SDH is a limited liability company incorporated on December 5, 2014 under the laws of China. Since 2017, SDH established several subsidiaries in China, including Global Mentor Board (Hangzhou) Technology Co., Ltd. (“GMB (Hangzhou)”), Global Mentor Board (Shanghai) Enterprise Management Consulting Co., Ltd. (“GMB Consulting”), Linking (Shanghai) Network Technology Co., Ltd. (“GMB Linking”, deconsolidated in July, 2021), Shanghai Voice of Seedling Cultural Media Co., Ltd. (“GMB Culture”), which has a majority owned subsidiary, Mentor Board Voice of Seedling (Shanghai) Cultural Technology Co., Ltd. (“GMB Technology”), Shidong (Beijing) Information Technology Co., Ltd. (“GMB (Beijing)”), and, Beijing Mentor Board Health Technology Co., Ltd. (“GMB Health”) and its major owned subsidiary Shidong Yike (Beijing) Technology Co., Ltd. (“Shidong Yike”), Zibo Shidong Digital Technology Co., Ltd. (“Zibo Shidong”) and its major owned subsidiaries, Shidong Trading Service (Zhejiang) Co., Ltd (“Shidong Trading”, deregistered in November 2022), Shanghai Jiagui Haifeng Technology Co., Ltd. (“Jiagui Haifeng”, disposal in March 2023), Shanghai Nanyu Culture Communication Co., Ltd. (“Nanyu Culture”, deregistered in July 2023) and Shanghai Yuantai Fengdeng Agricultural Technology Co., Ltd. (“Yuantai Fengdeng”, deregistered in April 2023). SDH and its subsidiaries are primarily engaged in providing peer-to-peer knowledge sharing and enterprise services to clients in the People’s Republic of China (“PRC”).

On October 8, 2021, EPOW incorporated SDH (HK) New Energy Tech Co., Ltd. (“SDH New Energy”), a limited liability company formed in accordance with laws and regulations of Hong Kong. SDH New Energy is acting as a holding company of Zhuhai (Zibo) Investment Co., Ltd (“Zhuhai Zibo”) and Zhuhai (Guizhou) New Energy Investment Co., Ltd. (“Zhuhai Guizhou”). Zhuhai Zibo and Zhuhai Guizhou were incorporated by SDH New Energy as Foreign Enterprises in China on October 15, 2021 and November 23, 2021, respectively.

On August 26, 2022, GMB HK transferred its equity interest in GIOP BJ to Zhuhai Zibo. GIOP BJ eventually became the wholly owned subsidiary of Zhuhai Zibo.  

On November 8, 2021, Zhuhai Zibo incorporated Sunrise (Guizhou) New Energy Materials Co., Ltd. (“Sunrise Guizhou”). Sunrise Guizhou incorporated Sunrise (Guxian) New Energy Materials Co., Ltd. (“Sunrise Guxian”) and Guizhou Sunrise Technology Innovation Research Co., Ltd. (“Innovation Research”) on April 26, 2022 and December 13, 2022, respectively. On July 2, 2022, Sunrise Guizhou entered into purchase agreements with original shareholders of Guizhou Sunrise Technology Co., Ltd. (“Sunrise Tech”, formerly as Anlong Hengrui Graphite Material Co., Ltd.) to acquire 100% of Sunrise Tech’s assets and equity ownership. On July 7, 2022, Sunrise Tech became the wholly owned subsidiary of Sunrise Guizhou. Sunrise Guizhou and its subsidiaries are primarily engaged in manufacturing lithium battery materials to clients in the PRC.

As described below in Reorganization, EPOW, through a restructuring which is accounted for as a reorganization of entities under common control (the “Reorganization”), became the ultimate parent entity of its subsidiaries, and the primary beneficiary of the variable interest entity (the “VIE”), SDH, and the VIE’s subsidiaries for accounting purposes under accounting principles generally accepted in the United States of America (“U.S. GAAP”) to the extent that SDH’s the financials results of is consolidated to the condensed consolidated statements under U.S. GAAP. EPOW, its subsidiaries, the VIE and the VIE’s subsidiaries, are collectively hereinafter referred as the “Company”.

Reorganization

On June 10, 2019, GIOP BJ entered into a series of contractual arrangements with SDH and shareholders of SDH. These agreements include an Exclusive Technical and Consulting Service Agreement, an Exclusive Service Agreement, an Exclusive Option Agreement and Powers of Attorney (collectively “VIE Agreements”). Pursuant to the above VIE Agreements, GIOP BJ has the exclusive right to provide SDH with comprehensive technical support, consulting services and other services in relation to the principal business during the term the VIE Agreement. All the above contractual arrangements obligate GIOP BJ to absorb a majority of the risk of loss from business activities of SDH and entitle GIOP BJ to receive a majority of their residual returns. In essence, GIOP BJ is the primary beneficiary of SDH for accounting purpose under U.S. GAAP. Therefore, SDH is considered as a VIE under the Statement of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810 “Consolidation”.

EPOW, together with its wholly owned subsidiaries, GIOP BJ, VIE and VIE’s subsidiaries were effectively controlled by the same shareholders before and after the Reorganization and, therefore, the Reorganization is considered under common control. The consolidation of the Company has been accounted for at historical cost and prepared on the basis as if the Reorganization had become effective as of the beginning of the first period presented in the consolidated financial statements.  

F-8

The consolidated financial statements reflect the activities of the Company and each of the following entities:

Name	Date of Incorporation	Place of incorporation	Percentage of effective ownership	Principal Activities
Subsidiaries
Global Mentor Board Information Technology Limited (“GMB HK”)	March 22, 2019	HK	100%	Holding company
Beijing Mentor Board Union Information Technology Co, Ltd. (“GIOP BJ”)	June 3, 2019	PRC	100%	Holding company of GIOP BJ
Shidong Cloud (Beijing) Education Technology Co., Ltd (“Shidong Cloud”)	December 22, 2021	PRC	75%	Educational consulting
SDH (HK) New Energy Tech Co., Ltd. (“SDH New Energy”)	October 8, 2021	HK	100%	Holding company
Zhuhai (Zibo) Investment Co., Ltd. (“Zhuhai Zibo”)	October 15, 2021	PRC	100%	New energy investment
Zhuhai (Guizhou) New Energy Investment Co., Ltd. (“Zhuhai Guizhou”)	November 23, 2021	PRC	100%	New energy investment
Sunrise (Guizhou) New Energy Materials Co., Ltd.  (“Sunrise Guizhou”)	November 8, 2021	PRC	39.35%	Manufacture of lithium battery materials
Guizhou Sunrise Technology Co., Ltd. (“Sunrise Tech”)	September 1, 2011, acquired through an asset acquisition on July 7, 2022	PRC	39.35%	Manufacture of lithium battery materials
Sunrise (Guxian) New Energy Materials Co., Ltd. (“Sunrise Guxian”)	April 26, 2022	PRC	20.07%	Manufacture of lithium battery materials
Guizhou Sunrise Technology Innovation Research Co., Ltd. (“Innovation Research”)	December 13, 2022	PRC	39.35%	Research and development
Variable Interest Entity (“VIE”) and subsidiaries of VIE
Global Mentor Board (Zibo) Information Technology Co., Ltd. (“SDH” or “VIE”)	December 5, 2014	PRC	VIE	Peer-to-peer knowledge sharing and enterprise service platform provider
Global Mentor Board (Hangzhou) Technology Co., Ltd. (“GMB (Hangzhou)”)	November 1, 2017	PRC	100% by VIE	Consulting, training and tailored services provider
Global Mentor Board (Shanghai) Enterprise Management Consulting Co., Ltd. (“GMB Consulting”)	June 30, 2017	PRC	51% by VIE	Consulting services provider
Shanghai Voice of Seedling Cultural Media Co., Ltd. (“GMB Culture”)	June 22, 2017	PRC	51% by VIE	Cultural and artistic exchanges and planning, conference services provider
Shidong (Beijing) Information Technology Co., LTD. (“GMB (Beijing)”)	June 19, 2018	PRC	100% by VIE	Information technology services provider
Mentor Board Voice of Seeding (Shanghai) Cultural Technology Co., Ltd. (“GMB Technology”)	August 29, 2018	PRC	30.6% by VIE	Technical services provider
Shidong Zibo Digital Technology Co., Ltd. (“Zibo Shidong”)	October 16, 2020	PRC	100% by VIE	Technical services provider
Shidong Trading Service (Zhejiang) Co., Ltd. (“Shidong Trading”)	April 19, 2021	PRC	Deregistered in November 2022	Sale of merchandise
Shanghai Jiagui Haifeng Technology Co., Ltd. (“Jiagui Haifeng”)	November 29, 2021	PRC	Disposed in March 2023	Business incubation services provider
Shanghai Nanyu Culture Communication Co., Ltd. (“Nanyu Culture”)	July 27, 2021	PRC	Deregistered in July 2023	Enterprise information technology integration services provider
Beijing Mentor Board Health Technology Co., Ltd (“GMB Health”)	January 7, 2022	PRC	100% by VIE	Health services
Shidong Yike (Beijing) Technology Co., Ltd. (“Shidong Yike”)	July 16, 2021	PRC	51% by VIE	Health services
Shanghai Yuantai Fengdeng Agricultural Technology Co., Ltd. (“Yuantai Fengdeng”)	March 4, 2022	PRC	Deregistered in April 2023	Agricultural technology service

The VIE contractual arrangements

Neither the Company nor the Company’s subsidiaries own any equity interest in SDH. Instead, The Company directs the activities and receives the economic benefits of SDH’s business operation through a series of contractual arrangements. GIOP BJ, SDH and its shareholders entered into a series of contractual arrangements, also known as VIE Agreements, in June 2019.

F-9

Each of the VIE Agreements is described in detail below:  

Exclusive Technical and Consulting Services Agreement

Pursuant to the Exclusive Technical and Consulting Services Agreement between SDH and GIOP BJ (the “Exclusive Service Agreement”), GIOP BJ provides SDH with technical support, consulting services, business support and other management services relating to its day-to-day business operations and management, on an exclusive basis, utilizing its advantages in technology, human resources, and information. For services rendered to SDH by GIOP BJ under the Exclusive Service Agreement, GIOP BJ is entitled to collect a service fee approximately equal to SDH’s earnings before corporate income tax, i.e., SDH’s revenue after deduction of operating costs, expenses and other taxes, subject to adjustment based on services rendered and SDH’s operation needs.

This agreement became effective on June 10, 2019 and will remain effective unless otherwise terminated as required by laws or regulations, or by relevant governmental or regulatory authorities otherwise terminated earlier in accordance with the provisions of this agreement or relevant agreements separately executed between the parties. Nevertheless, this agreement shall be terminated after all the equity interest in SDH held by its shareholders and/or all the assets of SDH have been legally transferred to GIOP BJ and/or its designee in accordance with the Exclusive Option Agreement (described below).

The Chief Executive Officer (“CEO”) of GIOP BJ, Mr. Haiping Hu, is currently managing SDH pursuant to the terms of the Exclusive Service Agreement. The Exclusive Service Agreement does not prohibit related party transactions. The Company’s audit committee will be required to review and approve in advance any related party transactions, including transactions involving GIOP BJ or SDH.

Equity Pledge Agreement

Under the Equity Pledge Agreement between GIOP BJ, and shareholders of SDH, together holding 100% of the shares of SDH (“SDH Shareholders”), the SDH Shareholders pledged all of their equity interests in SDH to GIOP BJ to guarantee the performance of SDH’s obligations under the Exclusive Service Agreement. Under the terms of the Equity Pledge Agreement, in the event that SDH or the SDH Shareholders breach their respective contractual obligations under the Exclusive Service Agreement, GIOP BJ, as pledgee, will be entitled to certain rights, including, but not limited to, the right to collect dividends generated by the pledged equity interests. The SDH Shareholders also agreed that upon occurrence of any event of default, as set forth in the Equity Pledge Agreement, GIOP BJ is entitled to dispose of the pledged equity interests in accordance with applicable PRC laws. The SDH Shareholders further agreed not to dispose of the pledged equity interests or take any actions that would prejudice GIOP BJ’s interests without the prior written consent of GIOP BJ.

The Equity Pledge Agreement is effective until: (1) the secured debt in the scope of pledge is cleared off; and (2) Pledgers transfer all the pledged equity interests to Pledgees according to the Equity Pledge Agreement, or other entity or individual designated by it.

The purposes of the Equity Pledge Agreement are to (1) guarantee the performance of SDH’s obligations under the Exclusive Service Agreement; (2) make sure the SDH Shareholders do not transfer or assign the pledged equity interests, or create or allow any encumbrance that would prejudice GIOP BJ’s interests without GIOP BJ’s prior written consent. In the event SDH breaches its contractual obligations under the Exclusive Service Agreement, GIOP BJ will be entitled to dispose of the pledged equity interests.

Exclusive Option Agreement

Under the Exclusive Option Agreement, the SDH Shareholders irrevocably granted GIOP BJ (or its designee) an exclusive option to purchase, to the extent permitted under PRC law, once or at multiple times, at any time, part or all of their equity interests in SDH or the assets of SDH. The option price to be paid by GIOP BJ to each shareholder of SDH is RMB10 (approximately US$1.41) or the minimum amount to the extent permitted under PRC law at the time when such transfer occurs.

Under the Exclusive Option Agreement, GIOP BJ may at any time under any circumstances, purchase, or have its designee purchase, at its discretion, to the extent permitted under PRC law, all or part of the SDH Shareholders’ equity interests in SDH or the assets of SDH. The Equity Pledge Agreement, together with the Equity Pledge Agreement, the Exclusive Service Agreement, and Powers of Attorney, enable GIOP BJ to be the primary beneficiary of SDH.

The Exclusive Option Agreement remains effective until all the equity or assets of SDH is legally transferred under the name of GIOP BJ and/or other entity or individual designated by it, or unilaterally terminated by GIOP BJ within 30-day prior written notice.

Powers of Attorney

Under each of the Powers of Attorney, the SDH Shareholders authorized GIOP BJ to act on their behalf as their exclusive agent and attorney with respect to all rights as shareholders, including, but not limited to: (a) attending shareholders’ meetings; (b) exercising all the shareholder’s rights, including voting, that shareholders are entitled to under the laws of China and the Articles of Association, including, but not limited to, the sale or transfer or pledge or disposition of shares in part or in whole; and (c) designating and appointing on behalf of shareholders the legal representative, the executive director, supervisor, the chief executive officer, and other senior management members of SDH.

The Powers of Attorney are irrevocable and continuously valid from the date of execution of the Powers of Attorney, so long as the SDH Shareholders own the equity interests of SDH.

F-10

Spousal Consent

Pursuant to the Spousal Consent, each spouse of the individual shareholders of SDH irrevocably agreed that the equity interest in SDH held by their respective spouses would be disposed of pursuant to the Equity Interest Pledge Agreement, the Exclusive Option Agreement, and the Powers of Attorney. Each spouse of the shareholders agreed not to assert any rights over the equity interest in SDH held by their respective spouses. In addition, in the event that any spouse obtains any equity interest in SDH through the respective shareholder for any reason, he or she agrees to be bound by the contractual arrangements.

Risks in relation to the VIE structure

EPOW believes that the contractual arrangements among GIOP BJ, the VIE and their respective shareholders are in compliance with PRC laws and regulations and are legally enforceable. However, uncertainties in the PRC legal system could limit the EPOW’s ability to enforce the contractual arrangements. If the legal structure and contractual arrangements were found to be in violation of PRC laws and regulations, the PRC government could:

● revoke the business and operating licenses of the Company’s PRC subsidiary and VIE;

● discontinue or restrict the operations of any related-party transactions between the Company’s PRC subsidiary and VIE;

● limit the Company’s business expansion in China by way of entering into contractual arrangements;

● impose fines or other requirements with which the Company’s PRC subsidiary and VIE may not be able to comply;

● require the Company or the Company’s PRC subsidiary and VIE to restructure the relevant ownership structure or operations; or

● restrict or prohibit the Company’s use of the proceeds of the additional public offering to finance.

The Company’s ability to conduct its wisdom sharing and enterprise consulting business may be negatively affected if the PRC government were to carry out any of the aforementioned actions. As a result, the Company may not be able to consolidate its VIE in its consolidated financial statements as it may lose the ability to receive economic benefits from the VIE. The Company, however, does not believe such actions would result in the liquidation or dissolution of the Company, its PRC subsidiary and VIE.

