Akso Health Group 20-F for FY2026
Akso Health Group (AHG)
About this 20-F
Akso Health Group filed this 20-F on July 23, 2026, covering the fiscal year ended March 31, 2026 (FY2026).
Headline figures
Fiscal year ended March 31, 2026, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $13.83M
- down 6.4% from $14.78M a year earlier
- Net loss
- $18.67M
- compared with a net loss of $134.98M a year earlier
- Diluted EPS
- $0.01
- down 93.8% from $0.16 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
OR
For the fiscal year ended
OR
For the transition period from to
OR
Date of event requiring this shell company report
Commission file number:
| (Exact name of Registrant as specified in its charter) |
| N/A |
| (Translation of Registrant’s name into English) |
| (Jurisdiction of incorporation or organization) |
| Tel: +86 152 1005 4919 |
| (Address of principal executive offices) |
| Telephone: Email: |
| (Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person) |
Securities registered or to be registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered |
||
| * | for trading, but only in connection with the listing of the American depositary shares on the NASDAQ Capital Market. |
Securities registered or to be registered pursuant to Section 12(g) of the Act:
| None |
| (Title of Class) |
| Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: |
| None |
| (Title of Class) |
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
The number of outstanding shares of each of the issuer’s classes of capital or common stock as of March 31, 2026 were
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
☐ Yes ☒
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Accelerated filer ☐ | Non-accelerated filer ☐ | Emerging growth company |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| † | The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012. |
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ Yes ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
| International Financial Reporting Standards as issued | Other ☐ | |
| by the International Accounting Standards Board ☐ |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
☐ Item 17 ☐ Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐ Yes
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. ☐ Yes ☐ No
TABLE OF CONTENTS
i
INTRODUCTION
In this annual report on Form 20-F, unless otherwise indicated or the context otherwise requires, references to:
| ● | “ADSs” are to our American depositary shares, each of which represents three Class A ordinary shares; |
| ● | “App”, “Xiaobai Maimai” are to Xiaobai Maimai application; |
| ● | “big data” are to voluminous structured and unstructured data from multiple sources and in multiple formats; |
| ● | “CAGR” are to compound annual growth rate; |
| ● | “China” or the “PRC” are to the People’s Republic of China, including Hong Kong Special Administrative Region and the Macau Special Administrative Region, unless referening specific laws and regulatioins adopted by the PRC and other legal or tax matters only applicable to mainland China, and excluding, for the purposes of this annual report on Form 20-F only, Taiwan; |
| ● | “CSRC” are to China Securities Regulatory Commission; |
| ● | “GMV” or “Gross Merchandise Value” are to the value of confirmed orders of products and services on our platform, regardless of how, or whether, the buyer and seller settle the transaction; |
| ● | “Hexin Digital” are to Hexin Digital Technology Co., Ltd.; |
| ● | “Hexin E-commerce” are to Hexin E-Commerce Co. Ltd.; |
| ● | “Hexin Fengze” are to Hexin Fengze Asset Management (Beijing) Co., Ltd.; |
| ● | “Hexin Jinke” are to Hexin Jinke Group Co., Ltd.; |
| ● | “Hexin Jiuding” are to Beijing Hexin Jiuding Technology Co., Ltd. |
| ● | “Wusu Company” are to Wusu Hexin Yongheng Commercial and Trading Co., Ltd. (formerly known as Wusu Hexin Internet Small Loan Co., Ltd.); |
| ● | “Hexin Yongheng” are to Beijing Hexin Yongheng Technology Development Co., Ltd.; |
| ● | “Kuaishangche” are to Kuaishangche Automobile Leasing Co., Ltd.; |
| ● | “Akso Online MediTech” are to Akso Online MediTech Co., LTD. |
ii
| ● | “MAU” are to monthly active users; |
| ● | “MIIT” are to the Ministry of Industry and Information Technology; |
| ● | “Ordinary shares” are to our ordinary shares of par value US$0.0001 per share; |
| ● | “Our former variable interest entities” or “former VIEs” are to Hexin Jiuding, Wusu Company and Hexin Digital; |
| ● | “PCAOB” are to the Public Company Accounting Oversight Board; |
| ● | “Platforms” are to the e-commerce platforms that Hexin Digital cooperates with; |
| ● | “RMB” and “Renminbi” are to the legal currency of China; |
| ● | “SAMR” are to the PRC State Administration for Market Regulation (formerly known as the SAIC); |
| ● | “US$,” “U.S. dollars,” “$” and “dollars” are to the legal currency of the United States; |
| ● | “U.S. GAAP” are to accounting principles generally accepted in the United States; |
| ● | “Akso Health,” “our company”, or “the Company” are to Akso Health Group (formerly known as Xiaobai Maimai Inc.), an exempted company incorporated in the Cayman Islands with limited liability. |
| ● | “we,” “us,” “our company” and “our” refer to Akso Health Group and its consolidated subsidiaries. |
Exchange Rate Information
Our business is conducted in both China and the United States, and our financial records are maintained in RMB for our business in China and in U.S. dollar for our business in United States, respectively as our functional currency. However, we use the U.S. dollar as our reporting currency; therefore, periodic reports made to shareholders will include current period amounts translated into U.S. dollars using the then-current exchange rates, for the convenience of the readers. Unless otherwise noted, all translations from RMB to U.S. dollars and from U.S. dollars to RMB in this annual report on Form 20-F were made at a rate of RMB 7.8980 to US$1.00, the exchange rate set forth in the H.10 Statistical release of the Board of Governors of the Federal Reserve System as of March 31, 2026, the last business day of the fiscal year of 2026. Assets and liabilities are translated at the exchange rate at each reporting period end date. Equity is translated at historical rates. Income and expense accounts are translated at the average rate of exchange during the reporting period. The resulting translation adjustments are reported under accumulated other comprehensive income (loss). Gains and losses resulting from the translations of foreign currency transactions and balances are reflected in the consolidated statements of comprehensive income.
We make no representation that any RMB or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or RMB, as the case may be, at any particular rate, or at all. The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of RMB into foreign exchange and through restrictions on foreign trade. On July 10, 2026, the exchange rate was RMB 6.7766 to US$1.00.
iii
FORWARD-LOOKING INFORMATION
This annual report on Form 20-F contains forward-looking statements that reflect our current expectations and views of future events. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by terminology such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “is/are likely to,” “potential,” “continue” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, but are not limited to:
| ● | our goals and strategies; |
| ● | our future business development, financial condition and results of operations; |
| ● | the expected growth of the online retail and social e-commerce industry in China; |
| ● | our expectations regarding demand for and market acceptance of our products and services; |
| ● | our expectations regarding our relationships with our members, users, suppliers, third-party merchants, and other partners, including other social e-commerce platforms and service marketplaces; |
| ● | competition in our industry; |
| ● | relevant government policies and regulations relating to our industry; |
| ● | the development of COVID-19 in the PRC and globally; and |
| ● | assumptions underlying or related to any of the foregoing. |
We would like to caution you not to place undue reliance on these forward-looking statements and you should read these statements in conjunction with the risk factors disclosed in “Item 3. Key Information D. Risk Factors.” Those risks are not exhaustive. We operate in an evolving environment. New risks emerge from time to time and it is impossible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ from those contained in any forward-looking statement. We do not undertake any obligation to update or revise the forward-looking statements except as required under applicable law. You should read this annual report on Form 20-F and the documents that we reference in this annual report on Form 20-F completely and with the understanding that our actual future results may be materially different from what we expect.
iv
PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
Permissions Required from the PRC Authorities for the Operations and Securities Offerings of PRC Subsidiaries and Consolidated Affiliated Entities
Akso Health Group is a holding company incorporated in the Cayman Islands in April 2016 and not a Chinese or Hong Kong operating company. As a holding company with no material operations of our own, we conduct our business primarily through our U.S. subsidiaries, PRC subsidiaries in China and within the last fiscal year, the former variable interest entities based in China. The contracts relating to the former variable interest entities have not been tested in court. The former variable interest entity structure was used to provide investors with exposure to foreign investment in China-based companies where Chinese law prohibits direct foreign investment in the operating companies. Our current corporate structure involves unique risks to investors. Our securities are securities of Akso Health Group, the offshore holding company in the Cayman Islands, instead of securities of our subsidiaries. Investors may never hold equity interests in our subsidiaries. Our operations in China are governed by PRC laws and regulations. As of the date of this annual report, all of our PRC subsidiaries have obtained the requisite licenses and permits from the PRC government authorities for the business operations of our holding company, our subsidiaries, including, business licenses, a Class II Medical Device Selling Record Certificate and a Class III Medical Device Operation License. All of our PRC subsidiaries are required to obtain, and have obtained, their respective Business Licenses. However, given the uncertainties of interpretation and implementation of relevant laws and regulations and the enforcement practice by government authorities, we cannot assure you that we have obtained all the permits or licenses required by the PRC government authorities for conducting our business in China. We may be required to obtain additional licenses, permits, filings or approvals for the functions to operate our business in the future. The PRC government has significant oversight and discretion over the conduct of our operations and may intervene or influence our operations as the government deems appropriate to further regulatory, political and social goals. The PRC government has recently published new policies that significantly affected certain industries such as the internet industries and private education industries, and we cannot rule out the possibility that it will in the future release regulations or policies or take regulatory actions regarding our industry that could adversely affect our business, financial condition and results of operations. See “Item 3. Key Information-D. Risk Factors-Risks Related to Doing Business in the People’s Republic of China.-Any actions by the Chinese government, including any decision to intervene or influence the operations of the operating entities or to exert control over any offering of securities conducted overseas and/or foreign investment in China-based issuers, may cause us to make material changes to the operations of the PRC operating entities, may limit or completely hinder our ability to offer or continue to offer securities to investors, and may cause the value of such securities to significantly decline or be worthless.”
1
We are subject to legal and operational risks associated with being based in and having the majority of our operations in China. These risks may result in a material change in our operations, or a complete hindrance of our ability to offer or continue to offer our securities to investors, and could cause the value of such securities to significantly decline or become worthless. Recently, the PRC government initiated a series of regulatory actions and statements to regulate business operations in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas using variable interest entity structure, and adopting new measures to extend the scope of cybersecurity reviews. On July 6, 2021, the General Office of the Communist Party of China Central Committee and the General Office of the State Council jointly issued an announcement to crack down on illegal activities in the securities market and promote the high-quality development of the capital market, which, among other things, requires the relevant governmental authorities to strengthen cross-border oversight of law-enforcement and judicial cooperation, to enhance supervision over China-based companies listed overseas, and to establish and improve the system of extraterritorial application of the PRC securities laws. On November 14, 2021, the Cyberspace Administration of China (the “CAC”) published the Security Administration Draft, which provides that data processing operators engaging in data processing activities that affect or may affect national security must be subject to network data security review by the relevant Cyberspace Administration of the PRC. According to the Security Administration Draft, data processing operators who possess personal data of at least one million users or collect data that affects or may affect national security must be subject to network data security review by the relevant Cyberspace Administration of the PRC. The deadline for public comments on the Security Administration Draft was December 13, 2021. The Security Administration Draft has not been fully implemented as of the date of this annual report. On December 28, 2021, the CAC, together with 12 other governmental departments of the PRC, jointly promulgated the Cybersecurity Review Measures, which became effective on February 15, 2022. The Cybersecurity Review Measures require that an online platform operator which possesses the personal information of at least one million users must apply for a cybersecurity review by the CAC if it intends to be listed in foreign countries. As confirmed by our PRC counsel, Hebei Changjun Law Firm since we are not an online platform operator that possesses over one million users’ personal information, we are not subject to the cybersecurity review with the CAC under the Cybersecurity Review Measures, and for the same reason, we will not be subject to the network data security review by the CAC if the Draft Regulations on the Network Data Security Administration (Draft for Comments) are enacted as proposed. There remains uncertainty, however, as to how the Cybersecurity Review Measures will be interpreted or implemented and whether the PRC regulatory agencies, including the CAC, may adopt new laws, regulations, rules, or detailed implementation and interpretation related to the Cybersecurity Review Measures. For further details, see “Item 3. Key Information - D. Risk Factors - Risks Relating to Doing Business in the People’s Republic of China - We may become subject to a variety of laws and regulations in the PRC regarding privacy, data security, cybersecurity, and data protection.”
In addition, since 2021, the Chinese government has strengthened its anti-monopoly supervision, mainly in three aspects: (1) establishing the National Anti-Monopoly Bureau; (2) revising and promulgating anti-monopoly laws and regulations, including: the Anti-Monopoly Law (draft Amendment published on October 23, 2021 for public opinion; the newly revised Anti-Monopoly Law was promulgated on June 24, 2022, and became effective on August 1, 2022), the anti-monopoly guidelines for various industries, and the detailed Rules for the Implementation of the Fair Competition Review System; and (3) expanding the anti-monopoly law enforcement targeting Internet companies and large enterprises. As of the date of this annual report, the Chinese government’s recent statements and regulatory actions related to anti-monopoly concerns have not impacted our ability to conduct business, accept foreign investments, or list on a U.S. or other foreign exchange, because neither the Company nor its PRC operating entities engage in monopolistic behaviors that are subject to these statements or regulatory actions.
2
On February 17, 2023, the China Securities Regulatory Commission (the “CSRC”) released the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies, or the Overseas Listing Trial Measures, and five supporting guidelines, which came into effect on March 31, 2023. The Overseas Listing Trial Measures regulate both direct and indirect overseas offering and listing by PRC domestic companies by adopting a filing-based regulatory regime. Pursuant to the Overseas Listing Trial Measures, domestic companies that seek to offer or list securities overseas, whether directly or indirectly, should fulfill the filing procedures and report relevant information to the CSRC within three working days after submitting listing applications and subsequent amendments. According to the Notice on the Administrative Arrangements for the Filing of the Overseas Securities Offering and Listing by Domestic Companies from the CSRC, or the CSRC Notice, 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 to be existing issuers (the “Existing Issuers”). Existing Issuers are not required to complete the filing procedures immediately, and they shall be required to file with the CSRC for any subsequent offerings. Further, according to the CSRC Notice, domestic companies that have obtained approval from overseas regulatory authorities or securities exchanges (for example, the effectiveness of a registration statement for offering and listing in the U.S. has been obtained) for their overseas offering and listing prior March 31, 2023 but have not yet completed their overseas issuance and listing, are granted a six-month transition period from March 31, 2023 to September 30, 2023. Those that complete their overseas offering and listing within such six-month period are deemed to be Existing Issuers and are not required to file with the CSRC for their overseas offerings and listings. Within such six-month transition period, however, if such domestic companies fail to complete their overseas issuance and listing, they shall complete the filing procedures with the CSRC. Our PRC counsel, Hebei Changjun Law Firm, has advised us that, since we obtained approval from both the SEC and The Nasdaq Capital Market (“Nasdaq”) to issue and list our ordinary share on the Nasdaq prior to March 31, 2023, we are not required to make the filing with the CSRC pursuant to the Overseas Listing Trial Measures. We shall be required, however, to file with the CSRC for any subsequent offerings. Given the current PRC regulatory environment, it is uncertain whether we or our PRC subsidiaries will be required to obtain approvals from the PRC government to offer securities to foreign investors in the future, and whether we would be able to obtain such approvals. If we are unable to obtain such approvals if required in the future, or inadvertently conclude that such approvals are not required then the value of our ordinary shares may depreciate significantly or become worthless. See “Item 3. Key Information - D. Risk Factors -Risks Relating to Doing Business in the People’s Republic of China - The PRC government exerts substantial influence over the manner in which we and our PRC subsidiaries must conduct our business activities. We are currently not required to obtain approval from Chinese authorities to list on U.S. exchanges, however, if we or our PRC subsidiaries are required to obtain approval in the future and are denied permission from Chinese authorities to list on U.S. exchanges, we will not be able to continue listing on U.S. exchanges, which would materially affect the interest of the investors.”
Furthermore, we are subject to PRC rules and regulations relating to overseas listing and securities offering, and a substantial extension of the PRC government’s oversight over our business operations or overseas listings may hinder our ability to offer or continue to offer our securities. Under current PRC laws, regulations and regulatory rules, we and our PRC subsidiaries may be required to obtain permissions from the China Securities Regulatory Commission, or the CSRC, and may be required to go through cybersecurity review by the Cyberspace Administration of China, or the CAC, in connection with any future offering and listing on overseas capital markets.
On June 10, 2021, the Standing Committee of the National People’s Congress of China promulgated the Data Security Law which took effect on September 1, 2021. The Data Security Law provides for data security and privacy obligations of entities and individuals carrying out data activities, prohibits entities and individuals in China from providing any foreign judicial or law enforcement authority with any data stored in China without approval from the competent PRC authority, and sets forth the legal liabilities of entities and individuals found to be in violation of their data protection obligations, including rectification order, warning, fines of up to RMB10 million, suspension of relevant business, and revocation of business permits or licenses. The Data Security Law is relatively new, and therefore there are substantial uncertainties with respect to the interpretation and implementation of the law. We may need to adjust our operations to comply with data security requirements from time to time. If we were found to have violations, we may be ordered to rectify and terminate any actions that are deemed illegal by the government authorities and become subject to fines and other government sanctions, which may materially and adversely affect our business, financial condition, and results of operations.
On July 6, 2021, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with the Law, which took effect on the same day. These opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based companies. These opinions proposed to take effective measures, such as promoting the construction of relevant regulatory systems, to deal with the risks and incidents facing China-based overseas-listed companies and the demand for cybersecurity and data privacy protection. As of the date of this report, no official guidance and related implementation rules have been issued in relation to these recently issued opinions and the interpretation and implementation of these opinions remain unclear at this stage.
3
On July 10, 2021, the Cyberspace Administration of China issued the Measures for Cybersecurity Review which took effect on February 15, 2022. The Revised Cybersecurity Measures authorize the relevant government authorities to conduct cybersecurity review on a range of activities that affect or may affect national security, including listings in foreign countries by companies that possess personal data of more than one million users. The PRC National Security Law covers various types of national security, including technology security and information security. Given the nature of our business in China and the fact that we do not have personal information of more than one million users, we do not believe we are an “internet platform operator” that is required to file for a cybersecurity review pursuant to the Measures for Cybersecurity Review.
On August 20, 2021, the Standing Committee of the National People’s Congress adopted the Personal Information Security Law, which took effect on November 1, 2021. The Personal Information Protection Law includes the basic rules for personal information processing, the rules for cross-border provision of personal information, the rights of individuals in personal information processing activities, the obligations of personal information processors, and the legal responsibilities for illegal collection, processing, and use of personal information. We have access to confidential or personal information in certain of the businesses and have privacy policies and other documentation regarding the protection of personal information; however, we may not be successful in achieving compliance if we fail to comply with these policies and procedures.
On February 17, 2023, the China Securities Regulatory Commission (the “CSRC”) promulgated the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies, or the “Trial Measures,” and five supporting guidelines, which came into effect on March 31, 2023. Pursuant to the Trial Measures, domestic companies that seek to offer or list securities overseas, both directly and indirectly, shall complete filing procedures with the CSRC pursuant to the requirements of the Trial Measures within three working days following its submission of initial public offerings or listing application. If a domestic company fails to complete required filing procedures or conceals any material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative penalties, such as an order to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties, such as warnings and fines. According to the CSRC Notice, the domestic companies that have already been listed overseas before the effective date of the Trial Measures (namely, March 31, 2023) shall be deemed as existing issuers (the “Existing Issuers”). Existing Issuers are not required to complete the filing procedures immediately, and they shall be required to file with the CSRC for any subsequent offerings. Based on the foregoing, as of the date of this annual report, we are currently not required to complete the filing procedures and submit the relevant information to the CSRC.
Based on PRC laws and regulations effective as of the date of this report and subject to different interpretations of these laws and regulations that may be adopted by PRC authorities, we believe that, as of the date of this report, we, our PRC subsidiaries are not required to obtain any permission from the CSRC, the CAC, or any other PRC authority in connection with the listing or trading of our Ordinary Shares in foreign stock exchanges. As of the date of this annual report, we and our PRC subsidiaries have not received any inquiry, notice, warning or objection in relation to the listing or trading of our securities on Nasdaq from the CSRC, the CAC or any other PRC authorities. If we fail to obtain the relevant approval or complete other review or filing procedures for any future offshore offering or listing, we may face sanctions by the CSRC or other PRC regulatory authorities, which may include fines and penalties on our operations in China, limitations on our operating privileges in China, restrictions on or prohibition of the payments or remittance of dividends by our PRC subsidiaries, restrictions on or delays to our future financing transactions, or other actions that could have a material and adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our ADSs. For more detailed information, see “Item 3. Key Information-D. Risk Factors-Risks Relating to Doing Business in the People’s Republic of China- In light of recent events indicating greater oversight by the Cyberspace Administration of China, or CAC, over data security, particularly for companies seeking to list on a foreign exchange, we are subject to a variety of laws and other obligations regarding cybersecurity and data protection, and any failure to comply with applicable laws and obligations could have a material and adverse effect on our business, our listing on Nasdaq, financial condition, and results of operations,” and “Risk Factors-Risks Relating to Doing Business in the People’s Republic of China-The Opinions, the Trial Measures, and the revised Provisions recently issued by the PRC authorities may subject us to additional compliance requirements in the future.”
4
Holding Foreign Companies Accountable Act (HFCAA)
Our ADSs may be prohibited from trading on a national exchange or over-the-counter under the Holding Foreign Companies Accountable Act (the “HFCA Act”) if the Public Company Accounting Oversight Board (United States) (the “PCAOB”) is unable to inspect our auditors for three consecutive years beginning in 2021. Our auditor, CHI-LLTC (“CHI-LLTC”), is a firm registered with the PCAOB and is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards and is not subject to the determinations announced by the PCAOB on December 16, 2021. If trading in our ADSs is prohibited under the HFCA Act in the future because the PCAOB determines that it cannot inspect or fully investigate our auditor at such future time, Nasdaq may determine to delist our ADSs and trading in our ADSs could be prohibited. On December 29, 2022, legislation entitled “Consolidated Appropriations Act, 2023” (the “Consolidated Appropriations Act”) was signed into law by President Biden, which, among other things, amended HFCA Act by requiring the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three, thus reducing the time period for triggering the prohibition on trading. Furthermore, our auditor is not among the auditor firms listed on an HFCA Act Determination List, which includes all of the auditor firms that the PCAOB is not able to inspect. While our auditor is based at 47, First Floor, Jalan SS15/4B, 47500 Subang Jaya, Selangor and is registered with the PCAOB and subject to PCAOB inspection, in the event it is later determined that the PCAOB is unable to inspect or investigate completely our auditor because of a position taken by an authority in a foreign jurisdiction, then such lack of inspection could cause trading in our ADSs to be prohibited under the HFCA Act, and ultimately result in a determination by a securities exchange to delist our Ordinary Shares. On August 26, 2022, the PCAOB signed a Statement of Protocol (the “SOP”) Agreement with the CSRC and China’s Ministry of Finance. The SOP Agreement, together with two protocol agreements (collectively, “SOP Agreements”), governing inspections and investigations of audit firms based in mainland China and Hong Kong, taking the first step toward opening access for the PCAOB to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong. Pursuant to the fact sheet with respect to the Protocol disclosed by the U.S. Securities and Exchange Commission (the “SEC”), the PCAOB shall have independent discretion to select any issuer audits for inspection or investigation and has the unfettered ability to transfer information to the SEC. On December 15, 2022, the PCAOB Board determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate its previous determinations to the contrary. However, should PRC authorities obstruct or otherwise fail to facilitate the PCAOB’s access in the future, the PCAOB Board will consider the need to issue a new determination. See “Item 3. Key Information-D. Risk Factors-Risks Relating to Doing Business in the People’s Republic of China- Although the audit report included in this annual report is prepared by an auditor who are currently inspected by the PCAOB, there is no guarantee that future audit reports will be prepared by auditors inspected by the PCAOB and, as such, in the future investors may be deprived of the benefits of such inspection. Furthermore, trading in our securities may be prohibited under the HFCA Act if the SEC subsequently determines our audit work is performed by auditors that the PCAOB is unable to inspect or investigate completely, and as a result, U.S. national securities exchanges, such as Nasdaq, may determine to delist our securities. Furthermore, on December 29, 2022, the Consolidated Appropriations Act, was signed into law by President Biden. The Consolidated Appropriations Act contained, among other things, an identical provision to AHFCAA, which reduce the number of consecutive non-inspection years required for triggering the prohibitions under the HFCA Act from three years to two” for more information,” and “Item 3. Key Information-D. Risk Factors-Risks Relating to Doing Business in the People’s Republic of China-The recent joint statement by the SEC, proposed rule changes submitted by Nasdaq, and an act passed by the U.S. Senate and the U.S. House of Representatives, all call for additional and more stringent criteria to be applied to emerging market companies. These developments could add uncertainties to our business operations, share price and reputation.”
Cash and Other Assets Transfers within our Organization
The Company can transfer cash to its subsidiaries through capital contributions and/or intercompany loans, and the Company’s subsidiaries can transfer cash to the Company through dividends or other distributions and/or intercompany loans. The aforesaid transactions including capital injection and loans, would be eliminated upon consolidation.
Our cash primarily consists of cash on hand and cash in banks in the PRC, Hong Kong and USA, which is unrestricted for withdrawal and use and is deposited with banks in China. As of March 31, 2026 and March 31, 2025, we had approximately USD 0.2 million and USD 176.2 million of cash in bank, respectively, and the loan due to related parties is USD 2.0 million and USD 2.0 million, respectively. Funds are transferred between our subsidiaries, our WFOE, Qingdao Akso Health Management Co., Limited and Tianjin Akso Enterprise Management Co., Ltd. for their daily operation purposes.
There is no assurance that the PRC government will not intervene or impose restrictions on the ability of us and our subsidiaries to transfer cash. For our cash maintained in Renminbi, and the PRC government could prevent the cash maintained from leaving the PRC, and restrict the ability to pay dividends. For details regarding the restrictions on our ability to transfer cash between us and our subsidiaries, see “Item 3. Key Information-D. Risk Factors-Risks Related to Doing Business in the People’s Republic of China”
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We currently do not have cash management policies that dictate how funds are transferred between us and our subsidiaries. For more detailed information, see “Item 3. Key Information-D. Risk Factors-Risks Relating to Doing Business in the People’s Republic of China- In light of recent events indicating greater oversight by the Cyberspace Administration of China, or CAC, over data security, particularly for companies seeking to list on a foreign exchange, we are subject to a variety of laws and other obligations regarding cybersecurity and data protection, and any failure to comply with applicable laws and obligations could have a material and adverse effect on our business, our listing on Nasdaq, financial condition, and results of operations,” and “Risk Factors-Risks Relating to Doing Business in the People’s Republic of China-The Opinions, the Trial Measures, and the revised Provisions recently issued by the PRC authorities may subject us to additional compliance requirements in the future.”
As of the date of this annual report, our current corporate structure does not contain any variable interest entity in mainland China and we do not have intention establishing any VIEs in mainland China in the future.
Cash may be transferred within our organization in the following manner: (i) we may transfer funds to our subsidiaries, including our PRC subsidiaries, by way of capital contributions or loans, through intermediate holding companies or otherwise; and (ii) our subsidiaries, including our PRC subsidiaries, may make dividends or other distributions to us through intermediate holding companies or otherwise.
The following table describes transfers among us and our subsidiaries made during the periods presented:
| Year Ended March 31, 2026 | ||||
| (US$ in millions) | ||||
| Capital contributions from us to our offshore subsidiaries(1) | — | |||
| Loans repayment from our offshore subsidiaries to us | 0.9 | |||
| Capital contributions from us or our offshore subsidiaries to PRC subsidiaries | — | |||
| Loans transfer between our offshore subsidiaries | 175.7 | |||
Notes:
| (1) | “Offshore subsidiaries” refer to all of our subsidiaries except our PRC subsidiaries. |
Dividends or Distributions Made to our Company and U.S. Investors and Tax Consequences
Under the Cayman Islands law, we are permitted to provide funding to our subsidiaries through loans or capital contributions without restrictions on the amount of the funds, and we are permitted to pay a dividend out of either profit or share premium amount, provided that in no circumstances may a dividend be paid if this would result in us being unable to pay our debts due in the ordinary course of business. Our board of directors has discretion regarding whether to declare or pay dividends. In addition, our shareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our directors. In either case, all dividends are subject to certain restrictions under Cayman Islands law, namely that our company may only pay dividends out of profits or share premium, and provided always that we are able to pay our debts as they fall due in the ordinary course of business. The determination to declare and pay such annual dividend and special dividend and the amount of any dividend in any particular year will be based upon our operations, earnings, financial condition, cash requirements and availability and other factors as our board of directors may deem relevant at such time. See “D. Risk Factors - Risks Related to Our ADS - We cannot assure you that our existing dividend policy will not change in the future or the amount the dividends that you may receive, and as such, you must rely on price appreciation of our ADSs for return on your investment.”
We Healthy Limited (“We Health HK”) is permitted under the laws of Hong Kong to provide funding to Akso Health, the holding company incorporated in Cayman Islands through dividend distribution without restrictions on the amount of the funds. Both Akso Health and We Health HK currently intend to retain all available funds and future earnings, if any, for the operation and expansion of our business and do not anticipate declaring or paying any dividends in the foreseeable future. Any future determination related to our dividend policy will be made at the discretion of our board of directors after considering our financial condition, results of operations, capital requirements, contractual requirements, business prospects and other factors the board of directors deems relevant, and subject to the restrictions contained in any future financing instruments.
According to the Companies Ordinance of Hong Kong, a Hong Kong company may only make a distribution out of profits available for distribution or other distributable reserves. Dividends cannot be paid out from share capital. In addition, there can be no assurance that in the future the PRC government will not intervene or impose restrictions on our Hong Kong subsidiary’s ability to transfer or distribute cash/assets to entities outside of Hong Kong, which could result in an inability or prohibition on making transfers or distributions to Akso Health and adversely affect our business. As of the date of this annual report, there are no restrictions or limitations imposed by the Hong Kong government on the transfer of capital within, into and out of Hong Kong (including funds from Hong Kong to the PRC), except for the transfer of funds involving money laundering and criminal activities. See “Item 3. Key Information - D. Risk Factors - Risks Relating to Doing Business in the People’s Republic of China - To the extent cash or assets of our business, or of our PRC or Hong Kong subsidiaries, is in PRC or Hong Kong, such cash or assets may not be available to fund operations or for other use outside of the PRC or Hong Kong, due to interventions in or the imposition of restrictions and limitations by the PRC government to the transfer of cash or assets.”
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On July 19, 2018, our board of directors approved an annual dividend policy. Under this policy, annual dividends will be set at an amount equivalent to approximately 15-25% of our anticipated net income after tax in each year commencing from the fiscal year ended March 31, 2019. On July 19, 2018, our board of directors also approved a special cash dividend of US$0.13 per ordinary share of our company (or US$0.13 per ADS), in addition to an annual dividend pursuant to the newly adopted annual dividend policy of US$0.27 per ordinary share (or US$0.27 per ADS), for a total dividend of US$0.40 per ordinary share (or US$0.40 per ADS). The aggregated dividend payments to shareholders amounted to US$19,547,532 in the fiscal year ended March 31, 2019. We intend to keep any future earnings to finance the expansion of our business, and we do not anticipate that any cash dividends will be paid in the foreseeable future. Subject to the passive foreign investment company (“PFIC”) rules, the gross amount of distributions we make to investors with respect to our Ordinary Shares (including the amount of any taxes withheld therefrom) will be taxable as a dividend, to the extent that the distribution is paid out of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles.
Summary of Risk Factors
Investing in our ADSs involves significant risks. You should carefully consider all of the information in this annual report before making an investment in our ADSs. Below please find a summary of the principal risks we face, organized under relevant headings. These risks are discussed more fully in the section titled “Item 3. Key Information - D. Risk Factors” in this annual report.
RISKS RELATED TO OUR BUSINESS AND INDUSTRY
| ● | We are dependent on our suppliers to reach potential car insurance purchasers for our marketing promotion services business. Failure to maintain cooperation with our suppliers or to secure new suppliers could materially and adversely affect our business. (see “We are dependent on our suppliers to reach potential car insurance purchasers for our marketing promotion services business. Failure to maintain cooperation with our suppliers or to secure new suppliers could materially and adversely affect our business.” on page 16 of this annual report); | |
| ● | Concentration of our client base exposes us to significant business risks. (see “Concentration of our client base exposes us to significant business risks.” on page 16 of this annual report); | |
| ● | We are subject to governmental regulations and other legal obligations related to privacy, information security, and data protection, and any security breaches, and our actual or perceived failure to comply with our legal obligations could harm our brand and business. (see “We are subject to governmental regulations and other legal obligations related to privacy, information security, and data protection, and any security breaches, and our actual or perceived failure to comply with our legal obligations could harm our brand and business.” on page 16 of this annual report); | |
| ● | Our ability to protect the confidential information of our customers may be adversely affected by cyberattacks, computer viruses, physical or electronic break-ins or similar disruptions. (see “Our ability to protect the confidential information of our customers may be adversely affected by cyberattacks, computer viruses, physical or electronic break-ins or similar disruptions.” on page 17 of this annual report); | |
| ● | The successful operation of our business depends upon the performance and reliability of the internet infrastructure in China. (see “The successful operation of our business depends upon the performance and reliability of the internet infrastructure in China.” on page 18 of this annual report); | |
| ● | Part of our services could be disrupted by network interruptions. (see “Part of our services could be disrupted by network interruptions.” on page 18 of this annual report); |
| ● | Maintaining customers’ trust in our ecosystem is critical to our success, and any failure to do so could severely damage our reputation and brand. (See “Maintaining customers’ trust in our ecosystem is critical to our success, and any failure to do so could severely damage our reputation and brand” on page 18 of this annual report.) |
| ● | We are in the early stage of development with a limited operating history in an emerging and dynamic “Internet + healthcare” industry. (See “We are in the early stage of development with a limited operating history in an emerging and dynamic “Internet + healthcare” industry” on page 19 of this annual report.) |
| ● | If we are unable to compete effectively, our business, financial condition and results of operations may be materially and adversely affected. (See “If we are unable to compete effectively, our business, financial condition and results of operations may be materially and adversely affected” on page 19 of this annual report) |
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| ● | Our business generates and processes a large amount of data, and the improper use or disclosure of such data could harm our reputation as well as have a material adverse effect on our business and prospects. (See “Our business generates and processes a large amount of data, and the improper use or disclosure of such data could harm our reputation as well as have a material adverse effect on our business and prospects” on page 19 of this annual report.) |
| ● | If our solution does not drive customers’ engagement or if we fail to provide superior customer experience, our business and reputation may be materially and adversely affected. (See “If our solution does not drive customers’ engagement or if we fail to provide superior customer experience, our business and reputation may be materially and adversely affected” on page 21 of this annual report) |
| ● | Failure to properly manage and create values for various participants in the healthcare value chain may materially and adversely affect our business. (See “Failure to properly manage and create values for various participants in the healthcare value chain may materially and adversely affect our business.” on page 21 of this annual report.) |
| ● | The digital healthcare market is immature and volatile, and if it does not develop, if it develops more slowly than we expect, or if our services do not drive user engagement, the growth of our business will be harmed. (See “The digital healthcare market is immature and volatile, and if it does not develop, if it develops more slowly than we expect, or if our services do not drive user engagement, the growth of our business will be harmed.” on page 22 of this annual report.) |
| ● | We may fail to attract or retain sufficient users or medical professionals for our online healthcare services. (See “We may fail to attract or retain sufficient users or medical professionals for our online healthcare services.” on page 22 of this annual report.) |
| ● | We may become subject to medical liability claims in connection with our online healthcare services, which could cause us to incur significant expenses and be liable for significant damages if any claim is not covered by insurance. (See “We may become subject to medical liability claims in connection with our online healthcare services, which could cause us to incur significant expenses and be liable for significant damages if any claim is not covered by insurance.” on page 22 of this annual report.) |
| ● | We may be subject to penalties or disputes against us for failure to manage our doctors on our platform.(See “We may be subject to penalties or disputes against us for failure to manage our doctors on our platform.” on page 23 of this annual report.)) |
| ● | Our business may involve sale of prescription drugs that is subject to stringent scrutiny, which may expose us to risks and challenges. (See “We may be subject to penalties or disputes against us for failure to manage our doctors on our platform.” on page 23 of this annual report.) |
| ● | Failure of doctors on our platform to provide adequate and proper medical services on our platform may have a material and adverse effect on our reputation, business and results of operations. (See “Failure of doctors on our platform to provide adequate and proper medical services on our platform may have a material and adverse effect on our reputation, business and results of operations.” on page 24 of this annual report.) |
| ● | Any lack of requisite approvals, licenses or permits applicable to our business may have a material and adverse effect on our business, financial condition and results of operations and prospects. (See “Any lack of requisite approvals, licenses or permits applicable to our business may have a material and adverse effect on our business, financial condition and results of operations and prospects.” on page 24 of this annual report.) |
| ● | We are subject to a variety of laws and other obligations regarding data protection, and any failure to comply with applicable laws and obligations could have a material and adverse effect on our business, financial condition and results of operations. (See “We are subject to a variety of laws and other obligations regarding data protection, and any failure to comply with applicable laws and obligations could have a material and adverse effect on our business, financial condition and results of operations.” on page 25 of this annual report.) |
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| ● | We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position. (See “We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position.” on page 26 of this annual report.) |
| ● | We may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations. (See “We may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations.” on page 27 of this annual report.) |
| ● | Security breaches and attacks against our systems and network, and any potential resultant breach or failure to otherwise protect confidential and proprietary information, could damage our reputation and adversely affect our business, financial condition and results of operations. (See “Security breaches and attacks against our systems and network, and any potential resultant breach or failure to otherwise protect confidential and proprietary information, could damage our reputation and adversely affect our business, financial condition and results of operations.” on page 27 of this annual report.) |
| ● | We are subject to limitations in promoting healthcare-related services and products. (see “We are subject to limitations in promoting healthcare-related services and products” on page 27 of this annual report) |
| ● | We are no longer engaged in the online microlending business, but we cannot assure you that we would not be penalized under relevant regulations for the previous microlending business. (see “We are no longer engaged in the online microlending business, but we cannot assure you that we would not be penalized under relevant regulations for the previous microlending business” on page 28 of this annual report); |
| ● | Any harm to our brand or reputation may materially and adversely affect our business and results of operations. (see “Any harm to our brand or reputation may materially and adversely affect our business and results of operations” on page 28 of this annual report); |
| ● | If our social e-commerce platform is unable to provide good customer experience, our business and reputation may be materially and adversely affected. (see “If our social e-commerce platform is unable to provide good customer experience, our business and reputation may be materially and adversely affected” on page 28 of this annual report); |
| ● | We may incur liability or become subject to administrative penalties for counterfeit or unauthorized merchandise displayed on our platform, or for merchandise displayed on our platform that infringe on third-party intellectual property rights, or for other misconduct. (see “We may incur liability or become subject to administrative penalties for counterfeit or unauthorized merchandise displayed on our platform, or for merchandise displayed on our platform that infringe on third-party intellectual property rights, or for other misconduct” on page 29 of this annual report); | |
| ● | We plan to establish and operate cancer therapy and radiation oncology centers that will be majority-owned by us and are subject to significant risks. (see “We plan to establish and operate cancer therapy and radiation oncology centers that will be majority-owned by us and are subject to significant risks” on page 29 of this annual report); |
| ● | We may encounter difficulties in successfully introducing new services in a timely and cost-effective manner, which could materially and adversely affect our business and operations. (see “We may encounter difficulties in successfully introducing new services in a timely and cost-effective manner, which could materially and adversely affect our business and operations” on page 30 of this annual report); |
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| ● | Our development of new cancer therapy and radiation oncology centers could result in fluctuations in our short-term financial performance, and newly opened cancer therapy and radiation oncology centers and clinics may not achieve timely profitability, or at all. (see “Our development of new cancer therapy and radiation oncology centers could result in fluctuations in our short-term financial performance, and newly opened cancer therapy and radiation oncology centers and clinics may not achieve timely profitability, or at all” on page 30 of this annual report); |
| ● | Our growth plan includes the construction of cancer therapy and radiation oncology centers. If we cannot identify and seize growth opportunities in fast-changing markets, our future growth will face uncertainties. (see “Our growth plan includes the construction of cancer therapy and radiation oncology centers. If we cannot identify and seize growth opportunities in fast-changing markets, our future growth will face uncertainties” on page 30 of this annual report); |
| ● | We conduct our business in a heavily regulated industry. (see “We conduct our business in a heavily regulated industry” on page 31 of this annual report); |
| ● | We are reliant on our core senior management team. If one or more key executives were unable or unwilling to continue in their present positions, our business and results of operations may be adversely affected. (see “We are reliant on our core senior management team. If one or more key executives were unable or unwilling to continue in their present positions, our business and results of operations may be adversely affected” on page 31 of this annual report); |
| ● | We compete for skilled and quality employees, and failure to attract and retain them may adversely affect our business and prevent us from achieving our intended level of growth. (see “We compete for skilled and quality employees, and failure to attract and retain them may adversely affect our business and prevent us from achieving our intended level of growth” on page 31 of this annual report); |
| ● | If labor costs in the PRC increase substantially, our business and costs of operations may be adversely affected. (see “If labor costs in the PRC increase substantially, our business and costs of operations may be adversely affected” on page 31 of this annual report); |
| ● | Our innovative corporate culture is important to our business, if our culture changes our business and corporate objectives may be adversely affected. (see “Our innovative corporate culture is important to our business, if our culture changes our business and corporate objectives may be adversely affected” on page 32 of this annual report); |
| ● | We do not have business insurance coverage. (see “We do not have business insurance coverage” on page 32 of this annual report); |
| ● | If we do not find available sources of liquidity for capital and financing needs, our business and operations may be materially and adversely affected. (see “If we do not find available sources of liquidity for capital and financing needs, our business and operations may be materially and adversely affected” on page 32 of this annual report); | |
| ● | Our business, financial performance and results of operations could be adversely affected by deterioration of the relation between China and the United States. (see “Our business, financial performance and results of operations could be adversely affected by deterioration of the relation between China and the United States” on page 33 of this annual report); |
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RISKS RELATED TO OUR CORPORATE STRUCTURE
| ● | PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds of our initial public offering and the concurrent private placement to make loans to or make additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand our business. (see “PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds of our initial public offering and the concurrent private placement to make loans to or make additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand our business” on page 33 of this annual report); |
RISKS RELATED TO DOING BUSINESS IN THE PEOPLE’S REPUBLIC OF CHINA
| ● | Although the audit report included in this annual report is prepared by an auditor who are currently inspected by the Public Company Accounting Oversight Board (the “PCAOB”), there is no guarantee that future audit reports will be prepared by auditors inspected by the PCAOB and, as such, in the future investors may be deprived of the benefits of such inspection. Furthermore, trading in our securities may be prohibited under the Holding Foreign Companies Accountable Act (the “HFCA Act”) if the SEC subsequently determines our audit work is performed by auditors that the PCAOB is unable to inspect or investigate completely, and as a result, U.S. national securities exchanges, such as Nasdaq, may determine to delist our securities. Furthermore, on December 29, 2022, the Consolidated Appropriations Act, was signed into law by President Biden. The Consolidated Appropriations Act contained, among other things, an identical provision to AHFCAA, which reduce the number of consecutive non-inspection years required for triggering the prohibitions under the HFCA Act from three years to two. (see “Although the audit report included in this annual report is prepared by an auditor who are currently inspected by the Public Company Accounting Oversight Board (the “PCAOB”), there is no guarantee that future audit reports will be prepared by auditors inspected by the PCAOB and, as such, in the future investors may be deprived of the benefits of such inspection. Furthermore, trading in our securities may be prohibited under the Holding Foreign Companies Accountable Act (the “HFCA Act”) if the SEC subsequently determines our audit work is performed by auditors that the PCAOB is unable to inspect or investigate completely, and as a result, U.S. national securities exchanges, such as Nasdaq, may determine to delist our securities. Furthermore, on December 29, 2022, the Consolidated Appropriations Act, was signed into law by President Biden. The Consolidated Appropriations Act contained, among other things, an identical provision to AHFCAA, which reduce the number of consecutive non-inspection years required for triggering the prohibitions under the HFCA Act from three years to two” on page 34 of this annual report); |
| ● | The recent joint statement by the SEC, proposed rule changes submitted by Nasdaq, and an act passed by the U.S. Senate and the U.S. House of Representatives, all call for additional and more stringent criteria to be applied to emerging market companies. These developments could add uncertainties to our business operations, share price and reputation. (see “The recent joint statement by the SEC, proposed rule changes submitted by Nasdaq, and an act passed by the U.S. Senate and the U.S. House of Representatives, all call for additional and more stringent criteria to be applied to emerging market companies. These developments could add uncertainties to our business operations, share price and reputation” on page 36 of this annual report); | |
| ● | There may be changes in the regulations of PRC government bodies and agencies relating to VAT collection procedure and ACTCS business. (see “There may be changes in the regulations of PRC government bodies and agencies relating to VAT collection procedure and ACTCS business” on page 37 of this annual report); |
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| ● | Failure to comply with laws and regulations applicable to our business could subject us to fines and penalties and could also cause us to lose customers or otherwise harm our business. (see “Failure to comply with laws and regulations applicable to our business could subject us to fines and penalties and could also cause us to lose customers or otherwise harm our business” on page 37 of this annual report); |
| ● | In light of recent events indicating greater oversight by the Cyberspace Administration of China, or CAC, over data security, particularly for companies seeking to list on a foreign exchange, we are subject to a variety of laws and other obligations regarding cybersecurity and data protection, and any failure to comply with applicable laws and obligations could have a material and adverse effect on our business, our listing on NASDAQ, financial condition, and results of operations. (see “In light of recent events indicating greater oversight by the Cyberspace Administration of China, or CAC, over data security, particularly for companies seeking to list on a foreign exchange, we are subject to a variety of laws and other obligations regarding cybersecurity and data protection, and any failure to comply with applicable laws and obligations could have a material and adverse effect on our business, our listing on NASDAQ, financial condition, and results of operations” on page 38 of this annual report); |
| ● | The approval of the China Securities Regulatory Commission, or the CSRC, may be required in connection with an offering under PRC rules, regulations, or policies, and, if required, we cannot predict whether or how soon we will be able to obtain such approval. As a result, both you and us fact uncertainty about future actions by the PRC government that could significantly affect our business, our listing on Nasdaq, financial condition and results of operations. (see “The approval of the China Securities Regulatory Commission, or the CSRC, may be required in connection with an offering under PRC rules, regulations, or policies, and, if required, we cannot predict whether or how soon we will be able to obtain such approval. As a result, both you and us fact uncertainty about future actions by the PRC government that could significantly affect our business, our listing on Nasdaq, financial condition and results of operations” on page 39 of this annual report); |
| ● | Changes in the policies of the PRC government could have a significant impact upon our ability to operate profitably in the PRC. (see “Changes in the policies of the PRC government could have a significant impact upon our ability to operate profitably in the PRC” on page 41 of this annual report); |
| ● | Because our business is dependent upon government policies that encourage a market-based economy, change in the political or economic climate in the PRC may impair our ability to operate profitably, if at all. (see “Because our business is dependent upon government policies that encourage a market-based economy, change in the political or economic climate in the PRC may impair our ability to operate profitably, if at all” on page 41 of this annual report); |
| ● | PRC laws and regulations governing our current business operations are sometimes vague and uncertain and any changes in such laws and regulations may impair our ability to operate profitable. (see “PRC laws and regulations governing our current business operations are sometimes vague and uncertain and any changes in such laws and regulations may impair our ability to operate profitable” on page 41 of this annual report); |
| ● | Changes in China’s macroeconomic, socio-political conditions or government policies could have a material adverse effect on our business and results of operations. (see “Changes in China’s macroeconomic, socio-political conditions or government policies could have a material adverse effect on our business and results of operations” on page 42 of this annual report); |
| ● | Substantial uncertainties exist with respect to the interpretation and implementation of the newly enacted PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations. (see “Substantial uncertainties exist with respect to the interpretation and implementation of the newly enacted PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations” on page 42 of this annual report); |
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| ● | We may be adversely affected by the complexity, uncertainties and changes in PRC regulation of Internet-related businesses and companies, and any lack of requisite approvals, licenses or permits applicable to our business may have a material adverse effect on our business and results of operations. (see “We may be adversely affected by the complexity, uncertainties and changes in PRC regulation of Internet-related businesses and companies, and any lack of requisite approvals, licenses or permits applicable to our business may have a material adverse effect on our business and results of operations” on page 43 of this annual report); |
| ● | Fluctuations in exchange rates could have a material adverse effect on our results of operations and the value of your investment. (see “Fluctuations in exchange rates could have a material adverse effect on our results of operations and the value of your investment” on page 43 of this annual report); |
| ● | Governmental control of currency conversion may limit our ability to utilize our net revenues effectively and affect the value of your investment. (see “Governmental control of currency conversion may limit our ability to utilize our net revenues effectively and affect the value of your investment” on page 43 of this annual report); |
| ● | Failure to make adequate contributions to various employee benefit plans as required by PRC regulations may subject us to penalties. (see “Failure to make adequate contributions to various employee benefit plans as required by PRC regulations may subject us to penalties” on page 44 of this annual report); |
| ● | The M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China. (see “The M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China” on page 44 of this annual report); |
| ● | PRC regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiary’s ability to increase its registered capital or distribute profits to us or otherwise expose us or our PRC resident beneficial owners to liability and penalties under PRC law. (see “PRC regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiary’s ability to increase its registered capital or distribute profits to us or otherwise expose us or our PRC resident beneficial owners to liability and penalties under PRC law” on page 44 of this annual report); |
| ● | Any failure to comply with PRC regulations regarding the registration requirements for employee stock incentive plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions. (see “Any failure to comply with PRC regulations regarding the registration requirements for employee stock incentive plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions” on page 45 of this annual report); |
| ● | If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders or ADS holders. (see “If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders or ADS holders” on page 45 of this annual report); |
| ● | We may not be able to obtain certain benefits under relevant tax treaty on dividends paid by our PRC subsidiary to us through our Hong Kong subsidiary. (see “We may not be able to obtain certain benefits under relevant tax treaty on dividends paid by our PRC subsidiary to us through our Hong Kong subsidiary” on page 46 of this annual report); |
| ● | Enhanced scrutiny over acquisition transactions by the PRC tax authorities may have a negative impact on potential acquisitions we may pursue in the future. (see “Enhanced scrutiny over acquisition transactions by the PRC tax authorities may have a negative impact on potential acquisitions we may pursue in the future” on page 46 of this annual report); |
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| ● | Any actions by the Chinese government, including any decision to intervene or influence the operations of the operating entities or to exert control over any offering of securities conducted overseas and/or foreign investment in China-based issuers, may cause us to make material changes to the operations of the PRC operating entities, may limit or completely hinder our ability to offer or continue to offer securities to investors, and may cause the value of such securities to significantly decline or be worthless. (see “Any actions by the Chinese government, including any decision to intervene or influence the operations of the operating entities or to exert control over any offering of securities conducted overseas and/or foreign investment in China-based issuers, may cause us to make material changes to the operations of the PRC operating entities, may limit or completely hinder our ability to offer or continue to offer securities to investors, and may cause the value of such securities to significantly decline or be worthless” on page 47 of this annual report); |
| ● | The PRC government exerts substantial influence over the manner in which we and our PRC subsidiaries must conduct our business activities. We are currently not required to obtain approval from Chinese authorities to list on U.S. exchanges, however, if we or our PRC subsidiaries are required to obtain approval in the future and are denied permission from Chinese authorities to list on U.S. exchanges, we will not be able to continue listing on U.S. exchanges, which would materially affect the interest of the investors. (see “The PRC government exerts substantial influence over the manner in which we and our PRC subsidiaries must conduct our business activities. We are currently not required to obtain approval from Chinese authorities to list on U.S. exchanges, however, if we or our PRC subsidiaries are required to obtain approval in the future and are denied permission from Chinese authorities to list on U.S. exchanges, we will not be able to continue listing on U.S. exchanges, which would materially affect the interest of the investors” on page 48 of this annual report); |
| ● | To the extent cash or assets of our business, or of our PRC or Hong Kong subsidiaries, is in PRC or Hong Kong, such cash or assets may not be available to fund operations or for other use outside of the PRC or Hong Kong, due to interventions in or the imposition of restrictions and limitations by the PRC government to the transfer of cash or assets. (see “To the extent cash or assets of our business, or of our PRC or Hong Kong subsidiaries, is in PRC or Hong Kong, such cash or assets may not be available to fund operations or for other use outside of the PRC or Hong Kong, due to interventions in or the imposition of restrictions and limitations by the PRC government to the transfer of cash or assets” on page 48 of this annual report); |
| ● | There are uncertainties regarding the enforcement of laws and rules and regulations in China, which can change quickly with little advance notice, and there is a risk that the Chinese government may intervene or influence our operations at any time, exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers, which could materially and adversely affect our business and hinder our ability to offer or continue our operations, and cause the value of our securities to significantly decline or become worthless. (see “There are uncertainties regarding the enforcement of laws and rules and regulations in China, which can change quickly with little advance notice, and there is a risk that the Chinese government may intervene or influence our operations at any time, exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers, which could materially and adversely affect our business and hinder our ability to offer or continue our operations, and cause the value of our securities to significantly decline or become worthless.” on page 48 of this annual report); |
RISKS RELATED TO OUR ADSs
| ● | The trading price of our ADSs may be volatile, which could result in substantial losses to investors. (see “The trading price of our ADSs may be volatile, which could result in substantial losses to investors” on page 49 of this annual report); |
| ● | Techniques employed by short sellers may drive down the market price of our ADSs. (see “Techniques employed by short sellers may drive down the market price of our ADSs” on page 50 of this annual report); |
| ● | If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the market price for our ADSs and trading volume could decline. (see “If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the market price for our ADSs and trading volume could decline” on page 50 of this annual report); |
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| ● | We cannot assure you that our existing dividend policy will not change in the future or the amount the dividends that you may receive, and as such, you must rely on price appreciation of our ADSs for return on your investment. (see “We cannot assure you that our existing dividend policy will not change in the future or the amount the dividends that you may receive, and as such, you must rely on price appreciation of our ADSs for return on your investment” on page 50 of this annual report); | |
| ● | Substantial future sales or perceived potential sales of our ADSs in the public market could cause the price of our ADSs to decline. (see “Substantial future sales or perceived potential sales of our ADSs in the public market could cause the price of our ADSs to decline” on page 51 of this annual report); |
| ● | We may be classified as a passive foreign investment company for U.S. federal income tax purposes, which could result in adverse U.S. federal income tax consequences to U.S. Holders of our ADSs or ordinary shares. (see “We may be classified as a passive foreign investment company for U.S. federal income tax purposes, which could result in adverse U.S. federal income tax consequences to U.S. Holders of our ADSs or ordinary shares” on page 51 of this annual report); |
| ● | The amended and restated memorandum and articles of association that we expect to adopt contain anti-takeover provisions that could have a material adverse effect on the rights of holders of our ordinary shares and ADSs. (see “The amended and restated memorandum and articles of association that we expect to adopt contain anti-takeover provisions that could have a material adverse effect on the rights of holders of our ordinary shares and ADSs” on page 52 of this annual report); |
| ● | You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law. (see “You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law” on page 52 of this annual report); |
| ● | Certain judgments obtained against us by our shareholders may not be enforceable. (see “Certain judgments obtained against us by our shareholders may not be enforceable” on page 53 of this annual report); |
| ● | We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to United States domestic public companies. (see “We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to United States domestic public companies” on page 53 of this annual report); |
| ● | The voting rights of holders of ADSs are limited by the terms of the deposit agreement, and you may not be able to exercise any right to vote the ordinary shares which are represented by your ADSs. (see “The voting rights of holders of ADSs are limited by the terms of the deposit agreement, and you may not be able to exercise any right to vote the ordinary shares which are represented by your ADSs” on page 54 of this annual report); |
| ● | The depositary for our ADSs will give us a discretionary proxy to vote the ordinary shares represented by your ADSs if you do not give proper or timely voting instructions to the depositary, except in limited circumstances, which could adversely affect your interests. (see “The depositary for our ADSs will give us a discretionary proxy to vote the ordinary shares represented by your ADSs if you do not give proper or timely voting instructions to the depositary, except in limited circumstances, which could adversely affect your interests” on page 54 of this annual report); |
| ● | You may not receive dividends or other distributions on our ordinary shares and you may not receive any value for them if it is illegal or impracticable to make them available to you. (see “You may not receive dividends or other distributions on our ordinary shares and you may not receive any value for them if it is illegal or impracticable to make them available to you” on page 54 of this annual report); |
| ● | You may experience dilution of your holdings due to inability to participate in rights offerings. (see “You may experience dilution of your holdings due to inability to participate in rights offerings” on page 55 of this annual report); |
| ● | You may be subject to limitations on transfer of your ADSs. (see “You may be subject to limitations on transfer of your ADSs” on page 55 of this annual report); |
| ● | We will incur significantly increased costs and devote substantial management time as a result of being a public company. (see “We will incur significantly increased costs and devote substantial management time as a result of being a public company” on page 55 of this annual report). |
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A. [Reserved]
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
RISKS RELATED TO OUR BUSINESS AND INDUSTRY
We are dependent on our suppliers to reach potential car insurance purchasers for our marketing promotion services business. Failure to maintain cooperation with our suppliers or to secure new suppliers could materially and adversely affect our business.
Our business relies significantly on third-party suppliers who provide internet traffic and digital marketing services that enable us to reach and engage potential car insurance purchasers for our car insurance marketing promotions. If we fail to maintain effective cooperation and relationships with these suppliers, or if we are unable to identify and establish partnerships with new, reliable suppliers, our ability to generate sufficient internet traffic may be materially and adversely affected. This could result in a reduction in the number of leads we deliver to insurance providers, which would negatively impact our revenues, profitability, and overall business operations.
Concentration of our client base exposes us to significant business risks.
We derive a substantial portion of our revenues from a limited number of clients, insurance companies, in our marketing promotion services business. This concentration subjects us to risks associated with the potential loss or reduction of business from any single client, which could materially and adversely impact our financial condition, results of operations, and cash flows. Our insurance company clients may reduce or reallocate their marketing budgets, change their strategic priorities, or alter their vendor relationships, any of which could lead to decreased demand for our services. Additionally, changes in regulatory requirements or market conditions affecting the insurance industry could negatively influence our clients’ marketing expenditures and, consequently, our business. Our dependence on a narrow client base limits our ability to diversify revenue streams and may increase volatility in our financial performance.
We are subject to governmental regulations and other legal obligations related to privacy, information security, and data protection, and any security breaches, and our actual or perceived failure to comply with our legal obligations could harm our brand and business.
We generate, collect, store and process a large amount of personal, transactional, statistical and behavioral data, including certain personal and other sensitive data through our provision of car insurance to our clients, including names, identity card numbers, telephone numbers, correspondence addresses, and payment or transaction related information. We face risks inherent in handling large volumes of data and in securing and protecting such data. In particular, we face a number of data-related challenges related to our business operations, including: (i) protecting the data in and hosted on our system and servers, including against attacks on our system and cloud servers by external parties or fraudulent behavior by our employees; (ii) addressing concerns related to privacy and sharing, safety, security and other factors; and (iii) complying with applicable laws, rules and regulations relating to the collection, use, disclosure or security of personal information, including any requests from regulatory and government authorities relating to such data.
Although we have taken steps to protect such data, technology renovations or updates, increased level of expertise of hackers, new discoveries in the field of cryptography or others could still result in breach of the security measures that we use. On December 28, 2012, SCNPC promulgated the Decision to Strengthen the Protection of Internet Information, or the Information Protection Decision, to strengthen the protection of personal information on the internet. The Information Protection Decision provides that internet content providers must expressly inform their users of the purpose, manner to collect and use the users’ personal information and the scope of the information to be collected and used by the provider. As of this annual report, we have not experienced any material breach of our cybersecurity system or measures. As techniques used to sabotage or obtain unauthorized access to systems change frequently and generally are not recognized until they are launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. Any accidental or willful security breaches or other unauthorized access to our system and cloud servers could cause confidential information to be accessed, stolen and used for illegal or unauthorized purposes. Security breaches or unauthorized access to confidential information could also expose us to liability related to the loss of the information, time-consuming and expensive litigation and negative publicity. If security measures are breached because of third-party action, employee error, malfeasance or otherwise, or if design flaws in our technology infrastructure are exposed and exploited, our relationships with end customers, B channels, and other business partners could be severely damaged, we could incur significant liability, and our business and operations could be adversely affected.
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In addition, PRC government authorities have enacted a series of laws and regulations in regard of the protection of personal information, under which telecommunication business operators, internet service providers and other value chain operators are required to comply with the principles of legality, justification and necessity, to clearly indicate the purposes, methods and scope of any information collection and usage, to obtain the consent of customers, and to keep collected personal information confidential, as well as to establish customer information protection system with appropriate remedial measures. On November 7, 2016, the SCNPC promulgated the PRC Cybersecurity Law, which took effect on June 1, 2017. Pursuant to the Cybersecurity Law, any individual or organization using the network must comply with the constitution and the applicable laws, follow the public order and respect social moralities; and must not endanger cybersecurity, or engage in activities by making use of the network that endanger the national security, honor and interests, or infringe on the fame, privacy, intellectual property and other legitimate rights and interests of others. The PRC Cybersecurity Law sets forth various security protection obligations for network operators, which are defined as “owners and administrators of networks and network service providers”, including, among others, complying with a series of requirements of graded cybersecurity protection systems; verifying users’ real identity; localizing the personal information and important data gathered and produced by key information infrastructure operators during operations within the PRC; and providing assistance and support to government authorities where necessary for protecting national security and investigating crimes. Significant capital, managerial and human resources are required to comply with legal requirements, enhance information security and to address any issues caused by security failures. However, there is uncertainty as to the interpretation and application of such laws which may be interpreted and applied in a manner inconsistent with our current policies and practices or require changes to the features of our system. We cannot assure you that our existing information protection system and technical measures will be considered sufficient under applicable laws and regulations. If we are unable to address any information protection concerns, protect our systems or to comply with the then applicable laws and regulations, we may incur additional costs and liability and our reputation, business and operations might be adversely affected. In addition, complying with various laws and regulations may cause us to incur substantial costs or require us to change our business practices, including our data practices, in a manner adverse to our business.
We have implemented certain compliance measures designed to protect the personal information and other data that we collect and process in connection with our business, including obtaining consent from potential car insurance purchasers to use their information within the scope of authorization, including data protection clauses in contracts with business partners, using consent mechanisms prior to data collection, requiring regular password updates, encrypting data transmission across systems, and removing data after completion of applicable business processes. However, since the Cybersecurity Law and relevant regulations, rules and measures are relatively new, there are uncertainties as to the interpretation and application of these laws and regulations, and it is possible that our data protection practices are or will be inconsistent with regulatory requirements. Any violation of the provisions and requirements under the Cybersecurity Law and other relevant regulations, rules and measures may subject us to warnings, fines, confiscation of illegal gains, revocation of licenses, suspension of business, shutting down of websites or even criminal liabilities. Complying with such requirements could cause us to incur substantial expenses or to alter or change our practice in a manner that could harm our business. Any systems failure or security breach or lapse that results in the unauthorized release of our customer data could harm our reputation and brand and, consequently, our business, in addition to exposing us to potential legal liability. Furthermore, end customers may have concerns about our practices with regard to the collection, use, disclosure, or security of personal information or other privacy related matters, and any negative publicity on our information safety or privacy protection mechanism and policy, even if unfounded, could damage our reputation and brand and adversely affect our business and results of operations.
Our ability to protect the confidential information of our customers may be adversely affected by cyberattacks, computer viruses, physical or electronic break-ins or similar disruptions.
We collect, store, and process certain personal and other sensitive data from potential car insurance purchasers, which makes us an attractive target and potentially vulnerable to cyberattacks, computer viruses, physical or electronic break-ins or similar disruptions. While we have taken steps to mitigate the cyberattack risks and protect the confidential information that we have access to, including but not limited to installation and periodical updates of antivirus software and backup of information on our computer systems, our security measures could be breached. Because techniques used to sabotage or obtain unauthorized access to systems change frequently and generally are not recognized until they are launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. Any cybersecurity incident, accidental or willful security breaches or other unauthorized access to our systems could cause confidential information to be stolen and used for criminal purposes. Cybersecurity incidents, security breaches or unauthorized access to confidential information could also expose us to liability related to the loss of the information, time-consuming and expensive litigation and negative publicity. If security measures are breached because of third-party action, employee error, malfeasance or otherwise, or if design flaws in our technology infrastructure are exposed and exploited, our relationships with our customers could be severely damaged, we could incur significant liability, and our business and operations could be adversely affected.
Meanwhile, if we fail to protect confidential information, we may be involved in various claims and litigations raised for privacy or other damages. Such claims and litigations will take a lot of time and resources to defend and we cannot assure you these claims or litigations will result in a favorable outcome.
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The successful operation of our business depends upon the performance and reliability of the internet infrastructure in China.
Our business depends on the performance and reliability of the internet infrastructure in China. Almost all access to the internet is maintained through state-owned telecommunication operators under the administrative control and regulatory supervision of the MIIT. In addition, the national networks in China are connected to the internet through state-owned international gateways, which are the only channels through which a domestic Chinese user can connect to the internet outside of China. We may not have access to alternative networks in the event of disruptions, failures or other problems with China’s internet infrastructure. In addition, the internet infrastructure in China may not support the demands associated with continued growth in Internet usage.
We have no control over the costs of the services provided by the national telecommunications operators. If the prices that we pay for telecommunications and internet services rise significantly, our gross margins could be adversely affected.
Part of our services could be disrupted by network interruptions.
Part of our services depends on the efficient and uninterrupted operation of our computer and communications systems. Substantially all of our computer hardware and our cloud computing services is currently located in China. Although we have prepared for contingencies through redundancy measures and disaster recovery plans, such preparation may not be sufficient and we do not carry business interruption insurance. Despite any precautions we may take, the occurrence of a natural disaster, such as an earthquake, flood or fire, or other unanticipated problems at our facilities in China, including power outages, telecommunications delays or failures, break-ins to our systems or computer viruses, could result in delays or interruptions to our services, loss of our and customers’ data and business interruption for us and our customers or clients. Any of these events could damage our reputation, significantly disrupt our operations and subject us to liability, which could materially and adversely affect our business, financial condition and results of operations.
Maintaining customers’ trust in our ecosystem is critical to our success, and any failure to do so could severely damage our reputation and brand.
We plan to develop a comprehensive platform that connects users with various healthcare providers and delivers cost-effective and customized healthcare solutions, and cultivate a vibrant ecosystem around it. We have been building our brand name and reputation for our ecosystem as we believe that our ability to maintain customers’ trust in our ecosystem is critical to our success in the rapidly expanding Internet healthcare market in the PRC and globally. Our ability to maintain customers’ trust in our ecosystem is primarily affected by the following factors:
| ● | our ability to maintain superior customer experience and the quality of services and products provided through our platform, including the delivery of care; |
| ● | the breadth of offerings of our services and products and their efficacy in addressing our customers’ needs and meeting their expectations; |
| ● | the reliability, security and functionality of our platform; |
| ● | our ability to adopt new technologies or adapt our information infrastructure to changing user requirements or emerging industry standards; |
| ● | the strength of our consumer protection measures; and |
| ● | our ability to increase brand awareness among existing and potential customers through various marketing and promotional activities. |
Any loss of trust in our ecosystem could harm the value of our brand and reputation, result in participants ceasing to utilize our platform as well as reducing the level of their activity in our ecosystem, which could materially and adversely affect our business, financial condition and results of operations. Furthermore, there can be no assurance that our brand promotion efforts would be effective. Such efforts may be expensive, which may, in turn, materially and adversely affect our financial condition and results of operations.
Any negative review, comment or allegation about our company, doctors on our platform, hospital network, service providers in our consumer healthcare business and direct sales suppliers, among others, or services and products offered over our platform by the media, on social networks or other public online forums may harm our brand, reputation and public image. We may also face challenges from others seeking to profit from, or defame, our brand. Any of the foregoing may result in loss of potential and existing customers or business partners for our ecosystem and, in turn, have a material adverse effect on our business, financial condition, results of operations and prospects.
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We are in the early stage of development with a limited operating history in an emerging and dynamic “Internet + healthcare” industry.
We operate in the emerging and dynamic Internet hospital, Internet chronic disease management and digital healthcare industries in China. These industries are relatively new, and it is uncertain whether such industries would achieve and sustain high levels of demand, consumer acceptance and market reaction.
