MultiMetaVerse Holdings (MMV) Risk Factors

On July 6, 2021, the General Office of the Central Committee of the Communist Party of China and the General Office of the PRC State Council jointly issued the Opinions on Strictly Cracking Down on Illegal Securities Activities, which, among other things, require 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. On December 24, 2021, the CSRC promulgated Administrative Provisions of the PRC State Council Regarding the Overseas Issuance and Listing of Securities by Domestic Enterprises and the Administrative Measures for Record-Filings of the Overseas Issuance and Listing of Securities by Domestic Enterprises (the "Draft Measures"), according to which any domestic enterprise seeks for overseas securities offering and listing shall complete filing procedures with the CSRC, the "overseas securities offering and listing overseas offering and listing by the domestic enterprise" as stated in the Draft measures includes (i) issuance and listing of securities by a company incorporated in PRC directly, and (ii) overseas offering and listing made by an overseas company whose majority executive officers and primary operations are in the PRC or more than 50% of operation revenue, profit, underlying assets (total assets or net assets) are originated from PRC companies. On February 17, 2023, the CSRC promulgated the Trial Administrative Measures of the Overseas Securities Offering and Listing by Domestic Companies (the "Overseas Listing Trial Measures") and relevant five guidelines, which became effective on March 31, 2023. According to the Overseas Listing Trial Measures, PRC domestic companies that seek to offer securities or list in overseas markets, either directly or indirectly, are required to fulfill the filing procedure with the CSRC. The Overseas Listing Trial Measures provide that if the issuer meets both of the following criteria, the overseas securities offering and listing conducted by such issuer will be deemed as an indirect overseas offering and listing by PRC domestic companies: (i) 50% or more of any of the issuer's operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent fiscal year is accounted for by domestic companies; and (ii) the main parts of the issuer's business activities are conducted in mainland China, or its main places of business are located in mainland China, or the majority of senior management staff in charge of its business operations and management are PRC citizens or have their usual places of residence located in mainland China. Where an issuer submits an application for initial public offering to competent overseas regulators, such issuer must file with the CSRC within three business days after such application is submitted. At a press conference held for these new regulations, officials of the CSRC clarified that the domestic companies that have already been listed overseas before the effective date of the Overseas Listing Trial Measures (i.e. March 31, 2023) shall be deemed as existing issuers, or the Existing Issuers. Existing Issuers are not required to complete the filling procedures immediately, and they shall be required to file with the CSRC when subsequent matters such as refinancing are involved. The Overseas Listing Trial Measures, together with the guidelines reiterate the basic principles of the Draft Measures and impose substantially the same requirements for the overseas securities offering and listing by domestic enterprises, and clarified and emphasized several aspects, which include but are not limited to: (i) criteria to determine whether an applicant will be required to go through the filing procedures under the Overseas Listing Trial Measures; (ii) exemptions from immediate filing requirements for applicants including those that have already been listed in foreign securities markets, including U.S. markets, prior to the effective date of the Overseas Listing Trial Measures, but these applicants shall still be subject to filing procedures if they conduct refinancing or are involved in other circumstances that require filing with the CSRC; (iii) a negative list of types of applicants banned from listing or offering overseas, such as applicants whose affiliates have been recently convicted of bribery and corruption; (iv) applicants' compliance with web security, data security, and other national security laws and regulations; (v) applicants' filing and reporting obligations, such as obligation to file with the CSRC after it submits an application for initial public offering to overseas regulators, and obligation after offering or listing overseas to file with the CSRC after it completes subsequent offerings and to report to the CSRC material events including change of control or voluntary or forced delisting of the applicant; and (6) the CSRC's authority to fine both applicants and their relevant shareholders for failure to comply with the Overseas Listing Trial Measures, including failure to comply with filing obligations or committing fraud and misrepresentation. Pursuant to the Overseas Listing Trial Measures, our subsequent securities offerings in the same overseas market where we have previously offered and listed shall be filed with the CSRC within 3 working days after such offering is completed. In addition, since the Overseas Listing Trial Measures and relevant guidelines were newly promulgated, their interpretation, application and enforcement remain unclear. In addition, we also face challenges from the evolving regulatory environment regarding cybersecurity, information security, privacy and data protection, and many of these laws and regulations are subject to change and uncertain interpretation. Numerous regulations, guidelines and other measures have been or are expected to be adopted under the umbrella of or in addition to the Cybersecurity Law and Data Security Law, including but not limited to the draft Measures for the Security Assessment for Cross-border Transfer of Personal Information published by the CAC, in 2019, which may, upon enactment, require security review before transferring personal information out of China. Pursuant to the New CAC Measures, among others, network platform operators with personal information of over one million users shall be subject to a cybersecurity review before listing in foreign countries. The competent governmental authorities may also initiate a cybersecurity review against the operators if the authorities believe that the network product or service or data processing activities of such operators affect or may affect national security. Given the Cybersecurity Review Measures is relatively new, their interpretation, application and enforcement are subject to substantial uncertainties. As there are still uncertainties regarding the interpretation and implementation of Cybersecurity Review Measures and relevant regulatory guidance, we cannot assure you that the MMV will be able to comply with new regulatory requirements and MMV may become subject to more stringent requirements with respect to matters including data privacy, and cross-border investigation and enforcement of legal claims. See "- Risks Related to Doing Business in China - MMV faces challenges from the evolving regulatory environment regarding cybersecurity, information security, privacy and data protection, and user attitude toward data privacy and protection. The Chinese government exerts substantial influence over the manner in which the operating entities conduct their business activities, may intervene or influence such operations at any time, or may exert more control over offerings conducted overseas and/or foreign investment in China-based issuers, which could result in a material change in such operations and the value of our ordinary shares, 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. Many of these laws and regulations are subject to change and uncertain interpretation, and any actual or alleged failure to comply with related laws and regulations regarding cybersecurity, information security, data privacy and protection could materially and adversely affect our business and results of operations." As of the date of this annual report, (1) our PRC legal advisors have advised MMV that there are no PRC laws and regulations in force explicitly requiring that MMV obtain any permission from PRC authorities to consummate securities offerings in connection with the Business Combination, (2) Shanghai Jupiter has obtained a notification (No. 2022072101) from the Cyber Security Review Office, advising that our overseas listing is not subject to cybersecurity review, and (3) MMV has not received any inquiry, notice, warning, sanction or any regulatory objection to securities offerings in connection with the Business Combination from the CSRC, the CAC or any other PRC authorities that have jurisdiction over our operations. However, any future securities offerings and listings outside of mainland China by MMV, including but not limited to follow-on offerings, secondary listings and going private transactions, will be subject to the filing requirements with the CSRC under the Overseas Listing Trial Measures, and we cannot assure you that we will be able to comply with such filing requirements in a timely manner. In addition, the aforesaid laws, regulatory requirements and interpretations are evolving. There remains substantial uncertainty as to the enactment, interpretation and implementation of regulatory requirements related to overseas securities offering and other capital markets activities. If it is determined in the future that the approval, filing or other administrative procedures of the CSRC, the CAC or any other PRC regulatory authority is required for our subsequent securities offerings, and we fail to obtain such approval, complete such filing or other administrative procedure in a timely manner, or at all, we may face sanctions by the CSRC, the CAC or other PRC regulatory agencies. These regulatory agencies may impose fines and penalties on our operations in China, limit our ability to pay dividends outside of China, limit our operations in China, delay or restrict the repatriation of the proceeds from our securities offering into China or take other actions that could have a material adverse effect on our business, financial condition, results of operations and prospects, as well as the trading price of our securities. The CSRC, the CAC or other PRC regulatory agencies also may take actions requiring us, or making it advisable for us, to halt our subsequent securities offering. Consequently, if you engage in market trading or other activities in anticipation of and prior to settlement and delivery, you do so at the risk that settlement and delivery may not occur. In addition, if the CSRC, the CAC or other regulatory PRC agencies later promulgate new rules requiring that we obtain their approvals, complete filing or other administrative procedures for our subsequent securities offering, we may be unable to obtain a waiver of such approval, filing or other administrative procedure requirements, if and when procedures are established to obtain such a waiver. Any uncertainties and/or negative publicity regarding such an approval requirement could have a material adverse effect on the trading price of our securities.

