JFU 20-F
9F Inc. (JFU)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
OR
For the fiscal year ended
OR
OR
Date of event requiring this shell company report
For the transition period from to
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) |
People’s Republic of |
| (Address of Principal Executive Offices) |
People’s Republic of Tel: Email: |
| (Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person) |
Securities registered or to be registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange On Which Registered | ||
| The | ||||
| The |
| * |
Securities registered or to be registered pursuant to Section 12(g) of the Act:
| None |
| (Title of Class) |
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
| None |
| (Title of Class) |
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:
As of December 31, 2025, there were 235,466,660
ordinary shares outstanding, par value $0.00001 per share, being the sum of
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 ☒
Note - Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
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(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
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requirements for the past 90 days. ☒
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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 the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | 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.
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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.
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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 by the International Accounting Standards Board ☐ | Other ☐ |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. ☐ Item 17 ☐ Item 18
If this is an annual report, indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes
(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
| INTRODUCTION | ii | |
| FORWARD-LOOKING STATEMENTS | iii | |
| PART I | 1 | |
| Item 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS | 1 |
| Item 2. | OFFER STATISTICS AND EXPECTED TIMETABLE | 1 |
| Item 3. | KEY INFORMATION | 1 |
| Item 4. | INFORMATION ON THE COMPANY | 56 |
| Item 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS | 95 |
| Item 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES | 109 |
| Item 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS | 117 |
| Item 8. | FINANCIAL INFORMATION | 118 |
| Item 9. | THE OFFER AND LISTING | 120 |
| Item 10. | ADDITIONAL INFORMATION | 120 |
| Item 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 135 |
| Item 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES | 136 |
| PART II | 138 | |
| Item 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES | 138 |
| Item 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS | 138 |
| Item 15. | CONTROLS AND PROCEDURES | 138 |
| Item 16. | RESERVED | 140 |
| PART III | 143 | |
| Item 17. | FINANCIAL STATEMENTS | 143 |
| Item 18. | FINANCIAL STATEMENTS | 143 |
| Item 19. | EXHIBITS | 143 |
i
INTRODUCTION
Unless otherwise indicated and except where the context otherwise requires, references in this annual report to:
| ● | “9F,” “us,” “our Company,” “our” and “we” are to (i) 9F Inc. and its subsidiaries in the context of describing our offerings of wealth management services (including internet securities service, fund sales and insurance brokerage service) outside China, and (ii) 9F Inc., its subsidiaries, the VIEs and their subsidiaries in China in the context of describing the general nature of our operations and our consolidated financial information; |
| ● | “ADSs” are to our American depositary shares, each of which represents 20 Class A ordinary shares; |
| ● | “China” or the “PRC” are to the People’s Republic of China, excluding, for the purposes of this annual report only, the Hong Kong Special Administrative Region of the PRC, the Macau Special Administrative Region of the PRC and Taiwan; |
| ● | “Class A ordinary shares” are to our Class A ordinary shares, par value US$0.00001 per share; |
| ● | “Class B ordinary shares” are to our Class B ordinary shares, par value US$0.00001 per share; |
| ● | “financial institution partners” are to financial institutions that provide insurance and guarantee services, as well as banks and other institutions which have partnered with us on our previous direct lending program to fund loans originated to our borrowers; |
| ● | “legacy products” are to investments in the loans facilitated through our previous online lending information intermediary services for peer-to-peer lending and borrowing that are subject to PRC laws and regulations; |
| ● | “ordinary shares” or “Ordinary Shares” are to our Class A ordinary shares and Class B ordinary shares, par value US$0.00001 per share; |
| ● | “RMB” and “Renminbi” are to the legal currency of China; |
| ● | “US$,” “U.S. dollars,” “$” and “dollars” are to the legal currency of the United States; |
| ● | “VIEs” are to Jiufu Shuke Technology Group Co., Ltd., or Jiufu Shuke (formerly known as Beijing Jiufu Times Investment Consulting Co., Ltd., Jiufu Internet Finance Holdings Group Co., Ltd. and Jiufu Jinke Holdings Group Co., Ltd., successively), Beijing Puhui Lianyin Information Technology Co., Ltd., or Beijing Puhui, Zhuhai Huike Lianyin Technology Co., Ltd., or Zhuhai Lianyin, Beijing Yi Qi Mai Technology Co., Ltd., or Yi Qi Mai (formerly known as Beijing Wu Kong Mao Technology Co., Ltd. and Beijing Chaoka Internet Technology Co., Ltd., successively), and Shenzhen Fuyuan Network Technology Co., Ltd., or Shenzhen Fuyuan; and |
| ● | “WFOEs” are to Qianhai Fuyuan Network Technology (Shenzhen) Co., Ltd., Beijing Shuzhi Lianyin Technology Co., Ltd., or Shuzhi Lianyin (formerly known as Beijing Jiufu Lianyin Technology Co., Ltd.), Zhuhai Xiaojin Hulian Technology Co., Ltd. and Zhuhai Wukong Youpin Technology Co., Ltd., and our other wholly foreign-owned PRC subsidiaries. |
We present our financial results in RMB. 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. Unless otherwise noted, all translations from Renminbi to U.S. dollars and from U.S. dollars to Renminbi in this annual report were made at a rate of RMB6.9931 to US$1.00 as of December 31, 2025. The functional currency of certain of our subsidiaries is local currency (such as Hong Kong dollars) other than Renminbi or U.S. dollars. In preparing our financial results contained in this annual report, we have used foreign exchange rates as set out in our financial statements included elsewhere in this annual report.
ii
FORWARD-LOOKING STATEMENTS
This annual report contains forward-looking statements that relate to our current expectations and views of future events. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigations Reform Act of 1995.
You can identify some of these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “is/are likely to,” “potential,” “continue” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include statements relating to:
| ● | our goals and strategies; |
| ● | our expectations regarding demand for and market acceptance of our products and services; |
| ● | our expectations regarding our relationships with users and other partners we collaborate with; |
| ● | our future business development, results of operations and financial condition; |
| ● | competition in our industries; |
| ● | government policies and regulations governing our corporate structure, business and industries; |
| ● | general economic and business condition in China, Hong Kong and other places where we operate our business; |
| ● | the impact of the public health events on our business operations, the industries we are operating in and the economy of China and elsewhere generally; and |
| ● | assumptions underlying or related to any of the foregoing. |
You should read this annual report and the documents that we refer to in this annual report and have filed as exhibits to this annual report completely and with the understanding that our actual future results may be materially different from what we expect. Other sections (including “Item 3. Key Information—D. Risk Factors”) of this annual report discuss factors which could adversely impact our business and financial performance. Moreover, we operate in an evolving environment. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements.
You should not rely upon forward-looking statements as predictions of future events. The forward-looking statements made in this annual report relate only to events or information as of the date on which the statements are made in this annual report. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.
iii
PART I
Item 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
Item 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
Item 3. KEY INFORMATION
Our Holding Company Structure and Contractual Arrangements with Our VIEs
9F Inc. is a holding company with no material operations of its own. We conduct a major part of our operations through our PRC subsidiaries and our VIEs. PRC laws and regulations prohibit or restrict foreign ownership in companies involved in the provision of value-added telecommunication services in China. Our value-added telecommunication services in China have therefore been conducted through our VIEs in order to comply with PRC laws and regulations to provide investors with exposure to foreign investment in such entities. Investors in our ADSs are not acquiring any equity interest in our operating entities in China but instead are acquiring interest in 9F Inc., a holding company incorporated in the Cayman Islands which does not conduct operation on its own.
We have entered into a series of contractual arrangements with our subsidiaries, our VIEs, and the shareholders of our VIEs, including master exclusive service agreements, proxy agreements and powers of attorney, exclusive option agreements, and equity interest pledge agreements. As a result of these contractual arrangements, we have the power to direct the activities of our VIEs that most significantly impact their economic performance. We are also entitled to receive substantially all of the economic benefits generated by our VIEs as primary beneficiary and we bear the obligation to absorb any and all economic losses they incur. In addition, we have an exclusive option to purchase all or part of the equity interests in each of our VIEs when and to the extent permitted by PRC law. For the reasons above, while we do not own equity in our VIEs, we believe that our VIEs should be treated as Variable Interest Entities under the Financial Accounting Standards Board Accounting Standards Codification Topic 810 Consolidation and we should be regarded as the primary beneficiary of our VIEs. Accordingly, we consolidate our VIEs and their financial results in our consolidated financial statements in accordance with U.S. GAAP. The material terms of each set of contractual arrangements among us, our PRC subsidiaries and our VIEs and their respective shareholders are substantially similar. A summary of certain key terms is set out below:
| ● | Master Exclusive Service Agreement. Under the master exclusive service agreement between our relevant PRC subsidiary and our relevant VIE, our PRC subsidiary has the exclusive right to provide, among other things, technical support and consulting services to each VIE. In addition, each VIE irrevocably grants our PRC subsidiary an exclusive and irrevocable option to purchase any or all of the assets and business of each VIE at the lowest price permitted under PRC law. |
| ● | Proxy Agreement and Power of Attorney. Under the proxy agreement and power of attorney among our relevant PRC subsidiary, each relevant VIE and each shareholder of the VIE, such shareholder irrevocably nominates, appoints and constitutes our PRC subsidiary and its successors as his attorney-in-fact to exercise any and all of his rights as a shareholder of each VIE. |
| ● | Exclusive Option Agreement. Under the exclusive option agreement among 9F Inc., our relevant PRC subsidiary, each relevant VIE and each shareholder of the VIE, such shareholder irrevocably grants 9F Inc. or its designated person(s) an exclusive option to purchase, at any time and to the extent permitted under PRC law, all or part of his equity interests in the VIE at a price equal to the higher of the actual capital contribution paid in the registered capital of the VIE by such shareholder and the lowest price permitted under the PRC law. |
1
| ● | Equity Interest Pledge Agreements. Under the equity interest pledge agreement among our relevant PRC subsidiary, each VIE and each shareholder of each VIE, such shareholder pledges all of his equity interests in the VIE to our PRC subsidiary to secure the performance by the VIE and its shareholders of their respective obligations under the applicable contractual arrangements. If the pledger or the VIE breaches its obligations under these contractual arrangements, our PRC subsidiary, as the pledgee, will be entitled to certain rights and remedies including priority in receiving the proceeds from the auction or disposal of the pledged equity interests in each VIE. Our PRC subsidiary also has the right to receive dividends distributed on the pledged equity interests during the term of the pledge. |
For more details of these contractual arrangements, see “Item 4. Information on the Company—C. Organizational Structure—Contractual Arrangements with Our VIEs and Their Shareholders.”
Contractual arrangements may not be as effective as direct ownership in providing us with control over the VIEs, and we may incur substantial costs in enforcing the terms of these arrangements. For example, if we had direct ownership of the VIEs, we would be able to exercise our rights as a shareholder to effect changes in the board of directors of our VIEs, which in turn could implement changes, subject to any applicable fiduciary obligations, at the management and operational level. However, under the current contractual arrangements, we are required to rely on the performance by the VIEs and shareholders of the VIEs of their obligations under these arrangements to exercise control over the VIEs and their subsidiaries. Although we have the right to replace any shareholder of each VIE under the contractual arrangements, if any of these shareholders is uncooperative or any dispute relating to these contracts arises and remains unresolved, we will have to enforce our rights under these contracts through the operation of PRC laws, arbitration, litigation and other legal proceedings. Our contractual arrangements have not been tested in a court of law in China, and, as there are very few precedents and little formal guidance on how contractual arrangements in the context of a variable interest entity should be interpreted or enforced under PRC laws, there remain significant uncertainties regarding the ultimate outcome of such proceedings should they become necessary. See “—D. Risk Factors—Risks Related to Our Corporate Structure—We rely on contractual arrangements with our VIEs and shareholders of our VIEs for a major portion of our business operations, which may not be as effective as direct ownership in providing operational control and our VIEs’ shareholders may fail to perform their obligations under our contractual arrangements,” and “—D. Risk Factors—Risks Related to Our Corporate Structure—Any failure by our VIEs or shareholders of our VIEs to perform their obligations under the contractual arrangements we have with them would materially and adversely affect our business, financial condition, and results of operations.”
There are also substantial uncertainties regarding potential future actions by the PRC government that could affect the enforceability of our contractual arrangements with our VIEs. If the PRC government finds that the contractual arrangements which establish the structure of our business operations do not comply with PRC laws or regulations, or if these laws or regulations or their interpretations change in the future, we could be forced to relinquish our interests in those operations, which may result in our VIEs being deconsolidated. As a consequence, our operations and financial performance may be materially and adversely affected and our ADSs may significantly decline in value or become worthless. See “—D. Risk Factors—Risks Related to Our Corporate Structure—If the PRC government finds the commercial arrangements that establish the variable interest entity structure for a certain part of our operations in China non-compliant with the PRC laws, regulations, and rules, or if these laws, regulations, and rules or the interpretation thereof change in the future, we could be subject to severe penalties or be forced to relinquish our interests in our VIEs and may lose the ability to consolidate their financial information.”
In addition to the entities discussed above, we also consolidate one VIE for which we are the primary beneficiary indirectly through one of our subsidiaries. This entity is an exempted company incorporated with limited liability and registered as a segregated portfolio company under the Companies Act (As Revised) of the Cayman Islands, and a “regulated mutual fund” for the purposes of the Cayman Islands Mutual Funds Act. As we hold the voting management shares and the vast majority of the participating shares (with economic interest) in the entity, we have the power to direct the investment decision-making and an exposure to the economics of the entity. Therefore, we consolidate such entity as one VIE.
2
Cash Transfers within our Organization and Dividend Distributions
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; (ii) we and our subsidiaries may provide loans to the VIEs and vice versa; (iii) funds may be transferred between the VIEs and our subsidiaries, including our PRC subsidiaries, as service fees for services contemplated by the variable interest entity agreements, as repayment of loan or pursuant to other commercial contracts; and (iv) our subsidiaries, including our PRC subsidiaries, may make dividends or other distributions to us through intermediate holding companies or otherwise.
Because we control the VIEs through contractual arrangements, neither us nor our subsidiaries are able to make direct capital contribution to the VIEs or their respective subsidiaries.
The following table describes transfers among us, our subsidiaries and the VIEs made during the periods presented:
| Year Ended December 31, 2025 | ||
| (RMB in millions) | ||
| Capital contributions from us to our offshore subsidiaries(1) | nil | |
| Loans from us to our offshore subsidiaries | nil | |
| Capital contributions from us or our offshore subsidiaries to PRC subsidiaries | nil | |
| Loans from us or our offshore subsidiaries to PRC subsidiaries | nil | |
| Capital contributions from us or our offshore subsidiaries to Yuan Yu Global Fund SPC | 232.6 | |
| Loans from our subsidiaries to the VIEs, net | nil | |
| Other amounts paid by our subsidiaries to the VIEs | nil | |
| Other amounts paid by the VIEs and their subsidiaries to our subsidiaries | 47.5 |
Notes:
| (1) | “Offshore subsidiaries” refer to all of our subsidiaries except our PRC subsidiaries. |
Furthermore, as of the date of this annual report, (i) 9F Inc., our subsidiaries, and our VIEs have not declared or paid dividends or made any distributions, and (ii) 9F Inc., our subsidiaries, and our VIEs intend to distribute earnings or settle amounts owed under the variable interest entity agreements in the near future in line with our past practices. Our board of directors has discretion as to whether to distribute dividends, subject to certain restrictions under the Cayman Islands law. Even if our board of directors decides 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. See “—D. Risk Factors—Risks Related to Our American Depositary Shares—Because we do not expect to pay dividends in the foreseeable future, you must rely on price appreciation of our ADSs for return on your investment.”
The following discussions illustrate taxes we would hypothetically be required to pay in China, assuming that: (i) we have taxable earnings, and (ii) we decide to pay a dividend in the future:
Taxation | ||||
| Hypothetical pre-tax earnings(2) | 100.0 | % | ||
| Tax on earnings at statutory rate of 25%(3) | (25.0 | )% | ||
| Net earnings available for distribution | 75.0 | % | ||
| Withholding tax at standard rate of 10%(4) | (7.5 | )% | ||
| Net distribution to Parent/Shareholders | 67.5 | % | ||
Notes:
| (1) | For purposes of this example, the tax calculation has been simplified. The hypothetical book pre-tax earnings amount, not considering timing differences, is assumed to equal taxable income in China. |
3
| (2) | Under the terms of variable interest entity agreements, our VIEs are required to pay for services provided by our subsidiaries. These fees shall be recognized as expenses of our VIEs, with a corresponding amount as service income by our PRC subsidiaries and eliminated in consolidation. For income tax purposes, our PRC subsidiaries and VIEs file income tax returns on a separate company basis, as filing of consolidated tax returns is not allowed under PRC law. The fees paid are recognized as a tax deduction by our VIEs and as income by our PRC subsidiaries and should be tax neutral unless any of our VIEs or PRC subsidiaries qualifies for preferential income tax rates. |
| (3) | Certain of our subsidiaries and VIEs qualify for preferential income tax rates (20%) in China. However, such rates are subject to qualification, are temporary in nature, and may not be available in a future period when distributions are paid. For purposes of this hypothetical example, the table above reflects a maximum tax scenario under which the full statutory rate would be applied. |
| (4) | The PRC Enterprise Income Tax Law imposes a withholding income tax of 10% on dividends distributed by a foreign invested enterprise to its immediate holding company outside of China. A lower withholding income tax rate of 5% is applied if the foreign invested enterprise’s immediate holding company is registered in Hong Kong or other jurisdictions that have a tax treaty arrangement with China, subject to a qualification review at the time of the distribution. For purposes of this hypothetical example, the table above assumes a maximum tax scenario under which the full withholding tax would be applied. |
The table above has been prepared under the assumption that all profits of each VIE will be distributed as fees to our PRC subsidiaries under tax neutral contractual arrangements. If, in the future, the accumulated earnings of the VIEs exceed the fees paid to our PRC subsidiaries (or if the current and contemplated fee structure among these entities is determined to be non-substantive and disallowed by Chinese tax authorities), the VIEs could, as a matter of last resort, make a non-deductible transfer to our PRC subsidiaries for the amounts of the stranded cash in the VIEs. This would result in such transfer being non-deductible for PRC tax purposes for our VIEs while generating taxable income for the PRC subsidiaries. Such a transfer and the related tax burdens would reduce our after-tax income to approximately 51% of the pre-tax income. Our management believes that the possibility of this scenario occurring is remote.
Under PRC laws and regulations, our PRC subsidiaries, as wholly foreign-owned enterprises in China, may pay dividends only out of their respective accumulated after-tax profits as determined in accordance with PRC accounting standards and regulations. In addition, a wholly foreign-owned enterprise is required to set aside at least 10% of its accumulated after-tax profits each year, if any, to fund certain statutory reserve funds, until the aggregate amount of such funds reaches 50% of its registered capital. At its discretion, a wholly foreign-owned enterprise may allocate a portion of its after-tax profits based on PRC accounting standards to discretionary funds. These reserve funds and discretionary funds are not distributable as cash dividends. Remittance of dividends by a wholly foreign-owned company out of China is subject to examination by the banks designated by the State Administration of Foreign Exchange, or SAFE, and declaration and payment of withholding tax. Additionally, if our PRC subsidiaries and VIEs incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends or make other distributions or payments to us. As a holding company, we may rely on dividends and other distributions on equity paid by our subsidiaries, including our PRC subsidiaries, for our cash and financing requirements. However, our PRC subsidiaries will not be able to pay dividends until they generate accumulated profits and meet the requirements described above. See “—D. Risk Factors—Risks Related to Doing Business in China and Hong Kong—We rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material adverse effect on our ability to conduct our business.”
4
Permission Required from the PRC Authorities with respect to the Operations of our VIEs and PRC Subsidiaries
We conduct our business in China through our PRC subsidiaries, our VIEs and subsidiaries of our VIEs. Each of our PRC subsidiaries, our VIEs and subsidiaries of our VIEs is required to obtain, and has obtained, a business license issued by the PRC State Administration for Market Regulation and its local counterparts. Some of our VIEs and their subsidiaries are additionally required to obtain, and have obtained, an array of operating licenses and permits in connection with their operations, including but not limited to (i) value-added telecommunication business operation licenses for the provision of “internet information services” held by Jiufu Shuke, Beijing Jiufu Puhui Information Technology Co., Ltd., or Jiufu Puhui, Shenzhen Best Quality Mall Science and Trading Co., Ltd., or Best Quality Mall, Beijing Muyu Technology Development Co., Ltd., Xiamen Fucheng Financing Guarantee Co., Ltd., and Beijing Juhuixuan Technology Co., Ltd., or Beijing Juhuixuan, (ii) value-added telecommunication business operation licenses for the provision of “online data processing and transaction processing services” held by Best Quality Mall and Beijing Juhuixuan, (iii) food operation licenses held by Yi Qi Mai, Beijing Lirongxing Business & Technology Co., Ltd., or Beijing Lirongxing, Best Quality Mall, Beijing Juhuixuan, and Guizhou Diaogong Liquor Co., Ltd., (iv) permit of professional insurance intermediaries held by Jiuhang Insurance Brokers Co., Ltd., (v) financing guarantee organization business permit held by Xiamen Fucheng Financing Guarantee Co., Ltd., (vi) permit for the production and operation of radio and TV programs held by Beijing Juhuixuan, and(vii) publication business operating license held by Beijing Juhuixuan.
As of the date of this annual report, we have not received any warnings and have not been subject to any penalties or other disciplinary action from any PRC authority for the failure to obtain or the insufficiency of any approval or permit in connection with the conduct of our business operations. We have not been denied by any PRC authority with respect to the application of any requisite permissions by us, our PRC subsidiaries, our VIEs or subsidiaries of our VIEs in China.
If (i) we inadvertently concluded that certain permissions or approvals have been acquired or are not required, or (ii) applicable laws, regulations, or interpretations thereof change and we become subject to the requirement of additional permissions or approvals in the future, we may have to expend significant time and costs to procure them. If we are unable to do so, on commercially reasonable terms, in a timely manner or otherwise, we may become subject to sanctions imposed by the PRC regulatory authorities, which could include fines and penalties, proceedings against us, and other forms of sanctions, and our ability to conduct our business, invest into China as foreign investments or accept foreign investments, or be listed on a U.S. or other overseas exchange may be restricted, and our business, reputation, financial condition, and results of operations may be materially and adversely affected. For more detailed information, see “—D. Risk Factors—Risks Related to Our Business and Industry—We do not hold any licenses or permits for providing securities brokerage services in China. If some of our activities in China are considered by the authorities as provision of securities brokerage services, investment consulting services or otherwise conducting securities businesses in China, our business, financial condition, results of operations and prospects may be materially and adversely affected,” “—D. Risk Factors—Risks Related to Our Business and Industry—Any future change in the regulatory and legal regime for the securities brokerage and wealth management industries may have a significant impact on our business model,” “—D. Risk Factors—Risks Related to Our Business and Industry—We are subject to extensive regulatory requirements with respect to our business operations in Hong Kong and Southeast Asian countries, any non-compliance with which, or changes in these regulatory requirements, may affect our business operations and financial results,” “—D. Risk Factors—Risks Related to Doing Business in China and Hong Kong—Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us, hinder our ability and the ability of any holder of our securities (including the ADSs) to offer or continue to offer such securities, result in a material adverse change to our business operations, and damage our reputation, which would materially and adversely affect our financial condition and results of operations and cause the ADSs to significantly decline in value or become worthless,” and “—D. Risk Factors—Risks Related to Doing Business in China and Hong Kong—We may be adversely affected by the complexity, uncertainties and changes in PRC regulation of internet-related or finance-related businesses and companies, and any lack of requisite approvals, licenses, permits or filings applicable to our business may have a material adverse effect on our business and results of operations.”
5
However, there remain uncertainties as to the implementation and interpretation of existing laws and regulations by PRC authorities as well as future legislative initiatives in China. 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 Severely Cracking Down on Illegal Securities Activities According to Law. The Opinions stresses the need to strengthen the administration over illegal securities activities and the supervision over overseas listings by Chinese companies, and provides that effective measures, such as promoting the construction of relevant regulatory systems, would be taken to address risks and incidents of China-based companies that are listed overseas, cybersecurity issues, data privacy protection requirements and other similar matters. On December 28, 2021, the Cyberspace Administration of China, or the CAC, the National Development and Reform Commission, or the NDRC, and several other administrations jointly issued the revised Measures for Cybersecurity Review, or the Cybersecurity Review Measures, which became effective on February 15, 2022. According to the Cybersecurity Review Measures, if a “network platform operator” that is in possession of personal data of more than one million users intends to list in a foreign country, it must apply for a cybersecurity review prior to the submission of its listing application with non-PRC securities regulators. On February 17, 2023, the China Securities Regulatory Commission, or the CSRC, issued the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies, or the Trial Measures, and several supporting guidelines, which came into effect on March 31, 2023. Pursuant to the Trial Measures and supporting guidelines, in connection with any offering or listing of shares, depository receipts, convertible corporate bonds, or other equity-like securities by a PRC company in an overseas stock market, whether directly or indirectly through an offshore holding company, a filing should be made with the CSRC. The issuer (if the issuer is a PRC company), or its affiliated PRC company (if the issuer is an offshore holding company), must make a filing to the CSRC in respect of any initial public offerings, follow-on offerings and other offering activities conducted by the issuer. Specifically, the filing for initial public offering and listing, or for secondary or dual primary listing, of an issuer conducted overseas should be submitted to the CSRC within three business days after the initial filing of such issuer’s listing application overseas. The Trial Measures further provides that companies that have been listed overseas prior to March 31, 2023 constitute “Existing Issuers” and are not required to conduct the overseas listing filing procedure immediately, but shall carry out filing procedures as required if they conduct secondary or dual primary listing, follow-on offerings, bond offerings or are involved in other circumstances that require filings with the CSRC. Specifically, the filing for a follow-on offering by an issuer conducted in the same overseas market where it has previously offered or listed securities should be submitted to the CSRC within three business days after the completion of such follow-on offering. The filing for subsequent securities offerings and listings of an issuer in overseas markets other than where it has previously offered and listed securities should be submitted to the CSRC within three business days after the filing of such issuer’s listing application overseas. Once listed overseas, an issuer is further required to report to the CSRC within three business days after the occurrence of any of the following major events: (i) a change of control of the issuer; (ii) the investigation, sanction or other measures undertaken by foreign securities regulatory agencies or competent authorities with respect to the issuer; (iii) any change of listing status or transfer of listing segment; and (iv) the voluntary or mandatory delisting of the issuer. If a PRC company fails to complete the filing procedure or conceals any material fact or falsifies any major content in its filing documents, such PRC company may be subject to administrative penalties, such as orders to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly responsible persons may also be subject to administrative penalties, such as warnings and fines. For more detailed information, see “Item 4. Information on the Company—B. Business Overview—Regulations Related to Our Business Operation in China—Regulations Related to M&A Rules and Overseas Listings.” If the filing procedure with the CSRC under the Trial Measures is required for any of our future offerings, listing or any other capital raising activities, it is uncertain whether we could complete the filing procedure in a timely manner, or at all.
On February 24, 2023, the CSRC published the Provisions on Strengthening Confidentiality and Archives Administration in respect of Overseas Issuance and Listing of Securities by Domestic Enterprises, or the Confidentiality and Archives Rules, which came into effect on March 31, 2023. The Confidentiality and Archives Rules expressly applies to both direct and indirect overseas offerings and listings and requires PRC domestic companies conducting overseas offerings and listings, as well as their sponsors, underwriters and securities service providers (including accounting firms), to establish a sound confidentiality and archiving system. Pursuant to the Confidentiality and Archives Rules, if a PRC domestic company is, in the course of its overseas offering and listing, required to publicly disclose or provide to any sponsors, underwriters, securities service providers, or regulators of a foreign jurisdiction, any documents that contain state secrets or work secrets of state government agencies, or any documents that, if divulged, would jeopardize national security or the public interest, such PRC domestic company must complete the applicable approval and filing procedures and any other procedures prescribed by law. The Confidentiality and Archives Rules also mandates that all working paper and other files produced in China by sponsors, underwriters and securities service providers in the course of the overseas offerings and listings must be stored in China and not be transmitted outside China without the approval of the competent PRC authorities. The Confidentiality and Archives Rules also alters procedures regarding the inspections of PRC domestic companies listing overseas and their sponsors, underwriters and securities service providers by foreign regulators. Specifically, in relation to inspections conducted on-site in China, the Confidentiality and Archives Rules removes the requirements that such inspection must be carried out primarily by PRC regulators or must rely on the results of inspection of PRC regulators. Pursuant to the Confidentiality and Archives Rules, foreign regulators should carry out activities relating to investigation, evidence collection and inspection through cross-border cooperation mechanisms. Further, PRC domestic companies, sponsors, underwriters and securities service providers should obtain approvals from the CSRC or other PRC authorities before cooperating with foreign regulators in their investigations or inspections or providing any materials to them.
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We have been closely monitoring the development in the regulatory landscape in China, particularly regarding the requirement of approvals, including on a retrospective basis, from the CSRC, the CAC or other PRC authorities with respect to our previous and future offerings (including our initial public offering completed in 2019), as well as regarding any annual data security review or other procedures that may be imposed on us. If any approval, review or other procedure is in fact required, we are not able to guarantee that we will obtain such approval or complete such review or other procedure timely or at all. For any approval that we may be able to obtain, it could nevertheless be revoked and the terms of its issuance may impose restrictions on our operations and offerings relating to our securities.
Overall, the PRC government’s oversight and control over offerings conducted overseas in relation to securities of, and foreign investment in, China-based issuers could significantly limit or completely hinder our ability and the ability of any holder of our ADSs or other securities of our company to offer or continue to offer such securities to investors, or cause such securities to significantly decline in value or become worthless. For more detailed information, see “—D. Risk Factors—Risks Related to Doing Business in China and Hong Kong—The approval of and filing with the CSRC or other PRC government authorities may be required in connection with our previous and future securities offerings under PRC law, and, if so required, we cannot predict whether or when we will be able to obtain such approval or complete such filing, and even if we obtain such approval, it could be rescinded. Any failure to or delay in obtaining such approval or complying with such filing requirements, or a rescission of such approval, could subject us to sanctions imposed by the CSRC or other PRC government authorities.”
More generally, as a major part of our operations in China is conducted by our PRC subsidiaries, our VIEs and subsidiaries of our VIEs, the PRC government has significant authority to regulate our PRC operations at any time. We are also subject to risks associated with the rapidly evolving PRC legal system and possible changes in PRC laws, regulations, and rules which may occur quickly with little or no advance notice in certain circumstances. For example, the PRC Data Security Law and the PRC Personal Information Protection Law in 2021 posed additional challenges to our cybersecurity and data privacy compliance efforts. The Cybersecurity Review Measures and the Regulations on the Network Data Security promulgated by the State Council on September 24, 2024, could potentially expose us to additional restrictions and requirements, including requirements for the clearance of cybersecurity review. Given the novelty of some of the applicable PRC rules and regulations, there are and will continue to be substantial uncertainties with respect to their interpretation and implementation. If the clearance of cybersecurity review or the completion of any other procedures or actions is required of us, we cannot assure you that we can comply with such requirements timely or at all. Any of such actions, if taken by the PRC government, could materially and adversely affect our financial condition and results of operations and significantly limit or completely hinder our ability and the ability of any holder of our ADSs or other securities of our company to offer or continue to offer such securities to investors, or cause such securities to significantly decline in value or become worthless.
Pursuant to the Holding Foreign Companies Accountable Act, or the HFCAA, if the U.S. Securities and Exchange Commission, or the SEC, determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspections by the U.S. Public Company Accounting Oversight Board, or the PCAOB, for two consecutive years, the SEC will prohibit our securities from being traded on a national securities exchange or in the over-the-counter trading market in the United States. Each year, the PCAOB will determine whether it can inspect and investigate completely audit firms in a given jurisdiction. If the PCAOB determines in the future that it no longer has full access to inspect and investigate completely accounting firms in certain jurisdictions and we use an accounting firm headquartered in one of these jurisdictions to issue an audit report on our financial statements filed with the SEC, we would be identified as a Commission-Identified Issuer following the filing of the annual report on Form 20-F for the relevant fiscal year. There can be no assurance that we would not be identified as a Commission-Identified Issuer for any future fiscal year, and if we were so identified for two consecutive years, we would become subject to the prohibition on trading under the HFCAA. See “—D. Risk Factors—Risks Related to Doing Business in China and Hong Kong—Our securities may be prohibited from trading in the United States under the HFCAA in the future if the PCAOB is unable to inspect or investigate completely our auditor. The delisting of our securities, or the threat of their being delisted, may materially and adversely affect the value of your investment.”
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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 operate in emerging and evolving industries, and our operations and products have been and may need to be modified in responding to the latest market trends, which makes it difficult to evaluate our future prospects.
The industries we are operating in and we are expanding into are emerging and in general remain at relatively preliminary stages of development and may not continue to develop as rapidly as expected. The regulatory framework for the industries we operate in and we are expanding into is also evolving and may remain uncertain for the foreseeable future. We may need to change our business model or even terminate the operation of certain aspects of our businesses to stay compliant with regulatory requirements. See “—We do not hold any licenses or permits for providing securities brokerage services in China. If some of our activities in China are considered by the authorities as provision of securities brokerage services, investment consulting services or otherwise conducting securities businesses in China, our business, financial condition, results of operations and prospects may be materially and adversely affected.” In addition, there are few established players with business models similar to ours in these industries. Potential users and partners we collaborate with may not be familiar with the industries we are operating in or are expanding into, and may not fully appreciate the value we add and may have difficulty distinguishing our products and services from those of our competitors.
Furthermore, our historical growth rates associated with our legacy business may not be indicative of our future growth especially as we transit into a digital technology service provider. For example, our VIE ceased its operations of our online lending information intermediary business, and thus the historical growth we have achieved in such business cannot be relied upon for evaluation of our future developments.
We are subject to risks in relation to our transition into a digital technology service provider.
During the extended transition period to realign into a digital technology and wealth management services provider, our transition efforts may consume a large proportion of our resources. The execution of our strategy for such transition may not be as smooth as we expect, any new business areas we attempted to explore may not be as profitable as we expect, and we may incur additional costs to overcome hurdles that may arise. In addition, the exit process of Jiufu Puhui may result in legal proceedings, post-loan collection efforts, and related litigation expenses, which could significantly increase operating costs and add to the cost, complexity, and uncertainty of the company’s transition. Judicial account freezes and adverse online public opinion could further heighten the company’s liquidity and reputational risks. Therefore, we remain in a risk mitigation process and are actively executing our transition. However, our day-to-day operations and transition efforts are subject to various constraints, including government regulatory restrictions, and our risk-mitigation efforts may not be successful. We will continue to seek new opportunities for transition and strive to improve our new business to achieve profitability as soon as possible. There have been heightened tensions in international economic relations in recent years and these tensions may continue to escalate in the future. These tensions have resulted in changes in international trade policies, may result in additional barriers to trade. These developments may also lead to increased compliance costs, operational disruptions, and potential constraints on our access to capital markets.
We may launch new products and services and make modifications to our existing products and services in response to or in anticipation of changes in our industries’ landscape, user needs or regulatory scheme. We may lack experience in operating the business relating to newly explored products and services. We also face competition from existing market players, which could result in low price competition. In addition, each of these newly explored products and services, or modifications to existing ones calls for significant time and resource devotion of our management, which may have an adverse impact on our financial condition and results of operations, while we cannot assure you that our attempts to make such newly explored products and services, or modifications to existing ones will be successful, profitable or widely accepted by customers. Furthermore, as newly explored products and services, or modifications to existing ones may materially change the way we conduct our business, they may render the projection of our future operations obsolete, and therefore our future prospects may be difficult to evaluate.
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In addition, in connection with our transitional efforts or in response to general economic conditions, the performance of our existing businesses may be impacted by changes to the policies and qualifications made by us or our partners that are applicable to our existing products and services. It is therefore difficult to effectively assess our future prospects. You should consider our business and prospects in light of the risks and challenges we encounter or may encounter in these developing and rapidly evolving markets. These risks and challenges include our ability to, among other things:
| ● | navigate an evolving regulatory environment; |
| ● | expand the base of our users and partners we collaborate with; |
| ● | improve our operational efficiency; |
| ● | continue to scale our technology infrastructure to support the expected growth of our business; |
| ● | broaden our product and service offerings; |
| ● | operate without being adversely affected by the negative publicity about the industries in general and our company in particular, if any; |
| ● | maintain the security of our platform and the confidentiality of the information provided and utilized across our platforms; |
| ● | attract, retain and motivate talented employees to support our expected business growth; |
| ● | navigate economic conditions and fluctuations; |
| ● | seek new business opportunities for future growth; and |
| ● | defend ourselves in litigation, and against regulatory, intellectual property, privacy, product quality or other claims. |
We are subject to all risks and challenges inherent in developing business enterprises in emerging and evolving industries. If the industries do not develop as we expect, if we fail to educate users and partners about the value of our products and services, or if we fail to address the needs of our users and partners, or other risks and challenges, our business and results of operations will be materially and adversely affected.
In addition, there may exist uncertainty of the regulatory requirements in relation to the industries we operate in or explore and we cannot assure you that all of our business offerings will continue to be deemed in compliance with applicable laws and regulations in a fast-changing regulatory environment. For example, we are providing technology empowerment services to our partners operating in highly-regulated industries, which may subject us to additional regulatory compliance requirements. If any of our business offerings are deemed to be in violation of the applicable laws and regulations, our business, financial condition and prospects would be materially and adversely affected.
We are in an extended transition period as we transform our business operations, and the transformation may not be successful ultimately.
We ceased publishing information relating to new offerings of investment opportunities in legacy products for investors on Jiufu Puhui’s online lending information intermediary platform. We have entered into collaboration arrangements with certain licensed asset management companies, pursuant to which the investors’ rights to existing loans have been transferred to those companies, with relevant repayment of the principal and investment income, as applicable, in relation to the legacy products expected to be made by such asset management companies to the investors within 36 months in ways chosen by investors subject to terms and on the conditions set forth in the platform notice to the investors. As of December 31, 2022, settlement with a vast majority of the investors had been reached. After the change of business operations, Jiufu Puhui no longer provides loan facilitation services, and licensed asset management companies and other third-party service providers will continue to provide existing loan investors with services in relation to the return of their remaining investment in the loans. As of the date of report, we were still in the process of handling certain legacy business related issues, including litigations arising thereof. See relevant disclosures elsewhere in this annual report for details.
9
In connection with such efforts, we may experience a loss of continuity, loss of accumulated knowledge or loss of efficiency during the transitional period. Additionally, it is uncertain whether these efforts will eventually bring us benefits as we anticipated. If we fail to achieve some or all of the expected benefits of this business transformation, our competitive position, business, financial condition and results of operations could be materially and adversely affected.
Even if the transformation of our business model is implemented successfully as we planned, the actual costs incurred in this process may be substantially higher than we anticipated. There might also be other issues and negative consequences arising from our business transformation such as loss of the user base of ours or our VIEs’, additional regulatory requirements, internal control issues, changes in employee structure as well as other unexpected consequences, any of which may have a material adverse effect on our competitive position, business, financial condition and results of operations.
We have previously incurred net losses and negative cash flows from operating activities and may incur net losses and experience negative cash flows from operating activities in the future.
We incurred net losses of RMB140.3 million in 2023, net income of RMB50.2 million in 2024 and net income of RMB167.4 million (US$23.9 million) in 2025, respectively. Our net cash provided by operating activities were RMB46.5 million, RMB46.5 million and RMB207.7million (US$29.7 million) in 2023, 2024 and 2025, respectively, we may still have a cash outflow for our operating activities for the upcoming years, as we expect to incur net loss for our business operations in the future.
Our future financial performance depends on, among other factors, our ability to continue to attract and retain users, our user acquisition cost, market competition, and our ability to provide technology empowerment services to better serve our partners. Accordingly, you should not rely on the revenues of any past interim period or annual period as an indication of our future performance. We may not be able to maintain the current fee rates due to more intense competition in the future. Our costs might also increase in future periods as we continue to develop new business, acquire new users and expand our business and operations. In addition, we will continue to incur substantial costs and expenses as a result of being a public company.
In addition, we may not be able to achieve profitability or generate positive cash flows from operating activities and, even if we achieve positive operating cash flows, it may not be sufficient to satisfy our anticipated capital expenditures and other cash needs. Further, we may not be able to fund our operating expenses and expenditures and may be unable to fulfill our financial obligations as they become due, which may result in voluntary or involuntary dissolution or liquidation proceedings and a total loss of your investment.
We do not hold any licenses or permits for providing securities brokerage services in China. If some of our activities in China are considered by the authorities as provision of securities brokerage services, investment consulting services or otherwise conducting securities businesses in China, our business, financial condition, results of operations and prospects may be materially and adversely affected.
Pursuant to PRC laws and regulations, no entity or individual shall engage in the securities business without the approval of the securities regulatory authority of the State Council. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Related to Our Business Operation in China—Regulations Related to the Engagement of Securities Business within the Territory of the PRC by Foreign-Invested Securities Companies.” We do not hold any licenses or permits in relation to the provision of securities brokerage business in China. A significant portion of our technology, research and development, management, supporting and other teams are based in China and a large number of our users are PRC residents. As of the date of this annual report, we have not received any inquiry, examination or investigation relating to our stock investment services from regulatory authorities in China.
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According to the Administrative Measures on Securities Brokerage Business promulgated by the CSRC on January 13, 2023, which became effective on February 28, 2023, an overseas securities business entity violating Article 95 of the Regulations on Supervision and Administration of Securities Firms and, directly or through its affiliates, conducting activities such as opening account, marketing and other activities of overseas securities trading services within the PRC, shall be subject to penalties pursuant to the PRC Securities Law. Pursuant to Article 202 of the PRC Securities Law, any person who establishes a securities company without due approval, operates securities business illegally or carries out securities business activities as a securities company without approval shall be subject to penalties such as correction orders, confiscation of illegal income and the imposition of a fine ranging from one time to ten times the amount of illegal income (where there is no illegal income or the amount of illegal income is less than RMB1 million, a fine ranging from RMB1 million to RMB10 million shall be imposed). The directly accountable person(s) in charge and other directly accountable personnel of a violating entity shall be reprimanded and subject to a fine ranging from RMB200,000 to RMB2 million. In addition, we noted that the CSRC posted an announcement on December 30, 2022 relating to the cross-border operations by Futu Holdings Limited and UP Fintech Holding Limited in China. The announcement claimed that the cross-border securities business conducted by these two companies to investors based in China without the approval of the CSRC has constituted illegal securities business and shall be rectified. On May 16, 2023, Futu Holdings Limited announced its decisions to remove the Futubull app from app stores in China in order to bring its operations into compliance with such regulatory principle, and UP Fintech Holding Limited announced that in response to requirements of the CSRC, it would change its approach of updating user terminals for existing China-based clients and has removed its Tiger International app from app stores in China. According to the announcements of Futu Holdings Limited and UP Fintech Holding Limited, their existing clients will be able to continue using such apps and will not be affected by such changes.
We have been expanding our internet-based securities investment business that offers convenient and effective global asset allocation services, especially offshore securities investment services, to individual investors so as to connect them with Hong Kong and U.S. stock markets. See “Item 4. Information on the Company—B. Business Overview—Our Business and Services—Wealth Management Services—Internet Securities Services.” We will proactively seek guidance from and cooperate with the regulatory authorities, including the CSRC, in connection with the operation of our securities investment business and timely take necessary measures to modify and enhance our business operation to be in compliance with the currently applicable PRC laws and regulations related to securities business in China. However, we cannot assure you that we will not be deemed as operating securities brokerage business in China as significant portion of our clients are Chinese nationals. If some of our activities in China or our provision of services to our client base in China are deemed as provision of securities business such as securities brokerage services, investment consulting services, futures business and/or any other regulated services and activities in China, or any new PRC laws and regulations are enacted to impose license requirements on us with respect to our activities in China and/or our provision of services to our client base in China, we will be required to obtain the licenses or permits from the regulatory authorities, including the CSRC, and failure of obtaining such licenses or permits may subject us to regulatory actions and penalties, including fines, suspension of parts or all of our securities business-related operations or activities in China, and temporary suspension or removal of our securities business-related websites, desktop devices and mobile app in China, which, individually or taken as a whole, may have a material adverse effect on our ability to continue providing services to PRC-based clients and operating within China. If we were to become subject to any of the above-mentioned regulatory actions and penalties or we would not be able to obtain the license or permit which may be imposed by any new PRC laws or regulations in a timely manner or at all, our client base in China and revenue attributable to such clients in relation to our securities business could be materially and adversely affected, resulting in a material adverse change to our business, financial condition, results of operations and prospects. In order to address the uncertainty with respect to the compliance matter discussed above, we have removed our MetaStock app from app stores for the PRC region.