We cannot assure you that we will be able to successfully implement our business model. As the market and our business develop, we may modify our platform, products and services. These changes may not achieve expected results and may have a material and adverse impact on our results of operations and financial condition. We cannot assure you that we will be able to achieve similar results or grow at the same rate as we had in the past or at all. You should consider our business prospects in light of the risks and difficulties we may encounter as an early stage company operating in emerging and dynamic industries, including, among other things, our ability to attract and retain users, create value for participants in our ecosystem and increase monetization, navigate an evolving regulatory environment, provide high-quality products and satisfactory services, build up our reputation and promote our brand, and anticipate and adapt to changing market conditions. We may not be able to successfully address these risks and difficulties, which could significantly harm our business, results of operations and financial condition.
If we are unable to compete effectively, our business, financial condition and results of operations may be materially and adversely affected.
While the PRC Internet healthcare market is in an early stage of development, it is, and is expected to be increasingly competitive. Our key competitors include, but are not limited to, pharmaceutical retail companies (such as traditional offline pharmacies and online platforms) and companies that offer online healthcare services. These companies may have greater financial, technical, research and development, marketing, distribution, retail and other resources than we do. They may also have longer operating histories, a larger user base or broader and deeper market coverage. As a result, our competitors may be able to respond more quickly and effectively to new or evolving opportunities, technologies, standards or user requirements than us and may have the ability to initiate or withstand significant regulatory changes and industry evolvement. Furthermore, when we expand into other markets, we will face competition from new competitors, domestic or foreign, who may also enter markets where we currently operate or will operate.
In addition, many operators in the healthcare industry have consolidated in recent years to create larger healthcare enterprises with greater bargaining power, which has resulted in greater pricing pressures. If this consolidation trend continues, it could give the resulting enterprises even greater bargaining power, which may lead to further competitive pressure. New partnerships and strategic alliances in the healthcare industry also can alter market dynamics and adversely impact our businesses and competitive positioning.
Any significant increase in competition may have a material adverse effect on our revenue and profitability as well as on our business and prospects. We cannot assure you that we will be able to distinguish our products and services from those of our competitors, preserve and improve our relationships with various participants in the healthcare value chain, or increase or even maintain our existing market share. We may lose market share, and our financial condition and results of operations may deteriorate significantly if we fail to compete effectively.
Our business generates and processes a large amount of data, and the improper use or disclosure of such data could harm our reputation as well as have a material adverse effect on our business and prospects.
Our platform generates and processes a large amount of personal, transaction, demographic and behavioral data. Sensitive user information in our business operations is stored in the Internet data center established and owned by us. Such information includes, but is not limited to, personal information (such as user name, cell phone number, delivery address, age and gender), consultation record, order record and activity log. We have kept all sensitive user information in our database such as order record and consultation record since inception. We face risks inherent in handling large volumes of data and in securing and protecting such data. In particular, we face a number of data-related challenges from consultations, transactions and other activities on our platform, including:
| ● | protecting the data in and hosted on our system, including against attacks on our system by external parties or improper behavior by our employees; |
| ● | addressing concerns related to privacy and sharing, safety, security and other factors; and |
| ● | complying with applicable laws, rules and regulations relating to the collection, use, disclosure or security of personal information, including any requests from regulatory and government authorities relating to such data. |
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Any systems failure or security breach or lapse that results in the unauthorized release of our user data could harm our reputation and brand and, consequently, our business, in addition to exposing us to potential legal liability.
In the PRC, the rules governing the collection, use, disclosure or security of personal information are separately stipulated in various laws, regulations and rules. 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, network operators must not, without users’ consent, collect their personal information, and may only collect users’ personal information necessary to provide their services. Providers are also obliged to provide security maintenance for their products and services and shall comply with provisions regarding the protection of personal information as stipulated under the relevant laws and regulations. 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. PRC regulators, including the Cyberspace Administration of China, MIIT, and the Ministry of Public Security have been increasingly focused on regulation in the areas of data security and data protection. The PRC regulatory requirements regarding cybersecurity are constantly evolving. For instance, various regulatory bodies in China, including the Cyberspace Administration of China, the Ministry of Public Security and the SAMR, have enforced data privacy and protection laws and regulations with varying and evolving standards and interpretations.
On December 28, 2021, the Cyberspace Administration of China and 12 other relevant PRC governmental authorities published the amended Cybersecurity Review Measures, which came into effect on February 15, 2022. The final Cybersecurity Review Measures provide that a “network platform operator” that possesses personal information of more than one million users and seeks a listing in a foreign country must apply for a cybersecurity review. Further, the relevant PRC governmental authorities may initiate a cybersecurity review against any company if they determine certain network products, services, or data processing activities of such company affect or may affect national security. As a network platform operator who possesses personal information of more than one million users for purposes of the Cybersecurity Review Measures, we have applied for and completed a cybersecurity review with respect to our overseas listing pursuant to the Cybersecurity Review Measures.
On June 10, 2021, the Standing Committee of the National People’s Congress of China, or the SCNPC, promulgated the PRC Data Security Law, which came into effect in September 2021. The PRC Data Security Law imposes data security and privacy obligations on entities and individuals carrying out data activities, and introduces a data classification and hierarchical protection system based on the importance of data in economic and social development, as well as the degree of harm it will cause to national security, public interests, or legitimate rights and interests of individuals or organizations when such data is tampered with, destroyed, leaked, or illegally acquired or used. The PRC Data Security Law also provides for a national security review procedure for data activities that may affect national security and imposes export restrictions on certain data and information. As uncertainties remain regarding the interpretation and implementation of these laws and regulations, we cannot assure you that we will comply with such regulations in all respects and we may be ordered to rectify or terminate any actions that are deemed illegal by regulatory authorities. We may also become subject to fines and/or other sanctions which may have material adverse effect on our business, operations and financial condition.
On August 20, 2021, the Standing Committee of the National People’s Congress of China promulgated the PRC Personal Information Protection Law, or the PIPL, which came into effect in November 2021. In addition to other rules and principles of personal information processing, the PIPL specifically provides rules for processing sensitive personal information. Sensitive personal information refers to personal information that, once leaked or illegally used, could easily lead to the infringement of human dignity or harm to the personal or property safety of an individual, including biometric recognition, religious belief, specific identity, medical and health, financial account, personal whereabouts and other information of an individual, as well as any personal information of a minor under the age of 14. Only where there is a specific purpose and sufficient necessity, and under circumstances where strict protection measures are taken, may personal information processors process sensitive personal information. A personal information processor shall inform the individual of the necessity of processing such sensitive personal information and the impact thereof on the individual’s rights and interests. As uncertainties remain regarding the interpretation and implementation of the PIPL, we cannot assure you that we will comply with the PIPL in all respects and regulatory authorities may order us to rectify or terminate our current practice of collecting and processing sensitive personal information. We may also become subject to fines and/or other penalties which may have material adverse effect on our business, operations and financial condition. While we take various measures to comply with all applicable data privacy and protection laws and regulations, there is no guarantee that our current security measures and those of our third-party service providers may always be adequate for the protection of our customer, employee or company data; and like all companies, we have experienced data incidents from time to time. In addition, given the size of our customer base and the types and volume of personal data on our system, we may be a particularly attractive target for computer hackers, foreign governments or cyber terrorists. Unauthorized access to our proprietary internal and customer data may be obtained through break-ins, sabotage, breach of our secure network by an unauthorized party, computer viruses, computer denial-of-service attacks, employee theft or misuse, breach of the security of the networks of our third-party service providers, or other misconduct. Because the techniques used by computer programmers who may attempt to penetrate and sabotage our proprietary internal and customer data change frequently and may not be recognized until launched against a target, we may be unable to anticipate these techniques. Unauthorized access to our proprietary internal and customer data may also be obtained through inadequate use of security controls. Any of such incidents may harm our reputation and adversely affect our business and results of operations. In addition, we may be subject to negative publicity about our security and privacy policies, systems, or measurements from time to time.
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Any failure, or perceived failure, by us to comply with any applicable regulatory requirements or privacy protection-related laws, rules and regulations could result in proceedings or actions against us by governmental entities or others. These proceedings or actions may subject us to significant penalties and negative publicity, require us to change our business model or practices, increase our costs and severely disrupt our business. As we expand our operations, we may be subject to additional laws in other jurisdictions where our users and business partners of our ecosystem are located. The laws, rules and regulations of other jurisdictions may impose on us more stringent or conflicting requirements with harsh penalties for non-compliance than those in the PRC, and the compliance with such requirements could require significant resources and result in substantial costs, which may materially and adversely affect our business, financial condition, results of operations and prospects.
According to the Administrative Measures for Internet Diagnosis and Treatment (for Trial Implementation), level three information security protection shall be implemented for internet hospital information systems in accordance with the relevant national laws, regulations and provisions. According to the Administrative Measures for the Hierarchical Protection of Information Security, where the operator or user of an information system of level three or above fails to complete the record-filing or examining and approving procedures as required, the public security organ, the state secrecy department and the state cryptography administration shall, according to the division of work among them, order it to correct within a certain time limit, failing which, the operator or user shall be given a warning, the superior department in charge shall be informed of the relevant situation, and the directly liable person in charge and other directly liable persons shall be penalized as advised and the penalty result shall be report in a timely manner. To this end, we have implemented level three information security protection standard for each of our Internet hospital and pharmaceutical supply chain’s information system to achieve full compliance with regulatory requirements.
If our solution does not drive customers’ engagement or if we fail to provide superior customer experience, our business and reputation may be materially and adversely affected.
Our business is highly dependent on the receptiveness of our customers to our services and products as well as their willingness to use, and to increase the frequency and extent of their utilization of, our solution. Their degree of receptiveness to our services and products depends on a number of factors, including the demonstrated accuracy and efficacy of our offerings compared to those of others, turnaround time, cost-effectiveness, convenience and marketing support. In addition, negative publicity concerning our solution or the Internet healthcare market as a whole could limit market acceptance of our solution, especially that of the online consultation business. Meanwhile, there can be no assurance that our efforts and ability to demonstrate the value of our solution and the relative benefits of our services and products over those of our competitors to our customers would be successful. We may fail to achieve an adequate level of acceptance by our customers of our services and products, and we may not be able to effectively expand the registered user base, promote user engagement or convert registered patients to transacting patients. Consequently, our business may not develop as expected, or at all, and our business, financial condition or results of operations may be materially and adversely affected.
The success of our business also hinges on our ability to provide superior customer experience, which depends on our ability to continue to deliver quality care to our users, to maintain the quality of our services and products, to source services and products that are responsive to customer demands, and to provide timely and reliable delivery, flexible payment options and superior after-sales services. Such ability, in turn, depends on a variety of factors beyond our control. In particular, we rely on a number of third parties in the provision of our services and products. Their failure to provide high-quality customer experience to our customers may adversely affect our customers’ receptiveness of, and willingness to utilize, our solution, which may damage our reputation and cause us to lose customers.
Failure to properly manage and create values for various participants in the healthcare value chain may materially and adversely affect our business.
Our results of operations depend on our ability to manage and create values for participants in the healthcare value chain and generate more monetization opportunities for us. We will provide these participants with integrated, smart solutions and services to help them create value. By integrating these solutions into and channeling these participants onto our platform, we will allow all participants within the healthcare value chain, namely doctors, patients and pharmaceutical companies, to utilize the resources on our platform for all kinds of needs under the healthcare scenario, which in turn may increase monetization opportunities for us.
However, we cannot assure you that we are able to manage and create value for such participants, or at all. Those participants may consider our smart solutions and other services ineffective. If we fail to manage or create value for those participants, we may not be able to increase their engagement and connection with us and deepen our penetration in the healthcare value chain, which in turn may deprive monetization venues for us to drive our revenue growth.
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The digital healthcare market is immature and volatile, and if it does not develop, if it develops more slowly than we expect, or if our services do not drive user engagement, the growth of our business will be harmed.
The digital healthcare market is relatively new and unproven, and it is uncertain whether it will achieve and sustain high levels of demand, user acceptance and market adoption. Our success will depend to a substantial extent on the willingness of users to use, and to increase the frequency and extent of their utilization of, our services, as well as on our ability to demonstrate the value of our services to users, hospitals, medical professionals and other participants in the healthcare value chain. If users or healthcare service providers do not perceive the benefits of our services, or if our services do not drive user engagement, then our market may not develop at all, or it may develop more slowly than we expect. Similarly, individual and healthcare industry concerns regarding patient confidentiality and privacy in the context of digital healthcare in general could limit market acceptance of our digital healthcare services. If any of these events occurs, it could have a material adverse effect on our business, financial condition or results of operations.
We may fail to attract or retain sufficient users or medical professionals for our online healthcare services.
We will offer convenient access to a wide spectrum of healthcare services on our platform. For our online healthcare services, we will generate revenue from users paying for our services. Therefore, our ability to acquire and retain sufficient users for our online healthcare services is critical to the continued success and growth of such services, which in turn primarily depends on the overall experience we provide to our users as well as the actual or perceived effectiveness of our services. In order to attract and retain users for our online healthcare services, we must build our brand and reputation as an effective online healthcare platform, as well as effectively market and precisely target our services to prospective users. To retain and engage our user base, we must provide personalized, superior user experience, offer quality services covering a wide range of user demands and cultivate users’ stickiness to our platform. However, we cannot assure you that our users will consider their experience satisfactory or our services effective. For example, user who do not get satisfactory results following the recommendations from our online consultation and prescription renewal service may attribute such failure to the ineffectiveness of our services. In addition, some users may encounter trouble in navigating our platform or experience technical difficulties.
On the other hand, we also need to attract and retain sufficient medical professionals to our platform for our online healthcare services. Our medical team will be staffed by contracted doctors on the platform who are passionate about the digital healthcare industry, possess a user service mindset and be willing to accept challenging and creative tasks. We believe our platform and online healthcare services will provide compelling value propositions to those medical professionals by offering them an access to Internet traffic and an innovative healthcare venue. However, we cannot assure you that such medical professionals would be attracted to or stay at our platform.
If we fail to address, among other things, any of the foregoing challenges, users may become frustrated by or dissatisfied with our online healthcare services, and may leave our platform without making purchases, and existing users may discontinue using our online healthcare services. Furthermore, if we fail to attract or retain sufficient number of medical professionals, our medical services may not further develop and we may not be able to provide satisfactory services or user experience. As a result, our business, results of operations and financial condition will materially and adversely affected.
We may become subject to medical liability claims in connection with our online healthcare services, which could cause us to incur significant expenses and be liable for significant damages if any claim is not covered by insurance.
We will face risks of medical liability claims against our contracted doctors on the platform and us in connection with our online healthcare services. In particular, our contracted doctors may provide sub-standard services, mishandle sensitive information, engage in other misconduct or commit medical malpractice, which could subject us to medical liability claims. We do not carry insurance covering medical malpractice claims and professional liability insurance for doctors on our platform in relation to the provision of online hospital services over our platform. Professional liability insurance premiums can reach a considerable amount and may increase significantly in the future, particularly as we expand our services. As a result, adequate professional liability insurance may not be available to contracted doctors or us in the future on commercially acceptable terms, or at all.
Any claims made against us that are not fully covered by insurance could be costly to defend against, result in substantial damage awards against us and divert the attention of our management and contracted doctors from our operations, which could have a material adverse effect on our business, financial condition, results of operations and reputation.
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We may be subject to penalties or disputes against us for failure to manage our doctors on our platform.
The practice of doctors is strictly regulated under PRC laws, rules and regulations. Doctors who practice at medical institutions must hold practicing licenses and may only practice within the scope of their licenses and at the specific medical institutions as stated in their licenses. A doctor is required to register the medical institutions at which he or she practices in his or her license. If a doctor is found practicing at a medical institution not registered in his or her license, the doctor would be subject to regulatory penalties, from warning to suspension of practice and, in the worst-case scenario, revocation of licenses. A doctor practicing in multiple institutions must apply to register or file with competent in-charge administrative authorities and can only have the right to prescribe medicine at the registered or filed practicing institution. If the doctor issues a prescription in a medical institution not registered in his or her license, the relevant medical institution would also be subject to regulatory penalties, including a fine of up to RMB5,000 and, in the worst-case scenario, revocation of the medical institution’s Practicing License for Medical Institutions.
We cannot assure you that doctors on our platform will complete the registration and relevant government procedures in a timely manner, or at all, or that doctors on our platform will not practice outside the permitted scope of their respective licenses or strictly take their individual responsibilities under the applicable laws and regulations in connection with medical services, especially Internet healthcare services. Meanwhile, if doctors on our platform are found to have deficient registration or found to be practicing beyond the scope permitted by relevant authorities, they may be disciplined and lose their practicing licenses. In the event that the multi-institution practices of doctors on our platform are in breach of their contractual obligations owed to other institutions, such as non-compete obligations, we may be exposed to indemnity or other legal liabilities if we are deemed to have aided these breaches, and are therefore susceptible to legal disputes and potential damages. As a result, we may no longer be able to employ them in offering our online consultation and prescription renewal service, which could materially and adversely affect our business. In addition, there can be no assurance that we could timely find qualified replacements on commercially reasonable terms, or at all.
Our business may involve sale of prescription drugs that is subject to stringent scrutiny, which may expose us to risks and challenges.
Sale of prescription drugs in China shall be subject to stringent scrutiny. In particular, under the Supervision and Administration of Circulation of Pharmaceuticals promulgated by the CFDA in 2007, a pharmaceutical manufacture or operation enterprise shall not sell prescription drugs directly to the public by post or over internet, and the enterprise in violation of such restriction shall be instructed to rectify, given a disciplinary warning, and imposed a fine of not more than two times the value of the pharmaceuticals sold, but not more than RMB30,000. However, the newly revised Drug Administration Law abolishes the restriction on online sale of prescription drugs and adopts the principle of keeping online and offline sales consistent except that none of the drugs subject to the State’s special control may be sold online, such as vaccines, blood products, narcotic drugs, psychotropic drugs, toxic drugs for medical use, radioactive drugs and pharmaceutical precursor chemicals. In August 2022, NMPA published the Measures for the Supervision and Administration of Online Pharmaceuticals Sales or the Measures for Online Pharmaceuticals Sales which have become effective since December 1, 2022, aiming to enhance the supervision of online pharmaceutical sales and related platform services. The Measures for Online Pharmaceuticals Sales provides specific and explicit rules for the online sales of prescription drugs, which is perceived to be more conducive to online prescription drug sellers including us, but also provides certain requirements that we shall meet. The Measures for Online Pharmaceuticals Sales provides that, among others, online prescription drug sellers shall (i) ensure the accuracy and reliability of the source of e-prescription, (ii) keep records of any e-prescription for at least five (5) years and no less than one (1) year after the expiration date of the prescription drugs, and (iii) disclose safety warnings including “prescription drugs should only be purchased and used with prescriptions and guidance of licensed pharmacists” when displaying information of prescription drugs. The Measures for Online Pharmaceuticals Sales is relatively new and its implement provisions and the anticipated adoption or effective date may be subject to change with substantial uncertainty and we will closely monitor and assess the trajectory of the rule-making process. It remains uncertain that our platform is and will be in full compliance with the relevant laws and regulations or any new laws and regulations that may be enacted in the future, which are evolving and subject to uncertainties. Any failure to comply with such laws and regulations may subject us to disciplinary warnings and administrative penalties, which may in turn materially and adversely affect our business, reputation, and financial condition.
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Failure of doctors on our platform to provide adequate and proper medical services on our platform may have a material and adverse effect on our reputation, business and results of operations.
Doctors on our platform and our other employees may provide sub-standard services, mishandle sensitive information, engage in other misconduct or commit medical malpractice, which could subject us to medical liability claims. We do not carry and pay for any professional liability insurance covering medical malpractice claims for doctors that provide prescription renewal services on our platform. Adequate professional malpractice insurance coverage may not be available to doctors on our platform or us in the future on commercially acceptable terms, or at all.
Our business, financial condition, results of operations and reputation may be materially and adversely affected if any such claims are made against us or our medical professionals in connection with these actions that are not fully covered by insurance. With respect to contracted doctors as they often work remotely, we have limited control over them as well as the quality of their online healthcare consultation services. There can be no assurance that our risk management procedures will be sufficient to monitor their performance and control the quality of their work. In the event that our contracted doctors fail to comply with the contractual obligations and applicable laws in relation to the provision of our online consultation services, our user experience could deteriorate, and we may suffer as a result of any actual or alleged misconduct by them, which could materially and adversely affect our business, financial condition, results of operations and reputation.
Any lack of requisite approvals, licenses or permits applicable to our business may have a material and adverse effect on our business, financial condition and results of operations and prospects.
Our business is subject to governmental supervision and regulation by various PRC governmental authorities, including, but not limited to, the MOFCOM, the PRC Ministry of Industry and Information Technology, or the MIIT, and the NHC, National Medical Products Administration, or the NMPA, the PRC State Administration for Market Regulation, or the SAMR, the CAC, and the corresponding local regulatory authorities. Such government authorities promulgate and enforce laws and regulations that cover a variety of business activities that our operations concern, such as provision of Internet information, online healthcare services, online and offline retail, sales and online operation of pharmaceutical and healthcare products, sales of food, and Internet advertisement, among other things. These regulations in general regulate the entry into, the permitted scope of, as well as approvals, licenses, permits, filings and registrations for, the relevant business activities.
In addition to obtaining necessary approvals, licenses and permits for conducting our business, we must comply with relevant laws and regulations. Our businesses, such as online pharmaceutical sale and online healthcare services, are subject to various and complex laws and regulations, extensive government regulations and supervision. There may be certain new requirements under relevant laws and regulations from time to time, and even if we become aware of new requirements, due to uncertainties in their interpretations and implementation, it will be difficult for us to determine what actions or omissions would be deemed as violations of applicable laws and regulations. We may also not be able to respond to evolving laws and regulations and take appropriate action in time to adjust our business model. As a result, we may be in violation or non-compliance with such laws and regulations.
Moreover, our online hospital services are subject to governmental supervision and regulation relating to both general medical institution and online hospital. In particular, according to the Administrative Measures for Internet Diagnosis and Treatment (for Trial Implementation) by the NHC on July 17, 2018, Internet-based diagnosis services shall only provide re-diagnoses service after confirming that the patients have been diagnosed with one or more types of such common or chronic diseases in physical medical institutions. In addition, pursuant to the Administrative Regulations on Medical Institutions promulgated by the State Council on February 6, 2016 and its implementation rules, and the Administrative Measures for Internet Diagnosis and Treatment (for Trial Implementation), medical institutions including online hospitals shall carry out diagnosis and treatment activities according to the approved and registered medical subjects. If a medical institution carries out the online re-diagnoses business with respects to certain common and chronic diseases, the doctors in such medical institution shall review the patients’ medical records, and after confirming that the patients have been diagnosed with one or more types of such common or chronic diseases in physical medical institutions, may offer re-diagnoses service to such patients for the same diagnostic results. It remains uncertain that our online hospital services will be in full compliance with the relevant laws and regulations, which are evolving and subject to changes. Any failure to comply with such laws and regulations or any misconduct or even fraud of our doctors and patients could result in administrative penalties against us which could materially and adversely affects our business, results of operations, financial condition and prospects.
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Due to the uncertainties in the regulatory environment of the industries in which we operate, there can be no assurance that we have obtained or applied for or completed all the approvals, permits, licenses, filings and registrations required for conducting our business and all activities in the PRC, or that we would be able to maintain or renew or pass the annual inspections (as applicable) of our existing approvals, permits and licenses or obtain any new approvals, permits and licenses or complete filings and registrations in a timely manner if required by any future laws or regulations. If we fail to obtain and maintain approvals, licenses or permits or complete filings and registrations required for our business, or to comply with relevant laws and regulations, we could be subject to liabilities, fines, penalties and operational disruptions, or we could be required to modify our business model, which could materially and adversely affect our business, financial condition and results of operations.
We are subject to a variety of laws and other obligations regarding data protection, and any failure to comply with applicable laws and obligations could have a material and adverse effect on our business, financial condition and results of operations.
We are required by privacy and data protection laws in China to ensure the confidentiality, integrity and availability of the information of our users, customers and other data, which is also essential to maintaining their confidence in our online services. However, the interpretation and application of such laws in China are often uncertain and in flux.
In addition to Cyber Security Law, the PRC Data Security Law and the PRC Personal Information Protection Law and other relevant laws and administrative regulations, the PRC governmental authorities also formulated certain specific standards and rules on data protection. The SAMR, and the PRC Standardization Administration jointly issued the Standard of Information Security Technology — Personal Information Security Specification (2020 edition), which took effect on October 1, 2020. Pursuant to this standard, any person or entity who has the authority or right to determine the purposes for and methods of using or processing personal information is considered a personal information controller. Such personal information controller is required to collect information in accordance with applicable laws, and except in certain specific events that are expressly exempted in the standard, prior to collecting such data, the information provider’s consent is required. Furthermore, the CAC issued the Provisions on the Cyber Protection of Children’s Personal Information, which took effect on October 1, 2019. According to these provisions, no person or entity is allowed to produce, release, or disseminate information that infringes upon the personal information security of children aged below 14. Network operators collecting, storing, using, transferring, or disclosing children’s personal information are required to enact special protections for such information.
In addition to the laws and regulations, the PRC government may also carry out special rectifications on the illegal collection and use of any personal data. For example, the Announcement of Launching Special Crackdown Against Illegal Collection and Use of Personal Information by Mobile Apps was issued with effect on January 23, 2019 and commenced coordinated efforts among the CAC, the MIIT, the PRC Ministry of Public Security, and the SAMR to combat the illegal collection and use of personal information by mobile apps throughout China. On October 31, 2019, the MIIT also issued the Notice on the Special Rectification of Mobile Apps Infringing Users’ Rights and Interests, pursuant to which application providers were required to promptly rectify issues that the MIIT designated as infringing application users’ rights such as collecting personal information in violation of PRC regulations and setting obstacles for user account deactivation. In July 2020, the MIIT issued the Notice on Conducting Special Rectification Actions in Depth Against the Infringement upon Users’ Rights and Interests by Applications, to rectify the following issues: (i) illegal collection and use of personal information of users by an application and a software development kit, (ii) setting up obstacles and frequently harassing users, (iii) cheating and misleading users, and (iv) inadequate implementation of application distribution platforms’ responsibilities.
The above laws and regulations and recent events and pronouncements indicate greater oversight by Chinese regulators in terms of data protection and cybersecurity. Such laws, regulations and associated interpretation and implementation are evolving rapidly and may place restrictions on our business operations and the manner in which we interact with our patients.
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There remain uncertainties regarding further interpretation and implementation of those laws and regulations. For example, it should be noted that “core data” and “important data” are important concepts in the PRC Data Security Law. The scopes of these concepts are yet to be determined and need more interpretation from the competent governmental authorities. If the enacted version of the draft measures mandates clearance of cybersecurity review and other specific actions to be completed by companies like us, we face uncertainties as to whether we should obtain such clearance as a listed company in the United States and whether such clearance can be timely obtained, or at all. In early July 2021, regulatory authorities in China launched cybersecurity investigations with regard to several China-based companies that are listed in the United States. The relevant regulatory authorities in China continue to monitor the websites and apps in relation to the protection of personal data, privacy and information security, and may impose additional requirements from time to time. The relevant regulatory authorities also publicize, from time to time, their monitoring results and require relevant enterprises listed in such notices to rectify non-compliance. If any of our mobile apps are not in compliance with these regulations, we could be subject to penalties, including revocation of our business licenses and permits. In addition, compliance with any additional laws could be expensive and any failure to comply with applicable cybersecurity, privacy, and data protection laws and regulations could result in proceedings, penalties and legal liabilities against us. As a result, our business, financial condition, and results of operations could be materially and adversely affected. Besides, any negative publicity about our platform’s safety or privacy protection mechanism and policy could harm our public image and reputation.
We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position.
We regard our trademarks, copyrights, patents, domain names, know-how, proprietary technologies, and similar intellectual property (which we have ownership or legal rights to use) as critical to our success, and we rely on a combination of intellectual property laws and contractual arrangements, including confidentiality, invention assignment and non-compete agreements with our employees and others, to protect our proprietary rights. Although we are not aware of any copycat websites that attempt to cause confusion or diversion of traffic from us at the moment, we may become an attractive target to such attacks in the future because of our brand recognition in online retail, pharmaceutical and Internet healthcare industries in China. Despite these measures, any of our intellectual property rights could be challenged, invalidated, circumvented or misappropriated, or such intellectual property may not be sufficient to provide us with competitive advantages. In addition, there can be no assurance that our patent applications will be approved, that any issued patents will adequately protect our intellectual property, or that such patents will not be challenged by third parties or found by a judicial authority to be invalid or unenforceable. Further, because of the rapid pace of technological change in our industry, parts of our business rely on technologies developed or licensed by third parties, and we may not be able to obtain or continue to obtain licenses and technologies from these third parties on reasonable terms, or at all.
It may often take a long time or high cost to register, maintain and enforce intellectual property rights in China. Statutory laws and regulations are subject to judicial interpretation and enforcement and may not be applied consistently due to different and varying applications and interpretations in different parts of China. Confidentiality, invention assignment and non-compete agreements may be breached by counterparties, and there may not be adequate remedies available to us for any such breach. Accordingly, we may not be able to effectively protect our intellectual property rights or to enforce our contractual rights in China. Policing any unauthorized use of our intellectual property is difficult and costly, and the steps we take may be inadequate to prevent the infringement or misappropriation of our intellectual property. In the event that we resort to litigation to enforce our intellectual property rights, such litigation could result in substantial costs and a diversion of our managerial and financial resources, and could put our intellectual property at risk of being invalidated or narrowed in scope. We can provide no assurance that we will prevail in such litigation, and even if we do prevail, we may not obtain a meaningful recovery. In addition, our trade secrets may be leaked or otherwise become available to, or be independently discovered by, our competitors. Any failure in maintaining, protecting or enforcing our intellectual property rights could have a material adverse effect on our business, financial condition and results of operations.
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We may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations.
We cannot be certain that our operations or any aspects of our business do not or would not infringe upon or otherwise violate patents, copyrights or other intellectual property rights held by third parties. We from time to time in the future may be, subject to legal proceedings and claims relating to the intellectual property rights of others. In addition, there may be other third-party intellectual property that is infringed by our products, services or other aspects of our business. There could also be existing patents of which we are not aware that our products may inadvertently infringe. There can be no assurance that holders of patents purportedly relating to some aspect of our technology platform or business, if any such holders exist, would not seek to enforce such patents against us in the PRC or any other jurisdictions as applicable. Furthermore, the application and interpretation of PRC patent laws and the procedures and standards for granting patents in the PRC are still evolving, and there can be no assurance that PRC courts or regulatory authorities would agree with our analysis. If we are found to have violated the intellectual property rights of others, we may be subject to liability for our infringement activities or may be prohibited from using such intellectual property, and we may incur licensing fees or be forced to develop alternatives of our own. In addition, we may incur significant expenses, and may be forced to divert management’s time and other resources from our business and operations to defend against these third-party infringement claims, regardless of their merits. Successful infringement or licensing claims made against us may result in significant monetary liabilities and may materially disrupt our business and operations by restricting or prohibiting our use of the intellectual property in question, which may materially and adversely affect our business, financial condition and results of operations.
Security breaches and attacks against our systems and network, and any potential resultant breach or failure to otherwise protect confidential and proprietary information, could damage our reputation and adversely affect our business, financial condition and results of operations.
We will rely heavily on technology, particularly the Internet, to provide high-quality online services. However, our technology operations vulnerable to disruptions arising from human error, natural disasters, power failure, computer viruses, spam attacks, unauthorized access and other similar events. Disruptions to, or instability of, our technology or external technology that supports the offering of our online services and products could materially harm our business and reputation.
As techniques used to obtain unauthorized access to or sabotage systems change frequently and may not be known until launched against us, we may be unable to anticipate, or implement adequate measures to protect against, attacks. There can be no assurance that we would not in the future be subject to such attacks that may result in material damages or remediation costs. If we are unable to avert these attacks and security breaches, we could be subject to significant legal and financial liability, our reputation would be harmed and we could sustain substantial revenue loss from lost sales and user dissatisfaction.
In addition, we may not have the resources or technical sophistication to anticipate or prevent rapidly evolving types of cyber-attacks. Cyber-attacks may target us, our users or other participants of our ecosystem, or the information infrastructure on which we depend. Actual or anticipated attacks and risks may cause us to incur significantly higher costs, including costs to deploy additional personnel and network protection technologies, train employees, and engage third-party experts and consultants. Cybersecurity breaches may harm our reputation and business, and materially and adversely affect our financial condition and results of operations.
We are subject to limitations in promoting healthcare-related services and products.
We are subject to certain limitations in promoting healthcare-related services and products. Doctors on our platform and other relevant parties in the provision of our medical and wellness services have to comply with rules and regulations that restrict the promotion or dissemination of information about the professional healthcare services and practice provided by licensed doctors, and the publication or marketing efforts for the predominant purpose of promoting the products or services of doctors to customers or potential customers. Such restrictions may affect our ability to further enhance our brand recognition or secure new business opportunities in the future.
Under PRC laws and regulations, all advertisements published online containing drug names, applicable symptoms treated by such drugs (major functions) or other drug-related content, and advertisements published online containing medical device names and the applicable scope, performance, structure and composition, function and other contents relevant to medical device are subject to examination by relevant government authorities. We are prohibited from publishing advertisements of prescription drugs on the websites that we operate and must ensure that any advertisement of medical treatment, drugs or medical devices does not include any assertion or guarantee as to the function and safety or any statement of curative rate and effectiveness of such medical treatment, drugs or medical devices. Any violation of advertisement-related laws and regulations may subject us to fine, or even suspension of our business or revocation of our business license.
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We are no longer engaged in the online microlending business, but we cannot assure you that we would not be penalized under relevant regulations for the previous microlending business.
In August 2017, we established Wusu Company, through which we started to conduct our online microlending business. We have engaged in online microlending business since then and have been continuing to contribute resources to our microlending business up to September 30, 2019, since when the principal business scope of Wusu Company has been changed to trading, provision of technological promotion services and import and export. Since May 2019, we have ceased to issue new loans through microlending businesses. The microlending industry is rapidly evolving with significant regulatory uncertainties, and our microlending business may be subject to a variety of laws and regulations in the PRC with ambiguous and inconsistent application and interpretation. As a result, we cannot assure you that our investment and exploration in microlending would not be subject to legal risks. Since the change of Wusu Company’s business scope, we cannot carry out any new microlending business without the proper business registration. However, for the loans which were issued prior to the change of the business scope, we are entitled to the credit right over such loans until their maturity. If, however, the authorities were to determine that our historical microlending business was in violation of the relevant PRC laws and regulations, we may be subject to fines and other administrative penalties imposed by the authorities and our business and reputation could be adversely affected.
Any harm to our brand or reputation may materially and adversely affect our business and results of operations.
We believe that the recognition and reputation of our brand, Xiaobai Maimai, among our members, users, third-party merchants and service providers have contributed significantly to the growth and success of our business. Maintaining and enhancing the recognition and reputation of our brand are critical to our business and competitiveness. Many factors, some of which are beyond our control, are important to maintaining and enhancing our brand. These factors include our ability to:
| ● | provide a superior shopping experience to our members and users; |
| ● | maintain the popularity, attractiveness, diversity, quality and authenticity of product offerings on our platform; |
| ● | maintain the efficiency, reliability and quality of the fulfillment and delivery services to our buyers; |
| ● | maintain or improve user satisfaction with our services; |
| ● | increase brand awareness through marketing and brand promotion activities; and |
| ● | preserve our reputation and goodwill in the event of any negative publicity on consumer experience or merchant service, Internet and data security, product quality, price or authenticity, or other issues affecting us or other social e-commerce businesses in China. |
Public perception that non-authentic, counterfeit or defective goods are displayed on our platform or that we or third-party service providers do not provide satisfactory customer service, even if factually incorrect or based on isolated incidents, could damage our reputation, diminish the value of our brand, undermine the trust and credibility we have established and have a negative impact on our ability to attract new users or retain our current users. If we are unable to maintain our reputation, enhance our brand recognition or increase positive awareness of our platform, products and services, it may be difficult to maintain and grow our member and user base, and our business and growth prospects may be materially and adversely affected.
If our social e-commerce platform is unable to provide good customer experience, our business and reputation may be materially and adversely affected.
If our social e-commerce platform does not provide good consumer experience, it could damage our reputation, diminish the value of our brand, undermine the trust and credibility we have established, have a negative impact on our ability to attract new consumers or retain our current consumers, and our business and growth prospects may be materially and adversely affected. Our ability to provide good customer experience depends on a variety of factors. These factors include, among others, our ability to continue to offer authentic products at competitive prices, to source products in response to evolving customer tastes and demands, to ensure the quality of our products and services and to provide flexible payment options. For example, If we are unable to develop and maintain good relationships with third-party merchants that would allow us to obtain a sufficient amount and variety of authentic and quality products on acceptable commercial terms, we may be unable to meet customer demands for these products or to offer these products at attractive prices.
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The third-party merchants in our marketplace business rely on a number of contracted third-party delivery logistics service providers to deliver the products to the customers. The products on our platform are supplied by the merchants, who are separately responsible for sourcing and coordinating the delivery of the products with the third-party delivery logistics service providers. As we do not directly control or manage the operations of these third-party logistics service providers, we may not be able to guarantee their performance. Interruptions to or failures in the delivery services could prevent the timely or proper delivery of our products. These interruptions or failures may be due to unforeseen events that are beyond our control or the control of our third-party logistics and delivery service providers, such as inclement weather, health epidemics, natural disasters, transportation disruptions or labor unrest. Delivery of the products could also be affected or interrupted by the merger, acquisition, insolvency or shut-down of the delivery companies the third-party merchants engage to make deliveries, especially those local companies with relatively small business scales. If the products are not delivered on a timely basis or are delivered in a damaged state, customers may refuse to accept the products purchased and have less confidence in our platform, and our business and reputation could suffer. We cannot assure you that our third-party merchants will be able to find alternative cost-effective logistics service providers to offer satisfactory delivery services in a timely manner, or at all, which could cause our business and reputation to suffer or cause third-party merchants to move to other platforms and have a negative impact on our financial conditions. In addition, if our third-party logistics service providers fail to comply with applicable rules and regulations in China, our delivery services may be materially and adversely affected. Furthermore, the delivery personnel of contracted third-party delivery service providers directly interact with our customers on our behalf. We need to effectively manage these third-party logistics service providers to ensure the quality of customer services. Any failure to provide high-quality delivery services to our customers may negatively impact the shopping experience of our customers, damage our reputation, and cause us to lose customers.
If our customer service representatives, sales representatives or maintenance engineers and technicians fail to provide satisfactory service, it may compromise our ability to provide effective customer service and enjoyable user engagement, which may in turn cause damage to our reputation, loss of customers or direct economic loss. In addition, any negative publicity or poor feedback regarding our customer service may diminish customer confidence in us and the value of our brand, and in turn cause us to lose customers and market share.
In addition, we rely on our technology infrastructure to offer a good customer experience and to attract and retain customers on our platform. Any failure to properly upgrade our technology infrastructure to serve the growing number of customers, maintain the satisfactory performance, security and integrity of our social e-commerce platform
We may incur liability or become subject to administrative penalties for counterfeit or unauthorized merchandise displayed on our platform, or for merchandise displayed on our platform that infringe on third-party intellectual property rights, or for other misconduct.
Our platform sources merchandise from third-party merchants. Although we have adopted measures to verify the authenticity and authorization of merchandise displayed on our platform and to avoid potential infringement on third-party intellectual property rights in the course of sourcing and selling merchandise, we may not always be successful in these efforts. In the event that any counterfeit, unauthorized or infringing merchandise is displayed on our platform, we could face claims for which we may be held liable. We have not in the past received claims alleging our infringement on third parties’ rights, and if we receive such claims in the future irrespective of their validity, we could incur significant costs and efforts in either defending against or settling such claims. If there is a successful claim against us, we might be required to pay substantial damages or refrain from further sale of the relevant merchandise. If we negligently participate or assist in infringement activities associated with counterfeit goods, we may be subject to potential liability under PRC law including injunctions to cease infringing activities, rectification, compensation, administrative penalties, and even criminal liability. Moreover, such third-party claims or administrative penalties could result in negative publicity and our reputation could be severely damaged. Any of these events could have a material and adverse effect on our business, results of operations or financial condition.
We plan to establish and operate cancer therapy and radiation oncology centers that will be majority-owned by us and are subject to significant risks.
As part of our growth strategy, we plan to establish and operate cancer therapy and radiation oncology centers that will focus on providing a variety of radiotherapy services as well as catering to cancer patients at varying stages of treatment. This will include specialized radiation therapy centers for radiotherapy (RT), personalized consultation, conventional treatment planning, and other related services for a wide variety of cancer therapy treatments.
Since we have limited experience in operating our own centers and clinics, or in providing many of the services that we plan to offer in such centers and clinics, we may not be able to provide as high a level of service quality for those treatment options as compared to the other treatments that we offer at our network of centers, which may result in damage to our reputation and growth prospects.
In addition, we may not be successful in recruiting qualified medical professionals to effectively provide the services that we intend to offer in our own centers and clinics. When we establish our own centers and hospitals under our brand name, we may not be able to immediately gain wide acceptance among patients and, thus, may be unable to attract a sufficient number of patients to our new centers and clinics.
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We may encounter difficulties in successfully introducing new services in a timely and cost-effective manner, which could materially and adversely affect our business and operations.
Our new cancer therapy and radiation oncology services may not be well received by our clients, and newly introduced services may not achieve expected results. Furthermore, our services will require specialized knowledge of the industry and comprehensive understanding of the market of medical equipment and consumables. We may misjudge the trend of the industry and the market, and may not be able to develop the appropriate solutions for our clients. The efforts to introduce new services may require substantial investments of additional human capital and financial resources. If we fail to improve our existing services or introduce new ones in a timely or cost-effective manner, our ability to attract and retain clients may be impaired, and our results of operations and prospects may be adversely affected.
Our development of new cancer therapy and radiation oncology centers could result in fluctuations in our short-term financial performance, and newly opened cancer therapy and radiation oncology centers and clinics may not achieve timely profitability, or at all.
New cancer therapy and radiation oncology centers generally have lower income and higher operating costs during the initial stages of their operations. We will also incur substantial expenses before opening new cancer therapy and radiation oncology centers such as labor costs, construction expenditures, renovation costs, rental expenses and equipment costs. Based on our research, it generally takes years for new cancer therapy and radiation oncology centers to achieve monthly breakeven and much longer to recover the initial investment. Accordingly, the timing of new cancer therapy and radiation oncology centers openings may have a significant impact on our future profitability. As a result, our results of operations may fluctuate significantly from period to period, which renders the period-to-period comparisons of our results of operations to be not meaningful in predicting our future performance.
Moreover, we may not be successful in recruiting qualified medical professionals to effectively provide the services that we intend to offer in our new cancer therapy and radiation oncology centers. It could also take significant lead time for newly opened cancer hospitals and clinics to achieve a utilization rate that is profitable, due to factors such as time needed to build patient awareness in the local community. In addition, the opening of new cancer therapy and radiation oncology centers involve regulatory approvals and reviews by various authorities in the U.S., including health authorities. We may not be able to obtain all the required approvals, permits, licenses or certificates in a timely manner or at all. Therefore, we may not be able to immediately utilize or derive revenue from new cancer therapy and radiation oncology centers as anticipated. In addition, the operating results generated from newly opened cancer therapy and radiation oncology centers may not be comparable to the operating results generated from any of our existing businesses. Newly opened cancer therapy and radiation oncology centers may even operate at a loss, which could adversely affect our results of operations.
Our growth plan includes the construction of cancer therapy and radiation oncology centers. If we cannot identify and seize growth opportunities in fast-changing markets, our future growth will face uncertainties.
We plan to build cancer therapy and radiation oncology centers on the east coast of the United States, the implementation process of which will be complex, time-consuming and subject to uncertainty.
We are identifying suitable regions for self-operated cancer therapy and radiation oncology centers by considering a number of factors, including regional market size, existing competition and potential strategic partners. There are uncertainties regarding how successfully we can identify the suitable market, acquire required government approvals in a timely manner and control planned investments. In addition, we may face competition from our existing cancer therapy and radiation oncology centers.
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We conduct our business in a heavily regulated industry.
The operation of our cancer therapy and radiation oncology centers is subject to laws and regulations issued by a number of government agencies at the national and local levels. These rules and regulations relate mainly to the procurement of large medical equipment, the pricing of medical services, the operation of radiotherapy and diagnostic imaging equipment, the licensing and operation of medical institutions, the licensing of medical staff and the prohibition on non-profit medical institutions from entering into cooperation agreements with third parties to set up for-profit centers that are not independent legal entities. In addition, our cancer therapy and radiation oncology centers will be subject to periodic license or permit renewal requirements and inspections by various government authorities at the provincial and municipal levels. We are also exposed to potential legal liabilities arising from claims relating to medical incidents, patient privacy, anti-corruption and anti-bribery, and environmental protection. Our growth prospects may be constrained by such rules and regulations, particularly those relating to the procurement of large medical equipment. Moreover, new laws and regulations applicable to our operations may be introduced in the future, or the current applicable ones may otherwise be amended or replaced to impose additional supervision and management requirements. Any changes in laws and regulations could require us to obtain additional licenses, permits or approvals, broaden the scope of our potential liabilities, increase our operating costs and expenses, or even result in the invalidation of our existing licenses.
If we or our future partners fail to comply with such applicable laws and regulations, we could be required to make significant changes to our business or suffer fines or penalties, including the potential loss of our business licenses, the suspension from use of our medical equipment, and the suspension or cessation of operations at cancer therapy and radiation oncology centers in our network.
We are reliant on our core senior management team. If one or more key executives were unable or unwilling to continue in their present positions, our business and results of operations may be adversely affected.
Our business, corporate strategies and future performance depends on our core senior management team comprising our directors, executive officers and other key personnel. If we fail to attract and retain any of our key personnel, or if they are unable or unwilling to continue in their present position due to any reason, we will have to go through a difficult process of replacement. The replacement process will necessarily involve significant time and expenses and may adversely affect our business and results of operations and our business objectives may not be achieved at the pace we expected, or at all.
We compete for skilled and quality employees, and failure to attract and retain them may adversely affect our business and prevent us from achieving our intended level of growth.
Competition for our employees including systems engineers, financial officers and marketing professionals is intense. Our business and success relies on the efforts and standard of work of our employees. If we are unable to attract, motivate and retain skilled and trained employees, or if we are unable to continue to provide attractive compensation packages, our business and operations may be adversely affected and our intended levels and rates of growth may be impended.
We invest significant time and expense in the training and development of our employees. Failure to retain our existing employees will incur further significant costs to find suitable replacements and a duplication of effort for their training, which may affect our operations and our quality of service to customers and third-party merchants may be compromised, resulting in a material adverse effect on our business and results of operations.
If labor costs in the PRC increase substantially, our business and costs of operations may be adversely affected.
In recent years, the Chinese economy has experienced inflationary and labor costs increases. Average wages are projected to continue to increase. Further, under PRC law we are required to pay various statutory employee benefits, including pension, housing fund, medical insurance, work-related injury insurance, unemployment insurance and maternity insurance to designated government agencies for the benefit of our employees. The relevant government agencies may examine whether an employer has made adequate payments to the statutory employee benefits, and those employers who fail to make adequate payments may be subject to late payment fees, fines and/or other penalties. We expect that our labor costs, including wages and employee benefits, will continue to increase. If we are unable to control our labor costs or pass such increased labor costs on to our users by increasing the fees of our services, our financial condition and results of operations may be adversely affected.
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Our innovative corporate culture is important to our business, if our culture changes our business and corporate objectives may be adversely affected.
Our corporate culture fosters innovation, a collegiate environment of team effort and encourages creativity, which is important to our business and development of our product pipeline and service upgrades. If we fail to maintain these valuable aspects of our culture during the course of our adaptation into a public company and building the relevant infrastructure, our future success and strategic goals may be affected. Furthermore, we may be unable to retain and attract talent, leading to a negative impact on our business and corporate objectives.
We do not have business insurance coverage.
Insurance companies in China currently do not offer as extensive an array of insurance products as insurance companies in more developed economies. Currently, we do not have any business liability or disruption insurance to cover our operations. We have determined that the costs of insuring for these risks and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical for us to have such insurance. Any uninsured business disruptions may result in our incurring substantial costs and the diversion of resources, which could have an adverse effect on our results of operations and financial condition.
If we do not find available sources of liquidity for capital and financing needs, our business and operations may be materially and adversely affected.
We may experience unexpected changes in business conditions, creating additional capital and financing needs. We believe that our current cash and cash equivalents, anticipated cash flows from operating activities, and the loans from third parties or our related parties will be sufficient to meet our anticipated working capital requirements and capital expenditures in the ordinary course of business for the next 12 months. However, we may need additional sources of liquidity if we find and wish to pursue opportunities for investment, acquisition, capital expenditure or otherwise. If our available cash and cash equivalents on hand are insufficient to cover our expected cash requirements, we may seek to issue equity or debt securities or obtain credit facilities. The issuance and sale of additional equity would result in dilution to our shareholders. We cannot guarantee that financing will be available to us under terms acceptable to us, or at all.
| ● | The incurrence of indebtedness would result in increased fixed obligations and could result in covenants restricting our operations. It could further lead to a number of risks that could adversely affect our operations or financial conditions; |
| ● | default and foreclosure on our assets if our operating revenue is insufficient to repay debt obligations; |
| ● | acceleration of obligations to repay the indebtedness (or other outstanding indebtedness), even if we make all principal and interest payments when due, if we breach any covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; |
| ● | our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding; |
| ● | diverting a substantial portion of cash flow to pay principal and interest on such debt, which would reduce the funds available for expenses, capital expenditures, acquisitions, and other general corporate purposes; |
| ● | creating potential limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; and |
| ● | loss that might be incurred due to our overseas investment activities. |
If our internal controls over financial reporting are insufficient or ineffective, we may not be able to accurately report our financial results or prevent fraud.
We are subject to reporting obligations under the U.S. securities laws. Section 404 of the Sarbanes-Oxley Act of 2002 requires that we include a management report on such company’s internal control over financial reporting in our annual report on Form 20-F. Our management has concluded that our internal control over financial reporting was effective as of March 31, 2026. As previously disclosed, we had identified material weaknesses in our internal control over financial reporting as of March 31, 2025, and during the year ended March 31, 2026, we implemented remediation measures and concluded that such material weaknesses have been remediated. See “Item 15. Controls and Procedures.”
During the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404, we may identify weaknesses and deficiencies in our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control over financial reporting, as these standards are modified, supplemented or amended from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404. If we fail to achieve and maintain an effective internal control environment, we could suffer material misstatements in our financial
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Our business, financial performance and results of operations could be adversely affected by deterioration of the relation between China and the United States.
The relation between China and the United States is constantly changing. There was a “trade war” between the two countries in 2019 and tensions exist in other areas such as political, social and health issues, particularly recent disagreements in relation to the COVID-19 pandemic. In light of the recent tensions between China and the United States, there is a risk that our business, the offering and our listing status may be adversely affected by trade restrictions, sanctions and other policies that may be implemented. As we operate in China, any deterioration in political or trade relations might cause a public perception in the United States or elsewhere that might cause our services to become less attractive. The United States lawmakers have introduced several bills intended to protect American investments in Chinese companies. On June 4, 2020, the U.S. President Donald Trump issued PWG, criticizing China’s failure to uphold international commitment to transparency and calling for recommendations to protect U.S. investors from China’s failure to allow audits of U.S.-listed Chinese companies. PWG may impact U.S.-listed Chinese companies if strict compliance with audit requirements and U.S. law or new listing rules or governance standards were imposed. Changes in political conditions and changes in the state of China-U.S. relations are difficult to predict and could adversely affect our business, operating results and financial condition. We cannot predict what effect any changes in China-U.S. relations may have on our ability to access capital or effectively operate our business in China. Moreover, any political or trade controversies between the United States and China, whether or not directly related to our business, could cause investors to be unwilling to hold or buy our ADSs and consequently cause the trading price of our ADSs to decline.
RISKS RELATED TO OUR CORPORATE STRUCTURE
PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds of our initial public offering and the concurrent private placement to make loans to or make additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand our business.
Under PRC laws and regulations, we are permitted to utilize the proceeds from our initial public offering and the concurrent private placement to fund our PRC subsidiary by making loans to or additional capital contributions to our PRC subsidiary, subject to applicable government registration and approval requirements.
Any loans to our PRC subsidiary, which are treated as foreign-invested enterprises under PRC laws, are subject to PRC regulations and foreign exchange loan registrations. For example, loans by us to our PRC subsidiary to finance their activities cannot exceed statutory limits and must be registered with the local counterpart of the State Administration of Foreign Exchange, or SAFE. According to the Interim Measures on the Management of Foreign Debts promulgated by SAFE, the Ministry of Finance and the National Development and Reform Commission, or the NDRC, on January 8, 2003, the statutory limit for the total amount of foreign debts of a foreign-invested company is the difference between the amount of total investment as approved by the MOC or its local counterpart and the amount of registered capital of such foreign-invested company, or two times of the net assets provided in the latest audited financial report of such PRC subsidiary, as applicable. According to the Circular of the People’s Bank of China on Matters relating to the Comprehensive Macro-prudential Management of Cross-border Financing issued by the People’s Bank of China in January 2017, or Circular 9, and Circular of the People’s Bank of China and the State Administration of Foreign Exchange on Adjusting the Macro-prudential Regulation Parameter for Full-covered Cross-border Financing in March 2020, or Circular 64, the maximum amounts of foreign debt that each company may borrow is determined by reference to its so-called risk-weighted balance of cross-border financing, which may not exceed two times its net assets as indicated in its latest audited financial report. The risk-weighted balance of cross-border financing of a company is calculated based on its outstanding amounts of Renminbi and foreign currency cross-border debt, multiplied by risk conversion factors corresponding to their respective remaining terms, loan categories and currency. However, for a one-year grace period starting from January 11, 2017, a foreign-invested company such as our PRC subsidiaries may elect to determine the maximum amount of its foreign debt in according with the rules in effect prior to Circular 9, or to comply with Circular 9. On the other hand, PRC domestic companies such as our consolidated variable interest entities must comply with Circular 9. Moreover, according to Notice of the National Development and Reform Commission on Promoting the Administrative Reform of the Recordation and Registration System for Enterprises’ Issuance of Foreign Debts issued by the NDRC in September 2015, any loans we extend to our consolidated variable interest entities or other PRC operating companies that are domestic PRC entities for more than one year must be filed with the NDRC or its local counterpart and must also be registered with SAFE or its local branches.
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We may also decide to finance our PRC subsidiary by means of capital contributions. These capital contributions must be approved by the MOC or its local counterpart. In addition, SAFE issued a circular in September 2008, SAFE Circular 142, regulating the conversion by a foreign-invested enterprise of foreign currency registered capital into RMB by restricting how the converted RMB may be used. SAFE Circular 142 provides that the RMB capital converted from foreign currency registered capital of a foreign-invested enterprise may only be used for purposes within the business scope approved by the applicable government authority and unless otherwise provided by law, may not be used for equity investments within the PRC. Although on July 4, 2014, the SAFE issued the Circular of the SAFE on Relevant Issues Concerning the Pilot Reform in Certain Areas of the Administrative Method of the Conversion of Foreign Exchange Funds by Foreign-invested Enterprises, or SAFE Circular 36, which launched a pilot reform of the administration of the settlement of the foreign exchange capitals of foreign-invested enterprises in certain designated areas from August 4, 2014 and some of the restrictions under SAFE Circular 142 will not apply to the settlement of the foreign exchange capitals of the foreign-invested enterprises established within the designate areas and such enterprises mainly engaging in investment are allowed to use its RMB capital converted from foreign exchange capitals to make equity investment, our PRC subsidiary is not established within the designated areas. On March 30, 2015, SAFE promulgated Circular 19, to expand the reform nationwide. Circular 19 came into force and replaced both Circular 142 and Circular 36 on June 1, 2015. Circular 19 allows foreign-invested enterprises to make equity investments by using RMB fund converted from foreign exchange capital. However, Circular 19 continues to prohibit foreign-invested enterprises from, among other things, using RMB fund converted from its foreign exchange capitals for expenditure beyond its business scope, providing entrusted loans or repaying loans between non-financial enterprises. On June 9, 2016, the SAFE promulgated Circular 16, which expands the application scope from only the capital of the foreign-invested enterprises to the capital, the foreign debt funds and the funds from oversea public offerings. Also, Circular 16 allows enterprises to use their foreign exchange capitals under their capital account as stipulated by the relevant laws and regulations. On October 23, 2019, the SAFE issued the Notice of the State Administration of Foreign Exchange on Further Facilitating Cross-border Trade and Investment, which, among other things, expanded the use of foreign exchange capital to domestic equity investments. Non-investment foreign-funded enterprises are allowed to lawfully make domestic equity investments by using capital funds, subject to the authenticity and compliance with the regulations of such domestic investment projects (including, among others, the compliance of special administrative measures for access of foreign investments (negative list)). If our consolidated variable interest entities need financial support from us or our wholly owned subsidiaries in the future and we find it necessary to use foreign currency-denominated capital to provide such financial support, our ability to fund our consolidated variable interest entities’ operations will be subject to statutory limits and restrictions, including those described above.
In light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, if at all, with respect to future loans to our PRC subsidiary or future capital contributions by us to our PRC subsidiary. If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds we expect to receive from our initial public offering and the concurrent private placement and to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund and expand our business.
RISKS RELATED TO DOING BUSINESS IN THE PEOPLE’S REPUBLIC OF CHINA
Although the audit report included in this annual report is prepared by an auditor who are currently inspected by the Public Company Accounting Oversight Board (the “PCAOB”), there is no guarantee that future audit reports will be prepared by auditors inspected by the PCAOB and, as such, in the future investors may be deprived of the benefits of such inspection. Furthermore, trading in our securities may be prohibited under the Holding Foreign Companies Accountable Act (the “HFCA Act”) if the SEC subsequently determines our audit work is performed by auditors that the PCAOB is unable to inspect or investigate completely, and as a result, U.S. national securities exchanges, such as Nasdaq, may determine to delist our securities. Furthermore, on December 29, 2022, the Consolidated Appropriations Act, was signed into law by President Biden. The Consolidated Appropriations Act contained, among other things, an identical provision to AHFCAA, which reduce the number of consecutive non-inspection years required for triggering the prohibitions under the HFCA Act from three years to two.
As an auditor of companies that are registered with the SEC and publicly traded in the United States and a firm registered with the PCAOB, our auditor is required under the laws of the United States to undergo regular inspections by the PCAOB to assess their compliance with the laws of the United States and professional standards.
Although we operate part of our business in mainland China, a jurisdiction where the PCAOB is currently unable to conduct inspections without the approval of the Chinese government authorities, our auditor, CHI-LLTC, the independent registered public accounting firm that issues the audit report included elsewhere in this annual report, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess our auditor’s compliance with the applicable professional standards. Inspections of other auditors conducted by the PCAOB outside mainland China have at times identified deficiencies in those auditors’ audit procedures and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality. The lack of PCAOB inspections of audit work undertaken in mainland China prevents the PCAOB from regularly evaluating auditors’ audits and their quality control procedures. As a result, if there is any component of our auditor’s work papers become located in mainland China in the future, such work papers will not be subject to inspection by the PCAOB. As a result, investors would be deprived of such PCAOB inspections, which could result in limitations or restrictions to our access of the U.S. capital markets.
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As part of a continued regulatory focus in the United States on access to audit and other information currently protected by national law, in particular mainland China’s, in June 2019, a bipartisan group of lawmakers introduced bills in both houses of the U.S. Congress which, if passed, would require the SEC to maintain a list of issuers for which PCAOB is not able to inspect or investigate the audit work performed by a foreign public accounting firm completely. The proposed Ensuring Quality Information and Transparency for Abroad-Based Listings on our Exchanges (“EQUITABLE”) Act prescribes increased disclosure requirements for these issuers and, beginning in 2025, the delisting from U.S. national securities exchanges such as Nasdaq of issuers included on the SEC’s list for three consecutive years. It is unclear if this proposed legislation will be enacted. Furthermore, there have been recent deliberations within the U.S. government regarding potentially limiting or restricting China-based companies from accessing U.S. capital markets. On May 20, 2020, the U.S. Senate passed the Holding Foreign Companies Accountable Act (the “HFCA Act”), which includes requirements for the SEC to identify issuers whose audit work is performed by auditors that the PCAOB is unable to inspect or investigate completely because of a restriction imposed by a non-U.S. authority in the auditor’s local jurisdiction. The U.S. House of Representatives passed the HFCA Act on December 2, 2020, and the HFCA Act was signed into law on December 18, 2020. Additionally, in July 2020, the U.S. President’s Working Group on Financial Markets issued recommendations for actions that can be taken by the executive branch, the SEC, the PCAOB or other federal agencies and department with respect to Chinese companies listed on U.S. stock exchanges and their audit firms, in an effort to protect investors in the United States. In response, on November 23, 2020, the SEC issued guidance highlighting certain risks (and their implications to U.S. investors) associated with investments in China-based issuers and summarizing enhanced disclosures the SEC recommends China-based issuers make regarding such risks. On March 24, 2021, the SEC adopted interim final rules relating to the implementation of certain disclosure and documentation requirements of the HFCA Act. We will be required to comply with these rules if the SEC identifies us as having a “non-inspection” year (as defined in the interim final rules) under a process to be subsequently established by the SEC. The SEC is assessing how to implement other requirements of the HFCA Act, including the listing and trading prohibition requirements described above. Under the HFCA Act, our securities may be prohibited from trading on Nasdaq or other U.S. stock exchanges if our auditor is not inspected by the PCAOB for three consecutive years, and this ultimately could result in our Ordinary Shares being delisted.
Furthermore, on June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act (“AHFCAA”), which, if enacted, would amend the HFCA Act and require the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three and would reduce the time before our securities may be prohibited from trading or delisted. On September 22, 2021, the PCAOB adopted a final rule implementing the AHFCAA, which provides a framework for the PCAOB to use when determining, as contemplated under the AHFCAA, whether the Board is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction. On November 5, 2021, the SEC approved the PCAOB’s Rule 6100, Board Determinations Under the HFCA Act. On December 2, 2021, the SEC issued amendments to finalize rules implementing the submission and disclosure requirements in the HFCA Act. The rules apply to registrants that the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that PCAOB is unable to inspect or investigate completely because of a position taken by an authority in foreign jurisdictions. On December 16, 2021, the PCAOB issued a Determination Report which found that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in: (1) mainland China of the PRC, and (2) Hong Kong. In addition, the PCAOB’s report identified the specific registered public accounting firms which are subject to these determinations. On December 29, 2022, the Consolidated Appropriations Act, was signed into law by President Biden. The Consolidated Appropriations Act contained, among other things, an identical provision to AHFCAA, which reduce the number of consecutive non-inspection years required for triggering the prohibitions under the HFCA Act from three years to two. Our auditor, CHI-LLTC, is headquartered in Malaysia, not mainland China or Hong Kong and was not identified in this report as a firm subject to the PCAOB’s determination. Therefore, our auditor is not currently subject to the determinations announced by the PCAOB on December 16, 2021, and it is currently subject to the PCAOB inspections.
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While our auditor is based in the Malaysia and is registered with the PCAOB and has been inspected by the PCAOB on a regular basis, in the event it is later determined that the PCAOB is unable to inspect or investigate completely our auditor because of a position taken by an authority in a foreign jurisdiction, then such lack of inspection could cause trading in the our securities to be prohibited under the HFCA Act, and ultimately result in a determination by a securities exchange to delist our securities. In addition, the recent developments would add uncertainties to the listing and trading of our Class A ordinary shares and we cannot assure you whether Nasdaq or regulatory authorities would apply additional and more stringent criteria to us after considering the effectiveness of our auditor’s audit procedures and quality control procedures, adequacy of personnel and training, or sufficiency of resources, geographic reach or experience as it relates to the audit of our financial statements. It remains unclear what the SEC’s implementation process related to the above rules will entail or what further actions the SEC, the PCAOB or Nasdaq will take to address these issues and what impact those actions will have on U.S. companies that have significant operations in the PRC and have securities listed on a U.S. stock exchange (including a national securities exchange or over-the-counter stock market). In addition, the above amendments and any additional actions, proceedings, or new rules resulting from these efforts to increase U.S. regulatory access to audit information could create some uncertainty for investors, the market price of our ADSs could be adversely affected, and we could be delisted if we and our auditor are unable to meet the PCAOB inspection requirement or being required to engage a new audit firm, which would require significant expense and management time.
On August 26, 2022, the PCAOB signed a Statement of Protocol (the “SOP”) Agreements with the CSRC and China’s Ministry of Finance. The SOP Agreement, together with two protocol agreements (collectively, “SOP Agreements”), governs inspections and investigations of audit firms based in mainland China and Hong Kong, taking the first step toward opening access for the PCAOB to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong. Pursuant to the fact sheet with respect to the Protocol disclosed by the SEC, the PCAOB shall have independent discretion to select any issuer audits for inspection or investigation and has the unfettered ability to transfer information to the SEC. On December 15, 2022, the PCAOB Board determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate its previous determinations to the contrary. However, should PRC authorities obstruct or otherwise fail to facilitate the PCAOB’s access in the future, the PCAOB Board will consider the need to issue a new determination. Delisting of our ADSs would force holders of our ADSs to sell their ADSs. The market price of our ADSs could be adversely affected as a result of anticipated negative impacts of these executive or legislative actions upon, as well as negative investor sentiment towards, companies with significant operations in China that are listed in the United States, regardless of whether these executive or legislative actions are implemented and regardless of our actual operating performance.
The recent joint statement by the SEC, proposed rule changes submitted by Nasdaq, and an act passed by the U.S. Senate and the U.S. House of Representatives, all call for additional and more stringent criteria to be applied to emerging market companies. These developments could add uncertainties to our business operations, share price and reputation.
U.S. public companies that have substantially all of their operations in China have been the subject of intense scrutiny, criticism and negative publicity by investors, financial commentators and regulatory agencies, such as the SEC. Much of the scrutiny, criticism and negative publicity has centered on financial and accounting irregularities and mistakes, a lack of effective internal controls over financial accounting, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations of fraud.
On December 7, 2018, the SEC and the PCAOB issued a joint statement highlighting continued challenges faced by the U.S. regulators in their oversight of financial statement audits of U.S.-listed companies with significant operations in China. On April 21, 2020, SEC Chairman Jay Clayton and PCAOB Chairman William D. Duhnke III, along with other senior SEC staff, released a joint statement highlighting the risks associated with investing in companies based in or have substantial operations in emerging markets including China, reiterating past SEC and PCAOB statements on matters including the difficulty associated with inspecting accounting firms and audit work papers in China and higher risks of fraud in emerging markets and the difficulty of bringing and enforcing SEC, Department of Justice and other U.S. regulatory actions, including in instances of fraud, in emerging markets generally.
On May 18, 2020, Nasdaq filed three proposals with the SEC to (i) apply minimum offering size requirement for companies primarily operating in a “Restrictive Market”, (ii) adopt a new requirement relating to the qualification of management or board of director for Restrictive Market companies, and (iii) apply additional and more stringent criteria to an applicant or listed company based on the qualifications of the company’s auditors.
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On May 20, 2020, the U.S. Senate passed the Holding Foreign Companies Accountable Act requiring a foreign company to certify it is not owned or controlled by a foreign government if the PCAOB is unable to audit specified reports because the company uses a foreign auditor not subject to PCAOB inspection. If the PCAOB is unable to inspect the company’s auditors for three consecutive years, the issuer’s securities are prohibited to trade on a national exchange. On December 2, 2020, the U.S. House of Representatives approved the Holding Foreign Companies Accountable Act.
On May 21, 2021, Nasdaq filed three proposals with the SEC to (i) apply minimum offering size requirement for companies primarily operating in a “Restrictive Market”, (ii) prohibit Restrictive Market companies from directly listing on Nasdaq Capital Market, and only permit them to list on Nasdaq Global Select or Nasdaq Global Market in connection with a direct listing and (iii) apply additional and more stringent criteria to an applicant or listed company based on the qualifications of the company’s auditors.
As a result of these scrutiny, criticism and negative publicity, the publicly traded stock of many U.S. listed Chinese companies sharply decreased in value and, in some cases, has become virtually worthless. Many of these companies are now subject to shareholder lawsuits and SEC enforcement actions and are conducting internal and external investigations into the allegations. It is not clear what effect this sector-wide scrutiny, criticism and negative publicity will have on us, our business and our share price. If we become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we will have to expend significant resources to investigate such allegations and/or defend our company. This situation will be costly and time consuming and distract our management from developing our growth. If such allegations are not proven to be groundless, we and our business operations will be severely affected and you could sustain a significant decline in the value of our share.