Total assets and liabilities presented on the Company’s consolidated balance sheets and revenue, expense, net loss presented on consolidated statement of operations and comprehensive loss as well as the cash flow from operating, investing and financing activities presented on the consolidated statement of cash flows are substantially the financial position, operation and cash flow of the Company’s VIE and VIE’s subsidiaries. The Company has provided interest free loans of $400,000 to a VIE subsidiary, Zibo Shidong, for the year ended December 31, 2023. The Company has not provided any financial support to VIE and VIE’s subsidiaries for the years ended December 31, 2022 and 2021. The following financial statements of the VIE and VIE’s subsidiaries were included in the consolidated financial statements as of December 31, 2023 and 2022 and for the year ended December 31, 2023, 2022 and 2021:

	As of December 31,
	2023		2022
Cash and cash equivalents	$	264,375	$	336,871
Restricted cash		42,410		-
Accounts receivable, net		1,352		200,539
Inventories		4,789		3,590
Due from related parties		511,452		391,982
Prepaid expenses and other current assets		1,177,643		2,537,524
Total current assets		2,002,021		3,470,506
Long term prepayments and other non-current assets		47,094		14,358
Plant, property and equipment, net		2,649,977		2,874,500
Intangible assets, net		27,322		31,036
Long-term investments		1,879,986		3,019,281
Total non-current assets		4,604,379		5,939,175
Total assets	$	6,606,400	$	9,409,681
Accounts payable	$	49,982	$	50,953
Deferred revenue		311,089		222,605
Deferred revenue - related parties		340,850		347,471
Deferred government subsidy		2,816,941		2,871,665
Income taxes payable		501,526		506,638
Due to related parties		414,200		96,627
Accrued expenses and other current liabilities		478,666		293,699
Total current liabilities		4,913,254		4,389,658
Total liabilities	$	4,913,254	$	4,389,658

F-11

	For the years ended December 31,
	2023			2022			2021
Total net revenues	$	656,113		$	613,679		$	7,409,272
Net loss	$	(3,697,384	)	$	(15,438,135	)	$	(5,629,408	)

	For the years ended December 31,
	2023			2022			2021
Net cash (used in) provided by operating activities	$	(423,730	)	$	(3,320,442	)	$	2,314,408
Net cash used in investing activities		-			-		$	(3,025,281	)
Net cash provided by financing activities	$	400,000			-			-

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  

Basis of presentation

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and have been consistently applied.

Principles of consolidation 

The consolidated financial statements include the financial statements of the Company, its subsidiaries, the VIE and VIE’s subsidiaries for which the Company is the ultimate primary beneficiary for accounting purpose only under U.S. GAAP.

A subsidiary is an entity in which the Company, directly or indirectly, controls more than one half of the voting power, has the power to appoint or remove the majority of the members of the board of directors, to cast a majority of votes at the meeting of the board of directors or to govern the financial and operating policies of the investee under a statute or agreement among the shareholders or equity holders. The Company owns 39.35% equity interest in Sunrise Guizhou, but has the power to cast a majority of votes at the meeting of the board of directors and governs the financial and operating policies of Sunrise Guizhou under an agreement among the shareholders.

All transactions and balances between the Company, its subsidiaries, the VIE and VIE’s subsidiaries have been eliminated upon consolidation.

Non-controlling interests

Non-controlling interests are recognized to reflect the portion of their equity that is not attributable, directly or indirectly, to the Company as the controlling shareholder. As of December 31, 2023, for the Company’s consolidated subsidiaries, the VIE and VIE’ s subsidiaries, non-controlling interests represent: a) a non-controlling shareholder’s 49% ownership interest in GMB (Beijing), GMB Consulting and Shidong Yike; b) a non-controlling shareholder’s 37.81% ownership interest in Sunrise Guizhou; c) a non-controlling shareholder’s 49% ownership interest in GMB Culture, which has a subsidiary called GMB Technology; and d) a non-controlling shareholder’s 25% ownership interest in Shidong Cloud, and 40% ownership interest in Shidong Trading.

As of December 31, 2022, for the Company’s consolidated subsidiaries, the VIE and VIE’ s subsidiaries, non-controlling interests represent: a) a non-controlling shareholder’s 49% ownership interest in GMB (Beijing), GMB Consulting, Nanyu Culture and Jiagui Haifeng; b) a non-controlling shareholder’s 37.81% ownership interest in Sunrise Guizhou; c) a non-controlling shareholder’s 49% ownership interest in GMB Culture, which has a subsidiary called GMB Technology; and d) a non-controlling shareholder’s 25% ownership interest in Shidong Cloud, and 40% ownership interest in Shidong Trading.

Non-controlling interests are presented as a separate line item in the equity section of the Company’s consolidated balance sheets and have been separately disclosed in the Company’s consolidated statements of operations and comprehensive loss to distinguish the interests from that of the Company.

Use of estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates and judgments are based on historical information, information that is currently available to the Company and on various other assumptions that the Company believes to be reasonable under the circumstances. Significant estimates required to be made by management, include, but are not limited to, the assessment of the allowance for credit loss, inventory valuation, depreciable lives of property and equipment, impairment of long-lived assets, impairment of long-term investments that do not have readily determinable fair values, realization of deferred tax assets and accretion to redemption value of redeemable non-controlling interests. Actual results could differ from those estimates.

F-12

Foreign currency translation

The Company’s principal country of operations is the PRC. The financial position and results of its operations are determined using RMB, the local currency, as the functional currency. The Company’s consolidated financial statements are reported using the U.S. Dollars (“US$” or “$”). The results of operations and the consolidated statements of cash flows denominated in foreign currency are translated at the average rate of exchange during the reporting period. Assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the applicable rates of exchange in effect at that date. The equity denominated in the functional currency is translated at the historical rate of exchange at the time of capital contribution. Because cash flows are translated based on the average translation rate, amounts related to assets and liabilities reported on the consolidated statements of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheets. Translation adjustments arising from the use of different exchange rates from period to period are included as a separate component of accumulated other comprehensive loss included in consolidated statements of changes in shareholders’ equity. Gains and losses from foreign currency transactions are included in the Company’s consolidated statements of operations and comprehensive loss.

The value of RMB against US$ and other currencies may fluctuate and is affected by, among other things, changes in the PRC’s political and economic conditions. Any significant revaluation of RMB may materially affect the Company’s financial condition in terms of US$ reporting. The following table outlines the currency exchange rates that were used in preparing the consolidated financial statements:

	December 31, 2023	December 31, 2022	December 31, 2021
Year-end spot rate	US$1= RMB 7.0999	US$1= RMB 6.9646	US$1= RMB 6.3757
Average rate	US$1= RMB 7.0809	US$1= RMB 6.7261	US$1= RMB 6.4515

Fair value measurements

The Company follows the provisions of ASC 820, Fair Value Measurements and Disclosures. ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

Level 2 - Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

Level 3 - Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

The carrying amounts reported in the balance sheets for cash, restricted cash, accounts receivable, notes receivable, due from related parties, advance to suppliers, prepaid expenses and other current assets, deferred revenue, income taxes payable, accounts payable, note payable, due to related parties, accrued expenses and other current liabilities approximate their fair value based on the short-term maturity of these instruments. The carrying amount of long-term loans, financial lease liabilities, long-term payables and consideration payable approximates fair value as its interest rates are at the same level as the current market yield for comparable loans.

The Company’s non-financial assets, such as property and equipment, land use rights and financial lease right-of-use assets would be measured at fair value only if they were determined to be impaired.

As a practical expedient, the Company uses Net Asset Value (“NAV”) or its equivalent to measure the fair value of its certain fund investment. NAV is primarily determined based on information provided by external fund administrators. The Group’s investments valued at NAV as a practical expedient are private equity funds, which represent the short-term investment on the balance sheet.

Cash and cash equivalents

Cash and cash equivalents include cash on hand and demand deposits in accounts maintained with commercial banks, as well as highly liquid investments which are unrestricted as to withdrawal or use and are readily convertible to known amounts of cash. The interest incomes of highly liquid investments are reported in the Company’s consolidated statements of operations and comprehensive loss. The Company maintains the bank accounts in Mainland China and Hong Kong. Cash balances in bank accounts in Mainland China and Hong Kong are not insured by the Federal Deposit Insurance Corporation or other programs.

Restricted cash

Restricted cash represents bank deposits with designated use, which cannot be withdrawn without certain approval or notice. Such restricted cash mainly relates to the deposit for commercial note issuance and an escrowed fund of listing companies.

On August 4, 2022, Sunrise Guizhou entered into a line of credit financing contract with Bank of Guizhou for revolving credit for a term from August 4, 2022 to August 3, 2023. Pursuant to the line of credit contract, the Company was obliged to deposit fifty percent of the notes payable amount issued as restricted cash in the designated bank account in Bank of Guizhou. As of December 31, 2023 and 2022, the deposit for commercial note issuance was $1,976,675 and $1,938,374, respectively.

F-13

On December 14, 2023, Sunrise Guizhou entered into a banker’s acceptance note contract with Shanghai Pudong Development Bank Co., Ltd. (“SPD Bank”) for issuing banker’s acceptance note to the suppliers of Sunrise Guizhou. Pursuant to the contract, the Company was obliged to deposit fifty percent of the note payable amount issued as restricted cash in the designated bank account in SPD Bank. As of December 31, 2023, the deposit for note issuance was $205,637.

The escrowed fund of listing companies was held by an Escrow Agent for the purpose of satisfying the initial $700,000 of the indemnification obligations of the Company, with respect to the Escrowed Funds, for a period of 24 months from the closing of the Company’s initial public offering in February 2021. As of December 31, 2023 and 2022, the escrowed fund balance was $nil and $700,094, respectively.

Short-term investments

The Company evaluates whether an investment is other-than-temporarily impaired based on the specific facts and circumstances. Factors that are considered in determining whether an other-than-temporary decline in value has occurred include the market value of the security in relation to its cost basis, the financial condition of the investee, and the intent and ability to retain the investment for a sufficient period of time to allow for recovery in the market value of the investment.

Accounts receivable, net

Accounts receivables mainly represent amounts due from clients in the ordinary course of business and are recorded net of allowance for doubtful accounts.

On January 1, 2023, the Company adopted ASC 326 Financial Instruments – Credit Losses (“ASC 326”) using the modified retrospective approach through a cumulative-effect adjustment to the accumulated deficit. Upon adoption, the Company changed its impairment model to utilize a current expected credit losses model in place of the incurred loss methodology for financial instruments measured at amortized cost. The Company had not recorded an adjustment to the opening accumulated deficit as of January 1, 2023 due to immaterial cumulative impact of adopting ASC 326.

The Company used an expected credit loss model for the impairment of financial instruments mentioned above as of period ends. For the allowance of the accounts receivable, the Company believes the aging of accounts receivable is a reasonable parameter to estimate expected credit loss, and determines expected credit losses for accounts receivables using an aging schedule as of period ends. The expected credit loss rates under each aging schedule were developed on the basis of the average historical loss rates from previous years, and adjusted to reflect the effects of those differences in current conditions and forecasted changes. The Company measured the expected credit losses of accounts receivable on a collective basis. When an accounts receivable does not share risk characteristics with other accounts receivables, management will evaluate such accounts receivable for expected credit loss on an individual basis. Doubtful accounts balances are written off and deducted from allowance for credit loss, when receivables are deemed uncollectible, after all collection efforts have been exhausted and the potential for recovery is considered remote. The allowance was $8,016,322, and $8,047,527 as of December 31, 2023 and 2022, respectively.

Inventories, net

The inventories as of December 31, 2023 consisted of raw materials, materials in transit, work in process and finished goods. Finished goods were mainly graphite anode materials, health service gift cards, learning course gift cards, Chinese tea, latex pillows and health care products.

Part of the Company’s finished goods, such as health service gift cards, learning course gift cards, Chinese tea, latex pillows and health care products, were obtained through fee exchange arrangements with its customers prior to 2022. These arrangements were entered into at the Company’s discretion to receive inventory in exchange for collection of account receivables and deferred revenue due from the customers. The Company accounted for these nonmonetary exchanges based on the fair values of the assets involved. The cost of inventories acquired in exchange was initially measured at the fair value of the accounts receivable the Company surrendered to obtain them.

F-14

Other than inventories obtained through fee exchange arrangements, the costs of inventories include the cost of raw materials, freight, direct labor and related production overhead. The cost of inventories is calculated using the weighted average method. Inventory shall be measured at the lower of cost and net realizable value. Net realizable value is estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. When evidence exists that the net realizable value of inventory is lower than its cost, the difference shall be recognized as a loss in earnings in the period in which it occurs.

The impairment of inventories provided for lower of cost and net realizable value was $7,238,819, $2,711,158 and $nil for the years ended December 31, 2023, 2022 and 2021, respectively.

Lease

At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is or contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for a consideration. To assess whether a contract is or contains a lease, the Company assess whether the contract involves the use of an identified asset, whether it has the right to obtain substantially all the economic benefits from the use of the asset and whether it has the right to control the use of the asset.

A lease arrangement is being evaluated for classification as operating or financing upon lease commencement. The right-of-use assets and related lease liabilities are recognized at the lease commencement date.

Lease liabilities, which represent the Company’s obligation to make lease payments arising from the lease, and corresponding right of-use assets, which represent the Company’s right to use an underlying asset for the lease term, are recognized at the commencement date of the lease based on the present value of fixed future payments, calculated using the discount rate implicit in the lease, if available, or the Company’s incremental borrowing rate.

The right-of-use of asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and less any lease incentive received.

Finance lease

Finance leases are generally those leases that transfer ownership to the Company or allow the Company to purchase assets at a nominal amount by the end of the lease term. Assets acquired under finance leases are recorded as finance lease right-of-use, or ROU, assets.

The Company’s leases have initial terms ranging from 2 to 3 years for the Company. The lease term includes the lessee’s option to purchase assets at a nominal amount by the end of the lease term. As the lease transfers ownership of the underlying asset to the Company and the Company is reasonably certain to exercise an option to purchase the underlying asset, the Company amortizes the finance lease right-of-use asset to the end of the useful life of the underlying asset.

For finance lease, lease expense is generally front-loaded as the finance lease ROU asset is depreciated on a straight-line basis over the amortization period, but interest expense on the lease liability is recognized in interest expense using the effective interest method which results in more expense during the early years of the lease.

Operating lease

For operating leases, lease expense relating to fixed payments is recognized on a straight-line basis over the lease term. Additionally, the Company elected not to recognize leases with lease terms of 12 months or less at the commencement date. Lease payments on short-term leases are recognized as an expense on a straight-line basis over the lease term, not included in lease liabilities.

Sales and leaseback contracts

The Company enters into sale and leaseback transactions. The Company acts as the seller-lessee, transfers its assets to a third-party entity (the buyer-lessor) and then leases the transferred assets back from the buyer-lessor at a contract designated rental price. The Company evaluates if sales of the underlying assets in the sale and leaseback contract have occurred in accordance with ASC 606. When a sale and leaseback transaction does not qualify for sale accounting, the transaction is accounted for as a financing transaction by the seller-lessee and a lending transaction by the buyer-lessor. The seller-lessee shall not derecognize the transferred asset and shall account for any amounts received as a financial liability.

F-15

Plant, property and equipment, net

Plant, property and equipment are stated at cost less accumulated depreciation. Depreciation of property and equipment is provided using the straight-line method over their expected useful lives, as follows:

Building	22 to 30 years
Machines	10 years
Electronic equipment	3 years
Furniture, fixtures and equipment	3 years
Vehicle	3 years
Leasehold improvements	The shorter of useful life and lease term

Expenditures for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and betterments which substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in the consolidated statements of operation and comprehensive loss in other income or expenses.

Land use right, net

Land use rights are recorded at cost less accumulated amortization Land use rights are amortized on a straight-line basis over the remaining term of the land certificates, from 40 years to 50 years.

Intangible assets, net

The Company’s intangible assets represent intellectual property rights on manufacturing graphite anode materials from capital injection by a non-controlling shareholder of Sunrise Guizhou and the copyright of course videos purchased from a third party including but not limited to course videos which cover subjects such as entrepreneurship development, financial service, corporate governance, team management, marketing strategy and etc. Intangible assets are stated at cost less accumulated amortization and impairment. Intangible assets are amortized on a straight-line basis over their estimated useful lives. The estimated useful lives of intangible assets are determined to be 5 to 10 years in accordance with the period the Company estimates to generate economic benefits from such intellectual property rights and copyright.