In addition, our employees or business partners may engage in certain activities in relation to which the authorities would require permits or licenses. If such permits or licenses are not obtained or maintained, we may be subject to regulatory inquiries and penalties and may suffer negative publicity for such activities conducted by our employees or business partners.
PRC governmental control of currency conversion, cross-border remittance and offshore investment could have a direct impact on the trading volume completed on our platform. If the government further tightens restrictions on the conversion of Renminbi to foreign currencies, including Hong Kong dollars and U.S. dollars, and/or deems our practice as in violation of PRC laws and regulations, our business will be materially and adversely affected.
A significant portion of our clients are Chinese nationals. We do not provide cross-border currency conversion services related to Renminbi to our clients, and we require those who would like to trade securities listed on the Hong Kong Stock Exchange or any major stock exchanges in the United States or purchase any offshore wealth management products through our platform to deposit funding into their respective offshore trading accounts.
11
The PRC government imposes controls on the conversion of Renminbi into foreign currencies and, in certain cases, currency remittance out of China. Since 2016, the PRC government has tightened its foreign exchange policies and stepped up its scrutiny of outbound capital movement. Under the current regulatory framework, Chinese nationals are limited to a foreign exchange quota of US$50,000 per year for approved uses only, such as tourism and education purposes, and Chinese nationals can only engage in offshore investments under capital items through specified methods such as through investment funds established as Qualified Domestic Institutional Investors. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Related to Our Business Operation in China—Regulations Related to Foreign Exchange.” If the government authorities further tighten the currency exchange quota applied to Chinese nationals, increase the control over remittance of currency out of the PRC, and/or specifically prohibit any exchanges for securities-related investment, the trading activities of Chinese nationals on our platform could be restricted, which would significantly reduce the trading volume on our platform. As our revenues from brokerage commission income depends heavily on the total trading volume facilitated by our internet securities investment platform, the occurrence of any of the abovementioned regulatory changes may have a material and adverse impact on our brokerage and wealth management business and in turn our business, financial condition, results of operations and prospects overall.
In addition, under the existing regulations on offshore investments, approval from or registration with appropriate government authorities is required when Renminbi is to be converted into foreign currency for the purpose of offshore investment. As we do not provide cross-border currency conversion services related to Renminbi to our Chinese national clients, we do not require our clients to submit evidence of approval or registration from the authorities with respect to the foreign currency used for offshore investments. However, since the PRC authorities and the commercial banks designated by the SAFE to conduct foreign exchange services have discretion in interpreting, implementing and enforcing the foreign exchange rules and regulations, and for many other factors that are beyond our control and anticipation, we cannot assure you that our operations will not be deemed by the authorities as providing currency conversion services or otherwise violating the foreign exchange laws and regulations. In such cases, we may be asked to take additional and burdensome measures to monitor the source and use of the foreign currency funds in the accounts of our clients and verify evidence of approval obtained by our clients from the authorities, and we may also be subject to regular inspections from the authorities from time to time, warnings, correction orders, condemnation and fines, suspension or termination of certain of our operations. If any of such events occurs, our business, financial condition, results of operations and prospects may be materially and adversely affected.
Any future change in the regulatory and legal regime for the securities brokerage and wealth management industries may have a significant impact on our business model.
Securities brokerage and wealth management industries have been subject to an increasingly regulated environment in recent years, and penalties and fines sought by regulatory authorities have also increased. This regulatory and enforcement environment has created uncertainties with respect to various types of products and services that historically had been offered by us and that were generally believed to be permissible and appropriate. Changes in rules promulgated by government agencies and self-regulatory organizations in various jurisdictions that oversee our businesses, and changes in the interpretation or enforcement of existing laws and rules, such as the potential imposition of transaction taxes, may directly affect our model of operations and profitability.
In addition, to continue to operate and expand our services internationally, we may be required to comply with the regulatory regime of each jurisdiction where we conduct, or intend to conduct business, the requirements of which may not be clearly defined. The varying compliance requirements across different jurisdictions, which again can often be ambiguous, may limit our ability to continue our existing multinational operations or to further expand our business internationally. For example, we face significant legal uncertainties as to whether the CSRC would require us to obtain certain licenses or permits relating to our activities in China given the fact that most of our technology, customer services and administrative teams are based in China, or whether the CSRC would view our current or previous business operations in China as non-compliant with the regulatory regime. See also “—We do not hold any licenses or permits for providing securities brokerage services in China. If some of our activities in China are considered by the authorities as provision of securities brokerage services, investment consulting services or otherwise conducting securities businesses in China, our business, financial condition, results of operations and prospects may be materially and adversely affected.” We could be subject to disciplinary or other actions in the future due to alleged or deemed non-compliance, which could have a material adverse effect on our business, financial condition and results of operations.
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We may from time to time be subject to claims, controversies, lawsuits and legal proceedings, which could have a material adverse effect on our results of operations, financial condition, liquidity, cash flows and reputation.
We may from time to time become subject to or involved in various claims, controversies, lawsuits, and legal proceedings. However, claims, lawsuits, and litigation are subject to inherent uncertainties, and we are uncertain how they will develop. Lawsuits and litigation may cause us to incur significant litigation costs, utilize a significant portion of our resources and divert management’s attention from our day-to-day operations, any of which could harm our business. Any unfavorable settlements or judgments against us could have a material adverse impact on our results of operations, financial condition, liquidity and cash flows. In addition, negative publicity regarding claims or judgments made against us may damage our reputation and may result in a material adverse impact on us.
We and PICC Property and Casualty Company Limited Guangdong Branch, or PICC, are pursuing legal actions against each other. In May 2020, we commenced a legal proceeding against PICC by submitting a complaint with a local court in Beijing for contract non-performance under the cooperation agreement between us and PICC. We, together with our legal counsel of the case, determined that PICC has breached its contractual obligations under the cooperation agreement for not paying service fees that were due to us. We are seeking payments of approximately RMB2.3 billion from PICC to cover the outstanding service fees and related late payment losses. After our legal action was filed against PICC, PICC filed a civil lawsuit against us at a local court in Guangzhou claiming that the second amendment under the cooperation agreement is invalid, and therefore PICC is not obligated to pay any outstanding service fees and that a portion of the service fees paid to us under the cooperation agreement plus accrued interest should be refunded to PICC. The court proceedings in Beijing and Guangzhou were later consolidated. Currently, the consolidated court proceeding has concluded with the ruling pending. Although the hearing process has been completed, under applicable legal procedures, the court may schedule additional hearings, which could further delay resolution of the matter and increase related costs and uncertainty. If we do not prevail in these lawsuits completely or in part, or fail to reach a favorable settlement with PICC, our results of operations, financial condition, liquidity and prospects would be materially and adversely affected.
In addition, from time to time, we are subject to legal proceedings in relation to the operation of our business and legacy business. Starting from 2023, each of Jiufu Puhui and Jiufu Shuke has been named as a co-defendant, in their respective capacity as the operator of an online lending information intermediary platform offering online wealth management products to investors, by loan investors in a large number of small claims initiated in local courts in China in relation to our legacy business. See “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Legal Proceedings.” In relation to such legal proceedings, certain assets of the Company, in an aggregate amount of approximately RMB231.0 million, were subject to judicial freezing orders as of March 31, 2026.
We cannot guarantee the profitability of investments made through our platform and our business and reputation may be harmed by events beyond our control.
As a provider of securities brokerage services, wealth management services and investment banking services, we cannot guarantee the profitability of investments made through our platform. The profitability of our clients’ investments as well as our business, results of operations and reputation are directly affected by elements beyond our control, such as economic and political conditions, changes in the volatility in financial markets, significant increases in the volatility or trading volume of particular securities, broad trends in business and finance, changes in volume of securities transactions, changes in the markets in which such transactions occur and changes in how such transactions are processed. These elements can arise suddenly and the full impact of such conditions remain uncertain.
Unfavorable financial markets and economic conditions in Asia and elsewhere in the world could negatively affect our clients’ business and materially reduce demand for our services and increase price competition among financial services firms seeking such engagements, and thus could materially and adversely affect our business, financial condition, and results of operations.
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In addition, a prolonged weakness in the U.S. or Hong Kong stock markets or in specific securities or a general economic downturn could cause our users to incur losses, which in turn could cause our brand and reputation to suffer. If our reputation is harmed, the willingness of our existing users, and potential new users, to use our services could be negatively impacted, which would adversely affect our business, financial condition and results of operations. Some of our users may also seek to hold us responsible when they suffer a financial loss on trades executed through our platform, or if such trades are not as profitable as they have expected. They may seek to recover their damages from us or bring lawsuits against us which would harm our reputation and adversely affect our business, financial condition and results of operations.
At the same time, our business also includes financing guarantee services. During the course of our operations, we may incur corresponding operational losses due to significant losses in our clients’ investments. Due to the nature of this related business, the risk of such operational losses is inherent and cannot be effectively mitigated through the standardized business processes we have established. Therefore, market fluctuations may have adverse impacts on our business in multiple dimensions.
If we are not able to respond to changes in user preferences for our products and services and provide a satisfactory user experience, or our existing and new products and services do not maintain or achieve sufficient market acceptance, we will not be able to maintain and expand our user base and increase user activities, and our financial results and competitive position will be harmed.
We believe that our user base and partners network are the cornerstone of our business. Attracting new users and partners is critical to the continued success of our business. We strategically focus on serving the younger generation and seek to cultivate user loyalty. Our ability to attract and retain users and partners largely depends on whether we can effectively address their needs. Moreover, we depend on our existing user base to build user loyalty, grow with our users and offer them better products and services. Our ability to maintain and expand our user base depends on a number of factors, including our ability to develop other products and services, and our ability to provide relevant and timely products and services to meet changing user needs. We have devoted significant resources to, and will continue to emphasize on, upgrading and marketing our products and services. We also incur expenses and expend resources upfront to develop, acquire and market new products and services that incorporate additional features, improve functionality or otherwise make our products more desirable to our users and partners. New products must achieve high levels of market acceptance in order for us to recoup our investment in developing and/or acquiring them and in bringing them to market. If we fail to retain our existing users or to offer products and services that cater to their evolving needs, we may not be able to capture their long-term growth potential, and our business and results of operations may be adversely affected.
Furthermore, prior to the discontinuation of our online lending information intermediary business, our legacy products constituted a significant portion of the online wealth management products we offered. Investors of legacy products may not wish to invest in securities or other wealth management products due to their profit/risk appetite. Although we have been developing other online wealth management products and services, we cannot guarantee that they will, and will continuously, retain and attract new investors. If the market acceptance of the online wealth management products offered by us, or such products in general, declines, and we fail to retain our investors by developing and promoting other wealth management products as alternative investment portfolio options for investors, we may suffer a shrinkage of our investor base, and our business, operating results and financial condition will be adversely impacted.
Loss of or failure to maintain relationships with our partners or implement our strategy to develop new relationships with other potential partners may materially and adversely affect our business and results of operations.
We anticipate that we will continue to leverage relationships with existing partners to grow our business while pursuing new relationships with additional partners. For example, our success depends in part on our ability to provide our partners with desirable and competitive technology empowerment services that capture both the core demand of our partners and the development trajectory of the industries they operate in. If we fail to cater to our partners’ evolving needs, or fail to offer competitive services in a timely manner in response to growing competition, we may not be able to retain our partners or to expand our partnership network, and as a result our results of operations will be negatively and materially impacted.
Pursuing, establishing and maintaining relationships with partners require significant time and resources. Our current agreements with our partners generally do not prohibit them from working with our competitors or from offering competing services. Our competitors may be more effective in incentivizing our partners to favor their products or services, which may in turn make our products and services less attractive to our partners. In addition, certain partners may suspend or terminate their cooperation with us, or may not perform as expected under our agreements with them, and we may have disagreements or disputes with them, which could adversely affect our brand and reputation. Furthermore, our partners may build their own in-house solutions team and devote more resources to support their own competing business. If we cannot successfully enter into and maintain effective relationships with our partners, our business will be harmed.
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Moreover, if any of our partners decides to suspend or terminate its cooperation with us, or fails to perform properly, we cannot assure you that we will be able to find an alternative in a timely and cost-efficient manner or at all. Any of these occurrences could result in our diminished ability to operate our business, potential liability to our users and partners, inability to attract users and partners, reputational damage, regulatory intervention and financial harm, which could negatively impact our business, financial condition and results of operations and could negatively affect the value of your investment.
We may not be able to ensure the accuracy of information relating to third-party products or the authenticity of third-party wealth management products on our platform, and we have limited control over performance of investment products we market.
We offer other onshore and offshore investment products such as stock investments, insurance and fund investment products. Certain underlying wealth management products are offered by third-parties. The acceptance and popularity of our platform are partially premised on the reliability of the underlying wealth management products and information on our platform. We rely on third-party providers of the relevant wealth management products for the authenticity of their underlying products and the comprehensiveness, accuracy and timeliness of the related financial information. While the products and information from these third-party providers have been generally reliable, there can be no assurance that the reliability can be maintained in the future. If these third-party providers or their agents provide false financial products or incomplete, misleading, inaccurate or fraudulent information, we may lose the trust of existing and prospective investors. In addition, if our investors purchase the underlying wealth management products that they find on our platform and suffer losses, they may consider us culpable and attempt to hold us responsible for their losses, even though we have made risk disclosures before they invest. Our reputation could be harmed and we could experience reduced user traffic on our platform, which would adversely affect our business and financial performance.
Furthermore, as investors access the underlying wealth management products through our platform, they may have the impression that we are at least partially responsible for the quality of these products. Although we have established standards to screen product providers before they are allowed to sell their products on our platform, we have limited control over the performance of the investment products we distribute. In the event that an investor is dissatisfied with the underlying products or the services of a product provider, we do not have any means to directly address these issues in response to user complaints. If investors become dissatisfied with the underlying wealth management products available on our platform, our business, reputation, financial performance and prospects could be materially and adversely affected.
Fraudulent or illegal activities associated with our users and business partners could negatively impact our brand and reputation and result in a loss of users. As a result, our business may be materially and adversely affected.
We remain subject to the risk of fraudulent or illegal activities associated with our users and business partners. The resources, technologies and fraud detection tools we have employed may be insufficient to accurately detect and prevent fraudulent or illegal activities. Significant increases in fraudulent or illegal activities could negatively impact our brand and reputation and therefore harm our operating and financial results. Any misbehavior of or violation by our users of applicable laws and regulations could lead to regulatory inquiries and investigations that involve us, which may affect our business operations and prospects. We might also incur higher costs than expected in order to take additional steps to reduce risks related to fraudulent and illegal activities. High-profile fraudulent or illegal activities could also lead to regulatory intervention, and may divert our management’s attention and cause us to incur additional regulatory and litigation expenses and costs. Although we have not experienced any material business or reputational harm as a result of fraudulent or illegal activities in the past, we cannot rule out the possibility that any of the foregoing may occur and thereby causing harm to our business or reputation in the future. If any of the foregoing were to occur, our results of operations and financial condition could be materially and adversely affected.
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We face risks related to our “know-your-client” procedures when our clients provide outdated, inaccurate, false or misleading information.
We collect personal information during the account opening and registration process for our wealth management business. Although we require our clients to submit documents for the proof of their identity and address for completing the account registration process and to update such information from time to time, we face the risks that information provided by our clients may be outdated, inaccurate, false or misleading. Although the fact that we have appropriate ongoing monitoring procedures in place to keep customer information up to date pursuant to applicable regulatory requirements, we cannot fully verify the accuracy, currency and completeness of such information beyond reasonable effort. For example, certain of our users are holders of the PRC identity cards. As the PRC identity cards are usually valid for more than ten years with some having no expiration term at all, certain clients may have changed their domicile or citizenship during the validity of their PRC identity cards and therefore be subject to applicable laws and regulations of jurisdictions other than the PRC. In this situation, our provision of products and services to such clients could be in violation of applicable laws and regulations in the jurisdictions where those clients reside, of which we may not be aware until we are warned by the regulatory authorities. We could be subject to legal or regulatory sanctions, fines or penalties, financial loss, or damage to our reputation resulting from such violations.
Misconduct, mistakes and malperformance of our employees and third-party service providers could harm our business and reputation.
We are exposed to many types of operational risks, including the risk of misconduct and mistakes of our employees and third-party service providers. Our business depends on our employees and third-party service providers to interact with our users and partners we collaborate with and to process large numbers of transactions, both of which involve the use and disclosure of personal information. We could be materially adversely affected if transactions were redirected, misappropriated, hacked or otherwise improperly executed, if personal information was disclosed to unintended recipients or if an operational breakdown or failure in the processing of transactions occurred, whether as a result of human error, intentional sabotage or fraudulent manipulation of our operations or systems. It is not always possible to identify, prevent and deter misconduct or mistakes of employees or third-party service providers, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses. If any of our employees or third-party service providers take, convert or misuse funds, documents or data or fail to follow protocol when interacting with users, we could be liable for damages and subject to regulatory actions and penalties. We could also be perceived to have facilitated or participated in the illegal misappropriation of funds, documents or data, or the failure to follow protocol, and therefore be subject to civil or criminal liability.
We are subject to consumer protection laws that could require us to modify our current business practices and incur increased costs.
Our e-commerce business is currently offered through third-party e-commerce platforms and covers seven major categories of merchandise. We are subject to numerous PRC laws and regulations that regulate retailers generally or govern online retailers specifically, such as the Consumers’ Rights Protection Law. If these regulations were to change or if we or our suppliers or third party e-commerce platforms we cooperated were to violate them, the costs of certain products or services could increase, or we could be subject to fines or penalties or suffer reputational harm, which could reduce demand for the products or services offered by us and hurt our business and results of operations. For example, the amended PRC Consumers’ rights Protection Law, which became effective in March 2014, strengthens the protection of consumers and imposes more stringent requirements and obligations on business operators, especially on businesses that operate on the internet. Pursuant to the PRC Consumers’ Rights Protection Law, except for certain types of products, such as custom-made goods, fresh and perishable goods, consumers are generally entitled to return goods purchased within seven days upon receipt without giving any reasons if they purchased the goods over the internet. Consumers whose interests have been damaged due to their purchase of goods or acceptance of services on online marketplace platforms may claim damages from merchants or service providers. Moreover, if business operators deceive consumers or knowingly sell substandard or defective products, they should not only compensate consumers for their losses, but also pay additional damages equal to three times the price of the goods or services. Legal requirements are frequently changed and subject to interpretation, and we are unable to predict the ultimate cost of compliance with these requirements or their effect on our operations. We may be required to make significant expenditures or modify our business practices to comply with existing or future laws and regulations, which may increase our costs and materially limit our ability to operate our e-commerce business. Furthermore, on March 15, 2024, the Implementing Rules of the Consumers’ Rights Protection Law of the People’s Republic of China was released and came into effect on July 1, 2024. These rules further specify the obligations stipulated in the Consumers’ Rights Protection Law, such as protecting consumers personal and property safety, handling of defective products, prohibiting fraudulent advertising and unfair practices in standard terms, price transparency, quality guarantee, and protecting consumers’ personal information.
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Any failure by our third-party service providers to comply with applicable anti-money laundering and anti-terrorism financing laws and regulations could damage our reputation.
Currently, we rely on our third-party service providers to have their own appropriate anti-money laundering policies and procedures. If any of our third-party service providers fails to comply with applicable anti-money laundering laws and regulations, our reputation could suffer and we could become subject to regulatory intervention, which could have a material adverse effect on our business, financial condition and results of operations.
In addition, the Administrative Measures for Anti-money Laundering and Counter-terrorism Financing by Internet Finance Service Agencies (for Trial Implementation) promulgated by the government authorities have imposed on us the obligation of anti-money laundering and anti-terrorism financing, including the verification of customer identification, the reporting of suspicious transactions, and the preservation of customer identification information and transaction records. While we have formulated and adopted policies and procedures, including internal controls and “know-your-customer” procedures, aimed at preventing money laundering and terrorism financing, we cannot assure you that the anti-money laundering and anti-terrorism financing policies and procedures we have adopted will be effective in protecting our platform from being exploited for money laundering or terrorism financing purposes or will be deemed to be in compliance with applicable anti-money laundering and anti-terrorism financing laws and regulations.
Any negative publicity with respect to us, the industries we are operating in and our partners may materially and adversely affect our business and results of operations.
Our reputation is critical to our business and competitiveness. Factors that are vital to our reputation include but are not limited to our ability to:
| ● | maintain the quality and reliability of our products and services; |
| ● | provide our users and partners with a superior experience; |
| ● | effectively manage and resolve user complaints; and |
| ● | effectively protect personal information and privacy of users. |
Any allegation or negative reporting made by the media or any other parties regarding the foregoing, or with regard to, among others, our management, business, compliance with laws, financial condition or prospects, whether with merit or otherwise, could significantly harm our reputation and our business and operating results.
As the industries we are operating in or are expanding into are new and the regulatory framework for these industries is also evolving, negative publicity about these industries may arise from time to time. Such general negative publicity about the industries we are operating in may also have an adverse impact on our reputation, regardless of whether we have actually engaged in any inappropriate activities. The violation of applicable regulations by any participant in the industries we operate in or are expanding into may adversely impact the reputation of the industries as a whole.
In addition, negative publicity about our partners, third party service providers or other counterparties, such as any failure by them to adequately protect the information of our users, to comply with applicable laws and regulations or to otherwise meet required quality and service standards, could harm our reputation. If any of the foregoing occurs, our business and results of operations could be materially and adversely affected.
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Our failure to compete effectively could adversely affect our results of operations and market share.
The industries we are operating in and we are expanding into are competitive and evolving.
Our competitors may operate with different business models, have different cost structures or participate selectively in different market segments. They may ultimately prove more successful or more adaptable to new regulatory, technological and other developments. Some of our current and potential competitors have significantly more financial, technical, marketing and other resources than we do and may be able to devote greater resources to the development, promotion, marketing, sale and support of their products and services. Our competitors may also have more extensive user bases, greater brand recognition and brand loyalty and broader partnership networks than us. Additionally, a current or potential competitor may acquire one or more of our competitors or form a strategic alliance with all or any of them. Any of the foregoing could adversely affect our business, results of operations, financial condition and future growth. In addition, our competitors may be more capable at developing new products and services, responding faster to new technologies and undertaking more extensive marketing campaigns. When new competitors seek to enter our target market, or when existing market participants seek to increase their market share, they may resort to the undercutting of market-standard pricing and terms, which could adversely affect our market share or ability to exploit new market opportunities. Our pricing and terms could become less favorable if we fail to meet these competitive challenges. Furthermore, to the extent that our competitors are able to offer more attractive terms to our partners, such partners may choose to terminate their relationships with us.
In addition, the industries we are operating in or are expanding into are subject to rapid and significant technological changes. In order to compete in these industries and pursue our technology empowerment strategies, we need to continue to make significant investments in developing technologies across all areas of our business, such as artificial intelligence, information privacy security, and other emerging new technologies. Incorporating new technologies into our products and services may require substantial expenditures and take considerable time, and may eventually not be successful. If we are unable to compete effectively and meet the need for innovation in the industries we are operating in or are expanding into, the demand for our products and services could plateau or significantly decline, we could experience reduced revenues or our platform could fail to achieve or maintain more widespread market acceptance, any of which could harm our business and results of operations.
If we fail to promote and maintain our brand in a cost-efficient way, we may lose market share and our revenue may decrease.
We believe that developing and maintaining the awareness of our brand is critical to achieving widespread acceptance of our products and services, gaining trust in our brand and attracting new users and partners. The successful promotion of our brand will depend largely on the effectiveness of our marketing efforts, the popularity of the channels we use to promote our platform, and the user experience we provide on our platform. Historically, our efforts to build our brand have incurred significant expense, and it is likely that our future marketing efforts will require us to incur significant additional marketing expenses. In 2023, 2024 and 2025, our sales and marketing expenses were RMB27.8 million, RMB14.1 million and RMB12.4 (US$1.8 million), respectively. These brand promotion activities may not increase our revenues immediately or at all, and, even if they do, any revenue increases may not offset the expenses we incur to promote our brand. If we fail to successfully promote and maintain our brand, or if we incur substantial expenses in an unsuccessful attempt to promote and maintain our brand image, we may lose our existing users to our competitors or be unable to attract new users, which may cause our revenue to decrease and negatively impact our business and results of operations.
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We collect, store, process and use certain personal information and other sensitive data from our users and partners and our business is subject to complex and evolving laws and regulations regarding cybersecurity, information security, privacy and data protection in China and other jurisdictions.
Our platform collects, stores, processes and uses certain personal information and other sensitive data from our users and partners. There are numerous laws governing privacy and the storage, sharing, use, disclosure and protection of personally identifiable information and user data. Specifically, personally identifiable and other confidential information is increasingly being governed by legislation and regulations in China, Hong Kong and elsewhere. The regulatory framework and enforcement regime regarding cybersecurity, information security, privacy and data protection have been constantly evolving in China, Hong Kong and worldwide and are likely to remain uncertain for the foreseeable future. We could be adversely affected if legislation or regulations in China, Hong Kong and elsewhere in the world where we have business operations or are expanding into, require changes in business practices or privacy policies, or if the governmental authorities in China, Hong Kong and elsewhere in the world where we have business operations or are expanding into, interpret or implement their legislation or regulations in ways that negatively affect our business, financial condition and results of operations.
For comprehensive discussions on the PRC laws and regulations with respect to cybersecurity, data security and privacy protection issues, see “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Related to Our Business Operation in China—Regulations Related to Cybersecurity, Data Security and Privacy Protection.”
We expect that the operations in the areas referenced above will receive greater public scrutiny and attention from regulators and more frequent and rigid investigation or review by regulators, which will increase our compliance costs and subject us to heightened risks. We are constantly in the process of evaluating the potential impact of the Cyber Security Law, the Civil Code, the Data Security Law, the Personal Information Protection Law and other laws and regulations on our current business practices. We have not experienced any material breaches of any of our cyber-security measures and we believe that we have complied with such laws and regulations regarding cybersecurity, information security, privacy and data protection in all material aspects. However, we cannot assure you that the measures we have taken or will take are or will be adequate under the Cyber Security Law, the Civil Code, the Data Security Law, the Personal Information Protection Law or any other applicable laws or regulations. If further changes to our business practices are required under the evolving regulatory framework governing cybersecurity, information security, privacy and data protection in China, Hong Kong or elsewhere, our business, financial condition and results of operations may be adversely affected. Furthermore, we use certain data collected from external data sources to verify information of our users in compliance with industry practice. In the event that the collection or provision of such data by any of our external data sources is considered to be in violation of the Cyber Security Law, the Civil Code, the Data Security Law, the Personal Information Protection Law or any other applicable laws and regulations, we may not be able to use such data for our credit assessment and our business may be materially and adversely affected.
As of the date of this annual report, we have not been informed that we are a critical information infrastructures operator or a “data processor” carrying out data processing activities that affects or may affect national security by any governmental authorities, and it is uncertain whether we would be categorized as such under PRC laws. We cannot rule out the possibility that the foregoing measures may be enacted, interpreted or implemented in ways that will negatively affect us. There is also no assurance that we would be able to complete the applicable cybersecurity review procedures in a timely manner, or at all, if we are subject to the same. If we fail to comply with applicable cybersecurity and data privacy regulations (including any failure or delay in the completion of the cybersecurity review procedures if applicable), we may be subject to government investigations and enforcement actions, fines, penalties, suspension of our non-compliant operations, and removal of our app from app stores, among other sanctions, which could materially and adversely affect our business and results of operations. As of the date of this annual report, we have not been involved in any investigations or cybersecurity review made by the CAC and we have not received any inquiry, notice, warning, or sanctions in this respect.
In addition to laws, regulations and other applicable rules regarding cybersecurity, information security, privacy and data protection, industry associations and other private parties may propose and adopt new and different privacy standards. All of these may be drafted, interpreted and applied in a manner that is inconsistent with our practices. Any inability to adequately address privacy concerns, even if unfounded, or failure to comply with such standards, could result in inquiries and other proceedings or actions against us by governmental authorities, users, consumers or others, such as warnings, fines, penalties, required rectifications, service suspension or removal of our apps from app stores and/or other sanctions, as well as negative publicity and damage to our reputation, which could cause us to lose customers and business partners and have an adverse effect on our business and results of operations.
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Our ability to protect the confidential information of our users and our ability to conduct our business may be adversely affected by cyber-attacks, computer viruses, physical or electronic break-ins or similar disruptions.
The massive amount of data that we have collected and stored make us and the third-party service providers who host our servers, targets of and potentially vulnerable to cyber-attacks, computer viruses, physical or electronic break-ins, or similar disruptions. While we have taken steps to protect the confidential information that we have access to and put in place internal procedures relating to material cybersecurity incidents, 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 preventive measures. Any accidental or willful security breaches or other unauthorized access to our platform could cause, among other things, confidential user information to be leaked or stolen and used for illegal or criminal purposes and could result in misappropriation of funds of our users. Security breaches or unauthorized access to confidential information could also expose us to liability related to the loss of information and losses suffered by our users that arise from the misappropriation of funds or otherwise, time-consuming and expensive litigation and negative publicity. If security measures are breached because of any third-party action, employee error, malfeasance or otherwise, or if design flaws in our technology infrastructure are exposed and exploited, our relationships with users could be severely damaged, we could incur significant liability and our business and operations could be adversely affected.
In addition, we rely on the massive amount of data and user information that we have accumulated over time to conduct our business. If this data is lost, stolen or compromised due to cyber-attacks, computer viruses, physical or electronic break-ins, or similar disruptions, our business could be adversely affected.
Any significant disruption in our information technology systems, including events beyond our control, could prevent us from offering our products and services, thereby reducing the availability of our products and services and result in a loss of users and revenues.
In the event of a system outage and physical data loss, our ability to provide our products and services would be materially and adversely affected. The satisfactory performance, reliability and availability of our technology and our underlying network infrastructure are critical to our operations, user services, reputation and our ability to attract new and retain existing users. Our information technology system infrastructure is currently deployed through and our data is currently maintained mainly through third-party cloud computing service providers in China. Our operations depend on their ability to protect their and our systems in their facilities against damage or interruption from natural disasters, power or telecommunications failures, air quality issues, environmental conditions, computer viruses or attempts to harm these systems, criminal acts and other similar events. Although historically we have not experienced any system outages resulting in material interruption to our services, we cannot assure you that such incidents will not occur in the future. Moreover, if our arrangement with the service provider is terminated or if there is a lapse of service or damage to their facilities, we could experience interruptions in our service as well as delays and additional expense in arranging services to users.
Any interruptions or delays in our services, whether as a result of third-party error, our error, natural disasters or security breaches, whether accidental or willful, could harm our relationships with our users and our reputation. We also may not have sufficient capacity to recover all data and services in the event of an outage. These factors could prevent us from continuing our business operations, damage our brands and reputation, divert our employees’ attention, reduce our revenue, subject us to liability and cause users to shun our products and services, any of which could adversely affect our business, financial condition and results of operations.
The offering of our products and services depends on the effective use of mobile operating systems and the efficient distribution through mobile app stores, over which we have no control.
Our products and services are mainly offered through mobile apps. It is difficult to predict the problems we may encounter in developing applications for newly released devices and platforms, and we may need to devote significant resources to the development, support and maintenance of such applications. We are dependent on the interoperability of popular mobile operating systems, such as Android and iOS, in providing our products and services over which we have no control, and any changes in such systems that reduce the accessibility of our products and services or give preferential treatment to competing products and services could adversely affect the usability of our products and services on mobile devices. In addition, we rely on third-party mobile app stores for users to download our mobile apps. As such, the promotion, distribution and operation of our mobile apps are subject to these app stores’ standard terms and policies for app developers.
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Our future growth and results of operations could suffer if we experience difficulties in offering our products and services through our apps on mobile devices, if problems arise with respect to our relationships with providers of mobile operating systems or mobile app stores, or if we have to incur increased costs to distribute or to have users access our apps on mobile devices. In the event that it is more difficult for our users to access and utilize our products and services on their mobile devices, or if our users choose not to access or use our products and services on their mobile devices or to use mobile operating systems that do not offer access to our products and services, we may lose our users and experience a reduction in user retention, and our business and financial condition and operating results may be adversely affected.
Our operations depend on the performance of the internet infrastructure and telecommunications networks in China, Hong Kong and in other regions that we operate.
Our system’s infrastructure is currently deployed through and our data is currently and mainly maintained on third-party cloud computing services platform. Our cloud computing service provider may rely on a limited number of telecommunication service providers to provide it with data communications capacity through local telecommunication lines and internet data centers to host its servers. Such service provider may have limited access to alternative networks or services in the event of disruptions to, failures of or other problems associated with the basic internet infrastructure in China, Hong Kong or in other regions that we operate, or the fixed telecommunication networks provided by telecommunication service providers. Specifically, almost all access to internet in China is maintained through state-owned telecommunication operators under the administrative control and regulatory supervision of the Ministry of Industry and Information Technology. With the expansion of our business, we may be required to upgrade our technology and infrastructure to keep up with increasing traffic. We cannot assure you that our cloud computing service provider and the underlying internet infrastructure and the fixed telecommunication networks in China, Hong Kong and in other regions that we operate will be able to support the continued growth in internet usage.
In addition, we have no control over the costs of the services provided by telecommunication service providers which in turn, may affect our costs of utilizing customized cloud computing services. If the prices we pay for third-party cloud computing services rise significantly, our results of operations may be adversely affected. Furthermore, if internet access fees or other charges to internet users increase, our user traffic may decline and our business may be harmed.
Our platform and internal systems rely on software that is highly technical, and if it contains undetected errors, our business could be adversely affected.
Our platform and internal systems rely on software that is highly technical and complex. In addition, our platform and internal systems depend on the ability of such software to store, retrieve, process and manage immense amounts of data. The software on which we rely has contained, and may now or in the future contain, undetected errors or bugs. Some errors may only be discovered after the code has been released for external or internal use. Errors or other design defects within the software on which we rely may result in a negative experience for users using our platform, delay introductions of new features or enhancements, result in errors or compromise our ability to protect user data or our intellectual property. Any errors, bugs or defects discovered in the software on which we rely could result in harm to our reputation, loss of users or liability for damages, any of which could adversely affect our business, results of operations and financial condition.
Our products and services contain open-source software, which may pose particular risks to our proprietary software, products and services in a manner that negatively affect our business.
We use open-source software in our products and services and will use open-source software in the future. There is a risk that open-source software licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to provide or distribute our products or services. Additionally, we may face claims from third parties claiming ownership of, or demanding release of, the open-source software or derivative works that we developed using such software. These claims could result in litigation and could require us to make our software source code freely available, purchase a costly license or cease offering our products or services unless and until we can re-engineer them to avoid infringement. This re-engineering process could require significant additional research and development resources, and we may not be able to complete it successfully.
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Furthermore, because any software source code we contribute to open-source projects is publicly available, our ability to protect our intellectual property rights with respect to such software source code may be limited or lost entirely. As a result, we may be unable to prevent our competitors or others from using such software source code contributed by us.
We may not be able to prevent unauthorized use of our intellectual property, which could reduce demand for our services, adversely affect our revenues and harm our competitive position.
We rely primarily on a combination of copyright, trademark and trade secret laws and contractual rights to establish and protect our intellectual property rights in our services, credit risk management procedures and policies and other aspects of our business. The steps we have taken or will take in the future to protect our intellectual property from infringement, misappropriation or piracy may be insufficient. Any inability or failure to protect our intellectual property could adversely impact our business, results of operations and financial condition.
As of the date of this annual report, we have registered a series of intellectual property rights for our business under our name in the PRC and Hong Kong. We cannot guarantee that any of our present or future intellectual property rights will not lapse or be invalidated, circumvented, challenged, or abandoned. Current or potential competitors may use our intellectual property without our authorization in the development and marketing of services that are substantially equivalent or superior to ours, which could reduce demand for our services, adversely affect our revenues and harm our competitive position.
Even if we were to discover evidence of infringement or misappropriation, our recourse against such competitors may be limited or could require us to pursue litigation, which could involve substantial costs and diversion of management’s attention from the operation of our business.
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 will not infringe upon or otherwise violate trademarks, patents, copyrights, know-how or other intellectual property rights held by third parties. We may from time to time in the future be subject to legal proceedings and claims relating to the intellectual property rights of others. In addition, there may be third-party trademarks, patents, copyrights, know-how or other intellectual property rights that are infringed by our products, services or other aspects of our business without our awareness. Holders of such intellectual property rights may seek to enforce such intellectual property rights against us in China, the United States or other jurisdictions. If any third-party infringement claims are brought against us, we may be forced to divert management’s time and other resources from our business and operations to defend against these claims, regardless of their merits.
Additionally, the application and interpretation of China’s intellectual property right laws and the procedures and standards for granting trademarks, patents, copyrights, know-how or other intellectual property rights in China are still evolving, and we cannot assure you that PRC courts or regulatory authorities would agree with our analysis. If we were 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. As a result, our business and results of operations may be materially and adversely affected.
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We may be held liable for information or content displayed on, retrieved from or linked to our websites and mobile apps, which may materially and adversely affect our business and operating results.
The PRC government has adopted regulations governing the distribution of content over the internet. Under these regulations, internet content providers are prohibited from posting or displaying over the internet any content that, among other things, violates PRC laws and regulations, impairs the national dignity of China or the public interest, or is obscene, superstitious, frightening, gruesome, offensive, fraudulent or defamatory. In addition to our website, we also offer our products and services through our mobile apps, which are regulated by the Administrative Provisions on Mobile Internet Applications Information Services, or the APP Provisions, which was amended on June 14, 2022 and became effective on August 1, 2022. According to the APP Provisions, the providers of mobile apps shall not create, copy, publish or distribute information and content that is prohibited by laws and regulations. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Related to Our Business Operation in China—Regulations Related to Value-added Telecommunication Services—Regulations related to mobile internet applications information services.” At the end of 2019, the CAC issued the Provisions on the Management of Network Information Content Ecology, or the CAC Order No. 5, which became effective on March 1, 2020, to further strengthen the regulation and management of network information content. See “Item 4. Information on the Company—B. Business Overview—Regulation —Regulations Related to Our Business Operation in China—Regulations Related to Cybersecurity, Data Security and Privacy Protection.” We have implemented internal control procedures to screen the information and content on our websites and mobile apps to ensure their compliance with the APP Provisions, CAC Order No. 5 and other applicable PRC laws and regulations. However, we cannot assure you that all information or content displayed on, retrieved from or linked to our websites and mobile apps complies with the requirements of PRC laws and regulations at all times. If our websites or mobile apps were found to be violating PRC laws and regulations, we may be subject to administrative penalties, including warning, service suspension or removal of our mobile apps from the relevant mobile app store, which may materially and adversely affect our business and operating results.
From time to time, we may evaluate and potentially consummate strategic investments or acquisitions, which could require significant management attention, disrupt our business and adversely affect our financial results.
We may evaluate and consider strategic investments, combinations, acquisitions or alliances to further increase the value of our platform and better serve our users. These transactions could be material to our financial condition and results of operations if consummated. If we are able to identify an appropriate business opportunity, we may not be able to successfully consummate the transaction and, even if we do consummate such a transaction, we may be unable to obtain the benefits or avoid the difficulties and risks associated with such transaction.
Strategic investments or acquisitions will involve risks commonly encountered in business relationships, including:
| ● | difficulties in assimilating and integrating the operations, personnel, systems, data, technologies, rights, platform, products and services of the acquired business; |
| ● | inability of the acquired technologies, products or businesses to achieve expected levels of revenue, profitability, productivity or other benefits; |
| ● | difficulties in retaining, training, motivating and integrating key personnel; |
| ● | diversion of management’s time and resources from our daily operations; |
| ● | difficulties in maintaining uniform standards, controls, procedures and policies within the combined organizations; |
| ● | difficulties in retaining relationships with customers, employees and suppliers of the acquired business; |
| ● | risks of entering markets in which we have limited or no prior experience; |
| ● | regulatory risks, including remaining in good standing with existing regulatory authorities or receiving any necessary pre-closing or post-closing approvals, as well as being subject to the oversight of new regulators which regulate an acquired business both domestically and internationally; |
| ● | assumption of contractual obligations that contain terms that are not beneficial to us, require us to license or waive intellectual property rights or increase our risk for liability; |
| ● | failure to successfully further develop the acquired technology; |
| ● | liability for activities of the acquired business undertaken before the acquisition, including intellectual property infringement claims, violations of laws, commercial disputes, tax liabilities and other known and unknown liabilities; |
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| ● | lack of sufficient power or influence over the business we invest in; |
| ● | potential disruptions to our ongoing businesses; and |
| ● | unexpected costs and unknown risks and liabilities associated with strategic investments or acquisitions. |
We may not make any investments or acquisitions, and our future investments or acquisitions may not be successful, may not benefit our business strategy, may not generate sufficient revenues to offset the associated acquisition costs and may not otherwise result in the intended benefits. In addition, we cannot assure you that any future investment in or acquisition of new businesses or technology will lead to the successful development of new or enhanced products and services or that any new or enhanced products and services, if developed, will achieve market acceptance or prove to be profitable.
We are subject to potential exposure to allegations of professional misconduct liability with respect to our business operations in Hong Kong.
Our business operations in Hong Kong involve the provision of professional advice to clients on stock investments by professionals employed by us. A client who suffers loss due to his/her reliance on the advice given by our subsidiary operating such business may have a legal cause of action against it, its employees or us for damages, compensation and/or other relief.
Although we have adopted certain internal control measures to minimize the risk of negligence and/or infidelity of our employees with respect to our operation in Hong Kong, there is no assurance that these risks can be eliminated with respect to our operation in Hong Kong. We still owe a duty of care towards our clients to exercise proper skill and/or care, and could be potentially liable for breaches in failure to carry out such duty of care resulting in a loss. Furthermore, as we do not maintain any insurance for allegations relating to professional negligence or employee infidelity, we are exposed to potential liabilities resulting from these allegations.
If there is any allegation of negligence and/or employee infidelity brought against us or our employees, we may be exposed to legal and/or other proceedings in Hong Kong which may result in substantial costs and diversion of resources and management’s attention. It may also have an adverse impact on our profitability, financial position and reputation.
We are subject to extensive regulatory requirements with respect to our business operations in Hong Kong and Southeast Asian countries, any non-compliance with which, or changes in these regulatory requirements, may affect our business operations and financial results.
The financial market in Hong Kong in which we operate is highly regulated. There have been and will continue to be changes in rules and regulations from time to time in relation to the regulatory regime of the financial service industry, including, but not limited to, the SFO, the Companies Ordinance, the Companies (Winding Up and Miscellaneous Provisions) Ordinance, the Securities and Futures (Financial Resources) Rules, the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited and the Codes on Takeovers and Mergers and Share Buy-backs issued by the SFC, all as amended, supplemented or otherwise modified from time to time. Any such changes in the rules and regulations may result in an increase in our cost of compliance, or might restrict our business activities. If we fail to comply with these applicable rules and regulations from time to time, we may face fines or restrictions on our business activities or even suspension or revocation of some or all of our licenses for carrying on our business activities.
Furthermore, we are required to be licensed with the regulatory authorities, including without limitation as licensed corporations under the SFO. In this respect, we have to ensure continuous compliance with all applicable laws, regulations and guidelines, and satisfy the SFC, the Hong Kong Stock Exchange and/or other regulatory authorities that we remain fit and proper to be licensed. If there is any change or tightening of the relevant laws, regulations and guidelines, it may materially and adversely affect our business operations.