There may be changes in the regulations of PRC government bodies and agencies relating to VAT collection procedure and ACTCS business
PRC laws, regulations and policies concerning VAT collection procedures and ACTCS business are evolving and the PRC government authorities may promulgate new laws, regulations and policies in the future. We cannot assure you that our practices would not be deemed to violate any PRC laws, regulations or policies either now or in the future.
Moreover, developments in the ACTCS service industry may lead to changes in PRC laws, regulations and policies or in the interpretation and application of existing laws, regulations and policies, which may limit or restrict the ACTCS hardware and services we offer. Furthermore, we cannot rule out the possibility that the PRC government will institute a new licensing regime covering services we provide in the future. If such a licensing regime were introduced, we cannot assure you that we would be able to obtain any newly required license in a timely manner, or at all, which could materially and adversely affect our business and impede our ability to continue our operations.
Failure to comply with laws and regulations applicable to our business could subject us to fines and penalties and could also cause us to lose customers or otherwise harm our business.
Our business is subject to regulation by various governmental agencies in China, including agencies responsible for monitoring and enforcing compliance with various legal obligations, such as value-added telecommunication laws and regulations, privacy and data protection-related laws and regulations, intellectual property laws, employment and labor laws, workplace safety, environmental laws, consumer protection laws, governmental trade laws, import and export controls, anti-corruption and anti-bribery laws, and tax laws and regulations. In certain jurisdictions, these regulatory requirements may be more stringent than in China. These laws and regulations impose added costs on our business. Noncompliance with applicable regulations or requirements could subject us to:
| ● | investigations, enforcement actions, and sanctions; |
| ● | mandatory changes to our network and products; |
| ● | disgorgement of profits, fines, and damages; |
| ● | civil and criminal penalties or injunctions; |
| ● | claims for damages by our customers or channel partners; |
| ● | termination of contracts; |
| ● | loss of intellectual property rights; |
| ● | failure to obtain, maintain or renew certain licenses, approvals, permits, registrations or filings necessary to conduct our operations; and |
| ● | temporary or permanent debarment from sales to public service organizations. |
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If any governmental sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, results of operations, and financial condition could be adversely affected. In addition, responding to any action will likely result in a significant diversion of our management’s attention and resources and an increase in professional fees. Enforcement actions and sanctions could materially harm our business, results of operations, and financial condition.
Additionally, companies in the technology industry have recently experienced increased regulatory scrutiny. Any reviews by regulatory agencies or legislatures may result in substantial regulatory fines, changes to our business practices, and other penalties, which could negatively affect our business and results of operations. Changes in social, political, and regulatory conditions or in laws and policies governing a wide range of topics may cause us to change our business practices. Further, our expansion into a variety of new fields also could raise a number of new regulatory issues. These factors could negatively affect our business and results of operations in material ways.
Moreover, we are exposed to the risk of misconduct, errors and failure to functions by our management, employees and parties that we collaborate with, who may from time to time be subject to litigation and regulatory investigations and proceedings or otherwise face potential liability and penalties in relation to noncompliance with applicable laws and regulations, which could harm our reputation and business.
In light of recent events indicating greater oversight by the Cyberspace Administration of China, or CAC, over data security, particularly for companies seeking to list on a foreign exchange, we are subject to a variety of laws and other obligations regarding cybersecurity and data protection, and any failure to comply with applicable laws and obligations could have a material and adverse effect on our business, our listing on NASDAQ, financial condition, and results of operations.
We are subject relating various risks and costs associated with to the collection, use, sharing, retention, security, and transfer of confidential and private information, such as personal information and other data. This data is wide ranging and relates to our customers and any other third parties. Our compliance obligations include those relating to the Data Protection Act (As Revised) of the Cayman Islands and the relevant PRC laws in this regard. These PRC laws apply not only to third-party transactions, but also to transfers of information among us and our PRC subsidiaries, and other parties with which we have commercial relations. These laws continue to develop, and the PRC government may adopt other rules and restrictions in the future. Non-compliance could result in penalties or other significant legal liabilities.
Pursuant to the PRC Cybersecurity Law, which was promulgated by the Standing Committee of the National People’s Congress on November 7, 2016 and took effect on June 1, 2017, personal information and important data collected and generated by a critical information infrastructure operator in the course of its operations in China must be stored in China, and if a critical information infrastructure operator purchases internet products and services that affects or may affect national security, it should be subject to cybersecurity review by the CAC. Due to the lack of further interpretations, the exact scope of “critical information infrastructure operator” remains unclear. On December 28, 2021, the CAC and other relevant PRC governmental authorities jointly promulgated the Cybersecurity Review Measures (the “new Cybersecurity Review Measures”) to replace the original Cybersecurity Review Measures. The new Cybersecurity Review Measures took effect on February 15, 2022. Pursuant to the new Cybersecurity Review Measures, if critical information infrastructure operators purchase network products and services, or network platform operators conduct data processing activities that affect or may affect national security, they will be subject to cybersecurity review. A network platform operator holding more than one million users/users’ individual information also shall be subject to cybersecurity review before listing abroad. The cybersecurity review will evaluate, among others, the risk of critical information infrastructure, core data, important data, or a large amount of personal information being influenced, controlled or maliciously used by foreign governments and risk of network data security after going public overseas. In the opinion of our PRC counsel, Hebei Changjun Law Firm we are not subject to cybersecurity review, because: (i) we do not collect or maintain personal information in our business operations and (ii) data processed in our business does not have a bearing on national security and thus may not be classified as core or important data by the authorities. However, Hebei Changjun Law Firm has also advised us that since the regulatory authorities have discretion in this regard, whether an entity is subject to cybersecurity review shall still subject to the regulatory authorities’ view. In addition, we currently do not have over one million users’ personal information and do not anticipate to collect over one million users’ personal information in the foreseeable future. If we ever became subject to the cybersecurity review of CAC in the future as the applicable rules, regulations, policies or the interpretation thereof change, during such review, we may be required to suspend our operation or experience other disruptions to our operations. Cybersecurity review could also result in negative publicity with respect to our company and diversion of our managerial and financial resources.
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Furthermore, if we were found to be in violation of applicable laws and regulations in China during such review, we could be subject to administrative penalties, such as warnings, fines, or service suspension. Therefore, cybersecurity review could materially and adversely affect our business, financial condition, and results of operations.
In addition, the PRC Data Security Law, which was promulgated by the Standing Committee of the National People’s Congress on June 10, 2021 and took effect on September 1, 2021, requires data collection to be conducted in a legitimate and proper manner, and stipulates that, for the purpose of data protection, data processing activities must be conducted based on data classification and hierarchical protection system for data security. As the Data Security Law was recently promulgated, we may be required to make further adjustments to our business practices to comply with this law. If our data processing activities were found to be not in compliance with this law, we could be ordered to make ‘corrections, and under certain serious circumstances, such as severe data divulgence, we could be subject to penalties, including the revocation of our business licenses or other permits. Furthermore, the recently issued Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with the Law require (i) speeding up the revision of the provisions on strengthening the confidentiality and archives management relating to overseas issuance and listing of securities and (ii) improving the laws and regulations relating to data security, cross-border data flow, and management of confidential information. As there remain uncertainties regarding the further interpretation and implementation of those laws and regulations, we cannot assure you that we will be compliant such new regulations in all respects, and we may be ordered to rectify and terminate any actions that are deemed illegal by the regulatory authorities and become subject to fines and other sanctions. As a result, we may be required to suspend our relevant businesses, shut down our website, take down our operating applications, or face other penalties, which may materially and adversely affect our business, financial condition, and results of operations.
On August 20, 2021, the Standing Committee of the National People’s Congress of China promulgated the PIPL, which took effect in November 2021. As the first systematic and comprehensive law specifically for the protection of personal information in the PRC, the PIPL provides, among others, that (i) an individual’s consent shall be obtained to use sensitive personal information, such as biometric characteristics and individual location tracking, (ii) personal information operators using sensitive personal information shall notify individuals of the necessity of such use and impact on the individual’s rights, and (iii) where personal information operators reject an individual’s request to exercise his or her rights, the individual may file a lawsuit with a People’s Court. As uncertainties remain regarding the interpretation and implementation of the PIPL, we cannot assure you that we will comply with the PIPL in all respects, we may become subject to fines and/or other penalties which may have material adverse effect on our business, operations and financial condition.
While we take measures to comply with all applicable data privacy and protection laws and regulations, we cannot guarantee the effectiveness of the measures undertaken by us. However, compliance with any additional laws could be expensive, and may place restrictions on our business operations and the manner in which we interact with our users. In addition, any failure to comply with applicable cybersecurity, privacy, and data protection laws and regulations could result in proceedings against us by government authorities or others, including notification for rectification, confiscation of illegal earnings, fines, or other penalties and legal liabilities against us, which could materially and adversely affect our business, financial condition, results of operations and the value of our ADSs. In addition, any negative publicity on our website or platform’s safety or privacy protection mechanism and policy could harm our public image and reputation and materially and adversely affect our business, financial condition, and results of operations.
The approval of the China Securities Regulatory Commission, or the CSRC, may be required in connection with an offering under PRC rules, regulations, or policies, and, if required, we cannot predict whether or how soon we will be able to obtain such approval. As a result, both you and us fact uncertainty about future actions by the PRC government that could significantly affect our business, our listing on Nasdaq, financial condition and results of operations.
On August 8, 2006, six PRC regulatory agencies, including the MOFCOM, the State-Owned Assets Supervision and Administration Commission, or the SASAC, the SAT, the State Administration for Industry and Commerce, or the SAIC, the CSRC, and the State Administration of Foreign Exchange, or the SAFE, jointly adopted the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, which came into effect on September 8, 2006 and were amended on June 22, 2009. The M&A Rules include, among other things, provisions that purport to require that an offshore special purpose vehicle that is controlled by PRC domestic companies or individuals and that has been formed for the purpose of an overseas listing of securities through acquisitions of PRC domestic companies or assets to obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange. On September 21, 2006, the CSRC published on its official website procedures regarding its approval of overseas listings by special purpose vehicles. However, substantial uncertainty remains regarding the scope and applicability of the M&A Rules to offshore special purpose vehicles.
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While the application of the M&A Rules remains unclear, we believe, based on the advice of our PRC legal counsel, Hebei Changjun Law Firm that the CSRC approval is not required for the listing and trading our ADSs on the Nasdaq Capital Market because Qingdao Akso Health Management Co., Ltd., or our WFOE was incorporated as a foreign-invested enterprise by means of foreign direct investments rather than by merger with or acquisition of any PRC domestic companies as defined under the M&A Rules. There can be no assurance that the relevant PRC government agencies, including the CSRC, would reach the same conclusion as our PRC legal counsel. If the CSRC or other PRC regulatory body subsequently determines that we need to obtain the CSRC’s approval for our offering or if the CSRC or any other PRC government authorities promulgates any interpretation or implements rules that would require us to obtain CSRC or other governmental approvals for our offering, we may face adverse actions or sanctions by the CSRC or other PRC regulatory agencies. In any such event, these regulatory agencies may impose fines and penalties on our operations in China, limit our operating privileges in China, delay or restrict the repatriation of the proceeds from our offerings into the PRC, restrictions on or prohibition of the payments or remittance of dividends by our subsidiaries in China, or other actions that could have a material and adverse effect on our business, reputation, financial condition, results of operations, prospects, as well as the trading price of the ADSs. The CSRC or other PRC regulatory agencies may also take actions requiring us, or making it advisable for us, to halt our offering before settlement and delivery of the Ordinary Shares that we are offering. Consequently, if you engage in market trading or other activities in anticipation of and prior to settlement and delivery, you would be doing so at the risk that the settlement and delivery may not occur. In addition, if the CSRC or other regulatory agencies later promulgate new rules or explanations requiring us to obtain their approvals for our offering, we may be unable to obtain waivers of such approval requirements. Any uncertainties or negative publicity regarding such approval requirements could materially and adversely affect the trading price of our ADSs.
As of the date of this annual report, as advised by our PRC counsel, Hebei Changjun Law Firm, we and our subsidiaries, (1) currently are not required to obtain permissions from any PRC authorities to list or trade our ADSs in foreign stock exchanges, (2) are not subject to permission requirements from the CSRC, CAC or any other entity that is required to approve of our PRC subsidiaries’ operations, and (3) have not received or were denied such permissions by any PRC authorities. Nevertheless, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the “Opinions on Severely Cracking Down on Illegal Securities Activities According to Law,” or the Opinions, which were made available to the public on July 6, 2021. The Opinions emphasized the need to strengthen the administration over illegal securities activities, and the need to strengthen the supervision over overseas listings by Chinese companies. Given the current PRC regulatory environment, it is uncertain when and whether we or our PRC subsidiaries, will be required to obtain permission from the PRC government to list on U.S. exchanges in the future, and even when such permission is obtained, whether it will be denied or rescinded. We have been closely monitoring regulatory developments in China regarding any necessary approvals from the CSRC or other PRC governmental authorities required for overseas listings. As of the date of this annual report, we have not received any inquiry, notice, warning, sanctions or regulatory objection to this offering from the CSRC or other PRC governmental authorities. However, there remains significant uncertainty as to the enactment, interpretation and implementation of regulatory requirements related to overseas securities offerings and other capital markets activities.
On February 17, 2023, the CSRC promulgated the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies (the “Trial Measures”), which took effect on March 31, 2023. The Trial Measures clarified and emphasized several aspects, which include but are not limited to: (1) comprehensive determination of the “indirect overseas offering and listing by PRC domestic companies” in compliance with the principle of “substance over form” and particularly, an issuer will be required to go through the filing procedures under the Trial Measures if the following criteria are met at the same time: a) 50% or more 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 accounting year is accounted for by PRC domestic companies, and b) 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 senior managers in charge of its business operation and management are mostly Chinese citizens or domiciled in mainland China; (2) exemptions from immediate filing requirements for issuers that a) have already been listed or registered but not yet listed in foreign securities markets, including U.S. markets, prior to the effective date of the Trial Measures, and b) are not required to re-perform the regulatory procedures with the relevant overseas regulatory authority or the overseas stock exchange, c) whose such overseas securities offering or listing shall be completed before September 30, 2023, provided however that such issuers shall carry out filing procedures as required if they conduct refinancing or are involved in other circumstances that require filing with the CSRC; (3) a negative list of types of issuers banned from listing or offering overseas, such as (a) issuers whose listing or offering overseas have been recognized by the State Council of the PRC as possible threats to national security, (b) issuers whose affiliates have been recently convicted of bribery and corruption, (c) issuers under ongoing criminal investigations, and (d) issuers under major disputes regarding equity ownership; (4) issuers’ compliance with web security, data security, and other national security laws and regulations; (5) issuers’ 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 report to the CSRC material events including change of control or voluntary or forced delisting of the issuer; and (6) the CSRC’s authority to fine both issuers and their shareholders between 1 and 10 million RMB for failure to comply with the Trial Measures, including failure to comply with filing obligations or committing fraud and misrepresentation.
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Changes in the policies of the PRC government could have a significant impact upon our ability to operate profitably in the PRC.
We conduct all of our operations and all of our revenue is generated in the PRC. Accordingly, economic, political and legal developments in the PRC will significantly affect our business, financial condition, results of operations and prospects. Policies of the PRC government can have significant effects on economic conditions in the PRC and the ability of businesses to operate profitably. Our ability to operate profitably in the PRC may be adversely affected by changes in policies by the PRC government, including changes in laws, regulations or their interpretation, particularly those dealing with the Internet, including censorship and other restriction on material which can be transmitted over the Internet, security, intellectual property, money laundering, taxation and other laws that affect our ability to operate our website.
Because our business is dependent upon government policies that encourage a market-based economy, change in the political or economic climate in the PRC may impair our ability to operate profitably, if at all.
Although the PRC government has been pursuing a number of economic reform policies for more than two decades, the PRC government continues to exercise significant control over economic growth in the PRC. Because of the nature of our business, we are dependent upon the PRC government pursuing policies that encourage private ownership of businesses. Restrictions on private ownership of businesses would affect the VAT filing and collection in general and businesses using ACTCS in particular. We cannot assure you that the PRC government will pursue policies favoring a market-oriented economy or that existing policies will not be significantly altered, especially in the event of a change in leadership, social or political disruption, or other circumstances affecting political, economic and social life in the PRC.
PRC laws and regulations governing our current business operations are sometimes vague and uncertain and any changes in such laws and regulations may impair our ability to operate profitable.
There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations including, but not limited to, the laws and regulations governing our business and the enforcement and performance of our arrangements with customers in certain circumstances. The laws and regulations are sometimes vague and may be subject to future changes, and their official interpretation and enforcement may involve substantial uncertainty. The effectiveness and interpretation of newly enacted laws or regulations, including amendments to existing laws and regulations, may be delayed, and our business may be affected if we rely on laws and regulations which are subsequently adopted or interpreted in a manner different from our understanding of these laws and regulations. New laws and regulations that affect existing and proposed future businesses may also be applied retroactively. For the fiscal years ended March 31, 2025 and 2026, we do not have substantially operations conducted by our VIEs in China, which are governed by PRC laws, rules and regulations. Our PRC subsidiaries and the VIEs are subject to laws and regulations applicable to foreign investment in China. We cannot predict what effect the interpretation of existing or new PRC laws or regulations may have on our business.
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. Since these laws and regulations are relatively new and the PRC legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and the enforcement of these laws, regulations and rules involves uncertainties.
In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. The overall effect of legislation over the past three decades has significantly enhanced the protections afforded to various forms of foreign investments in China. However, China has not developed a fully integrated legal system, and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in China. In particular, the interpretation and enforcement of these laws and regulations involve uncertainties. Since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory provisions and contractual terms, it may be difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy. These uncertainties may affect our judgment on the relevance of legal requirements and our ability to enforce our contractual rights or tort claims. In addition, the regulatory uncertainties may be exploited through unmerited or frivolous legal actions or threats in attempts to extract payments or benefits from us.
Furthermore, the PRC legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or at all and may have retroactive effect. As a result, we may not be aware of our violation of any of these policies and rules until sometime after the violation. In addition, any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention.
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From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. However, since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. Furthermore, the PRC legal system is based in part on government policies and internal rules (some of which are not published in a timely manner or at all) that may have retroactive effect. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation. Such uncertainties, including uncertainty over the scope and effect of our contractual, property (including intellectual property) and procedural rights, and any failure to respond to changes in the regulatory environment in China could materially and adversely affect our business and impede our ability to continue our operations.
Recently, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the “Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with the Law,” or the Opinions, which was made available to the public on July 6, 2021. The Opinions emphasized the need to strengthen the administration over illegal securities activities, and the need to strengthen the supervision over overseas listings by Chinese companies. Effective measures, such as promoting the construction of relevant regulatory systems will be taken to deal with the risks and incidents of China-concept overseas listed companies, and cybersecurity and data privacy protection requirements and similar matters. The Opinions and any related implementing rules to be enacted may subject us to compliance requirement in the future.
Changes in China’s macroeconomic, socio-political conditions or government policies could have a material adverse effect on our business and results of operations.
All of our operations are located in China. Accordingly, our business, prospects, financial condition and results of operations are affected significantly by the political, economic and social climate in China and continuously by the economic performance of China as a whole.
The Chinese economy is unique from the economies of most developed countries in many respects, the more salient aspects include the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. Although the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in China is still state-owned. In addition, the Chinese government continues to play a significant role in regulating industry development by imposing industrial policies. The Chinese government also exercises significant control over China’s economic growth through allocating resources, controlling payment of foreign currency-denominated obligations, setting the monetary policy, and determining the different levels of treatment accorded to different industries and companies in accordance with its national development policy.
While the Chinese economy has experienced significant growth over the past decades, the growth rate has had sporadic bursts, across geographically and among various sectors and industries. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall Chinese economy, but may have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations. In addition, in the past the Chinese government has implemented certain measures, including interest rate increases, to control the pace of economic growth. These measures may cause decreased economic activity in China, and since 2012, China’s economic growth has slowed down. Any prolonged slowdown in the Chinese economy may reduce the demand for our products and services and materially and adversely affect our business and results of operations.
Substantial uncertainties exist with respect to the interpretation and implementation of the newly enacted PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations.
On March 15, 2019, the National People’s Congress approved the Foreign Investment Law, which came into effect on January 1, 2020 and replaced the trio of existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary regulations. The Foreign Investment Law embodies an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments. However, since the Foreign Investment Law is relatively new, uncertainties still exist in relation to its interpretation and implementation. For instance, under the Foreign Investment Law, “foreign investment” refers to the investment activities directly or indirectly conducted by foreign individuals, enterprises or other entities in China. Although it does not explicitly classify contractual arrangements as a form of foreign investment, there is no assurance that foreign investment via contractual arrangement would not be interpreted as a type of indirect foreign investment activities under the definition in the future. In addition, the definition contains a catch-all provision which includes investments made by foreign investors through means stipulated in laws or administrative regulations or other methods prescribed by the State Council. Therefore, it still leaves leeway for future laws, administrative regulations or provisions promulgated by the State Council to provide for contractual arrangements as a form of foreign investment. In any of these cases, it will be uncertain whether our contractual arrangements will be deemed to be in violation of the market access requirements for foreign investment under the PRC laws and regulations. Furthermore, if future laws, administrative regulations or provisions prescribed by the State Council mandate further actions to be taken by companies with respect to existing contractual arrangements, we may face substantial uncertainties as to whether we can complete such actions in a timely manner, or at all. Failure to take timely and appropriate measures to cope with any of these or similar regulatory compliance challenges could materially and adversely affect our current corporate structure, corporate governance and business operations.
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We may be adversely affected by the complexity, uncertainties and changes in PRC regulation of Internet-related businesses and companies, and any lack of requisite approvals, licenses or permits applicable to our business may have a material adverse effect on our business and results of operations.
The PRC government extensively regulates the Internet industry, including foreign ownership of, and the licensing and permit requirements pertaining to, companies in the Internet industry. These Internet-related laws and regulations are relatively new and evolving, and their interpretation and enforcement involve significant uncertainties. As a result, in certain circumstances it may be difficult to determine what actions or omissions may be deemed to be in violation of applicable laws and regulations.
We have only contractual control over our website. We do not directly own the website due to the restriction of foreign investment in businesses providing value-added telecommunication services in China, including Internet information provision services. This may significantly disrupt our business, subject us to sanctions, compromise enforceability of related contractual arrangements, or have other harmful effects on us.
The evolving PRC regulatory system for the Internet industry may lead to the establishment of new regulatory agencies. For example, in May 2011, the State Council announced the establishment of a new department, the State Internet Information Office (with the involvement of the State Council Information Office, the Ministry of Industry and Information Technology, or the MIIT, and the Ministry of Public Security). The primary role of this new agency is to facilitate the policy-making and legislative development in this field, to direct and coordinate with the relevant departments in connection with online content administration and to deal with cross-ministry regulatory matters in relation to the Internet industry.
Fluctuations in exchange rates could have a material adverse effect on our results of operations and the value of your investment.
A portion of our revenues and expenditures are denominated in RMB, and the functional currency for our PRC subsidiary and consolidated variable interest entities is RMB, whereas our reporting currency is the U.S. dollar. Any significant revaluation of RMB may materially and adversely affect our cash flows, revenues, earnings and financial position, and the value of, and any dividends payable on, our ADSs in U.S. dollars. For example, to the extent that we need to convert U.S. dollars we receive from our initial public offering into RMB to pay our operating expenses, appreciation of the RMB against the U.S. dollar would have an adverse effect on the RMB amount we would receive from the conversion. If we decide to convert our RMB into U.S. dollars for the purpose of making payments for dividends on our ordinary shares or for other business purposes, appreciation of the U.S. dollar against the RMB would have a negative effect on the U.S. dollar amount available to us. Moreover, a significant depreciation of the RMB against the U.S. dollar may significantly reduce our earnings translated in the U.S. dollars, which in turn could adversely affect the price of our ADSs. Furthermore, fluctuations in currencies relative to the periods in which the earnings are generated may make it more difficult to perform period-to-period comparisons of our reported results of operations.
The value of the RMB against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in China’s political and economic conditions and foreign exchange policies. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the RMB and the U.S. dollar in the future. In the year ended March 31, 2024, the value of the RMB depreciated by approximately 5.1% against the U.S. dollar. And in the year ended March 31, 2025, the value of the RMB depreciated by approximately 0.5% against the U.S. dollar. In the year ended March 31, 2026, the value of the RMB appreciated approximately by 4.9% against of the U.S dollar. With the development of the foreign exchange market and progress towards interest rate liberalization and RMB internationalization, the PRC government may in the future announce further changes to the exchange rate system and there is no guarantee that the RMB will not appreciate or depreciate significantly in value against the U.S. dollar in the future.
Very limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure or at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert RMB into foreign currency. As a result, fluctuations in exchange rates may have a material adverse effect on your investment.
Governmental control of currency conversion may limit our ability to utilize our net revenues effectively and affect the value of your investment.
The PRC government imposes controls on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance of currency out of China. We receive substantially all of our net revenues in RMB. Under our current corporate structure, our company in the Cayman Islands relies on dividend payments from our PRC subsidiary to fund any cash and financing requirements we may have. Under existing PRC foreign exchange regulations, payments of current account items, such as profit distributions and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from SAFE by complying with certain procedural requirements. Therefore, our PRC subsidiary is able to pay dividends in foreign currencies to us without prior approval from SAFE, subject to the condition that the remittance of such dividends outside of the PRC complies with certain procedures under PRC foreign exchange regulation, such as the overseas investment registrations by the beneficial owners of our company who are PRC residents. However, approval from or registration with appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders, including holders of our ADSs.
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Failure to make adequate contributions to various employee benefit plans as required by PRC regulations may subject us to penalties.
We are required under PRC laws and regulations to participate in various government sponsored employee benefit plans, including certain social insurance, housing funds and other welfare-oriented payment obligations, and contribute to the plans in amounts equal to certain percentages of salaries, including bonuses and allowances, of our employees up to a maximum amount specified by the local government from time to time at locations where we operate our businesses. The requirement of employee benefit plans has not been implemented consistently by the local governments in China given the different levels of economic development in different locations. We have not made adequate employee benefit payments. We may be required to make up the contributions for these plans as well as to pay late fees and fines. If we are subject to late fees or fines in relation to the underpaid employee benefits, our financial condition and results of operations may be adversely affected.
The M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China.
The Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies in 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, including requirements in some instances that the MOC be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise. Moreover, the Anti-Monopoly Law requires that the MOC shall be notified in advance of any concentration of undertaking if certain thresholds are triggered. In addition, the security review rules issued by the MOC that became effective in September 2011 specify that mergers and acquisitions by foreign investors that raise “national defense and security” concerns and mergers and acquisitions through which foreign investors may acquire de facto control over domestic enterprises that raise “national security” concerns are subject to strict review by the MOC, and the rules prohibit any activities attempting to bypass a security review, including by structuring the transaction through a proxy or contractual control arrangement. In the future, we may grow our business by acquiring complementary businesses. Complying with the requirements of the above-mentioned regulations and other relevant rules to complete such transactions could be time-consuming, and any required approval processes, including obtaining approval from the MOC or its local counterparts may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.
PRC regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiary’s ability to increase its registered capital or distribute profits to us or otherwise expose us or our PRC resident beneficial owners to liability and penalties under PRC law.
SAFE promulgated the Circular on Relevant Issues Relating to Domestic Resident’s Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, in July 2014 that requires PRC residents or entities to register with SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing. In addition, such PRC residents or entities must update their SAFE registrations when the offshore special purpose vehicle undergoes material events relating to any change of basic information (including change of such PRC citizens or residents, name and operation term), increases or decreases in investment amount, transfers or exchanges of shares, or mergers or divisions. SAFE Circular 37 is issued to replace the Notice on Relevant Issues Concerning Foreign Exchange Administration for PRC Residents Engaging in Financing and Roundtrip Investments via Overseas Special Purpose Vehicles, or SAFE Circular 75. SAFE promulgated the Notice on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning Direct Investment in February 2015, which took effect on June 1, 2015. This notice has amended SAFE Circular 37 requiring PRC residents or entities to register with qualified banks rather than SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing.
If our shareholders who are PRC residents or entities do not complete their registration as required, our PRC subsidiary may be prohibited from distributing its profits and proceeds from any reduction in capital, share transfer or liquidation to us, and we may be restricted in our ability to contribute additional capital to our PRC subsidiary. Moreover, failure to comply with the SAFE registration described above could result in liability under PRC laws for evasion of applicable foreign exchange restrictions.
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All of our shareholders who directly or indirectly hold shares in our Cayman Islands holding company and who are known to us as being PRC residents have completed the foreign exchange registrations required in connection with our recent corporate restructuring.
However, we may not be informed of the identities of all the PRC residents or entities holding direct or indirect interest in our company, nor can we compel our beneficial owners to comply with SAFE registration requirements. As a result, we cannot assure you that all of our shareholders or beneficial owners who are PRC residents or entities have complied with, and will in the future make or obtain any applicable registrations or approvals required by, SAFE regulations. Failure by such shareholders or beneficial owners to comply with SAFE regulations, or failure by us to amend the foreign exchange registrations of our PRC subsidiary, could subject us to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit our PRC subsidiary’s ability to make distributions or pay dividends to us or affect our ownership structure, which could adversely affect our business and prospects.
Any failure to comply with PRC regulations regarding the registration requirements for employee stock incentive plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions.
In February 2012, SAFE promulgated the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Publicly-Listed Company, replacing earlier rules promulgated in March 2007. Pursuant to these rules, PRC citizens and non-PRC citizens who reside in China for a continuous period of not less than one year who participate in any stock incentive plan of an overseas publicly listed company, subject to a few exceptions, are required to register with SAFE through a domestic qualified agent, which could be the PRC subsidiary of such overseas listed company, and complete certain other procedures. In addition, an overseas entrusted institution must be retained to handle matters in connection with the exercise or sale of stock options and the purchase or sale of shares and interests. We and our executive officers and other employees who are PRC citizens or who have resided in the PRC for a continuous period of not less than one year and who have been granted options or other awards are subject to these regulations. Failure to complete the SAFE registrations may subject them to fines and legal sanctions and may also limit our ability to contribute additional capital into our PRC subsidiary and limit our PRC subsidiary’s ability to distribute dividends to us. We also face regulatory uncertainties that could restrict our ability to adopt additional incentive plans for our directors, executive officers and employees under PRC law. See “Item 4. Information on the Company-B. Business Overview-Regulation-Regulations Relating to Foreign Exchange - Regulations on Stock Incentive Plans.”
If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders or ADS holders.
Under the EIT Law and its implementation rules, an enterprise established outside of the PRC with a “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 over and overall management of the business, productions, personnel, accounts and properties of an enterprise. In April 2009, the State Administration of Taxation, or the SAT, issued a circular, known as 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 only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners like us, the criteria set forth in Circular 82 may reflect the SAT’s general position on how the “de facto management body” test should be applied in determining the tax resident status of all offshore enterprises. According to Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “de facto management body” in China 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.
We believe none of our entities outside of China is a PRC resident enterprise for PRC tax purposes. See “Item 10. Additional Information-E. Taxation-People’s Republic of China Taxation.” 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.” As substantially all of our management members are based in China, it remains unclear how the tax residency rule will apply to our case. If the PRC tax authorities determine that we or any of our subsidiaries outside of China is a PRC resident enterprise for PRC enterprise income tax purposes, then we or such subsidiary could be subject to PRC tax at a rate of 25% on its world-wide income, which could materially reduce our net income. In addition, we will also be subject to PRC enterprise income tax reporting obligations. Furthermore, if the PRC tax authorities determine that we are a PRC resident enterprise for enterprise income tax purposes, dividends we pay to non-PRC holders may be subject to PRC withholding tax, and gains realized on the sale or other disposition of ADSs or ordinary shares may be subject to PRC tax, at a rate of 10% in the case of non-PRC enterprises or 20% in the case of non-PRC individuals (in each case, subject to the provisions of any applicable tax treaty), if such dividends or gains are deemed to be from PRC sources. It is unclear whether non-PRC shareholders of our company would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that we are treated as a PRC resident enterprise. Any such tax may reduce the returns on your investment in the ADSs.
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We may not be able to obtain certain benefits under relevant tax treaty on dividends paid by our PRC subsidiary to us through our Hong Kong subsidiary.
We are a holding company incorporated under the laws of the Cayman Islands and as such rely on dividends and other distributions on equity from our PRC subsidiary to satisfy part of our liquidity requirements. Pursuant to the EIT Law, a withholding tax rate of 10% currently applies to dividends paid by a PRC “resident enterprise” to a foreign enterprise investor, unless any such foreign investor’s jurisdiction of incorporation has a tax treaty with China that provides for preferential tax treatment. Pursuant to the Arrangement between the Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, or the Double Tax Avoidance Arrangement, such withholding tax rate may be lowered to 5% if a Hong Kong resident enterprise owns at least 25% of a PRC enterprise. Pursuant to the Notice of the State Administration of Taxation on the Issues concerning the Application of the Dividend Clauses of Tax Agreements, or Circular 81, the 5% withholding tax rate does not automatically apply and certain requirements must be satisfied, including without limitation that (a) the Hong Kong enterprise must be the beneficial owner of the relevant dividends; and (b) the Hong Kong enterprise must directly hold at least 25% share ownership in the PRC enterprise during the 12 consecutive months preceding its receipt of the dividends. However, a transaction or arrangement entered into for the primary purpose of enjoying a favorable tax treatment should not be a reason for the application of the favorable tax treatment under the Double Tax Avoidance Arrangement. If a taxpayer inappropriately is entitled to such favorable tax treatment, the competent tax authority has the power to make appropriate adjustments.
In August 2015, the State Administration of Taxation promulgated the Administrative Measures for Non-Resident Taxpayers to Enjoy Treatments under Tax Treaties, or Circular 60, which became effective on November 1, 2015. Circular 60 provides that non-resident enterprises are not required to obtain pre-approval from the relevant tax authority in order to enjoy the reduced withholding tax rate. Instead, non-resident enterprises and their withholding agents may, by self-assessment and on confirmation that the prescribed criteria to enjoy the tax treaty benefits are met, directly apply the reduced withholding tax rate, and file necessary forms and supporting documents when performing tax filings, which will be subject to post-tax filing examinations by the relevant tax authorities. However, if a competent tax authority finds out that it is necessary to apply the general anti-tax avoidance rules, it may start general investigation procedures for anti-tax avoidance and adopt corresponding measures for subsequent administration. Accordingly, Hexindai Hong Kong Limited, or Hexindai HK, our Hong Kong subsidiary, may be able to enjoy the 5% withholding tax rate for the dividends they receive from Hexin Yongheng, our PRC subsidiary, if it satisfies the conditions prescribed under Circular 81 and other relevant tax rules and regulations. However, according to Circular 81 and Circular 60, if the relevant tax authorities consider the transactions or arrangements we have are for the primary purpose of enjoying a favorable tax treatment, the relevant tax authorities may adjust the favorable withholding tax in the future.
Enhanced scrutiny over acquisition transactions by the PRC tax authorities may have a negative impact on potential acquisitions we may pursue in the future.
In connection with the EIT Law, the SAT issued the Circular on Strengthening the Administration of Enterprise Income Tax on Non-resident Enterprises’ Equity Transfer Income, or Circular 698, which became effective as of January 1, 2008, the Notice on Issues Concerning Process of Enterprise Income Tax in Enterprise Restructuring Business, or Circular 59 on April 30, 2009, and the Announcement of the State Administration of Taxation on Several Issues concerning the Enterprise Income Tax on the Indirect Transfers of Properties by Non-Resident Enterprises, or the SAT Announcement 7, on February 3, 2015. By promulgating and implementing the above, the PRC tax authorities have strengthened their scrutiny over the direct or indirect transfer of equity interest in a PRC resident enterprise by a non-PRC resident enterprise. Pursuant to SAT Announcement 7, if a non-resident enterprise, or referred to as a transferor, transfers its equity in an offshore enterprise which directly or indirectly owns PRC taxable assets, including ownership interest in PRC resident companies, or the Taxable Properties, without a “reasonable commercial purpose”, such transfer shall be deemed as a direct transfer of such Taxable Properties. The payer, or referred as a transferee, in such transfer shall be the withholding agent, and is obligated to withhold and remit the enterprise income tax to the relevant PRC tax authority. If a transferor fails to declare for payment timely or in full of the tax due on proceeds from indirect transfer of PRC taxable assets and the withholding agent also fails to withhold such tax, the tax authority shall, in addition to supplementary collection of such tax, also charge for interest on a daily basis from the transferor according to the EIT Law and its implementation rules. Factors that may be taken into consideration when determining whether there is a reasonable commercial purpose include, among other factors, the value of the transferred equity, offshore taxable situation of the transaction, the offshore structure’s economic essence and duration and trading fungibility. If an equity transfer transaction satisfies all the requirements mentioned above, such transaction will be considered an arrangement with reasonable commercial purpose. On October 17, 2017, the SAT issued the Bulletin of SAT on Issues Concerning the Withholding of Non-resident Enterprise Income Tax at Source, or Bulletin 37, which came into effect on December 1, 2017 and was amended in June 2018, which, among others, repeals certain rules stipulated in Circular 7. Bulletin 37 further details and clarifies the tax withholding methods in respect of the income of non-resident enterprises.
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Accordingly, we and non-resident enterprise investors face uncertainties on the reporting and consequences on future private equity-financing transactions, share exchange or other transactions involving the transfer of shares in our company by investors that are non-PRC resident enterprises. The PRC tax authorities may pursue such non-resident enterprises with respect to a filing or the transferees with respect to withholding obligation, and request our PRC subsidiaries to assist in the filing. As a result, we and non-resident enterprises in such transactions may become at risk of being subject to filing obligations or being taxed, under Circular 59, Circular 698, the SAT Announcement 7 and Bulletin 37, and we may be required to expend valuable resources to comply with Circular 59, Circular 698, the SAT Announcement 7 and Bulletin 37 or to establish that we and our non-resident enterprises should not be taxed under these circulars, which may have a material adverse effect on our financial condition and results of operations.
Additionally, the PRC tax authorities have the discretion under SAT Circular 59, Circular 698, the SAT Announcement 7 and Bulletin 37 to make adjustments to the taxable capital gains based on the difference between the fair value of the taxable assets transferred and the cost of investment. Although we currently have no plans to pursue any acquisitions in China or elsewhere in the world, we may pursue acquisitions in the future that may involve complex corporate structures. If we are considered a non-resident enterprise under the EIT Law and if the PRC tax authorities make adjustments to the taxable income of the transactions under SAT Circular 59, Circular 698, the SAT Announcement 7 and Bulletin 37, our income tax costs associated with such potential acquisitions will be increased, which may have an adverse effect on our financial condition and results of operations.
Any actions by the Chinese government, including any decision to intervene or influence the operations of the operating entities or to exert control over any offering of securities conducted overseas and/or foreign investment in China-based issuers, may cause us to make material changes to the operations of the PRC operating entities, may limit or completely hinder our ability to offer or continue to offer securities to investors, and may cause the value of such securities to significantly decline or be worthless.
We are a Cayman Islands holding company and are not a Chinese company. As a holding company with no material operations of our own, we conduct all of our operations through our PRC operating entities in China. As such, our corporate structure involves unique risks to investors. There are legal and operational risks associated with having operations in mainland China, and the Chinese regulatory authorities could disallow this ownership structure, which would likely result in a material change in our operations and/or a material change in the value of the securities we are registering for sale, including that it could cause the value of such securities to significantly decline or become worthless.
In the meeting of the Political Bureau of the CPC Central Committee held on July 30, 2021, the improvement of the regulatory system for overseas listing of enterprises was first proposed. On February 17, 2023, the CSRC released the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies, or the Overseas Listing Trial Measures, and five supporting guidelines, which came into effect on March 31, 2023. Pursuant to the Overseas Listing Trial Measures, domestic companies that seek to offer or list securities overseas, whether directly or indirectly, should fulfil the filing procedures and submit relevant information to the CSRC.
Although the detailed implementations are still unclear, the supervision of overseas listing of Chinese stocks may continue to tighten. The Chinese government has exercised, and continues to exercise, substantial control over virtually every sector of the Chinese economy through regulation and state ownership. The ability of our operating entities to operate in China may be impaired by changes in its laws and regulations, including those relating to taxation, environmental regulations, land use rights, foreign investment limitations, and other matters. The central or local governments of China may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts on our part to our compliance with such regulations or interpretations. As such, we may be subject to various government and regulatory interference in the provinces in which we operate. We could be subject to regulation by various political and regulatory entities, including various local and municipal agencies and government sub-divisions. We may incur increased costs necessary to comply with existing and newly adopted laws and regulations or penalties for any failure to comply.
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Furthermore, it is uncertain when and whether we will be required to obtain permission from the PRC government to list on U.S. exchanges in the future, and even when such permission is obtained, whether it will be denied or rescinded. Although we believe that we are currently not required to obtain permission from any Chinese authorities and have not received any notice of denial of permission to list on the U.S. exchange, our operations could be adversely affected, directly or indirectly, by existing or future laws and regulations relating to the PRC operating entities’ business or industry, particularly in the event permission to list on U.S. exchanges may be later required, or withheld or rescinded once given.
Accordingly, government actions in the future, including any decision to intervene or influence our operations at any time or to exert control over an offering of securities conducted overseas and/or foreign investment in China-based issuers, may cause us to make material changes to our operations, may limit or completely hinder our ability to offer or continue to offer securities to investors, and/or may cause the value of such securities to significantly decline or be worthless.
There are uncertainties regarding the enforcement of laws and rules and regulations in China, which can change quickly with little advance notice, and there is a risk that the Chinese government may intervene or influence our operations at any time, exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers, which could materially and adversely affect our business and hinder our ability to offer or continue our operations, and cause the value of our securities to significantly decline or become worthless.
There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations including, but not limited to, the laws and regulations related to our business and the enforcement and performance of our arrangements with customers in certain circumstances. The laws and regulations are sometimes vague and may be subject to future changes, and their official interpretation and enforcement may involve substantial uncertainty. The effectiveness and interpretation of newly enacted laws or regulations, including amendments to existing laws and regulations, may be delayed, and our business may be affected if we rely on laws and regulations which are subsequently adopted or interpreted in a manner different from our understanding of these laws and regulations. New laws and regulations that affect existing and proposed future businesses may also be applied retroactively. We cannot predict what effect the interpretation of existing or new PRC laws or regulations may have on our business. The uncertainties regarding the enforcement of laws and the fact that rules and regulations in mainland China can change quickly with little advance notice could result in a material change in our operations, financial performance and/or cause the value of our securities to significantly decline or become worthless and/or impair our ability to raise money.
The Chinese government may exercise significant oversight and discretion over the conduct of business in the PRC and may intervene in or influence our operations at any time, which could result in a material change in our operations and/or the value of our securities. We are also currently not required to obtain approval from Chinese authorities to list on U.S. exchanges, however, if we are required to obtain approval in the future and are denied permission from Chinese authorities to list on U.S. exchanges, we will not be able to continue listing on U.S. exchange, which would materially affect the interest of the investors. The PRC government may intervene or influence our business operations at any time or may exert more control over offerings conducted overseas and foreign investment in China-based issuers, which could result in a material change in our business operations or the value of our securities. Additionally, the governmental and regulatory interference could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.
To the extent cash or assets of our business, or of our PRC or Hong Kong subsidiaries, is in mainland China or Hong Kong, such cash or assets may not be available to fund operations or for other use outside of the PRC or Hong Kong, due to interventions in or the imposition of restrictions and limitations by the PRC government to the transfer of cash or assets.
The transfer of funds and assets among the Company, its Hong Kong and PRC subsidiaries is subject to governmental control and restriction. The competent PRC government imposes controls on the conversion of the RMB into foreign currencies and the remittance of currencies out of mainland China. In addition, the PRC EIT Law and its implementation rules provide that a withholding tax at a rate of 10% will be applicable to dividends payable by Chinese companies to enterprises that are not mainland China resident enterprises, unless reduced under treaties or arrangements between the PRC central government and the governments of other countries or regions where the enterprises that are not mainland China resident enterprises are tax resident.
As of the date of this report, there are no restrictions or limitations imposed by the Hong Kong government on the transfer of capital within, into and out of Hong Kong (including funds from Hong Kong to the PRC), except for the transfer of funds involving money laundering and criminal activities. However, there is no guarantee that the Hong Kong government will not promulgate new laws or regulations that may impose such restrictions in the future.
As a result of the above, to the extent cash or assets of our business, or of our PRC or Hong Kong subsidiaries, is in mainland China or Hong Kong, such funds or assets may not be available to fund operations or for other use outside of the PRC or Hong Kong, due to interventions in or the imposition of restrictions and limitations by the competent government to the transfer of cash or assets.
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RISKS RELATED TO OUR ADSs
The trading price of our ADSs may be volatile, which could result in substantial losses to investors.
The trading price of our ADSs has ranged from US$0.84 to US$2.5 per ADS in the fiscal year ended March 31, 2026. The trading prices of our ADSs are likely to be volatile and could fluctuate widely due to factors beyond our control. This may happen because of broad market and industry factors, like the performance and fluctuation in the market prices or the underperformance or deteriorating financial results of Internet or other companies based in China that have listed their securities in the United States in recent years. The securities of some of these companies have experienced significant volatility since their initial public offerings, including, in some cases, substantial decline in their trading prices. The trading performances of other Chinese companies’ securities after their offerings may affect the attitudes of investors toward Chinese companies listed in the United States, which consequently may impact the trading performance of our ADSs, regardless of our actual operating performance. In addition, any negative news or perceptions about inadequate corporate governance practices or fraudulent accounting, corporate structure or other matters of us or other Chinese companies may also negatively affect the attitudes of investors towards Chinese companies in general, including us, regardless of whether we have conducted any inappropriate activities. In addition, securities markets may from time to time experience significant price and volume fluctuations that are not related to our operating performance, such as the large decline in share prices in the United States, China and other jurisdictions in late 2008, early 2009, the second half of 2011, the third quarter of 2015 and the first quarter of 2016, which may have a material adverse effect on the market price of our ADSs.
In addition to market and industry factors, the price and trading volume for our ADSs may be highly volatile for factors specific to our own operations, including the following:
| ● | regulatory developments affecting us, our customers or our industry; |
| ● | announcements of studies and reports relating to our products and service offerings or those of our competitors; |
| ● | changes in the economic performance or market valuations of other social e-commerce platforms; |
| ● | actual or anticipated fluctuations in our quarterly results of operations and changes or revisions of our expected results; |
| ● | changes in financial estimates by securities research analysts; |
| ● | conditions in the Internet and unsecured consumer finance industries; |
| ● | announcements of new product, service and expansions by us or our competitors; |
| ● | replacement of existing third-party service providers; |
| ● | additions to or departures of our senior management; |
| ● | detrimental negative publicity about us, our management or our industry; |
| ● | fluctuations of exchange rates between the RMB and the U.S. dollar; |
| ● | release or expiry of lock-up or other transfer restrictions on our outstanding ordinary shares or ADSs; and |
| ● | sales or perceived potential sales of additional ordinary shares or ADSs. |
Any of these factors may result in large and sudden changes in the volume and price at which our ADSs will trade.
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Techniques employed by short sellers may drive down the market price of our ADSs.
Short selling is the practice of selling securities that the seller does not own but rather has borrowed from a third party with the intention of buying identical securities back at a later date to return to the lender. The short seller hopes to profit from a decline in the value of the securities between the sale of the borrowed securities and the purchase of the replacement shares, as the short seller expects to pay less in that purchase than it received in the sale. As it is in the short seller’s interest for the price of the security to decline, many short sellers publish, or arrange for the publication of, negative opinions regarding the relevant issuer and its business prospects in order to create negative market momentum and generate profits for themselves after selling a security short. These short attacks have, in the past, led to selling of shares in the market.
We have been the subject of short selling, and it is not clear what long-term effect such negative publicity could have on us. We may also be subject to short seller attacks from time to time in the future. If we were to become the subject of any unfavourable allegations, whether such allegations are proven to be true or untrue, we may have to expend a significant amount of resources to investigate such allegations and/or defend ourselves. While we would strongly defend against any such short seller attacks, we may be constrained in the manner in which we can proceed against the relevant short sellers by principles of freedom of speech, applicable state law or issues of commercial confidentiality. Such a situation could be costly and time-consuming, and could divert management’s attention from the day-to-day operations of our company. Even if such allegations are ultimately proven to be groundless, allegations against us could severely impact the market price of our ADSs and our business operations.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the market price for our ADSs and trading volume could decline.
The trading market for our ADSs will depend in part on the research and reports that securities or industry analysts publish about us or our business. If research analysts do not establish and maintain adequate research coverage or if one or more of the analysts who cover us downgrade our ADSs or publish inaccurate or unfavourable research about our business, the market price for our ADSs would likely decline. If one or more of these analyst’s cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which, in turn, could cause the market price or trading volume of our ADSs to decline.
We cannot assure you that our existing dividend policy will not change in the future or the amount the dividends that you may receive, and as such, you must rely on price appreciation of our ADSs for return on your investment.
On July 19, 2018, our board of directors approved an annual dividend policy. Under this policy, annual dividends will be set at an amount equivalent to approximately 15-25% of our anticipated net income after tax in each year commencing from the fiscal year ended March 31, 2019. On July 19, 2018, our board of directors also approved a special cash dividend of US$0.13 per ordinary share of our company (or US$0.13 per ADS), in addition to an annual dividend pursuant to the newly adopted annual dividend policy of US$0.27 per ordinary share (or US$0.27 per ADS), for a total dividend of US$0.40 per ordinary share (or US$0.40 per ADS). No dividends have been declared or distributed since August 2018.
Our annual dividend policy is subject to change at any time at the discretion of our board of directors, and our board of directors has complete discretion as to whether to distribute dividends in the future. If our board of directors decides to continue to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on, among other things, our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us from our subsidiaries, our financial condition, contractual restrictions and other factors deemed relevant by our board of directors. As such, the amount of dividends that you will receive is subject to change. In addition, there can be no assurance that we will not adjust our dividend policy in the future. Accordingly, you should not rely on an investment in our ADSs as a source for any future dividend income, and the return on your investment in our ADSs will likely depend entirely upon any future price appreciation of our ADSs. There is no guarantee that our ADSs will appreciate in value or even maintain the price at which you purchased the ADSs. You may not realize a return on your investment in our ADSs and you may even lose your entire investment.
Any declaration and payment, as well as the amount, of dividends will be subject to our constitutional documents and applicable Chinese and U.S. state and federal laws and regulations, including the approval from the shareholders of each subsidiary which intends to declare such dividends, if applicable.
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Substantial future sales or perceived potential sales of our ADSs in the public market could cause the price of our ADSs to decline.
Sales of our ADSs in the public market, or the perception that these sales could occur, could cause the market price of our ADSs to decline. As of March 31, 2026, we had 2,570,112,530 ordinary shares outstanding. Among these shares, 44,056,049 ordinary shares are in the form of ADSs. All our ADSs are freely transferable without restriction or additional registration under the Securities Act. The remaining ordinary shares outstanding are available for sale, subject to volume and other restrictions as applicable under Rules 144 and 701 under the Securities Act. To the extent shares are sold into the market, the market price of our ADSs could decline.
Certain holders of our ordinary shares may cause us to register under the Securities Act the sale of their shares. Registration of these shares under the Securities Act would result in ADSs representing these shares becoming freely tradable without restriction under the Securities Act immediately upon the effectiveness of the registration. Sales of these registered shares in the form of ADSs in the public market could cause the price of our ADSs to decline.
We have adopted our 2023 Equity Incentive Plan which was approved by our shareholders at our 2023 annual general meeting of shareholders held on June 19, 2023, under which we have the discretion to grant a broad range of equity-based awards to eligible participants. See “Item 6. Directors, Senior Management and Employees-B. Compensation-Share Incentive Plan.” We have registered certain ordinary shares that we may issue under our share incentive plans and intend to register all ordinary shares that we may issue under our share incentive plans. Once we register these ordinary shares, they can be freely sold in the public market in the form of ADSs upon issuance, subject to volume limitations applicable to affiliates and relevant lock-up agreements. If a large number of our ordinary shares or securities convertible into our ordinary shares are sold in the public market in the form of ADSs after they become eligible for sale, the sales could reduce the trading price of our ADSs and impede our ability to raise future capital. In addition, any ordinary shares that we issue under our share incentive plans would dilute the percentage ownership held by the investors who purchased ADSs.
We may be classified as a passive foreign investment company for U.S. federal income tax purposes, which could result in adverse U.S. federal income tax consequences to U.S. Holders of our ADSs or ordinary shares.
Depending upon the value of our assets, which is determined in part by the market value of our ADSs or ordinary shares, and the composition of our assets and income over time, we could be classified as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes. Based on the projected composition of our assets and income, we do not believe that we were a PFIC for our taxable year ended March 31, 2026 and we do not anticipate becoming a PFIC in the foreseeable future. While we do not anticipate becoming a PFIC, fluctuations in the market price of our ADSs or ordinary shares may cause us to become a PFIC for the current or any subsequent taxable year.
A non-U.S. corporation, such as our company, will be classified as a PFIC for U.S. federal income tax purposes for any taxable year, if either (i) 75% or more of its gross income for such year consists of certain types of “passive” income or (ii) 50% or more of the value of its assets (determined on the basis of a quarterly average) during such year produce or are held for the production of passive income. Whether we are a PFIC is a factual determination and we must make a separate determination each taxable year as to whether we are a PFIC (after the close of each taxable year). Accordingly, we cannot assure you that we will not be a PFIC for our taxable year ending March 31, 2027 or any future taxable year.
If we were to be classified as a PFIC for any taxable year during which a U.S. Holder (as defined in “Item 10. Additional Information-E. Taxation-U.S. Federal Income Tax Considerations”) holds an ADS or an ordinary share, such U.S. Holder would generally be subject to reporting requirements and might incur significantly increased U.S. federal income tax on gain recognized on the sale or other disposition of the ADSs or ordinary shares and on the receipt of distributions on the ADSs or ordinary shares to the extent such gain or distribution is treated as an “excess distribution” under the applicable U.S. federal income tax rules. Further, if we were to be classified as a PFIC for any year during which a U.S. Holder holds our ADSs or ordinary shares, we generally would continue to be treated as a PFIC for all succeeding years during which such U.S. Holder holds our ADSs or ordinary shares even if we cease to qualify as a PFIC under the rules set forth above. You are urged to consult your tax advisor concerning the U.S. federal income tax consequences of acquiring, holding, and disposing of ADSs or ordinary shares if we were to be classified as a PFIC. For more information, see “Item 10. Additional Information-E. Taxation-U.S. Federal Income Tax Considerations-PFIC Rules.”
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The amended and restated memorandum and articles of association that we expect to adopt contain anti-takeover provisions that could have a material adverse effect on the rights of holders of our ordinary shares and ADSs.
We have adopted an amended and restated memorandum and articles of association. Our amended and restated memorandum and articles of association contains provisions to limit the ability of others to acquire control of our company or cause us to engage in change-of-control transactions. These provisions could have the effect of depriving our shareholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging third parties from seeking to obtain control of our company in a tender offer or similar transaction. In addition, our board of directors has the authority, without further action by our shareholders, to issue preferred shares in one or more series and to fix their designations, powers, preferences, privileges, and relative participating, optional or special rights and the qualifications, limitations or restrictions, including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences, any or all of which may be greater than the rights associated with our ordinary shares underlying the ADSs. Preferred shares could be issued quickly with terms calculated to delay or prevent a change in control of our company or make removal of management more difficult. If our board of directors decides to issue preferred shares, the price of our ADSs may fall and the voting and other rights of the holders of our ordinary shares underlying the ADSs may be materially and adversely affected.
You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law.
We are an exempted company incorporated under the laws of the Cayman Islands with limited liability. Our corporate affairs are governed by our memorandum and articles of association, the Companies Act (As Revised) of the Cayman Islands and the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary duties of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from the common law of England, the decisions of whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of our shareholders and the fiduciary duties of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws than the United States. Some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States.
Shareholders of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporate records or to obtain copies of register of members of these companies. Our directors have discretion under our articles of association to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.
Certain corporate governance practices in the Cayman Islands, which is our home country, differ significantly from requirements for companies incorporated in other jurisdictions such as the U.S. Currently, we rely on home country practices with respect to certain corporate governance matters, please see “Item 16.G-Corporate Governance.” As a result, our shareholders may be afforded less protection than they otherwise would under rules and regulations applicable to U.S. domestic issuers.
As a result of all of the above, public shareholders may have more difficulty in protecting their interests in the face of actions taken by our management, members of the board of directors or controlling shareholders than they would as public shareholders of a company incorporated in the United States.
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Certain judgments obtained against us by our shareholders may not be enforceable.
We are a Cayman Islands exempted company and substantially all of our assets are located outside of the United States. Substantially all of our current operations are conducted in China. In addition, a majority of our current directors and officers are nationals and residents of countries other than the United States. Substantially all of the assets of these persons are located outside the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the United States in the event that you believe that your rights have been infringed under the U.S. federal securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of China may render you unable to enforce a judgment against our assets or the assets of our directors and officers.
There is no statutory enforcement in the Cayman Islands of judgments obtained in the federal or state courts of the United States (and the Cayman Islands are not a party to any treaties for the reciprocal enforcement or recognition of such judgments), a judgment obtained in such jurisdiction will be recognized and enforced in the courts of the Cayman Islands at common law, without any re-examination of the merits of the underlying dispute, by an action commenced on the foreign judgment debt in the Grand Court of the Cayman Islands, provided such judgment (a) is given by a foreign court of competent jurisdiction, (b) imposes on the judgment debtor a liability to pay a liquidated sum for which the judgment has been given, (c) is final, (d) is not in respect of taxes, a fine or a penalty, and (e) was not obtained in a manner and is not of a kind the enforcement of which is contrary to natural justice or the public policy of the Cayman Islands. However, the Cayman Islands courts are unlikely to enforce a judgment obtained from the U.S. courts under civil liability provisions of the U.S. federal securities law if such judgment is determined by the courts of the Cayman Islands to give rise to obligations to make payments that are penal or punitive in nature. Because such a determination has not yet been made by a court of the Cayman Islands, it is uncertain whether such civil liability judgments from U.S. courts would be enforceable in the Cayman Islands.
The recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based either on treaties between China and the country where the judgment is made or on principles of reciprocity between jurisdictions. China does not have any treaties or other forms of reciprocity with the United States that provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedures Law, the PRC courts will not enforce a foreign judgment against us or our director and officers if they decide that the judgment violates the basic principles of PRC laws or national sovereignty, security or public interest. As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by a court in the United States.
We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to United States domestic public companies.
Because we are a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including:
| ● | the rules under the Exchange Act requiring the filing of quarterly reports on Form 10-Q or current reports on Form 8-K with the SEC; |
| ● | the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act; |
| ● | the sections of the Exchange Act relating to liability for insiders who profit from trades made in a short period of time; and |
| ● | the selective disclosure rules by issuers of material non-public information under Regulation FD. |
We are required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend to publish our results periodically through press releases, distributed pursuant to the rules and regulations of the NASDAQ Capital Market. Press releases relating to financial results and material events will also be furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or information, which would be made available to you, were you investing in a U.S. domestic issuer.
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The voting rights of holders of ADSs are limited by the terms of the deposit agreement, and you may not be able to exercise any right to vote the ordinary shares which are represented by your ADSs.
As a holder of our ADSs, you will only be able to direct the exercise of the voting rights attaching to the ordinary shares which are represented by your ADSs in accordance with the provisions of the deposit agreement. Under the deposit agreement, you must vote by giving voting instructions to the depositary. Upon receipt of your voting instructions, the depositary will use its best endeavors to vote the ordinary shares which are represented by your ADSs in accordance with your instructions. You will not be able to directly exercise any right to vote with respect to the shares represented by your ADSs unless you withdraw the shares from the ADR facility prior to the applicable share record date. Under our amended and restated memorandum and articles of association, the minimum notice period required for convening a general meeting is ten calendar days. As a Cayman Islands exempted company, we are not obliged by the Companies Act to call shareholders’ annual general meetings. Our amended and restated memorandum and articles of association provide that we may, but are not obliged to, in each year hold a general meeting as our annual general meeting. When a general meeting is convened, you may not receive sufficient advance notice to withdraw the underlying shares represented by your ADSs to allow you to vote with respect to any specific resolution or matter to be considered and voted upon at such general meeting. If we give notice to our shareholders of any general meeting, the depositary will notify you of the upcoming vote and will arrange to deliver our voting materials to you. We cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote the underlying shares represented by your ADSs. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for their manner of carrying out your voting instructions. This means that you may not be able to exercise your right to vote and you may have no legal remedy if the underlying shares represented by your ADSs are not voted as you requested.
The depositary for our ADSs will give us a discretionary proxy to vote the ordinary shares represented by your ADSs if you do not give proper or timely voting instructions to the depositary, except in limited circumstances, which could adversely affect your interests.
Under the deposit agreement for the ADSs, if you do not give proper or timely voting instructions to the depositary, the depositary will give us a discretionary proxy to vote the ordinary shares represented by your ADSs at shareholders’ meetings unless:
| ● | we have failed to timely provide the depositary with notice of meeting and related voting materials; |
| ● | we have instructed the depositary that we do not wish a discretionary proxy to be given; |
| ● | we have informed the depositary that there is substantial opposition as to a matter to be voted on at the meeting; |
| ● | a matter to be voted on at the meeting would have a material adverse impact on shareholders; or |
| ● | the voting at the meeting is to be made on a show of hands. |
The effect of the foregoing is that if you do not give proper or timely voting instructions to the depositary as to how to vote at shareholders’ meetings, a discretionary proxy to vote the ordinary shares represented by your ADSs will be given to a person designated by us, except under the circumstances described above. This may make it more difficult for shareholders and holders of ADSs to influence the management of our company. Holders of our ordinary shares are not subject to this discretionary proxy.
You may not receive dividends or other distributions on our ordinary shares and you may not receive any value for them if it is illegal or impracticable to make them available to you.
The depositary of our ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on ordinary shares or other deposited securities which are represented by your ADSs, after deducting its fees and expenses. You will receive these distributions in proportion to the number of ordinary shares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impracticable to make a distribution available to any holders of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act but that are not properly registered or distributed under an applicable exemption from registration. The depositary may also determine that it is not practicable to distribute certain property through the mail. Additionally, the value of certain distributions may be less than the cost of mailing them. In these cases, the depositary may determine not to distribute such property. We have no obligation to register under U.S. securities laws any ADSs, ordinary shares, rights or other securities received through such distributions. We also have no obligation to take any other action to permit the distribution of ADSs, ordinary shares, rights or anything else to holders of ADSs. This means that you may not receive distributions we make on our ordinary shares or any value for them if it is illegal or impracticable for us to make them available to you. These restrictions may cause a material decline in the value of our ADSs.
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You may experience dilution of your holdings due to inability to participate in rights offerings.
We may, from time to time, distribute rights to our shareholders, including rights to acquire securities. Under the deposit agreement, the depositary will not distribute rights to holders of ADSs unless the distribution and sale of rights and the securities to which these rights relate are either exempt from registration under the Securities Act with respect to all holders of ADSs, or are registered under the provisions of the Securities Act. The depositary may, but is not required to, attempt to sell these undistributed rights to third parties, and may allow the rights to lapse. We may be unable to establish an exemption from registration under the Securities Act, and we are under no obligation to file a registration statement with respect to these rights or underlying securities or to endeavour to have a registration statement declared effective. Accordingly, holders of ADSs may be unable to participate in our rights offerings and may experience dilution of their holdings as a result.
You may be subject to limitations on transfer of your ADSs.
Your ADSs are transferable on the books of the depositary. However, the depositary may close its books at any time or from time to time when it deems expedient in connection with the performance of its duties. The depositary may close its books from time to time for a number of reasons, including in connection with corporate events such as a rights offering, during which time the depositary needs to maintain an exact number of ADS holders on its books for a specified period. The depositary may also close its books in emergencies, or on weekends and public holidays. The depositary may refuse to deliver, transfer or register transfers of our ADSs generally when our share register or the books of the depositary are closed, or at any time if we or the depositary thinks it is advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason.
We will incur significantly increased costs and devote substantial management time as a result of being a public company.
As a public company, we incur additional legal, accounting and other expenses as a public reporting company. For example, we will be required to comply with additional requirements of the rules and regulations of the SEC and requirements of the NASDAQ Capital Market, including applicable corporate governance practices. We expect that compliance with these requirements will increase our legal and financial compliance costs and will make some activities more time-consuming and costlier. In addition, we expect that our management and other personnel will need to divert attention from operational and other business matters to devote substantial time to these public company requirements. We cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.
In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time-consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may also initiate legal proceedings against us and our business may be adversely affected.
In the past, shareholders of public companies have often brought securities class action suits against those companies following periods of instability in the market price of their securities. If we were involved in a class action suit, it could divert a significant amount of our management’s attention and other resources from our business and operations and require us to incur significant expenses to defend the suit, which could harm our results of operations. Any such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition and results of operations.
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ITEM 4. INFORMATION ON THE COMPANY
A. History and Development of the Company
In April 2016, Hexindai Inc. was incorporated in Cayman Islands as a holding company. We provided online microlending business and P2P marketplace business from 2017 to 2019. As part of our major business restructuring and disposition of our P2P marketplace business in and around December 2020, which is described in greater detail below, we changed our name from Hexindai Inc. to Xiaobai Maimai Inc. to reflect our business that was built upon our social e-commerce platform. On December 3, 2021, we changed our name from Xiaobai Maimai Inc. to Akso Health Group in recognition of our focus on our new business development in the health sector. As of the date of this annual report, we are no longer engaged in the P2P marketplace businesses and are not making any new loans under the microlending business, and are no longer engaged in social e-commerce platform business, the Company currently focused on sale of medical devices business and provision of marketing promotion business.
In March 2014, our founders Mr. Xiaobo An and Mr. Xiaoning An, along with Mr. Xiaobin Zhai, established Hexin E-Commerce Co. Ltd in China, or Hexin E-Commerce, which at the time of its inception was not under our control and jointly owned by the individuals named above.
In order to obtain control of Hexin E-Commerce, in November 2016, we entered into a series of contractual arrangements with Hexin E-Commerce and its then-shareholders and became Hexin E-commerce’s primary beneficiary. Prior to our disposal of Hexin E-Commerce in December 2020, we conducted our P2P marketplace businesses primarily through Hexin E-Commerce.
In May 2016, we established a wholly-owned subsidiary in Hong Kong, Hexindai HK, and further established Beijing Hexin Yongheng Technology Development Co. Ltd., or Hexin Yongheng, which to this date remains Hexindai HK’s wholly-owned subsidiary in China, in August 2016.
In August 2017, we established Wusu Company to conduct online microlending business. At the time of Wusu Company’s inception, Hexin E-Commerce, Mr. Ming Jia and Mr. Shiwei Wu were the shareholders of Wusu Company. On January 1, 2018, Hexin Yongheng, Wusu Company, Hexin E-Commerce, Mr. Ming Jia and Mr. Shiwei Wu entered into a series of agreements (the “2018 Wusu VIE Agreements”), and as a result of which, Hexin Yongheng became the primary beneficiary of and controlled Wusu Company.
On November 3, 2017, our ADSs commenced trading on the NASDAQ Global Market under the symbol “HX.”
As part of our strategy to expand our investment, in June 2018, we incorporated HX Asia Investment Limited (“HX Asia”), a wholly-owned subsidiary in the British Virgin Islands, to acquire a 19.99% equity stake in Musketeer Group Inc, an Indonesian online lending platform that offers consumption instalment loans. We completed the acquisition in August 9, 2018 as part of our strategy to explore overseas opportunities by leveraging our extensive experience and expertise in new high-growth markets.
As part of our strategy to diversify funding sources for our P2P marketplace and online microlending businesses (which we are no longer engaged in), in December 2018, Hexin E-Commerce established Trust 1 with an independent third-party trust company. At the time of establishing Trust 1, Hexin E-Commerce was still an entity under our control. As part of our business restructuring in December 2020 and our disposal of Hexin E-commerce, we are no longer a beneficiary to Trust 1.
In January 2019, we incorporated HX China Investment Limited (“HX China”), also our wholly-owned subsidiary in the British Virgin Islands, for the purpose of acquiring a 5.88% equity stake in Phoenix Intelligent Credit Group Ltd. As part of that acquisition, we established Tianjin Haohongyuan in China in May 2018 to synergize the investment by way of providing loan assistance functions such as borrower assessment to Phoenix Intelligent Credit Group Ltd. At the time of our acquisition, Phoenix Intelligent Credit Group Ltd was an operator of one of China’s leading P2P lending platforms and a wholly-owned subsidiary of Phoenix Financial Group Ltd., which was unrelated to us.