Long-term investments

Equity method investments in investees represent the Company’s investments in privately held companies, over which it has significant influence but does not own a majority equity interest or otherwise control. The Company applies the equity method to account for an equity investment, in common stock or in-substance common stock, according to ASC 323 “Investment — Equity Method and Joint Ventures”.

An investment in in-substance common stock is an investment in an entity that has risk and reward characteristics that are substantially similar to that entity’s common stock. The Company considers subordination, risks and rewards of ownership and obligation to transfer value when determining whether an investment in an entity is substantially similar to an investment in that entity’s common stock.

Under the equity method, the Company’s share of the post-acquisition profits or losses of the equity investee is recognized in the consolidated income statements and its share of post-acquisition movements in accumulated other comprehensive income is recognized in shareholders’ equity. When the Company’s share of losses in the equity investee equals or exceeds its interest in the equity investee, the Company does not recognize further losses, unless the Company has incurred obligations or made payments or guarantees on behalf of the equity investee. Investment (gain) loss for long-term investments of $(365,721), $14,072 and $41,925 were recorded in the Company’s consolidated statements of operations and comprehensive loss for the years ended December 31, 2023, 2022 and 2021, respectively.

For other equity investments that do not have readily determinable fair values and over which the Company has neither significant influence nor control through investments in common stock or in-substance common stock, the Company accounts for these investments at cost minus any impairment, if necessary.

The Company continually reviews its investments in equity investees to determine whether a decline in fair value below the carrying value is other than temporary. The primary factors the Company considers in its determination are the length of time that the fair value of the investment is below the Company’s carrying value; the financial condition, operating performance and the prospects of the equity investee. If the decline in fair value is deemed to be other than temporary, the carrying value of the equity investee is written down to fair value. Impairment charges for long-term investments were $1,450,381, $979,426 and $nil recorded in the Company’s consolidated statements of operations and comprehensive loss for the years ended December 31, 2023, 2022 and 2021, respectively.

Impairment of long-lived assets

Long-lived assets, including plant, property and equipment, intangible asset, land use rights and finance lease right-of-use assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset or asset group may not be recoverable. When these events occur, the Company measures impairment by comparing the carrying value of the long-lived assets or assets group to the estimated undiscounted future cash flows expected to result from the use of the assets or asset group and their eventual disposition. If the sum of the expected undiscounted cash flow is less than the carrying amount of the assets or assets group, the Company would recognize an impairment loss based on the fair value of the assets or assets group, which is the excess of carrying amount over the fair value of the assets, using the expected future discounted cash flows.

F-16

Asset acquisition

When the Company acquires other entities, if the assets acquired and liabilities assumed do not constitute a business, the transaction is accounted for as an asset acquisition. Assets are recognized based on the cost, which generally includes the transaction costs of the asset acquisition, and no gain or loss is recognized unless the fair value of noncash assets given as consideration differs from the assets’ carrying amounts on the Company’s consolidated financial statements. The cost of a group of assets acquired in an asset acquisition is allocated to the individual assets acquired or liabilities assumed based on their relative fair value and does not give rise to goodwill.

Redeemable non-controlling interests

Redeemable non-controlling interests represent redeemable preferred shares financing in Sunrise Guizhou from a non-controlling shareholder. As the preferred shares could be redeemed by the shareholder upon the occurrence of certain events that are not solely within the control of the Company, these shares are accounted for as redeemable non-controlling interests. The Company assesses the probability of redemption by the holder of the redeemable non-controlling interests. Due to the probability of being redeemed, the Company adjusts the carrying amount of the mezzanine equity to the redemption value at the end of each reporting period as if it was the redemption date for the redeemable non-controlling interest. The Company accounts for the changes in accretion to the redemption value in accordance with ASC 480, Distinguishing Liabilities from Equity. The redeemable non-controlling interests are recorded at redemption value. The Company adopts equity classification method to classify the ASC 480 offsetting entry as an adjustment to retained earnings (or additional paid-in capital in the absence of retained earnings).

Share-based compensation

Share-based compensation is measured based on the grant date fair value of the equity instrument. Share-based compensation expenses are recognized over the requisite service period based on the graded vesting attribution method with corresponding impact reflected in additional paid-in capital. When no future services are required to be performed by grantees in exchange for an award of equity instruments, the cost of the award is expensed on the grant date. The Group elects to recognize forfeitures when they occur.

Government subsidies

The Company’s PRC based subsidiary received government subsidies from local government. Government subsidies are recognized when there is reasonable assurance that the attached conditions will be complied with. When the government subsidy relates to an expense item, it is net against the expense and recognized in the consolidated statements of income and comprehensive income over the period necessary to match the subsidy on a systematic basis to the related expenses. Where the subsidy relates to an asset acquisition, it is recognized as income in the consolidated statements of operations and comprehensive loss in proportion to the useful life of the related assets. Government grants received for the years ended December 31, 2023, 2022 and 2021 were $380,164, $3,048,035 and $458,182, respectively. As of December 31, 2023 and 2022, the deferred government grants were $2,816,941 and $2,871,665, respectively.

Revenue recognition

The Company recognizes revenue under Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. The core principle of the new revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:

Step 1: Identify the contract with the customer

Step 2: Identify the performance obligations in the contract

Step 3: Determine the transaction price

Step 4: Allocate the transaction price to the performance obligations in the contract

Step 5: Recognize revenue when the company satisfies a performance obligation

The Company mainly offers and generates revenue from five kinds of services to its clients in China, sales of graphite anode materials, member services, enterprise services, online services and other services. Enterprise services include comprehensive tailored services, sponsorship advertising services, and consulting services.

Revenue recognition policies for each type of the Company’s services are discussed as follows:

Sales of graphite anode materials

The Company’s major business is to sell graphite anode materials to its customers. The Company’s major customers are manufacturers of industrial and consumer energy storage lithium-ion batteries, such as batteries for electric vehicles and electric ships, and smart consumer electronics. The Company examines the availability of the inventory, takes control of products in its own and third-party warehouses, and then organizes the shipping and delivery of products to customers after the purchase orders are received from customers.

F-17

The Company accounts for revenue from sales of graphite anode materials on a gross basis as the Company is responsible for fulfilling the promise to provide the desired products to customers, and is subject to inventory risk before the product ownership and risk are transferred and has the discretion in establishing prices. All of the Company’s contracts and purchase orders are fixed prices and have one single performance obligation as the promise is to transfer the products to customers, and there are no separately identifiable other promises in the contracts. The Company’s revenue from sales of graphite anode materials is recognized at a point in time when title and risk of loss passes and the customer accepts the goods, which generally occurs at delivery. There is no separate rebate, discount, or volume incentive involved. Revenue is reported net of all value added taxes (“VAT”).

Member services

The Company offers three tiers of member services, Platinum, Diamond and Protégé, which differ in membership fees as well as the level of the services provided. Members pay a fixed fee for exchange of the right to participate in organized activities offered by the Company, such as study tours and forums, typically within one-year membership period. Any non-participating activities will expire and not be refunded beyond the agreed-upon period. Each member is entitled to choose from same activities offered by the Company for a total of seven times but different level of membership will receive different level of privileges at each activity, such as seating arrangement or private consultation opportunity etc. The activities for Platinum Members are also open to non-members, who pay a pre-set fee for participating in a single activity, while the Company does not offer Diamond and Protégé services to non-members separately.

Each activity represents a separate performance obligation, which is typically 5 days or less. The Company uses an expected cost plus margin approach to estimate the standalone selling prices of each activity. As Members can benefit from each activity on their own in the same way and there is no material difference in the Company’s delivery costs, such as number of staffs involved and size of each activity. Therefore, membership fees are equally allocated to seven performance obligations when the Company determines the transaction price of each performance obligation.

The Company recognizes membership fees as revenue upon completion of each activity as the duration of each activity is short. Membership fees from non-participating activity will be recognized when the agreed-upon period has expired. Membership fees collected in advance are recorded as deferred revenue on the consolidated balance sheets.

Enterprise services

The Company charges its clients service fees for providing enterprise services, which mainly include comprehensive tailored services, sponsorship advertising services and consulting services.

Comprehensive tailored services

The comprehensive tailored services provide tailored packaged services to small and medium business, including conference and salon organization, booth exhibition services, on-site Mentors’ guidance, and other value-added services. The Company typically signs one-year framework agreements and a tailored services contract with the clients, which list the types of tailored services as ordered by the clients to fit their specific needs. Each tailored service is a separate performance obligation under ASC 606, as these performance obligations are distinct, the clients can benefit from each service on their own and the Company’s promises to deliver the services are separately identifiable from each other in the services contract. The performance of each tailored service is usually on a specific date designated by the clients.

The Company establishes a uniform list for the unit price of each type of tailored services with reference to quoted market prices. If no quoted market price is available, the price will be estimated by using an expected cost plus a margin approach.

The Company recognizes the price for each tailored service as revenue when the service has been provided on a specific date designated and the receipt of each tailored service is confirmed by the clients. If a client does not request certain items of the tailored services included in the services contract during the agreed-upon period, the Company will not refund the service fees and the revenue will be recognized upon expiration of service contracts. The tailored services fees collected before providing services are recorded as deferred revenue on the consolidated balance sheets.

Sponsorship advertising service

The Company provides sponsorship advertising service for its clients at certain activities it holds, i.e. study tours and forums. The sponsorship advertising services are mainly to display banners with the clients’ information and distribute clients’ brochures through the activities, so that the clients can enhance their corporate and product image.

The fee the Company charges for sponsorship advertising service depends on multiple specific factors, including number of event participants, location, public interest, etc. The Company considers all factors and determines pricing for each contract separately. The sponsorship advertising fees are recognized as revenue when services have been provided on a specific date designated and receipt of sponsorship advertising services are confirmed by clients. Sponsorship advertising fees collected before providing services are recorded as deferred revenue on the consolidated balance sheets.

Consulting services

The Company provides consulting services to small and medium-sized enterprises by helping them to develop strategies and solutions including corporate reorganization, product promotion and marketing, industry supply chain integration, corporate governance, financing and capital structure, etc. The consulting services are tailored to meet each client’s specific needs and requirements.

F-18

Consulting fees are based on the specifics of the services provided, for instance, time and efforts required, etc. The Company considers comprehensive factors and determines prices with reference to quoted market prices. If no quoted market price is available, the price will be estimated by using an expected cost plus a margin approach.

Consulting fees are recognized as revenue when services have been provided and receipt of consulting services is confirmed by clients as the duration of services is short, typically one month or less. Consulting fees collected before providing any service are presented as deferred revenue on the consolidated balance sheets.

Online services

The Company provides two types of online services to the Company’s APP Users, which are questions and answers (Q&A) session with chosen Mentors and online streaming of courses and programs. Top-up credits are paid by Users through the Company’s APP platform, using which Users can purchase the online services.

Users can raise questions to chosen Mentors or Experts with a fixed fee per Q&A session preset by Mentors or Experts. The Q&A session is usually provided by chosen Mentors or Experts within a course of a 72-hour period. The Company charges 30% of the Q&A fees as a facilitator of online services. The Q&A fees are allocated to the Company and chosen Mentors or Experts automatically by the APP on a 30%/70% split upon completion of Q&A sessions. The Company recognizes this online service fees as revenue at completion of Q&A sessions on a net basis, i.e., in the amount of 30% of allocated Q&A fees, as the Company merely provides a platform for its Users and is not the primary obligor of the Q&A session, neither has risks and rewards as principal.

The Company granted Users the access to view various online courses and programs. Users can subscribe to an annual VIP at a rate of RMB299. The VIP grants Users the access right to the Company’s VIP courses and programs over the subscription period. The Company recognizes the VIP annual subscription fees as revenue on a straight-line basis over VIP subscription period. Users can also purchase à la carte courses and programs at a rate from RMB 9.9 to 299 per course or program by top-up credits through the Company’s APP platform. The payment for the à la carte course and program is not refundable. After the payment is collected by the Company, the Users obtain unlimited access to the courses and programs they purchased without limitation. The Company recognizes the fees a la carte courses and programs as revenue at the point of time that Users obtain access to the courses and programs.

Other services fees are mainly derived from non-member participation of study tours and forums at the service level of Platinum Members. The Company charges non-members a fixed fee for each Member activity and the price for non-members is determined based on the Company’s allocated Member pricing for each activity. Fees are usually collected on site at the date of each activity and revenues are recognized at the completion of such activity.

Contract assets and liabilities

The Group’s contract liabilities consist of deferred revenues, primarily relating to the advance consideration received from customers, which include the advance member service fees and enterprise service fees received from customers. The amount from customers before provision of service is recognized as deferred revenue. The deferred revenue is recognized as revenue once the criteria for revenue recognition are met.

The Company recognized $341,528, $170,061 and $253,157 in revenue for the years ended December 31, 2023, 2022 and 2021, respectively, which related to contract liabilities that existed as of December 31, 2022, 2021 and 2020, respectively. The balances as of December 31, 2023 are expected to be recognized as revenue within one year.

There was no contract asset recorded as of December 31, 2023 and 2022.

Cost of goods sold

The cost of goods sold for the year ended December 31, 2023 and 2022 was primarily the cost of finished goods of graphite anode materials, including single granular coke, secondary granular coke, mixed batches of single particle and secondary coke, depreciation and amortization, labor cost, outsourcing fee and freight. The cost of goods sold for the year ended December 31, 2021 was mainly the cost of electrolytic copper. Cost of goods sold was $57,172,626, $38,299,090, and $2,063,296 for the years ended December 31, 2023, 2022 and 2021, respectively.

Service costs

Service costs primarily include (1) the cost of holding events and activities, such as venue rental fees, conference equipment fees, (2) professional and consulting fees paid to third parties for the Company’s activity; (3) the fees paid to Mentors and Experts; and (4) labor costs. Service costs were $281,030, $1,176,956 and $1,823,358 for the years ended December 31, 2023, 2022 and 2021, respectively.

Income taxes

The Company accounts for income taxes under ASC 740. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

F-19

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

The provisions of ASC 740-10-25, “Accounting for Uncertainty in Income Taxes,” prescribe a more-likely-than-not threshold for consolidated financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. This interpretation also provides guidance on the recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and related disclosures.

The Company believes there were no uncertain tax positions as of December 31, 2023 and 2022, respectively. The Company does not expect that its assessment regarding unrecognized tax positions will materially change over the next 12 months. The Company is not currently under examination by an income tax authority, nor has been notified that an examination is contemplated. The Company will recognize interest and penalties, if any, related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated statement of operations. Accrued interest and penalties will be included on the related tax liability line in the consolidated balance sheet. Interest and penalties incurred related to underpayment of income tax are classified as income tax expense in the period incurred.

Loss per share

The Company computes loss per share (“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC 260”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS are computed by dividing the loss available to ordinary shareholders of the Company by the weighted average ordinary shares outstanding during the period. Diluted EPS takes into account the potential dilution that could occur if securities or other contracts to issue ordinary shares were exercised and converted into ordinary shares.

The Company has determined that the redeemable non-controlling interests are participating securities as the preferred shares participate in retained earnings of Sunrise Guizhou. The Company treats the entire measurement adjustment to redemption value of the redeemable non-controlling interest under ASC 480-10-S99-3A as being akin to a dividend, which affected in the calculation of loss available to ordinary shareholders of the Company used in the loss per share calculation.  

Comprehensive loss

Comprehensive loss income consists of two components, net loss and other comprehensive loss. Other comprehensive loss refers to revenue, expenses, gains and losses that under U.S. GAAP are recorded as an element of shareholders’ equity but are excluded from net loss. Other comprehensive loss consists of foreign currency translation adjustment resulting from the Company translating its financial statements from functional currency into reporting currency.

Risks and uncertainties

Currency risk

A majority of the Company’s expense transactions are denominated in RMB and a significant portion of the Company and its subsidiaries’ assets and liabilities are denominated in RMB. RMB is not freely convertible into foreign currencies. In the PRC, certain foreign exchange transactions are required by law to be transacted only by authorized financial institutions at exchange rates set by the People’s Bank of China (“PBOC”). Remittances in currencies other than RMB by the Company in China must be processed through the PBOC or other Company foreign exchange regulatory bodies which require certain supporting documentation in order to affect the remittance.