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We may be subject to regulatory inspection and investigations from time to time. With respect to SFC investigations, we may be subject to secrecy obligations under the SFO whereby we are not permitted to disclose certain information relating to the SFC investigations. In addition, unless we are specifically named as the party that is being investigated under the SFO investigation, we generally do not know whether we, any member of our staff, or any of our respective directors, our responsible officers, or our licensed representatives is the subject of SFC investigations. If the results of the inspections or investigations reveal misconduct, the SFC may take disciplinary actions such as revocation or suspension of licenses, public or private reprimand or imposition of pecuniary penalties against us, our responsible officers or licensed representatives and/or any of our staff. Any disciplinary actions taken against us or penalties imposed on us, our directors, responsible officers, licensed representatives or relevant staff could have an adverse impact on our business operations and financial results.
In addition, our operations in Southeast Asian countries are subject to licensing and other regulatory requirements, the compliance of which will incur additional costs. For example, Meta Securities Pte. Ltd., our Singaporean subsidiary, has obtained a Capital Markets Services license from the Monetary Authority of Singapore in December 2023, for which Meta Securities Pte. Ltd. shall remain subject to compliance requirements. However, we cannot assure you that we can successfully maintain such licenses or continue to obtain licenses necessary to satisfy the needs of our business operations in those countries. If we fail to maintain our current licenses or cannot obtain new licenses as required, our business operations and developments in Southeast Asian countries may be negatively impacted, having an adverse impact on our results of operations and financial condition.
We have granted share options and may continue to grant share options and other types of awards under our equity incentive plans, which may result in increased share-based compensation expenses and a corresponding reduction in our earnings per share.
As of March 31, 2026, options to purchase a total of 8,154,519 Class A ordinary shares of our company were granted to our management and employees and are outstanding. We recorded RMB(72.1) million, RMB(1.0) million, and RMB54 thousands (US$7 thousands) in 2023, 2024 and 2025, respectively, in share-based compensation expenses. We believe the grant of share options and other types of awards is of significant importance to our ability to attract and retain key personnel and employees, and we will continue to grant share options and other types of awards to employees in the future. As a result, our expenses associated with share-based compensation may increase, which may have an adverse effect on our results of operations.
We may not be able to obtain additional capital on favorable terms or at all.
We anticipate that our current cash will be sufficient to meet our current and anticipated needs for general corporate purposes for at least the next 12 months from the date of this annual report. However, we need to make continued investments in facilities, hardware, software, technology systems and to retain talent to remain competitive. Due to the unpredictable nature of the capital markets and the industries we are operating in, we cannot assure you that we will be able to borrow or raise additional capital on terms favorable to us, or at all, if and when required, especially if we experience poor operating results. If adequate loans and/or capital is not available to us as required, our ability to fund our operations, take advantage of unanticipated opportunities, develop or enhance our infrastructure or respond to competitive pressures could be significantly limited, which would adversely affect our business, financial condition and results of operations. If we do raise additional funds through the issuance of equity or convertible debt securities, the ownership interests of our shareholders could be significantly diluted. These newly issued securities may have rights, preferences or privileges senior to those of existing shareholders.
Our interim results may fluctuate significantly and may not fully reflect the underlying performance of our business.
Our interim results of operations, including the levels of our net revenues, expenses, net (loss)/income and other key metrics, may vary significantly in the future due to a variety of factors, some of which are outside of our control, and period-to-period comparisons of our operating results may not be meaningful. Accordingly, the results for any interim period are not necessarily indicative of future performance. Fluctuations in interim results may adversely affect the market price of our ADSs. Factors that may cause fluctuations in our interim financial results include but are not limited to the following:
| ● | our ability to attract new users and partners and maintain relationships with existing ones; |
| ● | the amount and timing of operating expenses related to acquiring users and the maintenance and expansion of our business, operations and infrastructure; |
| ● | network outages or security breaches; |
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| ● | general economic, regulatory, industry and market conditions; |
| ● | our emphasis on user experience instead of near-term growth; |
| ● | natural disasters, health epidemics and other calamities, and any measures taken in response thereto which are beyond our control; and |
| ● | the timing and expenses related to the development or acquisition of technologies or businesses. |
In addition, we may experience seasonality in our business, reflecting seasonal fluctuations in internet usage and traditional personal consumption and investment patterns. As a result, our results of operations could be affected by such seasonality in the future.
Our business depends on the continued efforts of our senior management and key employees. If one or more of our key executives or key employees were unable or unwilling to continue in their present positions, our business may be severely disrupted.
Our business operations depend on the continued services of our senior management, particularly the executive officers named in this annual report. While we have provided different incentives to our management, we cannot assure you that we can continue to retain their services. If one or more of our key executives were unable or unwilling to continue in their present positions, we may not be able to replace them easily or at all and we may incur additional expenses to recruit, train and retain qualified personnel, our future growth may be constrained, our business may be severely disrupted and our financial condition and results of operations may be materially and adversely affected.
Furthermore, we offer international stock investments and insurance brokerage services in Hong Kong. Under the licensing requirements of the SFO, our licensed corporations, Metaverse Securities Limited and Meta Futures Limited, are required to maintain at least two responsible officers to supervise one or more regulated activities as required under the SFO for each type of regulated activities. As of March 31, 2026, we have five responsible officers to supervise Type 1 (dealing in securities) activities, two responsible officers to supervise Type 2 (dealing in future contracts) activities, six responsible officers for Type 4 (advising on securities), three responsible officers to supervise Type 5 (advising on futures contracts) activities, and four responsible officers for Type 9 (asset management) activities under the SFO, and are in compliance with the laws and regulations in Hong Kong. In the event that such responsible officers resign, become disqualified or otherwise ineligible to continue their roles as responsible officers, and if there is no immediate and adequate replacement, this may result in a situation where one or more of the four regulated activities have fewer than two responsible officers. In this case, we will be in breach of the licensing requirements which could adversely affect our licensed corporations’ status, and our business and financial performance will be negatively impacted.
In addition, there is no assurance that any member of our management team will not join our competitors or form a competing business. If any dispute arises between our current or former officers and us, we may have to incur substantial costs and expenses in order to enforce such agreements in China and Hong Kong or we may be unable to enforce them at all.
Competition for employees is intense, and we may not be able to attract and retain the qualified and skilled employees needed to support our business.
We believe our success depends on the efforts and talent of our employees, including software engineering, financial and marketing personnel. Our future success depends on our continued ability to attract, develop, motivate and retain qualified and skilled employees. Competition for highly skilled technical and financial personnel is extremely intense. We may not be able to hire and retain these personnel at compensation levels consistent with our existing compensation and salary structure or at all. Some of the companies with which we compete for experienced employees have greater resources than we have and may be able to offer more attractive terms of employment.
In addition, we invest significant time and expenses in training our employees, which increases their value to competitors who may seek to recruit them. If we fail to retain our employees, we could incur significant expenses in hiring and training new employees, and the quality of our services and our ability to serve users could diminish, resulting in a material adverse effect to our business.
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Increases in labor costs in China and elsewhere in the world where we have operations may adversely affect our business and results of operations.
The economy in China has experienced increases in inflation and labor costs. As a result, average wages in the PRC are expected to continue to increase. In addition, we are required by PRC laws and regulations 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 requirement of employee benefit plans has not been implemented consistently by the local governments in the PRC given the different levels of economic development in different locations. If we are subject to late fees or fines in relation to the underpaid employee benefits, our financial condition and results of operations may be adversely affected. We expect that our aggregate labor costs, including wages and employee benefits, will continue to increase. Unless we are able to control our labor costs, our financial condition and results of operations may be adversely affected.
Furthermore, we expect that our business expansion in Southeast Asian countries will also result in the increase in the future, which may in turn adversely affect our business and result of operations, especially prior to the breakeven point of our business operations in such regions.
If we cannot maintain our corporate culture as we grow, our capabilities of innovation, collaboration and focus that contribute to our business may be compromised.
We believe that a critical component of our success is our corporate culture, which we believe fosters innovation, encourages teamwork and cultivates creativity. As we develop the infrastructure of a public company and grow, we may find it difficult to maintain these valuable aspects of our corporate culture. Any failure to preserve our culture could negatively impact our future success, including our ability to attract and retain employees, encourage innovation and teamwork and effectively focus on and pursue our corporate objectives.
We do not have business insurance coverage.
Insurance companies in China and in certain other regions that we operate 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.
Our right to and use of some properties could be challenged by third parties or government authorities, which may cause interruptions to our business operations.
We maintain offices and branch offices in China as well as in regions outside China for our operations. As of the date of this annual report, we lease properties underlying most of our offices and branch offices and we own a building of approximately 2,481 square meters in Xinjiang, China. A building of approximately 1,707 square meters is also available to be used by us in Beijing, China as office premises.
The lessors of some of our leased properties have not been able to provide proper ownership certificates for the properties we lease or prove their rights to sublease the properties to us. If our lessors are not the owners of the properties and they have not obtained consents from the owners or their lessors or permits from the government authorities, our leases could be invalidated. We may have to renegotiate the leases with the owners or the parties who have the right to lease the properties, and the terms of the new leases may be less favorable to us. In addition, our leasehold interests in leased properties have not been registered with the PRC government authorities as required by PRC law, which may expose us to potential fines of up to RMB10,000 (US$1,408) per unit leasehold. As of the date of this annual report, we are not aware of any claims or actions being contemplated or initiated by government authorities, property owners or any other third parties with respect to our leasehold interests in or use of such properties. However, we cannot assure you that our use of such leased properties will not be challenged. In the event that our use of properties is successfully challenged, we may be subject to fines and forced to relocate the affected operations. In addition, we may become involved in disputes with the property owners or third parties who otherwise have rights to or interests in our leased properties. We can provide no assurance that we will be able to find suitable replacement sites on terms acceptable to us on a timely basis, or at all, or that we will not be subject to material liability resulting from third parties’ challenges on our use of such properties.
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We have applied for the ownership certificate for the property underlying the 1,707 square meters of office space available to us in Beijing, China and the application is currently being processed. There is however no certainty that we will be able to obtain such ownership certificate or that the conditions for the issuance of the ownership certificate or the terms thereof will not be burdensome to us.
If any of the foregoing occurs, we may experience interruptions to our business operations and our business, financial condition and results of operations may be materially and adversely affected.
If our preferential tax treatments are revoked, become unavailable or if the calculation of our tax liability is successfully challenged by the PRC tax authorities, we may be required to pay tax, interest and penalties in excess of our tax provisions, and our results of operations could be materially and adversely affected.
The PRC government has provided various tax incentives to our subsidiaries, VIEs and their respective subsidiaries. These incentives include reduced enterprise income tax rates and exemptions from enterprise income tax. For example, under the PRC tax laws, the statutory enterprise income tax rate is 25%. However, the income tax rate of enterprises of encouraged industries in certain regions or enterprises qualified as “small enterprises with low profits” can be reduced to a favorable rate of 20%. Several of our subsidiaries, VIEs and their respective subsidiaries are subject to the favorable income tax rate of 20%. For details, please refer to “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Taxation—China.” Any increase in the enterprise income tax rate applicable to our subsidiaries, VIEs and their respective subsidiaries, or any discontinuation or retroactive or future reduction of any of the favorable tax treatments currently enjoyed by our subsidiaries, VIEs and their respective subsidiaries, could materially and adversely affect our business, financial condition and results of operations. In addition, in the ordinary course of our business, we are subject to complex income tax and other tax regulations and significant judgment is required in the determination of the provision for income taxes. Furthermore, competent PRC tax authorities may conduct tax audits on our subsidiaries, VIEs and their respective subsidiaries, and may also challenge our qualification to enjoy the corresponding preferential tax treatment and calculation of our tax liabilities. Although we believe our tax provisions are reasonable, if the PRC tax authorities successfully challenge our position and we are required to pay tax, interest and penalties in excess of our tax provisions, our financial condition and results of operations would be materially and adversely affected.
In connection with the audit of our consolidated financial statements included in this annual report, we and our independent registered public accounting firm identified three material weaknesses in our internal control over financial reporting. If we fail to develop and maintain an effective system of internal control over financial reporting, we may be unable to accurately report our financial results or prevent fraud.
Our independent registered public accounting firm has not conducted an audit of our internal control over financial reporting. However, in connection with the audit of our consolidated financial statements as of and for the year ended December 31, 2025, we and our independent registered public accounting firm identified three material weaknesses in our internal control over financial reporting. As defined in the standards established by the PCAOB, 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 annual or interim financial statements will not be prevented or detected on a timely basis.
The material weaknesses that have been identified related to (1) a lack of sufficient financial reporting and accounting personnel with appropriate U.S. GAAP knowledge and SEC reporting experience to properly address complex U.S. GAAP technical accounting issues and to prepare and review financial statements and related disclosures in accordance with U.S. GAAP and the financial reporting requirements set forth by the SEC; (2) a lack of proper documentation in support of certain accounting transactions and for the facilitation of the audit process and a lack of proper documentation in support of our investment values, credit losses and impairment analysis; and (3) a lack of sufficient policies and procedures to monitor the accounting treatment of complex financial instruments. Any of these material weaknesses, if not timely remedied, may lead to significant misstatements in our consolidated financial statements in the future. Neither we nor our independent registered public accounting firm undertook a comprehensive assessment of our internal control under the Sarbanes-Oxley Act for purpose of identifying and reporting any material weaknesses in our internal control over financial reporting. Had we performed a formal assessment of our internal control over financial reporting or had our independent registered public accounting firm been required to perform an audit of our internal control over financial reporting, additional deficiencies may have been identified.
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Following the identification of the material weaknesses, we have taken measures and plan to continue to take measures to remedy these material weaknesses. See “Item 15. Controls and Procedures—Management’s Plan for Remediation of Material Weaknesses.” However, we cannot assure you that the implementation of these measures will be sufficient to eliminate such material weaknesses, or that material weaknesses or significant deficiencies in our internal control over financial reporting will not be identified in the future. Our failure to correct these material weaknesses or our failure to discover and address any other material weaknesses or significant deficiencies could result in inaccuracies in our financial statements and impair our ability to comply with applicable financial reporting requirements and related regulatory filings on a timely basis. Moreover, ineffective internal control over financial reporting could significantly hinder our ability to prevent fraud.
During the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, we may identify other material weaknesses and significant deficiencies in our internal control over financial reporting. Furthermore, it is possible that, had our independent registered public accounting firm conducted an audit of our internal control over financial reporting, it may have identified additional material weaknesses and significant deficiencies. In addition, if we fail to maintain the adequacy of our internal control over financial reporting, as these standards are modified, supplemented or amended from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. If we fail to achieve and maintain an effective internal control environment, we could suffer material misstatements in our consolidated financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could in turn limit our access to capital markets, harm our results of operations, and lead to a decline in the trading price of our ADSs. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions. We may also be required to restate our consolidated financial statements for prior periods.
We face risks related to natural disasters, health epidemics and other calamities, which could significantly disrupt our operations.
Our business could be materially and adversely affected by natural disasters or calamities. Fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins, hacking, war, regional conflicts, riots, terrorist attacks or similar events may give rise to server interruptions, breakdowns, system failures, technology platform failures or internet failures, which could cause the loss or corruption of data or malfunctions of software or hardware as well as adversely affect our ability to provide products and services on our platform.
Our business could also be adversely affected by the effects of epidemics. In recent years, there have been epidemics in and outside China, such as the Ebola virus disease, H1N1 flu, avian flu and the recent COVID-19 pandemic. Our business operations could be disrupted if any of our employees is suspected of being affected by such epidemic, since it could require our employees to be quarantined and/or our offices to be disinfected. In addition, our results of operations could be adversely affected to the extent that any of these epidemics harms the Chinese or global economy in general.
Our headquarters are located in Hong Kong and we maintain our principal executive offices in Beijing, China. Most of our directors and management and a large majority of our employees currently reside in Hong Kong and Beijing. In addition, most of our system hardware and back-up systems are hosted in Beijing and Hong Kong. We conduct our stock investment businesses in Hong Kong with support provided by a research and development center in Shenzhen. Consequently, we are highly susceptible to factors adversely affecting Beijing, Shenzhen and Hong Kong. If any of the abovementioned natural disasters, health epidemics or other calamities were to occur in such cities or other cities where we may have material operations, our operations may experience material disruptions, such as temporary closure of our offices and suspension of services, which may materially and adversely affect our business, financial condition and results of operations.
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Risks Related to Our Corporate Structure
If the PRC government finds the commercial arrangements that establish the variable interest entity structure for a certain part of our operations in China non-compliant with the PRC laws, regulations, and rules, or if these laws, regulations, and rules or the interpretation thereof change in the future, we could be subject to severe penalties or be forced to relinquish our interests in our VIEs and may lose the ability to consolidate their financial information.
Foreign ownership in entities that provide internet and other related businesses, including value-added telecommunication services, is subject to restrictions under prevailing PRC laws, regulations, and rules, unless certain exceptions are available. On September 6, 2024, the NDRC and the Ministry of Commerce jointly issued the Special Administrative Measures for Entry of Foreign Investment (Negative List) (2024 Version), or the Negative List, which became effective and replaced the previous version on November 1, 2024. Pursuant to the Negative List, foreign investors are generally not allowed to own more than 50% of the equity interests in a value-added telecommunication service provider except for those engaged in e-commerce businesses, domestic multi-party communications services businesses, store-and-forward businesses and call center businesses, which may be 100% owned by foreign investors in accordance with the Negative List and other applicable laws and regulations. In addition, on April 8, 2024, the MIIT issued the Circular on Launching the Pilot Program of Expanding the Opening-up of Value-Added Telecommunications Services, which provides, among others, the removal of foreign ownership ratio restrictions for specific value-added telecommunications services, including (i) the Internet data centers (IDC), (ii) the content delivery networks (CDN), (iii) the Internet access services (ISP), (iv) the online data processing and transaction processing services, (v) the information release platform and transmission services (excluding internet news information, online publishing, online audio-visual, and internet cultural operation services), and (vi) information protection and processing services, in the pilot areas of Beijing, Shanghai, Hainan, and Shenzhen. Foreign-invested companies that plan to carry out the aforementioned value-added telecommunications services in such pilot areas and meet specific business operation requirements should apply to the MIIT for a pilot approval of value-added telecommunications business operations. The MIIT will have discretion as to whether to grant the license. However, there remains substantial uncertainties as to whether and what qualification requirements will be imposed on or applied to, a foreign investor with respect to holding equity interest in a value-added telecommunications services provider in China, as well as with the interpretation and implementation of existing and future regulations in this regard.
We are a Cayman Islands exempted company and our WFOEs are considered foreign invested enterprises. Our WFOEs (being our wholly foreign-owned PRC subsidiaries) are currently not eligible to apply for the required licenses for providing value-added telecommunication services that foreign ownership and investment is restricted under the Negative List. The online services offered by our VIEs in China would constitute a type of value-added telecommunication service that foreign ownership and investment is restricted and therefore these services are provided through our VIEs and their subsidiaries to ensure compliance with the PRC laws and regulations. We entered into a series of contractual arrangements with certain of our WFOEs, each of Jiufu Shuke, Beijing Puhui, Zhuhai Lianyin, Yi Qi Mai and Shenzhen Fuyuan, and the shareholders of each of such VIEs to conduct our operations in China. For a detailed description of these contractual arrangements, see “Item 4. Information on the Company—A. History and Development of the Company.” As a result of these contractual arrangements, we exert control over our VIEs and their subsidiaries and consolidate their operating results in our financial statements under U.S. GAAP. Although the structure that we have adopted is consistent with longstanding industry practices and is commonly adopted by comparable companies in China, the PRC government may not agree that these arrangements comply with PRC licensing, registration, or other regulatory requirements, with existing policies, or with requirements or policies that may be adopted in the future. Our VIEs and their subsidiaries hold licenses, approvals, and key assets that are essential for the operations of certain of our businesses. 9F Inc. does not have any equity interest in our VIEs. Therefore, investors in our ADSs are not acquiring any equity interest in our VIEs and their subsidiaries in China but instead are acquiring interest in our Cayman Islands holding company.
In the opinion of our PRC legal counsel, Han Kun Law Offices, subject to the risks disclosed in “—Risks Related to Our Corporate Structure,” our current ownership structure, the ownership structure of our VIEs and their subsidiaries, and the contractual arrangements among certain of our PRC subsidiaries, our VIEs and the shareholders of our VIEs are not in violation of any expressed and mandatory provisions of existing PRC laws, regulations and rules; and these contractual arrangements are valid, binding and enforceable in accordance with their terms and applicable PRC laws and regulations currently in effect. However, Han Kun Law Offices has also advised us that there are substantial uncertainties regarding the interpretation and application of current or future PRC laws and regulations and there can be no assurance that the PRC government will ultimately take a view that is consistent with the opinion of our PRC legal counsel. It is also uncertain whether any new PRC laws, regulations or rules relating to the “variable interest entity” structure will be adopted and if adopted, what they would require.
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On January 1, 2020, the PRC Foreign Investment Law and the Regulations for Implementation of the Foreign Investment Law of the People’s Republic of China, or the Implementation Regulations, came into effect. Although the PRC Foreign Investment Law and the Implementation Regulations do not explicitly classify contractual arrangements as a form of foreign investment, the definition of the “foreign investment” under the PRC Foreign Investment Law contains a catch-all provision to include investments made by foreign investors through other methods specified in laws or administrative regulations or other methods prescribed by the State Council, which leaves room for future laws, administrative regulations or provisions promulgated by the State Council to classify contractual arrangements as a form of foreign investment. On December 26, 2019, the Supreme People’s Court issued the Interpretations on Certain Issues Regarding the Applicable of Foreign Investment Law, which came into effect on January 1, 2020. In accordance with the foregoing interpretations, where a concerned party claims an investment agreement to be invalid on the basis that it is for investment in prohibited or restricted industries under the negative list and violates the restrictions set out therein, the courts should support such claim. Therefore, there is no assurance that foreign investment via contractual arrangement would not be interpreted as a type of indirect foreign investment activities in the future.
If the ownership structure, contractual arrangements and business of our company, our PRC subsidiaries or our VIEs are found to be in violation of any existing or future PRC laws or regulations, or we fail to obtain or maintain any of the required permits or approvals, the governmental authorities would have broad discretion in acting upon such violation, including:
| ● | revoking the business licenses or operating licenses of such entities; |
| ● | imposing fines on us; |
| ● | confiscating any of our income that they deem to be obtained through illegal operations; |
| ● | discontinuing or placing restrictions or onerous conditions on our operations; |
| ● | placing restrictions on our right to collect revenues; |
| ● | shutting down our servers, blocking our mobile apps or websites, or discontinuing or placing restrictions or stringent conditions on our operations through any transactions between our PRC subsidiaries and our VIEs; |
| ● | requiring us to restructure our ownership structure or operations, including terminating the contractual arrangements with our VIEs and deregistering the equity pledges of our VIEs, which in turn would affect our ability to consolidate or exert effective control over our VIEs; or |
| ● | taking other regulatory or enforcement actions that are detrimental to our business operations. |
The occurrence of any of the foregoing events could cause significant disruption to our business operations and severely damage our reputation, which would in turn materially and adversely affect our financial condition and results of operations. We also cannot be certain that equity interest will be disposed of in accordance with the contractual arrangements among our WFOEs, our VIEs, and shareholders of our VIEs. In addition, new PRC laws, regulations, and rules may be introduced to impose additional requirements, posing additional challenges to our corporate structure and contractual arrangements. If the occurrence of any of these events deprives us of the power to control or direct the key operations of our VIEs in China, which operations most significantly impact the economic performance of our VIEs or our ability to receive economic benefits and residual returns from our VIEs, and we are unable to restructure our ownership structure and operations in a satisfactory manner, we may not be able to consolidate the financial results of our VIEs in our consolidated financial statements in accordance with U.S. GAAP, which would materially and adversely affect our financial condition and results of operations and cause our ADSs to significantly decline in value or become worthless.
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We rely on contractual arrangements with our VIEs and shareholders of our VIEs for a major portion of our business operations, which may not be as effective as direct ownership in providing operational control and our VIEs’ shareholders may fail to perform their obligations under our contractual arrangements.
Because PRC laws limit foreign equity ownership in various businesses conducted domestically, we operate our business in China through our VIEs and their subsidiaries, in which we have no direct ownership interest, and we have relied and expect to continue to rely on contractual arrangements with our VIEs and their shareholders to operate our business in China. These contractual arrangements may not be as effective as direct ownership in providing us with control over our VIEs or their subsidiaries. For example, our VIEs and shareholders of our VIEs could fail to fulfill their contractual obligations with us, such as the obligations to operate our websites and apps effectively and use our domain names and trademarks in accordance with the contractual arrangements, or take other actions that are detrimental to our interests.
If we had direct ownership of our VIEs, we would be able to exercise our rights as a shareholder to effect changes in the board of directors of our VIEs, which in turn could implement changes, subject to any applicable fiduciary obligations, at the management and operational level. However, under the current contractual arrangements, we are required to rely on the performance by our VIEs and shareholders of our VIEs of their obligations under these contractual arrangements to exercise control over our VIEs and their subsidiaries. The shareholders of our VIEs may not act in the best interests of our company and may not perform their obligations under the relevant contracts. Such risks would persist for so long as we operate our business through contractual arrangements with our VIEs and shareholders of our VIEs. Although we have the right to replace any shareholder of our VIEs under the contractual arrangements, if any of these shareholders is uncooperative or any dispute relating to these contracts arises and remains unresolved, we will have to enforce our rights under these contracts through the operation of PRC laws, arbitration, litigation and other legal proceedings, the outcome of which will be subject to uncertainties. See “—Any failure by our VIEs or shareholders of our VIEs to perform their obligations under the contractual arrangements we have with them would materially and adversely affect our business, financial condition, and results of operations.” Therefore, our contractual arrangements with our VIEs and shareholders of our VIEs may not be as effective in ensuring our control over the relevant segments of our business operations as compared with a direct ownership.
Any failure by our VIEs or shareholders of our VIEs to perform their obligations under the contractual arrangements we have with them would materially and adversely affect our business, financial condition, and results of operations.
If our VIEs or the shareholders of our VIEs fail to perform their respective obligations under the contractual arrangements, we may incur substantial costs and expend additional resources to enforce such arrangements. We may also have to rely on legal remedies under PRC laws, including seeking specific performance or injunctive relief, and claiming damages, which we cannot assure you will be effective under PRC laws. For example, if the shareholders of our VIEs were to refuse to transfer their equity interests in our VIEs to us or our designee when we exercise the purchase option pursuant to these contractual arrangements, or if they were otherwise to act in bad faith toward us, then we may have to take legal actions to compel them to perform their contractual obligations. In addition, should the shareholders not perform their obligations under the contractual arrangements, our company’s ability to control the operations of the VIEs and their subsidiaries will be in question and the financial information of the VIEs and their subsidiaries may not be able to be consolidated in the consolidated financial statements in accordance with U.S. GAAP. This would materially and adversely affect our financial condition and results of operations and cause our ADSs to significantly decline in value or become worthless.
All the agreements under our contractual arrangements are governed by PRC laws and provide for the resolution of disputes through arbitration in China. Accordingly, these contracts would be interpreted in accordance with PRC laws and any disputes would be resolved in accordance with PRC legal procedures. These arbitration provisions relate to claims arising from the contractual relationship created by the variable interest entity agreements, rather than claims under US federal securities laws, and they do not prevent our shareholders or ADS holders from pursuing claims under US federal securities laws in the United States. Meanwhile, there are very few precedents and little formal guidance as to how contractual arrangements in the context of a variable interest entity should be interpreted or enforced under PRC laws. There remain significant uncertainties regarding the ultimate outcome of such arbitration should legal action become necessary. In addition, under PRC laws, rulings by arbitrators are final and parties cannot appeal arbitration results in court unless such rulings are revoked or determined unenforceable by a competent court. If the losing parties fail to carry out the arbitration awards within a prescribed time limit, the prevailing parties may only enforce the arbitration awards in PRC courts through arbitration award recognition proceedings, which would require additional expenses and delay. In the event that we are unable to enforce these contractual arrangements, or if we suffer significant delay or other obstacles in the process of enforcing these contractual arrangements, we may not be able to exert effective control over our VIEs and their subsidiaries, and our ability to conduct our business may be negatively affected. See “—Risks Related to Doing Business in China and Hong Kong—Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us, hinder our ability and the ability of any holder of our securities (including the ADSs) to offer or continue to offer such securities, result in a material adverse change to our business operations, and damage our reputation, which would materially and adversely affect our financial condition and results of operations and cause the ADSs to significantly decline in value or become worthless.”
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The shareholders of our VIEs may have potential conflicts of interest with us, which may materially and adversely affect our business, financial condition and the value of your investment in our shares.
The equity interests of our VIEs are held by certain individual shareholders. See “Item 4. Information on the Company—C. Organizational Structure.” Their interests in our VIEs may differ from the interests of our company as a whole. These shareholders may breach, or cause our VIEs to breach, the existing contractual arrangements we have with them and our VIEs, which would have a material adverse effect on our ability to effectively control our VIEs and their subsidiaries and receive economic benefits from them. For example, the shareholders of our VIEs may be able to cause our agreements with our VIEs to be performed in a manner adverse to us by, among other things, failing to remit payments due under the contractual arrangements to us on a timely basis. We cannot assure you that when conflicts of interest arise, any or all of these shareholders will act in the best interests of our company or such conflicts will be resolved in our favor.
Currently, we do not have any arrangements to address potential conflicts of interest between these shareholders and our company, except that we could exercise our purchase option under the exclusive option agreement with these shareholders to request them to transfer all of their equity interests in our VIEs to us or our designee, to the extent permitted by PRC laws. If we cannot resolve any conflict of interest or dispute between us and the shareholders of our VIEs, we would have to rely on legal proceedings, which could result in the disruption of our business and significant legal fees and subject us to substantial uncertainty as to the outcome of any such legal proceedings.
Contractual arrangements in relation to our VIEs may be subject to scrutiny by the PRC tax authorities and they may determine that we or our VIEs owe additional taxes, which could negatively affect our financial condition and the value of your investment.
Under applicable PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities. The PRC Enterprise Income Tax Law and other applicable laws and regulations require every enterprise in China to submit its annual enterprise income tax return together with a report on transactions with its related parties to the tax authorities. The tax authorities may impose reasonable adjustments on taxation if they have identified any related party transactions that are inconsistent with arm’s length principles. We may face material and adverse tax consequences if the PRC tax authorities determine that the contractual arrangements among certain of our PRC subsidiaries, each of our VIEs, and the shareholders of such VIEs were not entered into on an arm’s length basis in such a way as to result in an impermissible reduction in taxes under applicable PRC laws, regulations and rules, and adjust our VIEs income subject to tax in the form of a transfer pricing adjustment. A transfer pricing adjustment could, among other things, result in a reduction of expense deductions recorded by our VIEs for PRC tax purposes, which could in turn increase their tax liabilities. In addition, if we request the shareholders of our VIEs to transfer their equity interests in our VIEs at nominal or no value pursuant to these contractual arrangements, such transfer could be viewed as a gift and subject our designees to PRC income tax; and the taxable income of a transferring shareholder may be adjusted by the PRC tax authorities to an amount higher than the transfer price set forth under these contractual arrangements and thus the transferring shareholder may be subject to PRC income tax. The tax incurred during the equity interest transfer may be undertaken by us. Furthermore, the PRC tax authorities may impose late payment fees and other penalties on our VIEs for the adjusted but unpaid taxes according to the applicable laws and regulations. Our financial position could be materially and adversely affected if our VIEs’ tax liabilities increase or if they are required to pay late payment fees and other penalties.
We may lose the ability to use and enjoy assets and licenses held by our VIEs and their subsidiaries that are material to the operation of our business if such entities go bankrupt or become subject to a dissolution or liquidation proceedings.
Our VIEs and their subsidiaries hold certain assets and licenses that are material to the operations of our business, including, among others, intellectual property and value-added telecommunication licenses. Under the contractual arrangements, our VIEs may not, and the shareholders of our VIEs may not cause them to, in any manner, sell, transfer, mortgage or dispose of their assets or their legal or beneficial interests in the business without our prior consent. However, in the event our VIEs’ shareholders breach these contractual arrangements and voluntarily liquidate our VIEs, or our VIEs or their subsidiaries declare bankruptcy and all or part of their assets become subject to liens or rights of third-party creditors, or are otherwise disposed of without our consent, we may be unable to continue some or all of our business activities, which could materially and adversely affect our business, financial condition and results of operations. If our VIEs or their subsidiaries undergo a voluntary or involuntary liquidation proceeding, independent third-party creditors may claim rights to some or all of these assets, thereby hindering our ability to operate our business, which could materially and adversely affect our business, financial condition and results of operations.
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If the seals of our PRC subsidiaries, our VIEs and their subsidiaries, are not kept safely, are stolen or are used by unauthorized persons or for unauthorized purposes, the corporate governance of these entities could be severely and adversely compromised.
In China, a company “chop” or seal serves as the legal representation of the company with third parties even when unaccompanied by a signature. Each legally registered company in China is required to maintain a company chop, which must be registered with the local Public Security Bureau. In addition to this mandatory company chop, companies may have several other chops which can be used for specific purposes. The seals of our PRC subsidiaries, our VIEs and their subsidiaries are generally held securely by personnel designated or approved by us in accordance with our internal control procedures. To the extent those seals are not kept safe, are stolen or are used by unauthorized persons or for unauthorized purposes, the corporate governance of these entities could be severely and adversely compromised and those corporate entities may be bound to abide by the terms of any documents so chopped, even if they were sealed by an individual who lacked the requisite power and authority to do so.
Risks Related to Doing Business in China and Hong Kong
The current tensions in international trade and rising political tensions, may adversely impact our business, financial condition, and results of operations.
There have been heightened tensions in international economic relations in recent years and these tensions may continue to escalate in the future. These tensions have resulted in changes in international trade policies and, as they further escalate, may result in additional barriers to trade. For example, the tensions between the United States and China in recent years have led to additional, or higher tariffs imposed by the United States on products imported from China and restrictions on the sale of certain products into the United States. China has responded by imposing, and proposing to impose additional, or higher tariffs on products imported from the United States, among other measures. Although certain understanding has been entered into, there is still uncertainty with respect to such tariff-related measures and impacts thereof. In addition, international political tensions have escalated and continue to be subject to uncertainties with respect to a wide range of issues. The U.S. government has also adopted measures aiming to prohibit or restrict U.S. investment in China-associated companies that operate in certain industries. Rising political tensions could reduce levels of trades, investments, technological exchanges, and other economic activities, which would materially and adversely affect the global economic conditions and the stability of global financial markets. These developments may also lead to increased compliance costs, operational disruptions, and potential constraints on our access to capital markets. The possibility of the U.S. government delisting China-associated companies from U.S. stock exchanges, as recently reported in the media, creates uncertainty regarding our ability to maintain our Nasdaq listing. Any further escalation of international tensions may have a negative impact on the general, economic, political, and social conditions of the countries where we operate and, in turn, adversely impact our business, financial condition, and results of operations.
The PRC government has significant authority to regulate the China operations of an offshore holding company, such as us, at any time. Changes in China’s economic, political or social conditions, or government policies could materially and adversely affect our business, financial condition, and results of operations.
A major part of our operations is located in China. The PRC government has significant authority to regulate the China operations of an offshore holding company, such as us, at any time. Accordingly, our business, prospects, financial condition, and results of operations may be influenced by political, economic, and social conditions in China generally.
Although the Chinese government has implemented measures to underscore the importance of the utilization of market forces for economic reform, the divestment of state ownership in productive assets and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the government. In addition, the Chinese government continues to play a significant role in regulating industry development by imposing industrial policies. Implementation of industry-wide regulations directly targeting our operations could also cause the value of our securities to significantly decline or, in extreme cases, become worthless.
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While the Chinese economy has experienced significant growth over the past decades, growth has been uneven, both geographically and among different sectors of the economy. The Chinese government has implemented various measures to generate economic growth and guide the allocation of resources. Some of these measures may benefit the Chinese economy overall, but may have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by regulations over capital investments, banking and shadow banking, or changes in tax regulations. 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.
Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us, hinder our ability and the ability of any holder of our securities (including the ADSs) to offer or continue to offer such securities, result in a material adverse change to our business operations, and damage our reputation, which would materially and adversely affect our financial condition and results of operations and cause the ADSs to significantly decline in value or become worthless.
The PRC legal system is based on written statutes. Although court decisions may be cited for reference, they may have limited precedential value in certain areas. The PRC legal system is evolving rapidly and PRC laws, regulations, and rules may change quickly with little or no advance notice in certain circumstances. Since the government authorities in China have discretion in interpreting and implementing statutory and contractual terms, the interpretations and implementation of some PRC laws, regulations, and rules may be changing from time to time, subjecting the enforcement of the same to uncertainties. From time to time, we may have to resort to court and administrative proceedings to enforce our legal rights.
Laws and regulations concerning our industries are also developing and evolving in China and the PRC governmental authorities may further promulgate new laws and regulations regulating our industries and other businesses we have already engaged in or may further expand into in the future. The PRC government has published certain policies that significantly affected certain industries such as the internet industries, and we cannot rule out the possibility that it will in the future release further regulations or policies or take regulatory actions regarding our industries that could adversely affect our business, financial condition and results of operations. Although we have taken measures to comply with and avoid violation of applicable laws, regulations and regulatory policies, we cannot assure you that our practice are and will remain in full compliance with applicable PRC laws, regulations and regulatory policies.
In addition, the PRC government may regulate our operations at any time, or may exercise more oversight and control at any time over offerings conducted outside of China and foreign investment in China-based companies. For example, on February 17, 2023, the CSRC issued the Trial Measures and several supporting guidelines, under which a filing-based regulatory system will be applied to both “direct overseas offering and listing” and “indirect overseas offering and listing” of PRC domestic companies. On February 24, 2023, the CSRC issued the Confidentiality and Archives Rules, under which the PRC domestic company as well as sponsors, underwriters and securities service institutions providing relevant securities services for the overseas securities offering and listing by such PRC domestic company shall strictly comply with the requirements on confidentiality and archives management. On December 29, 2023, the Standing Committee of the National People’s Congress, or the SCNPC, issued the amended PRC Company Law, which came into effect on July 1, 2024. The amended PRC Company Law provides more stringent requirements on capital contribution of a company established in the PRC. According to the amended PRC Company Law, we may be required to fulfill the obligations of capital contribution to our PRC subsidiaries or to provide financial support to the nominee shareholders of our VIEs within a much shorter period than the currently effective period. These new laws and regulations and any future related implementation rules may subject us to additional compliance requirements in the future.
Therefore, we cannot assure you that we will remain fully compliant with any new regulatory requirements or any future implementation rules on a timely basis, or at all. Any failure of us to fully comply with applicable laws and regulations may significantly limit or completely hinder our ability and the ability of any holder of our securities (including the ADSs) to offer or continue to offer such securities, cause significant disruption to our business operations, and severely damage our reputation, which would materially and adversely affect our financial condition and results of operations and cause the ADSs to significantly decline in value or become worthless.
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The approval of and filing with the CSRC or other PRC government authorities may be required in connection with our previous and future securities offerings under PRC law, and, if so required, we cannot predict whether or when we will be able to obtain such approval or complete such filing, and even if we obtain such approval, it could be rescinded. Any failure to or delay in obtaining such approval or complying with such filing requirements, or a rescission of such approval, could subject us to sanctions imposed by the CSRC or other PRC government authorities.
The Rules on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, adopted by six different PRC regulatory authorities in 2006 and amended in 2009, purports to require offshore special purpose vehicles that are controlled by PRC companies or individuals and that have been formed for the purpose of seeking a public listing on an overseas stock exchange through acquisitions of PRC domestic companies or assets to obtain CSRC approval prior to publicly listing their securities on an overseas stock exchange. The interpretation and application of the regulations remain unclear. If CSRC approval is required, it is uncertain whether we are able to and how long it will take for us to obtain such approval, and, even if we obtain such CSRC approval, the approval could be rescinded. Any failure to obtain or any delay in obtaining CSRC approval for our listing may subject us to sanctions imposed by the CSRC and other PRC regulatory authorities, which could include fines and penalties on our operations in China, restrictions or limitations on our ability to pay dividends outside of China, and other forms of sanctions that may materially and adversely affect our business, financial condition, and results of operations.
Furthermore, the PRC government has indicated an intent to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers. On July 6, 2021, the PRC authorities issued the Opinions on Severely Cracking Down on Illegal Securities Activities According to Law. On September 6, 2024, the NDRC and the Ministry of Commerce jointly issued the Negative List, which became effective on November 1, 2024.
On February 17, 2023, with the approval of the State Council, the CSRC issued the Trial Measures and several supporting guidelines, which came into effect on March 31, 2023. Pursuant to the Trial Measures and supporting guidelines, in connection with any offering or listing of shares, depository receipts, convertible corporate bonds, or other equity-like securities by a PRC company in an overseas stock market, whether directly or indirectly through an offshore holding company, a filing should be made with the CSRC. The Trial Measures further provides that companies that have been listed overseas prior to March 31, 2023 constitute “Existing Issuers” and are not required to conduct the overseas listing filing procedure immediately, but shall carry out filing procedures as required if they conduct secondary or dual primary listing, follow-on offerings, bond offerings or are involved in other circumstances that require filing with the CSRC. If a PRC company fails to complete the filing procedure or conceals any material fact or falsifies any major content in its filing documents, such PRC company may be subject to administrative penalties, such as order to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties, such as warnings and fines.
On February 24, 2023, the CSRC published the Confidentiality and Archives Rules, which came into effect on March 31, 2023 and applies to both direct and indirect overseas offerings and listings of PRC companies. For more details of these regulations, see “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Related to Our Business Operation in China—Regulations Related to M&A Rules and Overseas Listings.”
Given the novelty of the Negative List, Trial Measures and the Confidentiality and Archives Rules, there remain substantial uncertainties as to what requirements, including filing and archiving management requirements, will be imposed on a PRC company with respect to our future listing and offerings overseas as well as with the interpretation and implementation of existing and future regulations in this regard.
In addition, on December 28, 2021, the CAC and several other governmental agencies jointly issued the Cybersecurity Review Measures, which became effective on February 15, 2022. According to the Cybersecurity Review Measures, if a “network platform operator” that is in possession of personal data of more than one million users intends to list in a foreign country, it must apply for a cybersecurity review. After the receipt of all required application materials, the authorities must determine, within ten business days thereafter, whether a cybersecurity review will be initiated. If a review is initiated and the authorities conclude after such review that the listing will affect national security, the listing of the applicant will be prohibited. Moreover, the State Council issued the Regulations on the Network Data Security on September 14, 2024, which became effective since January 1, 2025. According to the Regulations on the Network Data Security, where network data processors carry out network data processing activities that have affected or may affect national security, they shall undergo a national security review in accordance with the relevant laws and regulations. Pending the finalization, adoption, enforcement and interpretation of these new measures and regulations, we cannot rule out the possibility that the measures and regulations may be enacted, interpreted or implemented in ways that will negatively affect us.
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For comprehensive discussions on the PRC laws and regulations with respect to approvals of and filings with PRC governmental authorities that may be required in connection with securities offerings, see “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Related to Our Business Operation in China—Regulations Related to M&A Rules and Overseas Listings.”
If it is determined in the future that approval from or filing with CSRC, CAC or other governmental agencies are required for our future listing and offerings overseas, it is uncertain whether we can, or how long it will take us to, obtain such approval or complete such filing procedures and any such approval could be rescinded. Any failure to obtain or delay in obtaining clearance of such approval or completing such filing procedures, or a rescission of any such approval if obtained by us, would subject us to regulatory actions or other sanctions by the CSRC, CAC or other PRC regulatory authorities for failure to seek required governmental authorization in respect of the same. These governmental authorities may impose fines, restrictions and penalties on our operations in China, such as suspension of our apps, revocation of our licenses, or shutting down part or all of our operations, limit our ability to pay dividends outside of China, limit our operating privileges in China or take other actions that could have a material adverse effect on our business, financial condition, results of operations and prospects, as well as the trading price of the ADSs. Consequently, if you engage in market trading or other activities in anticipation of and prior to settlement and delivery, you do so at the risk that settlement and delivery may not occur.