On August 1, 2019, Hexin Digital, which was established on September 9, 2017 with the provision of technology consultancy and technological services as its principal business, was acquired by Hexin Jinke from an independent third party, and Hexin Digital had minimal activities before being acquired by us. We obtained control and became the primary beneficiary of Hexin Digital in August 2019 by entering into a series of contractual arrangements with Hexin Digital and Hexin Jinke. Hexin Digital is 100% owned by Hexin Jinke. Hexin Digital holds the requisite licenses necessary to conduct our online marketplace business which is subject to restrictions under current PRC laws and regulations. We operate our newly launched social e-commerce platform Xiaobai Maimai through Hexin Digital.
On September 30, 2019, we changed Wusu Company’s principal businesses from microlending to trading, provision of technological promotion services, and import and export.
On July 15, 2020, we incorporated Hexin Investment Private Limited in Singapore with a view to engage in future investment activities.
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As part of our corporate restructurings prior to our disposal of Hexin E-Commerce in December 2020, Mr. Ming Jia and Mr. Shiwei Wu transferred their equity interests of Wusu Company to Hexin E-Commerce, and therefore, Hexin E-Commerce became the sole shareholder of Wusu Company on November 20, 2020. On November 20, 2020, Hexin Yongheng, Wusu Company, Hexin E-Commerce, Mr. Ming Jia and Mr. Shiwei Wu entered into a VIE termination agreement, which terminated all rights and obligations with respect to each party thereto under the 2018 Wusu VIE Agreements. On December 1, 2020, Wusu Company and its shareholder, Hexin E-Commerce, entered into a new series of contractual arrangements with Hexin Yongheng, and as a result of which, Hexin Yongheng remains the primary beneficiary of and controls Wusu Company.
On December 16, 2020, Hexin Yongheng and Kuaishangche, a company not directly associated with the Company but controlled by Mr. Xiaobo An, and Hexin E-Commerce entered into an assignment and assumption agreement. Pursuant to the Agreement, Hexin Yongheng agreed to assign and transfer to Kuaishangche the control over Hexin E-Commerce, in exchange for cash consideration of RMB5.0 million (US$726,781).
On July 8, 2021, we incorporated WE HEALTH LIMITED in New York.
On December 15, 2021, we established We Healthy Limited in Hong Kong. WE HEALTH LIMITED owns 51% equity of We Healthy Limited.
On December 30, 2021, we incorporated Akso Health Treatment Center Inc. in the State of Massachusetts, and on January 10, 2022 we changed the name from Akso Health Treatment Center Inc. to Akso First Health Treatment Center Inc.
On January 3, 2022, we incorporated Akso Remote Medical Consultation Center Inc. in Wyoming.
On January 26, 2022, we established Qingdao Akso Health Management Co., Ltd, which is a wholly-owned subsidiary of We Healthy Limited (“Qingdao Akso”).
On January 4, 2022, we incorporated Akso Online MediTech Co., Ltd. (“Akso Online MediTech”) in Wyoming.
Akso First Health Treatment Center Inc., Akso Remote Medical Consultation Center Inc. and Akso Online MediTech Co., Ltd. are 100% owned by We Health Limited.
On November 15, 2023, we established Akso Medical Cloud Limited in British Virgin Island, which is 100% owned by Akso Health Group.
On December 4, 2023, we established Akso Medi-care Limited in Hong Kong, China, which is 100% owned by Akso Medical Cloud Limited.
On January 16, 2024, we established Tianjin Akso Enterprise Management Co., Ltd. in Tianjin Province, China, which is owned by Akso Medi-care Limited.
On March 5, 2024, Tianjin Akso Enterprise Management Co., Ltd., our PRC subsidiary, entered into certain securities purchase agreements with four shareholders of Tianjin Wangyi Cloud Co., Ltd. and acquired 50% of the equity interests of Tianjin Wangyi Cloud Co., Ltd. The transaction closed on April 15, 2024. Tianjin Wangyi Cloud Co., Ltd. engages in the business of providing online hospital services including health consultancy services and online sales of medicines and health products through its two wholly owned PRC subsidiaries, Tian Jin Deyihui Online Hospital Co., Ltd. and Tian Jin Deyihui Clinic Co., Ltd. Tianjin Wangyi Cloud Co., Ltd. also engages in the year ended March 31, 2025, the provision of marketing promotion services business through its subsidiaries. Bing optimistic about the development prospect of the medical industry and the synergy between Internet medicine and offline hospitals. The Company further acquired the remaining 50% equity interest of Tianjin Wangyi Cloud Co., Ltd. from its minority shareholders through transactions completed in June 2024 and December 2024. On December 10, 2024, the transaction was closed with the settlement of all consideration, and the Company currently holds 100% equity interest in Tianjin Wangyi Cloud Co., Ltd.
On April 30, 2024, the shareholders of the Company approved and adopted an amended and restated memorandum and articles of association (the “Amended M&A”), which changed the authorized issued share capital of the Company from US$500,000 divided into 5,000,000,000 ordinary shares, par value US$0.0001 each, to US$500,000 divided into 4,500,000,000 Class A ordinary shares, par value US$0.0001 each and 500,000,000 Class B ordinary shares, par value US$0.0001 each (the “Re-Designation of the Authorized Capital”). Each Class A ordinary share is entitled to one (1) vote and each Class B ordinary share is entitled to twenty (20) votes. In connection with the Re-Designation of the Authorized Capital, 7,980,800 ordinary shares owned by Webao Limited then and 492,019,200 authorized but unissued ordinary shares were converted into Class B ordinary shares on a one-for-one basis. 4,500,000,000 authorized ordinary shares (including 320,770,660 issued and outstanding ordinary shares held by all shareholders other than Webao Limited) were converted into Class A ordinary shares on a one-for-one basis.
On September 2, 2025, we established Tianjin Akso Technology Co., Ltd. in Tianjin Province, China, which is owned by Tianjin Akso Enterprise Management Co., Ltd.
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In June 2026, the Company terminated a series of procurement and development contracts with five suppliers for functional modules of its Internet Hospital management system, due to current market conditions, technical difficulties encountered by the suppliers, and uncertainties regarding timely delivery and quality compliance. The aggregate prepaid amount of approximately USD 175.7 million has been fully refunded to the Company.
Business Restructuring and Disposition
Prior to our disposition of Hexin E-Commerce, on November 20, 2020, Mr. Ming Jia and Mr. Shiwei Wu transferred their equity interest in Wusu Company to Hexin E-Commerce, which resulted in Wusu Company becoming a wholly-owned entity of Hexin E-Commerce. On November 20, 2020, Hexin Yongheng, Wusu Company, Hexin E-Commerce, Mr. Ming Jia and Mr. Shiwei Wu entered into a VIE termination agreement, which terminated all rights and obligations with respect to each party thereto under the 2018 Wusu VIE Agreements.
On December 1, 2020, Hexin Yongheng, our wholly-owned subsidiary, entered into a new series of contractual arrangements with Wusu Company and Hexin E-Commerce whereby Hexin Yongcheng retained its interests as the primary beneficiary to Wusu Company.
On December 16, 2020, Hexin Yongheng, Kuaishangche, Hexin E-Commerce, Xiaobo An, Xiaoning An, and Xiaobin Zhai entered into an assignment and assumption agreement. Pursuant to this agreement, Hexin Yongheng has agreed to assign and transfer to Kuaishangche the control over Hexin E-Commerce, in exchange for cash consideration of RMB 5 million. Upon the closing of the disposition, Kuaishangche became the primary beneficiary of and obtained control of Hexin E-Commerce, and as a result, assume all assets and liabilities of Hexin E-Commerce and subsidiaries owned or controlled by Hexin E-Commerce, excluding any rights, titles, interests or claims that Hexin E-Commerce had in Wusu Company, which remained a consolidated variable interest entity of the Hexin Yongheng by way of the December 1, 2020 contractual arrangements. We closed the disposition of Hexin E-Commerce on December 30, 2020. As a result of the disposition, we are no longer conducting the P2P marketplace business and instead are focusing on developing and investing resources into our social e-commerce platform, Xiaobai Maimai.
On December 16, 2020, our shareholders approved our name change from “Hexindai Inc.” to “Xiaobai Maimai Inc.” to reflect our business transition.
On January 1, 2021, Hexin Yongheng, our wholly-owned subsidiary, obtained control and became the primary beneficiary of Hexin Jiuding by entering into a series of contractual arrangements with Hexin Jiuding and Hexin Fengze, the shareholder of Hexin Jiuding and a wholly-owned subsidiary of Hexin Jinke.
On December 3, 2021, our shareholders approved our name change from “Xiaobai Maimai Inc.” to “Akso Health Group” to reflect our business transition.
On May 10, 2023, the Company, HX Asia, HX China, and Hexindai HK (together with HX Asia and HX China, the “Targets”), and Umbrella Capital Investment Co., Ltd, a British Virgin Islands company which is not affiliate of the Company of any of its directors or officers (the “Purchaser”) entered into certain share purchase agreement (the “Disposition SPA”). Pursuant to the Disposition SPA, the Purchaser agreed to purchase the Targets in exchange for cash consideration of US$215,000 (the “Purchase Price”). The Disposition closed on May 19, 2023. Upon the closing of the Disposition, the Buyer became the sole shareholder of the Targets and as a result, assume all assets and liabilities of the Targets and subsidiaries owned or controlled by the Target.
On March 5, 2024, Tianjin Akso Enterprise Management Co., Ltd., our PRC subsidiary, entered into certain securities purchase agreements with four shareholders of Tianjin Wangyi Cloud Co., Ltd. and acquired 50% of the equity interests of Tianjin Wangyi Cloud Co., Ltd. The transaction closed on April 15, 2024. Tianjin Wangyi Cloud Co., Ltd. engages in the business of providing online hospital services including health consultancy services and online sales of medicines and health products through its two wholly owned PRC subsidiaries, Tian Jin Deyihui Online Hospital Co., Ltd. and Tian Jin Deyihui Clinic Co., Ltd. Tianjin Wangyi Cloud Co., Ltd. also engages in the year ended March 31, 2025, the provision of marketing promotion services business through its subsidiaries. Bing optimistic about the development prospect of the medical industry and the synergy between Internet medicine and offline hospitals. The Company further acquired the remaining 50% equity interest of Tianjin Wangyi Cloud Co., Ltd. from its minority shareholders through transactions completed in June 2024 and December 2024. On December 10, 2024, the acquisition was closed upon the settlement of all consideration and, the Company currently holds 100% equity interest in Tianjin Wangyi Cloud Co., Ltd.
Corporate Information
Our principal executive offices are located at Room 8201-4-4(A), 2nd Floor, Qiantongyuan Building, No. 44, Moscow Road, QianwanBonded Port Area, Qingdao Pilot Free Trade Zone, China (Shandong). Our telephone number at this address is +86 152 1005 4919. Our registered office in the Cayman Islands is located at the offices of Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104. Our agent for service of process in the United States is Puglisi & Associates, located at 850 Library Ave., Suite 204, Newark, DE 19711
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B. Business Overview
Historically, the Company generated revenues primarily from our loan facilitation services, post-origination services, and other related services (the “P2P Business”). On December 30, 2020, we completed the disposal of the P2P Business and transitioned into a social e-commerce platform operator in China, offering high-quality and affordable branded products. Since the fourth quarter of 2021, the Company started exploring healthcare equipment and product trading and related healthcare services business. On January 4, 2022, we incorporated Akso Online Meditech in the State of Wyoming and have been engaged in the sale of COVID-19 Rapid Antigen test kits through Akso Online Meditech. In February 2022, Akso Online Meditech entered into a supply agreement to purchase “iHealth” branded COVID-19 Rapid Antigen test kits from its supplier and sells these test kits to distributers in the United States. On January 26, 2022, we incorporated Qingdao Akso in Shandong Province, China and started the sales of medical devices through Qingdao Akso since April 2022. Qingdao Akso has entered into supply agreements to purchase medical devices such as defibrillators, anesthesia laryngoscope from its supplier and sells these devices to distributers or end-users in China. In May 2023, the Company completed the disposition of its social e-commerce business. The Company has since then focused on exploring other area of healthcare sector other than the medical devices and supplies.
Recently, we advanced our presence in online hospital and chain pharmacies segments in China. In November 2024, we completed the acquisition of Tianjin Wangyi Cloud Co., Ltd. and its wholly owned subsidiaries, Tianjin Deyihui Online Hospital Co., Limited and Tianjin Deyihui Clinic Co., Limited (collectively “Deyihui Group”)，strengthening our foothold in internet healthcare. We continue to evaluate potential acquisitions of online hospital(s) in certain cities of China which provides online medical consultations for initial diagnosis, follow-up consultations, and management of chronic diseases, providing patients with an efficient and convenient solution to manage their health online through their smartphones or computers. Typically, the online hospitals are closely connected with and supported by traditional hospitals and outpatient clinics, and their main sources of revenue are from fees charged to patients for both online and offline consultations and the marketing and sales of a variety of health products including medicine, medical equipment and supplements. Future acquisitions of internet hospitals/clinics will be pursued at judicious timing based on real-time policy and market dynamics, reflecting our disciplined approach to capital allocation and investor accountability.
In addition to our plan to acquire online hospital(s), we believe that traditional independent pharmacies in China currently face serious competition and bottlenecks in sales growth, which is why we also plan to acquire multiple independent pharmacies nationwide throughout China, integrating and operating the pharmacies as a chain using our extensive offline resources and IT solutions. We plan to build a new type of pharmacy operation and management system, as well as digital operation and sales solutions for our pharmacies, thereby enhancing our competitiveness and overcoming the current difficulties in the industry.
On March 5, 2024, Tianjin Akso Enterprise Management Co., Ltd., our PRC subsidiary, entered into certain securities purchase agreements with four shareholders of Tianjin Wangyi Cloud Co., Ltd. and acquired 50% of the equity interests of Tianjin Wangyi Cloud Co., Ltd. The transaction closed on April 15, 2024. Bing optimistic about the development prospect of the medical industry and the synergy between Internet medicine and offline hospitals. The Company further acquired the remaining 50% equity interest of Tianjin Wangyi Cloud Co., Ltd. from its minority shareholders through transactions completed in June 2024 and December 2024. On December 10, 2024, the acquisition was closed upon the settlement of all consideration and the Company currently holds 100% equity interest in Tianjin Wangyi Cloud Co., Ltd. Tianjin Wangyi Cloud Co., Ltd. engages in the business of providing online hospital services including health consultancy services and online sales of medicines and health products through its two wholly owned PRC subsidiaries, Tian Jin Deyihui Online Hospital Co., Ltd. and Tian Jin Deyihui Clinic Co., Ltd. Tianjin Wangyi Cloud Co., Ltd. also engages in the provision of marketing promotion service to car insurance broker industry.services business through its subsidiaries.
The new business initiative involves Tianjin Deyihui Online Hospital Co., Ltd. Our focus is on creating a cutting-edge pharmacy system, enhancing service delivery through AI-driven health solutions, and expanding reach through an interconnected network of online and offline platforms.
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The social e-commerce industry
We were formally known as Hexindai Inc., and used to be engaged in the business of providing online facilitation related services via our consumer lending marketplace in China, facilitating loans to meet the increasing consumption demand of the emerging middle class in China from 2017 to 2019. Hexindai Inc. was a mobile e-commerce and consumer lending platform in China until it disposed of Hexin E-Commerce in December 2020 and changed its name to Xiaobai Maimai Inc. As part of its transition into the social e-commerce platform business, in May 2020, we launched a new form of social e-commerce mobile platform, Xiaobai Maimai App, offering high-quality and affordable branded products. Xiaobai Maimai leverages its cooperation with major domestic e-commerce platforms and services marketplaces as part of its integrated buyer resources to select and source the most desirable goods and services. Xiaobai Maimai rewards customers with a small commission for every purchase, share or recommendation of a product made to friends.
In August 2020, Xiaobai Maimai underwent an upgrade to offer an even wider variety of high-quality products covering food and beverage, wine, cosmetic products, fashion and apparel, entertainment, houseware, home appliances and cost-saving promotions at petrol gas stations nationwide. On Xiaobai Maimai App, customers can easily compare superior products at competitive prices without having to change their shopping preferences or switch between different online merchants. It is also a convenient, one-stop platform for customers to not only save big on daily necessities when they shop online, but also stay informed of the latest promotions with attractive discounts, coupons and rebates on the application. As of June 30, 2022, Xiaobai Maimai had approximately 288,858 active customer accounts (an active customer account refers to a customer account that has made at least one purchase) since its launch. In May 2023, the Company entered into a Disposition SPA to dispose the social e-commerce business and the disposal was completed May 19. 2023.
Healthcare equipment and products trading and radiation oncology service business
Sales of medical devices
Through our operating subsidiaries, Akso Online Meditech and Qingdao Akso, we are mainly specialized in the sales of medical devices both in China and in the United States.
On January 4, 2022, we incorporated Akso Online MediTech in the State of Wyoming and have begun the sale of COVID-19 Rapid Antigen test kits through Akso Online Meditech since March, 2022. Akso Online Meditech has entered into a supply agreement to purchase “iHealth” branded COVID-19 Rapid Antigen test kits from its supplier in Hong Kong and sells these test kits to distributors in the United States. Currently, the Company no longer to sell COVID-19 Rapid Antigen test kits since the cease of Covid-19 in the end of 2022.
Since April 2022, the Company has engaged in the sale of medical devices such as defibrillators and anesthesia laryngoscope through its subsidiary, Qingdao Akso, in China. Qingdao Akso purchases these medical devices in bulk from its suppliers and distributes the products to downstream distributors and end-users.
Pursuant to the Regulation on the Supervision and Administration of Medical Devices (2021 Revision) promulgated on January 4, 2000 and came into effect on June 1, 2014 (the “Supervision and Administration of Medical Devices”), which was latest amended on February 9, 2021 and came into effect on June 1, 2021, medical devices are classified into the following three categories based on the degree of risk.
| ● | “Class I medical devices” means the medical devices with low risks, whose safety and effectiveness can be ensured through routine administration. As of the date of this annual report, we and our subsidiaries do not sell Class I medical devices. | |
| ● | “Class II medical devices” means the medical devices with moderate risks, which shall be strictly controlled and administered to ensure their safety and effectiveness. For example, the anesthesia laryngoscope that Qingdao Akso currently may sell are Class II medical devices. | |
| ● | “Class III medical devices” means the medical devices with relatively high risks, which shall be strictly controlled and administered through special measures to ensure their safety and effectiveness. For example, the defibrillators Qingdao Akso currently may sell are Class III medical devices. |
Pursuant to the Administrative Measures on the Operation Supervision of Medical Devices, filing and licensing are not required for the operation of Class I medical devices. Operators engaged in the operation of Class II medical devices are subject to filing administration and will receive a Class II Medical Device Selling Record Certificate upon satisfaction of filing requirement and no pre-approval of authorities is needed. Operators engaged in the operation of Class III medical devices are subject to pre-approval licensing administration and will receive a Class III Medical Device Operation License upon the authorities’ approval. A Class II Medical Device Selling Record Certificate will be effective in the long term until it is revoked or canceled by the issuing authorities. A Class III Medical Device Operation License is valid for five years and may be renewed six months prior to its expiration date.
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As of the date of this annual report, Qingdao Akso has received from the PRC authorities all requisite licenses, permissions or approvals needed to engage in the resale of medical devices businesses currently conducted in China, and no permission or approval has been denied. Such licenses and permissions include business licenses, a Class II Medical Device Selling Record Certificate and a Class III Medical Device Operation License (as defined below). Pursuant to the Administrative Measures on the Operation Supervision of Medical Devices, filing and licensing are not required for the operation of Class I medical devices. Operators engaged in the resale of Class II medical devices are subject to filing administration and will receive a Class II medical device selling record certificate upon satisfaction of filing requirement and no pre-approval of the authorities is needed (the “Class II Medical Device Selling Record Certificate”). Operators engaged in the resale or distribution of Class III medical devices are subject to pre-approval licensing administration and will a receive medical device operation license upon the authorities’ approval (the “Class III Medical Device Operation License”). A Class III Medical Device Operation License is valid for five years and may be renewed six months prior to its expiration date. A Class II Medical Device Selling Record Certificate will be effective in the long term until it is revoked or canceled by the issuing authorities. Qingdao Akso obtained a Class II Medical Device Selling Record Certificate on February 25, 2022, and a Class III Medical Device Operation License, and such license will expire on March 1, 2027.
Revenue attributable to the sales of medical equipment for the fiscal year ended March 31, 2026 was nil.
Akso Health’s radiation oncology services business
On September 24, 2021, the Board of Directors approved our new business plan to enter the radiation oncology services market in the U.S. On September 26, 2021, we signed a product purchase agreement with a third-party supplier to purchase equipment for the new cancer therapy and radiation oncology business. The total price of the equipment was approximately US$12.7 million. We prepaid 80% of the purchase price and planned to pay the balance after the equipment was received and installed. In February 2022, affected by the continuous influence of COVID-19 and the global chip shortage, we terminated the purchase agreement and the prepayment for equipment purchase has been refunded. We intend to keep pursuing business opportunities in this sector under the guidance of Dr. Yingxian Liu.
For the Covid-19 research business which the Company engaged in the fiscal year ended March 31, 2022, initially focusing on the sale of COVID-19 Rapid Antigen test kits. Operations in this business ceased following the end of the pandemic. In the future, the Company will develop its the cancer therapy and radiation oncology market in the U.S. We plan to open 2 vaccine research centers for AIDS and Covid-19 and 100 radiation oncology centers on the east coast of the U.S. catering to cancer patients at varying stages of treatment. This will include specialized radiation therapy centers for radiotherapy (RT), personalized consultation, conventional treatment planning, and other related services for a wide variety of cancer therapy treatments. On October 22, 2021, we announced the appointment of Dr. Yingxian Liu as the medical consultant to the Company. Dr. Liu has extensive experience, and is highly respected in the pathology field. We believe Dr. Liu’s insights and guidance will support our mission in assembling the necessary team and infrastructure to build a best-in-class practice that’s scalable and delivers safe and high-quality cancer treatments for our patients.”
Online Healthcare Services Business
The Company begun engaging in the business of providing online hospital services, including health consultancy services and online sales of medicines and health products in China, through its two wholly owned PRC subsidiaries, Tian Jin Deyihui Online Hospital Co., Ltd. and Tian Jin Deyihui Clinic Co., Ltd, since it acquired the subsidiaries in April 2024. We are in the process of integrating medical products, telemedicine, and offline treatment platforms into a comprehensive healthcare information service system.
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Products and Services
Our comprehensive product and service offerings will include:
| ● | Pharmaceutical retail modernization: Enhancing traditional pharmacy operations. Traditional pharmacies face challenges that require new models to enhance competitiveness. The growing healthcare demands create market opportunities, and we can provide a more competitive development model for the traditional market with internet integration. |
| ● | Digital operations and sales solutions: Optimizing sales through digital channels. Customized smart speakers, smart photo frames, smart screens, and smart wearables, integrated with online consultation systems, will expand user engagement scenarios. |
| ● | Integrated online consultations: Offering AI-powered health assistants. By leveraging AI models like ChatGPT and training on health-related data, we can develop an AI health assistant capable of answering health inquiries for our consultation system. |
| ● | Community health stations: Facilitating physical health assessments and data integration. By establishing health stations in communities and deploying self-service health check kiosks, we can connect to internet hospital systems, allowing users to undergo offline health tests and integrate their health information into an online database. |
| ● | Insurance collaborations: Streamlining user services and expanding health coverage. We will partner with insurance companies and brokers to share revenue from these services. |
Growth Strategies/Marketing and Sales Strategy
| ● | Digital presence enhancement: We are optimizing our online platforms for superior user engagement and employing targeted social media strategies to amplify brand reach. |
| ● | Community engagement: Through partnerships with local health service centers, we plan to deepen our offline presence and increase user acquisition. |
| ● | Talent development: Our strategy includes attracting and retaining top talent to strengthen our team’s capabilities, ensuring sustained business growth and innovation. |
Revenue Model
| ● | Direct sales through our online health product marketplace. |
We will sell pharmaceutical products to hospital inpatients and outpatients in accordance with medical prescriptions. AHG recognizes the revenue on the consolidated basis when the pharmaceutical products are physically transferred to patients and fees can be collected. AHG is considered as a principal in the sale of pharmaceutical products because it takes inventory risk for the goods that are to be sold; accordingly, revenue is recognized on a gross basis. The performance obligation is the transfer of possession and control of the pharmaceutical product to the patient.
We will also sell medical supplies to hospitals or clinics. AHG recognizes the revenue on the consolidated basis when the medical supplies are handed over to clinics and proceeds can be collected. The performance obligation is the transfer control and possession of the products to the hospitals or clinics. AHG is considered as a principal when its sells the medical supplies because it takes inventory risk for the goods to be sold; accordingly, revenue is recognized on a gross basis. Payments is typically received after delivery of products.
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| ● | Medical service fees from Tianjin Deyihui Online Hospital’s diagnostic and treatment offerings. |
We plan to provide various medical and clinical services to patients. AHG recognizes revenue on a consolidated basis when individual deliverable services such as diagnosis, lab work, scans, consultation, and treatments, have been provided to the patients. Medical and clinical service revenue is recognized on a gross basis, as AHG is responsible to supervise, evaluate, manage, and compensate medical staff who deliver the services, and AHG has discretion in establishing the pricing for services charged to patients. The performance obligation is the provision of services detailed above to patients. Each deliverable service is typically completed in a single visit. Payment is received from patients after completion of each visit as well as through reimbursement by the government. For example, their system will identify whether each medical treatment requires a reimbursement and the specific proportion of that reimbursement according to the details of the patient’s treatment. The system will then record the reimbursement and such will be allocated by the Medical Insurance Bureau on a monthly aggregated amount. The Medical Insurance Bureau’s cycle to provide reimbursements is generally about 60-90 days. Specific price concessions and charitable assistance provided is carried out according to the overall arrangement of the hospital. For poor patients and those with special diseases, such patients will be given a discount.
| ● | Collaborative profit-sharing with insurance partners. |
Commission will be generated from sales of medical insurance. AHG, through AHG Online Search Engine, will market and sell insurance policies originated by multiple insurance carriers via offline and online platforms. AHG recognizes the commission revenue on a net basis as it acts as an agency in these transactions and is not responsible for fulfilling the promise to provide the specified insurance products. AHG recognizes revenue at the point of time when the insurance policy has been issued to the policyholder. Payments are typically either made in advance or upon completion of the writing of the policy.
| ● | Technical and brand collaborations to generate additional revenue from program development and marketing services |
We plan to provide medical software services to hospitals and/or clinics. AHG recognizes the revenue on a consolidated basis when the performance obligation has been met, which is when software is provisioned and made available to customers to use over a period of time. AHG also has developed an APP for medical consultations delivered online. AHG provides value added services via its end-to-end APP solution, to patients by providing access to a network of contracted physicians, pharmacies, and medical supply vendors across many geographical regions to deliver medical consultations, medication, and supplies without patients having to leave their homes. AHG accounts for fees collected through its APP using the gross method of accounting because the management has determined that it act as a principal in the transactions because AHG exercises control over the pricing of services and product offered, AHG has entered into minimum purchase commitments with pharmacies to procure medication each year, and minimum payouts to doctors conducting consultations through the APP regardless of the number of patients consulted.
Regulatory Approvals
This section sets forth a summary of the most significant rules and regulations that will affect our business activities in China.
We have secured a “Medical Institution Practice License” for Tianjin Deyihui Online Hospital, valid until August 20, 2028, issued by the Tianjin Port Free Trade Zone Administrative Approval Bureau. This license allows us to operate various medical services, including general medicine and specialized treatments.
Research and Development
Our research and development efforts are concentrated on developing AI-driven health management solutions and leveraging big data analytics to enhance our digital health platforms. This focus is integral to maintaining our leadership in smart healthcare innovation. We are also pursuing a strategic research and development program in brain-computer interface technology, which we believe represents a complementary frontier in next-generation healthcare and human-machine integration.
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Sales and Distribution
Our sales strategy encompasses a multi-channel approach, combining online health platforms with offline distribution networks. We aim to maximize market reach by optimizing supply chain processes and forging strategic partnerships with key stakeholders.
Integration of Digital Health Services
Currently our focus is on integrating digital health services with existing medical supply chains to streamline distribution and service delivery.
We will integrate existing resources in four steps:
1. Assess Current Resources: Review current medical, technical, human, and financial resources to understand the existing service range and capabilities.
2. Establish Partnerships: Build collaborations with local hospitals, pharmacies, and insurance companies to expand service scope and improve service quality.
3. Expand Professional Talent: Recruit experienced medical, technical, and management professionals to form a strong team.
4. Optimize Supply Chain Management: Integrate the supply chains for pharmaceuticals and medical equipment to ensure fast and efficient supply and distribution.
Seasonality
While the demand for healthcare services remains relatively stable year-round, seasonal trends do influence specific areas, such as preventive care during flu seasons or increased demand for chronic disease management in colder months.
Marketing Promotion Services
Since the acquisition of Tianjin Wangyi Cloud. Co., Ltd., the Company started its new business of provision of marketing promotion service to car insurance broker industry.
Since April 2024, through its subsidiary Tianjin Wangyi Cloud Technology Co., Ltd, the Company engaged in providing marketing promotion service to insurance broker agencies. The Company collects information from its promotion traffic suppliers and then filters, organizes, and evaluates the data to ensure its accuracy and relevance. It then provides potential car insurance purchaser information to its clients, who are insurance broker agencies. Through this process, the Company helps connect insurance brokers with prospective customers. The Company earns commissions from these agencies upon the successful transfer of information, aligning its revenue with the effectiveness of the connections it facilitates. The commission fees are calculated on a fixed amount per car user based on the agreements with different insurance brokers. The marketing promotion services are considered as a single performance obligation, as the Company’s responsibility was only limited to provide the potential car users’ information to insurance broker agencies, regardless of whether those car users finally purchasing car insurance or not.
Seasonality
Our business is affected by the seasonality in vehicle sales and promotional activities of auto insurance carriers in China market. Traditionally, higher levels of vehicle sales in China occur in September and October, which drives significant increases in sales of auto insurance policies. As we have a limited operating history for the marketing promotion services business, and the seasonal trends that we have experienced in the past may not be representative.
We will diversify our pool of suppliers as we develop our business to reduce the risk of our dependence on our major suppliers.
Our Suppliers
Sales of medical devices
Our subsidiaries source the medical devices, such as COVID-19 Rapid Antigen test kits, defibrillators and anesthesia laryngoscope, from its supplier in mainland China and Hong Kong, and source the service related to its provision of marketing promotion service from mainland China.
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Our subsidiaries enter into purchase agreements with the supplier in the ordinary course of business. Prices vary depending on the specific items they purchase in each purchase agreement. None of our subsidiaries have long-term agreements that obligate their supplier to continue supplying it with medical devices over the long term. Relationships with suppliers are subject to change from time to time. Changes in relationships with suppliers in the future could positively or negatively impact our subsidiaries’ net sales and operating profits. We believe our subsidiaries can be successful in mitigating negative effects resulting from unfavorable changes in the relationships with suppliers through, among other things, the development of new or expanded supplier relationships.
For the year ended March 31, 2026, the Company did not purchase medical devices from its suppliers.
Marketing Promotion Services
Currently, our suppliers are promotion traffic suppliers, which account for the majority of our total supplier costs. We may constantly adjust our supplier pool to optimize our procurement cost.
For the year ended March 31, 2026, three customers accounted for 31.9%, 20.6% and 10.5% for the Company’s total revenue from marketing promotion service business. For the year ended March 31, 2025, four customers accounted for 19.9%, 17.7%, 15.6% and 10.1% for the Company’s total revenue from marketing promotion service business. As of March 31, 2026, two customers accounted for 78.0% and 16.7% of the Company’s account receivable, net. As of March 31, 2025, two customers accounted for 76.9% and 16.5% of the Company’s account receivable, net.
We have entered into contracts with our suppliers. Our supplier agreements last for two or three years. Both parties have the right to terminate the agreement upon notifying the other party in advance. The supplier provides promotion traffic service and charges us a service fee on monthly or weekly basis under different charging items, or on an agreed-upon date. Both parties bear responsibilities to keep the business information confidential. The supplier agreements are governed by the law of PRC.
For the year ended March 31, 2026, one vendor accounted for 100.0% of the Company’s purchase of marketing promotion business. For the year ended March 31, 2025, one vendor accounted for 92.0% of the Company’s purchase of marketing promotion business. There was no vendor of the Company that accounted for greater than 10% of the Company’s carrying amount of accounts payable as of March 31, 2026 and 2025, respectively.
Our Customers
Sales of medical devices
Our medical devices business which includes the sale of defibrillators and anesthesia laryngoscopes primarily target medical product dealers and end-users such as hospitals. We do not currently have any long-term sale contracts with our customers. For the year ended March 31, 2026, the Company did not purchase medical devices from its suppliers.
Marketing Promotion Services
Our clients are well-known insurance carriers and insurance intermediaries in China. At present, we have established cooperation with several car insurance carriers across the country.
We have entered into corporation agreement with our clients. A typical corporation agreement lasts for two or three years. We provide marketing promotion services to clients and charge services fee per orders on weekly basis. Both parties bear responsibilities to keep the business information confidential. The corporation agreements are governed by the law of PRC.
For the year ended March 31, 2026, three customers accounted for 31.9%, 20.6% and 10.5% for the Company’s total revenue from marketing promotion service business. As of March 31, 2026, two customers accounted for 78.0% and 16.7% of the Company’s account receivable, net.
Online Healthcare Services Business
The primary clients of our healthcare services Business include companies such as Shiji Health Technology Co., Ltd. and Beijing Yimai Technology Co., Ltd., which are focused on health consulting services and medical device sales. The Company has established cooperative relationships with these customers, although actual business has not yet commenced. Our strategy focuses on building long-term partnerships by offering tailored health solutions.
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Competition
Radiation Oncology and Cancer Therapy Center Business
The oncology healthcare service market in the United States is fragmented and competition is intense. Our planned radiation oncology service and cancer therapy centers would compete primarily on a regional or local basis with government-owned and private hospitals that offer radiotherapy, diagnostic imaging and other oncology healthcare services either directly or in conjunction with third parties.
We would primarily compete with our competitors based on the range of services provided, the reputation of our cancer therapy and radiation oncology centers among doctors and patients in the U.S. and level of patient service and satisfaction.
In addition, we would compete with those who offer other types of available treatment methods that we do not offer, such as chemotherapy, surgery, different forms of radiotherapy that we do not offer, other alternative treatment methods commercialized in recent years and certain treatments that are currently in the experimental stage. These treatments may be more effective or less costly, or both, compared to the treatment methods that our cancer therapy and radiation oncology centers will provide.
iHealth COVID-19 Test Kit Business in the United States
The diagnostic testing industry, especially for COVID-19, is highly competitive, and given the significant interest and growth in COVID-19 related diagnostic tests, we expect ongoing intense competition from different sources, including from manufacturers and producers of diagnostic tests, vaccines and therapeutic treatments. In diagnostic testing, we anticipate facing competition from companies that have or are developing molecular tests (including centralized laboratory and POC tests) as well as antigen and antibody tests to detect SARS-CoV-2. In addition, we face competition from companies developing COVID-19, tests. We face potential competition from many sources, including academic institutions, public and private research institutions and governmental agencies.
In addition to competition from diagnostic testing companies, there are companies developing vaccines and therapeutic treatments for COVID-19. In December 2020 and February 2021, for example, the FDA issued Emergency Use Authorizations for three COVID-19 vaccines. If existing or future vaccines are widely distributed and compliantly administered or if therapeutic treatments are identified and become widely used, our COVID-19 testing opportunities and the market as a whole may shrink or disappear.
We believe the following factors affect our ability to compete successfully:
| ● | test accuracy; |
| ● | timeliness in delivery of test results; |
| ● | user experience; |
| ● | cost control; |
| ● | pricing; |
| ● | manufacturing capability; and |
| ● | access to market. |
Sales of Medical Devices
The medical device industry is intensely competitive, subject to rapid change and significantly affected by new product introductions and other market activities of industry participants. We compete or plan to compete with manufacturers and distributors of medical devices. Some of these competitors are large, well-capitalized companies with significantly greater market share and resources than we have. As a consequence, they are able to spend more on product development, marketing, sales and other product initiatives than we can. We also compete with smaller medical device companies that have single products or a limited range of products.
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We believe that the principal competitive factors in our industry are:
| ● | pricing; | |
| ● | name recognition; | |
| ● | product quality and selection; | |
| ● | product functionality, reliability and compatibility; | |
| ● | relations with healthcare professionals and customers; | |
| ● | distribution networks; | |
| ● | financial and human resources for sales and marketing; and | |
| ● | additional lines of products and the ability to offer rebates or bundle products to offer greater discounts or other incentives. |
Online Healthcare Services Business
China’s pharmaceutical retail market is experiencing significant growth, driven by the increasing adoption of chain store models and the rapid integration of online and offline sales channels. The landscape is evolving with heightened competition, rising operational costs, and a shift towards specialized pharmacies focused on personalized health services.
We believe we have the following Competitive Strengths:
| ● | Diverse product and service portfolio: Our extensive range of digital health solutions, including AI health management tools and offline treatment platforms, will position us ahead in the market. |
| ● | Strong supplier network: We will leverage our robust supplier relationships to secure high-quality, competitively priced medicines, enhancing our supply chain efficiency. |
| ● | Advanced technological capabilities: Our big data analytics and AI integration will enable seamless connectivity with insurance companies and other partners, driving continuous innovation and service enhancements. |
Marketing promotion service business
We believe we are well-positioned as a pioneer in the insurance technology industry, with a strategic focus on serving auto insurance carriers. Unlike certain competitors who primarily focus on client acquisition or policy issuance processes, we differentiate ourselves by leveraging internet technology and online traffic generation. Our goal is to build a leading business platform that bridges insurance brokers and carriers, facilitating their transition from traditional offline promotional methods to digital online channels.
We believe our business is distinguished by several key characteristics that we expect will contribute to our continued growth and market positioning nationally. These characteristics include:
| ● | Our managers have sharp business judgment, execution power and a keen eye on the future development trend of the industry. We have also cultivated a corporate culture that inspires insurance consumers to appreciate and understand all aspects of insurance products. We believe this culture is the foundation of innovative business models for our industry. |
| ● | We analyze user needs, behaviors, patterns and preferences to develop data-driven personalized content and service ranges. We have an accurate match between the insurance company clients and the insurance buyers and often successfully match the two groups based on each others’ unique needs. |
| ● | We have high standard in our recruitment and aim to build a diverse and multi-talented team that is able to generate up-to-date industry materials in multiple forms, including articles, audios and videos. Meanwhile, we are careful in providing insights about most recent industry policies. Given that regulations over insurance industry in China are strict and intricate, our editorial team also offers detailed policy analysis and apply their professional experience and knowledge in our articles. |
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Intellectual Property
We have registered a website at http://www.ahgtop.com/en/index.html. In addition, our intellectual property portfolio currently also includes a domain name linked to our digital healthcare platform, https://www.dyihui.com/.
To date, we have not experienced a material misappropriation of our intellectual property. Despite our efforts to protect our proprietary rights, third parties may attempt to use, copy or otherwise obtain and market or distribute our proprietary technology or develop a platform that is similar to our marketplace. We cannot be certain that the steps we have taken or will take in the future will prevent misappropriations of our technology and intellectual property rights. For a description of the risks related to our intellectual property rights, please see “Item 3. Key Information-D. Risk Factors-Risks Related to Our Business and Industry-We may be unable to protect our proprietary intellectual property rights from unauthorized use, such that our brand, reputation and business may be negatively impacted.”
Regulation
PRC Regulations
This section sets forth a summary of the most significant rules and regulations that affect our business activities in China.
Regulations Relating to Microlending
The Guidance on the Pilot Establishment of Microlending Companies jointly promulgated by the CBRC and the PBOC in May 2008 allows provincial governments to approve the establishment of microlending companies on a test basis. Based on this guidance, many provincial governments in China, including the Xinjiang Uygur Autonomous Region, promulgated local implementation rules on the administration of microlending companies. For example, Xinjiang Financial Service Office, the regulatory authority for microlending companies in the Xinjiang Uygur Autonomous Region, promulgated the Interim Measures for the Administration of Microlending Companies in Xinjiang Uygur Autonomous Region in August 2017, to impose management duties upon the relevant regulatory authorities and to specify more detailed requirements on microlending companies, including, among others, (i) microlending companies are prohibited from engaging in the receipt of deposits from the public and illegal fund-raising; (ii) the modification of certain company registration issues shall be subject to the approval by the relevant regulatory authorities; and (iii) the microlending company shall engage in the loan business in the place of registration and also in or around the surrounding counties within the same municipality as the place of registration, and the loan balance for the borrowers in the county of registration shall not be less than the 80% of the aggregate loan balance.
In November 2017, the Internet Finance National Rectification Office issued the Notice on the Immediate Suspension of Approvals for the Establishment of Online Microlending Companies, which took effect immediately, and provides that the relevant regulatory authorities of microlending companies at all levels shall suspend the approval of the establishment of online microlending companies and the approval of any microlending business conducted across provincial lines.
On December 1, 2017, the Internet Finance National Rectification Office and the Online Lending National Rectification Office jointly issued Circular 141, which suspends approval of new network microlending companies and further imposes measures to strengthen the regulation of network microlending companies.
On December 8, 2017, the Online Lending National Rectification Office promulgated the Implementation Plan of Specific Rectification for Risks in Microlending Companies and Online Microlending Companies, or the Rectification Implementation Plans of Online Microlending Companies. Pursuant to the Rectification Implementation Plans of Online Microlending Companies, “online microlending loans” are defined as microlending loans provided through the Internet by online microlending companies controlled by Internet enterprises. The features of online microlending loans include online borrower acquisition, credit assessment based on the online information collected from the Internet enterprise’s business operations and the borrower’s Internet usage, as well as online loan application, approval and funding.
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Consistent with the Guidance on the Pilot Establishment of Microlending Companies and Circular 141, the Rectification Implementation Plans of Online Microlending Companies emphasize several aspects where inspection and rectification measures must be carried out for the online microlending loans industry, which include, among others, (i) the online microlending companies shall be approved by the competent authorities in accordance with the applicable regulations promulgated by the State Council, and the approved online microlending companies subsequently in violation of any regulatory requirements shall be re-examined; (ii) qualification requirements to conduct online micro-loan business (including the qualification of sponsor shareholders, the sources of borrowers, the Internet scenario and the digital risk-management technology); (iii) whether the qualification and funding source of the shareholders of online microlending companies are in compliance with the applicable laws and regulations; (iv) whether the “integrated actual interest” (namely the aggregated borrowing costs charged to borrowers in the form of interest and various fees) are annualized and subject to the limit on the interest rate of private lending set forth in the Private Lending Judicial Interpretations issued by the Supreme People’s Court and, whether any interest, handling fee, management fee or deposit are deducted from the principal of loans provided to the borrowers in advance, prior to the repayment of the loan; (v) whether campus loans or online microlending loans with no specific scenario or designated use of loan proceeds are granted; (vi) with respect to the loan business conducted in cooperation with third-party institutions, whether the online microlending companies outsource the core business (including the credit assessment and risk control), or accept any credit enhancement service (whether or not in a disguised form) provided by any third-party institutions with no approval to provide financing guarantee and whether any applicable third-party institution collects any interest or fees from the borrowers; and (vii) entities that conduct online microlending loans business without relevant approval or license for lending business shall be shut down and banned.
The Rectification Implementation Plans of Online Microlending Companies also sets forth that all related institutions shall be subject to inspection and investigation. Depending on the results, different measures shall be implemented: (i) for institutions holding online microlending licenses but do not meet the qualification requirements to conduct online micro-loan business, their online microlending licenses shall be revoked and such institutions will be prohibited from conducting loan business outside the administrative jurisdiction of their respective approving authorities; and (ii) for institutions holding online microlending licenses that meet the qualification requirements to conduct online micro-loan business but were found not in compliance with other requirements, such as the requirements on the integrated actual interest rate, the scope of loan and the cooperation with third-party institutions, such institutions shall take rectification measures in a period to be separately specified by authorities, and in the event that the rectification does not meet the authorities’ requirements, such institutions shall be subject to several sanctions, including revocation of license and an order to cease business operations.
On September 7, 2020, CBIRC issued the Circular on Strengthening the Supervision and Administration of Microlending Companies (“Microlending Circular”). The Microlending Circular provides that the microlending companies shall mainly operate the lending business and shall act in accordance with the requirements regarding the loan concentration, loan purposes, fund management, debt collection and disclosure. Local authorities shall enhance supervision and administration of the establishment of the microlending companies and suspend newly-incorporated microlending companies from engaging in the Internet microlending business and other inter-provincial business.
On November 2, 2020, CBIRC and PBOC published the Interim Administrative Measures for Online Microlending Business (Draft for Comment) (“Draft Interim Administrative Measures”), for public review and comments. Pursuant to the Draft Interim Administrative Measures, “online microlending business” refers to any microlending business engaged in by a microlending company through using big data, cloud computing, mobile internet and other technical means, utilizing internally generated data and information on customer operation, online consumption, online transaction, etc., accumulated via internet platforms as well as other data and information obtained through legitimate channels to analyze and appraise the credit risk of borrowing customers, determine the mode and quota of loans, and complete such processes as loan application, risk review, loan approval, loan granting and loan recovery online. Online microlending business engaged in by a microlending company shall mainly be carried out in the provincial-level administrative region to which its place of registration belongs. Without the approval of the banking regulator under the State Council, no microlending company may carry out online microlending business across provincial-level administrative regions. The registered capital of a microlending company which engages in online microlending business shall not be less than CNY1 billion and shall be one-off paid-up monetary capital. The registered capital of a microlending company which engages in online microlending business across provincial-level administrative regions shall not be less than CNY5 billion and shall be one-off paid-up monetary capital. In principle, the balance of single-account online microlending loans granted to a natural person shall not exceed CNY300,000 or one-third of its average annual income in the last three years, between which the lower one shall be the maximum loan amount; and in principle, the balance of single-account online microlending loans granted to a legal person or any other organization and its related parties shall not exceed CNY1 million. The Draft Interim Administrative Measures was released for public comment only, there remains substantial uncertainty regarding the Draft Interim Administrative Measures, including with respect to its final content, adoption timeline or effective date.
We engage in online microlending businesses through our subsidiary Wusu Company, which has owned the business scope of microlending. However, we have ceased new microlending business as the principal business scope of Wusu Company has been changed to trading, provision of technological promotion services and import and export since September 30, 2019, yet still entitled to the credit right over the loans issued prior to the change of the business scope.
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Regulations Relating to Foreign Investment
PRC Foreign Investment Law
The Foreign Investment Law was formally adopted by the second session of the 13th National People’s Congress on March 15, 2019, which has become effective on January 1, 2020 and, together with their implementation rules and ancillary regulations, has replaced the trio of existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law. Meanwhile, the Regulations for the Implementation of the Foreign Investment Law has come into effect as of January 1, 2020, which clarified and elaborated the relevant provisions of the Foreign Investment Law. The organization form, organization and activities of foreign-invested enterprises shall be governed, among others, by the laws of the Company Law of the People’s Republic of China and the Partnership Enterprise Law of the People’s Republic of China. Foreign-invested enterprises established before the implementation of this Law may retain the original business organization and so on within five years after the implementation of this Law.
The Foreign Investment Law is formulated to further expand opening-up, vigorously promote foreign investment and protect the legitimate rights and interests of foreign investors. According to the Foreign Investment Law, foreign investments are entitled to pre-entry national treatment and are subject to negative list management system. The pre-entry national treatment means that the treatment given to foreign investors and their investments at the stage of investment access shall not be less favorable than that of domestic investors and their investments. The negative list management system means that the state implements special administrative measures for access of foreign investment in specific fields. The Foreign Investment Law does not mention the relevant concept and regulatory regime of VIE structures. See “Item 3. Key Information-D. Risk Factors-Risks Related to Doing Business in the People’s Republic of China-Substantial uncertainties exist with respect to the interpretation and implementation of the newly enacted PRC Foreign Investment law and how it may impact the viability of our current corporate structure, corporate governance and business operations.”
Foreign investors’ investment, earnings and other legitimate rights and interests within the territory of the PRC shall be protected in accordance with the law, and all national policies on supporting the development of enterprises shall equally apply to foreign-invested enterprises. Among others, the state guarantees that foreign invested enterprises participate in the formulation of standards in an equal manner and that foreign-invested enterprises participate in government procurement activities through fair competition in accordance with the law. Further, the state shall not expropriate any foreign investment except under special circumstances. Under special circumstances, the state may levy or expropriate the investment of foreign investors in accordance with the law for the needs of the public interest. The expropriation and requisition shall be conducted in accordance with legal procedures and timely and reasonable compensation shall be given. In carrying out business activities, foreign invested enterprises shall comply with relevant provisions on labor protection, social insurance, tax, accounting, foreign exchange and other matters stipulated in laws and regulations.
According to the Measures for the Security Review of Foreign Investment promulgated by National Development and Reform Commission, the NDRC, and Ministry of Commerce of the People’s Republic of China, the MOC, on December 19, 2020 and became effective on January 18, 2021, the NDRC and the MOC will establish a working mechanism office in charge of the security review of foreign investment. Such measures define foreign investment as direct or indirect investment by foreign investors in the PRC, which includes (i) investment in new onshore projects or establishment of wholly foreign owned onshore companies or joint ventures with foreign investors; (ii) acquiring equity or asset of onshore companies by merger and acquisition; and (iii) onshore investment by and through any other means. Investment in certain key areas with bearing on national security, such as important cultural products and services, important information technology and Internet services and products, key technologies, and other important areas with bearing on national security which results in the acquisition of de facto control of investee companies, shall be filed with a specifically established office before such investment is carried out. What may constitute “onshore investment by and through any other means” or “de facto control” could be broadly interpreted under such measures. It is likely that control through contractual arrangement be regarded as de facto control based on provisions applied to security review of foreign investment in the free trade zone. Failure to make such filing may subject such foreign investor to rectification within prescribed period, and will be recorded as negative credit information of such foreign investor in the relevant national credit information system, which would then subject such investors to joint punishment as provided by relevant rules. If such investor fails to or refuses to undertake such rectification, it would be ordered to dispose of the equity or asset and to take any other necessary measures so as to return to the status quo and to erase the impact to national security.
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Industry Catalog Relating to Foreign Investment
Investment activities in the PRC by foreign investors are principally governed by the Catalog of Industries for Encouraging Foreign Investment, or the Catalog, which became effective on January 27, 2021, and the Special Administrative Measures (Negative List) for Foreign Investment Access, or the Negative List promulgated by the MOC, which became effective on July 23, 2020 and has been amended from time to time by the MOC and the National Development and Reform Commission. It sets out the industries in which foreign investments are prohibited or restricted. Foreign investors will not make investments in prohibited industries, while must satisfy certain conditions stipulated in the Negative List for investment in restricted industries. According to the Negative List, the proportion of foreign investment in entities engaged in value-added telecommunication services (excluding e-commerce, domestic multi-party communications services, store-and-forward services, and call center services) shall not exceed 50%. The most updated Negative List, issued on 27 December, 2021 and became effective on 1 January, 2022, stipulates that any PRC domestic enterprise engaging in the fields prohibited by the negative list shall obtain the consent of the relevant competent PRC authorities for overseas listing, and the foreign investors shall not participate in the operation and management of such enterprise, and the shareholding percentage of the foreign investors in such enterprise shall be subject to the relevant administrative provisions of PRC domestic securities investment by foreign investors. Such negative list does not further elaborate whether existing overseas listed enterprise will be subject to such requirements. The staff of the NDRC addressed in an interview on 27 December, 2021 that certain existing overseas listed enterprises whose foreign investors’ shareholding percentage exceed the aforementioned threshold are not required to make adjustment or deduction.
Foreign Investment in Value-Added Telecommunication Services
The Provisions on Administration of Foreign Invested Telecommunications Enterprises promulgated by the State Council in December 2001 and subsequently amended in September 2008 and 2016 prohibit a foreign investor from owning more than 50% of the total equity interest in any value-added telecommunications service business in China and require the major foreign investor in any value-added telecommunications service business in China to have a good and profitable record and operating experience in this industry. The Catalog and the Foreign Investment Negative List allow a foreign investor to own more than 50% of the total equity interest in an e-commerce business.
In July 2006, the Ministry of Information Industry, the predecessor of the MIIT, issued the Circular on Strengthening the Administration of Foreign Investment in the Operation of Value-added Telecommunications Business, pursuant to which a domestic PRC company that holds an operating license for value-added telecommunications business, which we refer to as a VATS License, is prohibited from leasing, transferring or selling the VATS License to foreign investors in any form and from providing any assistance, including resources, sites or facilities, to foreign investors that conduct a value-added telecommunications business illegally in China. Further, the domain names and registered trademarks used by an operating company providing value-added telecommunications services must be legally owned by that company or its shareholders. In addition, the VATS License holder must have the necessary facilities for its approved business operations and to maintain the facilities in the regions covered by its VATS License.
In light of the above restrictions and requirements, we operate our website through Hexin Digital, which has received the VATS License necessary to provide online information service and other value-added telecommunications services in China.
Anti-money Laundering Regulations
The PRC Anti-money Laundering Law, which became effective in January 2007, sets forth the principal anti-money laundering requirements applicable to financial institutions as well as non-financial institutions with anti-money laundering obligations, including the adoption of precautionary and supervisory measures, establishment of various systems for client identification, retention of clients’ identification information and transactions records, and reports on large transactions and suspicious transactions. According to the PRC Anti-money Laundering Law, financial institutions subject to the PRC Anti-money Laundering Law include banks, credit unions, trust investment companies, stock brokerage companies, futures brokerage companies, insurance companies and other financial institutions as listed and published by the State Council, while the list of the non-financial institutions with anti-money laundering obligations will be published by the State Council. The PBOC and other governmental authorities issued a series of administrative rules and regulations to specify the anti-money laundering obligations of financial institutions and certain non-financial institutions, such as payment institutions.
In July 2018, the PBOC issued the Notice on Strengthening Supervision on Anti-money Laundering by Certain Non-financial Institutions, stipulating that the following non-financial institutions shall undertake the responsibilities of anti-money laundering and anti-terrorist financing during certain of their respective business operations: (i) real estate development enterprises and real estate agencies while selling real estates and providing service for real estate transactions; (ii) precious metal traders and precious metals trading platforms while conducting or providing service for precious metal spot trading; (iii) accounting firms, law firms and notary offices while conducting real estate transactions, asset management, bank account and securities account management, fund-raising for establishment or operation of enterprises and business entities transactions on behalf of their clients; and (iv) company service providers providing service for establishment, operation and management of companies.
On October 10, 2018, the PBOC, the CBIRC and CSRC together promulgated the Measures for the Anti-money Laundering and Anti-terrorist Finance of Internet Finance, which further specified that, any Internet finance institutions incorporated upon approval or upon record-filing by applicable regulatory authority, shall report any forms of cash receipts and payments whose transaction value reaches or exceeds RMB 50,000 or foreign currency equivalent of US$10,000 on a per-transaction or cumulative basis on a given day, within five working days from the date when such transaction takes place.
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Regulations on Value-Added Telecommunication Services
The Telecommunications Regulations promulgated by the State Council and its related implementation rules, including the Catalog of Classification of Telecommunications Business issued by the MIIT, amended in 2019 categorize various types of telecommunications and telecommunications-related activities into basic or value-added telecommunications services, and Internet information services, or ICP services, and on-line data processing and transaction processing services, are classified as value-added telecommunications businesses. In 2009, the MIIT promulgated the Administrative Measures on Telecommunications Business Operating Licenses, amended in July 2017, which set forth more specific provisions regarding the types of licenses required to operate value-added telecommunications services, the qualifications and procedures for obtaining such licenses and the administration and supervision of such licenses. Under these regulations, a commercial operator of value-added telecommunications services must first obtain a license for value-added telecommunications business, or VATS License, from the MIIT or its provincial level counterparts.
In September 2000, the State Council also issued the Administrative Measures on Internet Information Services, which was amended in January 2011. Pursuant to these measures, “Internet information services” refer to provision of Internet information to online users, and are divided into “commercial Internet information services” and “non-commercial Internet information services.” A commercial Internet information services operator must obtain a VATS License for Internet information services, or ICP License, from the relevant government authorities before engaging in any commercial Internet information services operations in China. The ICP License has a term of five years and can be renewed within 90 days before expiration.
We operate our social e-commerce platform Xiaobai Maimai which was launched in May 2020 through Hexin Digital. Xiaobai Maimai is a form of social e-commerce mobile platform offering high-quality and affordable branded products. Xiaobai Maimai leverages our integrated buyer resources to select and source goods globally, and rewards users with a small commission for every purchase, share or recommendation of a product made to friends. Hexin Digital has obtained its EDI License and ICP License for e-commerce business, which is qualified for providing online transactions between consumers and third-party merchants.
Regulations Relating to Product Quality and Consumer Rights Protection
Pursuant to the Product Quality Law of PRC promulgated by the Standing Committee of the National People’s Congress in February 1993, and as amended in July 2000, August 2009 and December 2018 respectively, or the Product Quality Law, a seller must establish and practise a check-for-acceptance system for replenishment of its stock, and examine the quality certificates and other marks and must also adopt measures to keep the products for sale in good quality. Violation of the Product Quality Law could result in various penalties, including the imposition of fines, suspension of business operations, revocation of business licenses or criminal liabilities. Where a defective product causes physical injury to a person or damage to another person’s property, the victim may claim compensation from the manufacturer or from the seller of the product. If the seller pays compensation and it is the manufacturer that should bear the liability, the seller has a right of recourse against the manufacturer. Similarly, if the manufacturer pays compensation and it is the seller that should bear the liability, the manufacturer has a right of recourse against the seller.
The PRC Consumer Rights and Interests Protection Law, as amended and effective as of March 15, 2014, the Online Transactions Measures and the E-Commerce Law, have provided stringent requirements and obligations on business operators, including Internet business operators and platform service providers. For example, consumers are entitled to return goods purchased online, subject to certain exceptions, within seven days upon receipt of such goods without stating a reason for such return. To ensure that sellers and service providers comply with these laws and regulations, the platform operators are required to implement rules governing transactions on the platform, monitor the information posted by sellers and service providers, and report any violations by such sellers or service providers to the relevant authorities. In addition, online marketplace platform providers may, pursuant to the relevant PRC consumer protection laws, be exposed to liabilities if the lawful rights and interests of consumers are infringed upon in connection with consumers’ purchase of goods or acceptance of services on online marketplace platforms and the online marketplace platform providers fail to provide consumers with the contact information of the seller or manufacturer. In addition, online marketplace platform providers may be jointly and severally liable with sellers and manufacturers if they are aware or should be aware that any seller or manufacturer is using the online platform to infringe upon the lawful rights and interests of consumers and fail to take measures necessary to prevent or stop such activity.
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The Civil Code of the PRC, effective on January 1, 2021, also provides that if an online service provider is aware that an online user is committing infringing activities, such as selling counterfeit products, through its Internet services and fails to take necessary measures, it shall be jointly liable with the said online user for such infringement. If the online service provider receives any notice from the infringed party on any infringing activities, the online service provider shall take necessary measures, including deleting, blocking, and unlinking the infringing content, in a timely manner. Otherwise, it will be jointly liable with the relevant online user for extended damages.
We are subject to these laws and regulations as an online supplier of commodities and a provider of an online marketplace platform. Failure to comply with the PRC Consumer Rights and Interests Protection Law and other laws and regulations mentioned above may subject us to civil liabilities such as refunding purchase prices, replacement of commodities, repairing or ceasing damages, compensation, and restoring reputation, and could subject us or the responsible individuals to criminal penalties when personal damages are involved or if the circumstances are severe.
Regulation and Classification of Medical Devices
Pursuant to the Regulations on the Supervision and Administration of Medical Devices promulgated on January 4, 2000 and came into effect on June 1, 2014 (the “Supervision and Administration of Medical Devices”), which was latest amended on February 9, 2021 and came into effect on June 1, 2021, the National Medical Products Administration shall be responsible for the national administration and supervision of medical devices and its local counterparts are responsible for the local administration and supervision of medical devices.
Under this regulation, medical devices have been classified into three categories based on the degree of risk. Class I medical devices shall refer to those devices with low level of risks and whose safety and effectiveness can be ensured through routine administration. Class II medical devices shall refer to those devices with moderate risks that must be strictly controlled and regulated to ensure their safety and effectiveness. Class III medical devices shall refer to those devices with relatively high risks that must be strictly controlled and regulated through special measures to ensure their safety and effectiveness.
Operation of Medical Devices
Pursuant to the Supervision and Administration of Medical Devices, and the Administrative Measures on the Operation Supervision of Medical Devices, promulgated on July 30, 2014, and came into effect on October 1, 2014, then amended on March 10, 2022, and came into effect on May 1, 2022, filing and licensing are not required for the operation of Class I medical devices. Operators engaged in the operation of Class II medical devices are subject to filing administration and will receive a Class II Medical Device Selling Record Certificate upon satisfaction of filing requirement and no pre-approval of the authorities is needed. In addition, the operators are required to guarantee the safety and effectiveness of Class II medical devices, or the record-filing shall be canceled, and an announcement shall be made. While operators engaged in the operation of Class III medical devices are subject to pre-approval licensing administration and will receive a Class III Medical Device Operation License upon the authorities’ approval. A Class III Medical Device Operation License is valid for five years and may be renewed six months prior to its expiration date. A Class II Medical Device Selling Record Certificate will be effective in the long term until it is revoked or canceled by the issuing authorities.
To engage in business operations of medical devices, the following requirements shall be met (a qualifying enterprise must have):
| ● | A quality control institution or staff corresponding to the business scope and scale, and the staff shall have relevant education or professional titles certified by the state. |
| ● | An operation and storage premise corresponding to the business scope and scale. |
| ● | Storage conditions corresponding to the business scope and scale; warehouses are not required if all storage is commissioned to other operators of medical devices. |
| ● | A quality control system corresponding to the medical devices concerned. |
| ● | Capability for professional guidance, technical training and after-sale service corresponding to the medical devices it operates; or it has come into an agreement on technical support with a relevant institution. |
An enterprise to be engaged in business operations of Class III medical devices shall also have a computerized information management system compliant with quality standards to ensure traceability of products. An enterprise to be engaged in business operations of Class I or Class II medical devices is encouraged to set up such a system.
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Advertisements of Medical Devices
Pursuant to the Regulations on Tentative Measures for the Censorship of Advertisement for Drugs, Medical Devices, Dietary Supplements, Food Formula for Special Medical Purpose promulgated by SAMR on December 24, 2019 and came into effect on March 1, 2020, the State Administration for Market Regulation is responsible for organizing and guiding the review of advertisements for drugs, medical devices, health foods and formula foods for special medical purposes. The administrations for market regulation and drug administrations of all provinces, autonomous regions and centrally administered municipalities shall be responsible for the review of advertisements for drugs, medical devices, health food and formula food for special medical purposes, and may entrust other administrative authorities to implement review of advertisements pursuant to the law.
The validity period of the advertisement approval number for drugs, medical devices, health food and formula food for special medical purposes shall be consistent with the shortest validity period of the product registration certificate, filing certificate or production license. If no valid period is prescribed in the product registration certificate, filing certificate or production license, the valid period of the advertisement approval number shall be two years.
Advertisements for drugs, medical devices, health food and formula food for special medical purposes shall be true and legitimate and shall not contain any false or misleading contents. Advertisers shall be responsible for the veracity and legitimacy of the contents of advertisements for drugs, medical devices, health food and formula food for special medical purposes.
Regulation on Intellectual Property Rights
The PRC has adopted comprehensive legislation governing intellectual property rights, including trademarks. The PRC Trademark Law and its implementation rules protect registered trademarks. The PRC Trademark Law has adopted a “first-to-file” principle with respect to trademark registration. The Trademark Office under the State Administration of Industry and Commerce is responsible for the registration and administration of trademarks throughout the PRC, and grants a term of ten years to registered trademarks and another ten years if requested upon expiry of the initial or extended term. Trademark license agreements must be filed with the Trademark Office for record. As of the date of this annual report on Form 20-F, we have no registered trademarks.
Regulations Relating to Indirect Transfers and Dividend Withholding Tax
Pursuant to the EIT Law and its implementation rules, if a non-resident enterprise has not set up an organization or establishment in the PRC, or has set up an organization or establishment but the income derived has no actual connection with such organization or establishment, it will be subject to a withholding tax on its PRC-sourced income at a rate of 10%. In connection with the EIT Law, the SAT issued Circular 698, which became effective as of January 1, 2008, Circular 59 on April 30, 2009, and the SAT Announcement 7, on February 3, 2015. By promulgating and implementing the above, the PRC tax authorities have strengthened their scrutiny over the direct or indirect transfer of equity interest in a PRC resident enterprise by a non-PRC resident enterprise. Pursuant to SAT Announcement 7, if a non-resident enterprise, or referred to as a transferor, transfers its equity in an offshore enterprise which directly or indirectly owns PRC taxable assets, including ownership interest in PRC resident companies, or the Taxable Properties, without a “reasonable commercial purpose”, such transfer shall be deemed as a direct transfer of such Taxable Properties. The payer, or referred as a transferee, in such transfer shall be the withholding agent, and is obligated to withhold and remit the enterprise income tax to the relevant PRC tax authority. If a transferor fails to declare for payment timely or in full of the tax due on proceeds from indirect transfer of PRC taxable assets and the withholding agent also fails to withhold such tax, the tax authority shall, in addition to supplementary collection of such tax, also charge for interest on a daily basis from the transferor according to the EIT Law and its implementation rules. Factors that may be taken into consideration when determining whether there is a reasonable commercial purpose include, among other factors, the value of the transferred equity, offshore taxable situation of the transaction, the offshore structure’s economic essence and duration and trading fungibility. If an equity transfer transaction satisfies all the requirements mentioned above, such transaction will be considered an arrangement with reasonable commercial purpose. On October 17, 2017, the SAT issued Bulletin 37, which came into effect on December 1, 2017 and amended in June 2018, which, among others, repeals certain rules stipulated in Circular 7. Bulletin 37 further details and clarifies the tax withholding methods in respect of income of non-resident enterprises.
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Pursuant to the Double Taxation Avoidance Arrangement, the withholding tax rate in respect to the payment of dividends by a PRC enterprise to a Hong Kong enterprise is reduced to 5% from a standard rate of 10% if the Hong Kong enterprise directly holds at least 25% of the PRC enterprise. Pursuant to Circular 81, a Hong Kong resident enterprise must meet the following conditions, among others, in order to enjoy the reduced withholding tax: (i) it must be the beneficial owners of the relevant dividends; and (ii) it must have directly owned at least 25% of the PRC resident enterprise throughout the 12 months prior to receiving the dividends. However, a transaction or arrangement entered into for the primary purpose of enjoying a favorable tax treatment should not be a reason for the application of the favorable tax treatment under the Double Taxation Avoidance Arrangement. If a taxpayer inappropriately is entitled to such favorable tax treatment, the competent tax authority has the power to make appropriate adjustments. In August 2015, the State Administration of Taxation promulgated Circular 60, which became effective on November 1, 2015. Circular 60 provides that non-resident enterprises are not required to obtain pre-approval from the relevant tax authority in order to enjoy the reduced withholding tax rate. Instead, non-resident enterprises and their withholding agents may, by self-assessment and on confirmation that the prescribed criteria to enjoy the tax treaty benefits are met, directly apply the reduced withholding tax rate, and file necessary forms and supporting documents when performing tax filings, which will be subject to post-tax filing examinations by the relevant tax authorities. On October 14, 2019, the State Administration of Taxation promulgated a new Administrative Measures for Non-Resident Taxpayers to Enjoy Treaty Benefits, or Circular 35, which became effective on January 1, 2020 and replaced and repealed Circular 60. However, Circular 35 sets forth similar rules that non-resident enterprises and their withholding agents shall enjoy treaty benefit by means of “self-judgment of eligibility, declaration of entitlement, and retention of relevant materials for future reference”. Accordingly, Hexindai HK, our Hong Kong subsidiary, may be able to enjoy the 5% withholding tax rate for the dividends they receive from Hexin Yongheng, our PRC subsidiary, if it satisfies the conditions prescribed under Circular 81 and other relevant tax rules and regulations. However, according to Circular 81 and Circular 35, if the relevant tax authorities consider the transactions or arrangements we have are for the primary purpose of enjoying a favorable tax treatment, the relevant tax authorities may adjust the favorable withholding tax in the future.