Our mobile game revenue is mainly derived from sales of in-game virtual items, which are regulated pursuant to the PRC laws and regulations on virtual currency of online games. The Notice on Strengthening Administration of Virtual Currency of Online Games (), which was jointly issued by the Ministry of Culture, or MOC, and the MOFCOM in 2009, have imposed various restrictions on virtual currency, and requirements and obligations on online game operators with respect to the virtual currency used in their games, including (i) virtual currency may only be provided to users in exchange for payment in legal currency and may be only used to pay for virtual items and services of the issuer of the currency, and online game operators are required to keep transaction data records for no less than 180 days; (ii) online game operators are prohibited from providing lucky draws or lotteries that are conducted on the condition that participants contribute cash or virtual currency in exchange for game props or virtual currencies; and (iii) companies involved with virtual currency in China must be issuers or trading platforms, and may not operate simultaneously as both issuers and trading platforms. MMV is required to tailor its business model carefully, in order to comply with the PRC laws and regulations, including the foregoing notice. Failure to do so may result in an adverse impact on our business and results of operations.

Shareholder claims or regulatory investigation that are common in jurisdictions outside China are difficult to pursue as a matter of law or practicality in China. For example, in China, there are significant legal and other obstacles to providing information needed for regulatory investigations or litigation initiated outside 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 the United States or other jurisdictions may not be efficient in the absence of mutual and practical cooperation mechanism. Furthermore, according to Article 177 of the PRC Securities Law which became effective in March 2020, no overseas securities regulator is allowed to directly conduct investigations or evidence collection activities within the PRC territory, and without the consent by the Chinese securities regulatory authorities and the other competent governmental agencies, no entity or individual may provide documents or materials related to securities business to any foreign party. While detailed interpretation of or implementation rules under the article have yet to be promulgated, the inability for an overseas securities regulator to directly conduct investigations or evidence collection activities within China and the potential obstacles for information provision may further increase difficulties faced by you in protecting your interests.

The Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies in 2006 and amended in 2009, and some other regulations and rules concerning mergers and acquisitions established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time consuming and complex. Moreover, the Anti-Monopoly Law of the PRC requires that MOFCOM be notified in advance of any concentration of undertaking if certain thresholds are triggered. In addition, the Circular of the General Office of the State Council on the Establishment of Security Review System for the Merger and Acquisition of Domestic Enterprises by Foreign Investors that became effective in March 2011, and the Rules on Implementation of Security Review System for the Merger and Acquisition of Domestic Enterprises by Foreign Investors issued by the MOFCOM that became effective in September 2011 specify that mergers and acquisitions by foreign investors that raise "national defense and security" concerns and mergers and acquisitions through which foreign investors may acquire de facto control over domestic enterprises that raise "national security" concerns are subject to strict review by the MOFCOM, and the rules prohibit any activities attempting to bypass a security review, including by structuring the transaction through a proxy or contractual control arrangement. MMV may grow its business by acquiring complementary businesses. Complying with the requirements of the above-mentioned regulations and other relevant rules to complete such transactions could be time consuming, and any required approval processes, including obtaining approval from the MOFCOM or its local counterparts, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand its business or maintain its market share.

In February 2012, SAFE promulgated the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Publicly Listed Company, replacing earlier rules promulgated in 2007. Pursuant to these rules, PRC citizens and non-PRC citizens who reside in China for a continuous period of not less than one year who participate in any stock incentive plan of an overseas publicly listed company, subject to a few exceptions, are required to register with SAFE through a domestic qualified agent, which could be the PRC subsidiaries of such overseas-listed company, and complete certain other procedures. In addition, an overseas-entrusted institution must be retained to handle matters in connection with the exercise or sale of stock options and the purchase or sale of shares and interests. As an overseas-listed company, MMV and its executive officers and other employees who are PRC citizens or who reside in the PRC for a continuous period of not less than one year and who have been granted options are subject to these regulations. Failure to complete the SAFE registrations may subject them to fines and legal sanctions, there may be additional restrictions on the ability of them to exercise their stock options or remit proceeds gained from the sale of their share into the PRC. MMV also faces regulatory uncertainties that could restrict its ability to adopt incentive plans for its directors, executive officers and employees under PRC law.

PRC laws and regulations prohibit advertising companies from producing, distributing, or publishing any advertisement with content that violates PRC laws and regulations, impairs the national dignity of the PRC, involves designs of the PRC national flag, national emblem or national anthem or the music of the national anthem, is considered reactionary, obscene, superstitious or absurd, is fraudulent, or disparages similar products. On February 25, 2023, the SAMR issued Administrative Measures for Internet Advertising, or the Internet Advertising Administrative Measures, which became effective on May 1, 2023, and replaced the Interim Measures for the Administration of Internet Advertising which became effective on September 1, 2016. According to the Internet Advertising Administrative Measures, the provisions of the Advertising Law and the Internet Advertising Administrative Measures shall apply to commercial advertising for direct or indirect marketing goods or services in the form of text, image, audio, video, or other means through websites, web pages, Internet apps, or other Internet media within the territory of PRC. MMV cannot assure you that all the content contained in its advertisements is true and accurate as required by, and complies in all aspects with, the advertising laws and regulations, including but not limited to the Advertising Law of the People's Republic of China and the Internet Advertising Administrative Measures, especially given the uncertainty in the interpretation of these PRC laws and regulations. If MMV is found to be in violation of applicable PRC advertising laws and regulations, MMV may be subject to penalties and our reputation may be harmed, which may negatively affect our business, financial condition, results of operations, and prospects. Under PRC advertising laws and regulations, MMV is obligated to monitor the advertising content shown on our platform to ensure that such content is true, accurate and in full compliance with applicable laws and regulations. and in accordance with the Internet Advertising Administrative Measures to establish an internal monitoring and management system over records, review and archives management of online advertising activities before it may publish any online advertisement. In addition, for advertising content related to specific types of products and services, advertisers, advertising agencies and advertising distributors must confirm that the advertisers have obtained requisite government approvals, including the advertiser's operating qualifications, proof of quality inspection of the advertised products, and, with respect to certain industries, government approval of the content of the advertisement and filing with the local authorities. Pursuant to the Internet Advertising Administrative Measures, we are required to take steps to monitor the content of advertisements displayed by us. Violation of the aforementioned laws and regulations may subject MMV to penalties, including fines, confiscation of our advertising income, orders to cease dissemination of the advertisements, and orders to publish an announcement correcting the misleading information. In circumstances involving serious violations, PRC governmental authorities may force MMV to terminate its advertising operation or revoke its licenses.

In July 2014, SAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents' Offshore Investment and Financing and Roundtrip Investment Through Special Purpose Vehicles, or SAFE Circular 37, to replace the Notice on Relevant Issues Concerning Foreign Exchange Administration for Domestic Residents' Financing and Roundtrip Investment Through Offshore Special Purpose Vehicles, or SAFE Circular 75, which ceased to be effective upon the promulgation of SAFE Circular 37. SAFE Circular 37 requires PRC residents (including PRC individuals and PRC corporate entities) to register with SAFE or its local branches in connection with their direct or indirect offshore investment activities. SAFE Circular 37 is applicable to our shareholders who are PRC residents and may be applicable to any offshore acquisitions that MMV makes in the future. Under SAFE Circular 37, PRC residents who make, or have prior to the implementation of SAFE Circular 37 made, direct investments in offshore special purpose vehicles, or SPVs, will be required to register such investments with SAFE or its local branches. In addition, any PRC resident who is a direct shareholder of an SPV is required to update its filed registration with the local branch of SAFE with respect to that SPV, to reflect any material change. If our shareholders who are PRC residents or entities fail to make the required registration or to update the previously filed registration, our PRC subsidiaries may be prohibited from distributing their profits and any proceeds from any reduction in capital, share transfer, or liquidation to us, and MMV may be restricted in its ability to contribute additional capital to its PRC subsidiaries. On February 13, 2015, the SAFE promulgated a Notice on Further Simplifying and Improving Foreign Exchange Administration Policy on Direct Investment, or SAFE Notice 13, which became effective on June 1, 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. MMV has requested PRC residents who MMV knows hold direct or indirect interest through an SPV in the Company to make the necessary applications, filings and registrations as required under SAFE Circular 37, and MMV is aware that most of these shareholders have completed the initial foreign exchange registrations with relevant banks. MMV cannot assure you, however, that all of these individuals may continue to make required filings or updates in a timely manner, or at all. MMV cannot provide any assurance that MMV is or will in the future continue to be informed of identities of all PRC residents holding direct or indirect interest through an SPV in MMV. Any failure or inability by such individuals to comply with SAFE regulations may subject MMV to fines or legal sanctions, restrict our cross-border investment activities, and limit our PRC subsidiaries' ability to distribute dividends to us. As a result, our business operations and our ability to make distributions to you could be materially and adversely affected. Furthermore, as these foreign exchange regulations are still relatively new and their interpretation and implementation have been constantly evolving, it is unclear how these regulations, and any future regulation concerning offshore or cross-border transactions, will be interpreted, amended, and implemented by the relevant government authorities. For example, MMV may be subject to a more stringent review and approval process with respect to its foreign exchange activities, such as remittance of dividends and foreign-currency-denominated borrowings, which may adversely affect our financial condition and results of operations. In addition, if MMV decides to acquire a PRC domestic company, MMV cannot assure you that MMV or the owners of such company, as the case may be, will be able to obtain the necessary approvals or complete the necessary filings and registrations required by the foreign exchange regulations. This may restrict our ability to implement its acquisition strategy and could adversely affect its business and prospects.