The Company maintains certain bank accounts in the PRC. On May 1, 2015, China’s new Deposit Insurance Regulation came into effect, pursuant to which banking financial institutions, such as commercial banks, established in the PRC are required to purchase deposit insurance for deposits in RMB and in foreign currency placed with them. Such Deposit Insurance Regulation would not be effective in providing complete protection for the Company’s accounts, as its aggregate deposits are much higher than the compensation limit, which is RMB 500,000 for one bank. However, the Company believes that the risk of failure of any of these Chinese banks is remote. Bank failure is uncommon in the PRC and the Company believes that those Chinese banks that hold the Company’s cash and cash equivalents are financially sound based on public available information.

Other than the deposit insurance mechanism in the PRC mentioned above, the Company’s bank accounts are not insured by Federal Deposit Insurance Corporation insurance or other insurance.

F-20

Concentration and credit risk

Financial instruments that potentially subject the Company to the concentration of credit risks consist of cash and short-term investments. The maximum exposures of such assets to credit risk are their carrying amounts as of the balance sheet dates. The Company deposits its cash and short-term investments with financial institutions located in jurisdictions where the subsidiaries are located. The Company believes that no significant credit risk exists as these financial institutions have high credit quality.

The Company’s exposure to credit risk associated with its trading and other activities is measured on an individual counterparty basis, as well as by group of counterparties that share similar attributes. There were $16,977,973, $11,100,114 and $4,766,496 of revenue from three clients which represented 38%, 25% and 11% of the total revenues for the years ended December 31, 2023, respectively. There were $10,837,501, $7,449,250, $7,358,181 and $7,193,849 of revenue from four clients which represented 28%, 20%, 19% and 19% of the total revenues for the years ended December 31, 2022, respectively. There was $2,000,483 of revenue from one client which represented 27% of the total revenues for the years ended December 31, 2021.

There were $2,008,773, $1,932,857, $1,884,206 and $1,340,182 of account receivable from four clients which represented 22%, 22%, 21% and 15% of the total account receivable as of December 31, 2023, respectively. There was $1,549,436 of account receivable from one client which represented 12% of the account receivable as of December 31, 2022.

Concentrations of credit risk can be affected by changes in political, industry, or economic factors. To reduce the potential for risk concentration, The Company generally requires advanced payment before delivery of the services but may extend unsecured credit to its clients in the ordinary course of business. Credit limits are established and exposure is monitored in light of changing counterparty and market conditions. The Company did not have any material concentrations of credit risk outside the ordinary course of business as of December 31, 2023 and 2022.  

Interest rate risk

Fluctuations in market interest rates may negatively affect the financial condition and results of operations. The Company is exposed to floating interest rate risk on cash deposit and floating rate borrowings, and the risks due to changes in interest rates are not material. The Company has not used any derivative financial instruments to manage its interest risk exposure.

Other uncertainty risk

The Company’s major operations are conducted in the PRC. Accordingly, the political, economic, and legal environments in the PRC, as well as the general state of the PRC’s economy may influence the Company’s business, financial condition, and results of operations.

The Company’s major operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic, and legal environment. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, and rates and methods of taxation, among other things. Although the Company has not experienced losses from these situations and believes that it is in compliance with existing laws and regulations, including its organization and structure disclosed in Note 1, this may not be indicative of future results.

Recently issued accounting pronouncements  

The Company considers the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued. The Company is an “emerging growth company” (“EGC”) as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, EGC can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies.

In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU updates reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance. The amendments in this ASU are effective for public entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is still evaluating the effect of the adoption of this guidance.

In December 2023, the FASB issued Accounting Standards Update (ASU) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances the transparency and decision usefulness of income tax disclosures. The amendments address more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The ASU also includes certain other amendments to improve the effectiveness of income tax disclosures. The amendments in this ASU are effective for public business entities for annual periods beginning after December 15, 2024 on a prospective basis. Early adoption is permitted. The Company is still evaluating the effect of the adoption of this guidance.

F-21

NOTE 3 –GOING CONCERN

As reflected in the consolidated financial statements, the Company incurred net losses of $32,920,724, $23,124,402 and $8,714,332 for the years ended December 31 2023, 2022 and 2021, respectively. Net cash used in operating activities were $7,282,995, $9,573,401 and $5,233,182 for the years ended December 31, 2023, 2022 and 2021, respectively. The working capital deficit was $27,672,523 as of December 31, 2023. Total cash, cash equivalents and restricted cash decreased by $673,350 and $10,322,198 for the years ended December 31, 2023 and 2022, respectively.

These adverse conditions and events raised substantial doubt about the Company’s ability to continue as a going concern. For the next 12 months from the issuance date of this report, the Company plans to continue implementing various measures to boost revenue and controlling the cost and expenses. Beginning in fiscal year 2022, the Company has started to transit its core business from knowledge sharing and enterprise services to sales of graphite anode material products. In assessing its liquidity, management monitors and analyzes the Company’s cash on-hand, its ability to generate sufficient revenue sources and ability to obtain additional financial support in the future, and its operating and capital expenditure commitments. The Company intends to finance its future working capital requirements and capital expenditures from financing activities for the cash shortfalls and the negative operating cash flows. The Company expects continued capital financing through debt or equity issuances to support its working capital requirements.

As of December 31, 2023, the Company had cash of $1,395,945. The management believes that it would be able to make borrowings from banks based on past experiences and the Company’s good credit history when necessary. As of December 31, 2023, the Company had available line of credit from each of SPD Bank and Post Savings Bank of China (“Post Bank”) for RMB8,540,000 and RMB1,700,000, approximately $1,202,834 and $239,440, respectively.

On May 16, 2023, Sunrise Guizhou entered into a credit facility agreement with China Everbright Bank (“Everbright Bank”) to obtain revolving fund up to RMB 100,000,000, approximately $14,084,705, for a term from June 1, 2023 to May 31, 2024. As of December 31, 2023, the Company had been able to utilize the line of credit for RMB 50,000,000 (approximately $7,042,353) with interest rates from 2% to 4.5% which would mature from June 4, 2024 to September 25, 2024, collateralized by the pledge of land use right of Sunrise Tech for RMB 50,000,000. The remaining unused RMB 50,000,000 line of credit will be available to the Company if additional collateral with adequate value is acknowledged by Everbright Bank.

On January 30, 2024, Sunrise Guizhou entered into a discounted commercial bill financing arrangement with Industrial and Commercial Bank of China Xingyi Branch (“ICBC”) for a contractual term from January 30, 2024 to January 30, 2025. The Company obtained the commercial bills from customers and subsequently discounted these commercial bills in ICBC. In the event of a default by the customers who do not pay the due commercial bills to ICBC, ICBC will have recourses against the Company.

On March 8, 2024, Sunrise Guizhou obtained bank loan of RMB100,000,000, approximately $14,084,705, from China Construction Bank (“CCB”) Qianxinan Branch for a term from March 8, 2024 to March 8, 2026.

Currently, the Company is working to improve its liquidity and capital sources primarily through cash flows from operation, debt financing, and financial support from its principal shareholder. In order to fully implement its business plans and sustain continued growth, the Company may also seek equity financing from outside investors when necessary.

The Company can make no assurances that required financings will be available for the amounts needed, or on terms commercially acceptable to the Company, if at all. If one or all of these events does not occur or subsequent capital raises are insufficient to bridge financial and liquidity shortfall, there would likely be a material adverse effect on the Company and its consolidated financial statements.

The consolidated financial statements have been prepared assuming that the Company will continue as a going concern and, accordingly, do not include any adjustments that might result from the outcome of this uncertainty.

NOTE 4 – ACCOUNTS RECEIVABLE, NET

Accounts receivable consisted of the following:

	As of December 31,
	2023			2022
Accounts receivable	$	16,952,637		$	13,215,228
Allowance for credit loss		(8,016,322	)		(8,047,527	)
Accounts receivable, net	$	8,936,315		$	5,167,701

F-22

The movement of allowance of credit loss is as follows:

	As of December 31,
	2023			2022			2021
Balance at beginning of the year	$	8,047,527		$	5,744,387		$	1,808,889
Current year addition		196,717			2,887,754			3,890,827
Write-off		-			-			(43,401	)
Reversed		(74,564	)		-			-
Foreign currency translation adjustments		(153,358	)		(584,614	)		88,072
Balance at end of the year	$	8,016,322		$	8,047,527		$	5,744,387

Doubtful accounts provision was $196,717, $2,887,754 and $3,847,426 recorded for the years ended December 31, 2023, 2022 and 2021, respectively.

NOTE 5 – INVENTORIES, NET

Inventories as of December 31, 2023 and 2022 consisted of the following:

	As of December 31,
	2023		2022
Raw materials	$	2,958,413	$	3,237,940
Finished goods		2,590,651		3,670,941
Work in process		10,289,693		11,418,045
Others		4,789		3,590
Total	$	15,843,546	$	18,330,516

The impairment of inventories was $7,238,819, $2,711,158 and $nil for the years ended December 31, 2023, 2022 and 2021, respectively. 

NOTE 6 – SHORT-TERM INVESTMENT

In February 2021, the Company entered into an investment agreement with Viner Total investment Fund (the “Fund”) to invest in the Fund with the total investment consideration of $8,000,000. The Fund is an exempted company incorporated in the Cayman Islands and managed by Mainstream Fund Services (HK). The Fund is invested in a wide range of instruments with no specific limitations. The redemption of such shares for cash can be made with a one-month advanced written notice (such advanced written notice period can be extended by the administrator).

The value of a private equity fund is measured at fair value with gains and losses recognized in earnings. As a practical expedient, the Company uses Net Asset Value (“NAV”) or its equivalent to measure the fair value of the Fund. NAV is primarily determined based on information provided by external fund administrators. The NAV of the Fund was $3,336,256 as of December 31, 2022. The Company redeemed the Fund with a redemption value of $3,282,770 on August 2, 2023. Investment loss of $86,314, $2,625,349 and $2,038,395 was recorded in the Company’s consolidated statements of operations and comprehensive loss for the years ended December 31, 2023, 2022 and 2021, respectively.  

F-23

NOTE 7 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

		As of December 31,
		2023			2022
Prepaid expenses		$	3,461		$	211,365
Advance to supplier			505,763			2,820,551
Loans to third parties	(1)		57,747			2,873,818
Receivable from redemption on short-term investment	(2)		2,371,942			-
Prepayment for investment			971,845			1,206,099
Other receivables			229,918			401,936
Interest receivable			364,833			365,478
Prepaid value added tax (“VAT”) and income tax	(3)		1,972,748			4,468,404
Deposits for operating lease			31,222			36,574
Subtotal			6,509,479			12,384,225
Less: allowance for prepaid expenses and other current assets			(546,526	)		(143,583	)
Total		$	5,962,953		$	12,240,642

(1) On March 10, 2021, the Company signed a loan contract with a third party, Waichun Logistics Technology Limited (“Waichun”), to lend $825,000, with annual interest rate of 8%, and would be due on May 10, 2022. The Company renewed the contract with Waichun on May 10, 2022 to extend the loan period to December 31, 2023; In addition, the Company signed a loan contract on March 8, 2021 and renewed it on March 6, 2022 with Waichun to lend $2,000,000 with annual interest rate of 8%, which would be due on December 31, 2023. As of December 31, 2023, Waichun did not repay $2,825,000 to the Company. The Company assessed the collectivity of the loan and determined that it was more likely than not that the Company would not be able to recover the loan. The Company had written off the $2,825,000 loans made to Waichun for the year ended December 31, 2023.

(2) In February 2021, the Company entered into an investment agreement with Viner Total investment Fund (the “Fund”) to invest in the Fund with the total investment consideration of $8,000,000. On August 2, 2023, the Company redeemed the Fund with a redemption value of $3,282,770, of which $2,371,942 had not been received as of December 31, 2023. By the date of issuance of the consolidated financial statements, the Company has received $2,043,666 in the year 2024.

(3) The amount of VAT payable is determined by applying the applicable tax rate to the invoiced amount of services provided (output VAT) less VAT paid on purchases made with the relevant supporting invoices (input VAT). The Company’s input VAT exceeded output VAT as the Company purchased plant, property and equipment for manufacturing graphite anode materials as of December 31, 2023 and 2022.

NOTE 8 – LONG TERM PREPAYMENTS AND OTHER NON-CURRENT ASSETS

		As of December 31,
		2023		2022
Prepaid for equipment	(1)	$	822,750	$	3,836,627
Finance lease deposit			654,235		-
Others			47,509		14,358
Total		$	1,524,494	$	3,850,985

(1) Prepaid for equipment represented advance payment on the production line equipment by Sunrise Guizhou, which had not been shipped as of December 31, 2023 and 2022, respectively.

Note 9 – PLANT, PROPERTY AND EQUIPMENT, NET  

Plant, property and equipment, stated at cost less accumulated depreciation, consisted of the following:  

	As of December 31,
	2023			2022
Building	$	29,618,983		$	4,656,184
Machines		35,880,013			16,341,419
Vehicles		399,822			332,113
Electronic equipment		878,145			587,131
Furniture, fixtures and equipment		333,183			139,650
Leasehold improvements		397,421			405,141
Subtotal		67,507,567			22,461,638
Construction in progress		2,401,354			20,135,220
Less:
Accumulated depreciation		(4,347,670	)		(1,128,475	)
Plant, property and equipment, net	$	65,561,251		$	41,468,383

Depreciation expense was $3,249,396, $750,220 and $198,747 for the fiscal years ended December 31, 2023, 2022 and 2021, respectively.

F-24

NOTE 10 – LAND USE RIGHTS, NET

Land use rights, stated at cost less accumulated amortization, consisted of the following:

	As of December 31,
	2023			2022
Land use rights - cost	$	10,010,496		$	10,204,968
Less:
Accumulated  amortization		(336,800	)		(121,726	)
Land use rights, net	$	9,673,696		$	10,083,242

For the years ended December 31, 2023, 2022 and 2021, amortization expense amounted to $217,977 and $126,042 and $nil, respectively. The following is a schedule of future amortization of land use rights as of December 31, 2023:

2024	$	217,394
2025		217,394
2026		217,394
2027		217,394
2028 and thereafter		8,804,120
Total	$	9,673,696

NOTE 11 – INTANGIBLE ASSETS, NET

Intangible assets, stated at cost less accumulated amortization and impairment, consisted of the following:

	As of December 31,
	2023			2022
Copyrights of course videos	$	4,783,485		$	4,876,413
Intellectual property rights		4,451,425			4,498,261
Intangible assets, cost		9,234,910			9,374,674
Less:
Accumulated amortization		(3,429,798	)		(2,852,753	)
Impairment		(5,724,172	)		(2,559,271	)
Intangible assets, net	$	80,940		$	3,962,650

The Company recorded impairment loss on intangible assets of $3,151,467, $2,650,020 and $nil for the years ended December 31,2023, 2022 and 2021, respectively.

For the years ended December 31, 2023, 2022 and 2021, amortization expense amounted to $703,932 and $1,312,279 and $789,925, respectively. The following is a schedule of future amortization of intangible asset as of December 31, 2023:

2024	$	3,123
2025		3,123
2026		3,123
2027		3,123
2028 and thereafter		68,448
Total	$	80,940

F-25

NOTE 12 – LONG-TERM INVESTMENTS

The Company’s long-term investments consist of the following:

	As of December 31,
	2023			2022
Equity method investments:
Shidong (Suzhou) Investment Co., Ltd. (“Suzhou Investment”)	$	36,967		$	37,056
Shenzhen Jiazhong Creative Capital LLP (“Jiazhong”)		1,772,594			1,435,832
Equity investments without readily determinable fair value:
Beijing Jinshuibanlv Technology Co., Ltd. (“Jinshuibanlv”)		1,126,776			1,148,665
Hangzhou Zhongfei Aerospace Health Management Co., Ltd. (“Zhongfei”)		422,541			430,750
Shanghai Zhongren Yinzhirun Investment Management Partnership (“Yinzhirun”)		281,694			287,167
Jiangxi Cheyi Tongcheng Car Networking Tech Co., Ltd.(“Cheyi”)		223,626			227,970
Chengdu Wanchang Enterprise Management Consulting Partnership (Limited Partnership) (“Wanchang”)		70,424			71,792
Shanghai Outu Home Furnishings Co., Ltd. (“Outu”)		70,424			71,792
Zhejiang Qianshier Household Co., Ltd.(“Qianshier”)		70,424			71,792
Taizhou Jiamenkou Auto Greengrocer’s Delivery Technology Co., Ltd. (“Jiamenkou”)		70,424			71,792
Zhejiang Yueteng Information Technology Co., Ltd. (“Yueteng”)		70,424			71,792
Shidong Funeng(Ruzhou) Industry Development Co., Ltd.( “Funeng”)		38,029			38,767
Dongguan Zhiduocheng Car Service Co., Ltd. (“Car Service”)		25,352			25,845
Subtotal		4,279,699			3,991,012
Less: impairment		(2,399,713	)		(971,731	)
Total	$	1,879,986		$	3,019,281

Equity method investments 

Investment in Suzhou Investment

In December 2017, the Company acquired 17% of the shareholding of Suzhou Investment with cash consideration of RMB 850,000. As the Company’s CEO, Mr. Haiping Hu is Suzhou Investment’s director and the Company can exercise significant influence on Suzhou Investment’s business operation, the Company therefore accounted for this investment under equity methods from December 2017 and share the profit or loss of Suzhou Investment accordingly. For the years ended December 31, 2023, 2022 and 2021, the Company recognized investment (gain) losses of $(619), $14,072 and $14,025, respectively, according to its share of the post-acquisition losses of Suzhou Investment.