According to the Circular on Several Issues regarding the “beneficial owner” in Tax Treaties, which was issued on February 3, 2018 by the SAT and has taken effect from April 1, 2018, or Circular 9, when determining the applicant’s status of the “beneficial owner” regarding tax treatments in connection with dividends, interests or royalties in the tax treaties, several factors, including without limitation whether the applicant is obligated to pay more than 50% of his or her income in 12 months to residents in a third country or region, whether the business operated by the applicant constitutes the actual business activities, and whether the counterparty country or region to the tax treaties levies any tax or grants tax exemption on relevant incomes or levies tax at an extremely low rate, will be taken into account, and such determination will be analyzed according to the actual circumstances of the specific cases. Circular 9 further provides that applicants who intend to prove his or her status of the “beneficial owner” shall submit the relevant documents to the relevant tax authority according to Circular 35. Based on Circular 35, non-resident enterprises are not required to file supporting documents when submitting one necessary form to the relevant tax authority in order to enjoy the reduced withholding tax rate. Instead, non-resident enterprises and their withholding agents may, by self-assessment and on confirmation that the prescribed criteria to enjoy the tax treaty benefits are met, directly apply the reduced withholding tax rate, and preserve the supporting documents for post-tax filing examinations by the relevant tax authorities. However, if a competent tax authority finds out that it is necessary to apply the general anti-tax avoidance rules, it may start general investigation procedures for anti-tax avoidance and adopt corresponding measures for subsequent administration.
Regulations Relating to Foreign Exchange
Regulation on Foreign Currency Exchange
The principal regulations governing foreign currency exchange in China are the Foreign Exchange Administration Regulations, most recently amended in August 2008. Under the PRC foreign exchange regulations, payments of current account items, such as profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from SAFE by complying with certain procedural requirements. By contrast, approval from or registration with appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital account items, such as direct investments, repayment of foreign currency-denominated loans, repatriation of investments and investments in securities outside of China.
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In November 2012, SAFE promulgated the Circular of Further Improving and Adjusting Foreign Exchange Administration Policies on Foreign Direct Investment, mostly recently amended in December 2019, which substantially amends and simplifies the current foreign exchange procedure. Pursuant to this circular, the opening of various special purpose foreign exchange accounts, such as pre-establishment expenses accounts, foreign exchange capital accounts and guarantee accounts, the reinvestment of RMB proceeds derived by foreign investors in the PRC, and remittance of foreign exchange profits and dividends by a foreign-invested enterprise to its foreign shareholders no longer require the approval or verification of SAFE, and multiple capital accounts for the same entity may be opened in different provinces, which was not possible previously. In addition, SAFE promulgated another circular in May 2013, which specifies that the administration by SAFE or its local branches over direct investment by foreign investors in the PRC must be conducted by way of registration and banks must process foreign exchange business relating to the direct investment in the PRC based on the registration information provided by SAFE and its branches. On February 13, 2015, the SAFE promulgated the Notice on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning Direct Investment, or SAFE Notice 13. After SAFE Notice 13 became effective on June 1, 2015, instead of applying for approvals regarding foreign exchange registrations of foreign direct investment and overseas direct investment from SAFE, entities and individuals will be required to apply for such foreign exchange registrations from qualified banks. The qualified banks, under the supervision of the SAFE, will directly examine the applications and conduct the registration.
On March 30, 2015, the SAFE promulgated Circular 19, to expand the pilot reform of the administration of the settlement of the foreign exchange capitals of foreign-invested enterprises nationwide. Circular 19 allows foreign-invested enterprises to make equity investments by using RMB fund converted from foreign exchange capital. However, Circular 19 continues to, prohibit foreign-invested enterprises from, among other things, using RMB fund converted from its foreign exchange capitals for expenditure beyond its business scope, providing entrusted loans or repaying loans between non-financial enterprises.
On June 9, 2016, the SAFE promulgated Circular 16, which expands the application scope from only the capital of the foreign-invested enterprises to the capital, the foreign debt fund and the fund from oversea public offering. Also, Circular 16 allows the enterprises to use their foreign exchange capitals under capital account allowed by the relevant laws and regulations.
On October 23, 2019, the SAFE promulgated the Notice of the Administration of Foreign Exchange on Further Promoting the Convenience of Cross-Border Trade and Investment, which, among other things, non-investment foreign-invested entities may use foreign exchange capital or Renminbi funds converted from the foreign exchange capital to make domestic equity investments, provided that such investments should comply with relevant PRC laws and regulations.
Regulations on Foreign Exchange Registration of Overseas Investment by PRC Residents
SAFE issued the SAFE Circular on Relevant Issues Relating to Domestic Resident’s Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, that became effective in July 2014, replacing the previous SAFE Circular 75. SAFE Circular 37 regulates foreign exchange matters in relation to the use of special purpose vehicles, or SPVs, by PRC residents or entities to seek offshore investment and financing or conduct round trip investment in China. Under SAFE Circular 37, a SPV refers to an offshore entity established or controlled, directly or indirectly, by PRC residents or entities for the purpose of seeking offshore financing or making offshore investment, using legitimate onshore or offshore assets or interests, while “round trip investment” refers to direct investment in China by PRC residents or entities through SPVs, namely, establishing foreign-invested enterprises to obtain the ownership, control rights and management rights. SAFE Circular 37 provides that, before making contribution into an SPV, PRC residents or entities are required to complete foreign exchange registration with SAFE or its local branch. SAFE promulgated the Notice on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning Direct Investment in February 2015, which took effect on June 1, 2015 and was further amended on December 30, 2019. This notice has amended SAFE Circular 37 requiring PRC residents or entities to register with qualified banks rather than SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing.
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PRC residents or entities who had contributed legitimate onshore or offshore interests or assets to SPVs but had not obtained registration as required before the implementation of the SAFE Circular 37 must register their ownership interests or control in the SPVs with qualified banks. An amendment to the registration is required if there is a material change with respect to the SPV registered, such as any change of basic information (including change of the PRC residents, name and operation term), increases or decreases in investment amount, transfers or exchanges of shares, and mergers or divisions. Failure to comply with the registration procedures set forth in SAFE Circular 37 and the subsequent notice, or making misrepresentation on or failure to disclose controllers of the foreign-invested enterprise that is established through round-trip investment, may result in restrictions being imposed on the foreign exchange activities of the relevant foreign-invested enterprise, including payment of dividends and other distributions, such as proceeds from any reduction in capital, share transfer or liquidation, to its offshore parent or affiliate, and the capital inflow from the offshore parent, and may also subject relevant PRC residents or entities to penalties under PRC foreign exchange administration regulations.
We are aware that our PRC resident beneficial owners subject to these registration requirements have registered with the Beijing SAFE branch.
Regulations on Stock Incentive Plans
SAFE promulgated the Stock Option Rules in February 2012, replacing the previous rules issued by SAFE in March 2007. Under the Stock Option Rules and other relevant rules and regulations, PRC residents who participate in stock incentive plan in an overseas publicly-listed company are required to register with SAFE or its local branches and complete certain other procedures. Participants of a stock incentive plan who are PRC residents must retain a qualified PRC agent, which could be a PRC subsidiary of the overseas publicly listed company or another qualified institution selected by the PRC subsidiary, to conduct the SAFE registration and other procedures with respect to the stock incentive plan on behalf of the participants. In addition, the PRC agent is required to amend the SAFE registration with respect to the stock incentive plan if there is any material change to the stock incentive plan, the PRC agent or other material changes. The PRC agent must, on behalf of the PRC residents who have the right to exercise the employee share options, apply to SAFE or its local branches for an annual quota for the payment of foreign currencies in connection with the PRC residents’ exercise of the employee share options. The foreign exchange proceeds received by the PRC residents from the sale of shares under the stock incentive plans granted and dividends distributed by the overseas listed companies must be remitted into the bank accounts in the PRC opened by the PRC agents before distribution to such PRC residents.
We have adopted a share incentive plan, under which we have the discretion to grant a broad range of equity-based awards to eligible participants. See “Item 6. Directors, Senior Management and Employees-B. Compensation-Share Incentive Plan.” However, any failure to complete the registration pursuant to the Stock Option Rules and other foreign exchange requirements may subject these PRC individuals to fines and legal sanctions and may also limit our ability to contribute additional capital to our PRC subsidiary, limit our PRC subsidiary’s ability to distribute dividends to us or otherwise materially adversely affect our business.
Regulations on Dividend Distribution
Under our current corporate structure, our Cayman Islands holding company may rely on dividend payments from Hexin Yongheng, which is a wholly foreign-owned enterprise incorporated in China, to fund any cash and financing requirements we may have. The principal regulations governing distribution of dividends of foreign-invested enterprises include the Company Law and Foreign Investment Law and its implementation rules. Under these laws and regulations, wholly foreign-owned enterprises in China may pay dividends only out of their accumulated after-tax profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, wholly foreign-owned enterprises in China are required to allocate at least 10% of their respective accumulated profits each year, if any, to fund certain reserve funds until these reserves have reached 50% of the registered capital of the enterprises. Wholly foreign-owned companies may, at their discretion, allocate a portion of their after-tax profits based on PRC accounting standards to staff welfare and bonus funds. These reserves are not distributable as cash dividends.
Regulations Relating to Employment
The PRC Labor Law and the Labor Contract Law require that employers must execute written employment contracts with full-time employees. If an employer fails to enter into a written employment contract with an employee within one year from the date on which the employment relationship is established, the employer must rectify the situation by entering into a written employment contract with the employee and pay the employee twice the employee’s salary for the period from the day following the lapse of one month from the date of establishment of the employment relationship to the day prior to the execution of the written employment contract. All employers must compensate their employees with wages equal to at least the local minimum wage standards. Violations of the PRC Labor Law and the Labor Contract Law may result in the imposition of fines and other administrative sanctions, and serious violations may result in criminal liabilities.
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Enterprises in China are required by PRC laws and regulations to participate in certain employee benefit plans, including social insurance funds, namely a pension plan, a medical insurance plan, an unemployment insurance plan, a work-related injury insurance plan and a maternity insurance plan, and a housing provident fund, and contribute to the plans or funds in amounts equal to certain percentages of salaries, including bonuses and allowances, of the employees as specified by the local government from time to time at locations where they operate their businesses or where they are located. Failure to make adequate contributions to various employee benefit plans may be subject to fines and other administrative sanctions. Also, enterprises in China are required by PRC laws and regulations to serve as the individual income tax withholding agents and withhold individual income tax from their employees accordingly.
We have not made adequate contributions to employee benefit plans, as required by applicable PRC laws and regulations. See “Item 3. Key Information-D. Risk Factors-Risks Related to Doing Business in the People’s Republic of China-Failure to make adequate contributions to various employee benefit plans as required by PRC regulations may subject us to penalties.”
M&A Rules and Regulations Relating to Overseas Listing
On August 8, 2006, six PRC regulatory agencies, including the CSRC, MOFCOM, the State-owned Assets Supervision and Administration Commission, the SAT, the State Administration of Industry and Commerce and SAFE, adopted the M&A Rules, which became effective on September 8, 2006, and were amended on June 22, 2009. Foreign investors shall comply with the M&A Rules when they purchase equity interests of a domestic company or subscribe the increased capital of a domestic company, and thus changing the nature of the domestic company into a foreign-invested enterprise, when the foreign investors establish a foreign-invested enterprise in the PRC, purchase the assets of a domestic company and operate the assets, or when the foreign investors purchase the assets of a domestic company, establish a foreign-invested enterprise by injecting such assets, and operate the assets. As for merger and acquisition of a domestic company with a related party relationship by a domestic company, enterprise or natural person in the name of an overseas company legitimately incorporated or controlled by the domestic company, enterprise of natural person, such merger and acquisition shall be subject to examination and approval of MOFCOM. The parties involved shall not use domestic investment by foreign investment enterprises or other methods to circumvent the requirement of examination and approval.
Pursuant to the Manual of Guidance on Administration for Foreign Investment Access, which was issued and became effective on December 18, 2008 by MOFCOM, notwithstanding the fact that (i) the domestic shareholder is connected with the foreign investor or not, or (ii) the foreign investor is the existing shareholder or the new investor, the M&A Rules shall not apply to the transfer of an equity interest in an incorporated foreign-invested enterprise from the domestic shareholder to the foreign investor.
On July 6, 2021, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the Opinions. The Opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based companies. The Opinions proposed to take effective measures, such as promoting the construction of relevant regulatory systems, to deal with the risks and incidents facing China-based overseas-listed companies and the demand for cybersecurity and data privacy protection.
On February 17, 2023, the CSRC promulgated the Trial Measures and five supporting guidelines, which came into effect on March 31, 2023. Pursuant to the Trial Measures, domestic companies that seek to offer or list securities overseas, both directly and indirectly, shall complete filing procedures with the CSRC pursuant to the requirements of the Trial Measures within three working days following its submission of initial public offerings or listing application. If a domestic company fails to complete required filing procedures or conceals any material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative penalties, such as an order to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties, such as warnings and fines.
The Trial Measures establish a list outlining the circumstances where a PRC enterprise is prohibited from offering and listing securities overseas, and the CSRC has the authority to block offshore listings that: (i) are explicitly prohibited by laws; (ii) may endanger national security as determined by relevant competent departments under the State Council; (iii) involve criminal offenses that disrupting PRC economy such as corruption, bribery, embezzlement, or misappropriation of property by the issuer, the controlling shareholder, and/or actual controller in the recent three years; (iv) involve the issuer under investigations for suspicion of criminal offenses or major violations of laws and regulations; or (v) involve material ownership disputes over the shares held by the controlling shareholder or by other shareholders that are controlled by the controlling shareholder and/or actual controller. An issuer seeking direct or indirect overseas listing is also required to undergo national security review or obtain clearance from relevant authorities if necessary before making any application with overseas regulator or listing venue. Where an overseas securities regulator investigates and collects evidence relating to the overseas offering and listing of a PRC enterprise and related activities, and requests the CSRC for cooperation in accordance with the cross-border supervision and management cooperation mechanism, the CSRC may provide necessary assistance according to law and based on the principle of reciprocity. Our application for listing in Nasdaq does not fall under the circumstance that such overseas listing is prohibited by the Trial Measures, nor do we need to go through the review such as security review or clearance approval from relevant authorities.
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According to the CSRC Notice, the domestic companies that have already been listed overseas before the effective date of the Trial Measures (namely, March 31, 2023) shall be deemed as Existing Issuers. Existing Issuers are not required to complete the filing procedures immediately, and they shall be required to file with the CSRC for any subsequent offerings. Further, according to the CSRC Notice, domestic companies that have obtained approval from overseas regulatory authorities or securities exchanges (for example, the effectiveness of a registration statement for offering and listing in the U.S. has been obtained) for their indirect overseas offering and listing prior to March 31, 2023 but have not yet completed their indirect overseas issuance and listing, are granted a six-month transition period from March 31, 2023 to September 30, 2023. Those that complete their indirect overseas offering and listing within such six-month period are deemed as Existing Issuers and are not required to file with the CSRC for their indirect overseas offerings and listings. Within such six-month transition period, however, if such domestic companies fail to complete their indirect overseas issuance and listing, they shall complete the filing procedures with the CSRC.
Based on the foregoing, we are currently not required to complete the filing procedures pursuant to the Trial Measures. However, in the event that we undertake new offerings or fundraising activities in the future, we may be required to complete the filing procedures.
On February 24, 2023, the CSRC, together with the MOF, National Administration of State Secrets Protection and National Archives Administration of China, revised the Provisions issued by the CSRC and National Administration of State Secrets Protection and National Archives Administration of China in 2009. The revised Provisions were issued under the title the “Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies,” and came into effect on March 31, 2023 together with the Trial Measures. One of the major revisions to the revised Provisions is expanding their application to cover indirect overseas offering and listing, as is consistent with the Trial Measures. The revised Provisions require that, among other things, (a) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals or entities, including securities companies, securities service providers, and overseas regulators, any documents and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level; and (b) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals and entities, including securities companies, securities service providers, and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations. Any failure or perceived failure by our Company or our subsidiaries to comply with the above confidentiality and archives administration requirements under the revised Provisions and other PRC laws and regulations may result in the relevant entities being held legally liable by competent authorities, and referred to the judicial organ to be investigated for criminal liability if suspected of committing a crime.
U.S. Regulations
This section sets forth a summary of the most significant rules and regulations that affect our business activities in the United States.
The levels of revenues and profitability of companies involved in the health services industry, such as the Company, may be affected by the continuing efforts of governmental and third-party payors to contain or reduce the costs of health care through various means. Although the Company does not believe that its business activities will be materially affected in the foreseeable future, it is not possible to predict the long term effect of recent and future changes in the regulatory environment, or the responses of federal, state or private payors for healthcare goods and services in response to healthcare proposals or legislation.
In March 2010, significant reforms to the healthcare system were adopted in the form of the Patient Protection and Affordable Care Act (the “PPACA”). The PPACA includes provisions that, among other things, reduce and/or limit Medicare reimbursement to certain providers, require all individuals to have health insurance (with limited exceptions) and impose new and/or increased taxes. The Company cannot predict the effects these changes may have on its business, and no assurance can be given that any such changes will not have a material adverse effect on the Company.
In addition, the provision of medical services in the United States is dependent on the availability of reimbursement to consumers from third party payors, such as government and private insurance companies. Although patients are ultimately responsible for services rendered, the Company expects that the majority of its revenues will be derived from reimbursements by third party payors. Medicare has authorized reimbursement for certain forms of cancer treatment. Over the last several years, such third-party payors are increasingly challenging the cost effectiveness of medical products and services and taking other cost containment measures.
In the future, the Company may establish additional radiation oncology and cancer therapy services. Completion of future centers would require approvals and arrangements with hospitals, health care organizations, or other third parties, including certain regulatory authorities. In addition, many states require hospitals to obtain a Certificate of Need (“CON”) before they can acquire a significant piece of medical equipment. Should the Company enter into future ventures such “need” will be demonstrable, but it can have no assurance that CONs will be granted.
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Regulation of Medical Devices in the United States
Our COVID-19 self-test kits and operations are subject to extensive and ongoing regulation by the FDA under the Federal Food, Drug, and Cosmetic Act and its implementing regulations, collectively referred to as the FDCA, as well as other federal and state regulatory bodies in the United States. The laws and regulations govern, among other things, product design and development, pre-clinical and clinical testing, manufacturing, packaging, labeling, storage, record keeping and reporting, clearance or approval, marketing, distribution, promotion, import and export and post-marketing surveillance.
The FDA regulates the development, design, pre-clinical and clinical research, manufacturing, safety, efficacy, labeling, packaging, storage, installation, servicing, recordkeeping, premarket clearance or approval, import, export, adverse event reporting, advertising, promotion, marketing and distribution of medical devices in the United States to ensure that medical devices distributed domestically are safe and effective for their intended uses and otherwise meet the requirements of the FDCA. Failure to comply with applicable requirements may subject a device and/or its manufacturer to a variety of administrative sanctions, such as FDA refusal to approve pending premarket applications, issuance of warning letters, mandatory product recalls, import detentions, civil monetary penalties, and/or judicial sanctions, such as product seizures, injunctions and criminal prosecution.
FDA Premarket Clearance and Approval Requirements
Unless an exemption applies, each medical device commercially distributed in the United States requires either FDA clearance of a 510(k) premarket notification, approval of a premarket approval, or PMA, or grant of a de novo request for classification. During public emergencies, FDA also may grant emergency use authorizations to allow commercial distribution of devices intended to address the public health emergency. Under the FDCA, medical devices are classified into one of three classes-Class I, Class II or Class III-depending on the degree of risk associated with each medical device and the extent of manufacturer and regulatory control needed to provide reasonable assurance of its safety and effectiveness. Classification of a device is important because the class to which a device is assigned determines, among other things, the necessity and type of FDA review required prior to marketing the device.
Class I devices include those with the lowest risk to the patient and are those for which safety and effectiveness can be reasonably assured by adherence to the FDA’s “general controls” for medical devices, which include compliance with the applicable portions of the FDA’s Quality System Regulation, or QSR, facility registration and product listing, reporting of adverse medical events and malfunctions through the submission of Medical Device Reports, or MDRs, and appropriate, truthful and non-misleading labeling, advertising, and promotional materials. Some Class I or low risk devices also require premarket clearance by the FDA through the 510(k) premarket notification process described below.
Class II devices are moderate risk devices subject to the FDA’s general controls, and any other “special controls” deemed necessary by the FDA to ensure the safety and effectiveness of the device, such as performance standards, product-specific guidance documents, special labeling requirements, patient registries or post-market surveillance. Premarket review and clearance by the FDA for Class II devices is accomplished through the 510(k) premarket notification process, though certain Class II devices are exempt from this premarket review process. When required, the manufacturer must submit to the FDA a premarket notification, or 510(k), submission demonstrating that the device is “substantially equivalent” to a legally marketed predicate device, which in some cases may require submission of clinical data. Unless a specific exemption applies, 510(k) premarket notification submissions are subject to user fees. If the FDA determines that the device, or its intended use, is not substantially equivalent to a legally marketed device, the FDA will place the device, or the particular use of the device, into Class III, and the device sponsor must then fulfill more rigorous premarketing requirements.
Class III devices include devices deemed by the FDA to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices and devices deemed not substantially equivalent to a predicate device following a 510(k) submission. The safety and effectiveness of Class III devices cannot be reasonably assured solely by general or special controls. Submission and FDA approval of a PMA application is required before marketing of a Class III device can proceed. As with 510(k) submissions, unless an exemption applies, PMA submissions are subject to user fees. The PMA process is much more demanding than the 510(k) premarket notification process. A PMA application, which is intended to demonstrate that the device is reasonably safe and effective for its intended use and must be supported by extensive data, typically including data from pre-clinical studies and clinical trials.
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Emergency Use Authorization
In emergency situations, such as a pandemic, the FDA has the authority to allow unapproved medical products or unapproved uses of cleared or approved medical products to be used in an emergency to diagnose, treat or prevent serious or life-threatening diseases or conditions caused by chemical, biological, radiological or nuclear warfare threat agents when there are no adequate, approved, and available alternatives.
Under this authority, the FDA may issue an EUA for an unapproved device if the following four statutory criteria have been met: (1) a serious or life-threatening condition exists; (2) evidence of effectiveness of the device exists; (3) a risk-benefit analysis shows that the benefits of the product outweigh the risks; and (4) no other alternatives exist for diagnosing, preventing or treating the disease or condition. Evidence of effectiveness includes medical devices that “may be effective” to prevent, diagnose, or treat the disease or condition identified in a declaration of emergency issued by the Secretary of HHS. The “may be effective” standard for EUAs requires a lower level of evidence than the “effectiveness” standard that FDA uses for product clearances or approvals in non-emergency situations. The FDA assesses the potential effectiveness of a possible EUA product on a case-by-case basis using a risk-benefit analysis. In determining whether the known and potential benefits of the product outweigh the known and potential risks, the FDA examines the totality of the scientific evidence to make an overall risk-benefit determination. Such evidence, which could arise from a variety of sources, may include (but is not limited to) results of domestic and foreign clinical trials, in vivo efficacy data from animal models, in vitro data, as well as the quality and quantity of the available evidence.
Once granted, an EUA will remain in effect and generally terminate on the earlier of (1) the determination by the Secretary of HHS that the public health emergency has ceased or (2) a change in the approval status of the product such that the authorized use(s) of the product are no longer unapproved. After the EUA is no longer valid, the product is no longer considered to be legally marketed and one of the FDA’s non-emergency premarket pathways would be necessary to resume or continue distribution of the subject product.
The FDA also may revise or revoke an EUA if the circumstances justifying its issuance no longer exist, the criteria for its issuance are no longer met, or other circumstances make a revision or revocation appropriate to protect the public health or safety.
On January 31, 2020, the Secretary of HHS issued a declaration of a public health emergency related to COVID-19. On February 4, 2020, HHS determined that COVID-19 represents a public health emergency that has a significant potential to affect national security or the health and security of U.S. citizens living abroad and, subsequently, declared on March 24, 2020, that circumstances exist to justify the authorization of emergency use of medical devices, including alternative products used as medical devices, during the COVID-19 pandemic, subject to the terms of any authorization as issued by the FDA. On February 29, 2020, the FDA issued an immediately in effect guidance with policy specific to development of in vitro diagnostic tests during the COVID-19 public health emergency, as periodically updated thereafter.
510(k) Clearance Marketing Pathway
Our current products are class II and, but for the immediate ability to seek an EUA, would be subject to premarket notification and clearance under section 510(k) of the FDCA. To obtain 510(k) clearance for a medical device, an applicant must submit to the FDA a 510(k) submission demonstrating that the proposed device is “substantially equivalent” to a legally marketed device, known as a “predicate device.” A legally marketed predicate device may include a device that was legally marketed prior to May 28, 1976 (a pre-amendment device), a device that has been reclassified from Class III to Class II or Class I, or a device that was found substantially equivalent through the 510(k) process. A device is substantially equivalent if, with respect to the predicate device, it has the same intended use and has either (1) the same technological characteristics, or (2i) different technological characteristics, but the information provided in the 510(k) submission demonstrates that the device does not raise new questions of safety and effectiveness and is at least as safe and effective as the predicate device. A showing of substantial equivalence sometimes, but not always, requires clinical data. Once the 510(k) submission is accepted for review, by regulation, the FDA has 90 calendar days to review and issue a determination. As a practical matter, clearance may take and often takes longer. Upon review, the FDA may require additional information, including clinical data, to make a determination regarding substantial equivalence. In addition, the FDA collects user fees for certain medical device submissions and annual fees and for medical device establishments.
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Before the FDA will accept a 510(k) submission for substantive review, the FDA will first assess whether the submission satisfies a minimum threshold of acceptability. If the FDA determines that the 510(k) submission is incomplete, the FDA will issue a “Refuse to Accept” letter which generally outlines the information the FDA believes is necessary to permit a substantive review and to reach a determination regarding substantial equivalence. An applicant must submit the requested information within 180 days before the FDA will proceed with additional review of the submission.
If the FDA agrees that the device is substantially equivalent to a predicate device currently on the market, it will grant 510(k) clearance to commercially market the device. If the FDA determines that the device is “not substantially equivalent” to a previously cleared device, for example, due to a finding of a lack of a predicate device, that the device has a new intended use or different technological characteristics that raise different questions of safety or effectiveness when the device is compared to the cited predicate device, the device is automatically designated as a Class III device. The device sponsor must then fulfill more rigorous PMA requirements, or can request a risk-based classification determination for the device in accordance with the “de novo” process, which is a route to market for novel medical devices that are low to moderate risk and are not substantially equivalent to a predicate device. If the FDA determines that the information provided in a 510(k) submission is insufficient to demonstrate substantial equivalence to the predicate device, the FDA generally identifies the specific information that needs to be provided so that the FDA may complete its evaluation of substantial equivalence, and such information may be provided within the time allotted by the FDA or in a new 510(k) submission should the original 510(k) submission have been withdrawn.
After a device receives 510(k) marketing clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute a major change or modification in its intended use, will require a new 510(k) marketing clearance or, depending on the modification, PMA approval. The determination as to whether or not a modification could significantly affect the device’s safety or effectiveness is initially left to the manufacturer using available FDA guidance. Many minor modifications today are accomplished by a “letter to file” in which the manufacturer documents the rationale for the change and why a new 510(k) submission is not required. However, the FDA may review such letters to file to evaluate the regulatory status of the modified product at any time and may require the manufacturer to cease marketing and recall the modified device until 510(k) marketing clearance or PMA approval is obtained. The manufacturer may also be subject to significant regulatory fines or penalties.
PMA Approval Pathway
Class III devices require PMA approval before they can be marketed although some pre-amendment Class III devices for which FDA has not yet required a PMA are cleared through the 510(k) process. The PMA process is generally more demanding than the 510(k) premarket notification process. In a PMA, the manufacturer must demonstrate that the device is reasonably safe and effective, and the PMA must be supported by extensive data, including data from pre-clinical studies and clinical trials. The PMA must also contain a full description of the device and its components, a full description of the methods, facilities and controls used for manufacturing, and proposed labeling. Following receipt of a PMA, the FDA determines whether the application is sufficiently complete to permit a substantive review. If the FDA accepts the application for review, it has 180 days under the FDCA to complete its review of a PMA, although in practice, the FDA’s review may take and often takes significantly longer, and can take up to several years. An advisory panel of experts from outside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device. The FDA may or may not accept the panel’s recommendation. In addition, the FDA will generally conduct a pre-approval inspection of the applicant or its third-party manufacturers’ or suppliers’ manufacturing facility or facilities to ensure compliance with the QSR.
The FDA will approve the new device for commercial distribution if it determines that the data and information in the PMA constitute valid scientific evidence and that there is reasonable assurance that the device is safe and effective for its intended use(s). The FDA may approve a PMA with post-approval conditions intended to ensure the safety and effectiveness of the device, including, among other things, restrictions on labeling, promotion, sale and distribution, and collection of long-term follow-up data from patients in the clinical trial that supported PMA approval or requirements to conduct additional clinical trials post-approval. The FDA may also condition PMA approval on some form of post-market surveillance when deemed necessary to protect the public health or to provide additional safety and efficacy data for the device in a larger population or for a longer period of use. In such cases, the manufacturer might be required to follow certain patient groups for a number of years and to make periodic reports to the FDA on the clinical status of those patients. Failure to comply with the conditions of approval can result in material adverse enforcement action, including withdrawal of the approval.
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Certain changes to an approved device, such as changes in manufacturing facilities, methods, or quality control procedures, or changes in the design performance specifications, that affect the safety or effectiveness of the device, require submission of a PMA supplement. PMA supplements often require submission of the same type of information as a PMA, except that the supplement is limited to information needed to support any changes from the device covered by the original PMA and may not require as extensive clinical data or the convening of an advisory panel. Certain other changes to an approved device require the submission of a new PMA, such as when the design change causes a different intended use, mode of operation, and technical basis of operation, or when the design change is so significant that a new generation of the device will be developed, and the data that were submitted with the original PMA are not applicable for the change in demonstrating a reasonable assurance of safety and effectiveness. None of our test kits are currently approved under a PMA. However, we may in the future develop devices which will require the approval of a PMA.
De novo Classification
Medical device types that the FDA has not previously classified as Class I, II or III are automatically classified into Class III regardless of the level of risk they pose. To market low to moderate risk medical devices that are automatically placed into Class III due to the absence of a predicate device, a manufacturer may request a de novo down-classification. This procedure allows a manufacturer whose novel device is automatically classified into Class III to request classification of its medical device into Class I or Class II on the basis that the device presents low or moderate risk, rather than requiring the submission and approval of a PMA application. A medical device may be eligible for de novo classification if the manufacturer first submitted a 510(k) premarket notification and received a determination from the FDA that the device was not substantially equivalent or a manufacturer may request de novo classification directly without first submitting a 510(k) premarket notification to the FDA and receiving a not substantially equivalent determination. The FDA is required to classify the device within 120 calendar days following receipt of the de novo application, although in practice, the FDA’s review may take significantly longer. During the pendency of the FDA’s review, the FDA may issue an additional information letter, which places the de novo request on hold and stops the review clock pending receipt of the additional information requested. In the event the de novo requestor does not provide the requested information within 180 calendar days, the FDA will consider the de novo request to be withdrawn. If the manufacturer seeks reclassification into Class II, the manufacturer must include a draft proposal for special controls that are necessary to provide a reasonable assurance of the safety and effectiveness of the medical device. In addition, the FDA may reject the de novo request for classification if it identifies a legally marketed predicate device that would be appropriate for a 510(k) or determines that the device is not low to moderate risk or that general controls would be inadequate to control the risks and special controls cannot be developed. In the event the FDA determines the data and information submitted demonstrate that general controls or general and special controls are adequate to provide reasonable assurance of safety and effectiveness, the FDA will grant the de novo request for classification. When the FDA grants a de novo request for classification, the device is granted marketing authorization and further can serve as a predicate for future devices of that type, through a 510(k) premarket notification.
Post-market Regulation
After a device is cleared or approved for marketing, numerous and pervasive regulatory requirements continue to apply. These include:
| ● | establishment registration and device listing with the FDA; |
| ● | QSR requirements, which require manufacturers and contract manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the design and manufacturing process; |
| ● | labeling regulations and FDA prohibitions against the promotion of investigational products, or “off-label” uses of cleared or approved products; |
| ● | requirements related to promotional activities; |
| ● | clearance or approval of product modifications to 510(k)-cleared devices that could significantly affect safety or effectiveness or that would constitute a major change in intended use of one of our cleared devices; |
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| ● | medical device reporting regulations, which require that a manufacturer report to the FDA if a device it markets may have caused or contributed to a death or serious injury, or has malfunctioned and the device or |
| ● | a similar device that it markets would be likely to cause or contribute to a death or serious injury, if the malfunction were to recur; |
| ● | correction, removal and recall reporting regulations, which require that manufacturers report to the FDA field corrections, product removals or recalls if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health; |
| ● | the FDA’s recall authority, whereby the agency can order device manufacturers to recall from the market a product that is in violation of governing laws and regulations; and |
| ● | post-market surveillance activities and regulations, which apply when deemed by the FDA to be necessary to protect the public health or to provide additional safety and effectiveness data for the device. |
Advertising and promotion of medical devices, in addition to being regulated by the FDA, are also regulated by the Federal Trade Commission and by state regulatory and enforcement authorities. Recently, promotional activities for FDA-regulated products have been the subject of enforcement action brought under healthcare reimbursement laws and consumer protection statutes. In addition, under the federal Lanham Act and similar state laws, competitors and others can initiate litigation relating to advertising claims. In general, if the FDA determines that our promotional materials or training constitutes promotion of an unapproved or uncleared use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional or training materials to constitute promotion of an unapproved or uncleared use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting false claims for reimbursement.
The FDA has broad regulatory compliance and enforcement powers. If the FDA determines that we failed to comply with applicable regulatory requirements, it can take a variety of compliance or enforcement actions, which may result in any of the following sanctions:
| ● | untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties; |
| ● | unanticipated expenditures to address or defend such actions; |
| ● | customer notifications for repair, replacement, refunds; |
| ● | recall, withdrawal, administrative detention or seizure of our test kits; |
| ● | operating restrictions or partial suspension or total shutdown of production; |
| ● | refusal of or delay in granting our requests for 510(k) clearance or PMA approval of new test kits or modified test kits; |
| ● | operating restrictions, partial suspension or total shutdown of production; |
| ● | withdrawing 510(k) clearance or PMA approvals that are already granted; |
| ● | refusal to grant export approval for our test kits; or |
| ● | criminal prosecution. |
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Health Insurance Portability and Accountability Act and Other Privacy Laws
The federal Health Insurance Portability and Accountability Act of 1996, as amended by the Healthcare Information Technology for Economic and Clinical Health Act of 2009, or collectively HIPAA, among other things, established federal protection for the privacy and security of protected health information, or PHI. Under HIPAA, the HHS has issued regulations to protect the privacy and security of PHI used or disclosed by “covered entities,” including certain healthcare providers, health plans and healthcare clearinghouses, and their respective “business associates” and their covered subcontractors that create, receive, maintain or transmit individually identifiable health information for or on behalf of a covered entity, with respect to safeguarding the privacy, security and transmission of individually identifiable health information. HIPAA also regulates standardization of data content, codes and formats used in healthcare transactions and standardization of identifiers for health plans and certain healthcare providers. The HIPAA privacy regulations protect PHI by limiting its use and disclosure, giving patients the right to access certain information about them, and limiting most disclosures of PHI to the minimum amount necessary to accomplish an intended purpose. The HIPAA security standards require the adoption of administrative, physical and technical safeguards and the adoption of written security policies and procedures. In addition, HIPAA requires covered entities to execute business associate agreements with their business associates and subcontractors, who provide services for or on behalf of covered entities. Business associates have a corresponding obligation to maintain appropriate business associate agreements with downstream subcontractors under HIPAA.
In addition, various states, such as California and Massachusetts, have implemented similar data privacy and security laws and regulations, such as the California Confidentiality of Medical Information Act, that impose restrictive requirements regulating the use and disclosure of health information and other personally identifiable information. In addition to fines and penalties imposed upon violators, some of these state laws also afford private rights of action to individuals who believe their personal information has been misused. California’s patient privacy laws, for example, provide for penalties of up to $250,000 and permit injured parties to sue for damages. Additionally, we are subject to other data privacy and security obligations, including federal, state, local, and foreign laws, regulations, guidance, and industry standards related to data privacy and security. Such obligations may include the Federal Trade Commission Act, the California Consumer Privacy Act of 2018, or the CCPA, the Canadian Personal Data Protection and Electronic Documents Act, and the Payment Card Industry Data Security Standard, or PCI DSS. In addition, states within the United States have enacted or proposed data privacy laws. For example, Virginia passed the Consumer Data Protection Act and Colorado passed the Colorado Privacy Act. For example, the CCPA, which increases privacy rights for California residents and imposes obligations on companies that process their personal information, came into effect on January 1, 2020. Among other things, the CCPA requires covered companies to provide new disclosures to California consumers and provide such consumers new data protection and privacy rights, including the ability to opt-out of certain sales of personal information. The CCPA provides for civil penalties for violations, as well as a private right of action for certain data breaches that result in the loss of personal information. In addition, it is anticipated that the California Privacy Rights Act of 2020, or the CPRA, effective January 1, 2023, will expand the CCPA. The interplay of federal and state laws may be subject to varying interpretations by courts and government agencies, creating complex compliance issues and potentially exposing us to additional expense, adverse publicity and liability. The compliance requirements of these laws, including additional breach reporting requirements, and the penalties for violation vary widely, and new data privacy and security laws in this area are evolving. Requirements of these laws and penalties for violations vary widely.
If we or our operations are found to be in violation of HIPAA, or its implementing regulations, and similar state laws, we may be subject to significant penalties, including civil, criminal and administrative penalties, fines, imprisonment and exclusion from participation in federal or state healthcare programs, and the curtailment or restructuring of our operations. HIPAA has four tiers of civil monetary penalties, as well as criminal penalties, both of which may be applied to business associates as well as covered entities, and state attorneys have authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions. Federal, state, local, and foreign data privacy and security obligations also may include penalties for noncompliance, as well as a private right of action.
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C. Organizational Structure
The following diagram illustrates our corporate structure, including our subsidiaries and consolidated affiliated entities as of the date of this annual report on Form 20-F:
D. Property, Plant and Equipment
Our headquarters are located in Qingdao. As of the date of the annual report, the Company had two paid leases of offices from unrelated third parties located in Tianjin and one premises we lease from unrelated third party free of charge. We believe our facilities are sufficient for our current needs and that, should it be needed, suitable additional space will be available on commercially reasonable terms to accommodate any such expansion of our operations.
ITEM 4A. UNRESOLVED STAFF COMMENTS
None.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this annual report on Form 20-F. This discussion and analysis may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Item 3. Key Information-D. Risk Factors” or in other parts of this annual report on Form 20-F.
A. Operating Results
Overview
Our Business
Historically, we generated revenues primarily from our loan facilitation services, post-origination services, and other related services. On December 30, 2020, we completed the disposal of P2P Business, which historically operated our loan facilitation services, post-origination services, and other related services.
Since August 2017, the Company started its microlending business and lent funds to borrowers up to their approved credit through its consolidated VIE, and since May 2019, the Company has ceased to issue new loans. Interest income was recognized based on the contractual interest rates of the loan. As of March 31, 2022, the outstanding balance of loan receivable, net of allowance was nil.
We launched our social e-commerce platform in May 2020 as a new business line for business transition, and we had developed and invested in our social e-commerce platform to take advantage of China’s fast-growing e-commerce industry. Our social e-commerce platform offered high-quality and affordable products to consumers in China. We cooperated with major domestic e-commerce platforms and services marketplaces to select and source goods and services, and rewarded users with a small commission for every purchase, share or recommendation of a product made to friends. In May 2023, to fully utilize the Company’s existing funds and resources and maximize the shareholders’ interest, the Company completed the disposition of its social e-commerce business. The Company has since then focused on exploring other area of healthcare sector other than the medical devices and supplies.
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On January 4, 2022, we incorporated Akso Online Meditech in the State of Wyoming and have begun the sale of COVID-19 Rapid Antigen test kits through Akso Online Meditech as of the date of this report. Akso Online Meditech has entered into a supply agreement to purchase “iHealth” branded COVID-19 Rapid Antigen test kits from its supplier and sells these test kits to distributers in the United States.
On January 26, 2022, we incorporated Qingdao Akso in Shandong Province, China and have begun the sales of medical devices through Qingdao Akso since April 2022. Qingdao Akso has entered into supply agreements to purchase medical devices such as defibrillators, anesthesia laryngoscope from its supplier and sells these devices to distributers or end-users in China.
We also advance our presence in online hospital and chain pharmacies segments in China. In November 2024, we completed the acquisition of Tianjin Wangyi Cloud Co., Ltd. and its wholly owned subsidiaries, Tianjin Deyihui Online Hospital Co., Limited and Tianjin Deyihui Clinic Co., Limited (collectively “Deyihui Group”)，strengthening our foothold in internet healthcare. We continue to evaluate potential acquisitions of online hospital(s) in certain cities of China which provides online medical consultations for initial diagnosis, follow-up consultations, and management of chronic diseases, providing patients with an efficient and convenient solution to manage their health online through their smartphones or computers. Typically, the online hospitals are closely connected with and supported by traditional hospitals and outpatient clinics, and their main sources of revenue are from fees charged to patients for both online and offline consultations and the marketing and sales of a variety of health products including medicine, medical equipment and supplements. Future acquisitions of internet hospitals/clinics will be pursued at judicious timing based on real-time policy and market dynamics, reflecting our disciplined approach to capital allocation and investor accountability.
In addition to our plan to acquire online hospital(s), we believe that traditional independent pharmacies in China currently face serious competition and bottlenecks in sales growth, which is why we also plan to acquire multiple independent pharmacies nationwide throughout China subject to favorable market and regulatory conditions, integrating and operating the pharmacies as a chain using our extensive offline resources and IT solutions. We plan to build a new type of pharmacy operation and management system, as well as digital operation and sales solutions for our pharmacies, thereby enhancing our competitiveness and overcoming the current difficulties in the industry.
On March 5, 2024, Tianjin Akso Enterprise Management Co., Ltd., our PRC subsidiary, entered into certain securities purchase agreements with four shareholders of Tianjin Wangyi Cloud Co., Ltd. and acquired 50% of the equity interests of Tianjin Wangyi Cloud Co., Ltd. The transaction closed on April 15, 2024. Tianjin Wangyi Cloud Co., Ltd. engages in the business of providing online hospital services including health consultancy services and online sales of medicines and health products through its two wholly owned PRC subsidiaries, Tian Jin Deyihui Online Hospital Co., Ltd. and Tian Jin Deyihui Clinic Co., Ltd. Being optimistic about the development prospects and synergies of combination for online and offline medical resources, the Company acquiring the remaining 50% equity interest of Tianjin Wangyi Cloud and its two wholly owned subsidiaries from the minority shareholders and started to conduct marketing promotion services in car insurance industry. The acquisition was closed on December 10, 2024 upon the settlement of consideration. Tianjin Wangyi Cloud Co., Ltd. also engages in the provision of marketing promotion services business through its subsidiaries.
Our net revenues were US$13.8 million, US$14.8 million and US$2.4 million for the fiscal years ended March 31, 2026, 2025 and 2024, respectively. We had net losses of US$18.7 million, net loss of US$135.5 million and net loss of US$9.5 million for the years ended March 31, 2026, 2025, and 2024, respectively.
Discontinued Operations
According to ASC 205, the effect of discontinued operations of commission service from social E-commerce business and interest income from microlending business and other related services for the fiscal years ended March 31, 2023 and 2024 has been accounted for retroactively in the consolidated statement of operations for all the periods presented. Results from these discontinued operations, net of income tax, were losses of nil, nil and US$ 0.4 million for the fiscal years ended March 31, 2026, 2025 and 2024, respectively.
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Key Components of Results of Operations
Revenues
Revenues are from the sale of medical devices business. The following table sets forth the components of our revenues by amounts and percentages of our total revenues for the periods presented:
| 2026 | 2025 | 2024 | ||||||||||||||||||||||
| % of | % of | % of | ||||||||||||||||||||||
| Amount | revenues | Amount | revenues | Amount | revenues | |||||||||||||||||||
| Revenues | ||||||||||||||||||||||||
| Sale of medical devices revenue | $ | — | 0 | % | $ | 415,020 | 3 | % | $ | 2,416,797 | 100 | % | ||||||||||||
| Marketing promotion service revenue | 13,835,063 | 100 | % | 14,366,602 | 97 | % | — | 0 | % | |||||||||||||||
| Total revenues | $ | 13,835,063 | 100 | % | $ | 14,781,622 | 100 | % | $ | 2,416,797 | 100 | % | ||||||||||||
| Business and sales related taxes | 3,159 | 0 | % | 3,824 | 0 | % | 2,459 | 0 | % | |||||||||||||||
| Net Revenues | $ | 13,831,904 | 100 | % | $ | 14,777,798 | 100 | % | $ | 2,414,338 | 100 | % | ||||||||||||
Sale of medical devices
Since February 2022, through its subsidiary Akso Online MediTech, the Company engaged in the sale of Covid-19 Antigen Rapid Tests in U.S. market. Akso Online MediTech purchases medical devices in quantity and distributes products primarily to medical products dealers. The deliveries may take one day or longer depending on the customers’ location. Revenue from sales of merchandise to non-retail customers is recognized when the merchandise is transferred to customers. There was no sales return since the start of the business. Since the end of COVID-19 in the beginning of 2023, the Company ceased the sale of COVID-19 Rapid Antigen test kits in US market.
Since April 2022, through its subsidiary Qingdao Akso, the Company engaged in the sale of medical devices such as defibrillators and anesthesia laryngoscope in market of China. Qingdao Akso purchases those medical devices in quantity and distributes products to medical products dealers and ender-users. The deliveries may take one day or longer depending on the customers’ location. Revenue from sales of merchandise to non-retail customers is recognized when the merchandise is transferred to customers. There was no sales return since the start of the business.
Marketing promotion service
Since April 2024, through its subsidiary Tianjin Wangyi Cloud Technology Co., Ltd, the Company engaged in providing marketing promotion service to insurance broker agencies. By recommendation of potential car insurance purchaser to the insurance broker agencies, the Company earns commissions from those agencies upon the completion of recommendation services. The commission fees are calculated on a fixed amount per car user based on the agreements with different insurance brokers. The marketing promotion services are considered as a single performance obligation, as the Company’s responsibility was only limited to provide the potential car users’ information to insurance broker agencies, regardless of whether those car users finally purchasing car insurance or not.
Cost of goods sold
Cost of revenue mainly consisted of purchase price for medical devices the Company sold such as defibrillators and anesthesia laryngoscope and including service fee incurred for the Company’s marketing promotion service business.
Operating expenses
Operating expenses primarily consist of sales and marketing expenses, general and administrative expenses. The following table sets forth a breakdown of our operating costs and expenses for the periods indicated:
| For the Fiscal Years Ended March 31, | ||||||||||||
| 2026 | 2025 | 2024 | ||||||||||
| Operating expenses | ||||||||||||
| Sales and marketing expenses | $ | — | $ | — | $ | 168,421 | ||||||
| General and administrative expenses | 3,988,741 | 3,641,446 | 8,591,751 | |||||||||
| Impairment of goodwill and intangible assets | 16,700,276 | 162,381,380 | — | |||||||||
| Total operating expenses | $ | 20,689,017 | $ | 166,022,826 | $ | 8,760,172 | ||||||
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Sales and marketing expenses
Sales and marketing expenses consist primarily of promotion and advertising expenses and other daily expenses which are related to the selling and marketing departments. Advertising expenses are expensed as incurred and were nil, nil and US$0.2 million for the years ended March 31, 2026, 2025 and 2024, respectively.
General and administrative expenses
General and administrative expenses consist primarily of salaries and benefits related to our management, professional service fees, depreciation and amortization expenses; provisions made for uncollected receivables.
Impairment of goodwill and intangible assets
Impairment of goodwill and intangible assets mainly consist of goodwill impairment and intangible assets impairment from acquired Tianjin Wangyi reporting unit. The Company recognized impairment loss for intangible assets of US$5.6 million,US$121.1 million and nil for the years ended March 31, 2026, 2025 and 2024, respectively. For the years ended March 31, 2026, 2025 and 2024, the amount of goodwill impairment the Company recognized were US$11.1 million, US$41.4 million and nil, respectively.
Income Taxes
The Company accounts for income taxes under ASC Topic 740, Income Taxes (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Based on the Company’s evaluation, it has been concluded that there are no significant uncertain tax positions requiring recognition in the Company’s financial statements. The Company does not believe that there was any uncertain tax position at March 31, 2026 and 2025.
| For years ended March 31, | ||||||||||||
| 2026 | 2025 | 2024 | ||||||||||
| Net Revenues | $ | 13,831,904 | $ | 14,777,798 | $ | 2,414,338 | ||||||
| Cost of revenue | 13,843,219 | 15,059,324 | 2,292,206 | |||||||||
| Gross Profit | $ | (11,315 | ) | $ | (281,526 | ) | $ | 122,132 | ||||
| OPERATING EXPENSE | ||||||||||||
| Sales and marketing | $ | — | $ | — | $ | 168,421 | ||||||
| General and administrative | 3,988,741 | 3,641,446 | 8,591,751 | |||||||||
| Impairment of goodwill and intangible assets | 16,700,276 | 162,381,380 | — | |||||||||
| Total Operating Expenses | $ | 20,689,017 | $ | 166,022,826 | $ | 8,760,172 | ||||||
| LOSS FROM CONTINUING OPERATIONS | (20,700,332 | ) | (166,304,352 | ) | (8,638,040 | ) | ||||||
| Total other (expenses) income, net | $ | (4,113 | ) | $ | 34,073 | $ | (453,751 | ) | ||||
| LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | (20,704,445 | ) | (166,270,279 | ) | (9,091,791 | ) | ||||||
| (BENEFIT) PROVISON FOR INCOME TAXES | (1,988,264 | ) | (30,801,146 | ) | 24,988 | |||||||
| NET LOSS FROM CONTINUING OPERATIONS | $ | (18,716,181 | ) | $ | (135,469,133 | ) | $ | (9,116,779 | ) | |||
| Net loss from discontinued operations, net of income taxes | $ | — | $ | — | $ | (3,884 | ) | |||||
| Loss from disposal of discontinued operations, net of income taxes | — | — | (395,914 | ) | ||||||||
| Total loss from discontinued operations | — | — | (399,798 | ) | ||||||||
| NET LOSS | $ | (18,716,181 | ) | $ | (135,469,133 | ) | $ | (9,516,577 | ) | |||
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of December 31, 2025. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is considered an exempted Cayman Islands Company and is presently not subject to income taxes or income tax filing requirements in the Cayman Islands or the United States. Consequently, income taxes are not reflected in the Company’s financial statements.
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Results of Operations
The following table sets forth a summary of our consolidated results of operations for the periods indicated, both in absolute amount and as a percentage of our net revenue This information should be read together with our consolidated financial statements and related notes included elsewhere in this annual report on Form 20-F. Our historical results presented below are not necessarily indicative of the results that may be expected for any future period.
The following table sets forth our revenues breakdown for the periods indicated:
| For the years ended March 31, | ||||||||||||
| 2026 | 2025 | 2024 | ||||||||||
| Revenues(1) | ||||||||||||
| Sale of medical devices revenue | $ | — | $ | 415,020 | $ | 2,416,797 | ||||||
| Marketing promotion service revenue | 13,835,063 | 14,366,602 | — | |||||||||
| Total revenues | $ | 13,835,063 | $ | 14,781,622 | $ | 2,416,797 | ||||||
| Business and sales related taxes | 3,159 | 3,824 | 2,459 | |||||||||
| Net Revenues | $ | 13,831,904 | $ | 14,777,798 | $ | 2,414,338 | ||||||
| (1) | Represents amounts net of VAT. |
Fiscal Year Ended March 31, 2026 Compared to Fiscal Year Ended March 31, 2025
Net revenues Net revenues generated for the fiscal year ended March 31, 2026 was approximately US$13.8 million, representing a decrease of US$0.9 million or 6.4% from approximately US$14.8 million for the fiscal year ended March 31, 2025.
Sale of medical devices Revenue from medical devices was nil for the year ended March 31, 2026, decrease representing a decrease of US$0.4 million or 100% from approximately US$0.4 million for the year ended March 31, 2025, the decrease was primarily due to decrease of market demand in fiscal year 2026.
Marketing promotion service Revenue from marketing promotion service was approximately US$13.8 million for the year ended March 31, 2026, representing a decrease of US$0.5 million or 3.7% from approximately US$14.4 million for the year ended March 31, 2025, the decrease was primarily due to the fluctuations in market demand and intense market competition.
Cost of revenue Cost of revenue for the year ended March 31, 2026 were approximately US$13.8 million, representing a decrease of US$1.2 million or 8.1% from approximately US$15.1 million for the year ended March 31, 2025. The decrease of cost was primarily due to the decrease of revenue from marketing promotion service business.
Costs of medical devices Costs of revenue for sales of medical devices business was nil for the year ended March 31, 2026, representing a decrease of US$0.4 million or 100% from US$0.4 million for the year ended March 31, 2025. The decrease of costs related to medical devices business was in line with the decrease of revenue from sale of medical devices.
Costs of Marketing promotion service Cost of revenue for marketing promotion service was approximately US$13.8 million for the year ended March 31, 2026, representing a decrease of US$0.8 million or 5.5% from US$14.7 million for the year ended March 31, 2025. The Company started its marketing promotion service business since April 2024 and the decrease of costs was in line with the decrease of revenue from marketing promotion service business.
Gross profit Gross profit for the year ended March 31, 2026 was US$(11,315) compared with US$(0.3) million for the year ended March 31, 2025. The changes in gross profit was mainly due to improvement of gross profit from marketing promotion business.
Gross profit for Sales of medical devices The gross profit from sales of medical devices business was nil for the year ended March 31, 2026, compared with that of US$12,120 in the year ended March 31, 2025. The decrease was mainly due to decrease of revenue from sales of medical devices affecting by decrease of market demand. The Company had no revenue from sales of medical devices in fiscal year 2026.
Gross profit for Marketing promotion service business The gross profit from marketing promotion service business was US$(11,315) for the year ended March 31, 2026, compared with US$(0.3) million for the year ended March 31, 2025. The Company started the marketing promotion service business in fiscal year 2025, and changes in gross profit was mainly due to improvement in conversion rate
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Gross margin The gross margin was (0.1)% in the year ended March 31, 2026, compared with (1.9)% in the year ended March 31, 2025. The changes was mainly due to gross margin improvement from marketing promotion business.
Gross margin for Sales of medical devices The gross margin from sales of medical devices business was nil for the year ended March 31, 2026, compared with 2.9% for the year ended March 31, 2025. The decrease was mainly due to decrease of revenue from sales of medical devices in fiscal year 2026.
Gross margin for Marketing promotion service business The gross margin from marketing promotion service business was (0.1)% for the year ended March 31, 2026, compared with (2.0)% for the year ended March 31, 2025. The Company started the marketing promotion service business in fiscal year 2025, and the changes in gross margin was mainly due to improvement in conversion rate.
Operating expenses Total operating costs and expenses for the year ended March 31, 2026 were approximately US$20.7 million, representing a decrease of 145.4 million or 87.5% from approximately US$166.0 million for the year ended March 31, 2025. The decrease was primarily due to a decrease of US$145.7 million or 89.7% in impairment of goodwill and intangible assets, offsetting by an increase of US$0.3 million or 9.5% in general and administrative expenses.
General and administrative expenses General and administrative expenses for the year ended March 31, 2026 was approximately US$4.0 million, representing an increase of US$0.3 million or 9.5%, from approximately US$3.6 million for the year ended March 31, 2025. The increase was primarily attributable to i) an increase of approximately US$0.2 million amortization, and ii) an increase of US$0.1 million in staff costs, iii) an increase of US$0.2 million in provision for doubtable accounts and iv) offsetting by a decrease of approximately US$0.1 million in professional service fee.
Impairment of goodwill and intangible assets Impairment of goodwill and intangible assets for the year ended March 31, 2026 was US$16.7 million, representing a decreased of US$145.7 million or 89.7% from US$162.4 million for the year ended March 31, 2025. The decrease was mainly due to i) a decrease of US$30.3 million from goodwill impairment and ii) a decrease of US$115.5 million from intangible assets impairment. All the impairment loss was related to the acquisition of Tianjin Wangyi in fiscal year 2025.
| ● | Impairment on acquired Internet Hospital License |
To expand its healthcare service business, the Company acquired Tianjin Wangyi Cloud Technology Co., Ltd and its wholly owned subsidiaries (“Tianjin Wangyi” or the “acquiree”) in the fiscal year ended March 31, 2025. Tianjin Wangyi was engaged in online hospital and clinic pharmacies in China. On April 15, 2024, the Company obtained 50% equity interest of the acquiree at the consideration of US$75,000,000. Being optimistic about the development prospects and synergies of combination for online and offline medical resources, the Company acquired the remaining 50% equity of Tianjin Wangyi at the consideration of US$75,000,000. The acquisition was closed on December 10, 2024 upon the settlement of the consideration. With the completion of the acquisition, the Company acquired intangible assets amounting to US$130,654,031 in connection with the business combination, of which the value of patents and Internet Hospital License (the “License”) amounting to US$120,748,253 and US$9,905,778, respectively. The value of intangible assets was measured at fair value by the using of discounted cashflow method upon acquisition.
As of March 31, 2026, the Company performed impairment assessment and determined that sufficient indicators of potential impairment existed to require an impairment analysis for the Internet Hospital License acquired. The indicators included: i) in the first half of fiscal year 2026, the Company entered into development agreements with 5 vendors to develop multiply functional modules for its Internet Hospital business and US$175.7 million advance payments was made for capital expenditures and all functional modules were expected to be delivered to the Company around September 2026. In late February 2026, global supply chain disruptions driven by international macroeconomic factors resulted in significant cost increases. The vendors notified the Company that they could no longer achieve the agreed technical specifications within the original contractual cost framework. The Company evaluated the situation and concluded that continuing the project under the current arrangements was no longer commercially viable. Consequently, in June 2026, the Company terminated the development agreements with all venders, and all advanced payment of US$175.7 million was refunded in the same months; ii) in the second half of fiscal year 2026, emerging policy tightening signals introduced material uncertainty into the Internet Hospital business commercialization landscape, impacting the initial valuation assumptions based on prevailing market conditions and industry projections at acquisition time; iii) affecting by above reasons, Company cut down its office lease space to half and cut down almost 90% of its staff for Internet Hospital business. Based on the results of the recoverability test, the Company determined that the carrying value of the Tianjin Wangyi’s asset group exceeded its undiscounted cash flows and was therefore not recoverable. The Company then compared the fair value of the asset group to its carrying value and determined the impairment loss. The impairment loss was allocated to the carrying values of the long-lived assets but not below their fair values. The Company estimated the fair value of the Internet Hospital License under an income approach. Based on the analysis, the Company recorded an impairment charge of US$5.6 million on purchased intangible assets, which represented a fully impairment on the purchased Internet Hospital License as of March 31, 2026.
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| ● | Impairment on goodwill |
The Company initiated its annual goodwill impairment analysis on annual basis as of March 31, 2026 and concluded that fair value was below carrying value for the Tianjin Wangyi reporting unit. The fair value of the Tianjin Wangyi reporting unit was based on the income approach.
The decline in the estimated fair value of the Tianjin Wangyi reporting unit results from lower projected revenue growth rates and profitability levels. The lower projected operating results were mainly the result of full impairment of Hospital Internet License mentioned above, market trends and expected deal synergies and other expectations about the anticipated short-term and long-term operating results of the healthcare business. These assumptions incorporate the Company’s analysis of what it believes were accounting improprieties, incomplete disclosures and misrepresentations at Tianjin Wangyi that occurred prior to the Tianjin Wangyi acquisition with respect to Tianjin Wangyi’s pre-acquisition business and related operating results. Based on the results of the recoverability test, the Company determined that the carrying value of the Tianjin Wangyi asset group exceeded its undiscounted cash flows and was therefore not recoverable. The Company then compared the fair value of the asset group to its carrying value and determined the impairment loss. And as a result, the Company recorded a goodwill impairment charge of approximately US$11.1 million for the year ended March 31, 2026.
Total other (expenses) income, net Our total other (expenses) income, net was US$(4,113) for the fiscal year ended March 31, 2026, compared with total other income, net of US$34,073 in the fiscal year ended March 31, 2025, the changes was primarily attributable to decrease of interest income.
(Benefit) provision for income tax The income tax benefit was approximately US$2.0 million in the fiscal year ended March 31, 2026, compared to income tax benefit of approximately US$30.8 million for the fiscal year ended March 31, 2025. The income tax benefit generated from intangible assets recognized in the business acquisition. The decrease was mainly due to impairment of acquired patents in fiscal year 2025.
Net loss from continuing operations Loss from continuing operations, net of income taxes, for fiscal year ended March 31, 2026, was approximately US$18.7 million, compared to US$135.5 million in the same prior period of fiscal year 2025. Net loss from continuing operations was mainly resulted from impairment of goodwill and intangible assets.
Net income from discontinued operations, net of income taxes Net income from discontinued operations, net of income taxes, was nil and nil for fiscal year ended March 31, 2026 and 2025, respectively.
Net loss As a result of the above factors, the Company had net loss of US$18.7 million for the fiscal year ended March 31, 2026, compared to net loss of US$135.5 million for the fiscal year ended March 31, 2025.
Fiscal Year Ended March 31, 2025 Compared to Fiscal Year Ended March 31, 2024
Net revenues Net revenues generated for the fiscal year ended March 31, 2025 was approximately US$14.8 million, representing an increase of 512.1% from approximately US$2.4 million for the fiscal year ended March 31, 2024.
Sale of medical devices Revenue from medical devices was approximately US$0.4 million, decrease from approximately US$2.4 million for the year ended March 31, 2024, the decrease was primarily due to decrease of market demand in fiscal year 2025.
Marketing promotion service Revenue from marketing promotion service was approximately US$14.4 million, increase from nil for the year ended March 31, 2024, the Company started its marketing promotion service business since April 2024, and the increase was primarily due to the growth of the scale of China’s automobile industry and the increase in demand for automobile insurance
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Cost of revenue Cost of revenue for the year ended March 31, 2025 were approximately US$15.1 million, representing a increase of 557.0% from approximately US$2.3 million for the year ended March 31, 2024. The increase of cost was primarily due to the increase of revenue from marketing promotion service business.
Costs of medical devices Costs of revenue for sales of medical devices business was approximately US$0.4 million, which was primarily the purchase price of goods sold. The decrease of costs related to medical devices business was in line with the decrease of revenue from sale of medical devices.
Costs of Marketing promotion service Cost of revenue for marketing promotion service was approximately US$14.7 million, increase from nil for the year ended March 31, 2024. The Company started its marketing promotion service business since April 2024 and the increase of costs was in line with the increase of revenue from marketing promotion service business.
Gross profit Gross profit for the year ended March 31, 2025 was negative US$281,526 compared with positive US$122,132 for the year ended March 31, 2024. The changes was mainly due to negative gross profit of US$289,822 from marketing promotion business.
Gross profit for Sales of medical devices The gross profit from sales of medical devices business was 12,120 for the year ended March 31, 2025, compared with that of US$122,132 in the year ended March 31, 2024. The decrease was mainly due to decrease of revenue from sales of medical devices affecting by decrease of market demand.
Gross profit for Marketing promotion service business The gross profit from marketing promotion service business was negative US$289,822 for the year ended March 31, 2025, compared with that of nil in the year ended March 31, 2024. The Company started the marketing promotion service business in fiscal year 2025, and the negative gross profit was mainly due to low conversion rate as the business still in its early stage.
Gross margin The gross margin was negative 1.9% in the year ended March 31, 2025, compared with positive 5.1% in the year ended March 31, 2024. The changes was mainly due to a negative 2.0% gross margin from marketing promotion business.
Gross margin for Sales of medical devices The gross margin from sales of medical devices business was 2.9% for the year ended March 31, 2025, compared with that of 5.1% in the year ended March 31, 2024. The decrease was mainly due to decrease of revenue with high margin in the year ended March 31, 2025 compared with year ended March 31, 2024.
Gross margin for Marketing promotion service business The gross margin from marketing promotion service business was negative 2.0% for the year ended March 31, 2025, compared with nil in the year ended March 31, 2024. The Company started the marketing promotion service business in fiscal year 2025, and the negative gross margin was mainly due to low conversion rate in its early stage resulting to a negative gross profit.
Operating expenses Total operating costs and expenses for the year ended March 31, 2025 were approximately US$166.0 million, representing an increase of 1,795.2% from approximately US$8.8 million for the year ended March 31, 2024. The increase was primarily due to a decrease of 100% or approximately US$0.2 million in sales and marketing expenses and an increase of 1,823.4% or approximately US$157.4 million in general and administrative expenses.
Sales and marketing expenses Sales and marketing expenses for the year ended March 31, 2025 was nil, representing a decrease of 100.0%, or approximately US$0.2 million from approximately US$0.2 million for the year ended March 31, 2024. The Company did not incur sales and marketing expense in fiscal year 2025.
General and administrative expenses General and administrative expenses for the year ended March 31, 2025 was approximately US$3.6 million, a decrease of 57.6%, or US$5.0 million, from approximately US$8.6 million for the year ended March 31, 2024. The decrease was primarily attributable to i) an increase of approximately US$2.1 million amortization, and ii) offsetting by a decrease of approximately US$7.5 million in provision for doubtful account.
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Impairment of goodwill and intangible assets Impairment of goodwill and intangible assets increased by US$162.4 million in the year ended March 31, 2025, compared with nil for the year ended March 31, 2024. The increase was mainly due to i) an increase of US$41.4 million from goodwill impairment and ii) an increase of US$121.1 million from intangible assets impairment. All the impairment loss was related to the acquisition of Tianjin Wangyi during the year ended March 31, 2025.
| ● | Impairment on acquired patents |
To expand its healthcare service business, the Company acquired Tianjin Wangyi Cloud Technology Co., Ltd and its wholly owned subsidiaries (“Tianjin Wangyi” or the “acquiree”) in the fiscal year ended March 31, 2025. Tianjin Wangyi was engaged in online hospital and clinic pharmacies in China. On April 15, 2024, the Company obtained 50% equity interest of the acquiree at the consideration of US$75,000,000. Being optimistic about the development prospects and synergies of combination for online and offline medical resources, the Company acquired the remaining 50% equity of Tianjin Wangyi at the consideration of US$75,000,000. The acquisition was closed on December 10, 2024 upon the settlement of the consideration. With the completion of the acquisition, the Company acquired intangible assets amounting to US$130,654,031 in connection with the business combination, of which the value of patents and Internet Hospital License (the “License”) amounting to US$120,748,253 and US$9,905,778, respectively. The value of intangible assets was measured at fair value by the using of discounted cashflow method upon acquisition.
Subsequent to the acquisition, the Company started its preparation for transforming patents into medical products and the achievement of its commercialization. In the process of reassessing the acquisition due diligence and acquiree’s information, the Company determined that sufficient indicators of potential impairment existed to require an impairment analysis for the patents acquired. The indicators included i) Post-acquisition emerging policy tightening signals introduced material uncertainty into the patent commercialization landscape, impacting the initial valuation assumptions based on prevailing market conditions and industry projections at acquisition time; ii) lower than expected revenue and profitability levels over a sustained period of time; and iii) downward revisions to management’s short-term and long-term forecast for the patent related business to be indicators of impairment for the Tianjin Wangyi’s long-lived assets. Based on the results of the recoverability test, the Company determined that the carrying value of the Tianjin Wangyi’s asset group exceeded its undiscounted cash flows and was therefore not recoverable. The Company then compared the fair value of the asset group to its carrying value and determined the impairment loss. The impairment loss was allocated to the carrying values of the long-lived assets but not below their fair values. The Company estimated the fair value of the purchased intangible assets, primarily patents, under an income approach. Based on the analysis, the Company recorded an impairment charge of US$121.1 million on purchased intangible assets, which represented a fully impairment on the purchased patents as of March 31, 2025.
| ● | Impairment on goodwill |
The Company initiated its annual goodwill impairment analysis on annual basis as of March 31, 2025 and concluded that fair value was below carrying value for the Tianjin Wangyi reporting unit. The fair value of the Tianjin Wangyi reporting unit was based on the income approach.