On March 15, 2019, the PRC National People's Congress approved the Foreign Investment Law, which took effect on January 1, 2020. Along with the Foreign Investment Law, the Implementing Rules of Foreign Investment Law promulgated by the PRC State Council and the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of the Foreign Investment Law promulgated by the PRC Supreme People's Courts became effective on January 1, 2020. Since the Foreign Investment Law and its current implementation and interpretation rules are relatively new, uncertainties still exist in relation to their further application and improvement. The Foreign Investment Law stipulates three forms of foreign investment. However, the Foreign Investment Law does not explicitly stipulate the variable interest entities and contractual arrangements as a form of foreign investment. Notwithstanding the above, the Foreign Investment Law stipulates that foreign investment includes "foreign investors invest through any other methods under laws, administrative regulations or provisions prescribed by the State Council". Therefore, it is possible that future laws, administrative regulations, or provisions prescribed by the PRC State Council may regard contractual arrangements as a form of foreign investment, and then whether our contractual arrangement will be recognized as foreign investment, whether our contractual arrangement will be deemed to be in violation of the foreign investment access requirements under PRC laws and how the above-mentioned contractual arrangement will be treated are uncertain. Therefore, there is no guarantee that our contractual arrangement and its business will not be materially and adversely affected in the future. In the extreme case-scenario, MMV may be required to unwind the contractual arrangement and/or dispose of the VIEs or their subsidiaries, which could have a material and adverse effect on our business, financial conditions and result of operations.

Any funds MMV transfers to its PRC subsidiaries, either as a shareholder loan or as an increase in registered capital, are subject to approval by or registration with relevant governmental authorities in China. According to the relevant PRC regulations on FIEs in China, capital contributions to our PRC subsidiaries are subject to the approval of or report investment information to the MOFCOM or their respective local branches and registration with a local bank authorized by the SAFE. In addition, any foreign loan procured by our PRC subsidiaries cannot exceed statutory limits and is required to be registered with SAFE or its respective local branches. Any medium or long-term loan to be provided by MMV to its VIEs must be registered with the NDRC, and the SAFE or its local branches. MMV may not be able to complete such registrations on a timely basis, with respect to future capital contributions or foreign loans by MMV to its PRC subsidiaries. If MMV fails to complete such registrations, its ability to use the proceeds to be received from the Business Combination and to capitalize its PRC operations may be negatively affected, which could adversely affect its liquidity and its ability to fund and expand business. On March 30, 2015, the SAFE promulgated the Circular on Reforming the Management Approach Regarding the Foreign Exchange Capital Settlement of Foreign-Invested Enterprises, or SAFE Circular 19, which took effect on June 1, 2015. SAFE Circular 19 launched a nationwide reform of the administration of the settlement of the foreign exchange capitals of FIEs and allows FIEs to settle their foreign exchange capital at their discretion, but continues to prohibit FIEs from using the Renminbi fund converted from their foreign exchange capital for expenditure beyond their business scopes, providing entrusted loans or repaying loans between nonfinancial enterprises. The SAFE issued the Circular on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts, or SAFE Circular 16, effective on June 9, 2016. Pursuant to SAFE Circular 16, enterprises registered in China may also convert their foreign debts from foreign currency to Renminbi on a self-discretionary basis. SAFE Circular 16 provides an integrated standard for conversion of foreign exchange under capital account items (including but not limited to foreign currency capital and foreign debts) on a self-discretionary basis which applies to all enterprises registered in China. SAFE Circular 16 reiterates the principle that Renminbi converted from foreign currency-denominated capital of a company may not be directly or indirectly used for purposes beyond its business scope or prohibited by PRC laws or regulations, while such converted Renminbi shall not be provided as loans to its non-affiliated entities. As this Circular is relatively new, there remains uncertainty as to its interpretation and application and any other future foreign exchange related rules. Violations of these Circulars could result in severe monetary or other penalties. SAFE Circular 19 and SAFE Circular 16 may significantly limit our ability to use Renminbi converted from the proceeds to be received from the Business Combination, to fund the establishment of new entities in China by our VIEs, to invest in or acquire any other PRC companies through our PRC subsidiaries, or to establish new consolidated VIEs in China, which may adversely affect our business, financial condition, and results of operations.

MMV is subject to relevant PRC regulations on operators of online games. On 28 September 2009, the GAPP, together with the National Copyright Administration, and the National Working Group for Crackdown on Pornography and Illegal Publications, jointly issued a Circular on Implementation of the Regulation on the Three Provisions of the State Council and the Relevant Interpretations and Further Strengthening of the Administration of Pre-examination and Approval of Online Games and the Examination and Approval of Imported Online Games (), or the GAPP Notice. The GAPP Notice provides, among other things, that foreign investors are not permitted to invest in online game operating businesses in the PRC via wholly-owned, equity joint venture or cooperative joint venture investments, and expressly prohibits foreign investors from gaining control over or participating in PRC entities' online game operations through indirect routes, such as establishing other joint venture companies, entering into contractual arrangements with or providing technical support for such operating companies, or through a disguised form, such as incorporating user registration, user account management or payment through game cards into online gaming platforms that are ultimately controlled or owned by foreign investors. Due to the ambiguity of various regulations on online games and a lack of interpretative materials from the relevant PRC authorities governing online game operations, there are uncertainties regarding whether PRC authorities would consider our corporate structure and contractual arrangements to be foreign investment in online game business. While MMV is not aware of any online game companies which use the same or similar contractual arrangements as MMV having been penalized or ordered to terminate operations by PRC authorities claiming that the contractual arrangements constitute control over, or participation in the operation of, online game operating businesses through indirect means, it is unclear whether and how the various regulations of the PRC authorities might be interpreted or implemented in the future. If our contractual arrangements were deemed to be such an "indirect means" or "disguised form" under the GAPP Notice, our contractual arrangements may be challenged by the competent press and publication authority. If MMV and its VIEs are found to be in violation of the GAPP Notice in operating our mobile games, the competent press and publication authority, in conjunction with relevant regulatory authorities, would have the power to investigate and deal with such violations, including, in the most serious cases, by suspending or revoking relevant licenses and registrations.