Investment in Jiazhong

In December 2020, the Company acquired 33% of partnership share of Jiazhong as a limited partner with cash consideration of RMB 10,000,000, approximately $1,408,469. The Company has fully paid RMB 10,000,000 as of December 31, 2020. Since the Company owns 33% of the partnership share of Jiazhong as a limited partner, therefore it accounts for the investment of Jiazhong under equity method and shares the profit or loss of Jiazhong accordingly. For the years ended December 31, 2023, 2022 and 2021, the Company recognized investment (gain) of $(365,102), $nil and $nil, respectively, according to its share of the post-acquisition losses of Jiazhong.

F-26

Equity investments without readily determinable fair value

Investment in Jinshuibanlv

In April 2021, the Company signed an investment agreement with Beijing Zhitong Zhenye Technology Co., Ltd. and Li Jiyou to invest RMB8,000,000, approximately $1,126,776, to Jinshuibanlv, which is accounting for 4% of its equity interest. Jinshuibanlv mainly operates an online tax management system. The Company has no control, joint control or significant influence on the invested units, and therefore accounted for the investment of Jinshuibanlv at cost minus impairments and plus or minus observable changes in prices. In 2023, the Company noticed that Jinshuibanlv had encountered going-concern issue due to the fact that it incurred significant loss and had insufficient bank and cash to support its operations. Therefore, the Company determined that the impairment on investment was other-than-temporary. Full impairment of $1,129,800 was recognized for investment of Jinshuibanlv for the year ended December 31, 2023.

Investment in Zhongfei

In November 2020, the Company acquired 3% of shareholding interest of Zhongfei through nonmonetary transactions, with which are entered into at the Company’s discretion to receive equity interest in exchange of collection of account receivables due from Zhongfei of RMB3,000,000, approximately $422,541. In 2021, The Company provided it with a customized service worth of RMB3,000,000. The service has been completed and Zhongfei has decided to transfer 3% of the equity according to its fair value to the Company. The registration change was completed as of December 31, 2021. The Company does not have significant influence or control over Zhongfei, and the equity investment does not have readily determinable market value, and therefore accounted for the investment of Zhongfei at cost minus impairments and plus or minus observable changes in prices. The cost of equity interest acquired in exchange is initially measured at the fair value of the account receivables the Company surrendered to obtain them. In 2022, the Company noticed that Zhongfei had encountered going-concern issue and determined that the impairment on investment was other-than-temporary. Full impairment of $446,025 was recognized for investment of Zhongfei for the year ended December 31, 2022.

Investment in Yinzhirun

In December 2016, the Company acquired 0.45% of shareholding interest of Yinzhirun with cash consideration of RMB 2,000,000, approximately $281,694. The Company does not have significant influence or control over Yinzhirun, and the equity investment does not have readily determinable market value, and therefore accounted for the investment of Yinzhirun at cost minus impairments and plus or minus observable changes in prices. Yinzhirun is the intermediate holding company for Shanghai PeopleNet Security Technology Co., Ltd. (“PeopleNet”). The Company noticed that PeopleNet was involved in legal proceedings for bankruptcy initiated by its debtor, and its accounts receivable, intellectual properties, brand name have been subject to the judicial auction since February 2024, all of which raised significant concerns about the Yinzhirun’s ability to continue as a going concern. Full impairment of $282,450 was recognized for investment of Yinzhirun for the year ended December 31, 2023.

Investment in Cheyi

In November 2020, the Company acquired 0.5% of shareholding interest of Cheyi through nonmonetary transactions, with which are entered into at the Company’s discretion to receive equity interest in exchange of collection of account receivables due from Cheyi of RMB1,587,719, approximately $223,626. In 2021, the Company provided it with a membership service worth of RMB1,500,000. This service has been completed. Cheyi has a poor capital turnover, it has decided to transfer 0.5% of the equity according to its fair value to the Company and registration change was completed as of December 31, 2021. The Company accounts for these non-monetary exchanges based on the fair values of the assets involved. The Company does not have significant influence or control over Cheyi, and the equity investment does not have readily determinable market value, and therefore accounted for the investment of Cheyi at cost minus impairments and plus or minus observable changes in prices. The cost of equity interest acquired in exchange is initially measured at the fair value of the account receivables the Company surrendered to obtain them.

The Company noticed that Industry and Commerce Administration of Nanchang Xihu Branch was not able to perform on-site inspection on Cheyi’s subsidiary Nanchang Qingchong Technology Co., Ltd. (“Qingchong”) in August 2022; Another Cheyi’s subsidiary, Jiangxi Cheyi Tongcheng Vehicle Networking Technology Co., Ltd. (“Cheyi Tongcheng”) had a legal dispute with CCB Nanchang Branch on March 9, 2023. The Company noticed the above factors that raise significant concerns about the investee’s ability to continue as a going concern. Full impairment of $236,053 was provided for investment of Cheyi for the year ended December 31, 2022.

Investment in Wanchang

In September 2019, the Company initially acquired 11.11% of partnership share of Chengdu Zhongfuze Investment LLP (“Zhongfuze”) with cash consideration of RMB500,000, approximately $70,424. The Company has fully paid RMB500,000 as of December 31, 2020. On December 6, 2022, the asset under Zhongfuze was transferred to Wanchang and the Company’s partnership share in Zhongfuze was simultaneously transferred to Wanchang. As a result, the Company owned 0.64% of the partnership share in Wanchang. The Company does not have significant influence or control over Wanchang, and the partnership share investment does not have readily determinable market value, and therefore accounted for the investment of Wanchang at cost minus impairments and plus or minus observable changes in prices.

Investment in Outu

In December 2019, the Company acquired 15% of shareholding interest of Outu with cash consideration of RMB3,000,000, approximately $422,541. The Company has paid RMB 500,000, approximately $70,424, as of December 31, 2022. The Company does not have significant influence or control over Outu, and the equity investment does not have readily determinable market value, and therefore accounted for the investment of Outu at cost minus impairments and plus or minus observable changes in prices. In 2022, the Company noticed that Qutu had encountered a going-concern issue and determined that the impairment on investment was other-than-temporary. Full impairment of $74,337 was provided for investment of Outu for the year ended December 31, 2022.

F-27

Investment in Qianshier

In December 2020, the Company acquired 5% of shareholding interest of Qiansier through nonmonetary transactions with, which are entered into at the Company’s discretion to receive equity interest in exchange of collection of account receivables due from Qianshier of RMB 500,000, approximately $70,424. The Company accounts for these nonmonetary exchanges based on the fair values of the assets involved. The Company does not have significant influence or control over Qianshier, and the equity investment does not have readily determinable market value, and therefore accounted for the investment of Qianshier at cost minus impairments and plus or minus observable changes in prices. The cost of equity interest acquired in exchange is initially measured at the fair value of the account receivables the Company surrendered to obtain them.

In 2022, the Company noticed Qianshier had been involved in proceedings as a dishonest entity subject to enforcement in connection with a rental dispute, which raised significant concerns about the investee’s ability to continue as a going concern. Full impairment of $74,337 was provided for investment of Qianshier for the year ended December 31, 2022.  

Investment in Jiamenkou

In June 2020, the Company acquired 5% of shareholding interest of Jiamenkou through nonmonetary transactions with Jiamenkou, which are entered into at the Company’s discretion to receive equity interest in exchange of collection of account receivables due from Jiamenkou of RMB500,000, approximately $70,424. The Company accounts for these nonmonetary exchanges based on the fair values of the assets involved. The Company does not have significant influence or control over Jiamenkou, and the equity investment does not have readily determinable market value, and therefore accounted for the investment of Jiamenkou at cost minus impairments and plus or minus observable changes in prices. The cost of equity interest acquired in exchange is initially measured at the fair value of the account receivables the Company surrendered to obtain them. In 2022, the Company noticed Jiamenkou was involved in legal proceedings as respondent to its debt guarantor, which raised significant concerns about the investee’s ability to continue as a going concern. Full impairment of $74,337 was provided for investment of Jiamenkou for the year ended December 31, 2022.

Investment in Yueteng

In June 2020, the Company acquired 5% of shareholding interest of Yueteng through nonmonetary transactions with Yueteng, which are entered into at the Company’s discretion to receive equity interest in exchange of collection of account receivables due from Yueteng of RMB500,000, approximately $70,424. The Company accounts for these nonmonetary exchanges based on the fair values of the assets involved. The Company does not have significant influence or control over Yueteng, and the equity investment does not have readily determinable market value, and therefore accounted for the investment of Yueteng at cost minus impairments and plus or minus observable changes in prices. The cost of equity interest acquired in exchange is initially measured at the fair value of the account receivables the Company surrendered to obtain them. In 2022, the Company determined that the investment was impaired and the impairment was other-than-temporary. Full impairment of $74,337 was provided for investment of Taizhoujia for the year ended December 31, 2022.

Investment in Funeng

In August 2019, the Company subscribed capital with cash consideration of RMB 570,000 and acquired 19% of shareholding interest of Funeng. The Company has paid RMB 270,000 as of December 31, 2020. The Company does not have significant influence or control over Funeng, and the equity investment does not have readily determinable market value, and therefore accounted for the investment of Funeng at cost minus impairments and plus or minus observable changes in prices. In 2023, the Company noticed that Funeng had encountered a going-concern issue due to the fact that it did not have sufficient bank deposits and cash to support its operation. Therefore, the Company determined that the impairment on investment was other-than-temporary. Full impairment of $38,131 was provided for investment of Funeng for the year ended December 31, 2023.

Investment in Car Service

In November 2017, the Company acquired 1.5 % of shareholding interest of Car Service with cash consideration of RMB90,000. In May 2019, the shareholding interest the Company held was diluted to 0.98% after Car Service received capital from a new shareholder. The Company does not have significant influence or control over Car Service, and the equity investment does not have readily determinable market value, and therefore accounted for the investment of Car Service at cost minus impairments and plus or minus observable changes in prices. In 2021, the Company noticed that with the adverse impact of COVID-19, Car Service failed to publish the annual report of 2020 in accordance with the time limit to the Industry and Commerce Administration of Dongguan Nancheng Branch, which was factors that raise significant concerns about the investee’s ability to continue as a going concern. Full impairment of $27,900 was provided for investment of Car Service for the year ended December 31, 2021.

F-28

NOTE 13 – ASSET ACQUISITION

In July 2022, Sunrise Guizhou entered into purchase agreements with original shareholders of Sunrise Tech (formerly known as Anlong Hengrui Graphite Material Co., Ltd.) to acquire 100% of Sunrise Tech’s assets and equity ownership for a gross consideration of RMB 40,000,000 (approximately $5,743,331), among of which RMB10,000,000 (approximately $1,486,746) was paid in July 2022. In July 2022, the Group completed the acquisition. Sunrise Tech held three land use rights and two buildings.

The Company evaluated the acquisition of the purchased assets under ASC 805-Business Combination (ASC 805), and concluded that as substantially all of the fair value of the gross assets acquired is concentrated in an identifiable group of similar assets, the transaction did not meet the requirements to be accounted for as a business combination and therefore was accounted for as an asset acquisition.

The purchase prices of the assets as of the acquisition date are as follows:

Land use rights	$	3,654,545
Plant, property and equipment – buildings		1,853,556
Total assets acquired		5,508,101
Deferred tax liabilities		(199,813	)
Net assets acquired	$	5,308,288

The Company recognized any excess consideration transferred over the fair value of the net assets acquired on a relative fair value basis to the identifiable net assets. The Company determined the estimated fair values using Level 3 inputs after review and consideration of relevant quoted market prices of comparable companies and relevant information.

In 2023, the Company had paid RMB 5,000,000 (approximately $706,125) to the original shareholders of Sunrise Tech. The unpaid consideration RMB25,000,000 (approximately $3,521,176) will be paid in installments from 2024 to 2026. These consideration payables were interest free, and the present value was discounted using the incremental borrowing rate. The current and non-current portion of the consideration payable was $591,369 and $ 2,703,528, respectively, as of December 31, 2023. The current and non-current portion of the consideration payable was $582,381 and $3,358,906, respectively, as of December 31, 2022. The Company recorded interest expense of $133,310 and $71,272 relating to the amortization of the discount for the year ended December 31, 2023 and 2022, respectively. The consideration payable is guaranteed by Mr. Haiping Hu, CEO and Chairman of the Board of Director.

NOTE 14 – FINANCE LEASES

The Company’s leases are mainly related to graphite anode material manufacturing equipment leases from financial lease companies. Finance lease contracts offer the Company an option to purchase assets at a nominal amount by the end of the lease term and it is reasonably certain the Company will exercise that option. The Company amortizes the finance lease right-of-use asset to the end of the useful life of the underlying asset.

As of December 31, 2023, the Company’s finance leases had a weighted average remaining lease term of 1.82 years and a weighted average discount rate of 7.58%.

The components of lease expense for the years ended December 31, 2023 and 2022 were as follows:

	Statement of	For the years ended December 31,
	Income Location	2023		2022		2021
Lease costs
Finance lease expense	Cost of goods sold	$	338,627	$	-	$	-

Maturity of lease liabilities under the finance leases as of December 31, 2023 were as follows:

For the years ending December 31,
2024		2,897,127
2025		1,752,795
2026		664,372
Total lease payments		5,314,294
Less: interest		(408,322	)
Present value of finance lease liabilities	$	4,905,972
Finance lease liabilities, current	$	2,610,633
Finance lease liabilities, non-current	$	2,295,339

F-29

NOTE 15 – DEFERRED GOVERNMENT SUBSIDY

GMB BJ planned to relocate the Company address from Beijing to Zibo city, and it applied for subsidy of RMB 21,926,900 to compensate for the future incremental costs arising from the relocation, which was approved by the Finance Bureau of Zibo in November 2021. The Company received government subsidy of RMB20,000,000, approximately $2,973,491 in January 2022. The Company relocated to Zibo in November 2023, however the expenditures related to relocation had not been audited and acknowledged by the government of Zibo as of December 31, 2023. Therefore, the cash received was recognized as a deferred government subsidy.

NOTE 16 – LONG TERM PAYABLE

Loans payable represented the financial liabilities due to financial lease companies maturing within one or over one year. The loans payable consisted of the following:

	As of December 31,
	2023		2022
Long term payables:
Far East International Financial Leasing Co., Ltd. (“Far East”)	$	598,112	$	2,594,415
China Power Investment Ronghe Financial Leasing Co., Ltd. (“Ronghe”)		3,403,003		5,191,056
Zhongguancun Science and Technology Leasing Co., Ltd. (“Zhongguancun”)		1,787,700		-
Xiamen Guomao Chuangcheng Financial Leasing Co., Ltd. (“Guomao”)		1,904,891		-
Total	$	7,693,706		7,785,471
Current portion	$	4,710,644	$	3,706,628
Non-current portion	$	2,983,062	$	4,078,843

On September 22, 2022, Sunrise Guizhou entered into a sales and leaseback contract with Far East. Pursuant to the contract, the Company sold its machines for RMB 20,000,000, approximately $2,816,941, and immediately leased it back from Far East for an eighteen-month period from September 22, 2022 to March 21, 2024. The Company had not transferred the control of the underlying assets to Far East and the Company determined that the sales transaction did not qualify as a sale in accordance with ASC 606. Therefore, the sales and leaseback contract was in essence a debt financing arrangement and did not apply sales and leaseback accounting in ASC 842. The proceeds, net of the financing costs, were financial liability with a yearly implied interest rate of 11.98%. This long-term payable was guaranteed by SDH and Mr. Haiping Hu. The Company was required to make monthly interest and principal payment. For the years ended December 31, 2023 and 2022, The Company repaid RMB 15,259,317 and RMB 2,277,510, approximately $2,154,997 and $338,608, respectively. As of December 31, 2023, the Company had an outstanding balance of $598,112, of which $598,112 and $nil were classified to a current portion and a non-current portion, respectively. As of December 31, 2022, the Company had an outstanding balance of $2,594,415, of which $1,984,684 and $609,731 were classified to current portion and non-current portion, respectively. The total outstanding balance of this long-term facility was collateralized by certain plant and equipment at the original cost of RMB 38,223,638, approximately $5,383,687, as of December 31, 2023.