In addition, if CSRC or other governmental authorities subsequently promulgate new rules or issue explanations mandating that we complete filings or obtain approvals, registrations or other kinds of authorizations for our previous listing and offerings, we cannot assure you that we will be able to obtain such approvals or authorizations, or to complete the required procedures (including filing procedures) or other requirements in a timely manner, or at all, or to obtain any waiver of the aforesaid regulatory requirements if and when procedures are established to obtain such a waiver. All of these could have a material adverse effect on the trading price of the ADSs and could significantly limit or completely hinder our ability and the ability of any holder of our securities (including the ADSs) to offer or continue to offer such securities.
Our securities may be prohibited from trading in the United States under the HFCAA in the future if the PCAOB is unable to inspect or investigate completely our auditor. The delisting of our securities, or the threat of their being delisted, may materially and adversely affect the value of your investment.
Pursuant to the HFCAA, if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspections by the PCAOB for two consecutive years, the SEC will prohibit our shares or ADSs from being traded on a national securities exchange or in the over-the-counter trading market in the United States.
On December 16, 2021, the PCAOB issued a report to notify the SEC of its determination that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in China and Hong Kong. Our auditor was not subject to that determination. On December 15, 2022, the PCAOB removed China and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered public accounting firms. Each year, the PCAOB will determine whether it can inspect and investigate completely audit firms in China and Hong Kong, among other jurisdictions. If PCAOB determines in the future that it no longer has full access to inspect and investigate completely accounting firms in certain jurisdictions and we use an accounting firm headquartered in one of these jurisdictions to issue an audit report on our financial statements filed with the SEC, we would be identified as a Commission-Identified Issuer following the filing of the annual report on Form 20-F for the relevant fiscal year. In accordance with the HFCAA, our securities would be prohibited from being traded on a national securities exchange or in the over-the-counter trading market in the United States if we are identified as a Commission-Identified Issuer for two consecutive years in the future. If our ADSs are prohibited from trading in the United States, there is no certainty that we will be able to list on a non-U.S. exchange or that a market for our shares will develop outside of the United States. A prohibition of being able to trade in the United States would substantially impair your ability to sell or purchase our ADSs when you wish to do so, and the risk and uncertainty associated with delisting would have a negative impact on the price of our ADSs. Also, such a prohibition would significantly affect our ability to raise capital on terms acceptable to us, or at all, which would have a material adverse impact on our business, financial condition, and prospects.
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A severe or prolonged downturn in jurisdictions in which we conduct our business or global economy could materially and adversely affect our business and financial condition.
The global macroeconomic environment faces significant challenges in the near-term future. For example, the Russia-Ukraine conflict, the Hamas-Israel conflict and the attacks on shipping in the Red Sea have heightened geopolitical tensions across the world. The impact of the Russia-Ukraine conflict on Ukraine food exports has contributed to increases in food prices and thus to inflation more generally. There have also been concerns about the relationship between China and other countries which may potentially have economic effects. In particular, there is significant uncertainty about the future relationship between the United States and China with respect to a wide range of issues including trade policies, treaties, government regulations and tariffs. Deterioration in political conditions and abrupt changes in Sino-U.S. relations are difficult to predict and could adversely affect China’s overall economic and market conditions and consequently our business, operating results and financial condition.
Social, political and economic risks associated with our business operations in Hong Kong.
Our headquarters are in Hong Kong and we have business operations in Hong Kong. Accordingly, our business operations and financial condition will be affected by the political and legal developments in Hong Kong. Any adverse social, political or economic conditions, material social unrest, strike, riot, civil disturbance or disobedience, as well as significant natural disasters, may adversely affect our business operations in Hong Kong.
Hong Kong is a special administrative region of China and the basic policies of the PRC with respect to Hong Kong are reflected in the Basic Law, Hong Kong’s constitutional document, which provides Hong Kong with a high degree of autonomy and executive, legislative and independent judicial powers, including that of final adjudication under the principle of “one country, two systems.” Nevertheless, there is no assurance that there will not be any changes in the economic, political and legal environment in Hong Kong or the political, legal or policy framework governing Hong Kong in the future. If and when such change occurs, there may be significant disturbance to the political and economic stability of Hong Kong, thereby materially and adversely affecting our results of operations and financial position.
Hong Kong has been implicated in political tensions between the United States and China which have escalated following the passage of Safeguarding National Security in the Hong Kong Special Administrative Region by the SCNPC and sanctions imposed by the U.S. Department of Treasury on certain officials of the Hong Kong Special Administrative Region and the PRC central government. Our businesses are materially affected by the financial markets and economic conditions in Hong Kong. Rising political tensions could reduce levels of trades, investments, technological exchanges, and other economic activities between the two major economies, which would materially and adversely affect global economic conditions and the stability of global financial markets. Escalations of the tensions that affect trade relations may lead to slower growth in the global economy in general, which in turn could materially reduce demand for our services, thus potentially negatively affect our business, financial condition, and results of operations.
Volatility of the stock market in Hong Kong could materially and adversely affect our business and financial condition.
As we have securities business operations in Hong Kong, we are subject to the volatility of the stock market in Hong Kong. The Hong Kong stock market is directly affected by the local and international economic and socio-political environments, including without limitation the monetary policies adopted and carried out by major economies, changes in global supply chains and consumption markets, wars, regional conflicts between Russian and Ukraine and in elsewhere, and other economic and social instabilities. Hong Kong is exposed to economic events around the globe for its highly open stock market, and therefore influenced by economic issues in all major markets. Any downturn in the stock market in Hong Kong will directly and adversely affect the number of active corporate finance projects in the market and therefore our performance. Historically, the local and international economic and socio-political environments fluctuated from time to time and the Hong Kong stock market was volatile due to the fluctuations. Severe fluctuations in market and economic sentiments may also result in a prolonged period of sluggish market activities which could in turn have a material adverse impact on our business and financial condition.
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We may be adversely affected by the complexity, uncertainties and changes in PRC regulation of internet-related or finance-related businesses and companies, and any lack of requisite approvals, licenses, permits or filings applicable to our business may have a material adverse effect on our business and results of operations.
The PRC government regulates the internet industry and finance-related industry, including foreign ownership of, and the licensing and permit requirements pertaining to, companies in the internet industry and finance-related industry. These internet-related or finance-related laws and regulations are relatively new and rapidly evolving, and thus their interpretation and enforcement, and under certain circumstances, the compliance requirements still involve significant uncertainties. As a result, under certain circumstances it may be difficult to determine what actions or omissions may be deemed to be in violation of applicable laws and regulations.
For example, PRC regulations impose sanctions for engaging in disseminating analysis, forecasting, advisory or other information related to securities and securities markets without having obtained the securities investment consultancy qualifications in China. See “Item 4. Information on the Company—B. Business Overview—Regulations—Regulations Related to Our Business Operation in China—Regulations Related to Securities Investment Consulting Business.” We have not obtained the securities investment consultancy qualifications in China. Without the required qualifications, we should refrain from as well as explicitly prohibit our users from sharing information related to securities analysis, forecasting or advisory on our stock investment platform. However, we cannot assure you that our users will not post articles or share videos that contain analysis, forecasting or advisory content related to securities on our securities investment platform. If any of the information or content displayed on our securities investment platform is deemed as analysis, forecasting, advisory or other information related to securities or securities markets, or any of our business in the PRC is deemed to be a service providing such information, we may be subject to regulatory measures including warnings, public condemnation, suspension of relevant business and other measures in accordance with applicable laws and regulations. Any such penalties may disrupt our business operations or materially and adversely affect our business, financial condition and results of operations.
In addition, we offer a suite of wealth management products to investors. In 2017, we expanded our product suite to international investment options including stock, insurance and mutual funds. According to the Securities Investment Funds Law, any entity that engages in fund services, including but not limited to sales, investment consulting, information technology system services, shall register or file with the securities regulatory authority of the State Council. See “Item 4. Information on the Company—B. Business Overview—Regulations—Regulations Related to Our Business Operation in China—Regulations Related to Online Sales of Securities Investment Funds.” We do not hold any licenses or permits for the promotion of, sales of, purchase of or redemption of funds in China. We do not believe the wealth management business we are conducting now in China should be deemed as fund services in China. However, we cannot assure you that the regulatory authorities will take the same view as ours. If certain of our activities in China were deemed by the regulators as provision of fund services in China, we may be subject to penalties including imposition of fines and suspension of such fund sales business.
The interpretation and application of existing PRC laws, regulations and policies and possible new laws, regulations or policies relating to the internet industry and finance-related have created substantial uncertainties regarding the legality of existing and future foreign investments in, and the businesses and activities of, internet and finance-related businesses in China, including our business. We cannot assure you that we have obtained all the permits or licenses and completed all the record-filing procedures required for conducting our business in China or will be able to maintain our existing licenses or obtain new ones. If the PRC government considers that we were operating without the proper approvals, licenses, permits or filings or promulgates new laws and regulations that require additional approvals, licenses, permits or filings or imposes additional restrictions on the operation of any part of our business, it has the power, among other things, to levy fines, confiscate our income, revoke our business licenses, and require us to discontinue our relevant business or impose restrictions on the affected portion of our business. Any of these actions by the PRC government may have a material adverse effect on our business and results of operations.
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We rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material adverse effect on our ability to conduct our business.
We are a holding company, and we rely on dividends and other distributions on equity paid by our PRC subsidiaries for our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders and service any debt we may incur. If our PRC subsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other distributions to us. In addition, the PRC tax authorities may require our PRC subsidiaries to adjust its taxable income under the contractual arrangements it currently has in place with our VIEs and their shareholders in a manner that would materially and adversely affect their ability to make their required distributions to us. See “—Risks Related to Our Corporate Structure—Contractual arrangements in relation to our VIEs may be subject to scrutiny by the PRC tax authorities and they may determine that we or our VIEs owe additional taxes, which could negatively affect our financial condition and the value of your investment.”
Under PRC laws and regulations, our PRC subsidiaries, as wholly foreign-owned enterprises in China, may pay dividends only out of their respective accumulated after-tax profits as determined in accordance with PRC accounting standards and regulations. In addition, a wholly foreign-owned enterprise is required to set aside at least 10% of its accumulated after-tax profits each year, if any, to fund certain statutory reserve funds, until the aggregate amount of such funds reaches 50% of its registered capital. At its discretion, a wholly foreign-owned enterprise may allocate a portion of its after-tax profits based on PRC accounting standards to discretionary funds. These reserve funds and discretionary funds are not distributable as cash dividends.
Under existing PRC foreign exchange regulations, payments of current account items, such as profit distributions and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from the SAFE, by complying with certain procedural requirements. Therefore, our PRC subsidiaries directly held by our non-PRC subsidiaries are able to pay dividends in foreign currencies to their non-PRC shareholders without prior approval from the 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.
In response to the persistent capital outflow and RMB’s depreciation against the U.S. dollar in the fourth quarter of 2016, the People’s Bank of China and the SAFE have implemented a series of capital control measures, including more stringent vetting procedures for China-based companies to remit foreign currency for overseas acquisitions, dividend payments and shareholder loan repayments. The PRC government may continue to strengthen its capital controls and our PRC subsidiaries’ dividends and other distributions may be subjected to tighter scrutiny in the future. Any limitation on the ability of our PRC subsidiaries to pay dividends or make other distributions to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business. See also “—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.”
PRC regulation on loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from making loans to or make additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.
We are an offshore holding company conducting our operations in China through our VIEs and their subsidiaries and our PRC subsidiaries.
We may make additional capital contributions or loans to our PRC subsidiaries, which are treated as foreign invested enterprises under PRC laws. Any funds we transfer to our PRC subsidiaries, either as a shareholder loan or as an increase in registered capital, are subject to approval by or registration or filing with the governmental authorities in China. According to the PRC regulations on foreign-invested enterprises in China, capital contributions to our PRC subsidiaries are subject to registration with the State Administration for Market Regulation or its local branches, the information reporting in the online enterprise registration system, and foreign exchange registration with qualified banks.
Because we control our VIEs through contractual arrangements, we are not able to make capital contributions to our VIEs and their subsidiaries; however, we may provide financial support to them by loans.
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On March 30, 2015, the SAFE issued the Circular on Reforming the Management Approach Regarding the Foreign Exchange Capital Settlement of Foreign-Invested Enterprises, or SAFE Circular 19, which took effect as of June 1, 2015 and was amended on March 23, 2023. SAFE Circular 19 launched a nationwide reform of the administration of the settlement of the foreign exchange capitals of foreign-invested enterprises by allowing foreign-invested enterprises to settle their foreign exchange capital at their discretion. On June 9, 2016, the SAFE issued the Circular on Reforming and Standardizing the Administrative Provisions on Capital Account Foreign Exchange, or SAFE Circular 16, which was amended on December 4, 2023. On September 12, 2025, the SAFE further issued the Circular on Matters Concerning Furthering Reform of Foreign Exchange Administration in Cross-Border Investment and Financing, or SAFE Circular 43, to further enhance the facilitation of cross-border investment and financing. Pursuant to SAFE Circular 19, SAFE Circular 16 and SAFE Circular 43, the utilization of foreign exchange funds under the capital account by domestic enterprises (including foreign exchange capital and foreign debt funds) and the RMB funds derived from the settlement thereof shall adhere to the principles of authenticity and self-use, and such funds shall not be used: (i) directly or indirectly, for expenditures prohibited by PRC laws and regulations; (ii) directly or indirectly, for securities investment or other investment and wealth management activities (except for wealth management products with a qualified risk rating and structural deposits); and (iii) for extending loans to non-affiliated enterprises (except where expressly permitted by the business scope). Where contractual arrangements exist between domestic enterprises and other parties regarding the scope of utilization of foreign exchange funds under the capital account, the use of relevant funds shall not exceed the scope stipulated in such contracts. Enterprises may freely elect to utilize their foreign exchange funds under either the payment-based settlement or voluntary settlement mechanism. On October 23, 2019, the SAFE issued the Circular on Further Promoting Cross-border Trade and Investment Facilitation, or SAFE Circular 28, which was amended on December 4, 2023. SAFE Circular 28 expressly allows foreign-invested enterprises that do not have equity investments in their approved business scope to use their capital obtained from foreign exchange settlements to make domestic equity investments as long as the investments are real and in compliance with the foreign investment-related laws and regulations. SAFE Circular 43 further clarifies the cancellation of foreign exchange registration for domestic equity investments by non-investment foreign-invested enterprises. See “Item 4. Information on the Company—B. Business Overview—Regulations—Regulations Related to Our Business Operation in China—Regulations Related to Foreign Exchange—General administration of foreign exchange.” The applicable foreign exchange circulars and rules may significantly limit our ability to make any transfer of fund to and use fund in China, which may adversely affect our business, financial condition and results of operations.
In addition, (a) any foreign loan procured by our PRC subsidiaries, VIEs and their subsidiaries is required to be filed with SAFE through the online filing system of SAFE, and (b) each of our PRC subsidiaries, VIEs and their subsidiaries may not procure loans which exceed a statutory upper limit. Any loan to be provided by us to our PRC subsidiaries, VIEs and their subsidiaries with a term of more than one year must be recorded and registered by the NDRC or its local branches. We may not complete such approval, recording, filings or registrations on a timely basis, if at all, with respect to future capital contributions or foreign loans by us to our PRC subsidiaries, VIEs and their subsidiaries.
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 filing or registration or obtain the necessary approval on a timely basis, or at all. If we fail to complete the necessary filing or registration or obtain the necessary approval, our ability to fund our VIEs and their subsidiaries and our PRC subsidiaries may be negatively affected, which could in turn adversely affect their liquidity and ability to fund their working capital and expansion projects and meet their obligations and commitments.
Fluctuations in exchange rates could have a material adverse effect on our results of operations and the price of our ADSs.
The conversion of Renminbi into foreign currencies, including U.S. dollars, is based on rates set by the People’s Bank of China. The Renminbi has fluctuated against the U.S. dollar, at times significantly and unpredictably. The value of Renminbi against the U.S. dollar and other currencies is affected by changes in China’s political and economic conditions and by China’s foreign exchange policies, among other things. We cannot assure you that Renminbi will not appreciate or depreciate significantly in value against the U.S. dollar in the future. It is difficult to predict how market forces or PRC or U.S. government policies may impact the exchange rate between Renminbi and the U.S. dollar in the future. We are also facing similar risks with respect to the fluctuation of foreign exchange rates of other foreign currencies in relation to our international operations.
Any significant appreciation or depreciation of the Renminbi may materially and adversely affect our revenues, earnings and financial position, and the value of, and any dividends payable on, our ADSs in U.S. dollars. For example, a significant depreciation of Renminbi against the U.S. dollar may significantly reduce the U.S. dollar equivalent of our earnings, which in turn could adversely affect the price of our ADSs.
Very limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure or at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert Renminbi into foreign currency. As a result, fluctuations in exchange rates may have a material adverse effect on your investment.
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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 a significant portion of our net revenues in RMB. Under our current corporate structure, our company in the Cayman Islands relies on dividend payments from our subsidiaries 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 the SAFE by complying with certain procedural requirements. Therefore, our PRC subsidiaries are able to pay dividends in foreign currencies to us without prior approval from the 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. But approval from, registration or filing 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.
In recent years, the PRC government has imposed more restrictive foreign exchange policies and stepped up scrutiny of major outbound capital movement. More restrictions and a substantial vetting process were put in place by the SAFE to regulate cross-border transactions falling under the capital account. The PRC government may at its discretion further restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders, including holders of our ADSs.
Failure to make adequate contributions to various employee benefit plans and withhold individual income tax on employees’ salaries as required by PRC regulations may subject us to penalties.
Companies operating in China are required to participate in various government sponsored employee benefit plans, including certain social insurance, housing funds and other welfare-oriented payment obligations, and contribute to the plans in amounts equal to certain percentages of salaries, including bonuses and allowances, of 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. Companies operating in China are also required to withhold individual income tax on employees’ salaries based on the actual salary of each employee upon payment.
With respect to the underpaid employee benefits, we may be required to make up the contributions for these plans as well as to pay late fees and fines; with respect to the under withheld individual income taxes, we may be required to make up sufficient withholding and pay late fees and fines. In addition, we engage third-party human resources agencies to make social insurance and housing fund contributions for some of our employees, and there is no assurance that such third-party agencies have made or will make such contributions in full or in a timely manner. The PRC authorities may require us to pay, or in the case of any shortfalls, to cover, such social insurance and housing fund contributions. If we are subject to late fees or fines in relation to the underpaid employee benefits and under withheld individual income taxes, 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 M&A Rules 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 that the approval from the Ministry of Commerce be obtained in circumstances where overseas companies established or controlled by PRC enterprises or natural persons acquire an affiliated PRC domestic enterprise. After the PRC Foreign Investment Law and its Implementation Regulations became effective on January 1, 2020, the provisions of the M&A Rules remain effective to the extent they are not inconsistent with the PRC Foreign Investment Law and its Implementation Regulations. Moreover, the Anti-Monopoly Law requires that the State Administration for Market Regulation shall be notified in advance of any concentration of undertaking if certain thresholds are triggered. On January 22, 2024, the State Council of the PRC issued the revised Provisions of the State Council on the Threshold for the Filing of Concentration of Undertakings, which raise the filing threshold of revenue, and provide that the anti-monopoly authority may order market participants involved in a market concentration transaction to make an application for clearance on concentration in cases where the revenue threshold is not met. 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 Ministry of Commerce, the State Administration for Market Regulation or other PRC government authorities may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.
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In addition, the Provisions of Ministry of Commerce on Implementation of Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors issued by the Ministry of Commerce 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 PRC government authorities, 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 December 2020, the NDRC and the Ministry of Commerce jointly issued the Measures for the Security Review of Foreign Investment, which came into effect on January 18, 2021. The NDRC and the Ministry of Commerce will establish a working mechanism office in charge of the security review of foreign investment. Such Measures defines 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” is not clearly defined under such Measures, and could be broadly interpreted. It is likely that control through contractual arrangements be regarded as de facto control based on provisions applied to the security review of foreign investment. Failure to make such filing may subject such foreign investor to rectification within a prescribed period, and will be recorded as negative credit information of such foreign investor in the national credit information system, which would then subject such investors to joint punishment as provided by the applicable 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 eliminate the impact on national security. Official guidance in relation to the Measures has not been issued by the designated office in charge of such security review yet, therefore, at this stage, the interpretation of the Measures remains unclear in many aspects such as what would constitute “important information technology and internet services and products” and whether the Measures may apply to foreign investment that is implemented or completed before the enactment of the Measures. As our business may be deemed to constitute the foregoing circumstances, we cannot assure you that our current business operations will remain fully compliant, or we can adapt our business operations to the new regulatory requirements on a timely basis, or at all.
PRC regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiaries’ ability to increase their registered capital or distribute profits to us or otherwise expose us or our PRC resident beneficial owners to liability and penalties under PRC law.
The SAFE issued 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, which replaced the previous Circular on Relevant Issues Concerning Foreign Exchange Administration for PRC Residents Engaging in Financing and Roundtrip Investments through Overseas Special Purpose Vehicles, or SAFE Circular 75. SAFE Circular 37 requires PRC residents, including PRC resident individuals and PRC 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 resident individuals must update their SAFE registrations when the offshore special purpose vehicle that such PRC resident individuals directly own the equity interests in undergoes material events relating to any change of basic information (including change of such PRC residents or entities, name and operation term), increases or decreases in investment amount, transfers or exchanges of shares, or mergers or divisions. SAFE Circular 37 also requires a PRC entity to undergo the foreign exchange registration and updating procedures in accordance with the Provisions on Foreign Exchange Administration of the Outbound Direct Investment of Domestic Institutions, issued by the SAFE in July 2009 and other regulations.
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On February 28, 2015, the SAFE issued a Notice on Further Simplifying and Improving Foreign Exchange Administration Policy on Direct Investment, or SAFE Notice 13, which became effective on June 1, 2015. In accordance with SAFE Notice 13, PRC residents are required to apply for foreign exchange registration of foreign direct investment and outbound direct investments, including those required under SAFE Circular 37, with qualified banks, instead of the SAFE. The qualified banks, under the supervision of the SAFE, directly examine the applications and conduct the registration.
If our direct or indirect shareholders who are PRC residents do not complete their registration with the local SAFE branches or qualified banks, our PRC subsidiaries may be prohibited from distributing their 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 subsidiaries. Moreover, failure to comply with the SAFE registration described above could result in liability under PRC laws for evasion of applicable foreign exchange restrictions.
Our founders and a number of our directors, officers and individual shareholders who indirectly hold shares in our Cayman Islands holding company and who are known to us as being PRC residents, including Yifan Ren, Lei Sun, Changxing Xiao, and Lei Liu have completed the foreign exchange registrations in accordance with SAFE Circular 37 or SAFE Circular 75 then in effect. In October 2018, Lei Sun established a trust, of which he and his family members are beneficiaries, and transferred all shares of our company he beneficially owned to this trust. Each of the four other directors and officers of our company established a trust, of which he and his family members are beneficiaries, and transferred all shares of our company each beneficially owned to such trusts. See “Item 7. Major Shareholders and Related Party Transactions—A. Major Shareholders.” All beneficiaries of such trusts who are PRC residents are required to complete the registrations pursuant to SAFE Circular 37. We have notified the beneficiaries of the trusts who we know are PRC residents of their filing obligation, including the obligation to make initial registration or updates under SAFE Circular 37, and such beneficiaries have undertaken to complete the registrations as soon as such registration is practical with the local SAFE branches or qualified banks.
However, we may not be informed of the identities of all the PRC residents holding direct or indirect interest in our company, nor can we compel our beneficial owners to comply with the requirements of SAFE Circular 37 and other outbound investment related regulations. As a result, we cannot assure you that all of our shareholders or beneficial owners who are PRC residents have complied with, and will in the future make or obtain any applicable registrations or approvals required by, SAFE Circular 37 and other outbound investment related regulations. Failure by such shareholders or beneficial owners to comply with SAFE Circular 37 and other outbound investment related regulations, or failure by us to amend the foreign exchange registrations of our PRC subsidiaries, could subject us or our shareholders to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit our PRC subsidiaries’ 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.
Pursuant to SAFE Circular 37, PRC residents who participate in stock incentive plans in overseas non-publicly-listed companies may submit applications to the SAFE or its local branches for the foreign exchange registration with respect to offshore special purpose vehicles. In the meantime, our directors, executive officers and other employees who are PRC residents and who have been granted stock options by us, may follow the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Publicly-Listed Company, issued by the SAFE in 2012. Pursuant to the foregoing notices, 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 are required to register with the SAFE through a domestic qualified agent, which could be the PRC subsidiaries of such overseas listed company, and complete certain other procedures. In addition, an overseas entrusted institution must be retained to handle matters in connection with the exercise or sale of stock options and the purchase or sale of shares and interests. We and our directors, executive officers and other employees who are PRC citizens or who reside in the PRC for a continuous period of not less than one year and who have been granted stock options will be 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 subsidiaries and limit our PRC subsidiaries’ 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 Related to Our Business Operation in China—Regulations Related to Employee Stock Incentive Plans.”
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The State Administration of Taxation has issued certain circulars concerning employee stock options and restricted shares. Under these circulars, our employees working in China who exercise stock options or are granted restricted shares will be subject to PRC individual income tax. Our PRC subsidiaries have obligations to file documents related to employee stock options or restricted shares with the tax authorities and to withhold individual income taxes of those employees who exercise their share options. If our employees fail to pay or we fail to withhold their income taxes according to the laws and regulations, we may face sanctions imposed by the tax authorities or other PRC governmental authorities. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Related to Our Business Operation in China—Regulations Related to Employee Stock Incentive Plans.”
In addition, on October 12, 2021, the State Administration of Taxation has issued the Notice of the State Administration of Taxation on Several Measures for Deepening the Reform of “Streamlining Administration, Instituting Decentralization, Improving Regulation and Optimizing Services” in the Taxation Field to Cultivate and Stimulate the Vitality of Market Players, or SAT Notice 69. Such notice requires domestic enterprises to report their share incentive plans to the tax authorities in charge, which gives the equity interests of an overseas enterprise to their employees. Under SAT Notice 69, our employees working in China who exercise share incentive awards will be subject to PRC individual income tax. Our PRC subsidiary has the obligation to make filings related to employee share incentive awards with the tax authorities and to withhold individual income taxes of those employees who exercise their share incentive awards. If our employees fail to pay or we fail to withhold their income taxes according to the laws and regulations, we may face sanctions imposed by the tax authorities or other PRC governmental authorities.
If our entities outside of China 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 Enterprise Income Tax 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. The Notice of the State Administration of Taxation on Issues Concerning the Determination of Chinese-Controlled Enterprises Registered Overseas as Resident Enterprises on the Basis of Their Bodies of Actual Management, or SAT Circular 82, issued by the State Administration of Taxation in April 2009 and amended in December 2017, 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 the circular may reflect the State Administration of Taxation’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 SAT Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “de facto management body” in China and will be subject to PRC enterprise income tax on its global income only if all of the following conditions are met: (i) the primary location of the day-to-day operational management is in the PRC; (ii) decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise’s primary assets, accounting books and records, company seals, and board and shareholder resolutions, are located or maintained in the PRC; and (iv) at least 50% of voting board members or senior executives habitually reside in the PRC.
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 9F Inc. or any of our subsidiaries outside of China is a PRC resident enterprise for PRC enterprise income tax purposes, then 9F Inc. 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, gains realized on the sale or other disposition of our ADSs or Class A ordinary shares may be subject to PRC tax, and dividends we pay may be subject to PRC withholding 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 gains or dividends 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 or Class A ordinary shares.
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We may not be able to obtain certain benefits under the relevant tax treaty on dividends paid by our PRC subsidiaries 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 subsidiaries to satisfy part of our liquidity requirements. Pursuant to the Enterprise Income Tax 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 Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income and the Circular on Certain Issues with Respect to the Enforcement of Dividend Provisions in Tax Treaties, or SAT Circular 81, issued by the State Administration of Taxation, such withholding tax rate may be lowered to 5% if the PRC enterprise is at least 25% held by a Hong Kong enterprise for at least 12 consecutive months prior to distribution of the dividends and is determined by the PRC tax authority to have satisfied other conditions and requirements under the foregoing arrangement and other applicable PRC laws. However, based on SAT Circular 81, if the PRC tax authority determines, in its discretion, that a company benefits from such reduced income tax rate due to a structure or arrangement that is primarily tax-driven, such PRC tax authority may adjust the preferential tax treatment. Furthermore, in October 2019, the State Administration of Taxation promulgated the Administrative Measures for Non-Resident Taxpayers to Enjoy Treaty Treatments, or SAT Circular 35, which became effective on January 1, 2020 and superseded the Administrative Measures for Non-Resident Enterprises to Enjoy Treatments under Tax Treaties. SAT Circular 35 abolished the record-filing procedure for justifying the tax treaty eligibility of taxpayers and stipulates that non-resident taxpayers can enjoy tax treaty benefits via the “self-assessment of eligibility, claiming treaty benefits, retaining documents for inspection” mechanism. Non-resident taxpayers can claim tax treaty benefits after self-assessment provided that relevant supporting documents shall be collected and retained for post-filing inspection by the tax authorities. In addition, based on the Notice on Issues concerning Beneficial Owner in Tax Treaties, or SAT Circular 9, issued on February 3, 2018 by the State Administration of Taxation, which became effective from April 1, 2018, when determining the applicant’s status of the “beneficial owner” regarding tax treatments in connection with dividends, interests or royalties in the tax treaties, several factors, including without limitation, whether the applicant is obligated to pay more than 50% of the applicant’s income in twelve months to residents in third country or region, whether the business operated by the applicant constitutes the actual business activities, and whether the counterparty country or region to the tax treaties does not levy any tax or grant tax exemption on relevant incomes or levy tax at an extremely low rate, will be taken into account, and the finding will be made based on the actual circumstances of the specific cases. There are also other conditions for enjoying the reduced withholding tax rate according to other relevant tax rules and regulations. See “Item 10. Additional Information—E. Taxation—People’s Republic of China Taxation.” We cannot assure you that our determination regarding our qualification to enjoy the preferential tax treatment will not be challenged by the PRC tax authority or we will be able to complete the necessary filings with the PRC tax authority and enjoy the preferential withholding tax rate of 5% under the Double Taxation Arrangement with respect to dividends to be paid by our PRC subsidiaries to our Hong Kong subsidiary.
We face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.
Pursuant to the Circular on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises, or SAT Circular 698, issued by the State Administration of Taxation in 2009 with retroactive effect from January 1, 2008, 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, or an Indirect Transfer, and such overseas holding company is located in a tax jurisdiction that: (a) has an effective tax rate less than 12.5% or (b) does not tax foreign income of its residents, the non-resident enterprise, being the transferor, shall report to the competent tax authority of the PRC resident enterprise this Indirect Transfer.
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On February 3, 2015, the State Administration of Taxation issued a Public Notice Regarding Certain Corporate Income Tax Matters on Indirect Transfer of Properties by Non-Resident Enterprises, or SAT Public Notice 7. It supersedes certain 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 Public Notice 7 has introduced a new tax regime that is significantly different from the previous one under SAT Circular 698. SAT Public Notice 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 Public Notice 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 Public Notice 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 tax authority. Using a “substance over form” principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring PRC tax. As a result, gains derived from such Indirect Transfer may be subject to PRC enterprise income tax, and the transferor shall be subject to withholding of applicable taxes, currently at a rate of 10%. On October 17, 2017, the State Administration of Taxation issued the Announcement of the State Administration of Taxation on Issues Concerning the Withholding of Non-resident Enterprise Income Tax at Source, or SAT Bulletin 37, which became effective on December 1, 2017 and abolished SAT Circular 698 as well as certain provisions in SAT Public Notice 7. SAT Bulletin 37 further clarifies the practice and procedure of the withholding of non-resident enterprise income tax. Pursuant to SAT Bulletin 37, where the party responsible to withhold such income tax did not or was unable to withhold, and the non-resident enterprise receiving such income failed to declare and pay the taxes that should have been withheld to the tax authority, both of such parties may be subject to penalties.
We face uncertainties as to the reporting and other implications of certain past and future transactions where PRC taxable assets are involved, such as offshore restructuring, sale of the shares in our offshore subsidiaries or investments. Our company may be subject to filing obligations or taxed or subject to withholding obligations in such transactions, under SAT Public Notice 7 and SAT Bulletin 37. For transfer of shares in our company by investors that are non-PRC resident enterprises, our PRC subsidiaries may be requested to assist in the filing under SAT Public Notice 7 and SAT Bulletin 37. As a result, we may be required to expend valuable resources to comply with SAT Public Notice 7 and SAT Bulletin 37 or to request the relevant transferors from whom we purchase taxable assets to comply with these circulars, or to establish that our company should not be taxed under these circulars, which may have a material adverse effect on our financial condition and results of operations.
Any failure or perceived failure by us to comply with the Anti-Monopoly Guidelines for Internet Platforms and other anti-monopoly laws and regulations may result in governmental investigations or enforcement actions, litigation or claims against us and could have an adverse effect on our business, financial condition and results of operations.
The PRC anti-monopoly enforcement agencies have in recent years strengthened enforcement under the PRC Anti-monopoly Law. In November 2021, the National Anti-monopoly Bureau was inaugurated by the State Council, with the aim to further implement fair competition policies, and strengthen anti-monopoly supervision, particularly the oversight and law enforcement in areas involving platform economy, innovation, science and technology, information security and people’s livelihood, in China. According to the PRC Anti-monopoly Law, which was issued on August 30, 2007, last amended on June 24, 2022 and took effective from August 1, 2022, business operators holding dominant market positions shall not abuse such position to restrict trading counterparts to transact only with such business operators or only with designated business operators without a justifiable reason. Where a business operator has violated the PRC Anti-monopoly Law by abusing its dominant market position, the anti-monopoly enforcement agency shall order the business operator to stop the illegal act and confiscate the illegal income; and a fine of 1% to 10% of the business operator’s revenue from the preceding year shall be imposed. In addition, the latest amended PRC Anti-monopoly Law raises the maximum fines for illegal concentration of business operators to no more than ten percent of its last year’s sales revenue if the concentration of business operators has or may have an effect of excluding or limiting competitions, or a fine of up to RMB5 million if the concentration of business operators does not have an effect of excluding or limiting competition. The authorities shall investigate a transaction where there is any evidence that the concentration has or may have the effect of eliminating or restricting competitions, even if such concentration does not reach the filing threshold. We may have to expend higher cost and more time evaluating and managing these risks and challenges in connection with our products and services as well as our investments. As of the date of this annual report, we had not been subject to any administrative penalties, regulatory actions or inquiries in connection with anti-monopoly.
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In February 2021, the Anti-monopoly Commission of the State Council issued the Guidelines to Anti-Monopoly in the Field of Internet Platforms, or the Anti-Monopoly Guidelines for Internet Platforms. The Anti-Monopoly Guidelines for Internet Platforms is consistent with the Anti-Monopoly Law and prohibits monopoly agreements, abuse of a dominant position and concentration of undertakings that may have the effect to eliminate or restrict competition in the field of platform economy. More specifically, the Anti-Monopoly Guidelines for Internet Platforms outlines certain practices that may, if without justifiable reasons, constitute abuse of a dominant position, including without limitation, tailored pricing using big data and analytics, actions or arrangements deemed as exclusivity arrangements, using technological means to block competitors’ interface, using bundle services to sell services or products, and compulsory collection of user data. In addition, the Anti-Monopoly Guidelines for Internet Platforms expressly provides that concentrations involving variable interest entities will also be subject to antitrust filing requirements. Pursuant to the Guidelines on Anti-Monopoly Compliance for Internet Platforms, which was promulgated by the SAMR on January 28, 2026, platform operators shall effectively assume primary responsibility for anti-monopoly compliance, establish and improve anti-monopoly compliance systems, strengthen anti-monopoly compliance management, and engage in competition and business operations in accordance with laws and regulations. Platform operators shall not engage in monopolistic behaviors by exploiting advantages in data, algorithms, technology, capital, or platform rules. We are unable to predict the impact of these guidelines on our business, financial condition, results of operations and prospects. We cannot assure you that our business operations are compliant with these guidelines in all respects. If any non-compliance is determined against us, we may be subject to fines and other penalties.
There are significant uncertainties with respect to the evolving anti-monopoly regulatory landscape, especially in terms of the enactment timetable, final provisions, and post-enactment interpretation and implementation of the rules and regulations. There is also a lack of clarity on the enforcement regime of, and differences exist in terms of local implementations of and practices on, anti-monopoly and competition laws and regulations. Any failure or perceived failure by us to comply with the Anti-Monopoly Guidelines for Internet Platforms, the Anti-Monopoly Law, or other anti-monopoly laws and regulations may result in governmental investigations or enforcement actions, lawsuits or claims against us and could have an adverse effect on our business, financial condition and results of operations.
Risks Related to Our American Depositary Shares
The market price for our ADSs may be volatile.
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 other listed 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 price declines in their trading prices. The trading performance 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 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, which may have a material adverse effect on the market price of our ADSs.
In addition to the above factors, the price and trading volume of our ADSs may be highly volatile due to multiple factors, including the following:
| ● | regulatory developments affecting us, our users, or our industries or listed companies in general; |
| ● | conditions in our industries; |
| ● | announcements of studies and reports relating to the quality of our products and service offerings or those of our competitors; |
| ● | actual or anticipated fluctuations in our interim results of operations and changes or revisions of our expected results; |
| ● | changes in financial estimates by securities research analysts; |
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| ● | announcements by us or our competitors of new products and service offerings, acquisitions, strategic relationships, joint ventures or capital commitments; |
| ● | additions to or departures of our senior management; |
| ● | detrimental negative publicity about us, our management or our industry; |
| ● | trends in the global economy in general or the Chinese economy in particular; |
| ● | rising international geopolitical tensions; |
| ● | fluctuations of exchange rates between the Renminbi and the U.S. dollar; and |
| ● | sales or perceived potential sales of additional Class A ordinary shares or ADSs. |
Substantial future sales or perceived potential sales of our ADSs or Class A ordinary shares in the public market could cause the price of our ADSs to decline.
Sales of our ADSs or Class A ordinary shares in the public market, including the issuance in a situation in which we acquire a company and the acquired company receives ordinary shares as consideration and the acquired company subsequently sells its ordinary shares, or by investors who acquired such ordinary shares in a private placement, or the perception that these sales could occur, could cause the market price of our ADSs to decline. Our Class A ordinary shares outstanding are also available for sale subject to volume and other restrictions as applicable under Rules 144 and 701 under the Securities Act. To the extent these shares are sold into the market, the market price of our ADSs could decline.
Certain holders of our Ordinary Shares may also 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.
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 unfavorable research about our business, the market price for our ADSs would likely decline. If one or more of these analysts 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 for our ADSs to decline.
Because we do not expect to pay dividends in the foreseeable future, you must rely on price appreciation of our ADSs for return on your investment.
We currently intend to retain most, if not all, of our available funds and any future earnings to fund the development and growth of our business. As a result, we do not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an investment in our ADSs as a source for any future dividend income.
Our board of directors has discretion as to whether to distribute dividends, subject to certain restrictions under the Cayman Islands law, namely that our company may only pay dividends out of profits or share premium, and provided always that in no circumstances may a dividend be paid if this would result in our company being unable to pay its debts as they fall due in the ordinary course of business. In addition, our shareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our board of directors. Even if our board of directors decides 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 VIEs and our subsidiaries, our financial condition, contractual restrictions and other factors deemed relevant by our board of directors. Accordingly, the return on your investment in our ADSs will likely depend entirely upon any future price appreciation of our ADSs, if any. 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 in our ADSs.
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Our dual-class share structure with different voting rights and the restriction on transfer of Class B ordinary shares will limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of our Class A ordinary shares and ADSs may view as beneficial.
Our authorized share capital is divided into Class A ordinary shares and Class B ordinary shares (with certain shares remaining undesignated, with power for our directors to designate and issue such classes of shares as they think fit). In respect of matters requiring the votes of shareholders, holders of Class A ordinary shares and Class B ordinary shares vote together as a single class except as may otherwise be required by law, holders of Class A ordinary shares will be entitled to one vote per share, while holders of Class B ordinary shares will be entitled to five votes per share. Each Class B ordinary share is convertible into one Class A ordinary share at any time by the holder thereof, while Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances. Upon any sale, transfer, assignment or disposition of any Class B ordinary shares by a holder thereof to any non-affiliate to such holder, or upon a change of control of any Class B ordinary shares to any person who is not an affiliate of the registered holder of such Class B ordinary shares, each of such Class B ordinary shares will be automatically and immediately be converted into one Class A ordinary share.
Mr. Lei Sun, the chairman of our board of directors, beneficially owns an aggregate of 6,085,465 Class A ordinary shares and 58,348,000 Class B ordinary shares, representing in aggregate 62.0% of our total voting power as of the date of this annual report. Consequently, Mr. Sun will be able to significantly influence matters requiring shareholders’ approval such as electing directors and approving material mergers, acquisitions or other business combination transactions. The dual-class share structure will also allow Mr. Sun to have significant influence on requisition of an extraordinary general meeting of shareholders and quorum required for a general meeting of shareholders. See “Item 10. Additional Information—B. Memorandum and Articles of Association—Voting Rights” and “Item 10. Additional Information—B. Memorandum and Articles of Association—General Meetings of Shareholders and Shareholder Proposals” for details. Mr. Sun may take actions that are not in the best interest of us or our other shareholders. This concentration of voting power and the restriction on transfer of Class B ordinary shares may also discourage, delay or prevent a change in control of our company, which could have the dual effect of depriving our other shareholders of an opportunity to receive a premium for their shares as part of a sale of our company and reducing the price of our ADSs. These actions may be taken even if they are opposed by our other shareholders. In addition, Mr. Sun could divert business opportunities away from us to himself or others. For more information regarding our principal shareholders and their affiliated entities, see “Item 7. Major Shareholders and Related Party Transactions—A. Major Shareholders.”
The voting rights of holders of ADSs are limited by the terms of the deposit agreement, and you may not be able to exercise your right to direct the voting of the underlying Class A ordinary shares which are represented by your ADSs.
As a holder of our ADSs, you will not have any direct right to attend general meetings of our shareholders or to cast any votes at such meetings. You will only be able to exercise the voting rights which attach to the underlying Class A ordinary shares which are represented by your ADSs indirectly by giving voting instructions to the depositary in accordance with the provisions of the deposit agreement. Under the deposit agreement, you may vote only by giving voting instructions to the depositary, as the holder of the underlying Class A ordinary shares which are represented by your ADSs. Upon receipt of your voting instructions, the depositary will endeavor to vote the underlying Class A ordinary shares in accordance with your instructions in the event voting is by poll, and in accordance with instructions received from a majority of holders of ADSs who provide instructions in the event voting is by show of hands. The depositary will not join in demanding a vote by poll. You will not be able to directly exercise any right to vote with respect to the underlying Class A ordinary shares unless you withdraw the shares and become the registered holder of such shares prior to the record date for the general meeting. Under our sixth amended and restated memorandum and articles of association, the minimum notice period required to be given by our company to our registered shareholders for convening a general meeting is seven days. When a general meeting is convened, you may not receive sufficient advance notice to enable you to withdraw the underlying Class A ordinary shares which are represented by your ADSs and become the registered holder of such shares prior to the record date for the general meeting to allow you to attend the general meeting or to vote directly with respect to any specific matter or resolution which is to be considered and voted upon at the general meeting. In addition, under our sixth amended and restated memorandum and articles of association, for the purposes of determining those shareholders who are entitled to attend and vote at any general meeting, our directors may close our register of members and/or fix in advance a record date for such meeting, and such closure of our register of members or the setting of such a record date may prevent you from withdrawing the underlying Class A ordinary shares which are represented by your ADSs and becoming the registered holder of such shares prior to the record date, so that you would not be able to attend the general meeting or to vote directly. Where any matter is to be put to a vote at a general meeting, the depositary will, if we request, and subject to the terms of the deposit agreement, endeavor to notify you of the upcoming vote and 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 which are 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 direct the voting of the underlying Class A ordinary shares which are represented by your ADSs, and you may have no legal remedy if the underlying Class A ordinary shares are not voted as you requested.