The PRC legal system is a civil law system based on written statutes. Unlike the common law system, prior court decisions under the civil law system may be cited for reference but have limited precedential value. The legal system in China evolves rapidly and new laws, regulations and rules may be adopted from time to time with or without advance notice. These laws, regulations, and legal requirements are constantly changing and their interpretation and enforcement involve inconsistency and uncertainties. In addition, the enforcement of laws and that rules and regulations in China can change quickly with little advance notice. These uncertainties could limit the legal protections available to us. Further, the PRC government has significant oversight and discretion over the conduct of our business and may intervene or influence our operations as the government deems appropriate to further regulatory, political and societal goals. The PRC government has recently published new policies that significantly affected certain industries, including the mobile and online games industry. On August 30, 2021, the PRC's National Press and Publication Administration, or the NPPA released Notice on Further Strict Management and Practically Preventing Minors from Indulging in Online Games (the "Notice"), requiring that, among other things, companies that engage in the online games business may only offer people under the age of 18 access to online games from 8 pm to 9 pm on Fridays, weekends and official holidays, with no access permitted at other times. The Notice became effective on September 1, 2021. The enforcement of the Notice imposes significant restrictions over the provision of online gaming services to minors. Although our gaming content offering emphasizes more on gameplay longevity rather than concentrated gameplay, such restriction on the operation of online game could adversely affect the operation results and financial performance of our games. On August 20, 2021, the Standing Committee of the PRC National People's Congress promulgated Personal Data Protection Law, which requires, among other things, the data operator to obtain the consent of the minor's parents or other guardians process the personal data of minors under the age of 14 ("-14 minors"). The Personal Data Protection Law became effective on November 1, 2021, which essentially demand the online game service provider, who are mandatory obliged to collect and process users' identification information, to obtain the consent of -14 minors' guardians when such -14 minors register for online games. MMV cannot rule out the possibility that certain -14 minors' guardians would refuse or fail to give such consent under Personal Data Protection Law which would result in adverse effect on MMV user growth. MMV cannot predict the effect of future developments in the PRC legal system, particularly with regard to internet-related industries, including the promulgation of new laws, changes to existing laws or the interpretation or enforcement thereof, or the preemption of local regulations by national laws. Such unpredictability towards its contractual, property (including intellectual property) and procedural rights could adversely affect its business and impede its ability to continue its operations. Furthermore, any litigation in China may be protracted and result in substantial costs and diversion of resources and management attention. Any such intervention in or influence on our business operations or action to exert more oversight and control over securities offerings and other capital markets activities, once taken by the PRC government, could adversely affect our business, financial condition and results of operations and the value of the MMV Ordinary Shares and Warrants. In addition, new laws and regulations may be enacted from time to time and substantial uncertainties exist regarding the interpretation and implementation of current and any future PRC laws and regulations applicable to its businesses. In particular, the PRC government authorities may continue to promulgate new laws, regulations, rules, and guidelines governing internet companies with respect to a wide range of issues, such as intellectual property, competition and antitrust, privacy and data protection, cybersecurity and other matters, which may result in additional obligations imposed on our business operation. Compliance with these laws, regulations, rules, guidelines, and implementations may be costly, and any incompliance or associated inquiries, investigations, and other governmental actions may divert significant management time and attention and financial resources, bring negative publicity, subject MMV to liabilities or administrative penalties, or materially and adversely affect its business, financial condition, and results of operations.

There is significant opposition in some jurisdictions, including in China, to interactive social gaming. In September 2018, the World Health Organization added "gaming disorder" to the International Classification of Diseases, defining the disorder as a pattern of behavior characterized by impaired control over gaming and an increase in the priority of gaming over other interests and daily activities. Additionally, the public has become increasingly concerned with the amount of time spent using phones, tablets and computers per day, and these concerns have increased as people spend more time at home and on their devices over the course of the stay-at-home orders caused by the COVID-19 pandemic. Such opposition could lead these jurisdictions, including China, to adopt legislation or impose a regulatory framework to govern interactive social gaming specifically. These could result in a prohibition on interactive social gaming altogether, restrict our ability to advertise its games, or substantially increase its costs to comply with these regulations, all of which could have an adverse effect on our results of operations, cash flows and financial condition. MMV cannot predict the likelihood, timing, scope or terms of any such legislation or regulation or the extent to which they may affect our business. Consumer protection concerns regarding games have been raised in the past and may again be raised in the future. These concerns include but are not limited to: (i) methods to limit the ability of children to make in- game purchases, and (ii) a concern that mobile game companies are using big data and advanced technology to predict and target "vulnerable" users who may spend significant time and money on mobile games in lieu of other activities. Such concerns could lead to increased scrutiny over the manner in which our games are designed, developed, distributed and presented. MMV cannot predict the likelihood, timing or scope of any concern reaching a level that will impact our business, or whether MMV would suffer any adverse impacts to its results of operations, cash flows and financial condition. Furthermore, China has established numerous laws and regulations with respect to the anti-addiction aspect in the gaming industry. Please refer to "- Risks Related to Doing Business in China - The PRC laws regulating the playing time of online games and the age of users playing them may adversely affect our business and operations." for more details. The scope and interpretation of these PRC laws that are or may be applicable to the gaming industry are uncertain and may be conflicting. There is a risk that existing or future laws may be interpreted in a manner that is not consistent with the gaming industry's current practices and could have an adverse effect on our business, financial condition, results of operations and growth prospects.

Our VIEs hold licenses, approvals, and assets that are necessary for its business operation. MMV relies on contractual arrangements with its VIEs to use, or otherwise benefit from, certain foreign restricted licenses and permits that it needs or may need in the future as its business continues to expand, such as Value-Added Telecommunications Business Operating License, or the ICP license, Internet Cultural Business License, or ICB License, and Radio and TV Programs Production and Operation License held by one of its VIEs. The contractual arrangements contain terms that specifically obligate the equity holders of Shanghai Jupiter to ensure the valid existence of our VIE arrangement and restrict the disposition of material assets or any equity interest of Shanghai Jupiter. However, in the event the equity holders of Shanghai Jupiter breach the terms of these contractual arrangements and voluntarily liquidate Shanghai Jupiter, or Shanghai Jupiter declares bankruptcy and all or part of its assets become subject to liens or rights of third-party creditors, or are otherwise disposed of without our consent, MMV may be unable to operate some or all of our businesses or otherwise benefit from the assets held by Shanghai Jupiter, which could have a material adverse effect on our business, financial condition, and results of operations. Furthermore, if Shanghai Jupiter undergoes a voluntary or involuntary liquidation proceeding, its equity holders or unrelated third-party creditors may claim rights to some or all of the assets of Shanghai Jupiter, thereby hindering our ability to operate our business as well as constrain our growth.

In accordance with the relevant laws and regulations in jurisdictions in which MMV operates, MMV is required to maintain various approvals, licenses, and permits to operate our business, including but not limited to business license, license related to content offerings, radio and TV programs Production and operation license, and value-added telecommunications license. These approvals, licenses, and permits are obtained upon satisfactory compliance with, among other things, the applicable laws and regulations. In particular, the internet and mobile internet industries in China are highly regulated. Our VIEs are required to obtain and maintain applicable licenses and approvals from different regulatory authorities in order to provide their current services. Under the current PRC regulatory regime, a number of regulatory authorities, including, but not limited to, the NPPA, the MOCT, the MIIT, the PRC State Council Information Office, and the CAC, jointly regulate all major aspects of the internet industry, including the mobile internet and online content communities. Operators must obtain various government approvals and licenses for relevant business. MMV has obtained Value-Added Telecommunications Business Operating License, or ICP License, for the provision of commercial internet information services, the ICB Licenses, for commercial internet culture activities, Radio and TV Programs Production and Operation License, a license for production and operation of TV programs (including animation), and a license for publication operation through our VIEs. These licenses are essential to the operation of our business and are generally subject to regular government review or renewal. MMV cannot assure you that it will be able to maintain our existing licenses or permits necessary for our business operations, update information (such as websites, apps, or legal representative) on file, or renew any of them when their current term expires. In particular, MMV must file and obtain an ISBN from the NPPA, for every game, including its updated version and expansion pack with names different from the original version, it develops before these games can be marketed to the public. While our management has significant experience in obtaining ISBN from NPPA, it cannot guarantee MMV will be able to achieve the same results in the future. If MMV is unable to obtain the ISBN from NPPA or do so in a timely manner, it could significantly impact its business plan and negative affect its financial condition and results of operation. Furthermore, MMV may experience compliance issues due to numerous factors including, but not limited to not having received and verified the relevant animation distribution license for "Aotu Academy" held by animation distributors. If MMV fails to obtain the necessary licenses, permits and approvals, MMV may be subject to fines, confiscation of revenues generated from incompliance operations, or the suspension of relevant operations. MMV may also experience adverse publicity arising from such non-compliance with government regulations that negatively impacts its brand. MMV may experience difficulties or failures in obtaining the necessary approvals, licenses, and permits for new spaces or new service offerings. If MMV fails to obtain the material licenses, our content offerings and business activities could be severely delayed. In addition, there can be no assurance that MMV will be able to obtain, renew, and/or convert all of the approvals, licenses, and permits required for its existing business operations upon their expiration in a timely manner or at all, which could adversely affect our business operations. In addition, considerable uncertainties exist in relation to the interpretation and implementation of existing and future laws and regulations governing our business activities. MMV could be found not in compliance with any future laws and regulations or of the laws and regulations currently in effect due to changes in the relevant authorities' interpretation of these laws and regulations. If MMV fails to complete, obtain, or maintain any of the required licenses or approvals or make the necessary filings, MMV may be subject to various penalties, such as confiscation of unlawful gains, the imposition of fines, revocation of licenses, and the discontinuation or restriction of our operations. Any such penalties or changes in policies, regulations, or enforcement by government authorities may disrupt our operations and materially and adversely affect our business, financial condition, and results of operations.