The decline in the estimated fair value of the Tianjin Wangyi reporting unit results from lower projected revenue growth rates and profitability levels. The lower projected operating results were mainly the result of full impairment of patents mentioned above, market trends and expected deal synergies and other expectations about the anticipated short-term and long-term operating results of the healthcare business. These assumptions incorporate the Company’s analysis of what it believes were accounting improprieties, incomplete disclosures and misrepresentations at Tianjin Wangyi that occurred prior to the Tianjin Wangyi acquisition with respect to Tianjin Wangyi’s pre-acquisition business and related operating results. Based on the results of the recoverability test, the Company determined that the carrying value of the Tianjin Wangyi asset group exceeded its undiscounted cash flows and was therefore not recoverable. The Company then compared the fair value of the asset group to its carrying value and determined the impairment loss. And as a result, the Company recorded a goodwill impairment charge of approximately US$41.4 million for the year ended March 31, 2025.
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Total other income (expense) Our total other income, net was US$34,073 for the fiscal year ended March 31, 2025, compared with total other expense, net of US$0.5 million in the fiscal year ended March 31, 2024, the changes was primarily attributable to a decrease of approximately US$0.2 million from interest income and a decrease of approximately US$0.6 million from exchange loss.
(Benefit) provision for income tax The income tax benefit was approximately US$30.8 million in the fiscal year ended March 31, 2025, compared to income tax expense of approximately US$ 24,988 for the fiscal year ended March 31, 2024. The income tax benefit generated from intangible assets recognized in the business acquisition.
Net loss from continuing operations Loss from continuing operations, net of income taxes, for fiscal year ended March 31, 2025, was approximately US$135.5 million, compared to US$9.1 million in the same prior period of fiscal year 2024. Net loss from continuing operations was mainly resulted from general and administrative expenses.
Net income from discontinued operations, net of income taxes Net income from discontinued operations, net of income taxes, for fiscal year ended March 31, 2025, was nil, compared to approximately US$0.4 million in the prior period. The Company completed the disposal of social E-commerce business in the fiscal year 2024.
Net loss As a result of the above factors, we had net loss of US$135.5 million for the fiscal year ended March 31, 2025, compared to net loss of US$9.5 million for the fiscal year ended March 31, 2024.
Changes in Financial Position
As of March 31, 2026, our cash and cash equivalents were US$0.2 million, representing a decrease of US$176.0 million from US$176.2 million as of March 31, 2025. For the fiscal year ended March 31, 2026, our net cash used in operating activities was US$12.8 million, compared with cash provided by operating activities of US$1.2 million in the year ended March 31, 2025; out net cash used in investing activities was US$163.5 million in the year ended March 31, 2026, compared to net cash of US$106.0 used in investing activities for the year ended March 31, 2025; and net cash provided by financing activities was US$0.4 million for the year ended March 31, 2026, compared to net cash of US$195.9 million provided by financing activities for the year ended March 31, 2025. The cash used in investing activities was mainly capital expenditures paid for the development of multiply functional modules related to the Company’s Internet Hospital business.
As of March 31, 2025, our cash and cash equivalents were US$176.2 million, representing an increase of US$91.1 million from US$85.2 million as of March 31, 2024, mainly due to an increase in cash used in investing activities and cash provided by financing activities. For the fiscal year ended March 31, 2025, our net cash used in investing activities was US$105.9 million, compared to net cash of US$54.7 used in investing activities for the year ended March 31, 2024; and net cash provided by financing activities was US$195.9 million for the year ended March 31, 2025, compared to net cash of US$131.7 million provided by financing activities for the year ended March 31, 2024. The fund from financing activities for the years ended March 31, 2025 and 2024 primarily attributable to the funds from private placements.
Recent Accounting Pronouncements
In January 2025, the FASB issued ASU 2025—01, “Income Statement – Comprehensive Income – Expense Disaggregation Disclosure (Subtopic 220—40): Clarifying the Effective Date.” This pronouncement revises the effective date of ASU 2024—03 and clarifies that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Entities within the ASU’s scope are permitted to early adopt the accounting standard update. The Company is currently evaluating these new disclosure requirements and does not expect the adoption to have a material impact.
In November 2024, the FASB issued ASU 2024—03, “Income Statement—Reporting Comprehensive Income (Subtopic 220—40): Disaggregation of Income Statement Expenses.” This pronouncement introduces new disclosure requirements aimed at enhancing transparency in financial reporting by requiring disaggregation of specific income statement expense captions. Under the new guidance, entities are required to disclose a breakdown of certain expense categories, such as: employee compensation; depreciation; amortization, and other material components. The disaggregated information can be presented either on the face of the income statement or in the notes to the financial statements, often using a tabular format. The ASU is effective for fiscal years beginning after December 15, 2025, and interim periods within those fiscal years. Early adoption is permitted. In January 2025, the FASB issued ASU 2025—01, which revises the effective date of ASU 2024—03 (on disclosures about disaggregation of income statement expenses) “to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027.” Entities within the ASU’s scope are permitted to early adopt the ASU. The Company is currently evaluating these new disclosure requirements and does not expect the adoption to have a material impact
The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the consolidated balance sheets, consolidated statements of operations and comprehensive loss (income) and consolidated statements of cash flows.
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Recent Developments
March 5, 2024 Private Placement
On March 5, 2024, the Company entered into a certain securities purchase agreement (the “SPA”) with certain non—affiliated institutional investors (the “Purchasers”) pursuant to which the Company agreed to sell an aggregate of 37,100,000 of its American Depositary Shares (“ADSs”) representing 111,300,000 ordinary shares, par value $0.0001 per share (“Ordinary Shares”), in a registered direct offering, and warrants (“Warrants”) to purchase 222,600,000 Ordinary Shares in a concurrent private placement for gross proceeds of approximately $49.34 million (the “Offering”).
The warrants are exercisable immediately as of the date of issuance at an exercise price of $0.4933 per ordinary share, or $1.48 per ADS and expire five years from the date of issuance. The purchase price for each ADS and the corresponding Warrants is $1.33. Each Warrant is subject to anti—dilution provisions to reflect stock dividends and splits, subsequent rights offerings or other similar transactions, but not as a result of future securities offerings at lower prices. Upon the occurrence of a Fundamental Transaction (as defined in the Warrants), the Warrants are subject to mandatory redemption for cash consideration equal to the Black Scholes Value (as defined in the Warrants) of such portion of such Warrant to be redeemed. The Company intended to use the net proceeds from the Offering for working capital and general corporate use. The Offering closed on March 7, 2024. On September 8, 2025, the warrants were exercised on cashless basis and resulting issuance of 155,820,000 ordinary shares in the year ended March 31, 2026.
November 4, 2024 Private Placement
On October 24, 2024, the Company entered into certain securities purchase agreement (the “SPA”) with certain “non—U.S. Persons” (the “Purchasers”) as defined in Regulation S of the Securities Act of 1933, as amended (the “Securities Act”) pursuant to which the Company agreed to sell up to an aggregate of 361,290,000 units (the “Units”), each Unit consisting of one Class A ordinary Share of the Company, par value $0.0001 per share (“Share”) and three warrants, each to purchase one Share (“Warrant”) with an initial exercise price of $0.461, or approximately $1.383 per American depositary share of the Company (“ADS”), at a price of $0.369 per Unit for an aggregate purchase price of approximately $133.32 million (the “Offering”).
The Warrants are exercisable immediately upon the date of issuance at an initial exercise price of $0.461, or approximately $1.383 per ADS, for cash (the “Warrant Shares”). The Warrants may also be exercised cashlessly if at any time after the six—month anniversary of the issuance date, there is no effective registration statement registering, or no current prospectus available for, the resale of the Warrant Shares. The Warrants shall expire five years from its date of issuance. The Warrants are subject to customary anti—dilution provisions reflecting stock dividends and splits or other similar transactions. The Offering closed on November 4, 2024, upon the satisfaction of all of the closing conditions set forth in the SPA. On September 8, 2025, the warrants were exercised on cashless basis and resulting issuance of 758,709,000 ordinary shares in the year ended March 31, 2026
B. Liquidity and Capital Resources
We have financed our operations primarily through cash provided by operating activities, the loans from third parties and shareholder, and proceeds from private placement and short term loan from related party. We plan to finance our future operations primarily from cash generated from our operations and cash on hand. As of March 31, 2026, 2025 and 2024, we had US$0.2 million, US$176.2 million, and US$85.2 million, respectively, in cash on hand and cash deposited with banks. As of March 31, 2026, 2025 and 2024, our working capital amounted to US$180.8 million, US$182.3 million, and US$138.4 million, respectively. Otherwise, in June 2026, we received a total of US$175.7 million refund from vendors due to termination of development agreements. As a result, we believe that our current cash, cash flows provided by operating activities and net proceeds from our financing activities will be sufficient to meet our working capital needs in the next 12 months from the date of this annual report on Form 20-F.
Substantially all of our operations are conducted in China, and all of our revenue, expenses, cash and cash equivalents are denominated in RMB. RMB is subject to the exchange control regulation in China, and, as a result, we may have difficulty distributing any dividends outside of China due to PRC exchange control regulations that restrict our ability to convert RMB into U.S. dollars.
We have limited financial obligations dominated in U.S. dollars, thus the foreign currency restrictions and regulations in the PRC on dividend distribution will not have a material impact on our liquidity, financial condition and results of operations.
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Holding Company Structure
We are a holding company with no material operations of our own. We conduct our operations primarily through our PRC subsidiaries. As a result, our ability to pay dividends and to finance any debt we may incur depends upon direct and indirect dividends paid by our subsidiaries and consolidated affiliated entities. If any of our subsidiaries or consolidated affiliated entities or any newly formed subsidiaries or consolidated affiliated entities incurs debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us. In addition, our PRC subsidiaries and consolidated entities are permitted to pay dividends only out of their respective retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Under PRC law, our PRC subsidiaries, consolidated affiliated entities and their subsidiaries, except for our joint venture, are required to set aside a portion of their respective after-tax profits each year to fund a statutory reserve. Our PRC subsidiaries and consolidated entities may also set aside a portion of their respective after-tax profits to fund the employee welfare fund at the discretion of the board of directors or the enterprise itself. Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends except in the event of liquidation of these subsidiaries or consolidated affiliated entities, as applicable.
C. Trend Information
Other than as disclosed elsewhere in this annual report on Form 20-F, we are not aware of any trends, uncertainties, demands, commitments or events for the fiscal year ended March 31, 2026 that are reasonably likely to have a material adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.
D. Critical Accounting Estimates.
Our discussion and analysis of our financial condition and results of operations relates to our consolidated financial statements, which have been prepared in accordance with United States of America generally accepted accounting principles (“U.S. GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. On an on-going basis, we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
We consider an accounting estimate to be critical if: (1) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (2) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations. There are other items within our financial statements that require estimation but are not deemed critical, as defined above. Changes in estimates used in these and other items could have a material impact on our financial statements.
For a detailed discussion of our significant accounting policies and related judgments, please see “Note 2-Summary of Significant Accounting Policies” of our consolidated financial statements included elsewhere in this annual report. You should read the following description of critical accounting estimates in conjunction with our consolidated financial statements and other disclosures included in this annual report.
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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Directors and Senior Management
The following table sets forth information regarding our directors and executive officers as of the date of this annual report on Form 20-F.
| Name | Age | Position with the Company | ||
| Executive Directors and Officers: | ||||
| Yilin (Linda) Wang | 39 | Chairwoman and Chief Executive Officer | ||
| Zhongliang Xie | 55 | Chief Financial Officer | ||
| Wenjuan (Vivian) Liu | 39 | Director | ||
| Non-Executive Directors: | ||||
| Stephen P. Brown | 66 | Independent director | ||
| Zhe Liu | 41 | Independent director | ||
| Jianqiang Xu | 62 | Independent director |
Executive Officers
Ms. Yilin (Linda) Wang, aged 39, has served as our chief executive officer since October 2021. From September 2021 to October 2021, Ms Wang served as the Co-CEO of the Company. Ms Wang has extensive years of experience in corporate management. She is an information technology expert and has rich professional experience in medical health, health management and medical technology-related businesses. Ms. Wang has been the founder and CEO of Shijiazhuang Weigou Information Technology Co., Ltd., since November 2010. Ms. Wang obtained her bachelor’s degree in management from the Hebei University of Science & Technology, China, and a master’s degree in science and engineering management from the Hebei Dizhi University, China.
Mr. Zhongliang Xie, aged 55, has served as our chief financial·officer·since Aprill 2025. He has served as the General Manager of Zhongxingcai Guanghua Certified Public Accountants Shaanxi Branch since 2019. He previously served as the General Manager of Beijing Xinghua Certified Public Accountants Xi’an Branch from 2008 to 2018, and as the Finance Manager of Zhongyi Far East Import & Export Co., Ltd. from 2005 to 2008. Mr. Xie has also been the signing CPA and lead audit partner for several bond issuance and annual report projects in China. In addition, he has served as the lead audit partner for the listing and annual reports of numerous companies listed on the National Equities Exchange and Quotations (NEEQ) of China. Mr. Xie is a Chinese Certified Public Accountant (CPA), Certified Asset Appraiser, Chinese Certified Cost Engineer, and a fellow of the International Association of Accountants (FAIA).
Ms. Wenjuan (Vivian) Liu, aged 39, was appointed as our director on July 14, 2021. Ms. Liu has served as the Chief Executive Officer of Hebei Chuangjie Technology Co., Ltd. since August 2018. From May 2015 to July 2018, Ms. Liu served as the Key Client Manager of Hebei Branch of Guosen Co., Ltd. Ms. Liu has extensive experience in financial investments, capital market operations and enterprise management. Ms. Liu obtained her bachelor’s degree in marketing from the Department of Economics and Management at Nankai University of China.
Non-executive Directors
Mr. Stephen P. Brown, aged 66 Mr. Stephen P. Brown has served as our independent director since April 11, 2022. Mr. Brown, has served as the chief financial officer of SolarMax Technology, Inc. since May 2017. From 2013 until April 2017, he was chief financial officer of STAAR Surgical Company. Mr. Brown was vice president, global finance of Bausch & Lomb from 2008 until 2013 and chief financial officer of Hoya Surgical Optics from 2007 to 2008. He served in various capacities over a 13-year period with Johnson & Johnson including chief financial officer of the Advanced Sterilization Products division. Mr. Brown holds a Master of Business Administration degree from University of California, Los Angeles Anderson School of Management, and earned a Bachelor’s degree from California State University, Fullerton.
Mr. Zhe Liu, aged 41, has served as our independent director since October 12, 2022. In 2012, Mr. Liu founded Shijiazhuang Zizhe Import and Export Trading Co., Ltd and served as CEO since January 2012. From June 2011 to January 2012, he served as deputy manager at Shijiazhuang Branch of Beijing Aohongxuan Wine Co., Ltd. From August 2009 to June 2011, he served as sales director at Henan Region of Shijiazhuang Shengdian Pharmaceutical Co., Ltd. Mr. Liu earned his bachelor’s degree in marking and business English from University of Portsmouth in 2007.
Mr. Jianqiang Xu, aged 62, has extensive experience in neurosurgery and hospital administration. Mr. Xu currently serves as Director of the Department of Neurosurgery, Vice President, and President of Fengfeng Group General Hospital, a Class III Grade A hospital in China since 2016. He specializes in the microsurgical treatment of intracranial and intraspinal tumors. Mr. Xu has published more than 40 academic papers in core journals and SCI-indexed publications and has edited four professional books. He has also spoken at certain provincial, national, and international neurosurgery and trauma conferences in September 2017. Mr. Xu received a bachelor’s degree in Medicine in 1986 and a master’s degree in Surgery in June 2001.
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Our insider trading policy allows directors, officers and other employees covered under the policy to establish, under limited circumstances contemplated by Rule 10b5-1 under the Securities Exchange Act of 1934, written programs that permit automatic trading of our stock or trading of our shares or ADSs by an independent person who is not aware of material non-public information at the time of the trade. From time to time, certain of our directors, executive officers, and employees have adopted Rule 10b5-1 trading plans.
Board Diversity
The table below provides certain information regarding the diversity of our board of directors as of the date of this annual report.
| Board Diversity Matrix | |||
| Country of Principal Executive Offices: | China | ||
| Foreign Private Issuer | Yes | ||
| Disclosure Prohibited under Home Country Law | No | ||
| Total Number of Directors | 5 |
| Female | Male | Non- Binary |
Did Not Disclose Gender |
|||||||||||||
| Part I: Gender Identity | ||||||||||||||||
| Directors | 2 | 3 | - | - | ||||||||||||
| Part II: Demographic Background | ||||||||||||||||
| Underrepresented Individual in Home Country Jurisdiction | - | - | - | - | ||||||||||||
| LGBTQ+ | - | - | - | - | ||||||||||||
| Did Not Disclose Demographic Background | - | - | - | - | ||||||||||||
B. Compensation
For the fiscal year ended March 31, 2026, we paid an aggregate of approximately US$265,138 in cash to our executive officers and directors. We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our executive officers and directors. Our PRC subsidiaries are required by law to make contributions equal to certain percentages of each employee’s salary for his or her pension insurance, medical insurance, unemployment insurance and other statutory benefits and a housing provident fund. For incentive share grants to our officers and directors, see “Item 7. Major Shareholders and Related Party Transactions-B. Compensation-Share Incentive Plan.”
Share Incentive Plan
2023 Equity Incentive Plan
Our 2023 Equity Incentive Plan was adopted to attract and retain the best available personnel for positions of substantial responsibility, provide additional incentive to employees, directors and consultants and promote the success of our business. The equity incentive plan provides for the grant of an option, restricted shares, restricted share units and local awards.
Authorized Shares The maximum aggregate number of shares that may be issued under the 2023 Equity Incentive Plan is 10,280,000 of our ordinary shares. Ordinary shares issued pursuant to awards under the 2023 Equity Incentive Plan that are forfeited or cancelled or otherwise expired, will become available for future grant under the 2023 Equity Incentive Plan. The shares that are tendered by a participant of the 2023 Equity Incentive Plan or withheld by us to pay the exercise price of an option or to satisfy the participant’s tax withholding obligations in connection with an award shall not be added back to the limit of the 2023 Equity Incentive Plan. During the term of the 2023 Equity Incentive Plan, we will at all times reserve and keep available a sufficient number of ordinary shares available for issue to satisfy the requirements of the 2023 Equity Incentive Plan.
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Plan Administration The 2023 Equity Incentive Plan is administered by our compensation committee. Subject to the provisions of the 2023 Equity Incentive Plan, the administrator has the power to determine the terms of awards, including the eligible participants, the exercise price, if any, the number of shares subject to each award, the fair market value of a share of our ordinary shares, the vesting schedule applicable to the awards, together with any vesting acceleration, and the form of settlement of awards in shares or cash or a combination thereof and the terms of the award agreement for use under the 2023 Equity Incentive Plan. In the event that any dividend or other distribution, recapitalization, share division, share consolidation, reorganization or any change in the corporate structure of the Company affecting the shares occurs, the administrators will make an adjustment with respect to the number and class of shares that may be delivered under the 2023 Equity Incentive Plan and/or the number, class and price of shares covered by outstanding awards, in order to prevent diminution of the benefits intended to be made available under the 2023 Equity Incentive Plan.
Awards under the Equity Incentive Plan
Share Options Share options may be granted under the 2023 Equity Incentive Plan. The exercise price of each option shall be determined by the administrator; provided, however, that the per share exercise price may be no less than 100% of the fair market value per share on the date of grant. Our administrator shall also determine the time or times at which the options shall vest and may be exercised and will determine any conditions that must be satisfied. One-third of the shares subject to an award will vest on each of the first, second and third annual anniversaries of the vesting commencement date, unless otherwise provided in the award agreement.
Restricted Shares A restricted share award agreement will specify restrictions on the duration of the restricted period, the number of shares granted, and any other terms and conditions specified by the administrator. Except to the extent otherwise provided in the award agreement, the holder of restricted shares will be entitled to receive all dividends and other distributions paid with respect to the shares, subject to the same restrictions on transferability and forfeitability as the underlying shares of restricted shares. Restricted shares may not be sold, transferred, assigned or pledged until the end of the restricted period and may be subject to forfeiture upon a termination of employment or service with us.
Restricted Share Units Awards of restricted share units may be granted by the administrator. At the time of the grant of restricted share units, the administrator may impose conditions that must be satisfied, such as continued employment or service or attainment of corporate performance goals, and may place restrictions on the grant and/or vesting of the restricted share units. A restricted share unit award agreement will specify applicable vesting criteria, the number of restricted share units granted, the terms and conditions on time and form of payment and any such terms and conditions determined by the administrator. Each restricted share unit, upon fulfilment of any applicable conditions, represents a right to receive an amount equal to the fair market value of one share.
Administrator may cause a local PRC subsidiary of our Company to grant local cash-settled awards in lieu of any other award under the 2023 Equity Incentive Plan, which such local awards shall be paid wholly by such PRC subsidiary. Each local award shall be linked to the fair market value of a share.
Change in Control The 2023 Equity Incentive Plan provides that in the event of a change in control of our Company, each outstanding award will be assumed or substituted by the successor corporation. Unless the administrator determines otherwise, in the event that the successor corporation does not assume or substitute for the award, the portion of the award that remains outstanding will fully vest and all applicable restrictions will lapse. The holders of any outstanding options will be provided notice and a specified period of time to exercise awards to the extent vested (with awards terminating upon the expiration of the specified period of time). An award will be considered assumed if, following the change in control transaction, the award confers the right to purchase or receive, for each share subject to the award, the same consideration received in the change in control transaction by the holders of ordinary shares for each share held on the effective date of the transaction.
Plan Amendment Our board of directors may amend, alter, suspend or terminate the 2023 Equity Incentive Plan, subject to certain exceptions. The termination of the 2023 Equity Incentive Plan will not limit the administrator’s ability to exercise the powers granted to it with respect to awards granted under the plan prior to the date of termination.
Granted Options and Restricted Share Units As of March 31, 2025, the aggregate numbers of our ordinary shares underlying our outstanding options and restricted share units were nil and nil, respectively. For the fiscal year ended March 31, 2026, nil of the options granted had been vested, and nil of the restricted share units granted had been vested. As of March 31, 2026, none of the options granted had been exercised, and none of the restricted share units granted had vested.
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The following table summarizes, as of March 31, 2026, the outstanding options granted to the individual executive officers and directors named below and to other individuals as a group.
| Number of | ||||||||||||||||
| Ordinary Shares |
Exercise | |||||||||||||||
| Underlying | Price | Date of | Date of | |||||||||||||
| Name | Options | (US$/Share) | Grant | Expiration | ||||||||||||
| Yilin (Linda) Wang | - | - | - | - | ||||||||||||
| Wenjuan (Vivian) Liu | - | - | - | - | ||||||||||||
| Zhongliang Xie | - | - | - | - | ||||||||||||
| Stephen P. Brown | - | - | - | - | ||||||||||||
| Zhe Liu | - | - | - | - | ||||||||||||
| Jianqiang Xu | - | - | - | - |
The following table summarizes, as of March 31, 2026 the outstanding restricted share units granted to the individual executive officers and directors named below and to other individuals as a group.
| Number of | ||||||||||||
| Ordinary Shares |
||||||||||||
| Underlying | ||||||||||||
| Restricted Share | Date of | Date of | ||||||||||
| Name | Units | Grant | Expiration | |||||||||
| Yilin (Linda) Wang | - | - | - | |||||||||
| Wenjuan (Vivian) Liu | - | - | - | |||||||||
| Zhongliang Xie | - | - | - | |||||||||
| Stephen P. Brown | - | - | - | |||||||||
| Zhe Liu | - | - | - | |||||||||
| Jianqiang Xu | - | - | - |
C. Board Practices
Our board of directors consists of five directors, including two executive directors and three non-executive directors. The powers and duties of our directors include convening general meetings and reporting our board’s work at our shareholders’ meetings, declaring dividends and distributions, determining our business and investment plans, appointing officers and determining the term of office of the officers, preparing our annual financial budgets and financial reports, formulating proposals for the increase or reduction of our authorized capital as well as exercising other powers, functions and duties as conferred by our articles of association. Our directors may exercise all the powers of our company to borrow money, mortgage its business, property and uncalled capital and issue debentures or other securities whenever money is borrowed or as security for any obligation of our company or of any third party.
A director may vote in respect of any contract or proposed contract or arrangement notwithstanding that he may be interested therein, and if he does so, his vote shall be counted, and he may be counted in the quorum at any meeting of the directors at which any such contract or proposed contract or arrangement is considered. A director who is in any way, whether directly or indirectly, interested in a contract or proposed contract with us is required to declare the nature of his interest at a meeting of our directors. A general notice given to the directors by any director to the effect that he is a member, shareholder, director, partner, officer or employee of any specified company or firm and is to be regarded as interested in any contract or transaction with that company or firm shall be deemed a sufficient declaration of interest for the purposes of voting on a resolution in respect to a contract or transaction in which he has an interest, and after such general notice, it shall not be necessary to give special notice relating to any particular transaction.
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Committees of the Board of Directors
We have established an audit committee, a compensation committee and a nominating and corporate governance committee under the board of directors. We have adopted a charter for each of the three committees. Each committee’s members and functions are described below.
Audit Committee. Our audit committee consists of three members and is chaired by Mr. Stephen P. Brown. Each of Mr. Stephen P. Brown, Mr. Zhe Liu and Mr. Jianqiang Xu satisfies the “independence” requirements of the listing rules of NASDAQ and meets the independence standards under Rule 10A-3 under the Exchange Act. We have determined that Mr. Stephen P. Brown qualifies as an “audit committee financial expert.” The audit committee oversees our accounting and financial reporting processes and the audits of the financial statements of our company. The audit committee is responsible for, among other things:
| ● | selecting the independent registered public accounting firm and pre-screening all auditing and non-auditing services permitted to be performed by the independent registered public accounting firm; |
| ● | reviewing with the independent registered public accounting firm any audit problems or difficulties and management’s response; |
| ● | reviewing and approving all proposed related party transactions, as defined in Item 404 of Regulation S-K under the Securities Act; |
| ● | discussing the annual audited financial statements with management and the independent registered public accounting firm; |
| ● | reviewing major issues as to the adequacy of our internal controls and any special audit steps adopted in light of material control deficiencies; |
| ● | annually reviewing and reassessing the adequacy of our audit committee charter; |
| ● | meeting separately and periodically with management and the independent registered public accounting firm; and |
| ● | reporting regularly to the board of directors. |
Compensation Committee. Our compensation committee consists of three members and is chaired by Mr. Jianqiang Xu. Each of Mr. Jianqiang Xu, Mr. Stephen P. Brown and Mr. Zhe Liu satisfies the “independence” requirements of the listing rules of NASDAQ. The compensation committee assists the board of directors in reviewing and approving the compensation structure, including all forms of compensation, relating to our directors and executive officers. Our executive officers may not be present at any committee meeting during which their compensation is deliberated upon. The compensation committee is responsible for, among other things:
| ● | reviewing the total compensation package for our executive officers and making recommendations to the board of directors with respect to it; |
| ● | approving and overseeing the total compensation package for our executives other than the three most senior executives; |
| ● | reviewing the compensation of our directors and making recommendations to the board of directors with respect to it; and |
| ● | periodically reviewing and approving any long-term incentive compensation or equity plans, programs or similar arrangements, annual bonuses, and employee pension and welfare benefit plans. |
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Nominating and Corporate Governance Committee. Our nominating and corporate governance committee consists of three members and is chaired by Mr. Zhe Liu. Each of Mr. Zhe Liu, Mr. Stephen P. Brown and Mr. Jianqiang Xu satisfies the “independence” requirements of the listing rules of NASDAQ. The nominating and corporate governance committee assists the board of directors in selecting individuals qualified to become our directors and in determining the composition of the board of directors and its committees. The nominating and corporate governance committee is responsible for, among other things:
| ● | recommending nominees to the board of directors for election or re-election to the board of directors, or for appointment to fill any vacancy on the board of directors; |
| ● | reviewing annually with the board of directors the current composition of the board of directors with regards to characteristics such as independence, age, skills, experience and availability of service to us; |
| ● | selecting and recommending to the board of directors the names of directors to serve as members of the audit committee and the compensation committee, as well as of the nominating and corporate governance committee itself; and |
| ● | monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance. |
Duties of Directors
Under Cayman Islands law, our directors owe fiduciary duties to our company, including a duty to act honestly, and a duty to act in what they consider in good faith to be in our best interests. Our directors must also exercise their powers only for a proper purpose. Our directors also owe to our company a duty to act with skills they actually possess and exercise such care and diligence that a reasonably prudent person would exercise in comparable circumstances. It was previously considered that a director need not exhibit in the performance of his duties a greater degree of skill than may reasonably be expected from a person of his knowledge and experience. However, English and Commonwealth courts have moved towards an objective standard with regard to the required skill and care and these authorities are likely to be followed in the Cayman Islands. In fulfilling their duty of care to our company, our directors must ensure compliance with our memorandum and articles of association, as amended and restated from time to time, and the rights vested thereunder in the holders of the shares. Our directors owe their fiduciary duties to our company and not to our company’s individual shareholders, and it is our company which has the right to seek damages if a duty owed by our directors is breached. In limited exceptional circumstances, a shareholder may have the right to seek damages in our name if a duty owed by our directors is breached.
Terms of Directors and Officers
Pursuant to our amended and restated memorandum and articles of association, subject to the approval of our shareholders, our board of directors has the power from time to time and at any time to appoint any person as a director to fill a casual vacancy on the board or as an addition to the existing board (subject to the maximum size limit). Our directors are not subject to a term of office and will hold their offices until such time as they are removed from office by an ordinary resolution of our shareholders.
In addition, the office of any of our directors shall be vacated if the director (a) becomes bankrupt or makes any arrangement or composition with his creditors; (b) dies or becomes of unsound mind; (c) resigns his office by notice in writing to our company; (d) without special leave of absence from our board of directors, is absent from meetings of the board for three consecutive meetings and the board of directors resolves that his office be vacated; (e) is prohibited by law or designated stock exchange rules from being a director; or (f) is removed from office pursuant to our memorandum and articles of association.
Our officers are elected by and serve at the discretion of the board of directors. Our senior executive officers are employed for a specified time period. We may terminate employment for cause, at any time, without advance notice or remuneration, for certain acts of the senior executive officers, such as the officer’s fraudulent or illegal conduct that is materially detrimental to our business, the officer’s uncured material breach of our confidentiality agreement or the officer’s uncured material breach of the applicable employment agreement. We may also terminate a senior executive officer’s employment without cause with advance written notice. Each senior executive officer may terminate employment at any time with advance written notice at the election of such officer.
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Employment Agreements and Confidentiality Agreements
We have entered into employment agreements and confidentiality agreements with each of our executive officers. Under these agreements, each of our executive officers is employed for a specified period of time. The employment agreements provide that the employment can be terminated pursuant to the PRC Employment Contract Law and relevant regulations. Under such law and regulations, we may terminate employment with an employee (i) for cause, at any time, without advance notice or remuneration, including for certain acts of the employee, such as conviction of a crime, malpractices which caused significant damage to us, or violation of our internal policies; or (ii) without cause by paying severance compensation to the employee.
According to the confidentiality agreements entered into with our executive officers, our executive officers may resign at any time with a 30-day advance written notice. Each executive officer has agreed, both during and within two years after the termination or expiry of his or her employment agreement to (i) hold, in strict confidence and not to use any of our confidential information or trade secrets, any confidential information or trade secrets of our users, or the confidential or proprietary information of any third party received by us and for which we have confidential obligations; and (ii) be bound by non-competition restrictions. Each executive officer has agreed not to, without our express consent, assume employment by, or provide direct or indirect services to, any of our competitors, whether as a shareholder, partner, executive, supervisor, consultant or otherwise, or to engage in any business that is similar to our business. Each executive officer has agreed to indemnify us against any actual loss incurred by us as a result of his or her breach of the confidentiality and non-competition obligations.
We have entered into indemnification agreements with each of our directors and executive officers. Under these agreements, we agree to indemnify our directors and executive officers against certain liabilities and expenses incurred by such persons in connection with claims made by reason of their being a director or officer of our company.
D. Employees
We had 9, 27 and 12 full-time employees as of March 31, 2024, 2025 and 2026, respectively. None of our employees are represented by a labor union. We have not experienced any work stoppages, and we consider our relations with our employees to be good.
We invest significant resources in the recruitment of employees in support of our business operations. We have established comprehensive training programs, including orientation programs and on-the-job-training, to enhance performance and service quality.
As required by PRC Laws and regulations, we participate in various government statutory employee benefit plans, including a pension contribution plan, a medical insurance plan, an unemployment insurance plan, a work-related injury insurance plan, a maternity insurance plan and a housing provident fund. We are required under PRC law to contribute to employee benefit plans at specified percentages of the salaries, bonuses and certain allowances of our employees up to a maximum amount specified by the local government from time to time.
We enter into standard labor contracts with our employees. We also enter into standard confidentiality and non-compete agreements with our executive officers. See “Item 7. Major Shareholders and Related Party Transactions-B. Compensation-Employment Agreements and Confidentiality Agreements.”
E. Share Ownership
Please refer to “Item 7. Major Shareholders and Related Party Transactions-A. Major Shareholder” and “-B. Compensation-Share Incentive Plan.”
F. Disclosure of a registrant’s action to recover erroneously awarded compensation.
Not applicable.
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ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. Major Shareholders
The following table presents information regarding the beneficial ownership of our ordinary shares as of the date of this annual report by:
| ● | each person or entity that we know beneficially owns or will beneficially own more than 5% of our outstanding ordinary shares; |
| ● | each director or executive officer who beneficially owns or will beneficially own more than 1% of our outstanding ordinary shares; and |
| ● | all of our directors and executive officers as a group. |
The calculations in the table below assume there are 2,570,112,530 ordinary shares (including 2,562,131,730 Class A ordinary shares and 7,980,800 Class B ordinary shares) outstanding as of the date of this annual report.
Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In computing the number of ordinary shares beneficially owned by a person and the percentage ownership of that person, we have included ordinary shares that the person has the right to acquire within 60 days, including through the exercise of any option, warrant, or other right or the conversion of any other security. These ordinary shares, however, are not included in the computation of the percentage ownership of any other person.
| Ordinary shares beneficially owned | ||||||||||||||||||||
| Class A ordinary shares | Class B ordinary shares | Total ordinary shares on as-converted basis | % of total ordinary shares on as-converted basis (2) | % of aggregate voting power (3) | ||||||||||||||||
| Directors and Executive Officers (1): | ||||||||||||||||||||
| Yilin (Linda) Wang (4) | - | - | - | - | - | |||||||||||||||
| Stephen P. Brown (5) | - | - | - | - | - | |||||||||||||||
| Zhe Liu (6) | - | - | - | - | - | |||||||||||||||
| Jianqiang Xu (7) | - | - | - | - | - | |||||||||||||||
| Zhongliang Xie | - | - | - | - | - | |||||||||||||||
| Wenjuan (Vivian) Liu | - | - | - | - | - | |||||||||||||||
| All directors and executive officers as a group | - | - | - | - | - | |||||||||||||||
| Principal Shareholders: | ||||||||||||||||||||
| Webao Limited (8) | - | 7,980,800 | 7,980,800 | 0.3 | 5.9 | |||||||||||||||
Notes:
| * | Less than 1% of our total outstanding ordinary shares. |
| (1) | Except for Mr. Stephen P. Brown, the business address of our directors and executive officers is Room 515, Floor 5, Jia No. 92-4 to 24 Jianguo Road Chaoyang District, Beijing 100020, People’s Republic of China. |
| (2) | For each person and group included in this column, percentage ownership is calculated by dividing the number of Class A and Class B ordinary shares beneficially owned by such person or group by the sum of the total number of Class A and Class B ordinary shares outstanding, which is 2,570,112,530 ordinary shares (including 2,562,131,730 Class A ordinary shares and 7,980,800 Class B ordinary shares) as of the date of this annual report, plus the number of Class A and Class B ordinary shares such person or group has the right to acquire upon the exercise of options, warrants or other rights within 60 days after as of the date of this annual report. We use the conversion rate of 1:1 for the incentive shares for the purpose of calculating the beneficial ownership of our ordinary shares. Vested incentive shares convert to ordinary shares of our company at a 1:1 conversion rate, subject to payment of the reserve amount, which was calculated by us to be our good faith estimate of the fair market value of our ordinary shares (or equivalent thereof) at the time of the grant of such incentive shares. |
| (3) | For each person or group included in this column, the percentage of total voting power represents voting power based on both Class A and Class B ordinary shares held by such person or group as of the date of this annual report with respect to all of our outstanding Class A and Class B ordinary shares as one class as of the date of this annual report. Each holder of Class A ordinary shares is entitled to one vote per share, subject to the limitations set forth in “Item 10. Additional Information-B. Memorandum and Articles of Association-Ordinary Shares.” Each holder of our Class B ordinary shares is entitled to 20 votes per share on all matters subject to a shareholder’s vote. Our Class B ordinary shares are convertible at any time by the holder into Class A ordinary shares on a one-for-one basis, whereas Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances. The total voting power of the Class B Holders is limited. See “Item 10. Additional Information-B. Memorandum and Articles of Association-Ordinary Shares.” |
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| (4) | Ms. Yilin (Linda) Wang does not hold any ordinary share in our company. |
| (5) | The business address of Mr. Stephen P. Brown is 9 Bent Oak Coto de Caza, CA 92679. |
| (6) | The business address of Mr. Zhe Liu is 101, Unit 2, Building 3, Block C, No. 35, Beicheng Road, Xinhua District, Shijiazhuang, Hebei Province, People’s Republic of China. |
| (7) | The business address of Jianqiang Xu is No. 5, Junmin Road, Xinshi District, Handan City, Hebei Province, China. |
| (8) | Represents 7,980,800 Class B ordinary shares held by Webao Limited. The registered office address of Webao Limited is 12 / F, Santai building, 137-139 Connaught Road Central, Hong Kong. |
To our knowledge, on the same basis of calculation as above, approximately 1.7% of our total outstanding Class A ordinary shares were held by one record shareholder in the United States, namely, Citibank, N.A., which held 44,056,049 Class A ordinary shares represented by 14,685,350 ADSs. The number of beneficial owners of our ADSs in the United States is likely to be much larger than the number of record holders of our ordinary shares in the United States.
None of our shareholders has informed us that it is affiliated with a registered broker-dealer or is in the business of underwriting securities. None of our existing shareholders will have different voting rights from other shareholders, except with respect to the differences in voting rights afforded to holders of Class A ordinary shares and Class B ordinary shares. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company.
B. Related Party Transactions
Contractual Arrangements and Corporate Structure
Akso Health Group, formerly known as Xiaobai Maimai Inc., is a limited company incorporated under the laws of the Cayman Islands and currently conducts substantially all of our business operations in the PRC through our wholly foreign owned entities (“WFOEs”) incorporated in the PRC. As used in this annual report, unless otherwise indicated, “we,” “us,” “our,” the “Company” and “Akso Health” refer to Akso Health Group, a company organized in the Cayman Islands; and the “VIE” refers respectively to our former variable interest entity and its subsidiaries, Wusu Hexin Yongheng Trading Co., Ltd, Hexin Digital Technology Co., Ltd. and Beijing Hexin Jiuding Technology Co., Ltd.
The Diagram below shows our corporate structure as of the date of March 31, 2023, including the WFOEs, our former VIE and its subsidiaries. At the time, the Company conducted operations in China primarily through WFOEs and its subsidiaries in China, including the former VIE. As a result, the Company did not conduct any business on its own. The VIE structure was used to provide investors with contractual exposure to foreign investment in China-based companies where Chinese law prohibits or restricts direct foreign investment in the operating companies.
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As of May 2023, the Company disposed its social E-commerce business. The following diagram illustrates our corporate structure, including our subsidiaries and consolidated affiliated entities as of the date of this annual report on Form 20-F.
On August 26, 2021, the Company entered into a loan agreement with Webao Limited, the majority shareholder of the Company, for a loan of US$2.0 million with a 0% annual interest rate. The loan term is 1 year. In August 2022, the loan was extended one year to August 27, 2023. In August 2023, the loan was extended one more year to August 27,2024. In August 2024, the loan was extended one more year to August 26, 2025. In August, 2025, the loan was extended one more year to August 26, 2026, and in February 2026, the loan was further amended to be due on demand. As of March 31, 2026, the balance of amount due to related parties was US$2.0 million.
Employment Agreements and Indemnification Agreements
See “Item 6. Directors, Senior Management and Employees-C. Board Practices-Employment Agreements and Confidentiality Agreements.”
Share Incentive Plans
See “Item 6. Directors, Senior Management and Employees-B. Compensation-Share Incentive Plan.”
C. Interests of Experts and Counsel
Not applicable.
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ITEM 8. FINANCIAL INFORMATION
A. Consolidated Statements and Other Financial Information
Please refer to Item 18.
Legal Proceedings
From time to time, the Company may become involved in litigation and other legal actions. The Company estimates the range of liability related to any pending litigation where the amount and range of loss can be estimated. The Company records its best estimate of a loss when the loss is considered probable. Where a liability is probable and there is a range of estimated loss with no best estimate in the range, the Company records a charge equal to at least the minimum estimated liability for a loss contingency when both of the following conditions are met: (i) information available prior to issuance of the financial statements indicates that it is probable that a liability had been incurred at the date of the financial statements and (ii) the range of loss can be reasonably estimated.
In January 2019, we were attacked by a short seller, alleging fraud in our financial reporting system. We conducted an internal investigation, with the assistance of forensic accountant, to evaluate these allegations. Based on the information reasonably available and reviewed as part of the investigation, the investigation did not identify any conclusive proof of fraud. In addition, two law firms launched investigations in connection with the short seller attack, though no securities lawsuits have been initiated, nor has there been any additional investigation notices as of the date of this annual report on Form 20-F.
Dividend Policy
Our board of directors has discretion regarding whether to declare or pay dividends. In addition, our shareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our directors. In either case, all dividends are subject to certain restrictions under Cayman Islands law, namely that our company may only pay dividends out of profits or share premium, and provided always that we are able to pay our debts as they fall due in the ordinary course of business. On July 19, 2018, our board of directors approved an annual dividend policy. Under this policy, annual dividends will be set at an amount equivalent to approximately 15-25% of our anticipated net income after tax in each year commencing from the fiscal year ended March 31, 2019. On July 19, 2018, our board of directors also approved a special cash dividend of US$0.13 per ordinary share of our company (or US$0.13 per ADS), in addition to an annual dividend pursuant to the newly adopted annual dividend policy of US$0.27 per ordinary share (or US$0.27 per ADS), for a total dividend of US$0.40 per ordinary share (or US$0.40 per ADS). The aggregated dividend payments to shareholders amounted to US$19,547,532 in the fiscal year ended March 31, 2019 and no dividends have been paid in following years. The determination to declare and pay such annual dividend and special dividend and the amount of any dividend in any particular year will be based upon our operations, earnings, financial condition, cash requirements and availability and other factors as our board of directors may deem relevant at such time.
We are a holding company incorporated in the Cayman Islands. We may rely on dividends from our subsidiaries in China for our cash requirements, including any payment of dividends to our shareholders. PRC regulations may restrict the ability of our PRC subsidiaries to pay dividends to us. See “Item 3. Key Information-D. Risk Factors-Risks Related to Our Corporate Structure-We rely on dividends and other distributions on equity paid by our PRC subsidiary to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiary to make payments to us could have a material adverse effect on our ability to conduct our business” and “Item 3. Key Information-D. Risk Factors-Risks Related to Doing Business in the People’s Republic of China-Enhanced scrutiny over acquisition transactions by the PRC tax authorities may have a negative impact on potential acquisitions we may pursue in the future.”
If we pay any dividends, we will pay such dividends on the shares represented by ADSs to the depositary, and the depositary will pay such dividends to our ADS holders to the same extent as holders of our ordinary shares, subject to the terms of the deposit agreement, including the fees and expenses payable thereunder. See “Item 12. Description of Securities other than Equity Securities-D. American Depositary Shares.” Cash dividends on our ordinary shares, if any, will be paid in U.S. dollars.
B. Significant Changes
We have not experienced any significant changes since the date of our audited consolidated financial statements included in this annual report on Form 20-F.
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ITEM 9. THE OFFER AND LISTING
A. Offering and Listing Details
Our ADSs, each representing three ordinary shares, have been listed on the NASDAQ since November 3, 2017. The ratio of ADS representing its ordinary shares was amended from one (1) ADS representing one (1) ordinary share to one (1) ADS representing three (3) ordinary shares with effect from August 24, 2020. Our ADSs trade under the symbol “AHG.”
On April 30, 2024, our 2024 annual general meeting of shareholders approved the amendment to our authorized share capital. Upon effective of the amendment May 7, 2024, our ADSs, each represents three Class A ordinary shares.
B. Plan of Distribution
Not applicable.
C. Markets
See “Item 9. The Offer and Listing-A. Offering and Listing Details.”
D. Selling Shareholders
Not applicable.
E. Dilution
Not applicable.
F. Expenses of the Issue
Not applicable.
ITEM 10. ADDITIONAL INFORMATION
A. Share Capital
Not applicable.
B. Memorandum and Articles of Association
We are a Cayman Islands exempted company with limited liability and our affairs are governed by our memorandum and articles of association, as amended and restated from time to time and the Companies Act of the Cayman Islands, which is referred to as the Companies Act below, and the common law of the Cayman Islands.
The following are summaries of the material provisions of our amended and restated memorandum and articles of association and the Companies Act insofar as they relate to the material terms of our ordinary shares. This summary is not complete, and you should read our amended and restated memorandum and articles of association, which has been filed as Exhibit 3.2 to our Form F-1 (File No. 333-220720), as amended, filed with the SEC on October 25, 2017.
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Registered Office and Objects
Our registered office in the Cayman Islands is located at the offices of Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104. As set forth in article 3 of our amended and restated memorandum of association, the objects for which our company is established are unrestricted.
Board of Directors
See “Item 6. Directors, Senior Management and Employees-C. Board Practices-Committees of the Board of Directors” and “Item 6. Directors, Senior Management and Employees-C. Board Practices-Terms of Directors and Officers.”
Ordinary Shares
General Our authorized share capital is US$500,000 divided into 5,000,000,000 ordinary shares of a par value of US$0.0001 each, comprising (i) 4,500,000,000 Class A ordinary shares of a par value of US$0.0001 each and (ii) 500,000,000 Class B ordinary shares of a par value of US$0.0001 each. All of our issued and outstanding ordinary shares are fully paid and non-assessable. Our ordinary shares are issued in registered form, and are issued when registered in our register of members. Our shareholders who are non-residents of the Cayman Islands may freely hold and vote their ordinary shares. Under our amended and restated memorandum and articles of association, our company may issue only non-negotiable shares and may not issue bearer shares.
Dividends The holders of our ordinary shares are entitled to such dividends as may be declared by our board of directors. In addition, our shareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our directors. Under Cayman Islands law, our company may declare and pay a dividend only out of funds legally available therefor, namely out of either profit or our share premium account, provided that in no circumstances may we pay a dividend if this would result in our company being unable to pay its debts as they fall due in the ordinary course of business.
Voting Rights The holders of Class A Ordinary Shares and Class B Ordinary Shares shall at all times vote together as one class on all resolutions submitted to a vote by the Members. Subject to any rights or restrictions as to voting attached to any shares, unless any share carries special voting rights, on a show of hands every shareholder who is present in person and every person representing a shareholder by proxy shall have one vote per Class A Ordinary Share and one vote per Class B Ordinary Share. On a poll, every shareholder who is present in person and every person representing a shareholder by proxy shall have one vote for each Class A Ordinary Share and twenty votes per Class B Ordinary Share of which he or the person represented by proxy is the holder. Votes may be given either personally or by proxy.
At any general meeting a resolution put to the vote of the meeting shall be decided by a show of hands unless a poll is demanded. A poll may be demanded by the chairman of such meeting or any one or more shareholders who together hold not less than 10% of the votes attaching to all issued and outstanding shares of our company entitled to vote at general meetings.
An ordinary resolution to be passed by the shareholders requires the affirmative vote of a simple majority of the votes attached to the ordinary shares cast by those shareholders entitled to vote who are present in person or by proxy at a general meeting, while a special resolution requires the affirmative vote of no less than two-thirds of the votes attached to the ordinary shares cast by those shareholders entitled to vote who are present in person or by proxy at a general meeting. A special resolution is required for important matters such as a change of name or any amendment to our memorandum and articles of association. Holders of our ordinary shares may effect certain changes by ordinary resolution, including increasing the amount of our authorized share capital, consolidating all or any of our share capital into shares of larger amount than our existing shares, sub-dividing our shares or any of them into shares of an amount smaller than that fixed by our memorandum, and cancelling any unissued shares. Both ordinary resolution and special resolution may also be passed by a unanimous written resolution signed by all the shareholders of our company, as permitted by the Companies Act and our amended and restated memorandum and articles of association.
Appointment and Removal of Directors Our board of directors may, by the affirmative vote of a simple majority of the directors present and voting at a board meeting, appoint any person as a director, to fill a casual vacancy on the board or as an addition to the existing board. Directors may be removed by ordinary resolution of our shareholders.
General Meetings of Shareholders and Shareholder Proposals As a Cayman Islands exempted company, we are not obliged by the Companies Act to call shareholders’ annual general meetings. Our amended and restated memorandum and articles of association provide that we may, but are not obliged to, in each year hold a general meeting as our annual general meeting in which case we shall specify the meeting as such in the notices calling it, and the annual general meeting shall be held at such time and place as may be determined by our directors.
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Shareholders’ annual general meetings and any other general meetings of our shareholders may be convened by a majority of our board of directors or the chairman of the board. Advance notice of at least ten calendar days is required for the convening of our annual general shareholders’ meeting and any other general meeting of our shareholders. A quorum required for a general meeting of shareholders consists of one or more shareholders present in person or by proxy or, if a corporation or other non-natural person, by its duly authorized representative, who hold in aggregate not less than one-third of the votes attaching to all issued and outstanding shares of our company entitled to vote at general meetings.
Cayman Islands law provides shareholders with only limited rights to requisition a general meeting, and does not provide shareholders with any right to put any proposal before a general meeting. However, these rights may be provided in a company’s articles of association. Our amended and restated memorandum and articles of association allow any two or more of our shareholders holding in the aggregate not less than one-third of the votes attaching to the issued and outstanding shares of our company entitled to vote at general meetings, to requisition an extraordinary general meeting of the shareholders, in which case our directors are obliged to call such meeting and to put the resolutions so requisitioned to a vote at such meeting; however, our amended and restated memorandum and articles of association do not provide our shareholders with any right to put any proposals before annual general meetings or extraordinary general meetings not called by such shareholders.
Transfer of Shares Subject to the restrictions of our amended and restated memorandum and articles of association set out below, as applicable, any of our shareholders may transfer all or any of his or her ordinary shares by an instrument of transfer in the usual or ordinary form or any other form approved by our board of directors.
Our board of directors may, in its sole discretion, decline to register any transfer of any ordinary share which is not fully paid up. Our directors may also decline to register any transfer of any ordinary share unless (a) the instrument of transfer is lodged with us, accompanied by the certificate for the ordinary shares to which it relates and such other evidence as our board of directors may reasonably require to show the right of the transferor to make the transfer; (b) the instrument of transfer is properly stamped, if required; (c) in the case of a transfer to joint holders, the number of joint holders to whom the ordinary share is to be transferred does not exceed four; (d) the share to be transferred is free of any lien in favor of us; (e) a fee of such maximum sum as NASDAQ may determine to be payable, or such lesser sum as our board of directors may from time to time require, is paid to us in respect thereof; and (f) the instrument of transfer is in respect of only one class of shares.
If our directors refuse to register a transfer they shall, within two months after the date on which the instrument of transfer was lodged, send to each of the transferor and the transferee notice of such refusal. The registration of transfers may, after compliance with any notice required of NASDAQ, be suspended and our register of members closed at such times and for such periods as our board of directors may from time to time determine, provided, however, that the registration of transfers shall not be suspended nor the register of members closed for more than 30 days in any year as our board of directors may determine.
Conversion Rights Each Class B Ordinary Share is convertible into one (1) Class A Ordinary Share at any time at the option of the holder thereof. The right to convert shall be exercisable by the holder of the Class B Ordinary Share delivering a written notice to the Company that such holder elects to convert a specified number of Class B Ordinary Shares into Class A Ordinary Shares. In no event shall Class A Ordinary Shares be convertible into Class B Ordinary Shares.
All conversions of Class B Ordinary Shares to Class A Ordinary Shares shall be effected by way of the re-designation of each relevant Class B Ordinary Share as a Class A Ordinary Share.
Liquidation On a winding up of our company, if the assets available for distribution among our shareholders shall be more than sufficient to repay the whole of the share capital at the commencement of the winding up, the surplus shall be distributed among our shareholders on a pro rata basis in proportion to the par value of the shares held by them at the commencement of the winding up, subject to a deduction from those shares in respect of which there are monies due, of all monies payable to our company for unpaid calls or otherwise. If our assets available for distribution are insufficient to repay all of the paid-up capital, the assets will be distributed so that the losses are borne by our shareholders in proportion to the par value of the shares held by them.
The liquidator may, with the sanction of a special resolution of our shareholders, divide amongst the shareholders in species or in kind the whole or any part of the assets of our company and may for that purpose value any assets and determine how the division shall be carried out as between our shareholders or different classes of shareholders.
We are an exempted company with limited liability incorporated under the Companies Act, and under the Companies Act, the liability of our members is limited to the amount, if any, unpaid on the shares respectively held by them. Our memorandum of association contains a declaration that the liability of our members is so limited.
Calls on Shares and Forfeiture of Shares Our board of directors may from time to time make calls upon shareholders for any amounts unpaid on their ordinary shares in a notice served to such shareholders at least 14 calendar days prior to the specified time and place of payment. The ordinary shares that have been called upon and remain unpaid on the specified time are subject to forfeiture.
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Redemption, Repurchase and Surrender of Shares We may issue shares on terms that such shares are subject to redemption, at our option or at the option of the holders, on such terms and in such manner as may be determined by our board of directors, before the issue of such shares, or by a special resolution of our shareholders. Our company may also repurchase any of our shares provided that the manner and terms of such purchase have been approved by our board of directors or by ordinary resolution of our shareholders, or are otherwise authorized by our memorandum and articles of association. Under the Companies Act, the redemption or repurchase of any share may be paid out of our company’s profits or out of the proceeds of a fresh issue of shares made for the purpose of such redemption or repurchase, or out of capital (including share premium account and capital redemption reserve) if the company can, immediately following such payment, pay its debts as they fall due in the ordinary course of business. In addition, under the Companies Act no such share may be redeemed or repurchased (a) unless it is fully paid up, (b) if such redemption or repurchase would result in there being no shares outstanding, or (c) if the company has commenced liquidation. In addition, our company may accept the surrender of any fully paid share for no consideration.
Variations of Rights of Shares If at any time, our share capital is divided into different classes of shares, all or any of the special rights attached to any class of shares may be varied either with the written consent of the holders of two-thirds in nominal value of the issued shares of that class, or with the sanction of a special resolution passed at a separate general meeting of the holders of shares of that class. The rights conferred upon the holders of the shares of any class issued with preferred or other rights will not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu with such existing class of shares.
Inspection of Books and Records Holders of our ordinary shares will have no general right under Cayman Islands law to inspect or obtain copies of our list of shareholders or our corporate records. However, at the discretion of our board of directors, we intend to provide our shareholders with annual audited financial statements.
Changes in Capital Our shareholders may from time to time by ordinary resolution:
| ● | increase our share capital by such sum, to be divided into shares of such classes and amount, as the resolution shall prescribe; |
| ● | consolidate and divide all or any of our share capital into shares of a larger amount than our existing shares; |
| ● | sub-divide our existing shares, or any of them into shares of a smaller amount, provided that in the subdivision the proportion between the amount paid and the amount, if any, unpaid on each reduced share shall be the same as it was in case of the share from which the reduced share is derived; or |
| ● | cancel any shares that, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person and diminish the amount of our share capital by the amount of the shares so cancelled. |
Our shareholders may, by special resolution and subject to confirmation by the Grand Court of the Cayman Islands on an application by our company for an order confirming such reduction, reduce our share capital and any capital redemption reserve in any manner authorized by law.
Issuance of Additional Shares Our amended and restated memorandum and articles of association authorizes our board of directors to issue additional ordinary shares from time to time as our board of directors shall determine, to the extent there are available authorized but unissued shares.
Our amended and restated memorandum and articles of association authorizes our board of directors to establish from time to time one or more series of convertible redeemable preferred shares and to determine, with respect to any series of convertible redeemable preferred shares, the terms and rights of that series, including:
| ● | designation of the series; |
| ● | the number of shares of the series; |
| ● | the dividend rights, conversion rights and voting rights; and |
| ● | the rights and terms of redemption and liquidation preferences. |
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The issuance of convertible redeemable preferred shares may be used as an anti-takeover device without further action on the part of the shareholders. Issuance of these shares may dilute the voting power of holders of ordinary shares.
Anti-Takeover Provisions Some provisions of our memorandum and articles of association may discourage, delay or prevent a change of control of our company or management that shareholders may consider favorable, including provisions that:
| ● | authorize our board of directors to issue preferred shares in one or more series and to designate the price, rights, preferences, privileges and restrictions of such preferred shares without any further vote or action by our shareholders; and |
| ● | limit the ability of shareholders to requisition and convene general meetings of shareholders. |
However, under Cayman Islands law, our directors may only exercise the rights and powers granted to them under our amended and restated memorandum and articles of association for a proper purpose and for what they believe in good faith to be in the best interests of our company.
C. Material Contracts
The following descriptions of the material provisions of the referenced agreements do not purport to be complete and are subject to, and qualified in their entirety by reference to the agreements which have been filed as exhibits to this report.
May 2023 Disposition SPA
On May 10, 2023, the Company (the “Seller”), HX Asia Investment Limited, a British Virgin Islands company (“HX Asia”), HX China Investment Limited, a British Virgin Islands company (“HX China”), and Hexindai Hong Kong Limited, a Hong Kong company (“Hexindai” and together with HX Asia and HX China, the “Targets”), and Umbrella Capital Investment Co., Ltd, a British Virgin Islands company which is not affiliate of the Company of any of its directors or officers (the “Purchaser”) entered into certain share purchase agreement (the “Disposition SPA”). Pursuant to the Disposition SPA, the Purchaser agreed to purchase the Targets in exchange for cash consideration of US$215,000 (the “Purchase Price”).
Upon the closing of the transaction (the “Disposition”) contemplated by the Disposition SPA, the Buyer will become the sole shareholder of the Targets and as a result, assume all assets and liabilities of the Targets and subsidiaries owned or controlled by the Target.
The closing of the Disposition is subject to the satisfaction or waiver of certain closing conditions including the payment of the Purchase Price, the receipt of a fairness opinion from an independent firm, and all consents required to be obtained from or made with any governmental authorities. The Disposition closed on May 19, 2023.
The form of the securities purchase agreement is filed as Exhibit 99.1 to the Current Report on Form 6-K filed with the Commission on May 25, 2023.
The foregoing is only a brief description of the material terms of the share purchase agreement and does not purport to be a complete description of the rights and obligations of the parties thereunder and is qualified in its entirety by reference to such exhibits.
October 2023 Private Placement
On October 2, 2023, the Company entered into certain securities purchase agreement (the “SPA”) with certain “non-U.S. Persons” (the “Purchasers”) as defined in Regulation S of the Securities Act of 1933, as amended (the “Securities Act”) pursuant to which the Company agreed to sell an aggregate of 35,739,270 units (the “Units”), each Unit consisting of one Ordinary Share of the Company, par value $0.0001 per share (“Share”) and a warrant to purchase one Share (“Warrant”) with an initial exercise price of $0.48875, or approximately $1.47 per American depositary share of the Company (“ADS”), at a price of $0.391 per Unit, or approximately $1.17 per ADS for an aggregate purchase price of approximately $14 million (the “Offering”). The net proceeds to the Company from such Offering will be approximately $14 million and shall be used by the Company for working capital and general corporate purposes.
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The Warrants are exercisable immediately upon the date of issuance at an initial exercise price of $$0.48875, or approximately $1.47 per ADS, for cash (the “Warrant Shares”). The Warrants may also be exercised cashlessly if at any time after the six-month anniversary of the issuance date, there is no effective registration statement registering, or no current prospectus available for, the resale of the Warrant Shares. The Warrants shall expire five years from its date of issuance. The Warrants are subject to customary anti-dilution provisions reflecting stock dividends and splits or other similar transactions.
The parties to the SPA have each made customary representations, warranties and covenants, including, among other things, (a) the Purchasers are “non-U.S. Persons” as defined in Regulation S and are acquiring the Shares for the purpose of investment, (d) the absence of any undisclosed material adverse effects, and (e) the absence of legal proceedings that affect the completion of the transaction contemplated by the SPA.
The SPA is subject to various conditions to closing, including, among other things, (a) Nasdaq’s approval of the supplemental listing application for the Units and (b) accuracy of the parties’ representations and warranties.
On October 17, 2023, the transaction contemplated by the SPA consummated when all the closing conditions of the SPA have been satisfied and the Company issued the Units to the Purchasers pursuant to the SPA.
The forms of the securities purchase agreement and warrant are filed as Exhibit 99.1 and 99.2 to the Current Report on Form 6-K filed with the Commission on October 2, 2023.
The foregoing is only a brief description of the material terms of the share purchase agreement and warrant, and does not purport to be a complete description of the rights and obligations of the parties thereunder and is qualified in its entirety by reference to such exhibits.
November 2023 Private Placement
On November 16, 2023, the Company entered into certain securities purchase agreement (the “SPA”) with certain “non-U.S. Persons” (the “Purchasers”) as defined in Regulation S of the Securities Act of 1933, as amended (the “Securities Act”) pursuant to which the Company agreed to sell up to an aggregate of 53,608,910 units (the “Units”), each Unit consisting of one Ordinary Share of the Company, par value $0.0001 per share (“Share”) and a warrant to purchase one Share (“Warrant”) with an initial exercise price of $0.52875, or approximately $1.59 per American depositary share of the Company (“ADS”), at a price of $0.423 per Unit, or approximately $1.27 per ADS for an aggregate purchase price of approximately $22.68 million (the “Offering”). The net proceeds to the Company from such Offering will be approximately $22.6 million and shall be used by the Company for working capital and general corporate purposes.
The Warrants are exercisable immediately upon the date of issuance at an initial exercise price of $0.423, or approximately $1.59 per ADS, for cash (the “Warrant Shares”). The Warrants may also be exercised cashlessly if at any time after the six-month anniversary of the issuance date, there is no effective registration statement registering, or no current prospectus available for, the resale of the Warrant Shares. The Warrants shall expire five years from its date of issuance. The Warrants are subject to customary anti-dilution provisions reflecting stock dividends and splits or other similar transactions.
The parties to the SPA have each made customary representations, warranties and covenants, including, among other things, (a) the Purchasers are “non-U.S. Persons” as defined in Regulation S and are acquiring the Shares for the purpose of investment, (d) the absence of any undisclosed material adverse effects, and (e) the absence of legal proceedings that affect the completion of the transaction contemplated by the SPA.
The SPA is subject to various conditions to closing, including, among other things, (a) Nasdaq’s approval of the supplemental listing application for the Units and (b) accuracy of the parties’ representations and warranties.
On November 21, 2023, the transaction contemplated by the SPA consummated when all the closing conditions of the SPA have been satisfied and the Company issued the Units to the Purchasers pursuant to the SPA.
The forms of the securities purchase agreement and warrant are filed as Exhibit 99.1 and 99.2 to the Current Report on Form 6-K filed with the Commission on November 17, 2023.
The foregoing is only a brief description of the material terms of the share purchase agreement and warrant, and does not purport to be a complete description of the rights and obligations of the parties thereunder and is qualified in its entirety by reference to such exhibits.
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January 2024 Private Placement
On January 17, 2024, the Company entered into certain securities purchase agreement (the “SPA”) with certain “non-U.S. Persons” (the “Purchasers”) as defined in Regulation S of the Securities Act of 1933, as amended (the “Securities Act”) pursuant to which the Company agreed to sell up to an aggregate of 160,826,730 units (the “Units”), each Unit consisting of one Ordinary Share of the Company, par value $0.0001 per share (“Share”) and a warrant to purchase one Share (“Warrant”) with an initial exercise price of $$0.4146, or approximately $1.2438 per American depositary share of the Company (“ADS”), at a price of $0.3317 per Unit, or approximately $0.9951 per ADS for an aggregate purchase price of approximately $53.35 million (the “Offering”). The net proceeds to the Company from such Offering shall be used by the Company for working capital and general corporate purposes.
The Warrants are exercisable immediately upon the date of issuance at an initial exercise price of $0.4146, or approximately $1.2438 per ADS, for cash (the “Warrant Shares”). The Warrants may also be exercised cashlessly if at any time after the six-month anniversary of the issuance date, there is no effective registration statement registering, or no current prospectus available for, the resale of the Warrant Shares. The Warrants shall expire five years from its date of issuance. The Warrants are subject to customary anti-dilution provisions reflecting stock dividends and splits or other similar transactions.
The parties to the SPA have each made customary representations, warranties and covenants, including, among other things, (a) the Purchasers are “non-U.S. Persons” as defined in Regulation S and are acquiring the Shares for the purpose of investment, (d) the absence of any undisclosed material adverse effects, and (e) the absence of legal proceedings that affect the completion of the transaction contemplated by the SPA.
The SPA is subject to various conditions to closing, including, among other things, (a) Nasdaq’s approval of the supplemental listing application for the Units and (b) accuracy of the parties’ representations and warranties.
On January 26, 2024, the transaction contemplated by the SPA consummated when all the closing conditions of the SPA have been satisfied and the Company issued the Units to the Purchasers pursuant to the SPA.
The forms of the securities purchase agreement and warrant are filed as Exhibit 99.1 and 99.2 to the Current Report on Form 6-K filed with the Commission on January 22, 2024.
The foregoing is only a brief description of the material terms of the share purchase agreement and warrant, and does not purport to be a complete description of the rights and obligations of the parties thereunder and is qualified in its entirety by reference to such exhibits.
March 2024 Registered Direct Offering
On March 5, 2024 Akso Health Group (the “Company”) entered into certain securities purchase agreement (the “Purchase Agreement”) with certain non-affiliated institutional investors (the “Purchasers”) pursuant to which the Company agreed to sell 37,100,000 of its American Depositary Shares (“ADSs”) representing 111,300,000 ordinary shares, par value $0.0001 per share (“Ordinary Shares”), in a registered direct offering, and warrants (“Warrants”) to purchase 222,600,000 Ordinary Shares in a concurrent private placement for gross proceeds of approximately $49.34 million (the “Offering”).
The warrants are exercisable immediately as of the date of issuance at an exercise price of $0.4933 per ordinary share, or $1.48 per ADS and expire five years from the date of issuance. The purchase price for each ADS and the corresponding Warrants is $1.33. Each Warrant is subject to anti-dilution provisions to reflect stock dividends and splits, subsequent rights offerings or other similar transactions, but not as a result of future securities offerings at lower prices. Upon the occurrence of a Fundamental Transaction (as defined in the Warrants), the Warrants are subject to mandatory redemption for cash consideration equal to the Black Scholes Value (as defined in the Warrants) of such portion of such Warrant to be redeemed. On September 8, 2025, the warrants were exercised on cashless basis and resulting issuance of 155,820,000 ordinary shares in the year ended March 31, 2026.
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The Warrants and the Ordinary Shares issuable upon the exercise of the Warrants are being offered pursuant to an exemption from the registration requirements of the Securities Act provided in Section 4(a)(2) of the Securities Act and/or Rule 506(b) of Regulation D.
The Company currently intends to use the net proceeds from the Offering for working capital and general corporate use. The Offering closed on March 7, 2024.
The forms of the securities purchase agreement and warrant are filed as Exhibit 99.1 and 99.2 to the Current Report on Form 6-K filed with the Commission on March 8, 2024.
The foregoing is only a brief description of the material terms of the share purchase agreement and warrants, and does not purport to be a complete description of the rights and obligations of the parties thereunder and is qualified in its entirety by reference to such exhibits.
October 2024 Private Placement
On October 24, 2024, the Company entered into certain securities purchase agreement (the “SPA”) with certain “non-U.S. Persons” (the “Purchasers”) as defined in Regulation S of the Securities Act of 1933, as amended (the “Securities Act”) pursuant to which the Company agreed to sell up to an aggregate of 361,290,000 units (the “Units”), each Unit consisting of one Class A ordinary Share of the Company, par value $0.0001 per share (“Share”) and three warrants, each to purchase one Share (“Warrant”) with an initial exercise price of $0.461, or approximately $1.383 per American depositary share of the Company (“ADS”), at a price of $0.369 per Unit for an aggregate purchase price of approximately $133.32 million (the “Offering”). The net proceeds to the Company from such Offering shall be used by the Company for the expansion and development of its new healthcare services business.