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Except in limited circumstances, the depositary for our ADSs will give us a discretionary proxy to vote our Class A ordinary shares underlying your ADSs if you do not instruct the depositary how to vote such shares, which could adversely affect your interests.
Under the deposit agreement for our ADSs, the depositary will give us (or our nominee) a discretionary proxy to vote our Class A ordinary shares represented by your ADSs at shareholders’ meetings if you do not give voting instructions to the depositary as to how to vote the Class A ordinary shares represented by your ADSs at any particular shareholders’ meeting, unless:
| ● | we have failed to timely provide the depositary with our 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; |
| ● | we have informed the depositary that a matter to be voted on by the discretionary proxy at the meeting may have an adverse impact on the rights of shareholders; or |
| ● | voting at the meeting is made by a show of hands. |
The effect of this discretionary proxy is that, if you fail to give voting instructions to the depositary as to how to vote the Class A ordinary shares represented by your ADSs at any particular shareholders’ meeting, you cannot prevent our Class A ordinary shares represented by your ADSs from being voted at that meeting, absent the situations described above, and it may make it more difficult for shareholders to influence our management. Holders of our ordinary shares are not subject to this discretionary proxy.
Your rights to pursue claims against the depositary as a holder of ADSs are limited by the terms of the deposit agreement and the deposit agreement may be amended or terminated without your consent.
Under the deposit agreement, any action or proceeding against or involving the depositary, arising out of or based upon the deposit agreement or the transactions contemplated thereby or by virtue of owning the ADSs may only be instituted by you in a state or federal court in the City of New York, the State of New York, and you, as a holder of our ADSs, will have irrevocably waived any objection which you may have to the laying of venue of any such proceeding, and irrevocably submitted to the exclusive jurisdiction of such courts in any such action or proceeding instituted by any person. Also, we may amend or terminate the deposit agreement without your consent. If you continue to hold your ADSs after an amendment to the deposit agreement, you agree to be bound by the deposit agreement as amended. See “Item 12. Description of Securities Other Than Equity Securities—D. American Depositary Shares” for more information.
Your right to participate in any future rights offerings may be limited, which may cause dilution to your holdings.
We may from time to time distribute rights to our shareholders, including rights to acquire our securities. However, we cannot make such rights available to you in the United States unless we register both the rights and the securities to which the rights relate under the Securities Act or an exemption from the registration requirements is available. Under the deposit agreement, the depositary will not make rights available to you unless both the rights and the underlying securities to be distributed to ADS holders are either registered under the Securities Act or exempt from registration under the Securities Act. We are under no obligation to file a registration statement with respect to any such rights or securities or to endeavor to cause such a registration statement to be declared effective and we may not be able to establish a necessary exemption from registration under the Securities Act. Accordingly, you may be unable to participate in our rights offerings in the future and may experience dilution in your holdings.
You may not receive dividends or other distributions on our Class A ordinary shares and you may not receive any value for them, if it is illegal or impractical 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 our Class A ordinary shares or other deposited securities underlying our ADSs, after deducting its fees and expenses. You will receive these distributions in proportion to the number of Class A ordinary shares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical 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 feasible 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, Class A 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, Class A ordinary shares, rights or anything else to holders of ADSs. This means that you may not receive distributions we make on our Class A ordinary shares or any value for them if it is illegal or impractical 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 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 transfer books at any time or from time to time when it deems it expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or of any government or governmental authority, or under any provision of the deposit agreement, or for any other reason.
Certain judgments obtained against us by our shareholders may not be enforceable.
We are an exempted company limited by shares incorporated under the laws of the Cayman Islands. We conduct a major part of our operations in China and Hong Kong. In addition, a majority of our directors and executive officers reside within China or Hong Kong, and some of the assets of these persons are located within China or Hong Kong. As a result, it may be difficult or impossible for you to effect service of process within the United States upon these individuals, or to bring an action against us or against these individuals in the United States in the event that you believe 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 the PRC may render you unable to enforce a judgment against our assets or the assets of our directors and officers.
It may be difficult for overseas regulators to conduct investigations or collect evidence within China.
Shareholder claims or regulatory investigations that are common in the United States generally are difficult to pursue as a matter of law or practicality in China. For example, in China, there are significant legal and other obstacles to providing information needed for regulatory investigations or litigation initiated outside China. Although the authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such cooperation with the securities regulatory authorities in the Unities States may not be efficient in the absence of a mutual and practical cooperation mechanism. Furthermore, according to Article 177 of the PRC Securities Law, which became effective in March 2020, no overseas securities regulator is allowed to directly conduct an investigation or evidence collection activities within the territory of the PRC, and without the consent by the Chinese securities regulatory authorities and the other competent governmental agencies, no entity or individual may provide documents or materials related to the securities business overseas. On February 17, 2023, the CSRC published the Trial Measures, which came into effect on March 31, 2023. According to Article 26 of the Trial Measures, where an overseas securities regulatory agency intends to carry out investigation and evidence collection regarding overseas offering and listing activities by a domestic company, and request assistance of the CSRC under relevant cross-border securities regulatory cooperation mechanisms, the CSRC may provide necessary assistance in accordance with applicable PRC laws. Any domestic entity or individual providing documents and materials requested by an overseas securities regulatory agency out of investigative or evidence collection purposes, shall not provide such information without prior approval from the CSRC and competent authorities under the State Council. On February 24, 2023, the CSRC further published the Confidentiality and Archives Rules, pursuant to which, the working papers and other files produced in the PRC by sponsors, underwriters and securities service institutions that provide PRC domestic companies with relevant securities services during the overseas securities offering and listing by such domestic companies shall be stored in PRC. If overseas securities regulators propose to carry out investigation, evidence collection or inspection on PRC domestic companies, or relevant sponsors, underwriters or securities service institutions, such activities shall be carried out through the cross-border regulatory cooperation mechanism. The PRC domestic companies, sponsors, underwriters and securities service institutions shall obtain approvals from the CSRC or other PRC authorities before cooperating with overseas securities regulators in their investigations and inspections or providing materials to them. In addition, the Data Security Law and the Personal Information Protection Law provide that no entity or individual within the territory of the PRC shall provide any foreign judicial authority and law enforcement authority with any data or any personal information stored within the territory of the PRC without the approval of the competent governmental authority of the PRC. In the event that the U.S. regulators carry out any investigation on us and there arises a need to conduct an investigation or collect evidence within the territory of China, the U.S. regulators may not be able to carry out such investigation or evidence collection directly in China under PRC laws. In addition, we and certain other entities and individuals, including our legal advisors, auditors and other agents, may be restricted from providing documents, materials, data and/or personal information to U.S. regulators before obtaining appropriate approvals from the PRC authorities. We may be subject to penalties if we or such other entities or individuals are found to have violated the foregoing restrictions. The U.S. regulators may resort to cross-border cooperation with the securities regulatory authority of China through judicial assistance, diplomatic channels or regulatory cooperation mechanisms in place involving the securities regulatory authority of China. While detailed interpretation of or implementation rules under these laws have yet to be issued, the inability of an overseas securities regulator to directly conduct investigations or collect evidence within China, and restrictions on the provision of documents, materials, data and/or personal information by entities and individuals to an overseas securities regulator, foreign judicial authority or foreign law enforcement authority may further increase difficulties faced by you in protecting your interests. See also “—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 the Cayman Islands law” for risks associated with investing in us as a Cayman Islands company.
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ADSs holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable outcomes to the plaintiff(s) in any such action.
The deposit agreement governing the ADSs representing our Class A ordinary shares provides that, to the fullest extent permitted by law, ADS holders waive the right to a jury trial of any claim they may have against us or the depositary arising out of or relating to our shares, the ADSs or the deposit agreement, including any claim under the U.S. federal securities laws.
If we or the depositary opposed a jury trial demand based on the waiver, the court would determine whether the waiver was enforceable based on the facts and circumstances of that case in accordance with the applicable state and federal laws. To our knowledge, the enforceability of a contractual pre-dispute jury trial waiver in connection with claims arising under the federal securities laws has not been finally adjudicated by the United States Supreme Court. However, we believe that a contractual pre-dispute jury trial waiver provision is generally enforceable, including under the laws of the State of New York, which govern the deposit agreement, by a federal or state court in the City of New York, which has non-exclusive jurisdiction over matters arising under the deposit agreement. In determining whether to enforce a contractual pre-dispute jury trial waiver provision, courts will generally consider whether a party knowingly, intelligently and voluntarily waived the right to a jury trial. We believe that this is the case with respect to the deposit agreement and the ADSs. It is advisable that you consult legal counsel regarding the jury waiver provision before entering into the deposit agreement.
If you or any other holders or beneficial owners of ADSs bring a claim against us or the depositary in connection with matters arising under the deposit agreement or the ADSs, including claims under federal securities laws, you or such other holder or beneficial owner may not be entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging lawsuits against us or the depositary. If a lawsuit is brought against us or the depositary under the deposit agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may result in different outcomes than a trial by jury would have had, including results that could be less favorable to the plaintiff(s) in any such action.
Nevertheless, if this jury trial waiver provision is not permitted by applicable law, an action could proceed under the terms of the deposit agreement with a jury trial. No condition, stipulation or provision of the deposit agreement or ADSs serves as a waiver by any holder or beneficial owner of ADSs or by us or the depositary of compliance with any substantive provision of the U.S. federal securities laws and the rules and regulations promulgated thereunder.
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 the Cayman Islands law.
We are an exempted company limited by shares incorporated under the laws of the Cayman Islands. Our corporate affairs are governed by our memorandum and articles of association, as amended from time to time, 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 and Wales, the decisions of whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of our shareholders and the fiduciary duties of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands 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, with respect to Cayman Islands companies, plaintiffs may face special obstacles, including but not limited to those relating to jurisdiction and standing, in attempting to assert derivative claims in state or federal courts of the United States.
Shareholders of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect or obtain register of members or corporate records (other than copies of the memorandum and articles of association, the register of mortgages and charges, and any special resolutions passed by the shareholders) of these companies. Under Cayman Islands law, the names of our current directors can be obtained from a search conducted at the Registrar of Companies. Our directors will have discretion under the memorandum and articles of association to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder resolution or to solicit proxies from other shareholders in connection with a proxy contest.
Certain corporate governance practices in the Cayman Islands, which is our home country, differ significantly from requirements for companies incorporated in other jurisdictions such as the United States. If we choose to follow home country practice, our shareholders may be afforded less protection than they otherwise would under rules and regulations applicable to U.S. domestic issuers. See also “Item 16G—Corporate Governance.”
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As a result of all of the above, our public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as public shareholders of a company incorporated in the United States.
Our memorandum and articles of association contains anti-takeover provisions that could discourage a third party from acquiring us and adversely affect the rights of holders of our Class A ordinary shares and ADSs.
Our memorandum and articles of association contain certain provisions that could limit the ability of others to acquire control of our company, including a provision that grants authority to our board of directors to establish and issue from time to time one or more series of preferred shares without action by our shareholders and to determine, with respect to any series of preferred shares, the terms and rights of that series. These provisions could have the effect of depriving our shareholders and ADS holders of the opportunity to sell their shares or ADSs at a premium over the prevailing market price by discouraging third parties from seeking to obtain control of our company in a tender offer or similar transactions.
Our directors and officers have substantial influence over our company and their interests may not be aligned with the interests of our other shareholders.
Our directors and officers collectively own an aggregate of 76.1% of our total voting power as of the date of this annual report. See “Item 7. Major Shareholders and Related Party Transactions—A. Major shareholders.” As a result, they have substantial influence over our business, including significant corporate actions such as mergers, consolidations, election of directors and other significant corporate actions. They may take actions that are not in the best interest of us or our other shareholders. This concentration of voting power may discourage, delay or prevent a change in control of our company, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of our company and may reduce the price of the ADSs. These actions may be taken even if they are opposed by our other shareholders.
In addition, the significant concentration of share ownership may adversely affect the trading price of the ADSs due to investors’ perception that conflicts of interest may exist or arise.
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 U.S. domestic public companies.
Because we qualify as 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 with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K; |
| ● | the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act; |
| ● | the sections of the Exchange Act requiring the liability for insiders who profit from trades made in a short period of time; and |
| ● | the selective disclosure rules by issuers of material nonpublic information under Regulation FD. |
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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 interim financial results, distributed pursuant to the rules and regulations of the Nasdaq Stock 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 that would be made available to you were you investing in a U.S. domestic issuer.
As an exempted company incorporated in the Cayman Islands, we have adopted certain home country practices in relation to corporate governance matters that differ significantly from the Nasdaq’s corporate governance requirements; these practices may afford less protection to shareholders than they would enjoy if we complied fully with the Nasdaq’s corporate governance requirements.
As a Cayman Islands exempted company listed on the Nasdaq Global Market, we are subject to the Nasdaq listing standards. Section 5250(d), Section 5635(c), Section 5605(b)(1), Section 5605(c)(2) and Section 5620 of the Nasdaq Listing Rules require listed companies to distribute their annual reports, obtain shareholders’ approval on adoption of equity incentive awards plans, have a majority of their board members be independent and an audit committee of at least three members, and hold an annual meeting of shareholders no later than one year after the end of their fiscal year-end. However, the Nasdaq Stock Market Rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. We followed home country practice with respect to the foregoing requirements.
Our shareholders may be afforded less protection than they would otherwise enjoy under the Nasdaq listing standards applicable to U.S. domestic issuers given our reliance on the home country practice exception.
If we are deemed an “investment company” under the Investment Company Act of 1940, it could adversely affect the price of the ADSs and could materially and adversely affect our business, results of operations, and financial condition.
We are primarily engaged in technology empowerment service, e-commerce business, and wealth management services, and approximately 70% of our employees are with our products, business, and sales team, and most members of our remaining general administration team directly manage or support our business operation. As disclosed in our public filings, we made certain minority equity investment in some entities that we believe have a synergy with our business. In addition, from time to time, we make certain investment for cash management purpose, mainly in products with high liquidity. We intend to continue to conduct our operations so that our company will not be deemed to be an investment company under the Investment Company Act of 1940 (the “Investment Company Act”). Notwithstanding our view that we are not an investment company, it is possible, in view of the fact that the availability of the exclusion from investment company status afforded by the Investment Company Act is based in part on subjective judgments as to a given issuer's particular facts and circumstances, that the SEC or a court would determine or take a position that we are indeed an investment company under the Investment Company Act. If we were to become subject to the Investment Company Act, any violation of the Investment Company Act could subject us to material adverse consequences, including potentially significant regulatory penalties and the possibility that certain of our contracts would be deemed unenforceable. Additionally, as an issuer organized outside the United States, we would not be eligible to register under the Investment Company Act absent an SEC exemptive order. Accordingly, in order to fall outside the definition of an investment company, we would either have to obtain exemptive relief from the SEC or dispose of certain assets, which may require disposition of assets that we would otherwise wish to retain or disposition of assets at inopportune times. Additionally, we may have to forego potential future acquisitions of assets that we would otherwise want to acquire and that would be important to our business strategy or may be required to materially restrict or limit the scope of our operations or plans. Failure to avoid being deemed an investment company under the Investment Company Act could also make us unable to comply with our reporting obligations as a public company in the United States and lead to our being delisted from Nasdaq Stock Market LLC, which would have a material adverse effect on the liquidity and value of our ADSs. Finally, we may be subject to SEC enforcement action or purported class action lawsuits for alleged violations of U.S. securities laws. Defending ourselves against any such enforcement action or lawsuits would require significant attention from our management and divert resources from our existing businesses and could materially and adversely affect our business, results of operations, and financial condition.
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We are a “controlled company” within the meaning of the Nasdaq Stock Market Rules and, as a result, can rely on exemptions from certain corporate governance requirements that provide protection to shareholders of other companies.
We are a “controlled company” within the meaning of the Nasdaq Stock Market Rules because Mr. Lei Sun, the chairman of our board of directors, owns more than 50% of our total voting power as at the date of this annual report. For so long as we remain a controlled company under that definition, we are permitted to elect to rely, and may rely, on certain exemptions from corporate governance rules. As a result, you may not have the same protection afforded to shareholders of companies that are subject to these corporate governance requirements.
We believe that we are likely a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes for our taxable year ended December 31, 2025, which could result in adverse U.S. federal income tax consequences to U.S. holders of our ADSs or ordinary shares.
A non-U.S. entity treated as a corporation for U.S. federal income tax purposes will generally be a PFIC for U.S. federal income tax purposes for any taxable year if either (1) 75% or more of its gross income for such year consists of certain types of “passive” income or (2) 50% or more of the value of its assets (generally determined on the basis of a quarterly average) during such year is attributable to assets that produce or are held for the production of passive income.
Based on the market price of our ADSs and the nature and composition of our assets (in particular the retention of a substantial amount of cash, deposits and investments), we believe that we were likely a PFIC for U.S. federal income tax purposes for our taxable year ended December 31, 2025, and we will likely be a PFIC for our current taxable year ending December 31, 2026 unless the market price of our ADSs significantly increases and/or we invest a substantial amount of cash and other passive assets we hold in assets that produce or are held for the production of non-passive income.
If we are a PFIC for any taxable year, a U.S. Holder (as defined in Item 10. Additional Information—E. Taxation—United States Federal Income Tax Considerations) will generally be subject to reporting requirements and may 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, if any, on the ADSs or ordinary shares to the extent such gain or distribution is treated as an “excess distribution” under the U.S. federal income tax rules. Furthermore, if we are a PFIC for any taxable year during which a U.S. Holder holds our ADSs or ordinary shares, we will generally continue to be treated as a PFIC with respect to such U.S. Holder for all succeeding years during which such U.S. Holder holds our ADSs or ordinary shares, unless we were to cease to be a PFIC and such U.S. Holder makes a “deemed sale” election with respect to the ADSs or ordinary shares. Accordingly, a U.S. Holder of our ADSs or ordinary shares should consult its tax advisor concerning the U.S. federal income tax consequences of an investment in our ADSs or ordinary shares, including the possibility of making a “mark-to-market” election. For more information, see “Item 10. Additional Information—E. Taxation—United States Federal Income Tax Considerations.”
Item 4. INFORMATION ON THE COMPANY
| A. | History and Development of the Company |
We initially conducted our business through Jiufu Shuke (formerly known as Beijing Jiufu Times Investment Consulting Co., Ltd., Jiufu Internet Finance Holdings Group Co., Ltd. and Jiufu Jinke Holdings Group Co., Ltd., successively), a company incorporated in China in December 2006.
We restructured our corporate organization in 2014. In January 2014, we incorporated our current holding company in the Cayman Islands under the name of JIUFU Financial Technology Service Limited, an exempted company with limited liability under the laws of the Cayman Islands, which was later changed to 9F Inc. in June 2014. In February 2014, we incorporated Moore Digital Technology Information Service Limited (formerly known as JIUFU Financial Information Service Limited) in Hong Kong, as a wholly-owned subsidiary of 9F Inc. We incorporated Shuzhi Lianyin (formerly known as Beijing Jiufu Lianyin Technology Co., Ltd.) in June 2014 and Shanghai Shuzhi Lianyin Network Co., Ltd. (formerly known as Shanghai Jiufu Network Co., Ltd.) in August 2014 in China as wholly-owned subsidiaries of Moore Digital Technology Information Service Limited.
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In August 2014, Shuzhi Lianyin obtained effective control over Jiufu Shuke and Beijing Puhui through a series of contractual arrangements. In July 2015, August 2015, June 2019, May 2020 and August 2020, we amended and restated some of the abovementioned contracts with then existing shareholders of Jiufu Shuke and Beijing Puhui. In April 2020, Zhuhai Xiaojin Hulian Technology Co., Ltd. and Zhuhai Wukong Youpin Technology Co., Ltd., each a wholly-owned subsidiary of us in China, obtained effective control over Zhuhai Lianyin and Yi Qi Mai through a series of new contractual arrangements (as amended). We terminated contractual agreements with respect to Beijing Jiufu Meihao Technology Co., Ltd. (currently known as Beijing Jinniu Zhixuan Technology Co., Ltd.) in September 2020 when acquiring 100% equity interest in it. In March 2021, Qianhai Fuyuan Network Technology (Shenzhen) Co., Ltd., a wholly-owned subsidiary of us in China, obtained effective control over Shenzhen Fuyuan through a series of new contractual arrangements. In December 2023, following the transfer of Zhuhai Hengqin Yunchuang Investment Partnership (Limited Partnership)’s shares in Yi Qi Mai to Chengmai Mingjun Management Consulting Partnership (Limited Partnership), we have amended our contractual arrangement with Yi Qi Mai and its new shareholder. As a result of our direct ownership in our WFOEs and the contractual arrangements with Beijing Puhui, Jiufu Shuke, Zhuhai Lianyin, Yi Qi Mai and Shenzhen Fuyuan, which are our VIEs, we believe that our VIEs should be treated as Variable Interest Entities under the Statement of Financial Accounting Standards Board Accounting Standards Codification Topic 810 Consolidation and we should be regarded as the primary beneficiary of our VIEs. Accordingly, we treat our VIEs as our consolidated entities under U.S. GAAP and we consolidate the financial results of our VIEs.
We currently conduct substantially all of our operations through our subsidiaries in China, Hong Kong and elsewhere in Asia, and our VIEs and their subsidiaries. The online lending platform business, which was a major part of our business, was mainly conducted by Jiufu Puhui, a wholly-owned subsidiary of Jiufu Shuke. The loan products related business was mainly conducted by Xinjiang Teyi Shuke Information Technology Co., Ltd. (formerly known as Xinjiang Jiufu Onecard Information Technology Co., Ltd.), a wholly-owned subsidiary of Yi Qi Mai through Beijing Lirongxing, and Guangxi Onecard AI Technology Co., Ltd. (formerly known as Zhuhai Onecard Xiaojin Technology Co., Ltd. and Zhuhai Jiufu Xiaojin Technology Co., Ltd.), a wholly-owned subsidiary of Zhuhai Lianyin. Shuzhi Lianyin provides technical support to our operations.
We started to offer offshore stock investment products to provide investors with access to stock trading opportunities in Hong Kong and the U.S. through Metaverse Securities Limited, after we acquired the majority of its equity interest in August 2016. In 2018, we started to engage in the stock distribution business and provide investors with access to stock subscription opportunities in Hong Kong through Metaverse Securities Limited. We conduct insurance brokerage business in Hong Kong through Ether Wealth Management Limited (formerly known as Fuyuan Wealth Management Limited and 9F Wealth Management Limited, successively), a company we acquired in July 2017. In 2022, we established Meta Futures Limited in Hong Kong via our wholly owned subsidiary, through which we plan to provide futures contracts trading services. In February 2024, we entered into transaction agreements to dispose of our equity interest in Lion Global Financial Limited previously acquired in March 2022, the transaction under which has been closed.
On August 15, 2019, our ADSs commenced trading on the Nasdaq Global Market under the symbol “JFU.” On January 3, 2023, we announced the plan to change the ratio of our ADSs to our Class A ordinary shares from the ratio of one ADS to one Class A ordinary share to a new ratio of one ADS to 20 Class A ordinary shares, which took effect on January 18, 2023.
In December 2020, as part of the effort to redirect our business focus, we ceased publishing information relating to new offerings of investment opportunities in legacy products for investors on Jiufu Puhui’s online lending information intermediary platform. Pursuant to certain collaboration arrangements entered into by 9F and certain licensed asset management companies, the rights of investors in then existing loans underlying our legacy products have been transferred to such companies, with relevant repayment of the principal and investment income, as applicable, in relation to the legacy products expected to be made by such asset management companies to the investors within 36 months in ways chosen by the investors subject to terms and on conditions set forth in the platform notice to the investors. As of December 31, 2022, settlement with a vast majority of the investors had been reached. After the change of business operations, Jiufu Puhui no longer provides loan facilitation services, and licensed asset management companies and other third-party service providers provide investors with services in relation to the return of their remaining investment in loans. Starting from 2023, each of Jiufu Puhui and Jiufu Shuke has been named as a co-defendant, in their respective capacity as the operator of online lending information intermediary platform offering online wealth management products to investors, by loan investors in a large number of small claims initiated in local courts in China in relation to our legacy business. See “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Legal Proceedings.”
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In 2025, we initiated a proposed sale of our subsidiary, Jiuxing Insurance Brokerage Co., Ltd., for consideration of RMB10.3 million. The transaction had not closed as of the date of this annual report.
Our principal executive offices are located at Room 1207, Building No. 5, 5 West Laiguangying Road, Chaoyang District, Beijing 100012, People’s Republic of China. Our telephone number at this address is +86 (10) 8527-6996. Our registered office in the Cayman Islands is located at Maples Corporate Services Limited, P.O. Box 309, Ugland House Grand Cayman, KY1-1104, Cayman Islands. Our agent for service of process in the United States is Cogency Global Inc., located at 122 East 42nd Street, 18th Floor, New York, NY 10168.
The SEC maintains an Internet website that contains reports, proxy and information statements, and other information regarding us that filed electronically with the SEC, which can be accessed at http://www.sec.gov. Our annual reports, interim results, press release and other SEC filings can also be accessed via our investor relationship website at http://ir.9fgroup.com/.
| B. | Business Overview |
We are a digital technology and wealth management service provider aiming to empower institutional partners with advanced financial technologies as well as attract investors with investment opportunities that come with the vast potential of China’s new consumer economy and the appreciation of global assets and access to quality products at competitive price.
Pursuant to industry-wide policy requirements, Jiufu Puhui ceased its online lending information intermediary services in China in 2020. Outstanding loans under the relevant online lending activities have been transferred to certain third parties and Jiufu Puhui continues to provide technical support for debt collection and post-origination customer services to such independent third parties to facilitate the phasing out of the online lending intermediary business and the settlement of outstanding loans under the supervision of competent government authorities.
Our Business and Services
Technology Empowerment Services
By deploying our accumulated financial technologies, especially the advanced artificial intelligence algorithms such as machine learning, community discovery, natural language processing voice recognition, and enhanced machine learning automation model training, we provide our partners with technology empowerment services with respect to user acquisition, risk management, consumption scenario perception and comprehension and data modeling. Through these technologies, we have helped them improve their ability for user acquisition, user filtering, user operation management and risk management, and reduce their user acquisition costs, promote their user conversion and enhance their profitability.
In 2019, we launched our proprietary platform that integrates our core artificial intelligence, cloud and big data technologies. Such platform provides our financial institution partners, and online merchants and offline merchants connected by our VIEs’ online platforms, including the merchants connected through our One Card-linked China UnionPay payment channels, with highly customized modularized service packages. We have also been working closely with licensed financial institutions, such as Hubei Consumption Financial Company, by providing them with user acquisition and credit assessment assistance, as well as consultation services. Benefiting from our well-developed risk management and data analysis technology, we are in a superior position to help financial institutions acquire potential borrowers that may fit their client profile, and our deep insight on the financial industry as a long-standing provider of digital finance solutions enable us to provide high quality consultation and integrated technology solutions to financial institutions. In addition, the risk management system developed by us has been widely used in banking, automobile, securities investment and insurance industries.
We have been actively developing our technologies such as big data and artificial intelligence technologies, through in-house research & development and investment in other emerging technology companies.
E-commerce Business
We rolled out online retailing services and offline B2B merchandise services in 2020. Our e-commerce business is currently offered through third-party e-commerce platforms and covers seven major categories of merchandise, including 3C products, beauty and skin care products, food, household appliances, and liquor and beverages. We collaborate with over 50 suppliers in China and have cumulatively offered over 10,000 products. We also provide 8x5 customer service to assist our customers.
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We aim to deliver a superior shopping experience with quality products and competitive prices for our customers, by rigorously adhering to our brand and service philosophy, playing a bigger part in the manufacturing process and supply chain management, and working with qualified suppliers.
Wealth Management Services
Internet Securities Services
We currently hold SFC Type 1 (dealing in securities), Type 2 (dealing in future contracts), Type 4 (advising on securities), Type 5 (advising on future contracts) and Type 9 (asset management) Licenses in Hong Kong through our subsidiaries, Metaverse Securities Limited and Meta Futures Limited. Benefiting from our technology capability, we aim to establish a new type of internet-based securities investment platform that offers convenient and effective global asset allocation services, especially offshore securities investment services, to individual investors so as to connect them with Hong Kong and U.S. stock markets. Currently, we are offering the following services to our users through Metaverse Securities Limited, a licensed entity:
| ● | real time trading information and professional news push notification services in relation to Hong Kong and U.S.-listed securities; |
| ● | online whole-process account opening services that satisfies Hong Kong SFC requirements using facial recognition and e-signatures; |
| ● | convenient transfer, FPS deposit and withdrawal services; |
| ● | multi-category trading services that help investors’ seize market opportunities; and |
| ● | comprehensive account design services that offer affordable investment opportunities in a wide array of securities and securities markets. |
While we believe we have acquired licenses that sufficiently cover the business we plan to conduct, in the future we may take further steps to acquire licenses so as to expand our services and products offerings in relevant regions.
Fund Sales and Insurance Brokerage Services
We hold a Hong Kong insurance brokerage license through our subsidiary Ether Wealth Management Limited (formerly known as Fuyuan Wealth Management Limited). Ether Wealth Management has an experienced and professional wealth management team that assesses risks according to our clients’ different wealth management needs, and provides clients with tailor-made, comprehensive and practical wealth allocation planning and management solutions. Our team assists clients to increase their asset value with diversified wealth management products and services that allow flexible asset allocation. Currently, we have rolled out a product portfolio that covers life protection plans, annuity plans, universal life insurance, general insurance, advisory services relating to Hong Kong mandatory provident fund, or MPF, among others, suitable for a range of financial needs of our clients at different stages of their journeys through life. We also hold an insurance brokerage license through a subsidiary of one of our VIEs, Jiuxing Insurance Brokerage Co., Ltd.
We also hold shares in a fund sales license holder, CSJ Golden Bull (Beijing) Fund Sales Co., Ltd (formerly known as CSJ Golden Bull (Beijing) Investment Consulting Co., Ltd.). Relying on existing licenses, we cooperate with fund managers, asset management companies, trust companies, securities companies, insurance companies, commercial banks, policy banks and other financial institutions and service institutions to provide high-net-worth individuals, family and institutional investors wealth management and investment advisory services.
Technology
Our success is, in part, dependent upon the technologies deployed across our business operations to support our product and service offerings.
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We have taken a data-driven approach in developing and upgrading our internet securities services. Our independently built data service system provides what-you-see-is-what-you-get interface editing environments and allows us to launch and edit new user-interfacing functions. Our front-end development infrastructure is compatible with iOS, Android, personal computer and other mainstream operating systems. This enables us to launch more products across different platforms, improve front-end development efficiency, keep up with the shift in market trends and remain attractive to our users. We offer a comprehensive suite of order transaction models with real-time order taking response to complement our internet securities services. We have developed data centers to provide us with data storage function and a clear data network, based on which we have built a big-data monitoring system that features centralized log management capabilities, visualization of monitoring data and intelligent warning system for risk management. We have also deployed an intelligent operating system that is capable of providing optimized risk management and highly customized information pushing service to millions of our users.
For our technology empowerment service, we have deployed technologies to support the offerings of both intelligent risk management service as well as targeted marketing services. We have developed an intelligent risk management system utilizing artificial intelligence and big data technologies. The fundamental technology platform is empowered by highly flexible risk management strategies and risk management models, which can protect the safety of user data while ensuring the speedy development of a full-cycle risk management process, rapid iteration, and fast online deployment, verification and real time monitoring. Relying on the precision of our risk management system that is made possible by our intelligent platform, we can help our customers effectively reduce the risk of fraud and credit loss. We have also developed a targeted marketing system, which can integrate data from internal and external sources and, through the operation of our marketing conversion model, deliver marketing information via multiple channels to address the needs of our customers.
Sales and Marketing
We benefit from a large user base and strong brand recognition, which help to drive our word-of-mouth marketing strategy. In addition, we also employ advertising campaigns through online marketing channels, including:
| ● | General online marketing. Our general online marketing relies mainly on data driven search engine marketing and displaying advertisements on portal websites. In addition, we promote our brand and software through our corporate pages on popular interactive social media platforms. |
| ● | Online video platforms. We collaborate with a number of major television producers and online video platforms for brand promotion, targeting television and video audiences that match our target demographics. |
| ● | User referrals. We acquire users through user referrals by giving certain benefits to existing users if they can successfully invite others to become our active users. |
| ● | Partner referrals. We acquire users through partner referrals. |
Competition
The industries we are operating in are competitive and evolving. For example, with respect to online wealth management products, we compete with market players such as internet ecosystem owners providing cash management and quasi fixed income products, online third-party financial brokers and information providers, and marketplace lending platforms. We also compete with other digital technology-based securities service providers. Some of our larger competitors have significantly more financial, technical, marketing and other resources than we do and may be able to devote greater resources to the development, promotion, sale and support of their development. Our competitors may also have more extensive user bases, greater brand recognition and brand loyalty and broader partner relationships than us. We believe that our ability to compete effectively for users and other partners depend on many factors, including the variety of our products and services, user experience on our platform, our technological capabilities, the risk-adjusted returns offered to investors, our partnership with third parties, our marketing and selling efforts and the strength and reputation of our brand.
Furthermore, as our business grows, we face significant competition for highly skilled personnel, including management, engineers, product managers and risk management personnel. The success of our growth strategies depends in part on our ability to retain existing personnel and add additional highly skilled employees.
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Intellectual Property
We rely on a combination of copyright, trademark and trade secret laws and restrictions on disclosure to protect our intellectual property rights. As of December 31, 2025, we have registered 984 trademarks with the Trademark Office of the PRC National Intellectual Property Administration, or the Trademark Office, seven trademarks with overseas authorities, 412 software copyrights and 29 work copyrights with the PRC National Copyright Administration, 58 domain names in the PRC and 13 overseas domain names. Furthermore, we are in the process of applying for trademark registrations in other regions we operate in.
Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use our technology. In addition, third parties may initiate litigation against us alleging infringement of their proprietary rights or declaring their non-infringement of our intellectual property rights. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—We may not be able to prevent unauthorized use of our intellectual property, which could reduce demand for our services, adversely affect our revenues and harm our competitive position.” and “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—We may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations.”
Seasonality
We may experience seasonality in our business, reflecting seasonal fluctuations in internet usage, cycles of investment opportunities and traditional personal consumption patterns. As a result, comparing our operating results on a period-to-period basis may not be meaningful, and our results of operations could be affected by such seasonality in the future.
Regulations Related to Our Business Operation in China
This section sets forth a summary of the most significant rules and regulations that affect our business activities in China or our shareholders’ rights to receive dividends and other distributions from us.
Regulations Related to Foreign Investment
On January 1, 2020, the PRC Foreign Investment Law and the Regulations for Implementation of the PRC Foreign Investment Law, or the Implementation Regulations, came into effect and became the principal laws and regulations governing foreign investment in the PRC, replacing the trio of prior 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.
According to the PRC Foreign Investment Law, “foreign investment” refers to the investment activities conducted directly or indirectly by foreign individuals, enterprises or other entities in the PRC, including the following circumstances: (i) the establishment of foreign-invested enterprises in the PRC by foreign investors solely or jointly with other investors, (ii) a foreign investors’ acquisition of shares, equity interests, property portions or other similar rights and interests of enterprises in the PRC, (iii) investment in new projects in the PRC by foreign investors solely or jointly with other investors, and (iv) investments made by foreign investors through means stipulated in laws or administrative regulations or other methods prescribed by the State Council. Pursuant to the PRC Foreign Investment Law, China has adopted a system of national treatment which includes a negative list with respect to foreign investment administration. The negative list will be issued by, amended or restated upon approval by the State Council, from time to time. The negative list will consist of a list of industries in which foreign investments are prohibited and a list of industries in which foreign investments are restricted. Foreign investment in prohibited industries is not allowed, while foreign investment in restricted industries must satisfy certain conditions stipulated in the negative list. Foreign investments and domestic investments in industries outside the scope of the prohibited industries and restricted industries stipulated in the negative list will be treated equally. The most recent version of the negative list was issued in September 2024.
PRC Foreign Investment Law and its Implementation Regulations allow foreign-invested enterprises established prior to January 1, 2020 and having corporate structure and governance inconsistent with the PRC Company Law or the PRC Partnership Enterprise Law, as applicable, to maintain their corporate structure and governance within a five-year transition period, but require adjustment for compliance with the PRC Company Law or the PRC Partnership Enterprise Law, as applicable, shall be completed prior to the expiration of such transition period.
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Foreign investors and foreign investment enterprise are also required to submit information reporting in accordance with the PRC Foreign Investment Law and its Implementation Regulations and will be imposed legal liabilities for failure to comply with such requirements.
The NDRC and the Ministry of Commerce jointly issued the Measures for the Security Review of Foreign Investment on December 19, 2020, which became effective on since January 18, 2021. Pursuant to the Measures for the Security Review of Foreign Investment, the NDRC and the Ministry of Commerce will establish a working mechanism office in charge of the security review of foreign investment, and any foreign investment which has or could have an impact on national security shall be subject to security review by such working mechanism office. The Measures for the Security Review of Foreign Investment further requires that a foreign investor or its domestic affiliate shall apply for clearance of national security review with the working mechanism office before they conduct any investment into any of the following fields: (i) investment in the military industry or military-related industry, and investment in areas in proximity of defense facilities or military establishment; and (ii) investment in any important agricultural product, important energy and resources, critical equipment manufacturing, important infrastructure, important transportation services, important cultural products and services, important information technologies and internet products and services, important financial services, critical technologies and other important fields which concern the national security where actual control over the invested enterprise is obtained.
Regulations Related to Insurance Brokerage and Internet Insurance
The primary regulation governing the insurance intermediaries is the Insurance Law of the PRC, as amended on April 24, 2015. According to this law, the China Insurance Regulatory Commission (currently known as the China Financial Regulatory Administration) is the regulatory authority responsible for the supervision and administration of the PRC insurance companies and the intermediaries in the insurance sector, including insurance agencies and brokers.
On February 1, 2018, the China Insurance Regulatory Commission issued the Provisions on the Regulation of Insurance Brokers, which became effective on May 1, 2018. “Insurance brokers,” as defined by the Provision on the Regulation of Insurance Brokers, cover such institutions (including insurance brokerage companies and their branches) that tender intermediary services to insurance policyholders in consideration of commissions in the process of insurance contract formation with insurance companies. Pursuant to the Provisions on the Regulation of Insurance Brokers, the establishment and operation of an insurance broker must meet the qualification requirements specified by the China Insurance Regulatory Commission, obtain approval from the China Insurance Regulatory Commission and be licensed by the China Insurance Regulatory Commission. Specifically, the paid-in registered capital of a cross-province insurance brokerage company at least must be RMB50 million and that for an intra-province insurance brokerage company (the one only operates within the province in which it is registered) at least must be RMB10 million.
In addition, as an operation requirement, an insurance broker has to register the practice of its insurance brokerage practitioners as required. An “insurance brokerage practitioner” is defined by the Provisions on the Regulation of Insurance Brokers as such individual working with an insurance broker (i) who is to draft insurance plans for policyholders or the insured, to handle the insurance procedures and to assist in the claims for compensation, or (ii) who is to provide the clients with consultation services regarding disaster and loss prevention, risk assessment and risk management, and to engage in reinsurance brokerage and other business.
According to the administrative guidelines published by the China Insurance Regulatory Commission on its official website and other PRC regulations, a foreign investor must satisfy the following requirements before it can invest in the insurance brokerage industry: (i) it should be a foreign insurance broker with more than thirty years of experience in operation of commercial institutions within the territories of World Trade Organization members; and (ii) its total assets shall be no less than US$200 million as of the end of the year prior to its application.
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On December 7, 2020, the China Banking and Insurance Regulatory Commission (the successor of China Insurance Regulatory Commission, currently known as the China Financial Regulatory Administration) issued the Regulatory Measures for Online Insurance Business, which became effective on February 1, 2021. The Measures stipulates that only insurance companies and professional insurance intermediaries established upon approval by, and registered with insurance regulatory authorities could provide Internet insurance services, such as providing insurance products consultation services, assisting policyholders with selecting insurance products, calculating insurance premiums, drafting insurance plans for policyholders and processing insurance application formalities. It also provides that insurance intermediaries are required to manage their marketing activities and retain records of online insurance transactions. In addition, it sets a higher standard for insurance intermediaries that conduct online insurance business to improve IT infrastructure and cybersecurity protection. Pursuant to the Measures, the insurance institutions shall (i) complete the rectification of the issues on internal protocols, marketing activities, sales management and information disclosure within three months from the effective date thereof; (ii) complete the rectification of other issues on business and operation within six months from the effective date thereof; and (iii) complete the authentication of classified cybersecurity protection of their independently-operated online platforms within twelve months from the effective date thereof.
On June 22, 2020, the China Banking and Insurance Regulatory Commission published the Notice on Regulating the Backtracking Management of Online Insurance Sales Behavior, with effect from October 1, 2020. This notice sets out requirements on various aspects of online sales by insurance institutions, including sales practices, record-keeping for backtracking sales, and disclosure requirements. For example, it requires that online sales pages should be displayed only on insurance institutions’ independently-operated online platforms and should be separated from non-sales pages. Insurance institutions should keep records for five years after the expiry of the policy for policies with a term of one year or less and for ten years for policies with a term longer than one year for purposes of backtracking sales. It also requires that important insurance clauses should be presented on a separate page and be confirmed by policyholders or the insured.
According to the Administrative Measures for the Protection of Consumers’ Rights and Interests by Banking and Insurance Institutions issued by the China Banking and Insurance Regulatory Commission on December 26, 2022, banking and insurance institutions shall assume the primary responsibility for the protection of the legitimate rights and interests of consumers, and treat consumers in a fair, equitable and honest manner in the whole process of business operations under appropriate procedures and measures. Banking and insurance institutions shall (i) establish and improve systems and mechanisms for the protection of consumers’ rights and interests; (ii) review the protection of consumers’ rights and interests in the stages of design and development, pricing management, agreement formulation, marketing and promotion of products and services provided to consumers; and (iii) establish a traceability management mechanism for sales practices to record and preserve the sales process of products and services.
On September 20, 2023, the China Financial Regulatory Administration issued the Administrative Measures for Insurance Sales Activities, which took effect on March 1, 2024. Pursuant to the Measures, insurance companies and insurance intermediaries are required to carry out insurance sales business within their scope of business and scope of regional operations allowed pursuant to applicable regulations as well as approved by regulatory authorities. Insurance sales personnel shall not engage in insurance selling activities beyond the authorized scope of business of the insurance company or insurance intermediary he or she works with. Insurance companies should also establish management systems for grading insurance products and their insurance sales personnel respectively, so that the selling of insurance products of each grade shall be handled by appropriate insurance sales personnel. Insurance companies and insurance intermediaries should also take other steps to strengthen the management of insurance sales channel business and enhance their internal compliance supervision of insurance sales channel, and shall not use the insurance sales channel to carry out illegal and irregular activities.
Jiuxing Insurance Brokerage Co., Ltd. (formerly known as Ruifeng Insurance Brokerage Co., Ltd.), which is a subsidiary of one of our VIEs, holds a license to conduct insurance brokerage business. It commenced its offering of onshore insurance products in February 2021.
Regulations Related to Online Sales of Securities Investment Funds
The Securities Investment Fund Law of the PRC, which was promulgated by the SCNPC on December 28, 2012 and amended with immediate effect on April 24, 2015, provides the legal framework for regulating securities investment funds. This law sets out the eligibility requirements and responsibilities of publicly-offered funds’ managers and of their directors, supervisors and senior management. It also regulates various aspects of publicly-offered funds’ operations and organization, including offering process, trading of fund units, subscription and redemption. For example, this law requires that any agencies that engages in the fund services, including but not limited to sales, investment consulting, information technology system services, shall be registered or filed with the provisions of the securities regulatory authority of the State Council.