Foreign ownership of internet-based businesses, such as provision of commercial internet information services, commercial internet culture activities, and internet audio-visual program is subject to restrictions under current PRC laws and regulations. For example, foreign investors are not allowed to own more than 50% of the equity interests in a value-added telecommunications enterprise (except for e-commerce, domestic multi-party communications, storage-forwarding, and call centers) and the main foreign investor of such enterprise must have experience in providing value-added telecommunications services overseas and maintain a good track record in accordance with the Special Administrative Measures (Negative List) for Foreign Investment Access (2021 Edition) issued on December 27, 2021 and effective on January 1, 2022, by the NDRC, and the MOFCOM, and other applicable laws and regulations. In addition, foreign investors are prohibited from investing in enterprises engaging in internet culture activities except for music or providing internet audio-visual program services. MMV is a BVI business company incorporated under the laws of the British Virgin Islands. To comply with PRC laws and regulations, MMV conducts our internet-related business in China through Shanghai Jupiter and its subsidiaries incorporated in China. Shanghai Jupiter and its subsidiaries hold the licenses, approvals, and key assets that are essential for the operations of certain of our businesses. Shanghai Jupiter is owned by PRC citizens or entities who are our founder, co-founders, or beneficially owned or controlled by our shareholders, with whom MMV has contractual arrangements. our control over the VIEs and our position of being the primary beneficiary of the VIEs for the accounting purposes are limited to the conditions that MMV met for consolidation of the VIEs under U.S. GAAP. Such conditions include that (i) MMV controls Shanghai Jupiter through power to govern the activities which most significantly impact the Shanghai Jupiter's economic performance, (ii) MMV is contractually obligated to absorb losses of Shanghai Jupiter that could potentially be significant to Shanghai Jupiter, and (iii) MMV is entitled to receive benefits from Shanghai Jupiter that could potentially be significant to Shanghai Jupiter. Only if MMV meets the aforementioned conditions for consolidation of the VIEs under U.S. GAAP, MMV will be deemed as the primary beneficiary of the VIEs, and the VIEs will be treated as our consolidated affiliated entities for accounting purposes. Although the structure MMV has adopted is consistent with longstanding industry practice, and is commonly adopted by comparable companies in China, such arrangements have not been tested in any of the PRC courts and the PRC government may not agree that these arrangements comply with PRC licensing, registration, or other regulatory requirements, with existing policies or with requirements or policies that may be adopted in the future. The VIE arrangements enable MMV to (i) direct the activities that most significantly affect the economic performance of the VIEs; (ii) receive substantially all of the economic benefits from the VIEs; and (iii) have an exclusive option to purchase all or part of the equity interests in the VIEs or to all or part of the assets of the VIEs, when and to the extent permitted by PRC law, or request any existing shareholder of the VIEs to transfer all or part of the equity interest in the VIEs to another PRC person or entity designated by the Company at any time in our discretion, therefore the VIE arrangements can provide sufficient protection to our shareholders. In the opinion of Global Law Office, our PRC legal counsel, the VIE arrangements are valid, binding, enforceable, and do not result in any violation of PRC laws or regulations currently in effect. However, there are substantial uncertainties regarding the interpretation and application of current or future PRC laws and regulations. The relevant PRC regulatory authorities have broad discretion in determining whether a particular contractual structure violates PRC laws and regulations. According to the Opinions on Strictly Cracking Down on Illegal Securities Activities promulgated on July 6, 2021 and the Trial Administrative Measures of the Overseas Securities Offering and Listing by Domestic Companies and relevant five guidelines promulgated on February 17, 2023, the PRC government will strengthen the administration over illegal securities activities, enhancing supervision over overseas listings of Chinese companies (including but not limited to the Chinese companies controlled by overseas parent company through VIE structure). Thus, MMV cannot assure you that the PRC government will not ultimately take a view contrary to our current corporate structure. If MMV is found in violation of any PRC laws or regulations or if the contractual arrangements under MMV are determined as illegal or invalid by any PRC court, arbitral tribunal, or regulatory authorities, the relevant governmental authorities would have broad discretion in dealing with such violation, including, without limitation: 1. revoke the agreements constituting the contractual arrangements;2. revoke the VIEs' business and operating licenses;3. require the VIEs to discontinue or restrict operations;4. restrict our right to collect revenue;5. restrict or prohibit our use of the proceeds from our public offering to fund its business and operations in China;6. shut down all or part of the VIEs' websites, apps, or services;7. levy fines on the VIEs or confiscate the proceeds that they deem to have been obtained through non- compliant operations;8. require MMV to register, file or apply for approval with respect to its adoption of VIE structure which MMV may not be able to complete;9. require the VIEs to restructure the operations in such a way as to compel it to establish a new enterprise, re-apply for the necessary licenses, or relocate the VIEs' businesses, staff, and assets;10. impose additional conditions or requirements with which the VIEs may not be able to comply;11. record the VIEs' illegitimate acts in the corporate credit information system; and/or 12. take other regulatory or enforcement actions that could be harmful to the VIEs' business. Furthermore, any of the equity interest in Shanghai Jupiter under the name of any record equity holder of Shanghai Jupiter may be put the court's custody in connection with litigation, arbitration, or other judicial or dispute resolution proceedings against that record holder. MMV cannot be certain that the equity interest will be disposed of in accordance with the contractual arrangements. In addition, new PRC laws, rules, and regulations may be introduced to impose additional requirements that may impose additional challenges to our corporate structure and contractual arrangements. The occurrence of any of these events or the imposition of any of these penalties may materially and adversely affect our ability to conduct internet-related businesses. In addition, if the imposition of any of these penalties causes MMV to be unable to direct the activities of our VIEs or the right to receive their economic benefits, MMV would no longer be able to consolidate Shanghai Jupiter into our financial statements, which could materially and adversely affect our financial condition and results of operations. If MMV is unable to claim its contractual right to control the assets of the VIEs that carry out substantially all of our operations in China, the MMV Ordinary Shares and Warrants may decline in value or become worthless.

Content in our UGC community may draw social attention, which may cause controversies. Moreover, the PRC government and regulatory authorities have adopted regulations governing content and information over the internet. Under these regulations, internet content providers are prohibited from posting, reproducing, transmitting, or displaying over the internet content that, among other things, violates PRC laws and regulations, impairs the national dignity of China or the public interest, or is obscene, superstitious, fraudulent, violent, or defamatory. Internet content providers are also prohibited from displaying content that may be deemed by relevant government authorities as "socially destabilizing" or leaking "state secrets" of China. The PRC government and regulatory authorities strengthen the regulation on internet content from time to time. For example, the PRC Cybersecurity Law, which took effect on June 1, 2017, provides that, among other things, a network operator must keep record of and report any instances of public dissemination of prohibited content and failure to do so may result in revocation of its Value-Added Telecommunications Business Operating License and termination of business. With respect to audio-visual and live streaming content, the Circular on Issues Concerning Strengthening the Administration of Online Live Streaming of Audio-Visual Programs requires online audio-visual live streaming service providers to monitor the living streaming content, and to have an established emergency reaction plan to replace content that violates PRC laws and regulations. The Administrative Regulations on Online Live Streaming Services requires online live streaming service providers to establish review platforms for live streaming content. In addition, the Administrative Provisions on Online Audio-Visual Information Services provides that online audio-visual information service providers are the principals responsible for managing the security of information content, and should establish and improve their internal policies on user registration, scrutiny of information publication, and information security management, and that they must report users' production, publication, and dissemination of prohibited content. Moreover, the Regulations on Administration of Network Short Video Platforms requires that all short videos to be reviewed before being broadcasted. Any failure to comply with the aforementioned regulations may cause negative publicity and subject MMV to fines or other penalties, which could materially and adversely affect our business, reputation, and results of operations. MMV cannot assure you that MMV can identify all objectionable or illicit content due to the large amount of content uploaded by our users every day. Failure to identify and prevent illegal or inappropriate content from being uploaded to our community may subject MMV to negative publicity or liability, such as limiting the dissemination of content, and suspension or removal of its contents from various distribution channels. Laws and rules, governmental or judicial interpretations, and implementations may change in a manner that could render our current efforts insufficient. If government actions or sanctions are brought or pending against MMV, or if there is publicity that government actions or sanctions have been brought or otherwise are pending against MMV, its reputation and brand image could be harmed, MMV may lose users and business partners, and our revenue and results of operation may be materially and adversely affected.