The Warrants are exercisable immediately upon the date of issuance at an initial exercise price of $0.461, or approximately $1.383 per ADS, for cash (the “Warrant Shares”). The Warrants may also be exercised cashlessly if at any time after the six-month anniversary of the issuance date, there is no effective registration statement registering, or no current prospectus available for, the resale of the Warrant Shares. The Warrants shall expire five years from its date of issuance. The Warrants are subject to customary anti-dilution provisions reflecting stock dividends and splits or other similar transactions. On September 8, 2025, the warrants were exercised on cashless basis and resulting issuance of 758,709,000 ordinary shares in the year ended March 31, 2026.
The parties to the SPA have each made customary representations, warranties and covenants, including, among other things, (a) the Purchasers are “non-U.S. Persons” as defined in Regulation S and are acquiring the Shares for the purpose of investment, (d) the absence of any undisclosed material adverse effects, and (e) the absence of legal proceedings that affect the completion of the transaction contemplated by the SPA.
The Offering closed on November 4, 2024, upon the satisfaction of all of the closing conditions set forth in the SPA.
The foregoing is only a brief description of the material terms of the SPA and Warrant, and does not purport to be a complete description of the rights and obligations of the parties thereunder and is qualified in its entirety by reference to such exhibits.
D. Exchange Controls
There is no exchange control legislation under Cayman Islands law, and accordingly, there are no exchange control regulations imposed under Cayman Islands law. See also “Item 4. Information on the Company-B. Business Overview-Regulation- Regulations Relating to Foreign Exchange -Regulations on Foreign Exchange Registration of Overseas Investment by PRC Residents,” “Item 4. Information on the Company-B. Business Overview-Regulation-Regulations Relating to Foreign Exchange-Regulation on Foreign Currency Exchange” and “Item 4. Information on the Company-B. Business Overview-Regulation-Regulations on Dividend Distribution.”
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E. Taxation
The following summary of the material Cayman Islands, PRC and U.S. federal income tax consequences of an investment in our ADSs or ordinary shares is based upon laws and relevant interpretations thereof in effect as of the date of this registration statement, all of which are subject to change. This summary does not deal with all possible tax consequences relating to an investment in our ADSs or ordinary shares, such as the tax consequences under U.S. state and local tax laws or under the tax laws of jurisdictions other than the Cayman Islands, PRC and the United States.
Cayman Islands Taxation
The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to us levied by the government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or after execution brought within the jurisdiction of the Cayman Islands. The Cayman Islands is not party to any double tax treaties that are applicable to any payments made to or by our company. There are no exchange control regulations or currency restrictions in the Cayman Islands.
Payments of dividends and capital in respect of the ordinary shares will not be subject to taxation in the Cayman Islands and no withholding will be required on the payment of a dividend or capital to any holder of the ordinary shares, nor will gains derived from the disposal of the ordinary shares be subject to Cayman Islands income or corporation tax.
People’s Republic of China Taxation
PRC Enterprise Income Tax Law
Under the EIT Law, which became effective on January 1, 2008 and amended by the PRC National People’s Congress in December 2018, an enterprise established outside the PRC with “de facto management bodies” within the PRC is considered a “resident enterprise” for PRC enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income. In 2009, the SAT issued 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. In 2011, the SAT issued SAT Bulletin 45 to provide more guidance on the implementation of SAT Circular 82.
According to SAT Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be considered a PRC resident enterprise by virtue of having its “de facto management body” in China and will be subject to PRC enterprise income tax on its worldwide income only if all of the following conditions are met: (a) the senior management and core management departments in charge of its daily operations function have their presence mainly in the PRC; (b) its financial and human resources decisions are subject to determination or approval by persons or bodies in the PRC; (c) its major assets, accounting books, company seals, and minutes and files of its board and shareholders’ meetings are located or kept in the PRC; and (d) more than half of the enterprise’s directors or senior management with voting rights habitually reside in the PRC. Although SAT Circular 82 and SAT Bulletin 45 only apply to offshore incorporated enterprises controlled by PRC enterprises or PRC enterprise groups and not those controlled by PRC individuals or foreigners, the determination criteria set forth therein may reflect the SAT’s general position on how the term “de facto management body” could be applied in determining the tax resident status of offshore enterprises, regardless of whether they are controlled by PRC enterprises, individuals or foreigners.
We believe that we do not meet all of the criteria described above. We believe that neither we nor our subsidiaries outside of China are PRC resident enterprises, because neither we nor they are controlled by a PRC enterprise or PRC enterprise group, and because our records and their records (including the resolutions of the respective boards of directors and the resolutions of shareholders) are maintained outside the PRC. However, as 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” when applied to our offshore entities, we may be considered as a PRC resident enterprise and therefore may be subject to PRC enterprise income tax at 25% on our worldwide income. In addition, if the PRC tax authorities determine that we are a PRC resident enterprise for PRC enterprise income tax purposes, dividends we pay to non-PRC holders may be subject to PRC withholding tax, and gains realized on the sale or other disposition of ADSs or ordinary shares may be subject to PRC tax, at a rate of 10% in the case of non-PRC enterprises or 20% in the case of non-PRC individuals (in each case, subject to the provisions of any applicable tax treaty), if such dividends or gains are deemed to be from PRC sources.
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If we are considered a “non-resident enterprise” by the PRC tax authorities, the dividends we receive from our PRC subsidiaries will be subject to a 10% withholding tax. The EIT Law also imposes a withholding income tax of 10% on dividends distributed by a foreign invested enterprise to its immediate holding company outside of China, if such immediate holding company is considered as a non-resident enterprise without any establishment or place within China or if the received dividends have no connection with the establishment or place of such immediate holding company within China, unless such immediate holding company’s jurisdiction of incorporation has a tax treaty with China that provides for a different withholding arrangement. Under the Arrangement Between the PRC and the Hong Kong Special Administrative Region on the Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital, the dividend withholding tax rate may be reduced to 5%, if a Hong Kong resident enterprise that receives a dividend is considered a non-PRC tax resident enterprise and holds at least 25% of the equity interests in the PRC enterprise distributing the dividends, subject to approval of the PRC local tax authority. However, if the Hong Kong resident enterprise is not considered to be the beneficial owner of such dividends under applicable PRC tax regulations, such dividends may remain subject to withholding tax at a rate of 10%.
The SAT issued an SAT Circular 59 together with the Ministry of Finance in April 2009 and a SAT Circular 698 in December 2009. By promulgating and implementing these two circulars, the PRC tax authorities have enhanced their scrutiny over the direct or indirect transfer of equity interests in a PRC resident enterprise by a non-resident enterprise. Under SAT Circular 698, where a non-resident enterprise transfers the equity interests of a PRC “resident enterprise” indirectly by disposition of the equity interests of an overseas holding company, and the overseas holding company is located in a tax jurisdiction that: (1) has an effective tax rate less than 12.5% or (2) does not tax foreign income of its residents, the non-resident enterprise, being the transferor, must report to the relevant tax authority of the PRC “resident enterprise” the indirect transfer. On February 3, 2015, the SAT issued the SAT Announcement 7. SAT Announcement 7 supersedes the rules with respect to the indirect transfer under SAT Circular 698, but does not touch upon the other provisions of SAT Circular 698, which remain in force. SAT Announcement 7 has introduced a new tax regime that is significantly different from the previous one under SAT Circular 698. SAT Announcement 7 extends its tax jurisdiction to not only indirect transfers set forth under SAT Circular 698 but also transactions involving transfer of other taxable assets through offshore transfer of a foreign intermediate holding company. In addition, SAT Announcement 7 provides clearer criteria than SAT Circular 698 for assessment of reasonable commercial purposes and has introduced safe harbors for internal group restructurings and the purchase and sale of equity through a public securities market. SAT Announcement 7 also brings challenges to both foreign transferor and transferee (or other person who is obligated to pay for the transfer) of taxable assets. Where a non-resident enterprise transfers taxable assets indirectly by disposing of the equity interests of an overseas holding company, which is an indirect transfer, the non-resident enterprise as either transferor or transferee, or the PRC entity that directly owns the taxable assets, may report such indirect transfer to the relevant tax authority. Using a “substance over form” principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacks a “reasonable commercial purpose” and was established for the purpose of reducing, avoiding or deferring PRC tax. Factors that may be taken into consideration when determining whether there is a reasonable commercial purpose include, among other factors, the value of the transferred equity, offshore taxable situation of the transaction, the offshore structure’s economic essence and duration and trading fungibility. If an equity transfer transaction satisfies all the requirements mentioned above, such transaction will be considered an arrangement with reasonable commercial purpose. If an overseas holding company lacks a reasonable commercial purpose, gains derived from an indirect transfer may be subject to PRC enterprise income tax, and the transferee or other person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a rate of 10% for the transfer of equity interests in a PRC resident enterprise. Both the transferor and the transferee may be subject to penalties under PRC tax laws if the transferee fails to withhold the taxes and the transferor fails to pay the taxes.
Accordingly, if we sell all or a part of our company and if the PRC tax authorities determine that we are a holding company that lacks a “reasonable commercial purpose”, such sale may be considered an indirect transfer under Circular 59, Circular 698, the SAT Announcement 7 and Bulletin 37 and subject non-PRC holders of our ordinary shares and ADSs to a PRC enterprise income tax, currently at a rate of 10%, on any gains derived by non-PRC holders on such sale. Additionally, a purchaser of all or a part of our company may determine that, under Circular 59, Circular 698, the SAT Announcement 7 and Bulletin 37, it is required to withhold the potentially applicable PRC tax rate of 10% from any consideration paid to non-PRC holders of our ordinary shares and ADSs.
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U.S. Federal Income Tax Considerations
The following is a discussion of the material U.S. federal income tax considerations relevant to the acquisition, ownership, and disposition of our ADSs or ordinary shares by U.S. Holders (as defined below) that will hold our ADSs or ordinary shares as “capital assets” (generally, property held for investment) under the U.S. Internal Revenue Code of 1986, as amended, or the Code. This discussion is based upon applicable provisions of the Code, U.S. Treasury regulations promulgated thereunder, pertinent judicial decisions, interpretive rulings of the Internal Revenue Service, or the IRS, and such other authorities as we have considered relevant, all of which are subject to change, possibly with retroactive effect. This discussion does not address all aspects of U.S. federal income taxation that may be important to particular investors in light of their individual investment circumstances, including investors subject to special tax rules (for example, certain financial institutions; insurance companies; broker-dealers; pension plans; regulated investment companies; real estate investment trusts; tax-exempt organizations (including private foundations); U.S. expatriates; holders who own (directly, indirectly, or constructively) 10% or more of our stock (by vote or value); investors that will hold their ADSs or ordinary shares as part of a straddle, hedge, conversion, constructive sale, or other integrated transaction for U.S. federal income tax purposes; investors required to accelerate the recognition of any item of gross income with respect to our ADSs or ordinary shares as a result of such income being recognized on an “applicable financial statement” (as defined in section 451 of the Code); investors that are traders in securities that have elected the mark-to-market method of accounting; or investors that have a functional currency other than the U.S. dollar), all of whom may be subject to tax rules that differ significantly from those discussed below.
In addition, this discussion does not address tax considerations relevant to U.S. Holders under any non-U.S., state or local tax laws, the Medicare tax on net investment income, U.S. federal estate or gift tax, or the alternative minimum tax. Each U.S. Holder is urged to consult its tax advisors regarding the U.S. federal, state, local, and non-U.S. income and other tax considerations of an investment in ADSs or ordinary shares.
The discussion below of U.S. federal income tax consequences applies to you if you are a “U.S. Holder.” You are a U.S. Holder if you are a beneficial owner of our ADSs or ordinary shares and you are: (i) an individual who is a citizen or resident of the United States for U.S. federal income tax purposes; (ii) a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, created in, or organized under the law of the United States, any state thereof or the District of Columbia; (iii) an estate the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; or (iv) a trust (A) the administration of which is subject to the primary supervision of a U.S. court and which has one or more U.S. persons who have the authority to control all substantial decisions of the trust or (B) that has otherwise validly elected to be treated as a U.S. person under the Code.
If you are a partner in a partnership (including any entity or arrangement treated as a partnership for U.S. federal income tax purposes) that holds our ADSs or ordinary shares, your tax treatment generally will depend on your status and the activities of the partnership. Partners in a partnership holding our ADSs or ordinary shares should consult their tax advisors regarding the tax consequences of an investment in the ADSs or ordinary shares.
Except as described in “-PFIC Rules” below, this discussion assumes that we are not, and will not become, a passive foreign investment company, or PFIC, for any taxable year.
ADSs
If you hold ADSs, for U.S. federal income tax purposes, you generally will be treated as the owner of the underlying ordinary shares that are represented by such ADSs. Accordingly, deposits or withdrawals of ordinary shares for ADSs will not be subject to U.S. federal income tax.
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Dividends
Subject to the PFIC rules discussed below, any cash distributions (including the amount of any PRC tax withheld) paid on our ADSs or ordinary shares out of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles, will generally be includible in your gross income as dividend income on the day actually or constructively received by you, in the case of ordinary shares, or by the depositary, in the case of ADSs. Because we do not intend to determine our earnings and profits under U.S. federal income tax principles, any distribution paid will generally be treated as a dividend for U.S. federal income tax purposes. Dividends received on our ADSs or ordinary shares will not be eligible for the dividends received deduction allowed to corporations under the Code.
A non-corporate recipient will be subject to tax at preferential tax rates applicable to “qualified dividend income,” provided that certain conditions are satisfied, including that (1) our stock (or ADSs representing such stock) is readily tradable on an established securities market in the United States, or, in the event that we are deemed to be a PRC tax resident enterprise under the PRC tax law, we are eligible for the benefit of the United States-PRC income tax treaty, or the Treaty, (2) we are neither a PFIC nor treated as such with respect to a U.S. Holder (as discussed below) for the taxable year in which the dividend was paid and the preceding taxable year, and (3) certain holding period requirements are met. The ADSs are readily tradable on the NASDAQ Capital Market, and as such, we believe that dividends paid on the ADSs constitute qualified dividend income. There can be no assurance that our ADSs will continue to be considered readily tradable on an established securities market in later years. Our ordinary shares are not traded on an established securities market in the United States. Accordingly, we do not believe that dividends paid on our ordinary shares that are not backed by ADSs currently meet the conditions required for the reduced tax rate.
In the event that we are deemed to be a PRC tax resident enterprise under PRC tax law, you may be subject to PRC withholding taxes on dividends paid on our ADSs or ordinary shares, as described under “Taxation-People’s Republic of China Taxation.” If we are deemed to be a PRC tax resident enterprise, we may, however, be eligible for the benefits of the Treaty. If we are eligible for such benefits, dividends we pay on our ordinary shares, regardless of whether such shares are represented by our ADSs, may be eligible for the reduced rates of taxation applicable to qualified dividend income, as discussed above.
For U.S. foreign tax credit purposes, dividends generally will be treated as income from foreign sources and generally will constitute passive category income. Depending on your particular circumstances, you may be eligible, subject to a number of complex limitations, to claim a foreign tax credit in respect of any foreign withholding taxes imposed on dividends received on our ADSs or ordinary shares. If you do not elect to claim a foreign tax credit for foreign tax withheld, you may instead claim a deduction, for U.S. federal income tax purposes, for the foreign tax withheld, but only for a year in which you elect to do so for all creditable foreign income taxes. The rules governing the foreign tax credit are complex. You are urged to consult your tax advisor regarding the availability of the foreign tax credit under your particular circumstances.
Sale or Other Disposition of ADSs or Ordinary Shares
Subject to the PFIC rules discussed below, you generally will recognize capital gain or loss upon the sale or other disposition of our ADSs or ordinary shares in an amount equal to the difference, if any, between the amount realized upon the disposition and your adjusted tax basis in such ADSs or ordinary shares. Any capital gain or loss will be long-term capital gain or loss if you have held the ADSs or ordinary shares for more than one year, and will generally be U.S.-source gain or loss for U.S. foreign tax credit purposes. The deductibility of a capital loss may be subject to limitations. In the event that we are deemed to be a PRC tax resident enterprise under PRC tax law, gain from the disposition of the ADSs or ordinary shares may be subject to tax in the PRC, as described under “Taxation-People’s Republic of China Taxation.” If we are treated as a PRC resident enterprise and PRC tax were imposed on any gain from your disposition of the ADSs or ordinary shares, you would be able to elect to treat the gain as PRC source income for foreign tax credit purposes if you are eligible for the benefits of the Treaty. You are urged to consult your tax advisor regarding the tax consequences if a foreign tax is imposed on a disposition of our ADSs or ordinary shares, including the availability of the foreign tax credit under your particular circumstances.
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PFIC Rules
A non-U.S. corporation, such as our company, will be classified as a PFIC for U.S. federal income tax purposes for any taxable year, if either (i) 75% or more of its gross income for such year consists of certain types of “passive” income or (ii) 50% or more of the value of its assets (determined on the basis of a quarterly average) during such year produce or are held for the production of passive income. Passive income generally includes dividends, interest, royalties, rents, annuities, net gains from the sale or exchange of property producing such income and net foreign currency gains. For this purpose, cash is categorized as a passive asset and the company’s goodwill associated with active business activity is taken into account as a non-passive asset. We will be treated as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation in which we own, directly or indirectly, more than 25% (by value) of the stock.
Based on the projected composition of our assets and income, we do not believe that we were a PFIC for our taxable year ended March 31, 2026 and we do not anticipate becoming a PFIC for our taxable year ending March 31, 2027. While we do not anticipate becoming a PFIC, because the value of our assets for purposes of the PFIC asset test will generally be determined by reference to the market price of our ADSs or ordinary shares, fluctuations in the market price of our ADSs or ordinary shares may cause us to become a PFIC for the current or any subsequent taxable year. The determination of whether we will become a PFIC will also depend, in part, on the composition of our income and assets, which will be affected by how, and how quickly, we use our liquid assets and the cash raised in our initial public offering. Additionally, although the law in this regard is unclear, we treat our VIE as being owned by us for U.S. federal income tax purposes, not only because we exercise effective control over the operation of such entity but also because we are entitled to substantially all of its economic benefits, and, as a result, we consolidate their results of operation in our combined and consolidated financial statements. Whether we are a PFIC is a factual determination and we must make a separate determination each taxable year as to whether we are a PFIC (after the close of each taxable year). Accordingly, we cannot assure you that we will not be a PFIC for our taxable year ending March 31, 2027 or any future taxable year. If we are classified as a PFIC for any taxable year during which you hold our ADSs or ordinary shares, we generally will continue to be treated as a PFIC, unless you make certain elections, for all succeeding years during which you hold our ADSs or ordinary shares even if we cease to qualify as a PFIC under the rules set forth above. If we are a PFIC for any taxable year during which you hold our ADSs or ordinary shares, you will be subject to special tax rules with respect to any “excess distribution” that you receive and any gain you realize from a sale or other disposition (including a pledge) of our ADSs or ordinary shares, unless you make a “mark-to-market” election as discussed below. Distributions you receive in a taxable year that are greater than 125% of the average annual distributions you received during the shorter of the three preceding taxable years or your holding period for the ADSs or ordinary shares will be treated as an excess distribution. Under these special tax rules:
| ● | the excess distribution or gain will be allocated ratably over your holding period for the ADSs or ordinary shares; |
| ● | amounts allocated to the current taxable year and any taxable years in your holding period prior to the first taxable year in which we are classified as a PFIC, or a pre-PFIC year, will be taxable as ordinary income; and |
| ● | amounts allocated to each prior taxable year, other than the current taxable year or a pre-PFIC year, will be subject to tax at the highest tax rate in effect applicable to you for that year, and such amounts will be increased by an additional tax equal to interest on the resulting tax deemed deferred with respect to such years. |
| ● | If we are a PFIC for any taxable year during which you hold our ADSs or ordinary shares and any of our non-U.S. subsidiaries is also a PFIC, you will be treated as owning a proportionate amount (by value) of the shares of each such non-U.S. subsidiary classified as a PFIC for purposes of the application of these rules. |
A U.S. Holder of “marketable stock” (as defined below) in a PFIC may make a mark-to-market election for such stock of a PFIC to elect out of the tax treatment discussed in the two preceding paragraphs. If you make a valid mark-to-market election for the ADSs, you will include in income each year an amount equal to the excess, if any, of the fair market value of the ADSs as of the close of your taxable year over your adjusted basis in such ADSs. You will be allowed a deduction for the excess, if any, of the adjusted basis of the ADSs over their fair market value as of the close of the taxable year. However, deductions will be allowable only to the extent of any net mark-to-market gains on the ADSs included in your income for prior taxable years. Amounts included in your income under a mark-to-market election, as well as gain on the actual sale or other disposition of the ADSs, will be treated as ordinary income. Ordinary loss treatment will also apply to the deductible portion of any mark-to-market loss on the ADSs, as well as to any loss realized on the actual sale or disposition of the ordinary shares, to the extent that the amount of such loss does not exceed the net mark-to-market gains previously included for such ADSs. Your basis in the ADSs will be adjusted to reflect any such income or loss amounts. If you make a mark-to-market election, tax rules that apply to distributions by corporations which are not PFICs (described above in “-Dividends”) would apply to distributions by us (except that the preferential rates for qualified dividend income would not apply).
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The mark-to-market election is available only for “marketable stock” which is stock that is traded in other than de minimis quantities on at least 15 days during each calendar quarter (“regularly traded”) on a qualified exchange or other market, as defined in applicable U.S. Treasury regulations. We expect that the ADSs will be listed on the NASDAQ Capital Market, which is a qualified exchange for these purposes. If the ADSs are regularly traded, and the ADSs qualify as “marketable stock” for purposes of the mark-to-market rules, then the mark-to-market election might be available to you if we were to become a PFIC.
Because, as a technical matter, a mark-to-market election cannot be made for any lower-tier PFICs that we may own, you may continue to be subject to the PFIC rules with respect to your indirect interest in any investments held by us that are treated as an equity interest in a PFIC for U.S. federal income tax purposes. We do not currently intend to provide information necessary for U.S. Holders to make qualified electing fund elections, which, if available, would result in tax treatment different from the general tax treatment for PFICs described above.
If you own our ADSs or ordinary shares during any taxable year that we are a PFIC, you must file an annual report on IRS Form 8621 (Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund) with the IRS, generally with your federal income tax returns for such year, subject to certain exceptions based on the value of the ADSs or ordinary shares held. A failure to file a required annual report will suspend the statute of limitations with respect to any tax return, event, or period to which such report relates (potentially including with respect to items that do not relate to your investment in the ADSs or ordinary shares). You are urged to consult your tax advisor concerning the U.S. federal income tax consequences of purchasing, holding, and disposing of our ADSs or ordinary shares if we are or become a PFIC, including the possibility of making a mark-to-market election.
Information with Respect to Specified Foreign Financial Assets
You may be required to submit to the IRS certain information with respect to your beneficial ownership of our ADSs or ordinary shares, if such ADSs or ordinary shares are not held on your behalf by certain financial institutions. Penalties also may be imposed if you are required to submit such information to the IRS and fail to do so.
Information Reporting and Backup Withholding
Dividend payments with respect to ADSs or ordinary shares and proceeds from the sale, exchange or redemption of ADSs or ordinary shares may be subject to information reporting to the IRS and possible U.S. backup withholding. Backup withholding will not apply, however, to a U.S. Holder who furnishes a correct taxpayer identification number and makes any other required certification or who is otherwise exempt from backup withholding. U.S. Holders who are required to establish their exempt status generally must provide such certification on IRS Form W-9 or an acceptable substitute form.
Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against your U.S. federal income tax liability, and you may obtain a refund of any excess amounts withheld under the backup withholding rules by timely filing the appropriate claim for refund with the IRS and furnishing any required information. You are urged to consult your tax advisors regarding the application of the U.S. information reporting and backup withholding rules.
F. Dividends and Paying Agents
Not applicable.
G. Statements by Experts
Not applicable.
H. Documents on Display
We previously filed with the SEC our registration statement on Form F-1, as amended, to register our ordinary shares in relation to our initial public offering. We have also filed with the SEC a related registration statement on F-6 (Registration No. 333- 220966) to register the ADSs.
We are subject to periodic reporting and other information requirements of the Securities Exchange Act of 1934, as amended, or the “Exchange Act.” Under the Exchange Act, we are required to file reports and other information with the SEC, including filing annually a Form 20-F within four months after the end of each fiscal year, which is March 31. The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding registrants that make electronic filings with the SEC using its EDGAR system. As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of quarterly reports and proxy statements, and officers, directors and principal shareholders are exempt from short-swing profit recovery provisions contained in Section 16 of the Exchange Act.
We will furnish Citibank, N.A., the depositary of our ADSs, with our annual reports, which will include a review of operations and annual audited consolidated financial statements prepared in conformity with U.S GAAP, and all notices of shareholders’ meeting and other reports and communications that are made generally available to our shareholders. The depositary will make such notices, reports and communications available to holders of ADSs and, upon our written request, will mail to all record holders of ADSs the information contained in any notice of a shareholders’ meeting received by the depositary from us.
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I. Subsidiary Information
Not applicable.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign Exchange Risk
Substantially all of our revenue and substantially all of our expenses are denominated in RMB. In our consolidated financial statements, our financial information that uses RMB as the functional currency has been translated into U.S. dollars. Due to foreign currency translation adjustments, we had a foreign exchange loss of US$0.2 million for the fiscal year ended March 31, 2024, a foreign exchange translation gain of US$ 0.3 million for the fiscal year ended March 31, 2025, and a foreign exchange translation gain of US$0.5 million for the fiscal year ended March 31, 2026. Appreciation or depreciation in the value of the RMB relative to the U.S. dollar would affect our financial results reported in U.S. dollar terms without giving effect to any underlying change in our business or results of operations.
The conversion of RMB into foreign currencies, including U.S. dollars, is based on rates set by the PBOC. In fiscal year 2024, the value of RMB depreciated by approximately 5.1% against U.S. dollar. In fiscal year 2025, the value of RMB depreciated by approximately 0.5% against U.S dollar. In fiscal year 2026, the value of RMB appreciated by 4.9% against U.S dollar. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the RMB and the U.S. dollar in the future.
To the extent that we need to convert U.S. dollars into RMB for our operations, appreciation of the RMB against the U.S. dollar would have an adverse effect on the RMB amount we receive from the conversion. Conversely, if we decide to convert RMB into U.S. dollars for the purpose of making payments for dividends on our ordinary shares or ADSs or for other business purposes, appreciation of the U.S. dollar against the RMB would have a negative effect on the U.S. dollar amounts available to us.
It is difficult to predict how market forces, including the volatile market conditions arising from the COVID-19 pandemic, or PRC or U.S. government policy may impact the exchange rate between the RMB and the U.S. Dollar in the future.
See “Item 3. Key Information-D. Risk Factors-Risks Related to Doing Business in the People’s Republic of China-Fluctuations in exchange rates could have a material adverse effect on our results of operations and the value of your investment.”
Interest Risk
We have not been exposed to material risks due to changes in market interest rates, and we have not used any derivative financial instruments to manage our interest risk exposure. However, we cannot provide assurance that we will not be exposed to material risks due to changes in market interest rate in the future. Our future interest income may fall short of expectations due to changes in market interest rates.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
A. Debt Securities
Not applicable.
B. Warrants and Rights
Not applicable.
C. Other Securities
Not applicable.
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D. American Depositary Shares
Fees and Charges Our ADS Holders May Have to Pay
As an ADS holder, you will be required to pay the following service fees to the depositary and certain taxes and governmental charges (in addition to any applicable fees, expenses, taxes and other governmental charges payable on the deposited securities represented by any of your ADSs):
| Service | Fees | ||
| (1) | Issuance of ADSs ( e.g. , an issuance upon a deposit of Shares, upon a change in ADS(s)-to-Share(s) ratio, or for any other reason), excluding issuances as a result of distributions described in paragraph (4) below. | Up to U.S. $5.00 per 100 ADSs (or fraction thereof) issued | |
| (2) | Cancellation of ADSs ( e.g. , a cancellation of ADSs for delivery of deposited Shares, upon a change in the ADS(s)-to-Shares(s) ratio, or for any other reason. | Up to U.S. $5.00 per 100 ADSs (or fraction thereof) cancelled. | |
| (3) | Distribution of cash dividends or other cash distributions ( e.g. , upon a sale of rights and other entitlements) | Up to U.S. $5.00 per 100 ADSs (or fraction thereof) held. | |
| (4) | Distribution of ADSs pursuant to (i) stock dividends or other free stock distributions, or (ii) an exercise of rights to purchase additional ADSs. | Up to U.S. $5.00 per 100 ADSs (or fraction thereof) held. | |
| (5) | Distribution of securities other than ADSs or rights to purchase additional ADSs ( e.g. , spin-off shares). | Up to U.S. $5.00 per 100 ADSs (or fraction thereof) held. | |
| (6) | ADS Services. | Up to U.S. $5.00 per 100 ADSs (or fraction thereof) held on the applicable record date(s) established by the depositary. | |
As an ADS holder, you will also be responsible to pay certain fees and expenses incurred by the depositary and certain taxes and governmental charges (in addition to any applicable fees, expenses, taxes and other governmental charges payable on the deposited securities represented by any of your ADSs) such as the following:
| ● | Fees for the transfer and registration of ordinary shares charged by the registrar and transfer agent for the ordinary shares in Cayman Islands (i.e., upon deposit and withdrawal of ordinary shares). |
| ● | Expenses incurred for converting foreign currency into U.S. dollars. |
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| ● | Expenses for cable, telex, fax and electronic transmissions and for delivery of securities. |
| ● | Taxes and duties upon the transfer of securities, including any applicable stamp duties, any stock transfer charges or withholding taxes (i.e., when ordinary shares are deposited or withdrawn from deposit). |
| ● | Fees and expenses incurred in connection with the delivery of ordinary shares on deposit or the servicing of ordinary shares, deposited securities and/or ADSs. |
| ● | Fees and expenses incurred in connection with complying with exchange control regulations and other regulatory requirements applicable to ordinary shares, deposited securities, ADSs and ADRs. |
ADS fees and charges payable upon (i) deposit of the ordinary shares against issuance of ADSs and (ii) surrender of ADSs for cancellation and withdrawal of the ordinary shares are charged to the person to whom the ADSs are delivered (in the case of ADS issuances) and to the person who delivers the ADSs for cancellation (in the case of ADS cancellations). In the case of ADSs issued by the depositary bank into DTC or presented to the depositary bank via DTC, the ADS issuance and cancellation fees and charges may be deducted from distributions made through DTC and may be charged to the DTC participant(s) receiving the ADSs or the DTC participant(s) surrendering the ADSs for cancellation, as the case may be, on behalf of the beneficial owner(s) and will be charged by the DTC participant(s) to the account(s) of the applicable beneficial owner(s) in accordance with the procedures and practices of the DTC participant(s) as in effect at the time. ADS fees and charges in respect of distributions and the ADS service fee are charged to the holders as of the applicable ADS record date. In the case of distributions of cash, the amount of the applicable ADS fees and charges is deducted from the funds being distributed. In the case of (i) distributions other than cash and (ii) the ADS service fee, holders as of the ADS record date will be invoiced for the amount of the ADS fees and charges, and such ADS fees and charges may be deducted from distributions made to holders of ADSs. For ADSs held through DTC, the ADS fees and charges for distributions other than cash and the ADS service fee may be deducted from distributions made through DTC and may be charged to the DTC participants, in accordance with the procedures and practices prescribed by DTC, and the DTC participants in turn charge the amount of such ADS fees and charges to the beneficial owners for whom they hold ADSs.
In the event of refusal to pay the depositary bank fees, the depositary bank may, under the terms of the deposit agreement, refuse the requested service until payment is received or may set off the amount of the depositary bank fees from any distribution to be made to the ADS holder. Note that the fees and charges you may be required to pay may vary over time and may be changed by us and by the depositary bank. You will receive prior notice of such changes.
Citibank, N.A. and/or its agent may act as principal for such conversion of foreign currency.
The charges described above may be amended from time to time by agreement between us and the depositary.
Fees and Other Payments Made by the Depositary to Us
The depositary bank may reimburse us for certain expenses incurred by us in respect of the ADR program, by making available a portion of the ADS fees charged in respect of the ADR program or otherwise, upon such terms and conditions as we and the depositary bank agree from time to time.
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PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
Material Modifications to the Rights of Security Holders
See “Item 10. Additional Information-B. Memorandum and Articles of Association-Ordinary Shares” for a description of the rights of securities holders, which remain unchanged.
Use of Proceeds
The following “Use of Proceeds” information relates to (i) the registration statement on Form F-1, as amended (File Number: 333-220720) in relation to our initial public offering of 5,036,950 ADSs representing 5,036,950 ordinary shares, at an initial offering price of US$10.00 per ADS. Our initial public offering closed on November 3, 2017. Network 1 Financial Securities, Inc. was the representative of the underwriters for our initial public offering. As a result of our initial public offering, we raised an aggregate of approximately US$43.3 million in net proceeds, after deducting related costs and expenses.
As of the date of this annual report, we had used all the net proceeds received from our initial public offering.
ITEM 15. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
(a) Disclosure Controls and Procedures.
We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) that are designed to ensure that information required to be disclosed in our reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time period specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow for timely decisions regarding disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As of March 31, 2026, the end of the fiscal year covered by this report, our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of our disclosure controls and procedures. Based on the evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2026, our disclosure controls and procedures were effective.
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(b) Management’s annual report on internal control over financial reporting.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities and Exchange Act of 1934. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of the effectiveness of internal control to future periods are subject to the risk that controls may become inadequate because of changes in conditions, and that the degree of compliance with the policies or procedures may deteriorate.
Our management has assessed the effectiveness of our internal control over financial reporting as of March 31, 2026, using the criteria described in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, our management concluded that our internal control over financial reporting was effective.
Remediation of Previously Reported Material Weakness in Internal Control over Financial Reporting
A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. As previously disclosed in our Annual Report on Form 20-F as of and for the year ended March 31, 2025, management of the Company concluded that we did not maintain effective internal control over financial reporting due to the existence of the following material weaknesses:
| ● | The Company has inadequate documentation on internal control over financial reporting; |
| ● | The Company has ineffective design and operation of controls, which include management review controls, over the assessment for business combination; |
| ● | The Company has ineffective design and operating of controls over certain information technology general controls (“ITGC’s”), particularly such controls related to change management and ineffective data integrity controls, which limited management’s ability to rely on technology-dependent controls relevant to the Company’s consolidated financial statements. As a result, information technology-dependent manual and automated controls that rely on the affected ITGC’s, or information from the information technology systems with affected ITGC’s, were also ineffective; |
| ● | The Company has inadequate segregation of duties. Due to the relatively small scale of operations and the early-stage nature of its new business initiatives, certain personnel are assigned multiple responsibilities across functions, including accounting, business development and operations. Additionally, several officers and employees of the holding company also serve concurrently in positions at the Company’s subsidiaries; |
| ● | The Company’s financial management function requires improvement in various aspects, including but not limited to: a) The Company’s supervision and approval procedures in financial accounting and financial statement disclosure are not rigorous enough, b) The Company lacks of a comprehensive and effective internal audit system, and c) The Company does not have sufficient number of skilled financial and accounting personnel and have yet to provide periodic professional and business training to the current financial personnel. |
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This material weakness could result in a substantial misstatement of all account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected. During the year ended March 31, 2026, we continued taking steps to successfully remediate this material weakness and to strengthen our control environment. The steps taken to remediate the deficiencies mentioned above included:
| ● | Implementation of a mandatory standardized documentation template across all key financial processes, and assigned formal ownership to each process owner with quarterly update requirements. |
| ● | Implementation a formal valuation review checklist, requiring independent second-level approval by the Corporate Controller for all purchase price allocations, and engaging external valuation specialist to validate key assumptions if needed. |
| ● | Implementation of a formalized change management policy covering all relevant systems, with documented requirements for change requests, approvals, testing, and post-implementation reviews. During the fiscal year, the Company completed a comprehensive ITGC assessment covering user access management, change management, system security, and data backup controls. |
| ● | Realigned roles and responsibilities to establish clear functional boundaries, separating accounting, business development, and operations duties to the extent practicable given its current size. Specifically, the Company reassigned incompatible functions—such as transaction initiation, authorization, custody of assets, and recordkeeping—to different individuals, and for areas where full segregation remains impractical, implemented compensating controls including mandatory supervisory review and independent approval of all significant transactions. Additionally, the Company formally documented all role assignments, approval matrices, and delegated authorities to ensure clarity and accountability across both the holding company and its subsidiaries. The Company also engaged an external SOX compliance advisor to assist management in enhancing the design and documentation of its internal control framework. |
| ● | Implemented a multi-level supervisory review framework for financial reporting, requiring review and approval by senior finance management for all material journal entries, account reconciliations, and financial statement disclosures, with all approvals documented and retained. The Company established and maintained documented policies for financial reporting, internal audit functions, and finance staff training, and completed a formal internal control assessment documented in a management report on internal control over financial reporting. Finance staff training was conducted with attendance records maintained. The Company also engaged an external SOX compliance advisor to assist with control documentation and testing. All periodic financial statements were reviewed and approved by the Audit Committee. |
Management assessed the effectiveness of our internal control over financial reporting as of March 31, 2026 and concluded that, through this assessment, the previously identified material weakness has been remediated as of March 31, 2026. However, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with applicable policies, processes and documentation requirements may deteriorate.
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Attestation Report of the Independent Registered Public Accounting Firm
The accompanying Attestation Report of the Independent Registered Public Accounting Firm expresses an opinion on the effectiveness of the Company’s internal control over financial reporting as of March 31, 2026. The Company is required to include the auditor’s attestation report on internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and the applicable rules of the Securities and Exchange Commission.
Changes in Internal Control over Financial Reporting
As described in “—(b) Management’s Annual Report on Internal Control Financial Reporting” above, our management has determined that these controls were designed and are now operating effectively and concluded that the material weakness in our internal control over financial reporting reported as of March 31, 2025, has been remediated as of March 31, 2026. Based upon that evaluation, other than in respect of the changes described above, there was no change in our internal control over financial reporting during the year ended March 31, 2026, that has materially affected, or is reasonably likely to affect, our internal control over financial reporting.
ITEM 16. [Reserved]
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
Our audit committee consists of three members and is chaired by Mr. Stephen P. Brown. Each of Mr. Stephen P. Brown, Mr. Zhe Liu and Mr. Jianqiang Xu satisfies the “independence” requirements of the listing rules of NASDAQ and meet the independence standards under Rule 10A-3 under the Exchange Act. We have determined that each of Mr. Stephen P. Brown qualifies as an “audit committee financial expert.”
ITEM 16B. CODE OF ETHICS
Our board of directors adopted a code of business conduct and ethics that applies to our directors, officers, employees and advisors, which became effective in November 2017. We have posted a copy of our code of business conduct and ethics on our website at www.ahgtop.com/en/index.html
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth the aggregate fees by the categories specified in connection with certain professional services rendered by CHI-LLTC for the year ended March 31, 2026 and by Onestop Assurance PAC for the year ended March 31, 2025 and for the six months ended September 30, 2025. We did not pay any other fees to our auditor during the periods indicated below.
| Years ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Audit fees (1) | $ | 260,700 | $ | 228,000 | ||||
| Audit-related fees (2) | - | - | ||||||
| Tax fees (3) | - | - | ||||||
| All other fees | - | - | ||||||
| Total | $ | 260,700 | $ | 228,000 | ||||
| (1) | “Audit fees” represent the aggregate fees for professional services rendered by our principal auditors for the review of our interim consolidated financial statements, the audit of our annual consolidated financial statements and/or services that are normally provided by the auditors in connection with statutory and regulatory filings or engagements. |
| (2) | “Audit-related fees” means the aggregate fees billed for related services by our principal accountant that are reasonably related to the performance of the audit or review of our financial statements and are not reported under Audit fees. |
| (3) | “Tax fees” means the aggregated fees billed for professional services rendered by our independent registered public accounting firm for tax compliance, tax advice, and tax planning. |
The policy of our audit committee is to pre-approve all audit and non-audit services to be provided by CHI-LLTC, including audit services, audit-related services, tax services and other services as are described above, other than those for de minimis services which are approved by the audit committee prior to the completion of the audit.
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ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
The following table sets forth information about our purchases of outstanding ADSs as of the date of this report.
| Period | Total Number of ADSs Purchased | Average Price Paid per ADS (1) | Total Number of ADSs Purchased as Part of Publicly Announced Plans or Programs (2) | Approximate Dollar Value of ADSs that May Yet Be Purchased Under the Program (2) | ||||||||||
| December 10, 2019 to December 31, 2019 | - | - | - | US$ | 21.01 million | |||||||||
| January 2020 | - | - | - | US$ | 21.01 million | |||||||||
| February 2020 | - | - | - | US$ | 21.01 million | |||||||||
| March 2020 | - | - | - | US$ | 21.01 million | |||||||||
| April 2020 | - | - | - | US$ | 21.01 million | |||||||||
| May 2020 | - | - | - | US$ | 21.01 million | |||||||||
| June 2020 | - | - | - | US$ | 21.01 million | |||||||||
| From July 1, 2020 to June 30, 2023 | - | - | - | US$ | 21.01 million | |||||||||
| (1) | Each of our ADSs represents three ordinary shares. The average price per ADS is calculated using the execution price for each repurchase excluding commissions paid to brokers. |
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
On May 12, 2026, the audit committee of the Board has resolved to dismiss the engagement of Onestop Assurance PAC as the Company’s independent registered public accounting firm, effective on May 12, 2026, and to appoint CHI-LLTC to serve as its independent registered public accounting firm, effective on May 12, 2026.
In the Company’s fiscal year ended March 31, 2025 annual report, the Former auditor issued an adverse ICFR opinion identifying material weaknesses as of March 31, 2025, and its financial-statement report included a going-concern uncertainty section. Except that, during the two most recent fiscal years ended March 31, 2025 and 2024, and through the subsequent interim period preceding the release, the Former Auditor had no disagreement with the Company since their engagement on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements that, if not resolved to the Former Auditor’s satisfaction, would have caused the Former Auditor to make reference to the subject matter thereof in its reports for such fiscal years and interim period.
ITEM 16G. CORPORATE GOVERNANCE
As a Cayman Islands exempted company listed on NASDAQ, we are subject to the NASDAQ corporate governance listing standards. However, NASDAQ rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in the Cayman Islands, which is our home country, may differ significantly from the NASDAQ corporate governance listing standards. Currently, pursuant to the home country rule exemption set forth under NASDAQ Listing Rule 5615, we have elected to be exempt from the requirement under NASDAQ Listing Rule 5635 to obtain shareholder approval of a business combination and to obtain shareholder approval for the issuance of 20% or more of our outstanding ordinary shares, which are not required under the Companies Act of the Cayman Islands. See “Item 3. Key Information-D. Risk Factors-Risks Related to Our ADSs-We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to United States domestic public companies.”
ITEM 16H. MINE SAFETY DISCLOSURE
Not applicable.
ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable
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ITEM 16J. INSIDER TRADING POLICY
We have
ITEM 16K. CYBERSECURITY
Risk Management and Strategy
We recognize the importance of safeguarding the security of our computer systems, software, networks, and other technology assets.
Governance
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PART III
ITEM 17. FINANCIAL STATEMENTS
We have elected to provide financial statements pursuant to Item 18.
ITEM 18. FINANCIAL STATEMENTS
VIE Financial Information
Set forth below is selected consolidated statements of operations and cash flows for the fiscal years ended March 31, 2026, 2025 and 2024, and selected balance sheet information as of March 31, 2026, 2025 and 2024, showing financial information for the parent company Akso Health Group, the WFOE (as defined below) and WFOE’s subsidiaries (as defined below), the VIE and VIE’s subsidiaries, eliminating entries and consolidated information (in dollars). In the tables below, the column headings correspond to the following entities in the organizational diagram on page 86. See also VIE and consolidated financial information in Note 3 of our financial statements.
For the purposes of this section:
| ● | “Parent company” refers to Akso Health Group; |
| ● | “WFOE and WOFE’s subsidiary” refers to Beijing Hexin Yongheng Technology Development Co., Ltd., Tianjin Haohongyuan Technology Co., Ltd. and Qindao Akso Health Management Co., Limited, Tianjin Akso Enterprise Management Co., Ltd, Tianjin Wangyi Cloud Technology Co., Ltd,Tinajin Deyihui Internet Hospital Co., Ltd,Tianjin Deyihui Clinic Co., Ltd |
| ● | “VIE” refers to Wusu Hexin Yongheng Trading Co., Ltd, Hexin Digital Technology Co., Ltd., Beijing Hexin Jiuding Technology Co., Ltd. |
| ● | “Other subsidiaries” refers to HX Asia Investment Limited, HX China Investment Limited, We Health Limited, We Healthy Limited,Akso Online MediTech Co., Ltd, Akso Remote Medical Consultation Centre Inc., Akso First Health Treatment Centrer Inc.,Akso Medical Cloud Limited and Akso Medi-care Limited |
Selected Condensed Consolidation Schedule of Balance Sheet
| As of March 31, 2026 | ||||||||||||||||||||||||
| Parent Company | Other Subsidiaries | WOFE and WOFE’s subsidiary | VIE and VIE’s Subsidiary | Elimination Entries and Reclassification Entries | Consolidation Total | |||||||||||||||||||
| (US$) | (US$) | (US$) | (US$) | (US$) | (US$) | |||||||||||||||||||
| Cash and cash equivalents | 2,571 | 110,725 | 57,276 | — | — | 170,572 | ||||||||||||||||||
| Intercompany receivables (1) | 184,752,062 | — | — | — | (184,752,062 | ) | — | |||||||||||||||||
| Total current assets | 184,754,633 | 185,876,970 | 3,666,613 | — | (184,752,062 | ) | 189,546,154 | |||||||||||||||||
| Total non—current assets | — | — | 87,231 | — | — | 87,231 | ||||||||||||||||||
| Total Assets | 184,754,633 | 185,876,970 | 3,753,844 | — | (184,752,062 | ) | 189,633,385 | |||||||||||||||||
| Intercompany payables (1) | — | 191,638,037 | 157,628,309 | — | (349,266,346 | ) | — | |||||||||||||||||
| Total current liabilities | 3,820,021 | 192,084,392 | 162,070,374 | — | (349,266,346 | ) | 8,708,441 | |||||||||||||||||
| Total non—current liabilities | — | — | 2,565 | — | — | 2,565 | ||||||||||||||||||
| Total Liabilities | 3,820,021 | 192,084,392 | 162,072,939 | — | (349,266,346 | ) | 8,711,006 | |||||||||||||||||
| Total Shareholders’ Equity | 180,934,612 | (6,207,058 | ) | (158,307,226 | ) | — | 164,514,284 | 180,934,612 | ||||||||||||||||
| Non—controlling interests | — | (364 | ) | (11,869 | ) | — | — | (12,233 | ) | |||||||||||||||
| Total Liabilities and Equity | 184,754,633 | 185,876,970 | 3,753,844 | — | (184,752,062 | ) | 189,633,385 | |||||||||||||||||
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| As of March 31, 2025 | ||||||||||||||||||||||||
| Parent Company | Other Subsidiaries | WOFE and WOFE’s subsidiary | VIE and VIE’s Subsidiary | Elimination Entries and Reclassification Entries | Consolidation Total | |||||||||||||||||||
| (US$) | (US$) | (US$) | (US$) | (US$) | (US$) | |||||||||||||||||||
| Cash and cash equivalents | 2,279 | 176,131,613 | 95,982 | - | - | 176,229,874 | ||||||||||||||||||
| Intercompany receivables (1) | 202,627,825 | - | - | - | (202,627,825 | ) | - | |||||||||||||||||
| Total current assets | 202,630,104 | 176,131,613 | 19,991,000 | - | (202,627,825 | ) | 196,124,892 | |||||||||||||||||
| Total non-current assets | — | - | 18,828,433 | - | - | 18,828,433 | ||||||||||||||||||
| Total Assets | 202,630,104 | 176,131,613 | 38,819,433 | - | (202,627,825 | ) | 214,953,325 | |||||||||||||||||
| Intercompany payables (1) | — | 182,209,467 | 160,420,715 | - | (342,630,182 | ) | - | |||||||||||||||||
| Total current liabilities | 3,510,959 | 182,302,284 | 170,629,846 | - | (342,630,182 | ) | 13,812,907 | |||||||||||||||||
| Total non-current liabilities | — | - | 1,989,282 | - | - | 1,989,282 | ||||||||||||||||||
| Total Liabilities | 3,510,959 | 182,302,284 | 172,619,128 | - | (342,630,182 | ) | 15,802,189 | |||||||||||||||||
| Total Shareholders’ Equity | 199,119,145 | (6,202,662 | ) | (133,799,695 | ) | - | 140,002,357 | 199,119,145 | ||||||||||||||||
| Non-controlling interests | — | 31,991 | - | - | - | 31,991 | ||||||||||||||||||
| Total Liabilities and Equity | 202,630,104 | 176,131,613 | 38,819,433 | - | (202,627,825 | ) | 214,953,325 | |||||||||||||||||
| As of March 31, 2024 | ||||||||||||||||||||||||
| Parent Company | Other Subsidiaries | WOFE and WOFE’s Subsidiary | VIE and VIE’s Subsidiary | Elimination Entries and Reclassification Entries (1) | Consolidated Total | |||||||||||||||||||
| (US$) | (US$) | (US$) | (US$) | (US$) | (US$) | |||||||||||||||||||
| Cash and cash equivalents | 2,279 | 74,791,108 | 10,530,935 | 880,073 | (1,030,378 | ) | 85,174,017 | |||||||||||||||||
| Intercompany receivables (1) | 141,456,064 | - | - | 20,383,406 | (161,839,470 | ) | - | |||||||||||||||||
| Total current assets | 141,458,343 | 75,194,606 | 73,158,083 | 25,636,634 | (173,429,549 | ) | 142,018,117 | |||||||||||||||||
| Total Assets | 141,458,343 | 85,195,260 | 73,158,419 | 25,661,413 | (183,455,318 | ) | 142,018,117 | |||||||||||||||||
| Intercompany payables (1) | - | 121,749,699 | 60,538,415 | - | (182,288,114 | ) | - | |||||||||||||||||
| Total Liabilities | 3,090,959 | 122,266,987 | 67,354,488 | 17,647 | (189,136,158 | ) | 3,593,923 | |||||||||||||||||
| Total Shareholders’ Equity | 138,367,384 | (37,128,537 | ) | 5,803,931 | 25,643,766 | 5,680,840 | 138,367,384 | |||||||||||||||||
| Non-controlling interests | - | 56,810 | - | - | - | 56,810 | ||||||||||||||||||
| Total Liabilities and Equity | 141,458,343 | 85,195,260 | 73,158,419 | 25,661,413 | (183,455,318 | ) | 142,018,117 | |||||||||||||||||
| (1) | Elimination of intercompany balances among parent company, other subsidiaries, WOFE and VIEs and their subsidiaries that we consolidate and reclassification of retroactive adjustment for discontinued operations. |
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Selected Condensed Consolidated Statements of Operations Data
| For the year ended March 31, 2026 | ||||||||||||||||||||||||
| Parent Company | Other Subsidiaries | WOFE and WOFE’s subsidiary | VIE and VIE’s Subsidiary | Elimination Entries and Reclassification Entries | Consolidation Total | |||||||||||||||||||
| (US$) | (US$) | (US$) | (US$) | (US$) | (US$) | |||||||||||||||||||
| Total revenue, net | - | - | 13,831,904 | - | - | 13,831,904 | ||||||||||||||||||
| Total costs and expenses | 1,231,452 | 32,790 | 33,267,994 | - | - | 34,532,236 | ||||||||||||||||||
| Loss from subsidiaries and VIEs | 17,440,450 | - | - | - | (17,440,450 | ) | - | |||||||||||||||||
| Total other expenses (income), net | (292 | ) | 3,963 | 442 | - | - | 4,113 | |||||||||||||||||
| (Loss) income from continuing operations before income tax expenses | (18,671,610 | ) | (36,753 | ) | (19,436,532 | ) | - | 17,440,450 | (20,704,445 | ) | ||||||||||||||
| Less: income tax expense (benefit) | - | - | (1,988,264 | ) | - | - | (1,988,264 | ) | ||||||||||||||||
| Net (loss) income from continuing operations | (18,671,610 | ) | (36,753 | ) | (17,448,268 | ) | - | 17,440,450 | (18,716,181 | ) | ||||||||||||||
| Total gain (loss) from discontinued operations | - | - | - | - | - | - | ||||||||||||||||||
| Net (loss) income | (18,671,610 | ) | (36,753 | ) | (17,448,268 | ) | - | 17,440,450 | (18,716,181 | ) | ||||||||||||||
| For the year ended March 31, 2025 | ||||||||||||||||||||||||
| Parent Company | Other Subsidiaries | WOFE and WOFE’s subsidiary | VIE and VIE’s Subsidiary | Elimination Entries and Reclassification Entries | Consolidation Total | |||||||||||||||||||
| (US$) | (US$) | (US$) | (US$) | (US$) | (US$) | |||||||||||||||||||
| Total revenue, net | - | 415,020 | 14,362,778 | - | - | 14,777,798 | ||||||||||||||||||
| Total costs and expenses | 1,288,585 | 311,957 | 179,481,608 | - | - | 181,082,150 | ||||||||||||||||||
| Loss from subsidiaries | 133,688,784 | - | - | - | (133,688,784 | ) | - | |||||||||||||||||
| Total other expenses (income), net | - | 6,346 | (40,419 | ) | - | - | (34,073 | ) | ||||||||||||||||
| (Loss) income from continuing operations before income tax expenses | (134,977,369 | ) | 96,717 | (165,078,411 | ) | - | 133,688,784 | (166,270,279 | ) | |||||||||||||||
| Less: income tax expense (benefit) | - | - | (30,801,146 | ) | - | - | (30,801,146 | ) | ||||||||||||||||
| Net (loss) income from continuing operations | (134,977,369 | ) | 96,717 | (134,277,265 | ) | - | 133,688,784 | (135,469,133 | ) | |||||||||||||||
| Total gain (loss) from discontinued operations | - | - | - | - | - | - | ||||||||||||||||||
| Net (loss) income | (134,977,369 | ) | 96,717 | (134,277,265 | ) | - | 133,688,784 | (135,469,133 | ) | |||||||||||||||
| For the year ended March 31, 2024 | ||||||||||||||||||||||||
| Parent Company | Other Subsidiaries | WOFE and WOFE’s Subsidiary | VIE and VIE’s Subsidiary | Elimination Entries and Reclassification Entries (2) | Consolidated Total | |||||||||||||||||||
| (US$) | (US$) | (US$) | (US$) | (US$) | (US$) | |||||||||||||||||||
| Total revenue, net | - | - | 2,414,338 | 694 | (694 | ) | 2,414,338 | |||||||||||||||||
| Total costs and expenses (benefits) | 2,122,139 | 7,391,678 | 2,532,589 | (11,798 | ) | (982,230 | ) | 11,052,378 | ||||||||||||||||
| Loss from subsidiaries and VIEs | 7,336,645 | - | - | - | (7,336,645 | ) | - | |||||||||||||||||
| Total other income, net | - | 128,983 | 18,809 | 5 | (601,548 | ) | (453,751 | ) | ||||||||||||||||
| (Loss) income from continuing operations before income tax expenses | (9,458,784 | ) | (7,262,066 | ) | (99,443 | ) | 12,497 | 7,716,005 | (9,091,791 | ) | ||||||||||||||
| Less: income tax expense | - | - | 24,988 | - | - | 24,988 | ||||||||||||||||||
| Net (loss) income from continuing operations | (9,458,784 | ) | (7,262,066 | ) | (124,431 | ) | 12,497 | 7,716,005 | (9,116,779 | ) | ||||||||||||||
| Total gain (loss) from discontinued operations | - | - | - | - | (399,798 | ) | (399,798 | ) | ||||||||||||||||
| Net (loss) income | (9,458,784 | ) | (7,262,066 | ) | (124,431 | ) | 12,497 | 7,316,207 | (9,516,577 | ) | ||||||||||||||
| (2) | Reclassification of retroactive adjustment for discontinued operations |
134
Selected Condensed Consolidation Schedule of Cash Flows
| For the year ended March 31, 2026 | ||||||||||||||||||||||||
| Parent Company | Other Subsidiaries | WOFE and WOFE’s subsidiary | VIE and VIE’s Subsidiary | Elimination Entries and Reclassification Entries | Consolidaion Total | |||||||||||||||||||
| (US$) | (US$) | (US$) | (US$) | (US$) | (US$) | |||||||||||||||||||
| Net cash provided by (used in) operating activities | (922,097 | ) | 368,558 | (12,237,761 | ) | — | — | (12,791,390 | ) | |||||||||||||||
| Net cash provided by (used in) investing activities | — | (175,663,574 | ) | 12,199,055 | — | — | (163,464,519 | ) | ||||||||||||||||
| Net cash provided by (used in) financing activities | 922,389 | (572,389 | ) | — | — | — | 350,000 | |||||||||||||||||
| Intercompany receive | — | — | — | — | 176,585,963 | 176,585,963 | ||||||||||||||||||
| Intercompany payment | — | — | — | — | (176,585,963 | ) | (176,585,963 | ) | ||||||||||||||||
| For the year ended March 31, 2025 | ||||||||||||||||||||||||
| Parent Company | Other Subsidiaries | WOFE and WOFE’s subsidiary | VIE and VIE’s Subsidiary | Elimination Entries and Reclassification Entries | Consolidation Total | |||||||||||||||||||
| (US$) | (US$) | (US$) | (US$) | (US$) | (US$) | |||||||||||||||||||
| Net cash (used in) provided by operating activities | (871,318 | ) | (96,717 | ) | 2,145,198 | - | - | 1,177,163 | ||||||||||||||||
| Net cash (used in) provided by investing activities | - | - | (105,912,692 | ) | - | - | (105,912,692 | ) | ||||||||||||||||
| Net cash provided by (used in) financing activities | 871,318 | 101,262,706 | 93,750,000 | - | - | 195,884,024 | ||||||||||||||||||
| Intercompany receive | - | - | - | - | 101,214,128 | 101,214,128 | ||||||||||||||||||
| Intercompany payment | - | - | - | - | (101,214,128 | ) | 101,214,128 | |||||||||||||||||
| For the year ended March 31, 2024 | ||||||||||||||||||||||||
| Parent Company | Other Subsidiaries | WOFE and WOFE’s Subsidiary | VIE and VIE’s Subsidiary | Elimination Entries and Reclassification Entries | Consolidated Total | |||||||||||||||||||
| (US$) | (US$) | (US$) | (US$) | (US$) | (US$) | |||||||||||||||||||
| Net cash provided by (used in) operating activities | (1,614,326 | ) | 260,838 | 2,692,231 | 12,497 | - | 1,351,240 | |||||||||||||||||
| Net cash provided by (used in) investing activities | - | 1,528,918 | (56,250,000 | ) | - | - | (54,721,082 | ) | ||||||||||||||||
| Net cash provided by (used in) financing activities | 1,612,133 | 74,230,195 | 55,622,485 | 188,884 | - | 131,653,697 | ||||||||||||||||||
| Intercompany receive | - | - | - | - | 138,042,067 | - | ||||||||||||||||||
| Intercompany payment | - | - | - | - | (138,042,067 | ) | - | |||||||||||||||||
The consolidated financial statements of Akso Health Group, its subsidiaries and its consolidated former variable interest entities are included at the end of this annual report on Form 20-F.
135
ITEM 19. EXHIBITS
EXHIBIT INDEX
136
| * | Filed herewith |
| ** | Furnished herewith |
137
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F, and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
| Akso Health Group | |||
| By: | /s/ Yilin (Linda) Wang | ||
| Name: | Yilin (Linda) Wang | ||
| Title: | Chairwoman and Chief Executive Officer | ||
| Date: July 23, 2026 | |||
138
AKSO HEALTH GROUP AND SUBSIDIARIES
TABLE OF CONTENTS
F-1
Report of Independent Registered Public Accounting Firm
To the shareholders and the board of directors of Akso Health Group
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Akso Health Group and subsidiaries (collectively, the “Company”) as of March 31, 2026, the related consolidated statements of operations and comprehensive loss, changes in shareholders’ equity, and cash flows for the year ended March 31, 2026, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company as of March 31, 2026, and the consolidated result of its operations and its cash flows for the year ended March 31, 2026, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of March 31, 2026, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated July 23, 2026 expressed an unqualified opinion thereon.
Material Uncertainty Related to Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company had a net loss of approximately US$18.7 million and US$135.5 million from operations for the years ended March 31, 2026 and 2025, respectively. Accumulated deficit was US$217.6 million and US$198.9 million as of March 31, 2026 and 2025, respectively. And cash outflow of US$12.8 million from operations for the year ended March 31, 2026. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
F-2
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgements. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Description of Critical Audit Matter –Impairment on Intangible Assets and Goodwill
As described in Note 3, 11 and 12 to the consolidated financial statements, subsequent to the acquisition, the Company started its preparation for transforming patents into medical products and the achievement of its commercialization. Management reviews indicators of potential impairment existed to require an impairment analysis for the patents acquired and based on the results of the recoverability test. In the year ended March 31, 2026, the Company made an allowance of US$5.6 million on its license. The Company tests its goodwill for impairment on March 31 of each fiscal year, or whenever a change in events and circumstances (triggering event) occurs that indicates the fair value of intangible assets may be below their carrying values. Based on triggering events, the Company performed an impairment test as of March 31, 2026 on its goodwill and determined that the carrying value exceeded the respective fair value. As disclosed by management, the Company recognized $11.1 million of impairment during the year ended March 31, 2026.
We identified the impairment on intangible assets and goodwill as a critical audit matter. primarily because of the significant estimates involved in management’s impairment analysis, as these estimates resulted in audit procedures involving a high degree of auditor judgment and subjectivity and challenges in obtaining and evaluating audit evidence.
How the Critical Audit Matter Was Addressed in the Audit
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included (i) gaining an understanding of the Company’s controls over the review of impairment indicator analysis, including management’s assessments of significant judgments and assumptions; (ii) evaluating the reasonableness of management’s conclusions. For the Internet Hospital license and related goodwill, given the complete cessation of operations, we assessed the factual evidence supporting the “zero fair value” conclusion by inspecting Board resolutions, vendor termination agreements, and headcount reduction records, rather than relying on a discounted cash flow model; and (iii) recalculating the mathematical accuracy of the full impairment charges recognized for the Internet Hospital license and the goodwill, and assessing the appropriateness of the Company’s related financial statement disclosures.
/s/
We have served as the Company’s auditor since 2026.
July 23, 2026
PCAOB ID Number
F-3
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the board of directors of Akso Health Group
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Akso Health Group and its subsidiaries (the “Company”) as of March 31, 2026, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2026, based on criteria established in Internal Control —Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended March 31, 2026, of the Company and our report dated July 23, 2026, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ CHI-LLTC
Perak, Malaysia
July 23, 2026
F-4
Report of Independent Registered Public Accounting Firm
To the shareholders and the board of directors of Akso Health Group
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Akso Health Group and its subsidiaries (collectively referred as the “Company”) as of March 31, 2025, and the related consolidated statements of operations and comprehensive loss, shareholders’ equity, and cash flows for each of the two years in the period ended March 31, 2025, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company as of March 31, 2025, and the results of its operations and its cash flows for each of the two years in the period ended March 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
Going Concern Uncertainty
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company had a net loss of approximately $135.5 million from operations for the year ended March 31, 2025 and approximately $9.5 million for the year ended March 31, 2024. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this
uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Onestop Assurance PAC
We served as the Company’s auditor from 2022 to 2026
PCAOB# 6732
Singapore
August 14, 2025
F-5
AKSO HEALTH GROUP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| As of | As of | |||||||||
| March 31, | March 31, | |||||||||
| Notes | 2026 | 2025 | ||||||||
| ASSETS | ||||||||||
| CURRENT ASSETS: | ||||||||||
| Cash and cash equivalents | $ | $ | ||||||||
| Accounts receivable, net | 5 | |||||||||
| Prepayments and other assets | 6 | |||||||||
| Inventories | 7 | |||||||||
| Loan receivables | 8 | |||||||||
| Advances for capital expenditures | 9 | |||||||||
| TOTAL CURRENT ASSETS | $ | $ | ||||||||
| NON-CURRENT ASSETS | ||||||||||
| Property and equipment, net | 10 | |||||||||
| Intangible assets, net | 11 | |||||||||
| Right of use assets | 13 | |||||||||
| Goodwill | 12 | |||||||||
| TOTAL NON-CURRENT ASSETS | $ | $ | ||||||||
| TOTAL ASSETS | $ | $ | ||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||
| CURRENT LIABILITIES: | ||||||||||
| Accrued expenses and other current liabilities | 14 | |||||||||
| Contract liabilities | ||||||||||
| Taxes payable | 18 | |||||||||
| Loan from third party | 15 | |||||||||
| Operating lease liabilities-current | 13 | |||||||||
| Amount due to related parties | 16 | |||||||||
| TOTAL CURRENT LIABILITIES | $ | $ | ||||||||
| NON-CURRENT LIABILITIES | ||||||||||
| Operating lease liabilities-non-current | 13 | |||||||||
| Deferred tax liabilities | ||||||||||
| TOTAL NON-CURRENT LIABILITIES | $ | $ | ||||||||
| TOTAL LIABILITIES | $ | $ | ||||||||
| COMMITMENTS AND CONTINGENCIES (Note 24) | ||||||||||
| SHAREHOLDERS’ EQUITY: | ||||||||||
| Class A Ordinary share ($ | 21 | |||||||||
| Class B Ordinary share ($ | 21 | |||||||||
| Additional paid-in capital | ||||||||||
| Treasury stock ( | 22 | ( | ) | ( | ) | |||||
| Accumulated deficit | ( | ) | ( | ) | ||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||||
| TOTAL SHAREHOLDERS’ EQUITY | $ | $ | ||||||||
| Non-controlling interest | ( | ) | ||||||||
| TOTAL EQUITY | $ | $ | ||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | $ | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-6
AKSO HEALTH GROUP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
| For years ended March 31, | ||||||||||||
| 2026 | 2025 | 2024 | ||||||||||
| REVENUES | ||||||||||||
| Revenue | $ | $ | $ | |||||||||
| Tax and surcharges | ( | ) | ( | ) | ( | ) | ||||||
| Net Revenues | $ | $ | $ | |||||||||
| Cost of revenue | ||||||||||||
| Gross Profit | $ | ( | ) | $ | ( | ) | $ | |||||
| OPERATING EXPENSE | ||||||||||||
| Sales and marketing | ||||||||||||
| General and administrative | ||||||||||||
| Impairment of goodwill and intangible assets | ||||||||||||
| Total Operating Expenses | $ | $ | $ | |||||||||
| LOSS FROM CONTINUING OPERATIONS | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| OTHER (EXPENSE) INCOME | ||||||||||||
| Other income | ||||||||||||
| Other expense | ( | ) | ( | ) | ( | ) | ||||||
| Exchange gain (loss) | ( | ) | ( | ) | ||||||||
| Total Other (Expense) Income, net | $ | ( | ) | $ | $ | ( | ) | |||||
| LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| (BENEFIT) PROVISON FOR INCOME TAXES | ( | ) | ( | ) | | |||||||
| NET LOSS FROM CONTINUING OPERATIONS | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Net loss from discontinued operations, net of income taxes | ( | ) | ||||||||||
| Loss from disposal of discontinued operations, net of income taxes | ( | ) | ||||||||||
| Total loss from discontinued operations | $ | $ | $ | ( | ) | |||||||
| NET LOSS | ( | ) | ( | ) | ( | ) | ||||||
| Less: net loss attributable to non-controlling interest | ( | ) | ( | ) | ( | ) | ||||||
| NET LOSS ATTRIBUTABLE TO AKSO’S SHAREHOLDERS | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| OTHER COMPREHENSIVE LOSS | ||||||||||||
| NET LOSS | ( | ) | ( | ) | ( | ) | ||||||
| Foreign currency translation adjustment | ( | ) | ||||||||||
| COMPREHENSIVE LOSS | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Less: comprehensive loss attributable to non-controlling interest | ( | ) | ( | ) | ( | ) | ||||||
| COMPREHENSIVE LOSS ATTRIBUTABLE TO AKSO’S SHAREHOLDERS | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Net (loss) earnings per share | ||||||||||||
| Continuing operations | ||||||||||||
| Basic | ( | ) | ( | ) | ( | ) | ||||||
| Diluted | ( | ) | ( | ) | ( | ) | ||||||
| Discontinued operations | ||||||||||||
| Basic | ||||||||||||
| Diluted | ||||||||||||
| Net (loss) per share | ||||||||||||
| Basic | ( | ) | ( | ) | ( | ) | ||||||
| Diluted | ( | ) | ( | ) | ( | ) | ||||||
| Weighted average shares | ||||||||||||
| Basic | ||||||||||||
| Diluted | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-7
AKSO HEALTH GROUP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
| Class A Ordinary Shares |
Class B Ordinary Shares |
Additional | Treasury stock | Accumulated Other | Non- | Total | ||||||||||||||||||||||||||||||||||||||
| Number of | Number of | Paid-in | Number of | Accumulated | Comprehensive | controlling | Shareholder’s | |||||||||||||||||||||||||||||||||||||
| shares | Amount | shares | Amount | Capital | shares | Amount | Deficit | Loss | Interest | Equity | ||||||||||||||||||||||||||||||||||
| 2023/3/31 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||
| Private placement | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Exercise of warrants | — | ( | ) | — | ||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
| 2024/3/31 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||
| Private placement | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Exercise of warrants | — | ( | ) | — | ||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Business acquisition | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Purchase of shares from minority shareholders | — | — | ( | ) | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | ( | ) | |||||||||||||||||||||||||||||||||||||||
| 2025/3/31 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Exercise of warrants | — | ( | ) | — | ||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| 2026/3/31 | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements
F-8
AKSO HEALTH GROUP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the years ended March 31, | ||||||||||||
| 2026 | 2025 | 2024 | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||
| Net loss from continuing operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||||||
| Loss from disposal of discontinued operations | ||||||||||||
| Provision for (recovery of) doubtful accounts | ( | ) | ||||||||||
| Goodwill impairment | ||||||||||||
| Intangible assets impairment | ||||||||||||
| Depreciation and amortization | ||||||||||||
| Changes in the carrying amount of right-of-use assets | ( | ) | ||||||||||
| Deferred tax (benefit) | ( | ) | ( | ) | ||||||||
| Accrued interests | ||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Accounts receivable | ( | ) | ( | ) | ||||||||
| Prepayments and other assets | ( | ) | ( | ) | ( | ) | ||||||
| Inventories | ||||||||||||
| Accounts payable, accrued expenses and other current liabilities | ||||||||||||
| Operating lease liabilities | ( | ) | ||||||||||
| Contract liabilities | ( | ) | ||||||||||
| Taxes payable | ( | ) | ( | ) | ||||||||
| Net cash (used in) provided by operating activities from continuing operations | $ | ( | ) | $ | $ | |||||||
| Net cash provided by operating activities from discontinued operations | ||||||||||||
| NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES | $ | ( | ) | $ | $ | |||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||
| Cash paid for loan originations | ( | ) | ||||||||||
| Acquisitions of property and equipment | ( | ) | ( | ) | ||||||||
| Cash loans to third parties | ( | ) | ||||||||||
| Cash received from loan repayments | ||||||||||||
| Cah paid in connection with acquisition | ( | ) | ( | ) | ||||||||
| Prepayment for intangible assets development | ( | ) | ||||||||||
| Net cash (used in) investing activities from continuing operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Net cash provided by investing activities from discontinued operations | ||||||||||||
| NET CASH (USED IN) INVESTING ACTIVITIES | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||
| Repayments of loans due to related parties | ( | ) | ||||||||||
| Loan from third parties | ||||||||||||
| Proceeds from private placement, net of offering costs | ||||||||||||
| Net cash provided by financing activities from continuing operations | $ | $ | $ | |||||||||
| Net cash provided by financing activities from discontinued operations | ||||||||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | $ | $ | $ | |||||||||
| EFFECT OF EXCHANGE RATE CHANGE ON CASH | ( | ) | ( | ) | ( | ) | ||||||
| NET (DECREASE) INCREASE IN CASH | $ | ( | ) | $ | $ | |||||||
| CASH AND CASH EQUIVALENTS – beginning of year | ||||||||||||
| CASH AND CASH EQUIVALENTS – end of year | $ | $ | $ | |||||||||
| Less: cash and cash equivalents of discontinued operations at end of period | ||||||||||||
| Cash and cash equivalents of continuing operations, at end of period | $ | $ | $ | |||||||||
| SUPPLEMENTAL CASH FLOW DISCLOSURES: | ||||||||||||
| Cash paid for income tax | ||||||||||||
| Cash paid for interest | ||||||||||||
| Supplemental disclosure of non-cash information: | ||||||||||||
| Right-of-use assets obtained in exchange for new lease liabilities | ||||||||||||
| Modification of right-of-use assets and liabilities | ( | ) | ||||||||||
F-9
AKSO HEALTH GROUP AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – BUSINESS DESCRIPTION
Organization and description of business
Akso Health Group, formerly known as Xiaobai Maimai Inc., is a limited company incorporated under the laws of the Cayman Islands on April 25, 2016. Akso Health Group (“Akso Health” or the “Company”), its subsidiaries, and consolidated variable interest entities (“VIEs”) (collectively the “Company”), previously operated an online Peer to Peer (“P2P”) marketplace business and micro—lending business in the People’s Republic of China (the “PRC”). Since May 2019, the Company has ceased to issue new loans through its micro—lending business and since October 2019, the Company has ceased to conduct its P2P business. On December 30, 2020, the Company completed the disposition transaction of its P2P business.