On November 4, 2022, Sunrise Guizhou entered into a sales and leaseback financing contract a three-year financing with Ronghe to obtain an amount of RMB 40,000,000, approximately $5,633,882, for a term from November 10, 2022 to November 9, 2025. The sales and leaseback contract was a debt financing arrangement in essence, with a yearly interest rate of one-year loan prime rate plus 1.55%. This long-term payable is guaranteed by Mr. Haiping Hu and Zhuhai Zibo. The Company is required to make quarterly interest and principal payment. For the years ended December 31, 2023 and 2022, The Company repaid RMB 14,634,365 and RMB 3,693,843, approximately $2,066,738 and $549,181, respectively. As of December 31, 2023, the Company had an outstanding balance of $3,403,003, of which $1,697,425 and $1,705,578 were classified to a current portion and a non-current portion, respectively. As of December 31, 2022, the Company had outstanding balance of $5,191,056, of which $1,721,944 and $3,469,112 were classified to current portion and non-current portion, respectively. The total outstanding balance of this long-term facility was collateralized by certain plant and equipment at the original cost of RMB 47,917,699, approximately $6,749,067, as of December 31, 2023.

On February 7, 2023, Sunrise Guizhou entered into a sales and leaseback financing contract for a two-year financing with Zhongguancun to obtain an amount of RMB 20,000,000, approximately $2,816,941, for a term lasting from February 7, 2023 to February 6, 2025. The sales and leaseback contract were a debt financing arrangement in essence, with a yearly implied interest rate of 9.61%. This long-term payable is guaranteed by Mr. Haiping Hu and Zhuhai Zibo. The Company is required to make quarterly interest and principal payments. For the year ended December 31, 2023, the Company repaid RMB 8,124,466, approximately $1,147,378. As of December 31, 2023, the Company had an outstanding balance of $1,787,700, of which $1,413,966 and $373,734 were classified to a current portion and a non-current portion, respectively. The total outstanding balance of this long-term facility was collateralized by certain plant and equipment at the original cost of RMB 20,917,392, approximately $2,946,153, as of December 31, 2023. Other than the aforementioned plant and equipment as collateral assets, the Company has pledged any existing and future accounts receivable from a sales contract with Liyang Zichen New Materials Technology Co., Ltd. (“Liyang Zichen”) for the amount up to RMB 20,000,000. The accounts receivable from Liyang Zichen were $nil as of December 31, 2023.  

F-30

On October 27, 2023, Sunrise Guizhou entered into a sales and leaseback financing contract for a two-year financing with Guomao for RMB 15,000,000, approximately $2,112,706, for a term from October 27, 2023 to October 26, 2025. The sales and leaseback contract was a debt financing arrangement in essence, with a yearly implied interest rate of 9.13%. For the year ended December 31, 2023, the Company repaid RMB 1,335,438, approximately $188,597. As of December 31, 2023, the Company had outstanding balance of $1,904,891, of which $1,001,141 and $903,750 were classified to a current portion and a non-current portion, respectively. This debt financing arrangement was guaranteed by Mr. Haiping Hu, Sunrise Tech and Zhuhai Zibo. The total outstanding balance of this long-term facility was collateralized by certain plant and equipment at the original cost of RMB 15,000,000, approximately $2,112,706, as of December 31, 2023.

NOTE 17 – LOANS

	As of December 31,
	2023		2022
Short-term loan:
Everbright Bank	$	7,042,353	$	-
Long-term loan:
Post Savings Bank of China		3,985,972		-
Current portion	$	478,880	$	-
Non-current portion	$	3,507,092	$	-

Short-term loan

On May 16, 2023, Sunrise Guizhou entered into a credit facility agreement with Everbright Bank to obtain revolving fund up to RMB 100,000,000, approximately $14,084,705, for a term from June 1, 2023 to May 31, 2024. As of December 31, 2023, the Company had been able to utilize the line of credit for RMB 50,000,000 (approximately $7,042,353) with interest rates from 2% to 4.5% which would mature from June 4, 2024 to September 25, 2024, collateralized by the pledge of land use right of Sunrise Tech for RMB 50,000,000. This credit loan was guaranteed by Mr. Haiping Hu, CEO and Chairman of the Board of Director, Ms. Fangfei Liu, spouse of Mr. Haiping Hu and Ms. Huiyu Du, the legal representative of Sunrise Guizhou.

Long-term loan

On January 18, 2023, Sunrise Guizhou entered into a line of credit facility agreement with Post Bank to obtain revolving fund up to RMB 30,000,000, approximately $4,225,412, with an interest rate of 4.5% for a term from January 19, 2023 to January 18, 2031. This credit loan was guaranteed by Mr. Haiping Hu, CEO and Chairman of the Board of Director, and Zhuhai Zibo. As of December 31, 2023, the Company had utilized the line of credit with Post Bank for RMB 28,300,000 (approximately $3,985,972), which would mature between July 2023 and April 2026. The Company early repaid the outstanding long-term loan in March 2024.

NOTE 18 – TAXES

a. VAT

The Company is subject to VAT and related surcharges in China for sales of graphite anode materials and providing member services and other in-depth services. The applicable VAT rate for material sales is 13%. The applicable service VAT rate is 6% for general taxpayers and 3% for small-scale taxpayer. The amount of VAT liability is determined by applying the applicable tax rate to the invoiced amount of sales and services provided (output VAT) less VAT paid on purchases made with the relevant supporting invoices (input VAT). VAT liability is recorded in the line item of accrued expenses and other current liabilities on the consolidated balance sheets. Under the commercial practice of the PRC, the Company pays VAT based on tax invoices issued.

All of the tax returns of the Company have been and remain subject to examination by the PRC tax authorities for five years from the date of filing.

F-31

b. Income tax

Cayman Islands

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, after execution, brought within the jurisdiction of the Cayman Islands. No stamp duty is payable in the Cayman Islands on the issue of shares by, or any transfers of shares of, Cayman Islands companies (except those which hold interests in land in the Cayman Islands). There are no exchange control regulations or currency restrictions in the Cayman Islands.

Payments of dividends and capital in respect of our Ordinary Shares will not be subject to taxation in the Cayman Islands and no withholding will be required on the payment of a dividend or capital to any holder of our Ordinary Shares, as the case may be, nor will gains derived from the disposal of our Ordinary Shares be subject to Cayman Islands income or corporation tax.

Hong Kong

In accordance with the relevant tax laws and regulations of Hong Kong, a company registered in Hong Kong is subject to income taxes within Hong Kong at the applicable tax rate on taxable income. From year of assessment of 2019/2020 onwards, Hong Kong profit tax rates are 8.25% on assessable profits up to HK$2,000,000, and 16.5% on any part of assessable profits over HK$2,000,000. However, the Company’s HK subsidiary did not generate any assessable profits arising in or derived from Hong Kong for the fiscal years ended December 31, 2023, 2022 and 2021, and accordingly no provision for Hong Kong profits tax has been made in these periods.

China

The Company’s subsidiaries are incorporated in the PRC, and are subject to the PRC Enterprise Income Tax Laws (“EIT Laws”) with the statutory income tax rate of 25% with the following exceptions.

In accordance with the implementation rules of EIT Laws, a qualified “High and New Technology Enterprise” (“HNTE”) is eligible for a preferential tax rate of 15%. The HNTE certificate is effective for a period of three years. An entity could re-apply for the HNTE certificate when the prior certificate expires. SDH is eligible to enjoy a preferential tax rate of 15% from 2021 to 2023 to the extent it has taxable income under the EIT Law.

For qualified small and low-profit enterprises, from January 1, 2021 to December 31, 2021, 12.5% of the first RMB 1.0 million of the assessable profit before tax is subject to a preferential tax rate of 20% and the 50% of the assessable profit before tax exceeding RMB 1.0 million but not exceeding RMB 3.0 million is subject to a preferential tax rate of 20%. From January 1, 2022 to December 31, 2022, 12.5% of the first RMB 1.0 million of the assessable profit before tax is subject to a preferential tax rate of 20% and the 25% of the assessable profit before tax exceeding RMB 1.0 million but not exceeding RMB 3.0 million is subject to a preferential tax rate of 20%. From January 1, 2023 to December 31, 2027, 25% of the first RMB 3.0 million of the assessable profit before tax is subject to the tax rate of 20%. For the years ended December 31, 2021, 2022 and 2023, some PRC subsidiaries are qualified small and low-profit enterprises as defined, and thus are eligible for the above preferential tax rates for small and low-profit enterprises.

The components of the income tax (benefit) provision are as follows:

	For the years ended December 31,
	2023			2022		2021
Current
China	$	228		$	1,560	$	-
Deferred
China		(454	)		807,410		(236,581	)
Total	$	(226	)	$	808,970	$	(236,581	)

Loss before income taxes was attributable to the following geographic locations for the years ended December 31:

	For the years ended December 31,
	2023			2022			2021
PRC	$	(26,296,232	)	$	(16,323,667	)	$	(6,034,466	)
Others		(6,624,718	)		(5,991,765	)		(2,916,447	)
Loss before income taxes	$	(32,920,950	)	$	(22,315,432	)	$	(8,950,913	)

F-32

Reconciliation between the provision (benefit) for income taxes computed by applying the PRC EIT rate of 25% to loss before income taxes and the actual provision of income taxes is as follows:

	For the years ended December 31,
	2023			2022			2021
Loss before income taxes	$	(32,920,950	)	$	(22,315,432	)		(8,950,913	)
PRC EIT rate		25	%		25	%		25	%
Income taxes computed at statutory EIT rate	$	(8,230,238	)	$	(5,578,858	)		(2,237,728	)
Reconciling items:
Effect of tax holiday and preferential tax rate		(338	)		1,274,465			169,657
Effect of changes in tax rate		(1,194,103	)		-			-
Effect of tax rates in foreign jurisdictions		1,117,727			1,497,723			728,965
Effect of non-deductible share-based compensation					536,450			682,492
Effect of true up on net operating loss in the tax returns		687,460			-			-
Effect of non-deductible expense		6,277			13,917			4,403
Super deduction of qualified R&D expenditures		-			-			(107,975	)
Changes in valuation allowance		7,076,539			2,919,231			1,206,097
Income tax (benefit) expense	$	(226	)	$	808,970			(236,581	)
Effective tax rate		0.00	%		(3.63	)%		2.64	%

Deferred tax assets and liabilities

Significant components of deferred tax assets and liabilities were as follows:

	As of December 31,
	2023			2022
Deferred tax assets
Net operating loss carry forwards	$	4,981,536		$	1,934,559
Provision for doubtful debts		2,039,292			1,439,947
Finance lease liabilities		1,226,495			-
Impairment of inventory		2,446,724			398,578
Impairment of intangible assets		803,418			-
Impairment of long-term investment		599,928			163,420
Deferred tax assets, gross		12,097,393			3,936,504
Less: valuation allowance		(10,605,326	)		(3,936,504	)
Total deferred tax assets, net	$	1,492,067		$	-
Deferred tax liabilities
Finance lease right-of-use assets	$	1,492,067		$	-
Assets acquired in the asset acquisition	$	195,327			199,583
Total deferred tax liabilities	$	1,687,394		$	199,583
Deferred tax assets, net	$	-		$	-
Deferred tax liabilities, net	$	195,327		$	199,583

The movement of valuation allowance is as follows:

	As of December 31,
	2023			2022			2021
Balance at beginning of the year	$	3,936,504		$	1,218,319		$	-
Current year addition		7,076,539			2,919,231			1,206,097
Foreign currency translation adjustments		(407,717	)		(201,046	)		12,222
Balance at end of the year	$	10,605,326		$	3,936,504		$	1,218,319

F-33

For entities incorporated in Mainland China, net operating loss can be carried forward for five years, while the net operating loss of HNTEs can be carried forward for ten years. As of December 31, 2023, the Company had net operating loss carrying forwards of $19,917,412 from the Company’s PRC subsidiaries, which will expire by in calendar years 2024 through 2033, if not utilized. The graphite anode business was in a competitive environment for the year ended December 31, 2023. In the meantime, peer-to-peer knowledge sharing and enterprise business continued to shrink in 2023. Considering the factors in graphite anode business and peer-to-peer knowledge sharing and enterprise business, management believed that there was substantial doubt on realization of the benefits from these losses as they were not able to estimate if the business would start to make profits in the near future. In making as of such determination, the Company considered factors including (i) future reversals of existing taxable temporary differences, (ii) future taxable income exclusive of reversing temporary differences and carry forwards, and (iii) tax planning strategies. Therefore, the Company believes that it is more likely than not that the results of future operations will not generate sufficient taxable income to realize the deferred tax assets as of December 31, 2023 and 2022. Accordingly, as of December 31, 2023 and 2022, a $10,605,326 and $3,936,504 valuation allowance has been established respectively. The following is a schedule of expiration of carry forward operating loss as of December 31, 2023:

For the years ending December 31,
2024	$	629,461
2025		307,521
2026		50,384
2027		2,217,853
2028		12,486,235
2029		-
2030		-
2031		-
2032		2,738,449
2033		1,487,509
Total	$	19,917,412

As of December 31, 2023, the Company had net operating loss carrying forwards of $13,228 from the Company’s Hong Kong subsidiaries, which will be carried forward indefinitely to offset future profits of the Company’s Hong Kong subsidiaries.

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, 2023, 2022 and 2021, the Company did not have any unrecognized uncertain tax positions and the Company does not believe that its unrecognized tax benefits will change over the next twelve months. For the years ended December 31, 2023, 2022 and 2021, the Company did not incur any interest and penalties related to any potential underpaid income tax expenses.

For the Company’s operating subsidiaries, as of December 31, 2023, the tax years ended December 31, 2018, through December 31, 2022 remain open for statutory examination by PRC tax authorities.

NOTE 19 – RELATED PARTY BALANCE AND TRANSACTIONS

The following is a list of related parties which the Company has transactions with:

(a)	Ningbo Zhuhai Investment Co., Ltd. (“Zhuhai Investment”), a company controlled by Mr. Haiping Hu.
(b)	Bally, Corp. (“Bally”), a company controlled by Mr. Haiping Hu.
(c)	Mr. Xuanming Wang, General Manager and legal representative of GMB (Hangzhou).
(d)	Mr. Haiwei Zuo, Vice Chairman of the Board, 7.49% shareholder of GMB (Beijing).
(e)	Shanghai Hui Yang Investment Co., 9.6451% shareholder of Sunrise Guizhou and controlled by immediate family members of Mr. Haiping Hu.
(f)	Shidong (Suzhou) Investment Co., Ltd., a company of which Mr. Haiping Hu is the CEO.
(g)	Mr. Shousheng Guo, Director, 3.00% shareholder of GMB (Beijing).
(h)	Mr. Wenwu Zhang, Director of Sunrise Guizhou.
(i)	Mr. Chenming Qi, General Manager, Director and 3.00% shareholder of GIOP BJ; Director of GMB (Hangzhou).
(j)	Ms. Jing Ji, CEO of and 46% shareholder of GMB Technology.
(k)	Haicheng Shenhe, 9.6451% shareholder of Sunrise Guizhou.
(l)	Ms. Chao Liu, Chief Financial Officer of the Company.