MMV believes that virtual assets are valued by our users, particularly long-term users. However, on occasion, such assets can be lost if, for example, a user's identity is stolen by another user or MMV experiences a system error or crash. Other than the Civil Code of the PRC («??????????»), which was passed by the PRC National People's Congress on May 28, 2020 and took effect on January 1, 2021, and prescribes that network virtual property will be protected according to the laws and regulations stipulating the protection of such property, the Chinese government has not yet enacted any specific laws regarding virtual property rights. Accordingly, MMV has no basis to determine what the legal rights are, if any, associated with virtual assets and what liabilities MMV could be exposed to for the loss or destruction of virtual assets. In case of a loss of virtual assets, MMV may be sued by our users and held liable for damages, which may negatively affect our reputation and business, financial condition and results of operations. MMV has not been involved in any virtual assets related law suits. However, MMV cannot assure you that such law suits will not be brought against us in the future. Based on several judgments by PRC courts regarding the liabilities of game operators for loss of virtual assets by users, the courts have generally required the game operators to provide well-developed securities systems to protect such virtual assets owned by users and have required some game operators to return the virtual items or be liable for the loss and damage incurred therefrom if the online game operators have been determined to be in default or held liable for infringement of users' rights.

The legal system 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. Meanwhile, there are very few precedents and little formal guidance as to how contractual arrangements in the context of a VIE should be interpreted or enforced under PRC law. There remain significant uncertainties regarding the ultimate outcome of such arbitration should legal action become necessary. In addition, under PRC law, rulings by arbitrators are final, parties cannot appeal the arbitration results in courts except that parties may apply for a cancellation of such rulings before an intermediate people's court at the place where the arbitration commission is located under certain circumstances, and if the losing parties fail to carry out the arbitration awards within a prescribed time limit, the prevailing parties may only enforce the arbitration awards in PRC courts, which would require additional expenses and delay. In the event MMV is unable to enforce these contractual arrangements, or if MMV suffers significant delays or other obstacles in the process of enforcing these contractual arrangements, MMV may not be able to exert effective control over its VIEs, and our ability to conduct its business may be negatively affected.

If MMV or any of its subsidiaries is a PFIC for any taxable year, or portion thereof, that is included in the holding period of a U.S. Holder of MMV Ordinary Shares or Warrants, such U.S. Holder may be subject to certain adverse U.S. federal income tax consequences and may be subject to additional reporting requirements. There is no assurance that MMV or its subsidiaries are not currently PFICs for U.S. federal income tax purposes for the taxable year of the Business Combination or for foreseeable future taxable years. Moreover, MMV does not expect to provide a PFIC annual information statement for 2021 or going forward.

Under the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside of the PRC with its "de facto management body" within the PRC is considered a "resident enterprise" and will be subject to the enterprise income tax on its global income at the rate of 25%. The implementation rules define the term "de facto management body" as the body that exercises full and substantial control and overall management over the business, productions, personnel, accounts, and properties of an enterprise. In 2009, SAT issued a circular, known as SAT Circular 82, which provides certain specific criteria for determining whether the "de facto management body" of a PRC-controlled enterprise that is incorporated offshore is located in China. Although this circular applies only 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, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its "de facto management body" in China, and will be subject to PRC enterprise income tax on its global income only if all of the following conditions are met: (i) the primary location of the day-to-day operational management is in the PRC; (ii) decisions relating to the enterprise's financial and human resource matters are made or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise's primary assets, accounting books and records, company seals, and board and shareholder resolutions are located or maintained in the PRC; and (iv) at least 50% of voting board members or senior executives habitually reside in the PRC. MMV believes it is not a PRC resident enterprise for PRC tax purposes. However, the tax resident 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 the PRC tax authorities determine that MMV is a PRC resident enterprise for enterprise income tax purposes, MMV would be subject to PRC enterprise income tax on its worldwide income at the rate of 25%. Furthermore, MMV would be required to withhold a 10% tax from dividends it pays to its shareholders that are non-resident enterprises. In addition, non-resident enterprise shareholders may be subject to PRC tax on gains realized on the sale or other disposition of ordinary shares, if such income is treated as sourced from within the PRC. Furthermore, if MMV is deemed a PRC resident enterprise, dividends paid to its non-PRC individual shareholders and any gain realized on the transfer of the ordinary shares by such shareholders may be subject to PRC tax at a rate of 20% (which, in the case of dividends, may be withheld at source by us). These rates may be reduced by an applicable tax treaty, but it is unclear whether non-PRC shareholders of MMV would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that MMV is treated as a PRC resident enterprise. Any such tax may reduce the returns on your investment in the ordinary shares.

Our business involves collecting and retaining user data, including certain users' personal information as our various information technology systems enter, process, summarize and report such data. MMV also maintains information about various aspects of our operations as well as regarding its employees. The integrity and protection of our users, employees and company data is critical to our business. Our users and employees expect that MMV will adequately protect their personal information. MMV is required by applicable laws to keep strictly confidential the personal information that MMV collects, and to take adequate security measures to safeguard such information. The PRC Criminal Law ( ), as amended by its Amendment 7 (effective on February 28, 2009) and Amendment 9 (effective on November 1, 2015), prohibits institutions, companies, and their employees from selling or otherwise illegally disclosing a citizen's personal information obtained during the course of performing duties or providing services or obtaining such information through theft or other illegal ways. On November 7, 2016, the Standing Committee of the PRC National People's Congress issued the Cyber Security Law of the PRC (), or Cyber Security Law, which became effective on June 1, 2017. Pursuant to the Cyber Security Law, the owners and administrators of networks and network service providers have various personal information security protection obligations, including restrictions on the collection and use of personal information of users, and they are required to take steps to prevent personal data from being divulged, stolen, or tampered with. The Civil Code of the PRC ( ) (issued by the PRC National People's Congress on May 28, 2020 and effective from January 1, 2021) provides main legal basis for privacy and personal information infringement claims under the Chinese civil laws. Furthermore, on August 20, 2021, the Standing Committee of the PRC National People's Congress promulgated the Law of Personal Information Protection of PRC, or the Personal Information Protection Law (), which became effective on November 1, 2021, setting forth detailed rules for handling personal information. PRC regulators, including the CAC, MIIT, and the Ministry of Public Security of the PRC, or the MPC, have been increasingly focused on regulation in the areas of data security and data protection. On January 23, 2019, the CAC, the MIIT and 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 August 22, 2019, the CAC issued the Regulation on Cyber Protection of Children's Personal Information (), effective on October 1, 2019, according to which: (i) no organization or individual is allowed to produce, release or disseminate information that infringes upon the personal information security of children under 14; (ii) network operators are required to establish special policies and user agreements to protect children's personal information, and to appoint special personnel in charge of protecting children's personal information. Network operators who collect, use, transfer or disclose personal information of children are required to, in a noticeable and clear way, notify and obtain consent from children's guardians. On November 28, 2019, the CAC, MIIT, the MPS and SAMR jointly issued the Measures to Identify Illegal Collection and Usage of Personal Information by Apps (), which lists six types of illegal collection and usage of personal information, including "failure to publish rules on the collection and usage of personal information," "failure to expressly state the purpose, manner and scope of the collection and usage of personal information," "collecting and using personal information without obtaining consents from users," "collecting personal information irrelevant to the services provided," "providing personal information to other parties without obtaining consent" and "failure to provide the function of deleting or correcting personal information as required by law or failure to publish the methods for complaints and reports or other information." Regulatory requirements regarding the protection of personal information are constantly evolving and can be subject to differing interpretations or significant change, making the extent of our responsibilities in that regard uncertain. Complying with new laws and regulations could cause MMV to incur substantial costs or require MMV to change its business practices in a manner materially adverse to our business. For instance, various regulatory bodies in China, including the CAC, the MPC and the SAMR, have enforced data privacy and protection laws and regulations with varying and evolving standards and interpretations. MMV could become subject to enhanced cybersecurity review or investigations launched by PRC regulators in the future. Any non-compliance with the related laws and regulations may result in fines or other penalties, including suspension of business, website closure, removal of our app from the relevant app stores, and revocation of prerequisite licenses, as well as reputational damage or legal proceedings or actions against us, which may have material adverse effect on our business, financial condition or results of operations. Any system failure or compromise of our security that results in the unauthorized access to or release of the data of our users could significantly limit the adoption of our services, as well as harm our brand reputation, result in litigation against MMV, liquidated and other damages, regulatory investigations and penalties, and MMV could be subject to material liability. MMV expect to continue expending significant resources to protect against security breaches. The risk that these types of events could seriously harm our business is likely to increase as MMV expands the scope of services it offers and as it increases the size of its user base. In addition, the interpretation and application of the aforementioned laws and regulations are often uncertain and in flux. Our practice may become inconsistent with these laws and regulations. If so, in addition to the possibility of fines, this could result in an order requiring that MMV changes its practices, which could have an adverse effect on our business and results of operations.