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On December 17, 2015, the CSRC and the People’s Bank of China issued the Measures for the Supervision and Administration of Money Market Funds, which became effective on February 1, 2016. Pursuant to the Measures, money market fund refers to a fund invested in money market instruments and allowing the subscription for and redemption of fund shares on each trading day. The Measures provides as a general rule that no person may engage in the fund sales promotion, share offering, subscription, redemption or other related activities without relevant fund sales business qualifications granted by the CSRC. In addition, several disclosure rules must be observed during the fund sales activities. When fund managers, fund sales agencies and internet companies cooperate to conduct online sales of money market funds, certain information (e.g., the providers of fund sale services, potential investment risks and the names of money market funds being sold) shall be disclosed in a conspicuous way to the investors. For fund managers, fund sales agencies, fund sales payment institutions and internet companies which provide to investors quick redemption or other value-added services, they must fully disclose the rules of such services such as those regarding the expenses and restrictions, and shall not exaggerate the convenience of such services. Further, the fund managers, fund sales agencies and internet companies shall explicitly agree on certain terms in relation to the provision of fund service, which include the scope of cooperation, the legal relationships, information security, client information protection, legal compliance, emergency response mechanisms, prevention of illegal securities activities, post-termination operation schemes, delinquency liabilities and the protection of investors’ rights and interests. The Measures for Supervision and Administration of Sales Agencies for Publicly-offered Securities Investment Funds, which was issued by the CSRC on August 28, 2020 and became effective on October 1, 2020, further regulates that securities companies and other institutions, subject to satisfaction of the relevant requirements, may apply for business qualification for sales of funds from the local branches of the CSRC.
On December 20, 2019, the People’s Bank of China, the CSRC, the SAFE and other regulatory departments jointly issued the Notice on Further Regulating Financial Marketing and Publicity Activities, which came into effect on January 25, 2020. Pursuant to the Notice on Further Regulating Financial Marketing and Publicity Activities, “financial marketing and publicity activities” refers to the advertising and promotional activities of the financial institutions from the banking, securities and insurance sectors as well as institutions that conduct financial activities or financial related activities, or the Financial Offerings Providers, via the use of various promotional tools and approaches, which shall be conducted within the scope of the financial businesses approved by the financial regulatory authorities under the State Council and its local regulatory agencies. A market entity which fails to obtain the required qualifications for the relevant financial activities is prohibited from carrying out marketing and advertising activities relating to such financial activities, except for marketing and advertising activities performed by information publishing platforms or medias as entrusted by Financial Offerings Providers that have acquired qualifications for financial business operations by operation of law.
On April 21, 2026, the People’s Bank of China and seven other PRC governmental authorities issued the Administration Measures for Online Marketing of Financial Products, which will come into effect on September 30, 2026. Pursuant to these Measures, a “third-party internet platform” refers to any website, mobile internet application, or other similar medium that is not operated by a financial institution itself and provides services for the online marketing of financial products. Any third-party platform operator that is entrusted by a financial institution to promote financial products on the internet shall be governed by these Measures. Where a third-party internet platform provides a redirection channel for financial consumers and investors to purchase financial products provided by a financial institution, it shall: (i) redirect users to the self-operated platform of such financial institution, and shall not redirect to any other third-party internet platform; (ii) use online marketing content that has been reviewed and finalized by such financial institution, and shall not alter such content without authorization; (iii) truthfully and accurately disclose, in a clear and conspicuous manner, the basic information of such financial institution; (iv) verify the qualifications and credentials of such financial institution and the production of related information content; (v) not intervene in any aspect of the financial product sales process, including but not limited to the execution of sales contracts, fund transfers, suitability assessments of financial consumers and investors, and loan limit assessments; and shall not engage in interactive consultations with consumers and investors regarding financial products; (vi) not unlawfully obtain or use the customer information and data of financial institutions.
We have taken and will continue to take proper measures to ensure compliance with applicable laws rules and regulations, including those on marketing, disclosure and information filing. We cannot assure you that our current operation model will not be deemed as operating a fund sales business in China, which may subject us to further inquiries, penalties or remedial actions. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China and Hong Kong—We may be adversely affected by the complexity, uncertainties and changes in PRC regulation of internet-related or finance-related businesses and companies, and any lack of requisite approvals, licenses, permits or filings applicable to our business may have a material adverse effect on our business and results of operations.”
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Regulations Related to the Engagement of Securities Business within the Territory of the PRC by Foreign-Invested Securities Companies
On December 29, 1998, the SCNPC issued the PRC Securities Law, which was most recently amended on December 28, 2019 and became effective on March 1, 2020. The PRC Securities Law governs all the issuance or trading of shares, corporate bonds or any other securities approved by the State Council within China. No entities or individuals shall engage in securities business as a securities company without the approval by the securities regulatory authority of the State Council. Offering and trading of securities outside China which disrupt the domestic market order of China and harm the legitimate rights and interests of domestic investors shall be regulated pursuant to the provisions of the PRC Securities Law.
The State Council issued the Regulations on the Supervision and Administration of Securities Companies on April 23, 2008, which was most recently amended on July 29, 2014. The Regulations clarifies that the operation of securities businesses or establishment of representative agencies in China by foreign-invested securities companies shall be subject to the approval of the securities regulatory authority of the State Council.
On January 13, 2023, the CSRC issued the Administrative Measures on Securities Brokerage Business, which became effective on February 28, 2023. The Measures stipulates that the “securities brokerage business” refers to business activities such as securities trading, marketing, accepting investors’ entrustment to open accounts, processing transaction orders, and handling clearing and settlement, and no entity or individual other than registered securities companies may engage in the securities brokerage business. Any overseas securities business institution violating Article 95 of the Regulations on Supervision and Administration of Securities Firms, directly or through its affiliates conducting activities such as opening account, marketing and other activities of overseas securities trading services within the PRC, shall be penalized according to the PRC Securities Law. Article 95 of the Regulations on Supervision and Administration of Securities Firms stipulates that an overseas securities business entity that conducts securities business or establishes a representative office in China shall obtain the approval of the securities regulatory authority of the State Council. The specific measures shall be formulated by the securities regulatory agency of the State Council and submitted to the State Council for approval.
Pursuant to Article 202 of the PRC Securities Law, any person who establishes a securities company without due authorization, operates securities business illegally or carries out securities business activities as a securities company without approval shall be subject to penalties such as correction orders, confiscation of illegal income and the imposition of a fine ranging from one time to ten times the amount of illegal income (where there is no illegal income or the amount of illegal income is less than RMB1 million, a fine ranging from RMB1 million to RMB10 million shall be imposed). The directly accountable person(s) in charge and other directly accountable personnel of a violating entity shall be reprimanded and subject to a fine ranging from RMB200,000 to RMB2 million.
We historically redirected certain of our users and clients based in China to open accounts and make transactions outside China, which may be considered as “engaging in the securities business within the territory of the People’s Republic of China” and an approval from State Council securities regulatory authority may be required. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—We do not hold any licenses or permits for providing securities brokerage services in China. If some of our activities in China are considered by the authorities as provision of securities brokerage services, investment consulting services or otherwise conducting securities businesses in China, our business, financial condition, results of operations and prospects may be materially and adversely affected.”
Regulations Related to Securities Investment Consulting Business
On December 25, 1997, the CSRC issued the Interim Measures for the Administration of Securities or Futures Investment Consulting, which became effective on April 1, 1998. According to the Measures, the securities investment consulting service means any analysis, prediction, recommendations or other directly or indirectly charged consulting services provided by securities investment consulting institutions and their investment consultants to securities investors or clients, including: (i) to accept any entrustment from any investor or client to provide securities or futures investment consulting services; (ii) to hold any consulting seminar, lecture or analysis related to securities or futures investment; (iii) to write any article, commentary or report on securities or futures investment consultancy in any newspaper or periodical, or to provide securities or futures investment consulting services through media such as radio or television; (iv) to provide securities or futures investment consulting services through telecommunications facilities such as telephone, fax, computer network; and (v) other forms recognized by the CSRC. In addition, all institutions shall obtain the operation permits issued by the CSRC and all person must obtain professional qualification as a securities investment consultant and joining a qualified securities investment consulting institution before engaged in securities investment consulting service.
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On October 11, 2001, the CSRC issued the Notice with Respect to Certain Issues on Regulating the Securities Investment Consulting Services Provided for the Public, which became effective on the same day and was amended on October 30, 2020. It stipulates that media which disseminate securities-related information shall not publish or broadcast any analysis, prediction or recommendation in respect of the trends of securities markets and securities products, as well as the feasibility of the securities investment made by any institution which does not obtain the operation permits for securities investment consulting services from CSRC or any individual who is not employed by a qualified securities investment consulting services institution and who does not satisfy the professional requirements. Any media in violation of the foregoing stipulation will be subject to reprimand or exposure by the CSRC, or be subject to enforcement actions by other competent authorities.
On December 5, 2012, the CSRC published the Interim Provisions on Strengthening the Regulation over Securities Investment Consulting Services by Using “Stock Recommendation Software” Products, which came into effect on January 1, 2013 and was amended on October 30, 2020. Pursuant to the Provisions, “stock recommendation software” are defined as any software products, software tools or terminal devices with one or more of the following securities investment consulting services: (i) providing investment analysis on specific securities investment products or predicting the price trends of specific securities investment products; (ii) recommending the selection of specific securities investments products; (iii) recommending the timing for trading specific securities investments products; and/or (iv) providing other securities investment analysis, prediction or recommendations. Therefore, selling or providing “stock recommendation software” products to investors and directly or indirectly obtain economic benefits therefrom shall be considered as engaging in securities investment consulting business and the operation permits for securities investment consulting services from CSRC shall be obtained for the operation of such business.
We cannot guarantee that the display of certain information or content on our website and mobile app in China will not be considered as engaging in the investment consulting business for providing the public with securities analysis, forecast or recommendations through the forum or broadcasting of pre-recorded videos. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China and Hong Kong—We may be adversely affected by the complexity, uncertainties and changes in PRC regulation of internet-related or finance-related businesses and companies, and any lack of requisite approvals, licenses, permits or filings applicable to our business may have a material adverse effect on our business and results of operations.”
Regulations Related to Anti-money Laundering
The PRC Anti-money Laundering Law, promulgated by the SCNPC on October 31, 2006 and last amended on November 8, 2024, 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, retention of clients’ identification information and transactions records, and reports on large transactions and suspicious transactions. Pursuant to the PRC Anti-money Laundering Law, financial institutions subject to the PRC Anti-money Laundering Law include (i) financial institutions in banking, securities, fund, futures, insurance and trust industry, (ii) non-banking payment institutions, and (iii) other institutions engaging in financial business specified by the State Council, while the list of such other institutions with anti-money laundering obligations shall be separately published by the State Council. However, the State Council has not promulgated a list of such other institutions subject to anti-money laundering obligations. In addition, the People’s Bank of China 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 insurance brokerage companies, insurance agencies and payment institutions.
The China Insurance Regulatory Commission issued the Administrative Measures for the Anti-money Laundering Work in the Insurance Industry on September 13, 2011, which sets forth anti-money laundering requirements applicable to insurance companies, insurance assets management companies, insurance agencies and insurance brokerage companies. Insurance brokerage companies are required to provide insurance companies with customer identification information, and if necessary, copies of identification cards or other identification documents of customers, establish an internal control system for anti-money laundering, conduct anti-money laundering training, properly deal with major money-laundering cases involving them, cooperate during anti-money laundering supervision, inspections, administrative investigations, and criminal investigations, and keep confidential information related to anti-money laundering investigations. The senior management officers of insurance brokerage companies are also required to be familiar with anti-money laundering laws and regulations.
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On September 29, 2018, the People’s Bank of China, the China Insurance Regulatory Commission and the CSRC jointly issued the Administrative Measures for Anti-money Laundering and Counter-terrorism Financing by Internet Finance Service Agencies (for Trial Implementation), effective as of January 1, 2019, which specify the anti-money laundering obligations of internet finance service agencies and regulate that the Internet finance service agencies shall (i) adopt continuous customer identification measures; (ii) implement the system for reporting large-value or suspicious transactions; (iii) conduct real-time monitoring of the lists of terrorist organizations and terrorists; and (iv) properly keep the information, data and materials such as customer identification and transaction reports, among other things.
On August 12, 2022, the CSRC revised the Measures for the Implementation of Anti-Money Laundering in the Securities and Futures Sector, which reiterates that securities and futures operators shall establish sound anti-money laundering systems in accordance with the laws and report the relevant information to the CSRC and its local branches.
We have formulated and adopted certain policies and procedures, including internal controls and “know-your-customer” procedures, aimed at preventing money laundering and terrorism financing. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—Any failure by our third-party service providers to comply with applicable anti-money laundering and anti-terrorism financing laws and regulations could damage our reputation.”
Regulations Related to Value-added Telecommunication Services
General administration of value-added telecommunication services
On September 25, 2000, the State Council issued the Telecommunication Regulation of the People’s Republic of China, which was amended on July 29, 2014 and February 6, 2016 respectively. This Regulation is the primary PRC regulation governing telecommunication services and sets out the general regulatory framework for telecommunication services provided by PRC companies. It requires telecommunication service providers to obtain from the Ministry of Industry and Information Technology or its provincial level counterparts an operating license prior to the commencement of their operations. The Regulation categorizes telecommunication services into basic telecommunication services and value-added telecommunication services. Pursuant to the Regulation, value-added telecommunication services are defined as telecommunication and information services provided through public networks.
The Catalogue of Telecommunication Business, which was issued as an attachment to the foregoing Regulation and updated on February 21, 2003, December 28, 2015 and June 6, 2019, respectively, further categorizes value-added telecommunication services into Class 1 value-added telecommunication services and Class 2 value-added telecommunication services.
On July 3, 2017, the Ministry of Industry and Information Technology, or the MIIT, issued the Administration Measures for the Licensing of Telecommunication Business, which became effective on September 1, 2017. Pursuant to the Measures, a commercial operator of value-added telecommunication services must first obtain an operating license for value-added telecommunication businesses, or the VATS License. The Measures also provides that an operator providing value-added services in multiple provinces is required to obtain an inter-regional VATS License, whereas an operator providing value-added services in one province is required to obtain an intra-provincial VATS License. The Measures further sets forth the qualifications and procedures for obtaining VATS License. Pursuant to the Measures, any telecommunication services operator must conduct the telecommunication business pursuant to the type and within the scope of business as specified in its VATS License.
Regulations related to internet information services and online data processing and transaction processing services
Pursuant to the Catalogue of Telecommunication Business, both online data processing and transaction processing services and internet information services fall within Class 2 value-added telecommunication services.
The “online data processing and transaction processing services” means the online data processing and transaction/affair processing services provided for users through public communication networks or the internet, using various kinds of data and affair/transaction processing application platforms connected to various kinds of public communication networks or the internet. Online data processing and transaction processing services include transaction processing services, electronic data interchange services and network/electronic equipment data processing services. A telecommunication services operator engaged in online data processing and transaction processing services shall obtain a VATS License for “online data processing and transaction processing services.”
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The “information services” refer to the information services provided for users via the public communication network or the internet and by the information collection, development, processing and construction of information platforms. By technical service methods of information organization and transmission, among others, the “information services” are classified into information release platforms and transmission services, information retrieval and inquiry services, information community platform services, instant information interaction services as well as information protection and processing services. The Administrative Measures on Internet Information Services, which was promulgated by the State Council on September 25, 2000 and last amended on January 20, 2025, sets out guidelines on the provision of internet information services. Such Measures classifies internet information services into commercial internet information services and non-commercial internet information services. Pursuant to the Measures, commercial internet information services refers to the service activities of compensated provision to online subscribers through the internet of information or website production; non-commercial internet information services refers to the service activities of non-compensated provision to online subscribers through the internet of information that is in the public domain and openly accessible. The Measures requires that a provider of commercial internet information services shall obtain a VATS License for internet information services, or the ICP License. It further requires that a provider of non-commercial internet information services shall carry out record-filing procedures with the provincial level counterparts of the MIIT. Moreover, pursuant to the Measures, internet information service providers shall post their ICP License numbers or record-filing numbers in a prominent place on the homepage of their websites. In addition, the Measures specifies a list of prohibited content. Internet information service providers are prohibited from producing, copying, publishing or distributing information that is humiliating or defamatory to others or that infringes the legal rights of others. Internet information service providers must also monitor and control the information posted on their websites. If any prohibited content is found by an internet information service provider, it must immediately stop the transmission thereof, save the relevant records and make a report thereon to the regulatory authorities. Pursuant to the Measures, internet information service providers that violate such prohibition may face criminal charges or administrative sanctions.
Jiufu Puhui, which previously operated our online lending information intermediary services platform, has obtained an ICP License which will remain effective until December 31, 2026. Jiufu Shuke, one of our VIEs, and several other subsidiaries of our VIEs, have also obtained an ICP License. In addition, several other subsidiaries of our VIEs have obtained the VATS License for “online data processing and transaction processing services.”
Regulations related to e-commerce
On August 31, 2018, the National People’s Congress issued the E-commerce Law of the People’s Republic of China, which took effect on January 1, 2019. This law clarifies some obligations for the e-commerce operators. For example, among other things, an e-commerce operator shall (i) disclose its business license and other administrative licenses related to its business or a link to the above information at a prominent place on the homepage of the platform; (ii) fully and accurately disclose information related to commodities and services offered on its platform in a timely manner; (iii) inform the users in a clear, comprehensive and explicit manner of the steps to conclude a contract, cautions, how to download the contract, and ensure that users are able to read and download them conveniently; (iv) enable the users to make any corrections before orders are submitted; (v) disclose the methods and procedures for inquiring, correcting and deleting users’ information and deregistering users’ accounts, and not set unreasonable for such inquiry, correction, deletion and de-registration; and (vi) provide relevant e-commerce data to competent authorities as required by such authorities pursuant to laws and administrative regulations.
Furthermore, on March 15, 2021, the State Administration for Market Regulation issued the Measures for the Supervision and Administration of Online Trading, which took effect on May 1, 2021. The Measures imposes various restrictions on the business operations of online transaction operators. For example, online transaction operators are required to fully, truthfully, accurately and timely disclose information relating to goods and services to protect consumers’ right to information and right to choose. In the event that an online transaction operator sends notices and statements to consumers using standard forms in the course of providing goods or services, such operator should highlight contents that may be material to the interests of the consumers. Online transaction operators are also prohibited from engaging in unfair competition activities that disrupt competition in the relevant market and infringe on the legitimate rights and interests of other operators or consumers, or from conducting false or misleading commercial promotions to deceive or mislead consumers in any of the following ways: (i) fabricating transactions and customer reviews; (ii) making a misleading display or other means to prioritize the display of favorable comments and relegate negative comments to a lower priority, or failing to distinguish prominently the feedbacks and reviews for different products or services; (iii) carrying out deceptive marketing by means of falsely branding products as spot goods, fictitious booking or falsely touting limited offers, among others; or (iv) fabricating internet traffic data (such as the number of clicks and followers) or transaction or interaction data (such as number of likes and rewards). In addition, the Measures also stipulates detailed requirements with respect to the protection of consumer rights and personal information. For example, the Measures provides that online transaction operators shall not compel (including through disguised forms of coercion) customers to consent to the collection and use of their information for a purpose that is not directly related to the business activities of such operators, by ways of one-off general authorization, default authorization, bundling with other authorizations, or the suspension of the installation or use of relevant mobile apps, among others. The collection and use of each piece of sensitive information of a consumer, such as personal biological characteristics, medical and health information, financial information and information relating to banking accounts and personal whereabouts, require a separate consent of such consumer.
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On February 28, 2025, the State Administration for Market Regulation promulgated the Guiding Opinions on Promoting the Implementation of Compliance Management Responsibilities by Online Trading Platform Enterprises, or the Guiding Opinions, with the objective of enhancing compliance management frameworks for internet trading platform operators. The Guiding Opinions emphasize the imperative for enterprises to fully assume their primary compliance obligations, while explicitly reinforcing the accountability of corporate executives in overseeing compliance management systems.
On July 31, 2025, the SAMR published the Guidelines on Fee Charging Compliance for Online Transaction Platforms, aims to standardize how online transaction platforms charge merchants for services, such as commission fees, membership fees, technical service charges, information fees, and marketing expenses. Under the guidelines, the online transaction platforms must adhere to principles of fairness, legality, and good faith when determining fees. The guidelines also explicitly prohibits online transaction platforms from engaging in unreasonable fee practices including: (i) duplicating charges, (ii) collecting of fees without providing corresponding services, (iii) shifting platform costs to online merchants (iv) charging online merchants for access to basic operational data, (v) forcing or coercing online merchants to purchase services or participate in promotional or sales activities and imposing fees for such actions; (vi) imposing disguised charges or raising fees through mechanisms such as unreasonable security deposits; (vii) engaging in price discrimination by offering identical goods or services to online merchants under equivalent transaction conditions; (viii) levying any other unreasonable fees.
On December 18, 2025, the SAMR promulgated the Measures for the Supervision and Administration of Online Trading Platform Rules, which took effect on February 1, 2026. Pursuant to these measures, “platform rules” shall mean the collective designation of service agreements and trading rules pre-formulated by online trading platform operators to serve unspecified parties to online transactions and to administer transaction-related activities on the platform, including, inter alia, online trading platform service agreements, administrative rules for platform-based operators, rules for intra-platform transactions and dispute resolution, personal information protection rules, and intellectual property protection rules. Online trading platform operators shall continuously display platform rule information or hyperlinks thereto in a prominent position on the homepage of their websites and APPs, and shall not utilize platform rules to engage in conduct that endangers national interests or public interests, or infringes upon the lawful rights and interests of parties to online transactions.
Regulations related to mobile internet applications information services
In addition to the Telecommunication Regulation of the People’s Republic of China and other regulations above, mobile apps are also regulated by the APP Provisions, which was promulgated by the CAC on June 28, 2016 and most recently amended by the CAC on June 14, 2022 and became effective on August 1, 2022. Pursuant to the APP Provisions, CAC and local offices of cyberspace administration shall be responsible for the supervision and administration of mobile app information services. Pursuant to the APP Provisions, a mobile internet app refers to an app software that runs on mobile smart devices to provide users with information services, and mobile internet app providers refer to the owners or operators of mobile internet apps which provide information services. Mobile internet app providers shall comply with relevant provisions on the scope of necessary personal information when engaging in personal information processing activities and shall not compel users to agree to non-essential personal information collection or ban users from their basic functional services due to their refusal of providing unnecessary personal information. Mobile internet app providers shall not provide the relevant services to the users who fail to submit real identity information or use fraudulent identity information of other organizations or persons for fake registration. Mobile internet app providers shall also establish sound information content review and management mechanism, take sound management measures such as user registration, account management, information review, daily inspection and emergency disposal, and be staffed with professionals and technical ability appropriate to the service scale. Furthermore, mobile internet app providers who launch new technologies, applications or functions with the attribute of public opinion or the capability of social mobilization shall conduct security assessment in accordance with the applicable laws and regulations. If an internet app provider violates these regulations, internet app distribution platforms may issue warnings, suspend the release of its applications, or terminate the sale of its applications, and/or report the violations to governmental authorities, and the application provider may be imposed administrative penalty by the CAC and other competent authorities in accordance with the laws and regulations.
In addition, in December 2016, the MIIT issued the Interim Measures on the Administration of Pre-Installation and Distribution of Applications for Mobile Smart Terminals, which came into effect on July 1, 2017. The Measures aims to enhance the administration of mobile apps, and requires, among others, that mobile phone manufacturers and internet information service providers must ensure that a mobile app, as well as its ancillary resource files, configuration files and user data can be uninstalled by a user on a convenient basis, unless it is a basic function software, which refers to a software that supports the normal functioning of the hardware and operating system of a mobile smart device.
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Since 2021, the PRC government has taken steps to strengthen the supervision on the use of algorithm in the field of internet information service. On September 17, 2021, the CAC and eight other authorities jointly issued the Notice on Promulgation of the Guiding Opinions on Strengthening the Comprehensive Governance of Algorithm-Related Internet Information Services, which provides that, among others, enterprises shall establish an algorithmic security responsibility system and a technology ethics vetting system, improve the algorithmic security management organization, strengthen risk prevention and control, and improve the capacity to respond to algorithmic security emergencies. On December 31, 2021, the CAC, the MIIT, the Ministry of Public Security and the State Administration for Market Regulation jointly issued the Administration Provisions on Algorithmic Recommendation of Internet Information Services, which became effective on March 1, 2022. The Provisions stipulates that algorithmic recommendation service providers shall (i) fulfill their responsibilities with respect to algorithm security, (ii) establish and strengthen management systems for algorithm mechanism examination, technology ethics review, user registration, information release examination, data security and personal information protection, anti-telecom and network fraud, security assessment and monitoring, emergency response to security incidents, among others, and (iii) formulate and publish rules governing algorithmic recommendation related service. The provider of algorithmic recommendation services shall not use the services to (i) carry out any illegal activity which may endanger national security or social or public interest, disturb economic order or social order, or infringe on third parties’ legal interest, or (ii) disseminate any information prohibited by laws or regulations. Besides, it shall not take advantage of its algorithms to impose unreasonable restrictions on other information service providers, or hinder or obstruct the normal operation of their lawful services. The providers of algorithmic recommendation services involving public opinion or having the capacity to effect social mobilization shall complete a filing with the CAC’s filing system within ten business days after the launch of such services.
On July 21, 2023, the MIIT issued the Notice of the Record-filing of Mobile Internet Apps. Pursuant to this notice, operators of mobile internet apps which engage in internet information services within China shall complete a record-filing procedure prior to their provision of internet information services via mobile internet apps. The operators of mobile internet apps shall mark their respective record-filing number in a prominent place of the mobile internet apps, and incorporate a hyperlink of the record system below the record-filing number to facilitate the checking by the public. In case of any change to or deregistration of any filed information of such apps, the operators shall make revision record-filings with respect to such change or deregistration with the regulatory authority.
On September 12, 2024, the National Financial Regulatory Administration issued the Notice on Strengthening the Management of Mobile Internet Applications in Banking and Insurance Sectors, to guide banking financial institutions, insurance financial institutions and financial holding companies to further improve service quality and regulate the management of mobile internet applications.
We have implemented internal control procedures screening the information and content on our websites and mobile apps to ensure compliance with the APP Provisions. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—We may be held liable for information or content displayed on, retrieved from or linked to our websites and mobile apps, which may materially and adversely affect our business and operating results.”
Regulations related to foreign direct investment in value-added telecommunication enterprises
On January 1, 2020, the PRC Foreign Investment Law and its Implementation Regulations, came into effect and replaced the trio of existing laws regulating foreign investment in China. The PRC Foreign Investment Law and its Implementation Regulations are formulated to further expand the opening-up policy, vigorously promote foreign investment and protect the legitimate rights and interests of foreign investors. The PRC Foreign Investment Law does not specify the detailed regulatory regime for variable interest entity structures, please refer to “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—If the PRC government finds the commercial arrangements that establish the variable interest entity structure for a certain part of our operations in China non-compliant with the PRC laws, regulations, and rules, or if these laws, regulations, and rules or the interpretation thereof change in the future, we could be subject to severe penalties or be forced to relinquish our interests in our VIEs and may lose the ability to consolidate their financial information.”
Pursuant to the Provisions on Administration of Foreign Invested Telecommunications Enterprises, promulgated by the State Council on December 11, 2001 and amended on February 6, 2016, and the Negative List, the ultimate foreign equity ownership in a value-added telecommunications services provider shall not exceed 50%, except for e-commerce business, domestic multi-party communications services business, store-and-forward business and call center business which may be 100% owned by foreign investors. In order to acquire any equity interest in a value-added telecommunication business in China, a foreign investor must satisfy a number of stringent performance and operational experience requirements, including demonstrating a good track record and experience in operating a value-added telecommunication business overseas. On March 29, 2022, the Decision of the State Council on Revising and Repealing Certain Administrative Regulations, which took effect on May 1, 2022, was issued to amend certain provisions of regulations including the 2016 version of the Provisions on Administration of Foreign Invested Telecommunications Enterprises, pursuant to which the foreign investor contemplating to acquire equity interest in a value-added telecommunications services provider in China will not be required to demonstrate good track records and experience in operating a value-added telecommunication business overseas.
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A Notice on Intensifying the Administration of Foreign Investment in Value-Added Telecommunications Services, issued by the MIIT in July 2006, prohibits domestic telecommunication service providers from leasing, transferring or selling VATS Licenses to any foreign investor in any form, or providing any resources, sites or facilities to any foreign investor for their illegal operation of telecommunication businesses in China. Pursuant to this notice, either the holder of a VATS License or its shareholders must directly own the domain names and trademarks used by such license holder in its provision of value-added telecommunications services. The notice further requires each license holder to have the necessary facilities, including servers, for its approved business operations and to maintain the facilities in the regions covered by its license. If a license holder fails to comply with the requirements in the notice or cure any non-compliance, the MIIT or its local counterparts have the discretion to take measures against the license holder, including revoking its VATS License.
On April 8, 2024, the MIIT issued the Circular on Launching the Pilot Program of Expanding the Opening-up of Value-Added Telecommunications Services, which provides, among others, the removal of foreign ownership ratio restrictions for specific value-added telecommunications services, including (i) the Internet data centers (IDC), (ii) the content delivery networks (CDN), (iii) the Internet access services (ISP), (iv) the online data processing and transaction processing services, (v) the information release platform and transmission services (excluding internet news information, online publishing, online audio-visual, and internet cultural operation services), and (vi) information protection and processing services, in the pilot areas of Beijing, Shanghai, Hainan, and Shenzhen. Foreign-invested companies that plan to carry out the aforementioned value-added telecommunications services in such pilot areas and meet specific business operation requirements should apply to the MIIT for a pilot approval of value-added telecommunications business operations. The MIIT will have discretion as to whether to grant the license. However, there remains substantial uncertainties as to whether and what qualification requirements will be imposed on or applied to, a foreign investor with respect to holding equity interest in a value-added telecommunications services provider in China.
In view of these restrictions on foreign direct investment in value-added telecommunication services under which our business falls into, we have established various VIEs and their subsidiaries to engage in value-added telecommunication services, including operation of our websites and mobile apps. We have contractual relationships with these VIEs but we do not have actual ownership interests in them. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure.”
Regulations Related to Food Operation
The PRC Food Safety Law, which became effective in June 2009 and was most recently amended by the SCNPC in September 2025, has adopted a licensing system for food sales or catering services. According to the Administrative Measures for Food Operation Licensing and Record-filing, promulgated by the State Administration for Market Regulation on June 15, 2023, food operators shall obtain the food operation license for food selling and catering services. The food operation license is valid for five years. Where a food operator engages in online operation, it shall report to the local branch of the State Administration for Market Regulation within ten working days from the date of commencing such online business activities. On July 13, 2016, the China Food and Drug Administration promulgated the Measures for Investigation and Handling of Illegal Acts Involving Online Food Safety, which were further amended by the SAMR on April 2, 2021 and on March 18, 2025, pursuant to which a third-party platform provider for online food trading in China must file a record with the competent office of the SAMR at the provincial level and obtain a filing number. We sell seven major categories of merchandise, including food, liquor and beverages, through third-party e-commerce platforms. Certain subsidiaries of our VIEs engaging in food operation business have obtained food operation licenses.
Regulations Related to Internet Drug Information Services
According to the Provisions on the Administration of Internet Drug Information Services, which was promulgated by China Food and Drug Administration and most recently amended in November 2017, an enterprise publishing drug-related information must obtain a qualification certificate from the provincial-level food and drug administration before it applies for the ICP license or files with the MIIT or its local provincial-level counterpart. In addition, the SCNPC further amended the Drug Administration Law on August 26, 2019, which became effective on December 1, 2019, and the Implementation Rules of the Drug Administration Law on December 6, 2024, which became effective on January 20, 2025. Pursuant to these regulations, an internet information service operator that provides information regarding drugs or medical devices must obtain a qualification certificate for internet drug information service from the applicable provincial level administrative authority. On December 19, 2025, the National Medical Products Administration released the Regulations on the Filing Administration of Internet Drug or Medical Device Information Services. According to these regulations, information service providers shall, prior to providing internet drug or medical device information services, complete the filing procedures with the provincial-level drug regulatory department of their locality and obtain a filing number.
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Regulations Related to Publication
Under the latest Administrative Provisions for the Publication Market, which were jointly promulgated by the National Radio and Television Administration and the Ministry of Commerce on May 31, 2016 and amended on December 6, 2024, and the Administrative Regulations on Publication, which were promulgated by the State Council on November 29, 2020, an online trading platform that provides services for the distribution and retail of publications shall be approved by the competent publication administrative authority and obtain a publication business operating license.
Beijing Juhuixuan holds a publication business operating license for the wholesale and online sales of books, which will remain valid until April 2028.
Regulations Related to Product Quality and Consumer Protection
The Product Quality Law applies to all production and sale activities in China. Pursuant to this law, products offered for sale must satisfy relevant quality and safety standards. Enterprises may not produce or sell counterfeit products in any way, including forging brand labels or giving false information regarding a product’s manufacturer. Violations of state or industrial standards for health and safety and any other related violations may result in civil liabilities and administrative penalties, such as compensation for damages, fines, suspension or shutdown of business, as well as confiscation of products illegally produced and sold and the proceeds from such sales. Severe violations may subject the responsible individual or enterprise to 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 Consumers’ Rights Protection Law sets out the obligations of business operators and the rights and interests of the consumers in China. Pursuant to this law, business operators must guarantee that the commodities they sell satisfy the requirements for personal or property safety, provide consumers with authentic information about the commodities, and guarantee the quality, function, usage and term of validity of the commodities. Failure to comply with the Consumers’ Rights Protection Law may subject business operators to civil liabilities such as refunding purchase prices, replacement of commodities, repairing, ceasing damages, compensation, and restoring reputation, and even subject the business operators or the responsible individuals to criminal penalties when personal damages are involved or if the circumstances are severe.
The Consumers’ Rights Protection Law was further amended in October 2013 and became effective in March 2014. The amended Consumers’ Rights Protection Law further strengthen the protection of consumers and impose more stringent requirements and obligations on business operators, especially on the business operators through the internet. For example, the consumers are entitled to return the goods (except for certain specific goods, such as custom-made goods, fresh and perishable goods, digital products (e.g., audio-visual products, computer software downloaded online or unpacked by the consumer), newspapers and periodicals delivered and other goods for which non-return of goods is confirmed by the consumer at the time of purchase based on the characteristics of the goods,) within seven days upon receipt without any reasons when they purchase the goods from business operators on the internet. The consumers whose interests have been damaged due to their purchase of goods or acceptance of services on online marketplace platforms may claim damages from sellers or service providers. Moreover, if business operators deceive consumers or knowingly sell substandard or defective products, they should not only compensate consumers for their losses, but also pay additional damages equal to three times the price of the goods or services. Furthermore, on March 15, 2024, the Implementing Rules of the Consumers’ Rights Protection Law of the People’s Republic of China was released and came into effect on July 1, 2024. These rules further specify the obligations stipulated in the Consumers’ Rights Protection Law, such as protecting consumers personal and property safety, handling of defective products, prohibiting fraudulent advertising and unfair practices in standard terms, price transparency, quality guarantee, and protecting consumers’ personal information. Furthermore, these rules provide requirements to address situations where business operators may abuse technology, platform rules or their dominant positions to infringe on consumer rights, such as prohibiting price discrimination, fraudulent advertising and excessively collecting consumers’ personal information.
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We are subject to the laws and regulations related to product quality and consumer protection as an online supplier of commodities and believe that we are currently in compliance with these regulations in all material aspects.
Regulations Related to Cybersecurity, Data Security and Privacy Protection
We are in the process of evaluating the potential impact of the Cyber Security Law and other laws and regulations relating to cybersecurity, information security, privacy and data protection on our current business practices. We plan to further strengthen our information management and privacy protection systems to better secure the user data stored in our system. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—We collect, store, process and use certain personal information and other sensitive data from our users and partners and our business is subject to complex and evolving laws and regulations regarding cybersecurity, information security, privacy and data protection in China and other jurisdictions.”
Regulations related to cybersecurity and data security
The SCNPC enacted the Decisions on the Maintenance of Internet Security on December 28, 2000 and further amended such Decisions on August 27, 2009, which may subject persons to criminal liabilities in China for any attempt to use the internet to (i) gain improper entry to a computer or system of strategic importance; (ii) disseminate politically disruptive information; (iii) leak state secrets; (iv) spread false commercial information; or (v) infringe upon intellectual property rights. In 1997, the Ministry of Public Security issued the Administration Measures on the Security Protection of Computer Information Network with International Connections which prohibits using the internet to leak state secrets or to spread socially destabilizing materials. If an ICP License holder violates these measures, the PRC government may revoke its ICP License and shut down its websites.
The Cyber Security Law of the PRC, promulgated on November 7, 2016 by the SCNPC and effective on June 1, 2017 and was last amended on October 28, 2025, provides that network operators shall perform their cyber security obligations and shall take technical measures and other necessary measures to protect the safety and stability of their networks. Under the Cyber Security Law, network operators are subject to various security protection-related obligations, including, among others, (i) network operators shall comply with certain obligations regarding maintenance of the security of internet systems; (ii) network operators shall verify users’ identities before signing agreements or providing certain services such as information publishing or real-time communication services; (iii) when collecting or using personal information, network operators shall clearly indicate the purposes, methods and scope of the information collection, the use of information collection, and obtain the consent of those from whom the information is collected; (iv) network operators shall strictly preserve the privacy of user information they collect, and establish and maintain systems to protect user privacy; (v) network operators shall strengthen management of information published by users, and when they discover information prohibited by laws and regulations from publication or dissemination, they shall immediately stop dissemination of that information, including taking measures such as deleting the information, preventing the information from spreading, saving relevant records, and reporting to the regulatory authorities. In addition, the Cyber Security Law requires that critical information infrastructures operators, including those in the finance industry, generally shall store, within the territory of the PRC, the personal information and important data collected and produced during their operations in the PRC and their purchase of network products and services that affect or may affect national securities shall be subject to national cybersecurity review.
On December 28, 2021, the CAC, the NDRC, and several other administrations jointly issued the revised Measures for Cybersecurity Review, which became effective on February 15, 2022. The Measures establishes the basic framework for national security reviews of network products and services, and provides the principal provisions for undertaking cyber security reviews. According to the Measures, critical information infrastructures operators that purchase network products and services, and network platform operators engaging in data processing activities that affect or may affect national security are subject to cybersecurity review. In addition, the regulatory authorities may demand ad hoc security reviews on network products and services that are deemed capable of affecting national security. The network platform operators who possess personal information of more than one million users and intend to be listed on a foreign stock exchange must also be subject to the cybersecurity review. Critical information infrastructures operators and network platform operators may voluntarily file for a cybersecurity review with CAC prior to purchasing network products and services if they deem their behavior to be affecting or may be affecting national security based on self-assessment and self-evaluation, and the regulatory authorities may initiate ad hoc cybersecurity reviews in relation to such purchase on its own. Cybersecurity reviews focus on assessing the national security risks associated with relevant subjects or circumstances, mainly taking the following factors into account: (i) the risk of illegal control, interference or destruction of critical information infrastructure arising from the purchase and utilization of network products and services; (ii) the potential harm on the business continuity of critical information infrastructure incurring from a disruption of network products and services supply; (iii) the safety, openness, transparency, diversity of sources of Network Products and Services; the reliability of suppliers; and the risk of supply disruption due to political, diplomatic, trade and other reasons; (iv) the level of compliance with PRC laws, administrative regulations and ministry rules of the suppliers of Network Products and Services; (v) the risk of core data, important data or a large amount of personal information being stolen, leaked, destroyed, and illegally used or illegally transferred abroad; (vi) in connection with the listing of a company, the risk of critical information infrastructure, core data, important data or a large amount of personal information being affected, controlled, or used with malicious intent by foreign governments, as well as the risk relating to network information security; and (vii) other factors that may harm critical information infrastructure security, cyber security and/or data security.
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Furthermore, on July 30, 2021, the State Council issued the Provisions on Protection of Critical Information Infrastructure Security, which took effect on September 1, 2021 and provides that “critical information infrastructures” refers to important network facilities and information systems involved in important industries and fields such as public communication and information services, energy, transportation, water conservancy, finance, public services, e-government, national defense related science and technology industry, as well as those which may seriously endanger national security, national economy and citizen’s livelihood and public interests if damaged, malfunctioned, or if leakage of data relating thereto occurs. Pursuant to the Provisions, the governmental authorities are responsible for formulating the rules on identifying the critical information infrastructures and organizing to identify such critical information infrastructures in the related industries and fields, taking into account the factors set forth in the Provisions and shall notify the operators identified as critical information infrastructures operators. However, as the governmental authorities may further formulate detailed rules or explanations with respect to the interpretation and implementation of such Provisions, including the rules on identifying the critical information infrastructures in different industries and fields, it remains unclear whether we or other operators we provide network products and services to may be identified as critical information infrastructures operators. If we provide or are deemed to provide network products and services to critical information infrastructures operators, or if we are deemed to be a critical information infrastructures operator, we would be required to follow the cybersecurity review procedures and be subject to cybersecurity review by the CAC and other PRC regulatory authorities. During such review, we may be required to suspend new user registration in China and/or experience other disruptions to our operations. Such review, if undertaken, could also result in negative publicity with respect to our company and diversion of our managerial and financial resources. Furthermore, if we are identified as a critical information infrastructures operator, additional obligations will be imposed on us with respect to the protection of critical information infrastructures, including the obligation to set up a special security administration department and to conduct security background reviews on persons in charge of such department or holding other key positions in such department.
At the end of 2019, the CAC, issued the CAC Order No. 5, which became effective on March 1, 2020, to further strengthen the regulation and management of network information content. Pursuant to the CAC Order No. 5, each network information content service platform is required, among others, (i) not to disseminate any information prohibited by laws and regulations, such as information jeopardizing national security; (ii) to strengthen the examination of advertisements published on such network information content service platform; (iii) to promulgate management rules and platform convention and improve user agreement, such that such network information content service platform could clarify users’ rights and obligations and perform management responsibilities required by laws, regulations, rules and convention; (iv) to establish convenient means for complaints and reports; and (v) to prepare annual work report regarding its management of network information content ecology. In addition, a network information content service platform must not, among others, (i) utilize new technologies such as deep-learning and virtual reality to engage in activities prohibited by laws and regulations; (ii) engage in online traffic fraud, malicious traffic rerouting and other activities related to fraudulent account, illegal transaction account or maneuver of users’ account; and (iii) infringe a third party’s legitimate rights or seek illegal interests by way of interfering with information display. On July 12, 2021, the CAC, the MIIT and the Ministry of Public Security jointly issued the Circular of Issuing the Administrative Provisions on Security Vulnerabilities of Network Products, which took effect on September 1, 2021. The Circular states that, no organization or individual may abuse the security vulnerabilities of network products to engage in activities that endanger network security, or to illegally collect, sell, or publish information relating to such security vulnerabilities. Anyone who is aware of the aforesaid non-compliant activities should not provide any technical support, advertising, payment settlement and other assistance to the non-compliant actors. According to the Circular, network product providers, network operators, and platforms collecting network product security vulnerabilities must establish and improve channels for receiving network product security vulnerability information and keep such channels available, and retain network product security vulnerability information reception logs for at least six months. In order to ensure that security vulnerabilities in network products are fixed on a timely basis and reasonably reported, network product providers should perform certain obligations on the management of security vulnerabilities in their network products, including, among others, reporting the relevant vulnerability information to the Cybersecurity Threat and Vulnerability Information Sharing Platform of the MIIT within two days, which shall include the name, model, and version of the product affected by such security vulnerability, as well as the technical characteristics, degree of harm and scope of impact of such vulnerability. The Circular also prohibits the disclosure of undisclosed vulnerabilities to overseas organizations or individuals other than to the product providers.
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On June 10, 2021, the SCNPC issued the Data Security Law, which took effect on September 1, 2021. The Data Security Law provides for data security and privacy obligations on entities and individuals carrying out data activities. The Data Security Law also introduces a data classification and hierarchical protection system based on the importance of data in economic and social development, 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. Appropriate protection measures are required to be taken for each respective category of data. For example, a processor of important data shall designate the personnel and the management body responsible for data security, carry out risk assessments for its data processing activities and file the risk assessment reports with the competent authorities. In addition, the Data Security Law provides a national security review procedure for those data activities which may affect national security and imposes export restrictions on certain data and information.