In May 2020, the Company launched its social e—commerce platform to offer high—quality and affordable branded products through collaboration with online and offline merchants. In addition, the Company is in the process of developing a new business as a cancer therapy and radiotherapy oncology service provider with operations in the U.S. The Company plans to open 2 vaccine research centers and 100 radiation oncology centers to be located on the east coast serving cancer patients in need of varying stages of treatment, including specialized radiation therapy centers for radiotherapy (RT), personalized consultation, conventional treatment planning, and other cancer related treatment services. On December 3, 2021, the shareholders approved the Company’s plan to change its name to “Akso Health Group”. In January 2022, three centers were established in US and the Company started its business of sales of medical devices in US market. In April 2022, the Company started its sales of medical devices in China market through its subsidiary Qingdao Akso Health Management Co., Ltd. In May 2023, the Company disposed its social E—commerce business and would focus on healthcare business in the future. In April 15, 2024, the Company, through its wholly owned subsidiary Tianjin Akso Enterprise Management Co., Ltd. acquired
As of March 31, 2026, the Company’s principal subsidiaries are as follows:
| Date of incorporation / acquisition | Place of incorporation | Percentage of legal ownership | Principal activities | |||||||
| Wholly owned subsidiaries | ||||||||||
| We Health Limited (“We Health”) | % | |||||||||
| Akso Medical Cloud Limited (“Akso Medical Cloud”) | % | |||||||||
| We Healthy Limited (“We Healthy”) | % | |||||||||
| Akso Medi—care Limited (“Akso Medi—care”) | % | |||||||||
| Akso Remote Medical Consultation Center Inc. (“Akso Remote Medical”) | % | |||||||||
| Akso Online MediTech Co., Ltd.(“Akso Online MediTech”) | % | |||||||||
| Akso First Health Treatment Center Inc. (“Akso First Health”) | % | |||||||||
| Tianjin Akso Enterprise Management Co., Limited. (Wholly Owned Foreign Enterprise,“WOFE”, “Tianjin Akso”) | % | |||||||||
| Qindao Akso Health Management Co., Limited (“Qingdao Akso”) | % | |||||||||
| Tianjin Wangyi Cloud Technology Co., Ltd. | % | |||||||||
| Tianjin Deyihui Internet Hospital Co., Ltd. (“Deyihui Hospital”) | % | |||||||||
| Deyihui (Tianjin) Comprehensive Outpatient Department Co., Ltd (formerly known as Tianjin Deyihui Clinic Co., Ltd. (“Deyihui Tianjin”) | % | |||||||||
| Tianjin Akso Technology Co., Ltd. | % | |||||||||
F-10
NOTE 2 – GOING CONCERN
As indicated in the accompanying consolidated financial statements, the Company had a net loss of approximately US$
Note 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and have been consistently applied. Certain prior year balances in the consolidated statements of operations and comprehensive (loss) and cash flows have been reclassified to the current year’s presentation.
Basis of consolidation
The accompanying consolidated financial statements include the financial statements of the Company, and entities controlled by the Company and its subsidiaries, its consolidated VIEs and VIE’s subsidiaries for which the Company is the primary beneficiary.
A subsidiary is an entity in which the Company, directly or indirectly, controls more than one half of the voting powers; or has the power to appoint or remove the majority of the members of the board of directors; or to cast a majority of votes at the meeting of directors; or has the power to govern the financial and operating policies of the investee under a statute or agreement among the shareholders or equity holders.
All intercompany transactions and balances among the Company and its subsidiaries have been eliminated upon consolidation.
Due to the disposal of the social E—commerce business, which represented a strategic shift and had a major effect on the Company’s results of operations, revenues, costs and expenses related to the social E—commerce Business have been reclassified in the accompanying consolidated financial statements as discontinued operations for all the periods presented. Assets and liabilities of the social E—commerce business were reclassified separately from other assets and liabilities of the Company on the consolidated balance sheets. Refer to Note 1 and Note 4.
F-11
Consolidated VIEs
VIE arrangements
In order to comply with the PRC laws and regulations which prohibit or restrict foreign investments into companies involved in restricted businesses, the Company operates its marketplace and restricted businesses in the PRC through certain PRC domestic companies, whose equity interests are held by certain management members of the Company or onshore nominees of the Company (“Nominee Shareholders”). The Company obtained control over these PRC domestic companies by entering into a series of contractual arrangements with these PRC domestic companies and their respective Nominee Shareholders. These contractual agreements cannot be unilaterally terminated by the Nominee Shareholders or the PRC domestic companies. As a result, the Company maintains the ability to control these PRC domestic companies and is entitled to substantially all of the economic benefits from these PRC domestic companies. Management concluded that these PRC domestic companies are VIEs of the Company, of which the Company is the ultimate primary beneficiary. As such, the Company consolidated financial results of these PRC domestic companies and their subsidiaries in the Group’s consolidated financial statements. The principal terms of the agreements entered into amongst the VIEs, their respective shareholders and the WFOE are further described below.
Exclusive Business Cooperation Agreements
The Exclusive Business Cooperation Agreements enable the WOFE to receive substantially all of the assets and business of the VIEs in the PRC. Under these Agreements, the WOFE has the exclusive right to provide the VIEs with comprehensive technical support, consulting services and other services during the term of these Agreements, including but not limited to software licensing; development, maintenance and update of software, network systems, hardware and database; technical support and training for employees; consultancy on technology and market information; business management consultation; marketing and promotion services, etc. The WOFE has the right to determine the fees associated with the services it provides based on the technical difficulty and complexity of the services, the actual labor costs it incurs for providing the services and some other factors during the relevant period. This Agreements remain effective unless otherwise terminated in writing by WOFE.
Equity Interest Pledge Agreements
Pursuant to the Equity Interest Pledge Agreements, each Shareholder of the VIEs agreed to pledge their equity interest in the VIEs to the WOFE to secure the performance of the VIEs’ obligations under the Exclusive Business Cooperation Agreements and any such agreements to be entered into in the future. Shareholders of the VIEs agreed not to transfer, sell, pledge, dispose of or otherwise create any encumbrance on their equity interests in the VIEs without the prior written consent of the WOFE. The Pledges became effective on such date when the pledge of the Equity Interest contemplated herein were registered with the relevant administration for industry and commerce (the “AIC”) and remain effective until all contract obligations have been fully performed and all secured indebtedness has been fully paid.
Exclusive Option Agreements
Pursuant to the Exclusive Option Agreements, each of the Shareholders of the VIE irrevocably grant the WOFE an irrevocable and exclusive right to purchase, or designate one or more persons (including individuals, corporations, partnerships, partners, enterprises, trusts or non—corporate organizations) to purchase the equity interests in the VIEs then held by such Shareholder of the VIEs once or at multiple times at any time in part or in whole at the WOFE’s sole and absolute discretion to the extent permitted by Chinese laws at the price of RMB
F-12
Loan Agreements
Pursuant to the three Loan Agreements, the WOFE agreed to lend each of the Shareholders of VIEs a loan only to subscribe to the registered capital of the VIEs. The repayment of the loan shall be made by permitting the WOFE to execute its exclusive right to purchase shares from the shareholders of the VIEs under the Exclusive Option Agreement as the repayment is equivalent to the consideration of the purchased shares. The term of these loans is
Power of Attorney
Each Shareholder of the VIEs, executed a Power of Attorney agreement with the WOFE and the VIEs, whereby Shareholders of the VIEs irrevocably appoint and constitute the WOFE as their attorney—in—fact to exercise on the shareholders’ behalf any and all rights that Shareholders of the VIEs have in respect of their equity interests in the VIEs. These three Power of Attorney documents remain irrevocable and continuously effective and valid as long as the original shareholders of the VIEs remain as the Shareholders of the VIEs.
Risks in relation to the VIE structure
The Company believes that the contractual arrangements with its VIEs and their respective shareholders are in compliance with the PRC laws and regulations and are legally enforceable. However, uncertainties in the PRC legal system could limit the Company’s ability to enforce the contractual arrangements. If the legal structure and contractual arrangements were found to be in violation of the PRC laws and regulations, the PRC government could:
| ● | revoke the business and operating licenses of the Company’s PRC subsidiary and VIEs; |
| ● | discontinue or restrict the operations of any related—party transactions between the Company’s PRC subsidiary and VIEs; |
| ● | limit the Company’s business expansion in the PRC by way of entering into contractual arrangements; |
| ● | impose fines or other requirements with which the Company’s PRC subsidiary and VIEs may not be able to comply; |
| ● | require the Company or the Company’s PRC subsidiary and VIEs to restructure the relevant ownership structure or operations; and/or |
| ● | restrict or prohibit the Company’s use of the proceeds of the additional public offering to finance the Company’s business and operations in the PRC. |
The Company’s ability to conduct its Online Marketplace business may be negatively affected if the PRC government were to carry out any of the aforementioned actions. As a result, the Company may not be able to consolidate its VIEs in its consolidated financial statements as it may lose the ability to exert effective control over the VIEs and their respective shareholders and it may lose the ability to receive economic benefits from the VIEs. The Company, however, does not believe such actions would result in the liquidation or dissolution of the Company, its PRC subsidiary and VIEs.
The interests of the shareholders of VIEs may diverge from that of the Company and that may potentially increase the risk that they would seek to act contrary to the contractual terms, for example by influencing the VIEs not to pay the service fees when required to do so. The Company cannot assure that when conflicts of interest arise, shareholders of the VIEs will act in the best interests of the Company or that conflicts of interests will be resolved in the Company’s favor. Currently, the Company does not have existing arrangements to address potential conflicts of interest the shareholders of the VIEs may encounter in their capacity as beneficial owners and directors of the VIEs, on the one hand, and as beneficial owners and directors of the Company, on the other hand. The Company believes the shareholders of VIEs will not act contrary to any of the contractual arrangements and the exclusive option agreements provide the Company with a mechanism to remove the current shareholders of the VIEs should they act to the detriment of the Company. The Company relies on certain current shareholders of the VIEs to fulfill their fiduciary duties and abide by laws of the PRC and act in the best interest of the Company. If the Company cannot resolve any conflicts of interest or disputes between the Company and the shareholders of the VIEs, the Company would have to rely on legal proceedings, which could result in disruption of its business, and there is substantial uncertainty as to the outcome of any such legal proceedings.
F-13
In May 2023, the Company completed the disposal of its social E—commerce business. After that, no VIEs or its subsidiaries were included in the consolidated financial statement of the Company. As a result, the Company’s results of operations, revenues, costs and expenses related to the social E—commerce Business have been reclassified in the accompanying consolidated financial statements as discontinued operations for all the periods presented. Assets and liabilities of the social E—commerce business were reclassified separately from other assets and liabilities of the Company on the consolidated balance sheets. Refer to Note 1 and Note 4.
The following financial statement amounts of the consolidated VIEs were included in net income (loss) from discontinued operation in the accompanying consolidated statements of operations and comprehensive (loss) income.
| For the years ended March 31, | ||||||||||||
| 2026 | 2025 | 2024 | ||||||||||
| USD | USD | USD | ||||||||||
| Net revenues | ||||||||||||
| Net loss | ( | ) | ||||||||||
| For the years ended March 31, | ||||||||||||
| 2026 | 2025 | 2024 | ||||||||||
| USD | USD | USD | ||||||||||
| Net cash provided by operating activities | ||||||||||||
| Net cash (used in) investing activities | ||||||||||||
| Net cash provided by financing activities | ||||||||||||
Uses of estimates
The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during each reporting period. Actual results could differ from such estimates. Significant accounting estimates reflected in the Company’s consolidated financial statements include estimates and judgments applied in allocation of revenue with various performance obligations, allowance for accounts receivable, impairment on long—term investments, impairment on intangible assets, valuation allowance for deferred tax assets and allowance for loans receivable and other receivable.
Fair value of financial instruments
Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and the market—based risk measurement or assumptions that market participants would use when pricing the asset or liability.
The Company follows the provisions of Financial Accounting Standards Board (“FASB”), Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures. ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:
Level 1 — Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.
Level 2 — Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.
Level 3 — Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.
The carrying amounts reported in the balance sheets for cash, receivables, prepayments and other assets, loan principal and interest receivable, approximate their fair value based on the short—term maturity of these instruments. The Company did not transfer any assets or liabilities in or out of level 3 during the years ended March 31, 2026，2025 and 2024.
F-14
Discontinued Operations
A component of a reporting entity or a group of components of a reporting entity that are disposed or meet the criteria to be classified as held for sale, such as the management, having the authority to approve the action, commits to a plan to sell the disposal group, should be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. Discontinued operations are reported when a component of an entity comprising operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity is classified as held for disposal or has been disposed of, if the component either (1) represents a strategic shift or (2) have a major impact on an entity’s financial results and operations. Included in the consolidated statements of operations and comprehensive (loss) income, result from discontinued operations have been reported separately from the income and expenses from continuing operations and prior periods have been presented on a reclassified comparative basis. In order to present the financial effects of the continuing operations and discontinued operations, revenues and expenses arising from intra—group transactions are eliminated except for those revenues and expenses that are considered to continue after the disposal of the discontinued operations.
Due to the disposal of the social E—commerce business, which represented a strategic shift and had a major effect on the Company’s results of operations, revenues, costs and expenses related to the social E—commerce business have been reclassified in the accompanying consolidated financial statements as discontinued operations for all the periods presented.
Revenue recognition
In February 2022, the Company started its business in the US market for the sale of medical devices. In May 2020, the Company launched its social e—commerce platform and built collaboration with domestic mainstream E—commerce marketplaces, which was discontinued in fiscal year 2023 and disposed in May 2023. The Company provides recommendation services by referring certain interested users to those marketplaces for high—quality and affordable branded products. Prior to business transformation, the Company through its P2P business offered online consumer lending—related service in fiscal year 2020, which was discontinued in fiscal year 2021 and disposed on December 30, 2020. The Company presents value added taxes (“VAT”) as a reduction of revenues.
Revenues generated are accounted under Accounting Standards Update (ASU) 2014—09, “Revenue from contracts with Customers” (Topic 606). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, the Company applies the following steps:
Step 1: Identify the contract (s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation
Online marketplace services
| ● | Commission revenue |
The commission services revenue primarily consists of commission fees charged to the online E—commerce marketplace for recommending users to purchase on their marketplaces, where the Company generally is acting as an agent and its performance obligation is to provide recommendation services for purchasing specified goods or services by those third—party sellers, is not responsible for fulfilling the promise to provide the specified goods or services, and does not have the ability to control the related shipping services when utilized by the third—party sellers. Upon successful sales, the Company will charge the online E—commerce companies a negotiated amount or a fixed rate commission fee based on the sales amount. Commission services revenues are recognized on a net basis at the point of receipt of products, net of a return allowance and incentives to consumers or channels.
F-15
In order to promote its online marketplace and attract more registered consumers, the Company at its own discretion offers incentives to consumers. Consumers are not customers of the Company; therefore incentives offered to consumers are not considered payments to customers. Such incentives offered to consumers were as a reward for purchasing by themselves or their sharing through our platform. Incentives provided to consumers are specific to any merchant and are recognized as a reduction of commission service revenue. For the years ended March 31, 2026，2025 and 2024, the total amount of incentives was , and , respectively, which was included in net income (loss) from discontinued operation in the accompanying consolidated statements of operations and comprehensive (loss) income.
| ● | Interest income |
Started in August 2017, the Company lent funds to borrowers up to their approved credit through its consolidated VIE, and since May 2019, the Company has ceased to issue new loans through its microlending business. Interest income on loans receivable is recognized monthly based on the contractual interest rates of the loan. Accrual of interest is generally discontinued when reasonable doubt exists as to the full, timely collection of interest or principal. When a loan is discontinued from interest accrual, the Company stops accruing interest and reverses all accrued but unpaid interest as of such date. Interest income was , and for the years ended March 31, 2026,2025 and 2024, respectively, which was included in net income (loss) from discontinued operation in the accompanying consolidated statements of operations and comprehensive (loss) income.
| ● | Sales of medical devices |
Started in February 2022, through its subsidiary Akso Online MediTech, the Company engaged in the sale of medical devices. Akso Online MediTech purchases medical devices in quantity and distributes products primarily to medical products dealers. The deliveries may take one day or longer depending on the customers’ location. Revenue from sales of merchandise to non—retail customers is recognized when the merchandise is transferred to customers. There was no sales return since the start the business.
| ● | Marketing promotion service |
Since April 2024, through its subsidiary Tianjin Wangyi Cloud Technology Co., Ltd, the Company engaged in providing marketing promotion service to insurance broker agencies. By providing potential car insurance purchaser’s information to the insurance broker agencies, the Company earns commissions from those agencies upon the completion of information transfer. The commission fees are calculated on a fixed amount per car user based on the agreements with different insurance brokers. The marketing promotion services are considered as a single performance obligation, as the Company’s responsibility was only limited to provide the potential car users’ information to insurance broker agencies, regardless of whether those car users finally purchasing car insurance or not.
| ● | Disaggregation of revenue |
For the years ended March 31, 2026, 2025 and 2024, the revenue of the Company illustrated as below:
| For the years ended March 31, | ||||||||||||
| 2026 | 2025 | 2024 | ||||||||||
| Revenues | ||||||||||||
| Revenue from sale of medical devices | $ | $ | $ | |||||||||
| Revenue from marketing promotion service | ||||||||||||
| Total revenues | $ | $ | $ | |||||||||
| Business and sales related taxes | ( | ) | ( | ) | ( | ) | ||||||
| Net revenues | $ | $ | $ | |||||||||
Cash and cash equivalents
Cash and cash equivalents represent cash on hand, unrestricted demand deposits, and other short—term highly liquid investments placed with banks, which have original maturities of three months or less and are readily convertible to known amounts of cash.
F-16
Accounts receivable and allowance for credit losses
Accounts receivable are mainly receivables from marketing promotion service business, which are stated at the historical carrying amount net of allowance for credit losses. The Company establishes an allowance for credit losses receivable based on estimates, historical experience and other factors surrounding the credit risk of specific customers. Uncollectible accounts receivables are written off when a settlement is reached for an amount that is less than the outstanding historical balance or when the Company has determined that is not probable for the balance to be collected. Beginning on April 1, 2020, the Company evaluates its accounts receivable for expected credit losses on a regular basis. The Company maintains an estimated allowance for credit losses to reduce its accounts receivable to the amount that it believes will be collected. The Company uses the length of time a balance has been outstanding, the payment history, creditworthiness and financial conditions of the customers and industry trend as credit quality indicators to monitor the Company’s receivables within the scope of expected credit losses model and use these as a basis to develop the Company’s expected loss estimates. The Company adjusts the allowance percentage periodically when there are significant differences between estimated bad debts and actual bad debts. If there is strong evidence indicating that the accounts receivable is likely to be unrecoverable, the Company also makes a specific allowance in the period in which a loss is determined to be probable. Accounts receivable balances are written off after all collection efforts have been exhausted. For the years ended March 31, 2026 and 2025, the amount of provision for (recovery of) allowance for uncollectible accounts receivable balance was US$
Inventories
Inventories are comprised of finished goods, which are mainly defibrillators, and are stated at the lower of cost or net realizable value using first in first out (FIFO) method. Management reviews inventories for obsolescence and cost in excess of net realizable value periodically when appropriate and records a reserve against the inventory when the carrying value exceeds net realizable value. As of March 31, 2026 and 2025, the Company determined that allowance was necessary.
Property and equipment, net
Property and equipment are stated at cost. Depreciation and amortization are calculated using the straight—line method over the following estimated useful lives:
| Useful life | |||
| Office equipment |
The Company eliminates the cost and related accumulated depreciation and amortization of assets sold or otherwise retired from the accounts and includes any gains or losses from disposal of property, equipment, and software in other income. The Company charges maintenance, repairs, and minor renewals directly to expense as incurred; major additions and betterments to equipment are capitalized. For the disposal of social E—commerce business, property and equipment, net was recorded in discontinued operations.
Intangible assets, net
The Company’s intangible assets with definite useful lives primarily are purchased software, patents and internet hospital license. Purchased intangible assets are initially recognized and measured at cost upon acquisition.
| Category | Estimated useful lives | ||
| Software | |||
| Patent | |||
| License |
F-17
Impairment of long-lived assets
The carrying value of the long-lived assets are reviewed for impairment, whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of assets to future undiscounted net cash flows expected to be generated by the assets. Such assets are considered to be impaired if the sum of the expected undiscounted cash flows is less than carrying amount of the assets. The impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets. For the years ended March 31, 2026,2025 and 2024, the amount of impairment loss the Company recognized were US$
Advertising and promotion expenses
The Company recognizes its advertising and promotion expenses as sales and marketing expense. Advertising expenses represent expenses for placing advertisements on television, radio and in newspapers, as well as on internet websites and search engines. Advertising and promotion costs are expensed as incurred. For the years ended March 31, 2026, 2025 and 2024, the advertising and promotion expenses were , and US$
Lease
Upon the adoption of FASB ASC 842 on April 1, 2019 using the modified retrospective method, the Company determines if an arrangement is a lease or contains a lease at inception. Operating leases are included in operating lease right—of—use (“ROU”) assets and operating lease liabilities, in the Company’s consolidated balance sheets. The Company does not have any finance leases as of the adoption date or March 31, 2026.
ROU represents the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. When determining the lease term, the Company includes options to extend or terminate the lease when it is reasonably certain that it will exercise that option, if any. As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate, which it calculates based on the credit quality of the Company and by comparing interest rates available in the market for similar borrowings, and adjusting this amount based on the impact of collateral over the term of each lease.
For operating lease with a term of
Contract liabilities
Contract liabilities are presented as advances from customers in the consolidated balance sheets, which primarily represent the Company’s obligation to transfer goods or services to a customer for which the Company has received consideration in advance. The consideration received remains a contract liability until goods or services have been provided to the customers. Due to the generally short—term duration of the relevant contracts, the obligations are satisfied within one year. The amount of revenue recognized that was included in the contract liabilities at the beginning of the period were US$
Business combination
Business combinations are recorded using the acquisition method of accounting, and the cost of an acquisition is measured as the aggregate of the fair values at the date of exchange of the assets given, liabilities incurred, and equity instruments issued as well as the contingent considerations as of the acquisition date. The costs directly attributable to the acquisition are expensed as incurred. Identifiable assets, liabilities and contingent liabilities acquired or assumed are measured separately at their fair value as of the acquisition date, irrespective of the extent of any non—controlling interests. The excess of the (i) the total of consideration paid, fair value of the non—controlling interests and acquisition date fair value of any previously held equity interest in the subsidiary acquired over (ii) the fair value of the identifiable net assets of the subsidiary acquired is recorded as goodwill. If the consideration of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the consolidated statements of operations and comprehensive (loss)/income.
F-18
Goodwill
Goodwill represents the excess of the purchase price over the fair value of the identifiable assets and liabilities acquired as a result of the business combination. The Group performs quantitative goodwill impairment test annually or more frequently when an event occurs or circumstances change that indicate the carrying value may not be recoverable. A goodwill impairment loss is recognized for the amount that the carrying amount of a reporting unit, including goodwill, exceeds its fair value, limited to the total amount of goodwill allocated to that reporting unit. For the years ended March 31, 2026 and 2025, the Company recognized US$
Warrants
The Company accounts for warrants as either equity—classified or liability—classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) ASC 480 “Distinguishing Liabilities from Equity” (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, whether they meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent annually period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of equity at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as liabilities at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non—cash gain or loss on the statements of operations (Note 21).
Treasury stock
Treasury stock represents ordinary shares repurchased by the Company that are no longer outstanding and are held by the Company. The repurchase of ordinary shares is accounted for under the cost method whereby the entire cost of the acquired shares are recorded as treasury stock. The cost of treasury stock is transferred to “additional paid—in capital” when it is re—issued for the purpose of share options exercised and share awards.
Income taxes
The Company accounts for current income taxes in accordance with the laws of the relevant tax authorities. The charge for taxation is based on the results for the fiscal year as adjusted for items, which are non—assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
The Company accounts for income tax under the asset and liability method, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of the events that have been included in the financial statements or tax returns. Under this method, deferred income taxes will be recognized if significant temporary differences between tax and financial statements occur. A valuation allowance is established against net deferred tax assets when it is more likely that some portion or all of the net deferred tax asset will not be realized. For the years ended March 31, 2026, 2025 and 2024, the Company provided a full valuation allowance on the net deferred tax assets.
The Company may be subject to challenges from taxing authorities regarding the amounts of taxes due. These challenges may alter the timing or amount of taxable income or deductions. Management determines whether the benefits of its tax positions are more—likely—than—not of being sustained upon audit based on the technical merits of the tax position. The Company records a liability for uncertain tax positions when it is probable that a loss has been incurred and the amount can be reasonably estimated.
An uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Penalties and interest incurred related to underpayment of income taxes are classified as income tax expense in the period incurred. The Company evaluates each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measures the unrecognized benefits associated with the tax positions. As of March 31, 2026 and 2025, the Company did not have any significant unrecognized uncertain tax positions. The Company does not believe that its unrecognized tax benefits will change over the next twelve months.
F-19
Noncontrolling interests
Noncontrolling interest consists of
Noncontrolling interest consist of the following:
| March 31, 2026 | March 31, 2025 | |||||||
| USD | USD | |||||||
| We Healthy | ( | ) | ||||||
Earnings (loss) per share
The Company computes earnings per share (“EPS”) in accordance with FASB ASC 260, “Earnings per Share” (“ASC 260”). ASC 260 requires public companies with capital structures to present basic and diluted EPS. Basic EPS is measured as net income (loss) attributed to ordinary shareholders divided by the weighted average number of ordinary shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential ordinary shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential ordinary shares that have an anti—dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.
Foreign currency translation
The functional currency of the Company is United States Dollar. The Company’s subsidiaries with operations in mainland China, the Hong Kong Special Administrative Region of the PRC (“Hong Kong” or “Hong Kong S.A.R.”), the United States generally use their respective local currencies as their functional currencies. The Company’s financial statements have been translated into the reporting currency, the United States Dollar (“USD”). Assets and liabilities of the Company are translated at the exchange rate at each reporting period end date. Equity is translated at historical rates. Income and expense accounts are translated at the average exchange rate during the reporting period. The resulting translation adjustments are reported under accumulated other comprehensive income (loss). Transactions denominated in currencies other than functional currency are translated into the functional currency at the exchange rates quoted by authoritative banks prevailing at the dates of the transactions. Exchange gains and losses resulting from those foreign currency transactions denominated in a currency other than the functional currency are recorded in “other income (expense)” in the consolidated statements of operations and comprehensive income. The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that any RMB amounts could have been, or could be, converted, realized or settled into USD at the rates used in translation.
Spot exchange rates and average exchange rates were used in the translation of the consolidated financial statements.
| For the years ended March 31, | ||||||||||||
| 2026 | 2025 | 2024 | ||||||||||
| US Exchange Rate | ||||||||||||
| Year—end RMB | ||||||||||||
| Year average RMB | ||||||||||||
F-20
Significant risks and uncertainties
Foreign currency risk
RMB is not a freely convertible currency. The State Administration for Foreign Exchange, under the authority of the People’s Bank of China, controls the conversion of RMB into foreign currencies. The value of RMB is subject to changes in central government policies and to international economic and political developments affecting supply and demand in the China Foreign Exchange Trading System market. The Company’s cash and cash equivalents denominated in RMB amounted to US$
Concentration of credit risk
Financial instruments that potentially expose the Company to significant concentration of credit risk primarily included in the financial lines of cash and cash equivalents, accounts receivable, other receivables and prepayments and other assets. As of March 31, 2026, substantially all of the Company’s cash and cash equivalents were held by major financial institutions located worldwide, including mainland China and Unite State. According to the China Bank Deposit Insurance Ordinance, the deposits at each bank is covered by insurance with an upper limit of RMB
Accounts receivable is typically unsecured and are derived from revenue earned from customers in the PRC. The risk with respect to accounts receivable is mitigated by credit evaluations the Company performs on its customers and its ongoing monitoring process of outstanding balances.
Customer concentration risk
For the year ended March 31, 2026, three customers accounted for
As of March 31, 2026, two customers accounted for
Vendor concentration risk
For the year ended March 31, 2026, one vendor accounted for
There was no vendor of the Company that accounted for greater than 10% of the Company’s carrying amount of accounts payable as of March 31, 2026 and 2025, respectively.
F-21
Segment reporting
In accordance with ASC 280, Segment Reporting, operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”), or decision—making group, in deciding how to allocate resources and in assessing performance. The Company uses the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. The Company operates as a single reportable segment as defined by ASC 280, with the Chief Operating Decision Maker (CODM), identified as the Chief Executive Officer, reviewing consolidated results for the purpose of allocating resources and assessing performance. For the years ended March 31, 2026, 2025 and 2024, the operating expenses related to the reporting operation were US$
Recent Accounting Pronouncements
In January 2025, the FASB issued ASU 2025—01, “Income Statement – Comprehensive Income – Expense Disaggregation Disclosure (Subtopic 220—40): Clarifying the Effective Date.” This pronouncement revises the effective date of ASU 2024—03 and clarifies that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Entities within the ASU’s scope are permitted to early adopt the accounting standard update. The Company is currently evaluating these new disclosure requirements and does not expect the adoption to have a material impact.
In November 2024, the FASB issued ASU 2024—03, “Income Statement—Reporting Comprehensive Income (Subtopic 220—40): Disaggregation of Income Statement Expenses.” This pronouncement introduces new disclosure requirements aimed at enhancing transparency in financial reporting by requiring disaggregation of specific income statement expense captions. Under the new guidance, entities are required to disclose a breakdown of certain expense categories, such as: employee compensation; depreciation; amortization, and other material components. The disaggregated information can be presented either on the face of the income statement or in the notes to the financial statements, often using a tabular format. The ASU is effective for fiscal years beginning after December 15, 2025, and interim periods within those fiscal years. Early adoption is permitted. In January 2025, the FASB issued ASU 2025—01, which revises the effective date of ASU 2024—03 (on disclosures about disaggregation of income statement expenses) “to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027.” Entities within the ASU’s scope are permitted to early adopt the ASU. The Company is currently evaluating these new disclosure requirements and does not expect the adoption to have a material impact
The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the consolidated balance sheets, consolidated statements of operations and comprehensive loss (income) and consolidated statements of cash flows.
NOTE 4 – DISCONTINUED OPERATION
On December 16, 2020, Beijing Hexin Yongheng Technology Development Co., Ltd. (“Hexin Yongheng”), a wholly—owned subsidiary of the Company, Kuaishangche Automobile Leasing Co., Ltd. (“Kuaishangche”), a company not directly associated with the Company, Hexin E—Commerce Company Limited (“Hexin E—Commerce”), and individual shareholders of Hexin E—Commerce entered into an assignment and assumption agreement (the “Agreement”). Pursuant to the Agreement, Hexin Yongheng agreed to assign and transfer to Kuaishangche the control over Hexin E—Commerce, in exchange for cash consideration of RMB
F-22
On May 10, 2023, Akso Health Group (the “Company” or the “Seller”), HX Asia Investment Limited, a British Virgin Islands company (“HX Asia”), HX China Investment Limited, a British Virgin Islands company (“HX China”), and Hexindai Hong Kong Limited, a Hong Kong company (“Hexindai” and together with HX Asia and HX China, the “Targets”), and Umbrella Capital Investment Co., Ltd, a British Virgin Islands company which is not affiliate of the Company of any of its directors or officers (the “Purchaser”) entered into certain share purchase agreement (the “Disposition SPA”). Pursuant to the Disposition SPA, the Purchaser agreed to purchase the Targets in exchange for cash consideration of US$
The discontinued operation represents a strategic shift that has a major effect on the Company’s operations and financial results, which trigger discontinued operations accounting in accordance with FASB ASC 205—20—45. The assets and liabilities related to the discontinued operations are classified as assets/liabilities of discontinued operations as of March 31, 2024 and 2023, while results of operations related to the discontinued operations for the years ended March 31,2026, 2025 and 2024, were reported as (loss) income from discontinued operations.
The results of discontinued operations for years ended March 31, 2026, 2025 and 2024 are as follows:
| For the years ended March 31, | ||||||||||||
| 2026 | 2025 | 2024 | ||||||||||
| Net Revenues | $ | $ | $ | |||||||||
| Operating costs and development | ||||||||||||
| Loss income from discontinued operations | ( | ) | ||||||||||
| Other expense, net | $ | $ | $ | ( | ) | |||||||
| Loss before tax | ( | ) | ||||||||||
| Income tax provision | $ | $ | $ | |||||||||
| Net loss from discontinued operations | ( | ) | ||||||||||
| Loss on sale of discontinued operations, net of taxes | ( | ) | ||||||||||
| Net loss from discontinued operation | $ | $ | $ | ( | ) | |||||||
Note 5 – ACCOUNTS RECEIVABLE, NET
| As of March 31, | ||||||||
| 2026 | 2025 | |||||||
| Accounts receivable | $ | $ | ||||||
| Less: allowance for credit losses | ( | ) | ( | ) | ||||
| Accounts receivable, net | $ | $ | ||||||
F-23
The following table represent the movement of the allowance for credit losses:
| For the years ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Balance at the beginning of the year | $ | $ | ||||||
| Additions charged to (recovery of) credit losses | ( | ) | ||||||
| Balance at the end of the year | $ | $ | ||||||
Note 6 – PREPAYMENTS AND OTHER ASSETS, NET
| As of March 31, | ||||||||
| 2026 | 2025 | |||||||
| Prepayments to suppliers and others | $ | $ | ||||||
| Allowance | ( | ) | ( | ) | ||||
| Total prepayments and other assets, net | $ | $ | ||||||
Prepayments to suppliers and others primarily represents advance payment made to the Company’s vendors for its sales of medical devices or marketing promotion service business. The prepayments are expected to be consumed within twelve months after the balance sheet date and are therefore classified as current assets
Note 7 – INVENTORIES
As of March 31, 2026 and 2025, inventory consisted of finished goods, which were mainly defibrillators, valued at US$
Note 8 – LOAN RECEIVABLES
| As of March 31, | ||||||||
| 2026 | 2025 | |||||||
| Loan receivables | $ | $ | ||||||
| Allowance for uncollectible loan receivables | ||||||||
| Loan receivables, net | ||||||||
| Loan receivables — current | ||||||||
| Loan receivables — non—current | $ | $ | ||||||
During the year ended March 31, 2025, the Company, through its subsidiaries, issued loans to four third—party companies. The loan term for each loan was
NOTE 9 – ADVANCES FOR CAPITAL EXPENDITURES
During the period from April to May 2025, as part and partial of planned operation, the Company made strategic advance payments for the development of systemic functional modules critical to its Internet Hospital business. These payments, which are classified as advances for capital expenditures on the condensed consolidated balance sheet, were made in accordance with the terms of the underlying agreements to secure priority development and favorable commercial terms. None of the suppliers of the systemic function modules was related party of the Company. In late February 2026, global supply chain disruptions driven by international macroeconomic factors resulted in significant cost increases. The vendors notified the Company that they could no longer achieve the agreed technical specifications within the original contractual cost framework. The Company evaluated the situation and concluded that continuing the project under the current arrangements was no longer commercially viable. Consequently, in June 2026, the Company terminated the development agreements with all vendors. As of the date of this report, all advances for capital expenditures has been refunded to the Company.
F-24
NOTE 10 – PROPERTY AND EQUIPMENT, NET
As of March 31, 2026 and 2025, property and equipment, net consist of the following:
| As of March 31, | ||||||||
| 2026 | 2025 | |||||||
| Office equipment | $ | $ | ||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
For the years ended March 31, 2026 and 2025, the depreciation amount was US$
NOTE 11 – INTANGILBE ASSETS, NET
As of March 31, 2026 and 2025, intangible assets, net consist of the following:
| As of March 31, | ||||||||
| 2026 | 2025 | |||||||
| Software | $ | $ | ||||||
| Patent | ||||||||
| License | $ | $ | ||||||
| Total intangible assets | ||||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| Less: impairment | ( | ) | ( | ) | ||||
| Intangible assets, net | $ | $ | ||||||
For the years ended March 31, 2026 and 2025, the amortization amount was US$
The Company reviews its intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable. The impairment test compares the carrying amount to the undiscounted future cash flows expected to result from the use of the asset. If the carrying amount exceeds the undiscounted cash flows, an impairment loss is recognized for the difference between the carrying amount and the fair value of the asset. In the year ended March 31, 2026, the Company made an allowance of US$
Estimated future amortization expense related to intangible assets at March 31, 2026 is as follows:
| For the years ended March 31, | ||||
| 2027 | $ | |||
| 2028 | ||||
| Total | $ | |||
F-25
NOTE 12 – GOODWILL
The following table sets forth the movement of goodwill:
| For the years ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Balance at the beginning of the year | $ | $ | ||||||
| Addition | ||||||||
| Goodwill allowance | ( | ) | ( | ) | ||||
| Translation adjustment | ||||||||
| Balance at the end of the period | $ | $ | ||||||
Goodwill represents the excess value over the assets acquired and liabilities assumed. The goodwill recognized represents value the Company expects to be created by the expected operational synergies, the assembled workforce and the future development initiatives of the assembled workforce.
The Company determines the enterprise fair value using an income approach based on estimated discounted future cash flows. Determining the enterprise fair value is judgmental in nature and requires the use of significant estimates and assumptions, including revenue growth rates, discount rates, the Company’s market capitalization and future market conditions, among others. The level of judgment and estimation is inherently higher in uncertain economic times.
The Company tests its goodwill for impairment on March 31 of each fiscal year, or whenever a change in events and circumstances (triggering event) occurs that indicates the fair value of intangible assets may be below their carrying values. Based on triggering events, the Company performed an impairment test as of March 31, 2026 and 2025 on its goodwill and determined that the carrying value exceeded the respective fair value. As a result, during the years ended March 31, 2026 and 2025, the Company recorded goodwill impairment charges of US$
NOTE 13 – LEASE
The Company leases office space from third parties under non—cancellable operating lease agreements. The Company determines if an arrangement is, or contains, a lease at the inception of the contract based on the terms of the agreement and whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Right—of—use (ROU) assets and corresponding lease liabilities are recognized at the lease commencement date based on the present value of future lease payments over the lease term. The Company elected the short—term lease exemption under ASC 842 for certain lease arrangements that have a lease term of 12 months or less and do not contain purchase options. The Company expenses these short—term leases on a straight—line basis over the lease term and does not recognize ROU assets or lease liabilities on the consolidated balance sheet for these leases.
The Company’s lease agreements do not contain any material guarantees or restrictive covenants, and the Company has no finance leases or sublease activities as of March 31, 2026.
F-26
The following table summarizes the supplemental consolidated balance sheet information related to operating leases as of March 31, 2026 and 2025, respectively:
| As of March 31, | ||||||||
| 2026 | 2025 | |||||||
| Operating lease right-of-use assets, net | $ | $ | ||||||
| Operating lease liabilities, current | ||||||||
| Operating lease liabilities, non-current | $ | $ | ||||||
| Weighted average remaining lease terms - operating lease (months) | ||||||||
| Weighted average discount rate - operating lease | % | % | ||||||
Information related to operating lease activities for the years ended March 31, 2026 and 2025 are as follows:
| For the years ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Operating lease expense | ||||||||
| Short—term lease expense | ||||||||
Maturities of operating lease liabilities were as follows:
| For the years ended March 31, | ||||
| 2026 | $ | |||
| 2027 | ||||
| Total undiscounted lease payment | $ | |||
| Less: imputed interest | ||||
| Total lease liabilities | $ | |||
| Less: operating lease liabilities-current | ||||
| Operating lease liabilities – non-current | $ | |||
The Company entered into two leases for office space and warehouses located in Tianjin, China, and one lease for office in Hong Kong.:
| Location of property | Approximate gross floor area (sq. meters) | Term of lease | Facility usage | ||||
| Room 102, Building 22, West District, Airport Business Park, Tianjin Airport Economic Zone | |||||||
| Room 102—1, Building 22, West District, Airport Business Park, Tianjin Airport Economic Zone | |||||||
| Unit R12, Workshop A8, 3/F, Block A, Sheung Shui Plaza, 3 Ka Fu Close, Sheung Shui, N.T. | / | 1 year (October, 29, 2025 to October 28, 2026) | Office |
NOTE 14 – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
| As of March 31, | ||||||||
| 2026 | 2025 | |||||||
| Accrued payroll and benefits | $ | $ | ||||||
| Professional fees, other payable and accrued expenses | ||||||||
| Total | $ | $ | ||||||
F-27
NOTE 15 – LOAN FROM THIRD PARTY
As of March 31, 2026 and 2025, loan from third party consist of the following:
| As of March 31, | ||||||||
| 2026 | 2025 | |||||||
| Principal | $ | $ | ||||||
| Interest | ||||||||
| Total | $ | $ | ||||||
On December 31, 2025, the Company, through its subsidiary, entered into loan agreement with a third party for a total amount of US$
Note 16 – RELATED PARTY BALANCES AND TRANSACTIONS
As of March 31, 2026 and 2025, amount due to related party consist of the following:
| As of March 31, | ||||||||
| 2026 | 2025 | |||||||
| Webao Limited* | $ | $ | ||||||
| Total | $ | $ | ||||||
| * |
Note 17 – EMPLOYEE BENEFITS
The Company has made the required employee benefit contributions in accordance with relevant rules and regulations in the PRC. Such contributions include funding for retirement insurance, unemployment insurance, medical insurance, work injury insurance, maternity insurance and housing fund. The Company recorded the contributions in salary and employee charges at specified percentages of the salaries, bonuses and certain allowances of its employees, up to a maximum amount specified by the local government. The contributions made by the Company were US$
Note 18 – TAXES PAYABLE
As of March 31, 2026 and 2025, tax payable consist of the following:
| As of March 31, | ||||||||
| 2026 | 2025 | |||||||
| Income taxes payable | $ | $ | ||||||
| Other taxes payable (recovery) | ( | ) | ||||||
| Total taxes payable | $ | $ | ||||||
F-28
Note 19 – INCOME TAXES
Cayman Islands
Akso Health was incorporated in the Cayman Islands and is not subject to income taxes or capital gain under current laws of Cayman Islands.
Hong Kong
We Healthy Limited and Akso Medi—care Limited are investment holding companies registered in Hong Kong and exempted from income tax on its foreign—derived income.
United States
The Company’s subsidiaries established in the U.S. are incorporated in the U.S. and is subject to both federal and state income taxes for its business operation in the U.S. The applicable tax rate is
PRC
i)
| For the Years Ended March 31, | ||||||||||||
| 2026 | 2025 | 2024 | ||||||||||
| Current | $ | $ | $ | |||||||||
| Deferred | ( | ) | ( | ) | ||||||||
| Total | $ | ( | ) | $ | ( | ) | $ | |||||
The significant components of deferred tax assets and deferred tax liabilities as of March 31, 2026 and 2025 was as below:
| As of March 31, | ||||||||
| 2026 | 2025 | |||||||
| Deferred tax assets | ||||||||
| Net operating loss carryforwards in China | $ | $ | ||||||
| Allowance for credit loss | ||||||||
| Total deferred tax assets | $ | $ | ||||||
| Deferred tax liabilities | ||||||||
| Intangible assets from acquisition | $ | ( | ) | $ | ( | ) | ||
| Amortization | ||||||||
| Intangible assets impairment | ||||||||
| Total deferred tax liabilities | $ | $ | ( | ) | ||||
| Net deferred tax asset (liabilities) before allowance | $ | $ | ||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Total net deferred tax (liability) | $ | $ | ( | ) | ||||
All income taxes are related to income derived in the U.S. and PRC during the years ended March 31, 2026, 2025 and 2024.
F-29
The net (loss) income before taxes for the PRC entities was US$(
The following table reconciles the PRC statutory rates to the Company’s effective tax rate for the years ended March 31, 2026, 2025 and 2024.
| For the Years Ended March 31, | ||||||||||||
| 2026 | 2025 | 2024 | ||||||||||
| PRC Income tax statutory rate | ( | )% | ( | )% | ( | )% | ||||||
| Effect of tax holiday and preferential tax rate | % | % | % | |||||||||
| Non—deductible foreign losses | % | % | % | |||||||||
| Change in valuation allowance | % | % | % | |||||||||
| Non—deductible expenses and others | % | ( | )% | ( | )% | |||||||
| Effective tax rate | ( | )% | % | ( | )% | |||||||
According to the PRC Tax Administration and Collection Law, the statute of limitations is three years if the underpayment of income taxes is due to computational errors made by the taxpayer. The statute of limitations will be extended to five years under special circumstances, which are not clearly defined, but an underpayment of income tax liability exceeding US$
In accordance with the EIT Law, dividends, which arise from profits of foreign invested enterprises (“FIEs”) earned after January 1, 2008, are subject to a
A deferred tax liability should be recognized for the undistributed profits of PRC subsidiaries unless the Company has sufficient evidence to demonstrate that the undistributed dividends will be reinvested and the remittance of the dividends will be postponed indefinitely. The Company plans to indefinitely reinvest undistributed profits earned from its China subsidiaries in its operations in the PRC. Therefore, no withholding income taxes for undistributed profits of the Company’s subsidiaries have been provided as of March 31, 2026 and 2025. Under applicable accounting principles, a deferred tax liability should be recorded for taxable temporary differences attributable to the excess of the financial reporting basis over the tax basis in a domestic subsidiary. However, recognition is not required in situations where the tax law provides a means by which the reported amount of that investment can be recovered tax—free and the enterprise expects that it will ultimately use that means. The Company completed its feasibility analysis on a method, which the Company will ultimately execute if necessary to repatriate the undistributed earnings of the subsidiary without significant tax costs. As such, the Company does not accrue deferred tax liabilities on the earnings of the subsidiary given that the Company will ultimately use the means.
F-30
Note 20 – EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share is the amount of net earnings available to each share of ordinary shares outstanding during the reporting period. Diluted EPS is the amount of net earnings available to each share of ordinary shares outstanding during the reporting period adjusted to include the effect of potentially dilutive ordinary shares.
| For the years ended March 31, | ||||||||||||
| 2026 | 2025 | 2024 | ||||||||||
| Numerator: | ||||||||||||
| Net loss from continuing operation attributable to Akso Health Group’s shareholder | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Net loss from discontinued operation attributable to Akso Health Group’s shareholders | ( | ) | ||||||||||
| Net loss attributable to Akso Health Group’s shareholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Denominator: | ||||||||||||
| Weighted average number of ordinary shares outstanding—basic | ||||||||||||
| Weighted average number of dilutive potential ordinary shares from share options | ||||||||||||
| Weighted average number of ordinary shares outstanding—diluted | ||||||||||||
| Basic (loss) per common share | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Diluted (loss) per common share | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Note 21 – SHAREHOLDERS’ EQUITY
Akso Health was established under the laws of the Cayman Islands on April 25, 2016. The authorized number of ordinary shares is
On June 19, 2023, the Company increased its authorized shares from US$
On April 30, 2024, the Company’s authorized issued share capital is approved to change from US$
As of March 31, 2026, the Company’s issued and outstanding Class A ordinary shares, par value US$
As of March 31, 2026 and 2025, the Company’s issued and outstanding Class B ordinary shares, par value US$
F-31
Private Placement
On August 9, 2021, the Company entered into a certain securities purchase agreement (the “SPA”) with certain “non—U.S. Persons” pursuant to which the Company agreed to sell an aggregate of
The Warrants are exercisable immediately upon the date of issuance at an initial exercise price of $
On October 2, 2023, the Company entered into a certain securities purchase agreement (the “SPA”) with certain “non—U.S. Persons” pursuant to which the Company agreed to sell an aggregate of
The Warrants are exercisable immediately upon the date of issuance at an initial exercise price of $
On November 16, 2023, the Company entered into a certain securities purchase agreement (the “SPA”) with certain “non—U.S. Persons” pursuant to which the Company agreed to sell an aggregate of
The Warrants are exercisable immediately upon the date of issuance at an initial exercise price of $
On January 17, 2024, the Company entered into a certain securities purchase agreement (the “SPA”) with certain “non—U.S. Persons” pursuant to which the Company agreed to sell an aggregate of
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The Warrants are exercisable immediately upon the date of issuance at an initial exercise price of $
On March 5, 2024, the Company entered into a certain securities purchase agreement (the “SPA”) with certain non—affiliated institutional investors (the “Purchasers”) pursuant to which the Company agreed to sell an aggregate of
The warrants are exercisable immediately as of the date of issuance at an exercise price of $
On October 24, 2024, the Company entered into certain securities purchase agreement (the “SPA”) with certain “non—U.S. Persons” (the “Purchasers”) as defined in Regulation S of the Securities Act of 1933, as amended (the “Securities Act”) pursuant to which the Company agreed to sell up to an aggregate of
The Warrants are exercisable immediately upon the date of issuance at an initial exercise price of $
Warrants
As the warrants contained in the placement above are indexed to the Company’s ordinary share (and otherwise meet the requirements to be classified in equity), the Company recorded the consideration received from the issuance of the Warrants as additional paid—in capital on the Company’s consolidated balance. The Company accounts for the warrants issued in connection with the private placement in accordance with the guidance contained in ASC 815—40. The Company’s management has examined the warrants and determined that these warrants qualify for equity treatment in the Company’s financial statements.
The warrants contained in the private placements above shall expire
During the year ended March 31, 2026, a total of
As of March 31, 2026, the Company had
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Following is a summary of the status of warrants outstanding and exercisable as of March 31, 2026:
| August 9, 2021 warrants | October 2, 2023 warrants | November 16, 2023 warrants | January 17, 2024 warrants | March 5, 2024 warrants | July 3, 2024 warrants | November 4,2024 warrant | Total | Weighted Average Exercise Price | Aggregate Intrinsic Value | |||||||||||||||||||||||||||||||
March 31, 2024 | ||||||||||||||||||||||||||||||||||||||||
| Issued | — | |||||||||||||||||||||||||||||||||||||||
| Exercise | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | — | |||||||||||||||||||||||||||||
| Expired | — | |||||||||||||||||||||||||||||||||||||||
March 31, 2025 | ||||||||||||||||||||||||||||||||||||||||
| Issued | ||||||||||||||||||||||||||||||||||||||||
| Exercise | ( | ) | ( | ) | ( | ) | — | |||||||||||||||||||||||||||||||||
| Expired | ||||||||||||||||||||||||||||||||||||||||
March 31, 2026 | ||||||||||||||||||||||||||||||||||||||||
Upon the exercise of warrants, the Company will issue new shares of its Class A ordinary share.
The key inputs for the Black—Scholes Model calculations on March 31 2026 were as follows:
| August 9, 2021 warrants | ||||
| Stock price | ||||
| Risk—free interest rate | % | |||
| Expected dividend yield | ||||
| Expected term in years | ||||
| Expected volatility | % | |||
The key inputs for the Black—Scholes Model calculations on March 31 2025 were as follows:
| August 9, 2021 warrants | March 5, 2024 warrants | November 4, 2024 warrant | ||||||||||
| Stock price | ||||||||||||
| Risk—free interest rate | % | % | % | |||||||||
| Expected dividend yield | ||||||||||||
| Expected term in years | ||||||||||||
| Expected volatility | % | % | % | |||||||||
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Note 22 – TREASURY STOCK
On December 10, 2018, the Company announced that its board of directors authorized a share repurchase program under which the Company may repurchase up to US$
Note 23 – RESTRICTED NET ASSETS
Restricted Net Assets
As a result of the PRC laws and regulations and the requirement that distributions by the PRC entities can only be paid out of distributable profits computed in accordance with the PRC GAAP, the PRC entities are restricted from transferring a portion of their net assets to the Company. The restricted net assets consist of paid in capital, capital reserve and statutory reserves of the Company’s PRC entities. As of March 31, 2026 and 2025, the Company’s PRC entities had a negative net assets, and restricted net assets that are available for distribution.
Statutory Reserve
Pursuant to the Company Law of the PRC, each of the PRC entities is required to appropriate
Note 24 – COMMITMENTS AND CONTINGENCIES
Contingencies
In the ordinary course of business, the Company may be subject to legal proceedings regarding contractual and employment relationships and a variety of other matters. The Company records contingent liabilities resulting from such claims, when a loss is assessed to be probable and the amount of the loss is reasonably estimable. As of March 31, 2026 and 2025, no such contingent liabilities are assessed as probable.
Note 25 – SEGMENT INFORMATION
Reportable Segments
Measure of Segment Profit or Loss
The CODM reviews financial information on a consolidated basis, using net income as the primary measure of segment performance to monitor budget versus actual results and decide where to allocate and invest additional resources to achieve continued growth. Net income is defined as revenue less cost of revenue and operating expenses, and other segment items (including interest income, interest expense and other income), and income taxes.
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Significant Segment Expense Categories Provided to the CODM
| For the years ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Net revenues | $ | $ | ||||||
| Cost of revenue | ||||||||
| Gross profit | $ | ( | ) | $ | ( | ) | ||
| Operating expenses | ||||||||
| General and administrative | $ | $ | ||||||
| Impairment of goodwill and intangible assets | ||||||||
| Total operating expenses | $ | $ | ||||||
| Other (expenses) income, net | $ | ( | ) | $ | ||||
| Benefit for income taxes | ( | ) | ( | ) | ||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
Note 26 – SUBSEQUENT EVENTS
The Company evaluated all subsequent events and transactions that occurred after the balance sheet date through the date of this report, which is the date the consolidated financial statements were available to be issued. This evaluation was performed in accordance with the requirements of ASC 855 (Subsequent Events).
As part of this evaluation, the Company reviewed all significant events occurring between the balance sheet date and the issuance date of the consolidated financial statements to determine whether any recognized subsequent events (events that provide additional evidence about conditions that existed at the balance sheet date) or non—recognized subsequent events (events that provide evidence about conditions that arose after the balance sheet date) required adjustment or disclosure in the consolidated financial statements.
Based on this evaluation, the Company determined that there were no subsequent events required adjustment or disclosure in the consolidated financial statements other than the following.
As disclosed in NOTE 9, in the beginning of June 2026, the Company terminated the development agreements with all suppliers and as of the date of this report, all advances of US$
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AKSO HEALTH GROUP INC. AND SUBSIDIARIES
Schedule I — CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY
The Company’s subsidiaries and VIEs established in the PRC are restricted in their ability to transfer a portion of their net assets to the Company. The payment of dividends by entities organized in China is subject to limitations, procedures and formalities. Regulations in the PRC currently permit payment of dividends only out of accumulated profits as determined in accordance with accounting standards and regulations in China. The Company’s subsidiaries and its VIEs are also required to set aside at least
In addition, the Company’s operations and revenues are conducted and generated in China, all of the Company’s revenues being earned and currency received are denominated in RMB. RMB is subject to the foreign exchange control regulation in China, and, as a result, the Company may be unable to distribute any dividends outside of China due to the PRC foreign exchange control regulations that restrict the Company’s ability to convert RMB into US Dollars.
Regulation S—X requires the condensed financial information of a registrant shall be filed when the restricted net assets of consolidated subsidiaries exceed
The condensed financial information of the parent company has been prepared in accordance with SEC Regulation S—X Rule 5—04 and Rule 12—04, using the same accounting policies as set out in the Company’s consolidated financial statements, except that the Company uses the equity method to account for investments in its subsidiaries, VIEs and VIEs’ subsidiaries. The footnote disclosures generally included in financial statements prepared in accordance with US GAAP have been condensed or omitted. The footnote disclosures contain supplemental information relating to the operations of the Company, as such, these statements are not the general—purpose financial statements of the reporting entity and should be read in conjunction with the notes to the consolidated financial statements of the Company.
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CONDENSED BALANCE SHEETS
| As of March 31, | ||||||||
| 2026 | 2025 | |||||||
| Cash and cash equivalents | $ | $ | ||||||
| Intercompany receivables | ||||||||
| Total current assets | $ | $ | ||||||
| Total non-current assets | ||||||||
| Total Assets | $ | $ | ||||||
| Total current liabilities | ||||||||
| Total non-current liabilities | ||||||||
| Total Liabilities | $ | $ | ||||||
| Total Shareholders’ Equity | ||||||||
| Total Liabilities and Equity | $ | $ | ||||||
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CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
| For the years ended March 31, | ||||||||||||
| 2026 | 2025 | 2024 | ||||||||||
| Total revenue, net | $ | $ | $ | |||||||||
| Total costs and expenses | ||||||||||||
| Loss from subsidiaries and VIEs | ||||||||||||
| Total other expenses (income), net | ( | ) | ||||||||||
| (Loss) income from continuing operations before income tax expenses | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Less: income tax expense (benefit) | ||||||||||||
| Net (loss) income from continuing operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Total gain (loss) from discontinued operations | ||||||||||||
| Net (loss) income | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
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CONDENSED STATEMENTS OF CASH FLOWS
| For The Years Ended March 31, | ||||||||||||
| 2026 | 2025 | 2024 | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
| Provision for doubts accounts | ||||||||||||
| Equity in loss of subsidiaries | ||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Accrued expenses and other current liabilities | ||||||||||||
| NET CASH USED IN OPERATING ACTIVITIES | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||
| Proceeds from private placement offering, net of offering costs | $ | $ | $ | |||||||||
| Collection from (loan to) subsidiaries | ( | ) | ( | ) | ||||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | $ | $ | $ | |||||||||
| NET INCREASE (DECREASE) IN CASH | $ | $ | $ | ( | ) | |||||||
| CASH-beginning of year | ||||||||||||
| CASH-end of year | $ | $ | $ | |||||||||
| SUPPLEMENTAL CASH FLOW DISCLOSURES: | ||||||||||||
| Cash paid for income tax | ||||||||||||
| Cash paid for interest | ||||||||||||
F-40
AKSO HEALTH GROUP INC. AND SUBSIDIARIES
Schedule I — CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (Continued)
Notes to condensed financial statements
| 1. | Akso Health, formerly known as Xiaobai Maimai Inc., was founded on April 25, 2016 in the Cayman Islands. The condensed full year results of the Company have been prepared assuming the Reorganization (see Note 1 in the consolidated financial statements) was in effect from November 1, 2016. |
| 2. | The condensed financial statements of Akso Health have been prepared using the same accounting policies as set out in the consolidated financial statements except that the equity method has been used to account for investments in subsidiaries, VIEs and subsidiaries of VIEs. Such investment in subsidiaries and VIEs are presented on the balance sheets as interests in subsidiaries and VIEs and the income (loss) of the subsidiaries and VIEs is presented as equity in (loss) earnings of subsidiaries and VIEs on the statement of operations. |
| 3. | As of March 31, 2026 and 2025, there were no material contingencies, significant provisions of long—term obligations of the Company, except for those which have been separately disclosed in the consolidated financial statements. |
| 4. | Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. The notes to consolidated financial statements disclosed certain supplemental information relating to the operations of the Company and, as such, these statements should be read in conjunction with the notes to the accompanying Consolidated Financial Statements. |
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Exhibit 8.1
SUBSIDIARIES OF AND CONSOLIDATED ENTITIES OF
AKSO HEALTH GROUP
As of March 31, 2026
| Name of Subsidiary | Jurisdiction of Incorporation or Organization | Percentage of direct or indirect | ||||
| WE HEALTH LIMITED | New York, United States | 100 | % | |||
| Akso Remote Medical Consultation Center Inc | Wyoming, United States | 100 | % | |||
| Akso Online MediTech Co., LTD | Wyoming, United States | 100 | % | |||
| AKSO FIRST HEALTH TREATMENT CENTER INC. | Massachusetts, United States | 100 | % | |||
| We Healthy Limited | Hong Kong | 51 | % | |||
| Qingdao Akso Health Management Co., Ltd. | People’s Republic of China | 100 | % | |||
| Akso Medical Cloud Limited | British Virgin Islands | 100 | % | |||
| Akso Medi-care Limited (Hong Kong) | Hong Kong | 100 | % | |||
| Tianjin Akso Enterprise Management Co., Ltd. | People’s Republic of China | 100 | % | |||
| Tianjin Wangyi Cloud Technology Co., Ltd. | People’s Republic of China | 100 | % | |||
| Tianjin Deyihui Internet Hospital Co., Ltd. | People’s Republic of China | 100 | % | |||
| Tianjin Deyihui Clinic Co., Ltd. | People’s Republic of China | 100 | % | |||
| Tianjin Akso Technology Co., Ltd. | People’s Republic of China | 100 | % | |||
Exhibit 12.1
Certification by the Principal Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
| I, | Yilin (Linda) Wang, certify that: |
| 1. | I have reviewed this annual report on Form 20-F of Akso Health Group (the “Company”); |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report; |
| 4. | The Company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have: |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c. | Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d. | Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and |
| 5. | The Company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions): |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting. |
| Date: | July 23, 2026 | |
| /s/ Yilin Wang | ||
| Name: | Yilin (Linda) Wang | |
| Title: | Chief Executive Officer (Principal Executive Officer) |
Exhibit 12.2
Certification by the Principal Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
| I, | Zhongliang Xie, certify that: |
| 1. | I have reviewed this annual report on Form 20-F of Akso Health Group (the “Company”); |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report; |
| 4. | The Company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have: |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c. | Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d. | Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and |
| 5. | The Company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions): |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting. |
| Date: | July 23, 2026 | |
| /s/ Zhongliang Xie | ||
| Name: | Zhongliang Xie | |
| Title: | Chief Financial Officer (Principal Financial Officer) |
Exhibit 13.1
Certifications Pursuant to 18 U.S.C. Section 1350
Pursuant to U.S.C. Section 1350 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), each of the undersigned officers of Akso Health Group (the “Company”), does hereby certify, to such officer’s knowledge, that:
The Annual Report on Form 20-F for the year ended March 31, 2026 of the Company fully complies, in all material respects, with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 20-F fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Dated: July 23, 2026 |
|
| /s/ Yilin Wang | |
| Yilin (Linda) Wang | |
| Chief Executive Officer | |
| (Principal Executive Officer) |
| Dated: July 23, 2026 | |
| /s/ Zhongliang Xie | |
| Zhongliang Xie | |
| Chief Financial Officer | |
| (Principal Financial Officer) |
Exhibit 15.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statement on Form F-3 (333-277351) of our reports dated August 14, 2025, relating to the consolidated financial statements of Akso Health Group, included in this Form 20-F for the year ended March 31, 2026.
/s/ OneStop Assurance PAC
Singapore
July 23, 2026
Exhibit 15.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statement on Form F-3 (333-277351) of our reports dated July 23, 2026, relating to the consolidated financial statements of Akso Health Group (the “Company”) and the effectiveness of the Company’s internal control over financial reporting appearing in this Annual Report on Form 20-F for the year ended March 31, 2026.
/s/ CHI-LLTC
July 23, 2026
Exhibit 15.3
Date: July 23, 2026
Akso Health Group
Room 8201-4-4(A), 2nd Floor, Qiantongyuan Building,No. 44,
Moscow Road, Qianwan Bonded Port Area,Qingdao Pilot Free Trade Zone,
Shandong, People’s Republic of China
Dear Sir/Madam:
We hereby consent to the reference of our name under the headings “Item 3. Key Information—D. Risk Factors—Risks Related To Doing Business In The People’ S Republic Of China” in Akso Health Group ’ s annual report on Form 20-F for the year ended March 31, 2026 (the ” Annual Report”), which will be filed with the Securities and Exchange Commission (the “SEC”) in the month of July 2026. We also consent to the filing of this consent letter with the SEC as an exhibit to the Annual Report.
In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, or under the Securities Exchange Act of 1934, in each case, as amended, or the regulations promulgated thereunder.
Yours Sincerely,
| /s/ Hebei Changjun Law Firm |
Hebei Changjun Law Firm