MMV collects personal data from our users in order to better understand our users and their needs. Concerns about the collection, use, disclosure, processing, or security of personal information or other privacy-related matters, even for those without merit, could damage our reputation, cause MMV to lose users, and adversely affect our business and results of operations. MMV is required by privacy and data protection laws in China and other jurisdictions, including, without limitation, the PRC Cybersecurity Law, to ensure the confidentiality, integrity, and availability of the information of our users, advertising customers, and third-party content providers, which is also essential to maintaining their confidence in our services. However, the interpretation and implementation of such laws in China and elsewhere are often uncertain and in flux. In November 2016, the Standing Committee of the PRC National People's Congress promulgated the PRC Cybersecurity Law, which provides that network operators must meets their cybersecurity obligations and must take technical measures and other necessary measures to protect the safety and stability of their networks. The PRC Cybersecurity Law is relatively new and subject to interpretation by the regulator. MMV collects certain user information which mainly includes some registered consumers' name, address, mobile phone number, birthday date, in the course of its business operation for the purpose of member registration and mailing of merchandises. Although MMV only gains access to minimal user information that is necessary for, and relevant to, the services provided to meet the obligations mandated by law, the data MMV obtains and uses may be deemed as "personal information" under the PRC Cybersecurity Law and related data privacy and protection laws and regulations. While MMV takes measures to comply with all applicable data privacy and protection laws and regulations, MMV cannot guarantee the effectiveness of the measures undertaken by MMV and its business partners. The activities of third-parties, such as our users, merchants, brands, third-party data processor, and other business partners are beyond our control. If any of these parties violate the PRC Cybersecurity Law and related laws and regulations, or fail to fully comply with the service agreements with MMV, or if any of our employees fails to comply with our internal control measures and misuses the information, MMV may be subject to regulatory actions. Any failure or perceived failure to comply with all applicable data privacy and protection laws and regulations, or any failure or perceived failure of our business partners to do so, or any failure or perceived failure of our employees to comply with our internal control measures, may result in negative publicity and legal proceedings or regulatory actions against MMV, and could damage our reputation, discourage current and potential users and business partners from using our services, and subject MMV to claims, fines, suspension of relevant operations, revocation of licenses, or other damages, which could have a material adverse effect on our business and results of operations. New laws or regulations concerning data protection, or the interpretation and implementation of existing consumer and data protection laws or regulations, which is often uncertain and in flux, may be inconsistent with our practices. The introduction of new products or other actions that MMV may take may subject MMV to additional laws, regulations, or other government scrutiny. Complying with new laws and regulations could cause MMV to incur substantial costs or require MMV to change its business practices in a manner materially adverse to our business. In addition, some countries are considering or have passed legislation implementing data protection requirements or requiring local storage and processing of data or similar requirements that could increase the cost and complexity of delivering our services. MMV conducts all of its business through the operation of its subsidiaries in the PRC and VIEs. If the VIE structure and the series of agreements executed under the VIE arrangement are terminated or become invalid or illegal as a result of the new rules, MMV cannot exercise any contractual control over our subsidiaries in the PRC.

Pursuant to the applicable PRC laws and regulations concerning the use and sharing of personal data, our PRC subsidiaries and consolidated affiliated entities are required to keep our users' personal information confidential and are prohibited from disclosing such information to any third parties without the users' consent. New laws and regulations, such as The Decision of the Standing Committee of the PRC National People's Congress on Strengthening Network Information Protection, which was issued by the Standing Committee of the PRC National People's Congress on December 28, 2012, and the Provisions on Protection of Personal Information of Telecommunication and Internet Users, which was promulgated by the MIIT on July 16, 2013 and took effect on September 1, 2013 further enhanced the legal protection of information security and privacy on the Internet. The laws and regulations also require Internet operators to take measures to ensure confidentiality of information of users. On December 29, 2017, the National Information Security Standardization Technical Committee, or the NISSTC, issued the Information Security Technology- Personal Information Security Specification, which implemented on May 1, 2018. Although this is a recommended specification and not a mandatory one, it is used as a basis for carrying out regulatory work on privacy policies by the MIIT and the MPC. While MMV strives to comply with our privacy guidelines as well as all applicable data protection laws and regulations, any failure or perceived failure to comply may result in proceedings or actions against us by government entities or others, and could damage our reputation. User and regulatory attitudes towards privacy are evolving, and future regulatory or user concerns about the extent to which personal information is shared with merchants or others may adversely affect our ability to share certain data with merchants, which may limit certain methods of targeted marketing. Concerns about the security of personal data could also lead to a decline in general internet usage, which could lead to lower user traffic on our website. A significant reduction in user traffic could lead to lower revenues from paying users, which could have a material adverse effect on our business, financial condition and results of operations.

Our success depends on its ability to offer high-quality content focused on animation and games. The breadth, depth, and quality of its content are fundamental in maintaining the attractiveness and value to its users. We rely on its experience from past and current operations to offer, manage, and refine its high-quality content, which may not be effective as user preferences and market trends change. If we are unable to expand into new high quality content by diversifying its products under its Aotu World brand as well as developing new proprietary brand to diversify its animation or gaming product pipeline, its ability to keep content offerings comprehensive and up-to-date may be adversely affected. The quality of its content may be compromised if we are not able to continue to maintain in-depth and meaningful engagement of its user group. If we are unable to keep up with evolving user preferences, it may experience a decline in the attractiveness of its products to its user base. User generated content, or UGCs, and professional generated user content, or PUGCs, are critical to our content offering. We encourage and support UGC and PUGC creators in providing content to sustain its popularity among users and as an effective for product development inspiration. We also provide continuous support to UGC creators to encourage ongoing and future creation. Any failure in encouraging, supporting, and incentivizing UGC creators may materially and adversely affect the breadth, depth, and quality of its content offerings. We, in part, rely on the engagement of PUGC creators for brand and product development. If we determine that the PUGC creators and their concepts or developing products have commercial potential, we may formally engage these PUGC creators to establish the contractual basis for their commercial cooperation. However, we cannot assure you that it may reach an agreement with the PUGC creators to develop the product candidate. If we are unable to reach an agreement with the PUGC creators, its content offerings, product development and pipeline may be adversely affected. Furthermore, even if we are able to reach an agreement with the PUGC creators, we cannot assure you that the commercial terms of the agreement will be favorable to us or that the product under the cooperation agreement will ultimately be developed or achieve favorable financial results for us. If we are unable to continue to offer high-quality content and enhance its content offerings, the reputation and attractiveness of its brand could be compromised, and it may experience a decline in its user base, which could materially and adversely affect its business and results of operations.

Our new games may attract players away from our existing games and shrink the player base of our existing games, which could in turn make those existing games less attractive to other players, resulting in decreased revenue from our existing games. Players of our existing games may also spend less money purchasing virtual items in our existing games than they would have spent if they had continued playing our existing games without the introduction of new games. The occurrence of any of the above may have a material adverse effect on our business, financial condition, results of operations and prospects.

Our success and continued growth is driven by its highly engaged user base. MMV, and in particular the products under its Aotu World brand, has experienced support from its users since its market introduction. our users and fans support and also participate and contribute to the development of the Aotu World brand by generating a large volume of UGC. MMV retains users and attracts new users with its high- quality and entertaining content, and any failure by MMV to attract, maintain and engage its user base may affect the quality and quantity of UGC. MMV cannot assure you that it will sustain or continue to attract users in this age group as this generation of users matures and the consumer demand preference changes over time. MMV also deploys specific strategies to encourage and promote UGC in order to elevate user participation to strengthen the user base. If MMV experiences a decline in the depth, breadth, quantity or quality of our content, or our strategies and user growth efforts turn out to be ineffective, MMV may not be able to attract more users effectively or may experience a decline in our user base. Currently, MMV primarily relies on and benefits from the user base it has accumulated. If MMV fails to attract, sustain and engage its user base, it could result in a reduction of purchase of our merchandise and in-game items, result in high customer acquisition cost, and other results which could materially and adversely affect our business, financial condition and results of operations.