On July 7, 2022, the CAC issued the Measures for the Security Assessment of Cross-border Data Transfer, which became effective on September 1, 2022. On March 22, 2024, the CAC promulgated the Provisions on Promoting and Regulating Cross-border Data Flow, which took effect on the same date. In accordance with such regulations to provide data abroad under any of the following circumstances, a data processor must apply to the national cyberspace authority for data security assessment through the provincial-level cyberspace administration authority: (i) outbound transfer of important data by a data processor, (ii) outbound transfer of personal information by a critical information infrastructure operator; (iii) outbound transfer of personal information by a personal information processor who has made outbound transfers of the personal information (excluding sensitive personal information) of 1,000,000 people cumulatively or the sensitive personal information of 10,000 people cumulatively since January 1 of the current year, and (iv) other circumstances where an application for the security assessment for an outbound data transfer is required as prescribed by the national cyberspace administration authority. In addition, the Provisions on Promoting and Regulating Cross-border Data Flow provides certain exemptions for obligations in connection with cross-border data transfer, including the obligations for declaring data security assessment, executing a standard contract for provisions of personal information abroad or being certified for personal information protection. Furthermore, data processors shall conduct self-assessment on the risks of cross-border data transfer prior to their application for the security assessment and focus on assessment of the following significant matters, including, among others: (i) the legality and necessity of the purpose, scope and method of cross-border data transfer; (ii) the scale, scope, type and sensitivity of data transferred overseas, and risks to the national security, public interests or legitimate rights of individuals or organizations caused by such cross-border data transfer; (iii) the responsibilities and obligations that the overseas recipient of such data promises to undertake, and whether such overseas recipient’s management and technical measures and capabilities for performing its responsibilities and obligations can guarantee the security of cross-border data transfer; (iv) the risks that the data transferred overseas may be falsified, destroyed, divulged, lost, transferred, illegally obtained or illegally used during and after the cross-border transfer; and (v) whether contracts or other legally binding documents entered into with the overseas recipient have fully stipulated the responsibilities and obligations to protect data security. On December 16, 2022, the National Information Security Standardization Technical Committee issued the Practical Guidance on Cybersecurity Standard—the Regulations on Safety Verification in Cross-border Personal Information Processing, which stipulates personal information protection obligations of personal information processor and foreign recipient.
On December 8, 2022, the MIIT issued the Administrative Measures for Data Security in the Field of Industry and Information Technology (Trial), which stipulates that all businesses which handle data in the field of industry and informatization in China are required to categorize such information as “ordinary,” “important” or “core” and businesses processing “important” or “core” data shall comply with certain filing and reporting obligations. Data in the field of industry and informatization includes industrial data, telecoms data and radio data. Data handlers in the field of industry and informatization include software and information technology service providers and other entities in the field of industry and information technology that independently determine handling purposes and handling methods in the data handling activities and data handling activities include, but are not limited to, data collection, storage, use, processing, transmission, provision and publication. According to the Measures, data handlers in the field of industry and informatization shall file their catalogues of important data and core data with the local industrial regulatory authorities for the record. Data handlers in the field of industry and informatization shall follow the principles of legality and legitimacy in collecting data and shall not steal or collect data by other illegal means. To provide data handling services which involve operation of telecommunications business, data handlers in the field of industry and informatization shall obtain a telecommunications business permit in accordance with the provisions of the laws and administrative regulations.
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On May 24, 2024, the MIIT issued the Implementing Rules for Data Security Risk Assessments in the Field of Industry and Information Technology (Trial Implementation), which took effect on June 1, 2024. Such implementing rules apply to data security risk assessment activities conducted by important data or core data processors in the field of industry and information technology in China. General data processors may also refer to these rules to conduct data security risk assessment. The implementing rules establish data security risk assessment mechanisms at both ministerial and provincial levels, refine assessment obligations of processors of important data and core data, and clarify the mechanism and procedures for competent industrial authorities to supervise and administer such assessment activities.
On September 24, 2024, the State Council promulgated the Regulations on the Network Data Security, which came into effect on January 1, 2025. Pursuant to these regulations, a network data processer processing the personal information of more than 10 million individuals shall comply with the provisions governing the important data processers. An important data processor shall carry out the risk assessment before any network data is provided by such important data processor, or such important data processor is entrusted to process or jointly process the network data. In addition, the important data processor shall also carry out risk assessments of their network data processing activities every year and submit risk assessment reports to relevant authorities at or above the provincial level. These regulations also stipulate the obligations of the network platform service providers. network platform service providers shall specify the network data security protection obligations of third-party product and service providers who access their platforms, through platform rules, contracts or otherwise, and urge third-party product and service providers to strengthen network data security management. Network platform service providers recommending information to individuals in an automatic decision-making manner shall set up a personalized recommendation closing option that is easy to understand, access and operate, and provide users with such functions as refusing to receive recommended information and deleting user tags targeted at their personal characteristics. Where the service provider of a large network platform, which refers to a network platform with more than 50 million registered users or more than 10 million monthly active users, complex business types, and network data processing activities having a significant impact on national security, economic operation, national welfare and people’s livelihood, provides cross-border network data, it shall comply with the national administrative requirements on cross-border data security management and improve the relevant technical and administrative measures to prevent cross-border security risks of network data.
On December 6, 2025, the CAC released the Measures for Network Data Security Risk Assessment (Draft for Comments) to solicit public opinions until January 5, 2026. According to the draft Measures for Network Data Security Risk Assessment (Draft for Comments), data processors handling important data must conduct a risk assessment annually. If the security status of important data changes significantly and may adversely affect data security, an assessment on the affected parts shall be conducted promptly. Processors of general data are encouraged to carry out assessments at least once every three years.
Regulations related to privacy protection
The PRC Constitution states that PRC law protects the freedom and privacy of communications of citizens and prohibits infringement of these rights. In recent years, PRC government authorities have enacted legislation on the use of internet to protect personal information from any unauthorized disclosure. On May 28, 2020, the National People’s Congress adopted the Civil Code, which came into effect on January 1, 2021. The Civil Code provides in a stand-alone chapter of right of personality and reiterates that the personal information of a natural person shall be protected by the law. Any organization or individual shall legitimately obtain such personal information of others in due course on a need-to-know basis and ensure the safety and privacy of such information, and refrain from excessively handling or using such information. In the event that any personal information is or may be leaked, falsified or lost, the information processor shall take immediate remedial measures, inform the natural person concerned and escalate such situation to the competent department as required.
On December 29, 2011, the MIIT issued the Several Provisions on Regulating the Market Order of Internet Information Services, pursuant to which an internet information service provider may not collect any user personal information or provide any such information to third parties without the consent of the user. In addition, an internet information service provider must expressly inform the users of the method, content and purpose of the collection and processing of such user personal information and may only collect such information necessary for the provision of its services. An internet information service provider is also required to properly maintain the user personal information, and in case of any leak or likely leak of the user personal information, online lending service providers must take immediate remedial measures and, in severe circumstances, make an immediate report to the telecommunications regulatory authority.
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In addition, pursuant to the Decision on Strengthening the Protection of Online Information issued by the SCNPC on December 28, 2012 and the Order for the Protection of Telecommunication and Internet User Personal Information issued by the MIIT on July 16, 2013, any collection and use of users’ personal information must be subject to the consent of the users, abide by the principles of legality, rationality and necessity and be within the specified purposes, methods and scopes.
With respect to the security of information collected and used by mobile apps, pursuant to the Announcement of Conducting Special Supervision against the Illegal Collection and Use of Personal Information by Apps, which was issued on January 23, 2019, app operators should collect and use personal information in compliance with the Cyber Security Law and should be responsible for the security of personal information obtained from users and take effective measures to strengthen the personal information protection. Furthermore, app operators should not force their users to make authorization by means of bundling, suspending installation or in other default forms and should not collect personal information in violation of laws, regulations or breach of user agreements. Such regulatory requirements were emphasized by the Notice on the Special Rectification of Apps Infringing upon User’s Personal Rights and Interests, which was issued by the MIIT on October 31, 2019. On November 28, 2019, the CAC, the MIIT, the Ministry of Public Security and the State Administration for Market Regulation jointly issued the Methods of Identifying Illegal Acts of Apps to Collect and Use Personal Information. The Regulation further illustrates certain commonly-seen illegal behaviors of apps operators in terms of collection and use of personal information, including “failure to publicize rules for collecting and using personal information,” “failure to expressly state the purpose, manner and scope of collecting and using personal information,” “collection and use of personal information without consent of users of such app,” “collecting personal information irrelevant to the services provided by such app in violation of the principle of necessity,” “providing users’ personal information to others without users’ consent,” “failure to provide the function of deleting or correcting personal information as required by laws” and “failure to publish information such as methods for complaints and reporting.” Among others, any of the following acts of an app operator will constitute “collection and use of personal information without consent of users”: (i) collecting an user’s personal information or activating the permission for collecting any user’s personal information without obtaining such user’s consent; (ii) collecting personal information or activating the permission for collecting personal information of any user who explicitly refuses such collection, or repeatedly seeking for user’s consent such that the user’s normal use of such app is disturbed; (iii) any user’s personal information which has been actually collected by the app operator or the permission for collecting any user’s personal information activated by the app operator is beyond the scope of personal information which such user authorizes the app operator to collect; (iv) seeking for any user’s consent in a non-explicit manner; (v) modifying any user’s settings for activating the permission for collecting any personal information without such user’s consent; (vi) using users’ personal information and any algorithms to directionally push any information, without providing the option of non-directed pushing such information; (vii) misleading users to permit collecting their personal information or activating the permission for collecting such users’ personal information by improper methods such as fraud and deception; (viii) failing to provide users with the means and methods to withdraw their permission of collecting personal information; and (ix) collecting and using personal information in violation of the rules for collecting and using personal information promulgated by such app operator.
Furthermore, in order to improve the protection of personal information, the National Information Security Standardization Technical Committee also issued the Guide to Self-evaluation of Collection and Use of Personal Information by Mobile Internet Applications (Apps) on July 22, 2020 regarding the security of information collected and used by operators of mobile apps. In addition, pursuant to the Notice on Promulgation of the Rules on the Scope of Necessary Personal Information for Common Types of Mobile Internet Applications jointly issued by the CAC, the MIIT and certain other government authorities on March 12, 2021, and which took effect on May 1, 2021, “necessary personal information” refers to the personal information necessary for ensuring the normal operation of a mobile app’s basic function services, without which the mobile app cannot achieve its function services. For investment and financial management mobile apps, the basic function services are “stocks, futures, funds, securities or other related investment and financial services,” and the necessary personal information includes (i) mobile phone numbers of registered users, (ii) name, the type, number and validly period of the ID documentation, and bank account number or payment account number of users, and (iii) capital account, bank account number or payment account number of users.
Pursuant to the Ninth Amendment to the Criminal Law issued by the SCNPC on August 29, 2015 and becoming effective on November 1, 2015, any ICP License holder that fails to fulfill the obligations related to internet information security administration as required by applicable laws and refuses to rectify upon orders, will be subject to criminal liability for (i) any dissemination of illegal information in large scale; (ii) any severe effect due to the leakage of the client’s information; (iii) any serious loss of evidence of criminal activities; or (iv) other severe situations. In addition, any individual or entity that (i) sells or provides personal information to others unlawfully, or (ii) steals or illegally obtains any personal information, will be subject to criminal liability in severe situations.
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On May 8, 2017, the Supreme People’s Court and the Supreme People’s Procuratorate issued the Interpretations of the Supreme People’s Court and the Supreme People’s Procuratorate on Several Issues Concerning the Application of Law in the Handling of Criminal Cases Involving Infringement of Citizens’ Personal Information, which became effective on June 1, 2017. The Interpretations provides more practical conviction and sentencing criteria for the infringement of citizens’ personal information and mark a milestone for the criminal protection of citizens’ personal information. Moreover, on October 21, 2019, the Supreme People’s Court and the Supreme People’s Procuratorate of the PRC jointly issued the Interpretations on Certain Issues Regarding the Applicable of Law in the Handling of Criminal Case Involving Illegal Use of Information Networks and Assisting Committing Internet Crimes, which came into effect on November 1, 2019, and further clarifies the meaning of Internet service operators and the severe situations of certain crimes.
On August 20, 2021, the SCNPC promulgated the Personal Information Protection Law, which integrates the scattered rules with respect to personal information rights and privacy protection and took effect in November 2021. The Personal Information Protection Law aims at protecting the personal information rights and interests, regulating the processing of personal information, ensuring the orderly and free flow of personal information in accordance with the law and promoting the reasonable use of personal information. Personal information, as defined in the Personal Information Protection Law, refers to information related to identified or identifiable natural persons and is recorded by electronic or other means but excluding the anonymized information. The Personal Information Protection Law applies to personal information processing activities within China, as well as certain personal information processing activities outside China, including those for provision of products and services to natural persons within China or for analyzing and assessing acts of natural persons within China. The Personal Information Protection Law provides the circumstances under which a personal information processor could process personal information, which include but not limited to, where the consent of the individual concerned is obtained and where it is necessary for the conclusion or performance of a contract to which the individual is a contractual party. It also stipulates certain specific rules with respect to the obligations of a personal information processor, such as to inform the purpose, the method of processing, the type of personal information processed and retention period to the individuals, and the obligation of the third party who has access to the personal information by way of co-processing or delegation. Processors processing personal information exceeding the threshold to be set by the authorities and critical information infrastructures operators are required to store, within the territory of the PRC, the personal information collected and produced within the PRC. If the Personal Information Law is applied to a personal information processor’s processing activities outside the territory of the PRC, such processor must establish a special agency or designate a representative within the territory of the PRC to be responsible for the handling of all matters relating to personal information protection and must also file the name and contact information of such agency or representative with the governmental authorities responsible for personal information protection. Specifically, a personal information processor who uses personal information to make automated decision-making shall ensure the transparency of decision-making and the fairness and impartiality of the results and shall not impose unreasonable differential treatment on individuals in terms of pricing and other transaction conditions. The governmental authorities shall organize assessment on mobile apps’ personal information protection and publicize the outcome. The mobile apps that are identified as not in compliance with personal information protection requirements under such law may be required to suspend or terminate the services and the operators may also be subject to penalties including confiscation of illegal revenues and fines. Furthermore, the Personal Information Protection Law also provides for the rights of natural persons whose personal information is processed and takes special care of the personal information of children under 14 and sensitive personal information. In addition, the Personal Information Protection Law imposes pre-approval and other requirements for any cross-border data transfer by PRC entities. Besides, the Personal Information Protection Law also provides that the relevant governmental authorities should conduct assessment on the status of personal information protection by mobile apps and should publish the results of such assessment. Mobile apps that are identified as not in compliance with personal information protection requirements set out under the said law may be required to suspend or terminate their services and their operators may also be subject to penalties including the confiscation of illegal revenues and fines. There are uncertainties with respect to the interpretation and application of the Personal Information Protection Law, in particular the applicability of the Personal Information Protection Law to and the requirements thereunder for our offshore subsidiaries when they engage in personal information processing activities for natural persons within China. The Civil Code promulgated in 2020 also contains specific provisions regarding the protection of personal information. These rules may result in additional expenses being incurred and obligations being levied on us and subject us to potential liability and negative publicity. In addition, more laws or regulations on this subject matter may be promulgated in the future which may in turn impose further requirements on us.
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The Administrative Provisions on the Account Information of Internet Users, which was promulgated by the CAC on June 27, 2022 and became effective on August 1, 2022, sets out guidelines on the provision of the account information of internet users. Internet-based information service providers shall perform their responsibilities as the administrators of the account information of internet users, have in place professionals and technical capacity appropriate to the scale of services, and establish, improve and strictly implement the authentication of real identity information, verification of account information, security of information content, ecological governance, emergency responses, protection of personal information and other management systems.
On February 12, 2025, the CAC promulgated the Administrative Measures for Personal Information Protection Compliance Audits, which came into effect on May 1, 2025. According to such measures, the term “compliance audit of personal information protection” refers to the supervisory activities that review and evaluate whether the personal information processing activities performed by personal information processors comply with laws and administrative regulations. Personal information processors that process personal information of more than 10 million individuals shall carry out a compliance audit of personal information protection at least once every two years.
On November 22, 2025, the CAC and the Ministry of Public Security jointly released the Provisions on Personal Information Protection for Large Online Platforms (Draft for Comments), pursuant to which, the national cyberspace administration, together with the Ministry of Public Security and other relevant authorities, shall formulate and publish a catalogue of large-scale online platforms and update it dynamically. In determining large online platforms, the following factors shall be primarily considered: (i) registered users of 50 million or more, or monthly active users of 10 million or more; (ii) provision of important network services or business scope covering multiple types of business; (iii) data held and processed which, once leaked, tampered with, or damaged, shall have a significant impact on national security, economic operation, and national livelihood, among others; (iv) other circumstances as provided by the national cyberspace administration and the Ministry of Public Security. Such large-scale online platforms must appoint a management personnel member who is a Chinese national with no permanent residency abroad and over five years of relevant experience as Personal Information Protection Officer. And such large-scale online platforms shall conduct personal information protection compliance audits and risk assessments on their own or by engaging third-party professional institutions, and rectify issues identified. As of the date of this annual report, the Provisions on Personal Information Protection for Large Online Platforms has not been effective.
Regulations Related to Intellectual Property Rights
Regulations related to copyrights
The Copyright Law of the PRC (Revised in 2020) provides that Chinese citizens, legal persons, or other organizations shall, whether published or not, own copyright in their copyrightable works, which include, among others, works of literature, art, natural science, social science, engineering technology and computer software. Copyright owners enjoy certain legal rights, including right of publication, right of authorship and right of reproduction.
The Computer Software Copyright Registration Measures regulates registrations of software copyright, exclusive licensing contracts for software copyright and assignment agreements. The National Copyright Administration of China administers software copyright registration and China Copyright Protection Center is designated as the software registration authority. The China Copyright Protection Center shall grant registration certificates to the computer software copyrights applicants which meet the requirements of both the foregoing Measures and the Computer Software Protection Regulations (Revised in 2013).
As of December 31, 2025, we had registered 412 software copyrights and 29 work copyrights in the PRC.
Regulations related to trademarks
Trademarks are protected by the Trademark Law of the PRC (Revised in 2019) as well as by the Implementation Regulations of the PRC Trademark Law adopted by the State Council in 2002 and as most recently amended on April 29, 2014. The Trademark Office handles trademark registrations. The Trademark Office grants a ten-year term to registered trademarks and the term may be renewed for another ten-year period upon request by the trademark owner. A trademark registrant may license its registered trademarks to another party by entering into trademark license agreements, which must be filed with the Trademark Office for its record. As with trademarks, the Trademark Law has adopted a first-to-file principle with respect to trademark registration. If a trademark applied for is identical or similar to another trademark which has already been registered or subject to a preliminary examination and approval for use on the same or similar kinds of products or services, such trademark application may be rejected. Any person applying for the registration of a trademark may not injure existing trademark rights first obtained by others, nor may any person register in advance a trademark that has already been used by another party and has already gained a sufficient degree of reputation through such party’s use.
As of December 31, 2025, we have registered 984 trademarks in the PRC.
Regulations related to domain names
The MIIT issued the Measures on Administration of Internet Domain Names on August 24, 2017, which became effective on November 1, 2017. Pursuant to the Measures, the MIIT is in charge of the administration of PRC internet domain names. China Internet Network Information Center, under the supervision of the MIIT, is responsible for the daily administration of domain names and Chinese domain names. The domain name registration follows a first-to-file principle. Applicants for registration of domain names shall provide the true, accurate and complete information of their identifications to domain name registration service institutions. The applicants will become the holder of such domain names upon the completion of the registration procedure.
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As of December 31, 2025, we have registered 58 domain names in the PRC (.cn country and regional code top-level domain names and Chinese domain names).
Regulations related to patents
The PRC Patent Law provides for patentable inventions, utility models and designs, which must meet three conditions: novelty, inventiveness and practical applicability. The State Intellectual Property Office under the State Council is responsible for examining and approving patent applications. A patent is valid for a term of twenty years in the case of an invention, a term of fifteen years in the case of designs and a term of ten years in the case of utility models.
As of December 31, 2025, we have registered 6 patents in the PRC.
Regulations Related to Foreign Exchange
General administration of foreign exchange
Under the PRC Foreign Currency Administration Rules promulgated on January 29, 1996 and most recently amended on August 5, 2008 and various regulations issued by the SAFE and other PRC government authorities, RMB is convertible into other currencies for current account items, such as trade-related receipts and payments and payment of interest and dividends. The conversion of RMB into other currencies and remittance of the converted foreign currency outside the PRC for of capital account items, such as direct equity investments, loans and repatriation of investment, requires the prior approval from SAFE or its local office. Payments for transactions that take place within the PRC must be made in RMB.
The Circular of SAFE on Further Improving and Adjusting Foreign Exchange Administration Policies for Direct Investment promulgated by SAFE on November 19, 2012, which became effective on December 17, 2012 and was recently amended on December 30, 2019, respectively, amends and simplifies the foreign exchange procedures related to direct investment. Pursuant to the Circular, the opening of various special purpose foreign exchange accounts, the reinvestment of RMB proceeds 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. In addition, domestic companies are allowed to provide cross-border loans not only to their offshore subsidiaries, but also to their offshore parents.
In May 2013, SAFE issued the Circular on Printing and Distributing the Provisions on Foreign Exchange Administration over Domestic Direct Investment by Foreign Investors and the Supporting Document, which was recently amended on December 30, 2019. The Circular specifies that the administration by SAFE or its local branches over direct investment by foreign investors in the PRC shall be conducted by way of registration and banks shall process foreign exchange business relating to the direct investment in the PRC based on the registration information provided by SAFE and its branches. In February 2015, SAFE issued the SAFE Notice 13, which took effect on June 1, 2015. SAFE Notice 13 delegates the power to enforce the foreign exchange registration in connection with inbound and outbound direct investments under SAFE rules from local branches of SAFE to banks, thereby further simplifying the foreign exchange registration procedures for inbound and outbound direct investments.
On March 30, 2015, SAFE issued SAFE Circular 19, which took effective on June 1, 2015 and was recently amended on March 23, 2023. On June 9, 2016, SAFE further issued SAFE Circular 16, which, among other things, amends certain provisions of SAFE Circular 19 and was recently amended on December 4, 2023. On September 12, 2025, the SAFE further issued the Circular on Matters Concerning Furthering Reform of Foreign Exchange Administration in Cross-Border Investment and Financing, or SAFE Circular 43, to further enhance the facilitation of cross-border investment and financing. Pursuant to SAFE Circular 19, SAFE Circular 16 and SAFE Circular 43, the utilization of foreign exchange funds under the capital account by domestic enterprises (including foreign exchange capital and foreign debt funds) and the RMB funds derived from the settlement thereof shall adhere to the principles of authenticity and self-use, and such funds shall not be used: (i) directly or indirectly, for expenditures prohibited by PRC laws and regulations; (ii) directly or indirectly, for securities investment or other investment and wealth management activities (except for wealth management products with a qualified risk rating and structural deposits); and (iii) for extending loans to non-affiliated enterprises (except where expressly permitted by the business scope). Where contractual arrangements exist between domestic enterprises and other parties regarding the scope of utilization of foreign exchange funds under the capital account, the use of relevant funds shall not exceed the scope stipulated in such contracts. Enterprises may freely elect to utilize their foreign exchange funds under either the payment-based settlement or voluntary settlement mechanism.
On January 26, 2017, SAFE issued the Notice on Improving the Check of Authenticity and Compliance to Further Promote Foreign Exchange Control, which stipulates several capital control measures with respect to the outbound remittance of profit from domestic entities to offshore entities, including (i) under the principle of genuine transaction, banks shall check board resolutions regarding profit distribution, the original version of tax filing records and audited financial statements; and (ii) domestic entities shall hold income to account for previous years’ losses before remitting the profits. Moreover, pursuant to the Notice, domestic entities shall make detailed explanations of the sources of capital and utilization arrangements, and provide board resolutions, contracts and other proof when completing the registration procedures in connection with an outbound investment.
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On October 23, 2019, the SAFE issued SAFE Circular 28, which was recently amended on December 4, 2023. SAFE Circular 28 expressly allows foreign-invested enterprises that do not have equity investments in their approved business scope to use their capital obtained from foreign exchange settlement to make domestic equity investments as long as the investments are real and in compliance with the foreign investment-related laws and regulations. In addition, SAFE Circular 28 stipulates that qualified enterprises in certain pilot areas may use their capital income from registered capital, foreign debt and overseas listing, for the purpose of domestic payments without providing authenticity certifications to the relevant banks in advance for those domestic payments. SAFE Circular 43 further clarifies the cancellation of foreign exchange registration for domestic equity investments by non-investment foreign-invested enterprises.
On April 10, 2020, the SAFE issued the Circular of SAFE on Optimizing Foreign Exchange Administration to Support the Development of Foreign-related Business, pursuant to which the reform of facilitating the payments of incomes under the capital accounts shall be promoted nationwide. Under the prerequisite of ensuring true and compliant use of funds and complying with the prevailing administrative provisions on use of income from capital projects, enterprises which satisfy the criteria are allowed to use income under the capital account, such as capital funds, foreign debt and overseas listing, for domestic payment, without the need to provide proof materials for veracity to the bank beforehand for each transaction.
Regulations related to foreign exchange registration of offshore investment by PRC residents
SAFE issued SAFE Circular 37, in July 2014 that requires PRC residents, including PRC resident natural persons or PRC 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. The term “control” under SAFE Circular 37 is broadly defined as the operation rights, beneficiary rights or decision-making rights acquired by the PRC residents in the offshore special purpose vehicles by such means as acquisition, trust, proxy, voting rights, repurchase, convertible bonds or other arrangements. In addition, such PRC residents 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 further enacted SAFE Notice 13, which allows PRC residents to register with qualified banks in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing. However, remedial registration applications made by PRC residents that previously failed to comply with the SAFE Circular 37 continue to fall under the jurisdiction of the local branch of SAFE.
In the event that a PRC resident holding interests in a special purpose vehicle fails to fulfill the required SAFE registration, the PRC subsidiaries of that special purpose vehicle may be prohibited from distributing profits to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be restricted in its ability to contribute additional capital into its PRC subsidiary. Moreover, failure to comply with the various SAFE registration requirements described above could result in liability under PRC law for evasion of foreign exchange controls.
Regulations related to Offshore Stock Investments
On January 29, 1996, the State Council issued the Foreign Exchange Administration Regulations of the PRC, which was last amended with effective date of August 5, 2008. Pursuant to the Foreign Exchange Administration Regulations of the PRC, Chinese nationals shall register with the foreign exchange administration department of the State Council for any foreign direct investment or engagement in any issuance or transaction of offshore valuable securities or derivative products. On December 25, 2006, the People’s Bank of China issued the Administrative Measures for Personal Foreign Exchange, which further clarifies that any offshore equity, fixed-income or other approved financial investments by Chinese nationals, shall be conducted through a qualified domestic financial institution. On January 5, 2007, the SAFE published the Implementation of the Administrative Measures for Personal Foreign Exchange, which was last amended on March 23, 2023. Pursuant to the Measures, Chinese nationals are limited to a foreign exchange quota of US$50,000 per year for approved uses only.
In addition, pursuant to the SAFE Officials Interview on Improving the Management of Declarations of Individual Foreign Exchange Information on December 31, 2016, Chinese nationals can only engage in offshore investments under capital items only through prescribed methods such as Qualified Domestic Institutional Investors, without which Chinese nationals can only purchase foreign currency for the purpose of external payments within the scope of current items, including private travel, overseas study, business trips, family visits, overseas medical treatment, trade in goods, purchase of non-investment insurance and consulting services. Furthermore, in 2016, CSRC published a response letter to investors on its website to remind domestic investors that any offshore investments conducted by ways which are not explicitly specified under applicable PRC laws, may not be adequately protected by the PRC laws.
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We do not convert Renminbi into Hong Kong dollars or U.S. dollars for our clients, and require those who would like to trade securities listed on the Hong Kong Stock Exchange or any major stock exchange in the United States through our platform to inject funding into their respective trading accounts in Hong Kong in either Hong Kong dollars or U.S. dollars. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—PRC governmental control of currency conversion, cross-border remittance and offshore investment could have a direct impact on the trading volume completed on our platform. If the government further tightens restrictions on the conversion of Renminbi to foreign currencies, including Hong Kong dollars and U.S. dollars, and/or deems our practice as in violation of PRC laws and regulations, our business will be materially and adversely affected.”
Regulations Related to Dividend Distributions
Under the current regulatory regime in the PRC, foreign-invested enterprises in the PRC may pay dividends only out of their retained earnings, if any, determined in accordance with PRC accounting standards and regulations. A PRC company is required to set aside as statutory reserve funds of at least 10% of its after-tax profit, until the cumulative amount of such reserve funds reaches 50% of its registered capital unless laws regarding foreign investment provide otherwise. A PRC company may, at its discretion, allocate a portion of its after-tax profits based on PRC accounting standards to other reserve funds. These reserves are not distributable as cash dividends. A PRC company shall not distribute any profits until any losses from prior fiscal years have been offset. Profits retained from prior fiscal years may be distributed together with distributable profits from the current fiscal year.
Regulations Related to Taxation
Regulations related to enterprise income tax
On March 16, 2007, the SCNPC issued the PRC Enterprise Income Tax Law, which was amended on February 24, 2017 and December 29, 2018. On December 6, 2007, the State Council enacted the Regulations for the Implementation of the Law on Enterprise Income Tax, which was effective in 2008 and was last amended in January 2025. Under these law and regulations, both resident enterprises and non-resident enterprises are subject to enterprise income tax in the PRC. Resident enterprises are defined as enterprises that are established in China in accordance with PRC laws, or that are established in accordance with the laws of foreign countries but are actually or in effect controlled from within the PRC. Non-resident enterprises are defined as enterprises that are organized under the laws of foreign countries and whose actual management is conducted outside the PRC, but have established institutions or premises in the PRC, or have no such established institutions or premises but have income generated from inside the PRC. Under the Enterprise Income Tax Law and its Implementing Regulations, a uniform corporate income tax rate of 25% is applied, unless they qualify for certain exceptions. Pursuant to the Enterprise Income Tax Law and its Implementation Rules, the income tax rate of an enterprise that has been determined to be a high and new technology enterprise may be reduced to 15% with the approval of the tax authorities. If non-resident enterprises have not formed permanent establishments or premises in the PRC, or if they have formed permanent establishment or premises in the PRC but there is no actual relationship between the relevant income derived in the PRC and the established institutions or premises set up by them, enterprise income tax is set at the rate of 10% with respect to their income sourced from inside the PRC.
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Under the Enterprise Income Tax Law and its Implementation Rules, an enterprise established outside of the PRC with “de facto management body” within the PRC is considered a resident enterprise and will be subject to the enterprise income tax at the rate of 25% on its worldwide income. The term “de facto management body” refers to “the establishment that exercises substantial and overall management and control over the production, business, personnel, accounts and properties of an enterprise.” Pursuant to SAT Circular 82 issued by the State Administration of Taxation in April 2009 and amended in December 2017, an overseas registered enterprise controlled by a PRC company or a PRC company group will be classified as a “resident enterprise” with its “de facto management body” located within China if the following requirements are satisfied: (i) the senior management and core management departments in charge of its daily operations are mainly located in the PRC; (ii) its financial and human resources decisions are subject to determination or approval by persons or bodies located in the PRC; (iii) 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 (iv) no less than half of the enterprise’s directors or senior management with voting rights reside in the PRC. The State Administration of Taxation issued additional rules to provide more guidance on the implementation of SAT Circular 82 in July 2011, and issued an amendment to SAT Circular 82 delegating the authority to its provincial branches to determine whether a Chinese-controlled overseas-incorporated enterprise should be considered a PRC resident enterprise, in January 2014. Although SAT Circular 82, the additional guidance and its amendment only apply to overseas registered enterprises controlled by PRC enterprises and not those controlled by PRC individuals or foreigners, the determining criteria set forth in SAT Circular 82 may reflect the State Administration of Taxation’s general position on how the “de facto management body” test should be applied in determining the tax resident status of offshore enterprises, regardless of whether they are controlled by PRC enterprises, individuals or foreigners. If our offshore entities are deemed PRC resident enterprises, these entities may be subject to the enterprise income tax at the rate of 25% on their global incomes, except that the dividends distributed by our PRC subsidiaries may be exempt from the enterprise income tax to the extent such dividends are deemed “dividends among qualified resident enterprises.”
Regulations related to value-added tax
On December 25, 2024, the SCNPC promulgated the Value-added Tax Law, which came into effect on January 1, 2026 and simultaneously repealed the previous Provisional Regulations on Value-added Tax of the PRC. According to the Value-added Tax Law, entities and individuals (including individual businesses) engaged in the sale of goods, services, intangible assets and immovables and importation of goods within the territory of the PRC are payers of Value-added Tax, or the VAT, and shall pay VAT. Taxpayers that sell goods are subject to a tax rate of 13% and taxpayers that sell services or intangible assets are subject to a tax rate of 6%. Unless otherwise provided for in this Law, a taxpayer that makes a taxable transaction shall calculate and pay VAT by offsetting input tax against output tax according to the general tax calculation method and calculate the VAT payable. Where VAT is computed and paid under the general tax computation method, the tax amount payable shall be the balance of the output tax for the current period after offsetting against the input tax for the current period.
As of the date of this annual report, all our PRC subsidiaries and VIEs are subject to the VAT at rates ranging from 1% to 13%.
Regulations related to dividend withholding tax
The Enterprise Income Tax Law provides that an income tax rate of 10% will generally be applicable to dividends declared to non-PRC resident investors which do not have an establishment or place of business in the PRC, or which have such establishment or place of business but the relevant income is not effectively connected with the establishment or place of business, to the extent such dividends are derived from sources within the PRC.
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Pursuant to the Arrangement Between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income and other applicable PRC laws, if a Hong Kong resident enterprise is determined by the competent PRC tax authority to have satisfied the relevant conditions and requirements under such arrangement and other applicable laws, the 10% withholding tax on the dividends the Hong Kong resident enterprise receives from a PRC resident enterprise may be reduced to 5%. However, based on SAT Circular 81, issued on February 20, 2009 by the State Administration of Taxation, if the PRC tax authorities determine, in their discretion, that a company benefits from such reduced income tax rate due to a structure or arrangement that is primarily tax-driven, such PRC tax authorities may adjust the preferential tax treatment. Furthermore, in October 2019, the State Administration of Taxation promulgated SAT Circular 35, which became effective on January 1, 2020 and superseded the Administrative Measures for Non-Resident Enterprises to Enjoy Treatments under Tax Treaties. SAT Circular 35 abolished the record-filing procedure for justifying the tax treaty eligibility of taxpayers, and stipulates that non-resident taxpayers can enjoy tax treaty benefits via the “self-assessment of eligibility, claiming treaty benefits, retaining documents for inspection” mechanism. Non-resident taxpayers can claim tax treaty benefits after self-assessment provided that supporting documents shall be collected and retained for post-filing inspection by the tax authorities. Moreover, pursuant to SAT Circular 9 issued by the State Administration of Taxation in February 2018, which became effective on April 1, 2018, a resident of a contracting state will not qualify for the benefits under the tax treaties or arrangements, if it is not the “beneficial owner” of the dividend, interest and royalty income. Pursuant to SAT Circular 9, a “beneficial owner” is required to have ownership and the right to dispose of the income or the rights and properties giving rise to the income, and generally engage in substantive business activities. An agent or conduit company will not be regarded as a “beneficial owner” and, therefore, will not qualify for treaty benefits. A conduit company normally refers to a company that is set up primarily for the purpose of evading or reducing taxes or transferring or accumulating profits.
Regulations related to income tax for share transfers
On February 3, 2015, the State Administration of Taxation issued a Public Notice Regarding Certain Corporate Income Tax Matters on Indirect Transfer of Properties by Non-Resident Enterprises, or SAT Public Notice 7, which partially replaced and supplemented previous rules under the Circular on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises, or SAT Circular 698. On October 17, 2017, the State Administration of Taxation issued the Announcement of the State Administration of Taxation on Issues Concerning the Withholding of Non-resident Enterprise Income Tax at Source, or SAT Bulletin 37, which came into effect on December 1, 2017 and concurrently abolished SAT Circular 698. SAT Bulletin 37 further clarifies the practice and procedure of the withholding of non-resident enterprise income tax. By promulgating and implementing these circulars, the PRC tax authorities have enhanced their scrutiny over the direct or indirect transfer of equity interests or other taxable assets in a PRC resident enterprise by a non-resident enterprise. Under SAT Public Notice 7 and SAT Bulletin 37, where a non-resident enterprise transfers the equity interests or other taxable assets of a PRC “resident enterprise” indirectly by disposition of the equity interests of an overseas holding company, the non-resident enterprise, being the transferor, or the transferee, or the PRC entity which directly owned the taxable assets may report to the tax authority this “indirect transfer.” Using a “substance over form” principle, the PRC tax authority may re-characterize such indirect transfer as a direct transfer of the equity interests in the PRC tax resident enterprise and other properties in China. As a result, gains derived from such indirect transfer may be subject to PRC tax at a rate of up to 10%. We face uncertainties on the reporting and consequences on private equity financing transactions, share transfers or other transactions involving the transfer of shares in our company by investors that are non-PRC resident enterprises, or sale or purchase of shares in other non-PRC resident companies or other taxable assets by us. We and our non-resident investors may be at risk of being required to file a return and being taxed under SAT Public Notice 7 and SAT Bulletin 37, and we may be required to expend valuable resources to comply with SAT Public Notice 7 and SAT Bulletin 37 or to establish that we should not be taxed under these circulars.
Regulations Related to Employee Stock Incentive Plans
Pursuant to the Notice of Issues Related to the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Publicly-Listed Company, which was issued by the SAFE on February 15, 2012, employees, directors, supervisors, and other senior management who participate in any stock incentive plan of a publicly-listed overseas company and who are PRC citizens or non-PRC citizens residing in China for a continuous period of no less than one year, subject to a few exceptions, are required to register with the SAFE through a qualified domestic agent, which may be a PRC subsidiary of such overseas listed company, and complete certain other procedures. In addition, SAFE Circular 37 provides that PRC residents who participate in a share incentive plan of an overseas private special purpose company may register with the SAFE or its local branches before exercising rights.
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In addition, the State Administration of Taxation has issued certain circulars concerning employee stock options and restricted shares. Under these circulars, employees working in the PRC who exercise stock options or are granted restricted shares will be subject to PRC individual income tax. The PRC subsidiaries of an overseas listed company are required to file documents related to employee stock options and restricted shares with the tax authorities and to withhold individual income taxes of employees who exercise their stock option or purchase restricted shares. For example, on October 12, 2021, the State Administration of Taxation issued SAT Notice 69, which requires domestic enterprises to report their share incentive plans, which give the equity interests of an overseas enterprise to their employees, to the tax authorities in charge. If our employees fail to pay or we fail to withhold their income taxes according to the laws and regulations, we may face sanctions imposed by the tax authorities or other PRC governmental authorities.
Regulations Related to Employment and Social Welfare
Regulations related to labor contracts
The Labor Contract Law of the PRC, which was promulgated on January 1, 2008 and amended on December 28, 2012, is primarily aimed at regulating rights and obligations of employer and employee relationships, including the establishment, performance and termination of labor contracts. Pursuant to this law, labor contracts shall be concluded in writing if labor relationships are to be or have been established between employers and the employees. Employers are prohibited from forcing employees to work over certain time limit and employers shall pay employees for overtime work in accordance with national regulations. In addition, employee wages shall be no lower than local standards on minimum wages and shall be paid to employees timely.
Regulations related to social insurance and housing funds
Enterprises in China are required by the Social Insurance Law of the PRC promulgated by the SCNPC in October 2010, effective from July 2011 and amended in December 2018, the Regulations on Management of Housing Provident Fund issued by the State Council in March 2002 which was amended in March 2019, and other related rules 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, an occupational 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. Failure to make adequate contributions to various employee benefit plans may be subject to fines and other administrative sanctions. Pursuant to the foregoing law, an employer that fails to make social insurance contributions may be ordered to rectify the non-compliance and pay the required contributions within a stipulated deadline and be subject to a late fee of 0.05% per day, as the case may be. If the employer still fails to rectify the failure to make social insurance contributions within the deadline, it may be subject to a fine ranging from one to three times the amount overdue. Pursuant to the Regulations on Management of Housing Fund, an enterprise that fails to make housing fund contributions may be ordered to rectify the noncompliance and pay the required contributions within a stipulated deadline.
Regulations Related to M&A Rules and Overseas Listings
On August 8, 2006, six PRC governmental and regulatory authorities, including the Ministry of Commerce and CSRC, issued the Rules on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, effective as of September 8, 2006 and later revised on June 22, 2009, which governs the mergers and acquisitions of domestic enterprises by foreign investors. The M&A Rules, among other things, requires that if an overseas company established or controlled by PRC companies or individuals intends to acquire equity interests or assets of any other PRC domestic company affiliated with such PRC companies or individuals, such acquisition must be submitted to the Ministry of Commerce for approval. The M&A Rules also requires that an offshore special purpose vehicle formed for overseas listing purposes and controlled directly or indirectly by the PRC individuals or companies shall obtain the approval of the CSRC prior to overseas listing and trading of such special purpose vehicle’s securities on an overseas stock exchange. After the PRC Foreign Investment Law and its Implementation Regulations became effective on January 1, 2020, the provisions of the M&A Rules remain effective to the extent they are not inconsistent with the PRC Foreign Investment Law and its Implementation Regulations.
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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 Severely Cracking Down on Illegal Securities Activities According to Law. The Opinions emphasizes the need to strengthen the administration over illegal securities activities and the need to strengthen the supervision over overseas listings by Chinese companies and to establish a comprehensive regulatory system for the application of PRC capital market laws and regulations outside China. It also provides that effective measures, such as promoting the establishment of relevant regulatory systems, would be taken to deal with the risks and incidents of overseas listing of China-based companies, cybersecurity issues, data privacy protection requirements and other similar matters.
On February 17, 2023, with the approval of the State Council, the CSRC issued the Trial Measures and several supporting guidelines, which came into effect on March 31, 2023. Pursuant to the Trial Measures and supporting guidelines, in connection with any offering or listing of shares, depository receipts, convertible corporate bonds, or other equity-like securities by a PRC company in an overseas stock market, whether directly or indirectly through an offshore holding company, a filing should be made with the CSRC. The issuer (if the issuer is a PRC company), or its affiliated PRC company (if the issuer is an offshore holding company), must make a filing to the CSRC in respect of any initial public offerings, follow-on offerings and other offering activities conducted by the issuer. If a PRC domestic company fails to complete the filing procedure or conceals any material fact or falsifies any major content in its filing documents, such PRC domestic company may be subject to administrative penalties, such as order to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly responsible persons may also be subject to administrative penalties, such as warnings and fines. If (i) the issuer meets the accounting standard that its domestic operating entities’ total assets, net assets, revenues or profits in the most recent accounting year accounts for more than 50% of the corresponding line item in the issuer’s audited consolidated financial statements for the same period, and (ii) its major operational activities or its principal places of business are in China, or a majority of its senior managers in charge of its operation and management are Chinese citizens or residents, such issuer’s overseas offering and listing would be deemed as an indirect overseas offering and listing by such PRC domestic company. The determination of the indirect overseas offering and listing by PRC domestic companies shall follow the principle of “substance over form.” In connection with its overseas offering or listing, the PRC domestic company shall designate its major PRC domestic operating entity as the PRC entity responsible for all filing procedures with the CSRC. The filing for initial public offering and listing, or for secondary or dual primary listing, of an issuer conducted overseas should be submitted to the CSRC within three business days after the initial filing of such issuer’s listing application overseas. The Trial Measures further provides that companies that have been listed overseas prior to March 31, 2023 constitute “Existing Issuers” and are not required to conduct the overseas listing filing procedure immediately, but shall carry out filing procedures as required if they conduct secondary or dual primary listing, follow-on offerings, bond offerings or are involved in other circumstances that require filings with the CSRC. Specifically, the filing for a follow-on offering by an issuer conducted in the same overseas market where it has previously offered or listed securities should be submitted to the CSRC within three business days after the completion of such follow-on offering. The filing for subsequent securities offerings and listings of an issuer in other overseas markets than where it previously has offered and listed securities should be submitted to the CSRC within three business days after the filing of such issuer’s listing application overseas. Once listed overseas, an issuer is further required to report to the CSRC within three business days after the occurrence of any of the following major events: (i) a change of control of the issuer; (ii) the investigation, sanction or other measures undertaken by foreign securities regulatory agencies or relevant competent authorities with respect to the issuer; (iii) change of listing status or transfer of listing segment; and (iv) the voluntary or mandatory delisting of the issuer.