F-34

(m)	GMB Internet Technology Co., Ltd., one of the shareholders of the Company.
(n)	GMB Business Communication Co., Ltd. one of the shareholders of the Company.
(o)	GMB Enterprise Cooperation Development Co., Ltd., one of the shareholders of the Company.
(p)	GMB Information Technology Co., Ltd., one of the shareholders of the Company.
(q)	GMB Wisdom Sharing Platform Co., Ltd., one of the shareholders of the Company.
(r)	GMB Technology Co., Ltd., one of the shareholders of the Company.
(s)	GMB Project Incubation Services Co., Ltd., one of the shareholders of the Company.
(t)	Guizhou Yilong New Area Industrial Development and Investment Co., Ltd., 3.0864% shareholder of Sunrise Guizhou.
(u)	Ms. Fangfei Liu, spouse of Mr. Haiping Hu.
(v)	Mr. Huiyu Du, the legal representative of Sunrise Guizhou.
(w)	Beijing Huatai Zhonghe Venture Capital Center (Limited Partnership) (“Huatai Zhonghe”), controlled by Mr. Shousheng Guo

a. Due from related parties

As of December 31, 2023 and 2022, the balances of amount due from related parties were as follows:

		As of December 31,
		2023		2022
Due from related parties
Bally		$	5,172	$	5,168
Mr. Xuanming Wang			-		20,102
Mr. Shousheng Guo	(2)		100,000		-
Shidong (Suzhou) Investment Co., Ltd.			39,437		37,332
Mr. Wenwu Zhang	(1)		330,991		337,420
Ms. Chao Liu	(2)		141,024		-
Others			700		-
Total		$	617,324	$	400,022

(1) The balance as of December 31, 2023 and 2022 represented the prepaid acquisition consideration to purchase Mr. Wenwu Zhang’s equity in Haicheng Shenhe.

(2) The staff advance balances as of December 31, 2023 had been repaid by May 15, 2024.

b. Due to related parties

As of December 31, 2023 and 2022, the balances of amounts due to related parties were as follows:

		As of December 31,
		2023		2022
Due to related parties
Mr. Haiping Hu		$	903,789	$	2,872
Mr. Chenming Qi			5,476		9,189
Ms. Jing Ji			19,543		19,923
Shanghai HuiYang Investment Co.	(1)		800,785		738,128
Haicheng Shenhe			451,871		50,395
Huatai Zhonghe			98,593		-
Zhuhai Investment	(2)		2,183,911		64,643
Others			197		-
Total		$	4,464,165	$	885,150

(1)	The balance as of December 31, 2023 mainly represented the loans from Shanghai HuiYang Investment Co., with the annual interest rate of 4.35% and was initially due on August 13, 2023 and extended to December 31, 2024.
(2)	The balance as of December 31, 2023 represented the loans from Zhuhai Investment, with the annual interest rate of 8% and was initially due on December 31, 2023 and extended to December 31, 2024.

F-35

c. Deferred revenue -related parties

As of December 31, 2023 and 2022, the balances of deferred revenue of related parties were as follows:

		As of December 31,
		2023		2022
Deferred revenue of related parties
Shanghai Hui Yang Investment Co.	(1)	$	340,850	$	347,471
Total		$	340,850	$	347,471

(1) The balance as of December 31, 2023 and 2022 represented the advance from the related party for tailored services.

d. Related party transactions

Related party purchase

The Company rented office spaces from Zhuhai Investment. For the years ended December 31, 2023, 2022 and 2021, total rental fee to Zhuhai Investment were $nil, $118,475 and $103,411, respectively.

The Company purchased raw materials for graphite anode material manufacturing from Haicheng Shenhe. For the years ended December 31, 2023, 2022 and 2021, total purchases were $221,207, $1,031,043 and $nil, respectively.

Related party sales

The Company sold titanium for $205 to Mr. Shousheng Guo for the year ended December 31, 2022.

The Company sold medical wine for $666 to Zhuhai Investment for the year ended December 31, 2021.

e. Related party guarantee 

On August 4, 2022, Sunrise Guizhou entered into a line of credit financing contract with Bank of Guizhou for revolving credit of RMB 20,000,000, approximately $2,816,941, for a term from August 4, 2022 to August 3, 2023. The line of credit was in various means including bank loans, commercial note and letter of credit. As of December 31, 2023, the undue commercial notes issued to the vendors were RMB 26,532,265, approximately $3,736,991. The Company deposited RMB 14,034,196, approximately $1,976,675, as restricted cash in the designated bank accounts in Bank of Guizhou to secure the commercial notes. Pursuant to the contract, Mr. Haiping Hu and Guizhou Yilong New Area Industrial Development and Investment Co., Ltd., the non-controlling shareholder of Sunrise Guizhou, were the guarantor of the unsecured commercial notes for RMB 12,498,069, approximately $1,760,316 as of December 31, 2023.

On September 22, 2022, Sunrise Guizhou entered into a financing contract into an eighteen-month loan with Far East to obtain a loan of RMB 20,000,000, approximately $2,816,941, for a term from September 22, 2022 to March 21, 2024; On November 4, 2022, Sunrise Guizhou entered a sales and leaseback financing contract into a three-year financing with Ronghe to obtain an amount of RMB 40,000,000, approximately $5,633,882, for a term from November 10, 2022 to November 9, 2025; On February 7, 2023, Sunrise Guizhou entered a sales and leaseback financing contract into a two-year financing with Zhongguancun to obtain an amount of RMB 20,000,000, approximately $2,816,941, for a term from February 7, 2023 to February 6, 2025; On October 27, 2023, Sunrise Guizhou entered into a sales and leaseback financing contract for a two-year financing with Guomao for RMB 15,000,000, approximately $2,112,706, for a term from October 27, 2023 to October 26, 2025. Pursuant to these financing contracts, Mr. Haiping Hu, CEO and Chairman of the Board of Director, was the guarantor for the debts. See Note 16.

F-36

In July 2022, Sunrise Guizhou entered into purchase agreements with original shareholders of Sunrise to acquire 100% of Sunrise Tech’s assets and equity ownership for a gross consideration of RMB 40,000,000 (approximately $5,743,331), among of which RMB10,000,000 and RMB 5,000,000, approximately $1,486,746 and $706,125, were paid in July 2022 and August 2023, respectively. The unpaid consideration RMB 25,000,000 (approximately $3,521,176) will be paid in installments from 2024 to 2026. The consideration payable is guaranteed by Mr. Haiping Hu. See Note 13.

On May 16, 2023, Sunrise Guizhou entered into a credit facility agreement with Everbright Bank to obtain revolving fund up to RMB 100,000,000, approximately $14,084,705, for a term from June 1, 2023 to May 31, 2024. As of December 31, 2023, the Company had been able to utilize the line of credit for RMB 50,000,000 (approximately $7,042,353) with interest rates from 2% to 4.5% which would mature from June 4, 2024 to September 25, 2024, collateralized by the pledge of land use right of Sunrise Tech for RMB 50,000,000. This credit loan was guaranteed by Mr. Haiping Hu, Ms. Fangfei Liu and Ms. Huiyu Du. See Note 17.

On January 18, 2023, Sunrise Guizhou entered into a credit facility agreement with Post Bank to obtain revolving fund up to RMB 30,000,000, approximately $4,225,412, for a term from January 19, 2023 to January 18, 2031. As of December 31, 2023, the Company utilized the line of credit with Post Bank for RMB 28,300,000, approximately $3,985,972, which would mature from July 2023 to April 2024. In March 2024, the Company early repaid the long-term loan. This credit loan was guaranteed by Mr. Haiping Hu. See Note 17.

On June 13, 2023, Sunrise Guizhou entered into a finance lease agreement with Chongqing Xingyu Finance Lease Co., Ltd. to obtain graphite anode materials production facilities. The principal of the contract was RMB 29,257,844, approximately $4,120,881, with a nominal interest rate of 5.8%. This finance lease payment was guaranteed by Mr. Haiping Hu and Ms. Fangfei Liu.

On October 26, 2023, Sunrise Guizhou entered into a three-year debt arrangement with SPD Bank to obtain line of credit up to RMB 50,000,000, approximately $7,042,353, for a term from November 17, 2023 to November 17, 2026. The Company pledged its intellectual property and patent for the line of credit. Sunrise Guizhou utilized the line of credit by issuing banker’s acceptance note up to RMB 20,000,000, approximately $2,816,941 from SPD. Pursuant to the banker’s acceptance note contract, the Company was obliged to deposit fifty percent of the note payable amount issued as restricted cash in the designated bank account in SPD Bank. Therefore, the line of credit for issuance of acceptance note was RMB 10,000,000, approximately $1,408,471. As of December 31, 2023, the banker’s acceptance note was RMB 2,920,000, approximately $411,273 and the deposit for commercial note issuance was RMB 1,460,000, approximately $205,637. Other than the pledge of the Company’s intellectual property and patents, the unsecured amount of banker’s acceptance note, which was RMB 1,460,000 (approximately $205,636) was also guaranteed by Mr. Haiping Hu.

NOTE 20 – REDEEMABLE NON-CONTROLLING INTERESTS

On June 13, 2022, Guizhou Province New Kinetic Industry Development Fund Partnership (“New Kinetic Partnership”) subscribed 22.8395% of the preferred shares of Sunrise Guizhou, at total cash consideration of RMB200,000,000, approximately $29,467,667.

The New Kinetic Partnership has a right to require Sunrise Guizhou and its shareholders to redeem New Kinetic Partnership’s shares, at any time and from time to time on or after the date of the earliest to occurrence of the following: (i) Sunrise Guizhou fails to complete a qualified initial public offering (“IPO”) thirty-six months post-closing; (ii) Sunrise Guizhou fails to complete the profit commitment for consecutive two years; (iii) Sunrise Guizhou’s conviction of breaches or violation of criminal laws and/or applicable regulations which may have a material adverse effect on the Company’s business; (iv) the occurrence of the change of business of Sunrise Guizhou; (v) the net assets of Sunrise Guizhou is less than the net assets as of the date of the investment; (vi) the account receivable of Sunrise Guizhou exceeds RMB 200,000,000 and the aging of the account receivable is over five months; and (vii) Sunrise Guizhou fails to complete manufacturing infrastructure construction by December 31, 2023.

F-37

The redemption value on the investment by New Kinetic Partnership is higher of (i) 100% of the investment amount plus the aggregated amount of 65% of the profit commitment attributable to New Kinetic Partnership for the following six years post-closing multiplied by the days elapsed divided by (6*365); and (ii) Sunrise Guizhou’s net assets attributable to New Kinetic Partnership on the redemption date.

The movement of redeemable non-controlling interests is as follows:

	For the years ended December 31,
	2023			2022			2021
Balance at beginning of the period	$	31,228,329		$	-		$	-
Contribution from redeemable non-controlling interests		-			29,467,667			-
Accretion to redemption value of redeemable non-controlling interests		3,920,454			2,600,738			-
Foreign exchange effect		(605,597	)		(840,076	)		-
Balance at end of the period	$	34,543,186		$	31,228,329		$	-

NOTE 21 – SHAREHOLDERS’ EQUITY

Ordinary shares

EPOW was established under the laws of the Cayman Islands on February 22, 2019. The authorized number of Ordinary Shares was 500,000,000 with par value of $0.0001 per share. On February 22, 2019, EPOW issued 999,999 new shares to the controlling shareholders and one share to Osiris International Cayman Limited at par $0.0001 per share. On August 8, 2019, EPOW issued an aggregate of 27,000,000 ordinary shares at a price of US$0.0001 per share with total consideration of US$2,800, pro-rata to the shareholders of EPOW as of such date.

On April 2, 2020, the shareholders of the Company unanimously authorize a one-for-0.88 reverse stock split of the Company’s outstanding and issued ordinary shares (the “First Reverse Stock Split”), which became effective on April 3, 2020. Any fractional ordinary share that would have otherwise resulted from the First Reverse Stock Split were rounded up to the nearest full share. The First Reverse Stock Split did not change the par value of the ordinary shares and had no effect on the number of authorized ordinary shares of the Company. As a result of the First Reverse Stock Split, 28,000,000 ordinary shares that were issued and outstanding as of April 3, 2020 were reduced to 24,640,000 ordinary shares (taking into account the rounding of fractional shares).

On April 24, 2020, the shareholders of the Company unanimously authorize another one-for-0.68 reverse stock split of the Company’s issued and outstanding ordinary shares (the “Second Reverse Stock Split”), which became effective on April 24, 2020. Any fractional ordinary share that would have otherwise resulted from the Second Reverse Stock Split were rounded up to the nearest full share. The Second Reverse Stock Split did not change the par value of the ordinary shares and had no effect on the number of authorized ordinary shares of the Company. As a result of the Second Reverse Stock Split, 24,640,000 ordinary shares that were issued and outstanding as of April 24, 2020 was reduced to 16,800,000 ordinary shares (taking into account the rounding of fractional shares).

On February 11, 2021, the Company closed its initial public offering (“IPO”) on Nasdaq. The Company offered 6,720,000 ordinary shares, par value $0.0001 per share, at a price of $4.00 per share and received total gross proceed of $26,880,000. Besides, the Company offered 1,008,000 ordinary shares, par value $0.0001 per share, as part of the representative of the underwriters’ over-allotment option, at a price of $4.00 per share and received total gross proceed of $4,032,000. Total net proceeding amounted to $27,504,639 after deducting underwriting discounts and other related expenses.

F-38

Share capital increase and re-designation

On February 8, 2024, the 2023 annual general meeting of shareholders (the “Meeting”) of the Company was held. At the Meeting, the shareholders of the Company approved the increase and re-designation of the Company share capital.

The Company increased its authorized share capital from US$50,000 consisting of 500,000,000 ordinary shares of par value $0.0001 each to $500,000 consisting of 5,000,000,000 ordinary shares of par value US$0.0001 each (the “Share Capital Increase”).

Immediately following the Share Capital Increase, the Company re-designated and re-classified its authorized share capital so that the afore-mentioned authorized share capital of $500,000 comprise 3,500,000,000 Class A ordinary shares of par value US$0.0001 each and 1,500,000,000 Class B ordinary shares of par value US$0.0001 each. Pursuant to the Second Amended and Restated Memorandum and Articles of Association of the Company, on a poll at any general meeting every shareholder shall have one (1) vote for every Class A ordinary share and twenty (20) votes for every Class B ordinary share held.

The Company believes that the re-designation should be accounted for on a retroactive basis pursuant to ASC 260. The Company has retroactively restated all shares data for all periods presented. As a result, there were 19,574,078 and 18,794,278 Class A ordinary shares issued and outstanding and 6,567,272 and 6,567,272 Class B ordinary shares issued and outstanding as of December 31, 2023 and 2022, respectively.

Share-based compensation

The Company recorded share-based compensation expenses of $2,170,801, $2,729,969 and $nil for the years ended December 31, 2023, 2022 and 2021, respectively. The following table sets forth the allocation of share-based compensation expenses:

	For the years ended December 31,
	2023		2022		2021
Cost of revenues	$	4,617	$	8,188	$	-
Selling expenses		19,784		39,301		-
General and administrative expenses		2,138,978		2,674,292		-
Research and development expenses		7,422		8,188		-
Total	$	2,170,801	$	2,729,969	$	-

The Company adopted the 2022 Stock Incentive Plan for the grant of restricted share units to employees, directors and non-employees to provide incentive for their services.

The maximum number of ordinary shares that may be awarded pursuant to compensatory awards granted to the employees, directors and non-employees under the 2022 Stock Incentive Plan may not exceed 3,679,200 ordinary shares of par value $0.0001 per share.

Restricted share units

On August 26, 2022, the Company granted 3,334,200 restricted share units to its directors and employees. 25% of the restricted share units vested immediately on August 26, 2022. 75% of the restricted share units will vest within three years with equal yearly installments after August 26, 2022. The grant date fair value of the restricted share units was $2.00 per share, which was the closing price of the Company’s ordinary share on NASDAQ on August 26, 2022. This grant resulted in a total share-based compensation of $6,668,400 to be recognized ratably over the requisite service period of 3 years.

F-39

A summary of the restricted shares units’ activities is as follows: 

	Number of restricted share units outstanding			Weighted average grant date fair value		Aggregate intrinsic value
Restricted share units outstanding as of January 1, 2022		-			-		-
Granted		3,334,200			2.00		-
Vested		(833,550	)		2.00		-
Restricted share units outstanding as of December 31, 2022		2,500,650			2.00		6,826,775
Granted		-			-
Vested		(779,800	)		2.00
Forfeited		(228,750	)		2.00
Restricted share units outstanding as of December 31, 2023		1,492,100			2.00		1,611,468

The weighted average grant date fair value of restricted share units granted during the years ended December 31, 2023, 2022 and 2021 were $2.00, $2.00 and $nil, respectively. The total fair value of restricted share units vested during the years ended December 31, 2023, 2022 and 2021 were $1,559,600, $1,667,100, and $nil respectively.