Our failure to timely obtain preapproval for publication of online games from the NPPA before game launch may adversely affect our game pipelines. Publishing and monetizing mobile games in China are subject to preapproval by the NPPA. Accordingly, online games, including approved games' updated version and expansion pack with names different from the original version, are subject to preapproval by the NPPA. If MMV fails to obtain for any online games it develops, or neglect to obtain for any updated version and expansion pack of its approved games, the ISBN from the NPPA, none of them can be successfully launched in China as scheduled, which may adversely affect our game pipeline. In addition, the ISBN may become more difficult to be obtained in the future and the NPPA may delay or suspend the issuance of ISBN from time to time, and more restrictions on the issuance of the ISBN may be imposed in the future, which may disrupt our business plan and lead to a loss of business opportunities. NPPA at the national level had suspended the approval of game registration and issuance of ISBN for online games starting from March 2018, and later resumed game registration and issued ISBN for the first batch of games with an effective date of December 19, 2018. From August 2021, no new game registration or ISBN for online games were approved or issued from the NPPA at the national level until resumed in April 2022, which caused delays to the publication of our pipeline of games and other products. The unanticipated delays have adversely impacted our overall publication schedule and thus impacted our projected revenue. The processing time of games registration and issuance of the ISBN may vary greatly and is within the NPPA's discretion. Any future delay in game registration with NPPA or obtaining the ISBN could negatively affect the operation results of our games and businesses. Going forward, if any online games published or to be published by MMV fails to obtain the ISBN in time, or at all, these games may not be allowed to be released or may be ordered to be suspended or cease operation, and, as a result, our business and results of operations may be materially and adversely affected.

Our operations rely heavily on mobile based systems, telecommunications networks, and digital infrastructure. Almost all access to the internet in China is maintained through state-owned telecommunication operators under the administrative control and regulatory supervision of the MIIT. Moreover, MMV primarily relies on a limited number of telecommunication service providers to provide MMV with data communications capacity through local telecommunications lines and internet data centers to host our servers. MMV has limited access to alternative networks or services in the event of disruptions, failures, or other problems with China's internet infrastructure or the fixed telecommunications networks provided by telecommunication service providers. With the expansion of our business, MMV may be required to upgrade our technology and infrastructure to keep up with the increasing traffic on our internet and mobile gaming applications. MMV cannot assure you that the digital infrastructure and the telecommunications networks in China will be able to support the demands associated with the continued growth in digital usage. In addition, MMV has no control over the costs of the services provided by telecommunication service providers. If the prices MMV pays for telecommunications and digital services rise significantly, our results of operations may be materially and adversely affected. Furthermore, if data access fees or other charges to mobile users increase, our user traffic may decline and our business may be harmed.

Our ability to provide users with high-quality experience depends on the continuous and reliable operation of its technology infrastructure, the failure of which may significantly impair our user experience. Disruptions, failures, or unscheduled service interruptions could hurt our reputation, ability to operate its business, retain existing users and attract new users. Our technology infrastructure are vulnerable to damage or interruption as a result of fires, floods, earthquakes, power losses, telecommunications failures, undetected errors in software, computer viruses, hacking, and other attempts to harm our systems. These interruptions may be due to unforeseen events that are beyond our control or the control of our third-party service providers. MMV has experienced general intermittent interruptions in the past, and may continue to experience similar interruptions in the future despite our continuous efforts to improve our technology infrastructure. Since MMV hosts our servers at third-party internet data centers, any natural disaster or unexpected closure of internet data centers operated by third-party providers may result in lengthy service interruptions. The proper functioning of our technology is essential to our business. If MMV experiences frequent or persistent service disruptions, whether caused by failures of our own systems or those of third-party service providers, its users' experience may be negatively affected, which in turn, may materially and adversely affect our reputation. MMV cannot assure you that MMV will be successful in minimizing the frequency or duration of service interruptions.

Our compliance controls, policies, and procedures may not protect it from acts of our employees, business partners, or other third-parties that violate the laws or regulations of the jurisdictions in which MMV operates, which may adversely affect our business. In addition, our business partners may be subject to regulatory penalties or punishments because of their regulatory compliance failures, which may, directly or indirectly, disrupt our business. MMV identifies irregularities or non-compliance in the business practices of any parties with whom MMV pursues existing or future cooperation and MMV cannot assure you that any of these irregularities will be corrected in a prompt and proper manner. The legal liabilities and regulatory actions on our business partners or other third-parties involved in our business may affect our business activities and reputation and in turn, our results of operations.

The PRC National People's Congress promulgated the Labor Contract Law, which became effective on January 1, 2008 and was amended on December 28, 2012, and the PRC State Council promulgated implementing rules for the labor contract law on September 18, 2008. The labor contract law and the implementing rules impose requirements concerning, among others, the execution of written contracts between employers and employees, the time limits for probationary periods, and the length of employment contracts. The interpretation and implementation of these regulations are still evolving, our employment practices may violate the labor contract law and related regulations and MMV could be subject to penalties, fines, or legal fees as a result. If MMV violates relevant laws and regulations, MMV may be subject to severe penalties or incur significant legal fees in connection with labor law disputes or investigations, our business, financial condition, and results of operations may be adversely affected.

MMV currently uses numerous third-party suppliers and service providers to provide services that are critical to our businesses. MMV have engaged third-party or related service providers to provide online payment for gameplay and merchandise purchase, content distribution, data support, cybersecurity and maintenance services and other services. MMV has limited control over the operations of such third-parties and any significant interruption in their operations may have an adverse impact on our operations. For example, MMV relies on certain third parties to broadcast its animation series and distribute its mobile games, any interruption or deterioration of business relationship with these distributors may materially affect our business operation and financial results. This is significant as MMV relies on its animation series to promote its brand. In addition to television broadcastings, MMV broadcasts its animation series on various video platforms, and MMV continues to rely on these video platforms to promote its brand. In January and November 2019, and January 2022, MMV signed online broadcasting agreements with an affiliate of Bilibili Inc. for Bilibili's exclusive online broadcasting of our Aotu World the Animation in the PRC. While MMV believes this exclusive strategic cooperation with Bilibili Inc. will enhance its brand reputation, MMV cannot assure you that this exclusive right will benefit its brand and sufficient to promote its brand in the long term. If this arrangement with Bilibili Inc. is unable to maintain or achieve greater viewership results, our brand may be affected. In addition, the damages in reputation or otherwise of our animation series may also affect the commercial appeal and financial results for other entertainment genres, such as its mobile game, under the same brand. Furthermore, MMV generates a substantial portion of its revenue from the operation of its mobile game, and relies on certain application stores and other gaming platforms to promote and market its mobile games to its users. If our relationship with these application stores or gaming platforms deteriorates or is interrupted for any reason, these platforms may suspend or terminate their services to MMV. If such event occurs, our users may not have access or find an alternative method to access our mobile games, which may adversely affect our operation and financial results. In addition to providing hosting service to our mobile games, some of these application stores and gaming platforms may collect payments from users for certain in-game purchases. These application stores and gaming platforms revert the scheduled payments to MMV periodically. However, these application stores and gaming platforms, for any reason, may fail to provide payment to MMV or fail to do so in a timely manner. If such event occurs, our business operation, financial results, and in particular, its cash flow may be adversely affected. If any third-party service provider breaches its obligations under the contractual arrangements to provide relevant service to MMV, or revert payment to MMV for products provided and services rendered, or refuses to renew these service agreements on terms acceptable to MMV, MMV may not be able to find a suitable alternative service provider. Similarly, any failure of or significant quality deterioration in such service provider's service platform or system could materially and adversely affect our reputation, business, financial condition and results of operations. In addition, these third-party service providers may bring legal actions against MMV for various claims such as payment settlement, which could delay the service delivery and adversely affect our business and financial condition.

The insurance industry in China is still at an early stage of development, and insurance companies in China currently offer limited business-related insurance products. MMV maintains minimal insurance to meet the standard mandated by PRC law. Although MMV considers its insurance coverage to be in line with that of other companies in the same industry of similar size in China, these insurance and minimal coverage might not be able to cover all risks related to our operation. Any uninsured risks may result in substantial costs and the diversion of resources, which could adversely affect its results of operations and financial condition. For more information about our insurance coverage, please see "Item 4. Information on the Company - D. Business Overview - Insurance" in this annual report.

The global macroeconomic environment is facing challenges. The growth rate of the Chinese economy has gradually slowed in recent years and the trend may continue. There is considerable uncertainty over the long-term effects of the monetary and fiscal policies adopted by the central banks and financial authorities of some of the world's leading economies, including the United States and China. Unrest, terrorist threats and the potential for war in the Middle East and elsewhere may increase market volatility across the globe. There have also been concerns on the relationship among China and other countries, including the surrounding Asian countries, which may potentially have economic effects. In particular, there is significant uncertainty about the future relationship between the United States and China with respect to trade policies, treaties, government regulations, and tariffs. 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 PRC economy may materially and adversely affect our business, results of operations, and financial condition.