The Company recognized compensation expense over the requisite service period for each separately vesting portion of the award as if the award is in substance, multiple awards. The Company recorded share-based compensation expenses relating to restricted share units of $2,170,801 and $2,729,969 for the year ended December 31, 2023 and 2022. As of December 31, 2023, total unrecognized compensation expenses relating to nonvested shares were $1,310,130, which is expected to be recognized over a weighted average period of 1.28 years.

Non-controlling interests

Non-controlling interests consist of the following:

	As of December 31,
	2023			2022
GMB (Beijing)	$	3,187		$	4,313
GMB Culture		1,491			2,997
Jiagui Haifeng		-			(710	)
Sunrise Tech		(13,184	)		-
GMB Consulting		13,043			13,270
Shidong Cloud		38,463			42,389
Sunrise Guxian		(83,832	)		(39,323	)
GMB Technology		(189,364	)		(186,539	)
Sunrise Guizhou		8,373,766			13,616,498
Total	$	8,143,570		$	13,452,895

Jiagui Haifeng was established by Zibo Shidong and Mr. Lifeng Wang in November, 2021. 51% of the shares of Jiagui Haifeng was held by Zibo Shidong and 49% of the shares was held by Mr. Lifeng Wang. The Company disposed of Jiagui Haifeng in March 2023.

F-40

Sunrise Guizhou was established by Zhuhai (Zibo) Investment and five other companies in November, 2021. Shidong Cloud was established by GIOP BJ and Beijing Yunqianyi Information Technology Co., Ltd. (“Yunqianyi”) in December 2022. 75% shares of Shidong Cloud were held by GIOP BJ and 25% of shares was held by Yunqianyi.

Sunrise Guxian was established by Sunrise Guizhou and seven other companies in April 2022.

For the year ended December 31, 2022, the Company made capital contributions of $52,863 to Shidong Cloud; and the non-controlling shareholders made capital contributions of $78,851 to Shidong Cloud.

For the years ended December 31, 2023, 2022 and 2021, Zhuhai (Zibo) made capital contributions of $nil, $10,759,335 and $9,099,878 to Sunrise Guizhou, respectively; and the non-controlling shareholders made capital contributions of $3,910,897, $12,438,125 and $3,332,622 to Sunrise Guizhou, respectively.

The actual capital contributions made by the Company and the non-controlling shareholders for the years ended December 31, 2023, 2022 and 2021 had no effect on the Company’s percentage of interest in its subsidiaries and VIE’s subsidiaries.

Statutory reserves

In accordance with the Regulations on Enterprises of PRC, the Company’s subsidiaries, GIOP BJ, VIE and VIE’s subsidiaries in the PRC are required to provide for statutory reserves, which are appropriated from net profit as reported in the Company’s PRC statutory accounts. They are required to allocate 10% of their after-tax profits to fund statutory reserves until such reserves have reached 50% of their respective registered capital. These reserve funds, however, may not be distributed as cash dividends.

As of December 31, 2023 and 2022, the statutory reserves of the Company’s subsidiaries, GIOP BJ, VIE and VIE’s subsidiaries in the PRC have not reached 50% of their respective registered capital. As of December 31, 2023 and 2022, the balances of the statutory reserves were $2,477,940 and $2,477,940, respectively.

Restricted net assets

The Company’s PRC subsidiaries and the VIE and VIE’s subsidiaries are restricted in their ability to transfer a portion of their net assets, equivalent to their statutory reserves and their share capital to the Company in the form of loans, advances, or cash dividends. The payment of dividends by entities organized in China is subject to limitations, procedures, and formalities. Regulations in the PRC currently permit payment of dividends only out of accumulated profits as determined in accordance with accounting standards and regulations in China. As of December 31, 2023, the statutory reserves and the share capital amounted to $2,477,940 and $22,710,147, respectively.

NOTE 22 – LOSS PER SHARE

Immediately following the Share Capital Increase, the Company adopted dual class ordinary share structure. Pursuant to the Second Amended and Restated Memorandum and Articles of Association of the Company, at any general meeting every Member shall have one (1) vote for every Class A ordinary share and twenty (20) votes for every Class B ordinary share. Each Class B ordinary share shall be convertible, at the option of the holder thereof, at any time after the date of issuance of such share, at the office of the Company or any transfer agent for such shares, into one fully paid and non-assessable Class A ordinary share. Holders of Class A ordinary shares and Class B ordinary shares have the same rights, except for voting rights and conversion rights. Therefore, the two-class method of computing the loss per share is not applicable.

F-41

Basic and diluted loss per ordinary share is computed using the weighted average number of ordinary shares outstanding during the year.

	For the years ended December 31,
	2023			2022			2021
Numerator:
Net loss	$	(32,920,724	)	$	(23,124,402	)	$	(8,714,332	)
Less: accretion to redemption value of redeemable non-controlling interests		3,920,454			2,600,738			-
foreign currency effect on redemption value of redeemable non-controlling interests		(605,597	)		(840,076	)		-
net loss attributable to non-controlling interests		(8,688,144	)		(487,780	)		(311,072	)
Net loss attributable to ordinary shareholders	$	(27,547,437	)	$	(24,397,284	)	$	(8,403,260	)
Denominator:
Weighted average number of shares outstanding – basic and diluted		25,622,195			24,820,313			23,638,751
Loss per share – basic and diluted		(1.08	)		(0.98	)		(0.36	)

The potentially dilutive securities that were not included in the calculation of dilutive net loss per share in those periods where their inclusion would be anti-dilutive include restricted share units of 813,609, 1,302,476 and nil for the years ended December 31, 2023, 2022 and 2021, respectively.

NOTE 23 – COMMITMENTS AND CONTINGENCIES

Contingencies

The Company may be involved in various legal proceedings, claims and other disputes arising from the commercial operations, projects, employees and other matters which, in general, are subject to uncertainties and in which the outcomes are not predictable. The Company determines whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. Although the outcomes of these legal proceedings cannot be predicted, the Company does not believe these actions, in the aggregate, will have a material adverse impact on its financial position, results of operations or liquidity. As of December 31, 2023, the Company was not aware of any material litigations or lawsuits against it.

NOTE 24 – 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 details on the Company’s business segments.

The Company uses the management approach to determine reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker (“CODM”) for making decisions, allocating resources and assessing performance. The Company’s CODM has been identified as the CEO, who reviews consolidated results when making decisions about allocating resources and assessing the performance of the Company.

Based on the management’s assessment, the Company determined that it has two operating segments and therefore two reportable segments as defined by ASC 280, which are graphite anode business and peer-to-peer knowledge sharing and enterprise business. The Company’s assets are substantially all located in the PRC and substantially all of the Company’s revenue and expense are derived in the PRC. Therefore, no geographical segments are presented.

F-42

The Company’s CODM evaluates performance based on each reporting segment’s revenues, costs of revenues and gross (loss) profit. Revenues, cost of revenues and gross (loss) profits by segment are presented below. Separate financial information of operating income by segment is not available.

	For the years ended December 31,
REVENUES, NET	2023		2022		2021
Graphite anode business	$	44,384,004	$	37,580,677	$	-
Peer-to-peer knowledge sharing and enterprise business		666,401		544,991		7,409,272
Member services		-		106,724		498,330
Enterprise services
-Comprehensive tailored services		10,784		153,658		1,433,847
-Sponsorship advertising services		-		-		1,734,390
-Consulting services		471,978		9,645		1,583,583
Online services		7,827		2,100		40,391
Other revenues		175,812		272,864		2,118,731
Revenues, net	$	45,050,405	$	38,125,668	$	7,409,272

	For the years ended December 31,
COST OF REVENUES	2023		2022		2021
Graphite anode business	$	57,172,626	$	35,586,544	$	-
Peer-to-peer knowledge sharing and enterprise business		281,030		3,889,502		3,886,654
Member services		-		591,000		99,013
Enterprise services
-Comprehensive tailored services		12,444		294,759		157,563
-Sponsorship advertising services		-		-		34,041
-Consulting services		198,799		218,719		733,266
Online services		20,002		66,403		798,010
Other revenues		49,785		2,718,621		2,064,761
Cost of revenues	$	57,453,656	$	39,476,046	$	3,886,654

	For the years ended December 31,
GROSS (LOSS) PROFIT	2023			2022			2021
Graphite anode business	$	(12,788,622	)	$	1,994,133		$	-
Peer-to-peer knowledge sharing and enterprise business		385,371			(3,344,511	)		3,522,618
Member services		-			(484,276	)		399,317
Enterprise services		271,519
-Comprehensive tailored services		(1,660	)		(141,101	)		1,276,284
-Sponsorship advertising services		-			-			1,700,349
-Consulting services		273,179			(209,074	)		850,317
Online services		(12,175	)		(64,303	)		(757,619	)
Other revenues		126,027			(2,445,757	)		53,970
Gross (loss) profit	$	(12,403,251	)	$	(1,350,378	)	$	3,522,618

F-43

NOTE 25 – SUBSEQUENT EVENTS

On January 30, 2024, Sunrise Guizhou entered into a discounted commercial bill financing arrangement with Industrial and Commercial Bank of China Xingyi Branch (“ICBC”) for a contractual term from January 30, 2024 to January 30, 2025. The Company obtained the commercial bills from customers and subsequently discounted these commercial bills in ICBC. In the event of a default by the customers who do not pay the due commercial bills to ICBC, ICBC will have recourses against the Company.

On March 8, 2024, Sunrise Guizhou obtained bank loan of RMB100,000,000, approximately $14,084,705, from China Construction Bank (“CCB”) Qianxinan Branch for a term from March 8, 2024 to March 8, 2026.This loan was guaranteed by Mr. Haiping Hu, CEO and Chairman of the Board of Director, and Zhuhai Zibo. The Company also pledged its land use rights to CCB.

On February 8, 2024, the 2023 annual general meeting of shareholders of the Company was held. At the Meeting, the shareholders of the Company approved the 2024 Employee Share Incentive Plan. The Company adopted the 2024 Employee Share Incentive Plan for the grant of restricted share units to employees, directors and non-employees to provide incentive for their services. The maximum number of ordinary shares that may be delivered pursuant to compensatory awards granted to the eligible persons under the 2024 Stock Incentive Plan may not exceed 2,613,000 ordinary shares of par value $0.0001 per share. The Company had not granted any compensatory awards under the 2024 Employee Share Incentive Plan to its employees, directors and non-employees as of the issuance date of the consolidated financial statements.

The Company evaluated subsequent events and transactions that occurred after the balance sheet date through May 15, 2024, the date that the audited consolidated financial statements were available to be issued, and determined that that no subsequent events have occurred that would require recognition or disclosure in these financial statements, except as disclosed in this Note 25 or elsewhere in the notes to the consolidated financial statements.

NOTE 26 – UNAUDITED CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY

Rule 12-04(a), 5-04(c) and 4-08(e)(3) of Regulation S-X require the condensed financial information of the parent company to be filed when the restricted net assets of consolidated subsidiaries exceed 25 percent of consolidated net assets as of the end of the most recently completed fiscal year. The Company performed a test on the restricted net assets of consolidated subsidiaries in accordance with such requirement and concluded that it was applicable to the Company as the restricted net assets of the Company’s PRC subsidiaries and VIE and its subsidiaries exceeded 25% of the consolidated net assets of the Company, therefore, the condensed financial information for the parent company are included herein.

For purposes of the above test, restricted net assets of consolidated subsidiaries and VIE and its subsidiaries shall mean that amount of the Company’s proportionate share of net assets of consolidated subsidiaries (after intercompany eliminations) which as of the end of the most recent fiscal year may not be transferred to the parent company by subsidiaries and VIE and its subsidiaries in the form of loans, advances or cash dividends without the consent of a third party.

The unaudited condensed financial information of the parent company has been prepared using the same accounting policies as set out in the Company’s consolidated financial statements except that the parent company used the equity method to account for investment in its subsidiaries and the VIE and its subsidiaries. Such investment is presented on the condensed balance sheets as “Investment in subsidiaries and VIE” and the respective loss or profit as “Equity in loss of subsidiaries and VIE” on the condensed statements of operations and comprehensive loss.

The footnote disclosures contain supplemental information relating to the operations of the Company and, as such, these statements should be read in conjunction with the notes to the consolidated financial statements of the Company. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S GAAP have been condensed or omitted.

The Company did not pay any dividend for the periods presented. As of December 31, 2023 and 2022, there were no material contingencies, significant provisions for long-term obligations, or guarantees of the Company, except for those which have been separately disclosed in the consolidated financial statements, if any.

F-44

SUNRISE NEW ENERGY CO., LTD.

PARENT COMPANY BALANCE SHEETS

	As of December 31,
	2023			2022
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	347,731		$	285,916
Restricted cash		-			700,094
Due from related parties		105,872			5,168
Short-term investment		-			3,336,256
Advance to suppliers		-			7,694
Prepaid expenses and other current assets		2,577,085			2,994,975
TOTAL CURRENT ASSETS		3,030,688			7,330,103
NON-CURRENT ASSETS
Investment in subsidiaries and VIE		6,710,750			24,481,840
TOTAL NON-CURRENT ASSETS		6,710,750			24,481,840
TOTAL ASSETS		9,741,438			31,811,943
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accrued expenses and other current liabilities		31,824			15,550
TOTAL CURRENT LIABILITIES		31,824			15,550
TOTAL LIABILITES		31,824			15,550
EQUITY
Class A ordinary shares* (3,500,000,000 shares authorized; $0.0001 par value, 19,574,078 and 18,794,278 shares issued and outstanding as of December 31, 2023 and 2022, respectively)		1,957			1,879
Class B ordinary shares* (1,500,000,000 shares authorized; $0.0001 par value, 6,567,272 shares issued and outstanding as of December 31, 2023 and 2022)		657			657
Additional paid-in capital		36,842,425			34,696,702
Statutory reserves		2,477,940			2,477,940
Accumulated deficits		(29,613,365	)		(5,380,785	)
TOTAL EQUITY		9,709,614			31,796,393
TOTAL LIABILITIES AND EQUITY	$	9,741,438		$	31,811,943

* Retrospectively restated for effect of share re-designation on April 8, 2024 (see Note 21).

F-45

SUNRISE NEW ENERGY CO., LTD.

PARENT COMPANY STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

	For the years ended December 31,
	2023			2022			2021
REVENUES, NET	$	-		$	-		$	-
COSTS OF REVENUES		184,617			8,188			-
GROSS LOSS		(184,617	)		(8,188	)		-
OPERATING EXPENSES		6,339,405			3,578,664			1,010,536
LOSS FROM OPERATIONS		(6,524,022	)		(3,586,852	)		(1,010,536	)
OTHER EXPENSES		(87,468	)		(2,403,412	)		(1,904,135	)
LOSS BEFORE EQUITY IN LOSS OF SUBSIDIARIES AND VIE		(6,611,490	)		(5,990,264	)		(2,914,671	)
Equity in loss of subsidiaries and VIE		(17,621,090	)		(16,646,358	)		(5,488,589	)
NET LOSS ATTRIBUTABLE TO SUNRISE NEW ENERGY CO., LTD. ORDINARY SHAREHOLDERS		(24,232,580	)		(22,636,622	)		(8,403,260	)
Foreign currency translation adjustment		-			-			-
COMPREHENSIVE LOSS ATTRIBUTABLE TO SUNRISE NEW ENERGY CO., LTD. ORDINARY SHAREHOLDERS	$	(24,232,580	)	$	(22,636,622	)	$	(8,403,260	)

F-46

SUNRISE NEW ENERGY CO., LTD.

PARENT COMPANY STATEMENTS OF CASH FLOWS

	For the years ended December 31,
	2023			2022			2021
Net cash used in operating activities	$	(1,516,279	)	$	(808,226	)	$	(1,015,145	)
Net cash provided by (used in) investing activities		878,000			-			(25,825,000	)
Net cash provided by financing activities		-			310,000			28,249,093
(Decrease) increase in cash and cash equivalents		(638,279	)		(498,226	)		1,408,948
Cash, cash equivalents and restricted cash, beginning of year		986,010			1,484,236			75,288
Cash, cash equivalents and restricted cash, end of year	$	347,731		$	986,010		$	1,484,236
Cash, cash equivalents and restricted cash, end of year		347,731			986,010			1,484,236
Less: restricted cash		-			700,094			700,060
Cash and cash equivalents, end of year		347,731			285,916			784,176

F-47