Furthermore, on February 24, 2023, the CSRC jointly with other governmental authorities, promulgated the Provisions on Strengthening Confidentiality and Archives Administration in Respect of Overseas Issuance and Listing of Securities by Domestic Enterprises, which came into effect on March 31, 2023. Pursuant to the Provisions, PRC domestic companies seeking overseas offerings and listings, whether directly or indirectly, shall comply with the applicable laws and regulations, raise the awareness of confidentiality, improve their archives management system, and take necessary measures in accordance with their confidentiality and archives management responsibilities in the process of their overseas offerings and listings. Pursuant to the Provisions, if a PRC domestic company is, in the course of its overseas offering and listing, required to publicly disclose or provide to any sponsors, underwriters, securities service providers, or regulators of a foreign jurisdiction, any documents that contain state secrets or work secrets of state government agencies, or any documents that, if divulged, would jeopardize national security or the public interest, such PRC domestic company must complete the applicable approval and filing procedures and any other procedures prescribed by law. The Provisions also mandates that all working paper and other files produced in China by sponsors, underwriters and securities service providers in the course of the overseas offerings and listings must be stored in China and not be transmitted outside China without the approval of the competent PRC authorities. The Provisions also alters procedures for the inspections of PRC domestic companies listing overseas and their sponsors, underwriters and securities service providers by foreign regulators. Specifically, in relation to inspections conducted on-site in China, the Provisions removes the requirements that such inspection must be carried out primarily by PRC regulators or must rely on the results of inspection of PRC regulators. Pursuant to the Provisions, foreign regulators should carry out activities relating to investigation, evidence collection and inspection, through cross-border cooperation mechanisms. Further, PRC domestic companies, sponsors, underwriters and securities service providers should obtain approvals from the CSRC or other PRC authorities before cooperating with foreign regulators in their investigations or inspections or providing any material to them.
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Regulations Related to our Business Operations in Hong Kong
This section sets forth a summary of the most significant rules and regulations that affect our business activities in Hong Kong.
Regulations Related to our Wealth Management Services
The SFC authorizes corporations and individuals through licenses to act as financial intermediaries. Under the Securities and Futures Ordinance (Cap. 571) of Hong Kong, or the SFO, a corporation which is not an authorized financial institution but carries out the following activities must be licensed by the SFC: (i) carrying on a business in a regulated activity (or holding itself out as carrying on a business in a regulated activity) in Hong Kong; or (ii) actively marketing, whether by itself or another person on its behalf and whether in Hong Kong or from a place outside Hong Kong, to the public any services it provides, which would constitute a regulated activity if provided in Hong Kong.
According to the SFO, a licensed corporation must maintain a minimum level of paid-up share capital and liquid capital not less than the amounts specified under the Securities and Futures (Financial Resources) Rules (Cap. 571N). If the licensed corporation applies for more than one type of regulated activity, the minimum paid-up share capital and liquid capital shall be the higher or the highest amount individually required amongst those regulated activities.
In addition, each licensed corporation should appoint at least two responsible officers to directly supervise the conduct of each regulated activity for which the licensed corporation operates and at least one of the proposed responsible officers must be an executive director of the licensed corporation as defined under the SFO. As defined by the SFO, an “executive director” refers to a director of the corporation who actively participates in or is responsible for directly supervising the business of the regulated activity for which the corporation is licensed. All executive directors must seek SFC’s prior approval as responsible officers accredited to the licensed corporation. Further, for each regulated activity, the licensed corporation should have at least one responsible officer available at all times to supervise the business. The same individual may be appointed to be a responsible officer for more than one regulated activity, as long as he/she is fit and proper to be so appointed and there is no conflict in the roles assumed. A person who intends to apply to be a responsible officer must demonstrate that he/she fulfills the criteria of competence relating to academic/ industry qualification, relevant industry experience, management experience, and passing of the relevant local regulatory framework paper, and have sufficient authority to supervise the business of regulated activity within the licensed corporation.
As of March 31, 2026, through Metaverse Securities Limited, we have registered and maintained the following licenses from the SFC: (i) Type 1 License, effective since December 17, 2010, for conducting regulated activities related to dealing in securities; (ii) Type 4 License, effective since June 24, 2003, for conducting regulated activities related to advising on securities; (iii) Type 5 License, effective since June 24, 2003, for conducting regulated activities related to advising on futures contracts; and (iv) Type 9 License, effective since June 24, 2003, for conducting regulated activities related to asset management. As of March 31, 2026, through Meta Futures Limited, we have registered and maintained the following licenses from the SFC: (i) Type 2 License, effective since November 9, 2022, for conducting regulated activities related to dealing in future contracts; and (ii) Type 5 License, effective since November 9, 2022, for conducting regulated activities related to advising on futures contracts. Also we have 26 professionals employed with both Metaverse Securities Limited and Meta Futures Limited, certain of which are licensed with the SFC that are eligible to carry out different types of regulated activities for our Hong Kong business under the supervision of our responsible officers.
Ongoing obligations for compliance by licensed corporations and intermediaries
In April 2017, the SFC issued the Licensing Handbook, as amended and supplemented from time to time, which provides the ongoing obligations for compliance of a licensed corporation. In general, licensed corporations and licensed representatives must remain fit and proper at all times and must comply with all applicable provisions of the SFO and its subsidiary legislation as well as the codes and guidelines issued by the SFC, including but not limited to the Securities and Futures (Client Securities) Rules (Cap. 571H), the Securities and Futures (Client Money) Rules (Cap. 571I), the Securities and Futures (Keeping of Records) Rules (Cap. 571O), the Securities and Futures (Accounts and Audit) Rules (Cap. 571P), the Code of Conduct for Persons Licensed by or Registered with the SFC, the Fund Manager Code of Conduct, Fit and Proper Guidelines and the Management, Supervision and Internal Control Guidelines for Persons Licensed by or Registered with the SFC, as amended or supplemented by the SFC from time to time. There must also be at least one responsible officer available at all times to supervise the licensed corporation’s business of carrying on a regulated activity.
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Also, a licensed corporation is required by the Securities and Futures (Licensing and Registration) (Information) Rules (Cap. 571S) to notify the SFC of certain changes and events, which include, among others, changes in the basic information of the licensed corporation, its controlling persons and responsible officers, or subsidiaries and related corporation that carry on a business in a regulated activity; changes in the capital and shareholding structure of the licensed corporation; and significant changes in business plan.
Furthermore, according to SFO, the related licenses related to all or certain regulated activity of such corporation may be suspended or revoked by the SFC if the licensed corporation does not carry on all or some of the regulated activity for which it is licensed.
Regulations Related to our Hong Kong Insurance Brokerage Business
Effective September 23, 2019, the Insurance Authority of Hong Kong, or the IA, took over the regulation of insurance agents and brokers, or, collectively, the Insurance Intermediaries, from the three self-regulatory organizations (i.e., the Insurance Agents Registration Board established under The Hong Kong Federation of Insurers, The Hong Kong Confederation of Insurance Brokers and The Professional Insurance Brokers Association) and became the sole regulator to license and supervise all Insurance Intermediaries in Hong Kong. The IA is responsible for supervising Insurance Intermediaries’ compliance with the provisions of Insurance Ordinance (Cap. 41), or the IO, and the relevant regulations, rules, codes and guidelines issued by the IA. The IA is also responsible for promoting and encouraging proper standards of conduct of Insurance Intermediaries, and has regulatory powers in relation to licensing, inspection, investigation and disciplinary sanctions.
Types of licensed insurance brokers
The IO prohibits any person from carrying on insurance business in or from Hong Kong except an authorized insurer, Lloyd’s or an association of underwriters approved by the IA. The regulatory regime for Insurance Intermediaries is activity-based. Under the IO, a person must not carry on a regulated activity, or must not hold out that the person is carrying on a regulated activity, in the course of the person’s business or employment, or for reward unless the person holds an appropriate type of insurance intermediary license or is exempt under the IO, otherwise it is an offence for contravening the IO. The licensing regime under the IO prescribes two types of licensed insurance brokers: licensed insurance broker companies and licensed technical representatives (broker). A license granted under the IO is valid for 3 years or, if the IA considers it appropriate in a particular case, another period determined by the IA, beginning on the date on which it is granted.
Responsible officer, financial, conduct and other requirements for licensed insurance broker companies
Under the IO, a licensed insurance broker company should appoint a fit and proper person to discharge his or her responsibilities as a responsible officer of the insurance broker company, and should provide sufficient resources and support to that person for discharging his or her specified responsibilities in relation to the principal intermediary. Prior approval of the IA is required for appointment of the responsible officer.
Under the IO, a person who is, is applying to be, or is applying for a renewal of a license to be, a licensed insurance broker is required to satisfy the IA that he/she/it is a fit and proper person. In addition, for a licensed insurance agency or a licensed insurance broker company, the responsible officer(s), controller(s), and director(s) (where applicable) of a licensed insurance broker company are also required to be fit and proper persons. These “fit and proper” requirements aim at ensuring that the licensed insurance brokers are competent, reliable and financially sound, and have integrity. In addition, continuing professional development is part of the fit and proper requirement and the IA issued the Guideline on Continuing Professional Development for Licensed Insurance Intermediaries to provide guidance for complying with the continuing professional development requirements.
A licensed insurance broker company is required to comply with the Insurance (Financial and Other Requirements for Licensed Insurance Broker Companies) Rules (Cap. 41L), which set out, inter alia, some of the key requirements in relation to the maintenance of minimum paid-up share capital and net assets, professional indemnity insurance, client accounts and books and accounts keeping.
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Licensed insurance brokers are required to comply with the statutory conduct requirements set out in the IO. The IA also issued the Code of Conduct for Licensed Insurance Brokers to set out the general principles, together with the standards and practices relating to each general principle, serving as the minimum standards of professionalism to be met by licensed insurance brokers when carrying on regulated activities. A licensed insurance broker company is required to have proper controls and procedures in place to ensure that the broker company and its licensed technical representatives (broker) meet the general principles, standards and practices set out in such code of conduct.
Licensed insurance broker companies are required to file their audited financial statements and auditor’s compliance reports with the IA annually, and the IA will conduct annual reviews on the financial positions of the insurance broker companies by examining such documents. Any issue noted or qualified opinion expressed by the auditor will be followed up, and where applicable, further actions will be taken as the IA considers necessary.
Transitional Arrangements for Insurance Brokers
To facilitate a smooth transition, all insurance brokers who were validly registered with The Hong Kong Confederation of Insurance Brokers or Professional Insurance Brokers Association immediately before September 23, 2019, being the date of commencement of the new regulatory regime for insurance intermediaries, are deemed as licensed insurance brokers under the IO for a period of three years from the commencement of the new regime. The incumbent chief executives of the insurance broker companies are also eligible for the transitional arrangements. The transitional period ended on September 22, 2022.
We, through Ether Wealth Management Limited, which was previously each approved as an insurance broker by the Professional Insurance Brokers Association, have been granted Insurance Broker Company by the IA on January 6, 2022, respectively, to carry out both long-term (include linked long-term) and general business. As of March 31, 2026, Ether Wealth Management Limited holds Insurance Broker Company license issued by the IA effective from January 6, 2022 to January 5, 2028, and is entitled to conduct long term insurance business.
Acting as mandatory provident fund (MPF) intermediary
We also, through Ether Wealth Management Limited, carry on business as a principal intermediary for the MPF. Only registered MPF intermediaries are allowed to engage in conducting sales and marketing activities and giving advice in relation to MPF schemes. MPF is regulated by the Mandatory Provident Fund Schemes Authority (MPFA), which is the authority responsible for registering MPF intermediaries, issuing guidelines on compliance with statutory requirements, and imposing disciplinary sanctions for non-compliance. According to Mandatory Provident Fund Schemes Ordinance (Cap. 485), the MPFA relies on the existing regulatory regimes from frontline regulators including the IA, Hong Kong Monetary Authority, and SFC to supervise and investigate MPF intermediaries.
To register as a principal intermediary, an MPF intermediary must designate at least one responsible officer for the supervision of the regulated activities. In addition to other registration requirements, MPF intermediaries must pass a qualifying examination before they can become MPF intermediaries.
Registered MPF intermediaries must comply with a set of statutory conduct requirements when they engage in conducting sales and marketing activities and giving advice in relation to MPF schemes. The MPFA has issued the Guidelines on Conduct Requirements for Registered Intermediaries to assist the registered MPF intermediaries in understanding minimum standards of the conduct requirements.
MPF intermediaries must report any relevant change in writing to the MPFA within seven working days after the change occurs. Failure to report the relevant changes without reasonable excuse commits an offence and may be liable to a fine at HK$50,000 (approximately US$6,410).
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Regulation Related to Employment and Labor Protection
Employment Ordinance (Cap. 57)
The Employment Ordinance (Cap. 57) is an ordinance enacted for, amongst other things, the protection of the wages of employees and the regulation of the general conditions of employment and employment agencies. Under such ordinance, an employee is generally entitled to, amongst other things, notice of termination of his or her employment contract; payment in lieu of notice; maternity protection in the case of a pregnant employee; not less than one rest day in every period of seven days; severance payments or long service payments; sickness allowance; statutory holidays or alternative holidays; and minimum paid annual leave of up to 14 days depending on the period of employment.
Employees’ Compensation Ordinance (Cap. 282)
The Employees’ Compensation Ordinance (Cap. 282) is an ordinance enacted for the purpose of providing for the payment of compensation to employees injured in the course of employment. As stipulated by this ordinance, no employer shall employ any employee in any employment unless there is in force in relation to such employee a policy of insurance issued by an insurer for an amount not less than the applicable amount specified in the Fourth Schedule of this ordinance in respect of the liability of the employer. According to the Fourth Schedule of such ordinance, the insured amount shall be not less than HK$100,000,000 (approximately US$12,900,000) per event if a company has no more than 200 employees. Any employer who contravenes this requirement commits a criminal offence and is liable on conviction to a fine of HK$100,000 (approximately US$12,900) and imprisonment for two years and on summary conviction to a fine at HK$100,000 (approximately US$12,900) and to imprisonment for one year. An employer who has taken out an insurance policy under such ordinance is required to display a prescribed notice of insurance in a conspicuous place on each of its premises where any employee is employed. Any employer who, without reasonable excuse, contravenes this requirement commits a criminal offence and is liable on conviction to a fine of HK$10,000 (approximately US$1,290) and any employer who, without reasonable excuse, provides any false or misleading information in a notice commits an offence and is liable to a fine at $50,000 (approximately US$6,450).
Mandatory Provident Fund Schemes Ordinance (Cap. 485)
The Mandatory Provident Fund Schemes Ordinance (Cap. 485) is an ordinance enacted for the purposes of providing for the establishment of non-governmental MPF schemes. This ordinance requires every employer of an employee (other than exempt persons) of 18 years of age or above but under 65 years of age to take all practical steps to ensure the employee becomes a member of a registered MPF Scheme and continues to be a member of a registered MPF Scheme throughout his or her employment with that employer. Subject to the minimum and maximum relevant income levels, it is mandatory for both employers and their employees to contribute 5% of the employee’s relevant income to the MPF Scheme. For a monthly-paid employee, the maximum relevant income level is HK$30,000 (approximately US$3,870) per month and the maximum amount of contribution payable by the employer to the MPF scheme is HK$1,500 (approximately US$193). Any employer who, without reasonable excuse, contravenes this requirement commits a criminal offence and is liable on conviction to a fine of HK$350,000 (approximately US$45,200) and imprisonment for three years, and to a daily penalty of HK$500 (approximately US$65) for each day on which the offence is continued.
Inland Revenue Ordinance (Cap. 112)
Under the Inland Revenue Ordinance (Cap. 112), where an employer commences to employ in Hong Kong an individual who is or is likely to be chargeable to tax, or any married person, the employer shall give a written notice to the Commissioner of Inland Revenue not later than three months after the date of commencement of such employment. Where an employer ceases or is about to cease to employ in Hong Kong an individual who is or is likely to be chargeable to tax, or any married person, the employer shall give a written notice to the Commissioner of Inland Revenue not later than one month before such individual ceases to be employed in Hong Kong.
Regulations Related to Privacy Protection
The Personal Data (Privacy) Ordinance (Cap. 486) imposes a statutory duty on market participants using private data, or data users, to comply with the requirements of the data protection principles contained in Schedule 1 to this ordinance. This ordinance provides that data users shall not do an act, or engage in a practice, that contravenes such data protection principles unless otherwise permitted under the ordinance. Non-compliance with any data protection principle may lead to a complaint to the Privacy Commissioner for Personal Data, who may serve an enforcement notice to direct the data users to remedy the contravention and, if appropriate, prevent any recurrence of the contravention. A data user who contravenes an enforcement notice shall be deemed committing an offense, which may in turn result in a fine and imprisonment to such data user. This ordinance criminalizes, for example, the misuse or inappropriate use of personal data in direct marketing activities, non-compliance with a data access request and the unauthorized disclosure of personal data obtained without the relevant data user’s consent. An individual who suffers damage, including injury to feelings, by reason of a contravention of this ordinance in relation to his or her personal data may seek compensation from the data user concerned.
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Regulations Related to Anti-Money Laundering and Counter-Terrorist Financing
Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615)
The Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) imposes on certain institutions (which include licensed corporations as defined under the SFO and insurance institutions carrying on or advising on long term business) requirements relating to customer due diligence and record-keeping and provides regulatory authorities with the powers to supervise such institutions’ compliance actions with the requirements under this ordinance. In addition, the regulatory authorities are empowered to take all reasonable measures to (i) ensure that proper safeguards exist to prevent contravention of specified provisions in this ordinance; and (ii) mitigate money laundering and terrorist financing risks.
Drug Trafficking (Recovery of Proceeds) Ordinance (Cap. 405)
The Drug Trafficking (Recovery of Proceeds) Ordinance (Cap. 405) contains provisions for the investigation of assets suspected to be derived from drug trafficking activities, the freezing of assets on arrest and the confiscation of the proceeds from drug trafficking activities. It is an offence under this ordinance if a person deals with any property knowing, or having reasonable grounds to believe, it to be in whole or in part directly or indirectly the proceeds from drug trafficking. This ordinance requires a person to report to an authorized officer if he or she knows or suspects that any property (in whole or in part directly or indirectly) is the proceeds from drug trafficking or is intended to be used or was used in connection with drug trafficking, and failure to make such disclosure constitutes an offence under this ordinance.
Organized and Serious Crimes Ordinance (Cap. 455)
The Organized and Serious Crimes Ordinance (Cap. 455) empowers officers of the Hong Kong Police Force and the Hong Kong Customs and Excise Department to investigate organized crime and triad activities, and this ordinance gives the Hong Kong courts jurisdiction to confiscate the proceeds from organized and serious crimes, and to issue restraint orders and charging orders in relation to the property of defendants of specified offences. This ordinance extends the money laundering offence to cover the proceeds of all indictable offences in addition to drug trafficking.
United Nations (Anti-Terrorism Measures) Ordinance (Cap. 575)
The United Nations (Anti-Terrorism Measures) Ordinance (Cap. 575) provides that it is a criminal offence to (i) provide or collect property (by any means, directly or indirectly) with the intention or knowledge that the funds will be used to commit, in whole or in part, one or more terrorist acts; or (ii) make any property or financial (or related) services available (except under the authority of a license granted by the Secretary for Security), or collect property or solicit financial (or related) services, by any means, directly or indirectly, to or for the benefit of a person knowing that, or being reckless as to whether, such person is a terrorist or terrorist associate. This ordinance also requires a person to report his knowledge or suspicion of terrorist property to an authorized officer as soon as is practicable after that information or other matter comes to the person’s attention and failure to make such disclosure constitutes an offence under this ordinance.
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| C. | Organizational Structure |
The following diagram illustrates our corporate structure, including our significant subsidiaries and certain other subsidiaries through which we provide our major service and our VIEs as of the date of this annual report. In a yet-to-close sale, we plan to sell our subsidiary, Jiuxing Insurance Brokerage Co., Ltd, for RMB10.3 million.:
Notes:
| (1) | Each of our VIEs has entered into an Exclusive Option Agreement, as amended, if applicable, with 9F Inc. as a part of our variable interest entity structures. |
| (2) | Tianjin Yuying Enterprise Management Consulting Partnership (Limited Partnership) and Chengmai Mingjun Management Consulting Partnership (Limited Partnership) hold 55% and 45% equity interests in Yi Qi Mai, respectively. Bo Shao and Tianhua Cheng hold 60% and 40% equity interests in Zhuhai Lianyin, respectively. Yifan Ren, Zhuhai Hengqin Zhilue Investment Partnership (Limited Partnership), Zhuhai Hengqin Saixing Investment Partnership (Limited Partnership) and Lijun Zhang hold 48%, 33.2%, 10% and 8.8% equity interests in Jiufu Shuke, respectively. Lei Sun, Changxing Xiao, Lixing Chen, Lei Liu and Dongcheng Zhang hold 23.17%, 20.83%, 27.67%, 27.50% and 0.83% equity interests in Beijing Puhui, respectively. Dongcheng Zhang and Xiangchun Wu hold 60% and 40% equity interests in Shenzhen Fuyuan, respectively. As of the date of this annual report, Lei Sun, Yifan Ren, Lei Liu and Changxing Xiao are also directors of 9F Inc. |
| * | Beijing Jinniu Zhixuan Technology Co., Ltd. is wholly-owned by Jiufu Shuke indirectly through Zhuhai Jiuxin Asset Management Co., Ltd. |
| ** | Peaking Power Global Limited, 9F Financial Service Limited and 9FP Investments Holdings Limited are wholly-owned by Capital Nine Holding Limited indirectly through Meta Securities Holdings Limited (which was formerly known as Exceed Step Holding Limited). |
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Contractual Arrangements with our VIEs and Their Shareholders
The registered shareholders of Jiufu Shuke include Yifan Ren, Zhuhai Hengqin Zhilue Investment Partnership (Limited Partnership), Zhuhai Hengqin Saixing Investment Partnership (Limited Partnership) and Lijun Zhang, who hold 48%, 33.2%, 10% and 8.8% equity interests in Jiufu Shuke, respectively. The registered shareholders of Beijing Puhui include Lei Sun, Changxing Xiao, Lixing Chen, Lei Liu and Dongcheng Zhang, who hold 23.17%, 20.83%, 27.67%, 27.50% and 0.83% equity interests in Beijing Puhui, respectively. The registered shareholders of Zhuhai Lianyin include Bo Shao and Tianhua Cheng, who hold 60% and 40% equity interests in Zhuhai Lianyin, respectively. The registered shareholders of Yi Qi Mai include Tianjin Yuying Enterprise Management Consulting Partnership (Limited Partnership) and Chengmai Mingjun Management Consulting Partnership (Limited Partnership), who hold 55% and 45% equity interests in Yi Qi Mai, respectively. The registered shareholders of Shenzhen Fuyuan include Dongcheng Zhang and Xiangchun Wu, who hold 60% and 40% equity interests in Shenzhen Fuyuan, respectively.
The following is a summary of the currently effective contractual arrangements among 9F Inc., Shuzhi Lianyin, Jiufu Shuke and Jiufu Shuke’s shareholders. The contractual arrangements among 9F Inc., our WFOEs, and other VIEs, including Beijing Puhui, Zhuhai Lianyin, Yi Qi Mai and Shenzhen Fuyuan, and the shareholders of such VIEs, are substantially the same. As a result of these contractual arrangements, we have the power to direct activities of our VIEs that most significantly impact the economic performance of these VIEs. We are also entitled to receive substantially all of the economic benefits as primary beneficiary and we bear the obligation to absorb any and all economic losses incurred by our VIEs. In addition, we have an exclusive option to purchase all or part of the equity interests in each of our VIEs when and to the extent permitted by the PRC law. For the reasons above, we believe that our VIEs should be treated as Variable Interest Entities under the Financial Accounting Standards Board Accounting Standards Codification Topic 810 Consolidation and we should be regarded as the primary beneficiary of our VIEs. Accordingly, we treat our VIEs as our consolidated entities under U.S. GAAP and we consolidate the financial results of our VIEs.
Master Exclusive Service Agreements
Under the master exclusive service agreement between Jiufu Shuke and Shuzhi Lianyin, Shuzhi Lianyin has the exclusive right to provide, among other things, technical support and consulting services to Jiufu Shuke and Jiufu Shuke agrees to accept all the consultation and services provided by Shuzhi Lianyin. Without Shuzhi Lianyin’s prior written consent, Jiufu Shuke agrees not to accept the same or any similar services provided by any third party. In addition, Jiufu Shuke irrevocably grants Shuzhi Lianyin an exclusive and irrevocable option to purchase any or all of the assets and business of Jiufu Shuke at the lowest price permitted under PRC law. Shuzhi Lianyin exclusively owns all intellectual property rights arising out of or created during the performance of this agreement. Jiufu Shuke agrees to pay Shuzhi Lianyin a monthly service fee, which percentage may be determined and adjusted at the sole discretion of Shuzhi Lianyin after taking into account factors including the complexity and difficulty of the services provided, the time consumed, the seniority of the Shuzhi Lianyin employees providing services to Jiufu Shuke, the value of services provided, the market price of comparable services and the operating conditions of Jiufu Shuke. Furthermore, to the extent permitted under the PRC law, Shuzhi Lianyin agrees to provide financial support to Jiufu Shuke if Jiufu Shuke has any operating loss or suffered any critical operation adversity. The agreement will remain effective unless Shuzhi Lianyin terminates the agreement in writing or a governmental authority rejects the renewal applications by either Jiufu Shuke or Shuzhi Lianyin to renew their respective operation term provided in the business licenses upon expiration.
Proxy Agreements and Powers of Attorney, including Amended and Restated Proxy Agreements and Powers of Attorney
Under the proxy agreement and power of attorney, or the amended and restated proxy agreement and power of attorney, as applicable, by and among Shuzhi Lianyin, Jiufu Shuke and each shareholder of Jiufu Shuke, each of Jiufu Shuke’ shareholders irrevocably nominates, appoints and constitutes Shuzhi Lianyin and its successors as its attorney-in-fact to exercise any and all of his rights as a shareholder of Jiufu Shuke, including but not limited to the right to call, attend and vote at shareholders’ meetings and the right to appoint and remove directors and senior management. Each shareholder of Jiufu Shuke further covenants that, without the prior written consent of Shuzhi Lianyin, such shareholder shall not exercise any shareholder’s right, and if the shareholder receives any dividends, interest, any other forms of capital distributions, residual assets upon liquidation, or proceeds or consideration from the transfer of equity interest as a result of, or in connection with, such shareholder’s equity interests in Jiufu Shuke, the shareholder shall, to the extent permitted by applicable laws, pass them all on to Shuzhi Lianyin or its designee at no consideration. The proxy agreements and powers of attorney will remain effective as long as Jiufu Shuke exists. The shareholders of Jiufu Shuke do not have the right to terminate this agreement or revoke the appointment of the attorney-in-fact without the prior written consent of Shuzhi Lianyin.
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Exclusive Option Agreements, including Amended and Restated Exclusive Option Agreements
Under the exclusive option agreements, or amended and restated exclusive option agreements if applicable, by and among 9F Inc., Shuzhi Lianyin, Jiufu Shuke and each of the shareholders of Jiufu Shuke, each shareholder of Jiufu Shuke irrevocably grants 9F Inc. or its designated person(s) an exclusive option to purchase, at any time and to the extent permitted under PRC law, all or part of his equity interests in Jiufu Shuke at a price equal to the actual capital contribution paid in the registered capital of Jiufu Shuke by such shareholder. If the above price is lower than the lowest price permitted by the PRC law, the lowest price permitted under the PRC law will apply. As agreed in the loan agreements between Shuzhi Lianyin and such shareholder, if 9F Inc. designates Shuzhi Lianyin as its designated person to exercise the option to purchase the equity interests in Jiufu Shuke, Shuzhi Lianyin may elect to pay for the purchase by canceling the outstanding amount of loans owed by such shareholder to Shuzhi Lianyin. Without 9F Inc.’s prior written consent, Jiufu Shuke and its shareholders will not sell, transfer, mortgage or otherwise dispose of Jiufu Shuke’s legal or beneficial interests in its assets, business or revenues, or allow the creation of any encumbrance on such interests. To the extent permitted under applicable PRC laws, the shareholders of Jiufu Shuke also agree to timely donate to 9F Inc. or its designee any profits, interests, dividends or proceeds of liquidation received from Jiufu Shuke or proceeds received from the transfer of equity interests in Jiufu Shuke. These agreements will remain effective until all equity interests held in Jiufu Shuke by its shareholders are transferred or assigned to 9F Inc. or its designated person(s).
Loan Agreements
Pursuant to the loan agreements between Shuzhi Lianyin and each of the shareholders of Jiufu Shuke, Shuzhi Lianyin extended loans to the shareholders of Jiufu Shuke, who had contributed the loan principal to Jiufu Shuke as registered capital. The shareholders of Jiufu Shuke may repay the loans only by transferring their respective equity interests in Jiufu Shuke to 9F Inc. or its designated person(s) pursuant to the exclusive option agreements. Each loan shall be interest-free unless, in the event of a transfer of equity interests by a shareholder of Jiufu Shuke to 9F Inc. or its designated person(s) pursuant to the exclusive option agreement, the transfer price exceeds the loan principal. The excess over the loan principal shall be deemed the interest of the loan to the extent permitted under PRC law. These loan agreements will remain effective until the date of full performance by the parties of their respective obligations thereunder.
Equity Interest Pledge Agreements, including Amended and Restated Equity Interest Pledge Agreements
Under the equity interest pledge agreements, or amended and restated equity interest pledge agreements if applicable, among Shuzhi Lianyin, Jiufu Shuke and each of the shareholders of Jiufu Shuke, the shareholders of Jiufu Shuke pledge all of their equity interests in Jiufu Shuke, including any equity interest subsequently acquired, to Shuzhi Lianyin to secure the performance by Jiufu Shuke and its shareholders of their respective obligations under the contractual arrangements, including the payments due to Shuzhi Lianyin for services provided. If Jiufu Shuke or the pledger breach their obligations under these contractual arrangements, Shuzhi Lianyin, as the pledgee, will be entitled to certain rights and remedies including priority in receiving the proceeds from the auction or disposal of the pledged equity interests in Jiufu Shuke. Shuzhi Lianyin has the right to receive dividends distributed on the pledged equity interests during the term of the pledge. The pledge becomes effective on the date when the pledge of equity interests contemplated under the agreement has been registered with the local administration for industry and commerce (currently known as the administration for market regulation) and will remain valid until the master exclusive service agreement and the relevant exclusive option agreements and proxy agreement and power of attorney, expire or terminate. We have registered the equity interest pledge with the Chaoyang Branch of Beijing Administration for Industry and Commerce in Beijing.
Spousal Consent Letters
Pursuant to spousal consent letters, the spouse of each of the shareholders, if applicable, of Jiufu Shuke acknowledges that the equity interests in Jiufu Shuke held by and registered in the name of such shareholders will be disposed of pursuant to the equity interest pledge agreement, the exclusive option agreement, the proxy agreement and power of attorney, and the loan agreement by and among 9F Inc., Shuzhi Lianyin, Jiufu Shuke, the shareholders of Jiufu Shuke and their respective spouse. The spouses undertake not to make any assertions in connection with the equity interests in Jiufu Shuke, and agree to be bound by the afore-mentioned agreements if they receive any equity interests in Jiufu Shuke.
In the opinion of Han Kun Law Offices, our PRC legal counsel:
| ● | the ownership structures of our PRC subsidiaries and VIEs are not in violation of any expressed and mandatory provisions of PRC laws, rules or regulations currently in effect; and |
| ● | the contractual arrangements among our PRC subsidiaries, our VIEs and the shareholders of such VIEs governed by PRC laws, rules and regulations are valid, binding and enforceable, and are not in violation of any expressed and mandatory provisions of PRC laws, rules or regulations currently in effect. |
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However, we have been further advised by our PRC legal counsel that there are substantial uncertainties regarding the interpretation and application of current and future PRC laws, rules and regulations. Accordingly, the PRC regulatory authorities may in the future take a view that is contrary to the above opinion of our PRC legal counsel. We have been further advised by our PRC legal counsel that if the PRC government finds that the agreements that establish the structure for operating our business do not comply with PRC government restrictions on foreign investment in telecommunications businesses, we could be subject to severe penalties including being prohibited from continuing operations. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure.”
| D. | Property, Plant and Equipment |
As of December 31, 2025, our headquarters are located in Hong Kong, consisting of approximately 767 square meters of leased office space, which serves as the center of our product offering and compliance functions. We also keep our principal executive offices in Beijing, China, for general administration functions as well as product and operation support functions. In addition to our headquarters and principal executive offices, we also maintain key branch offices in Shenzhen, China, for product development and system maintenance, as well as in regions outside China for our international operations. Our offices occupy an aggregate leased area of 5,260 square meters in China. The lessors of our branch offices are independent third parties, and we plan to renew these leases from time to time as needed. A building of approximately 1,707 square meters is also available to be used by us in Beijing, China as office premises. We own a building of approximately 2,481 square meters in Xinjiang, China, to operate our fintech empowerment services. We believe that our facilities are adequate for our current needs and, should we need additional space, we believe we will be able to obtain additional space on commercially reasonable terms.
Our servers are mainly hosted in leased internet data centers in different geographic regions in China. The majority of these data centers are owned and maintained by internet data center providers. We typically enter into leasing and hosting service agreements that are renewed periodically with these internet data center providers. We believe that our existing facilities are sufficient for our current needs and we will obtain additional facilities, principally through leasing, to accommodate our future expansion plans.
Item 4A. UNRESOLVED STAFF COMMENTS
None.
Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and the related notes included elsewhere in this annual report on Form 20-F. This discussion 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 |
Background Information on Our Legacy and Current Businesses
Pursuant to industry-wide policy requirements, Jiufu Puhui ceased its online lending information intermediary services in China in 2020, and as a result, we stopped offering certain products and services in relation to such online lending information intermediary business, which we referred to as “legacy business” in this annual report. See “—Key Line Items and Specific Factors Affecting Our Results of Operations—Revenues” for discussion on line items in relation to such legacy business. Due to the nature of our legacy business and the accounting treatment with respect to our revenue therefrom, we continued, and may continue, to record revenue from such legacy business, but we expect that the amount and percentage (as compared with our total revenue) of such revenue will decline, and the contribution of our other businesses to our results of operations will continue to increase.
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Key Factors Affecting Our Results of Operations
Key factors affecting our results of operations include the following:
Ability to Maintain and Expand our User Base in a Cost-Effective Manner
Our revenues are, to a large extent, dependent on the growth of our user base. We are constantly seeking to improve and optimize user experience to achieve a high level of user satisfaction, which in turn helps us retain existing users and attract new users through word-of-mouth referrals. Our results of operations will depend, in part, on the effectiveness of our sales and marketing efforts in user acquisition. We intend to continue to expend sales and marketing efforts appropriate to our business needs and continually seek to improve the effectiveness of these efforts, in particular with regard to user acquisition.
Ability to Advance our Technologies on a Continuing Basis
Our performance to date is largely underpinned by our ability to seamlessly integrate the use of technologies into the provision of our services. We have been focusing on leveraging our advanced technology capabilities such as data collection and artificial intelligence capabilities to increase the automation level of our platform and optimize our operational efficiency. Our highly advanced technology infrastructure enables us to facilitate a large number of transactions simultaneously. As we transit into a digital technology service provider, and in keeping with our strategic focus on technology empowerment, we will continue to invest in the betterment of our technology infrastructure, which may increase our expenses in the short term.
Ability to Broaden our Service and Product Offerings
Our growth to date has depended on, and our future success will in part depend on, successfully meeting user demand for new products and services. With our footprint expanding internationally, we have made and will continue to make substantial investments to develop and offer new services and products, both domestically and internationally to our users. For example, we aim to offer a more diversified array of investment products and to leverage our securities and insurance licenses to seek additional cross-selling opportunities in our online wealth management product lines including insurance brokerage services and overseas stock investment products. Failure to continue to successfully broaden our service and product offerings could adversely affect our operating results and we may not be able to recoup the costs of developing and launching new services and products.
We provider certain services to our customers operating in highly regulated industries. Fluctuations in market or adverse regulatory movements may have negative impact on their business operations, and therefore results of our relevant business lines. For example, we are navigating a period of transition to adapt to the regulatory regime under the Notice of Strengthening the Management of the Internet Loan Facilitation Business of Commercial Banks to Enhance the Quality and Efficiency of Financial Services, as issued by the National Financial Regulatory Administration in 2025, which has brought, and is expected to further bring about a reduction in our technology-based businesses and require us to enhance our operational efficiency, reduce costs at the operational level and pursue new business opportunities.
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Key Line Items and Specific Factors Affecting Our Results of Operations
Revenues
In the reporting period, we generated revenue principally from the sale of products and provision of technical services. The following table sets forth the breakdown of our revenues, both in absolute amount and as a percentage of our total revenues, for the periods indicated.
| Years Ended December 31, | ||||||||||||||||||||||||||||
| 2023 | 2024 | 2025 | ||||||||||||||||||||||||||
| RMB | % | RMB | % | RMB | US$ | % | ||||||||||||||||||||||
| (in thousands, except for percentages) | ||||||||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||||
| Sales income | 142,628 | 34.6 | 124,973 | 40.3 | 134,308 | 19,206 | 46.3 | |||||||||||||||||||||
| Post-origination services | 3,629 | 0.9 | 5,326 | 1.7 | — | — | — | |||||||||||||||||||||
| Technical services | 247,770 | 60.1 | 143,648 | 46.3 | 117,698 | 16,831 | 40.6 | |||||||||||||||||||||
| Wealth management | 18,422 | 4.4 | 36,027 | 11.7 | 37,874 | 5,416 | 13.1 | |||||||||||||||||||||
| Total revenues | 412,449 | 100.0 | 309,974 | 100.0 | 289,880 | 41,453 | 100.0 | |||||||||||||||||||||
Sales income. Sales income is mainly derived from the sale of products to end customers directly through the online stores run by us on third party e-commerce platforms. We set up online stores on such platforms pursuant to the platform service agreement we enter into with the platform service providers, while we enter into sales contracts directly with the end customers and are responsible for fulling all obligations under such sales contracts including delivering products to end customers at the purchase price.
Post-origination services. Our online lending platform revenue includes revenue from post-origination services for our legacy business. For each loan facilitated on our VIE’s platform for our online lending information intermediary services, our VIE charged a service fee to the borrower and the investor each at a certain percentage of the loan principal and allocated such fee between loan facilitation services and post-origination services that our VIE provided. The rate of such service fees varied depending on the type, pricing and term of underlying loans.
Technical services. We charge our financial institution partners for the technical services we render. Such technical services include technology empowerment services, operation and marketing support services, and customized software development with respect to user acquisition, risk management and data modeling. We currently generate a majority portion of our technical services revenue from services we provide in relation to our legacy business.
Wealth management. Wealth management revenues are from Internet securities services and insurance services. Revenue from internet securities services primarily consists of commission and brokerage income, management fee income and agency fee income. Revenue from insurance services consists primarily customers referral income.
See “SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES” for details.
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Operating Expenses and Fees
The table below sets forth the breakdown of our operating expenses and fees, both in absolute amount and as a percentage of our total revenues, for the periods indicated.
| Years Ended December 31, | ||||||||||||||||||||||||||||
| 2023 | 2024 | 2025 | ||||||||||||||||||||||||||
| RMB | % | RMB | % | RMB | US$ | % | ||||||||||||||||||||||
| (in thousands, except for percentages) | ||||||||||||||||||||||||||||
| Operating expenses and fees: | ||||||||||||||||||||||||||||
| Cost of goods sold | 61,654 | 14.9 | 29,751 | 9.6 | 25,287 | 3,616 | 8.7 | |||||||||||||||||||||
| Sales and marketing | 27,801 | 6.7 | 14,089 | 4.5 | 12,391 | 1,772 | 4.3 | |||||||||||||||||||||
| Origination and servicing | 53,525 | 13.0 | 78,097 | 25.2 | 59,776 | 8,548 | 20.6 | |||||||||||||||||||||
| General and administrative | 270,290 | 65.5 | 222,928 | 71.9 | 181,356 | 25,934 | 62.6 | |||||||||||||||||||||
| Provision for (reversal of) credit losses | 192,756 | 46.7 | 10,565 | 3.4 | (204 | ) | (29 | ) | (0.1 | ) | ||||||||||||||||||
| Total operating expenses and fees (including cost of goods sold) | 606,026 | 146.8 | 355,430 | 114.6 | 278,606 | 39,841 | 96.1 | |||||||||||||||||||||
Cost of goods sold. Cost of goods sold primarily consists of the purchase price of products, packaging materials, handling costs and product delivery costs.
Sales and marketing. Sales and marketing expenses consist primarily of various marketing expenses, including those related to user acquisition and retention, and general brand and awareness building.
Origination and servicing. We incurred expenses in relation to our post-origination services in 2022 for loans originated in previous years, which consisted primarily of variable expenses and vendor costs, including costs related to customer and system support, payment processing and collection services associated with facilitating and servicing loans. Due to our transition of business, starting in 2023, our servicing expenses consisted primarily of expenses and vendor costs for our technical services, including direct channeling, human resources and other costs related to customer and system support, payment processing services and other customer services.
General and administrative. General and administrative expenses consist primarily of salaries, share-based compensation and other benefits granted primarily to our management, and finance and administrative personnel, rent, professional service fees and other expenses.
Provision for (reversal of) credit losses. Reversal/(Provision) for credit losses consist primarily of the allowance for account receivable, loans receivable, other receivables and amounts due from related parties.
Taxation
Cayman Islands
We are an exempted company incorporated in the Cayman Islands. The Cayman Islands currently levy no taxes on corporations based upon profits, income, gains or appreciations. There are no other taxes likely to be material to our Company levied by the government of the Cayman Islands save certain stamp duties which may be applicable, from time to time, on certain instruments executed in or brought within the jurisdiction of the Cayman Islands. The Cayman Islands is not party to any double tax treaties that are applicable to any payments made by or to our Company. There are no exchange control regulations or currency restrictions in the Cayman Islands.
Hong Kong
Our subsidiaries incorporated in Hong Kong are subject to Hong Kong profits tax on their assessable profits arising in or derived from Hong Kong from such trade, profession or business. Hong Kong has a two-tiered profits tax rate for corporations, where the first HK$2 million of assessable profits will be taxed at 8.25%, and the balance over HK$2 million will be taxed at 16.5%. In addition, for two or more connected entities, only one of them may elect the two-tiered profit tax rates. Under the Hong Kong Inland Revenue Ordinance, profits derived from sources outside of Hong Kong are generally not subject to the Hong Kong profits tax. In addition, payments of dividends from our Hong Kong subsidiaries to our holding company in the Cayman Islands are not subject to any Hong Kong withholding tax.
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China
Generally, our PRC subsidiaries, VIEs and their respective subsidiaries, which are considered PRC resident enterprises under PRC tax law, are subject to enterprise income tax on their worldwide taxable income as determined under PRC tax laws and accounting standards at a rate of 25%. A “high and new technology enterprise” is entitled to a favorable income tax rate of 15% and such qualification is reassessed by the governmental authorities every three years. For details of our subsidiaries, VIEs and their respective subsidiaries qualified as “high and new technology enterprises,” please refer to Note 11 of our consolidated financial statements included elsewhere in this annual report. In addition, enterprises of encouraged industries are subject to preferential tax treatment or tax exemption for a certain period in certain areas of China, such as Xinjiang Kashgar Economic Development Zone. For details of our subsidiaries, VIEs and their respective subsidiaries that are subject to such preferential tax treatment or exemptions, please refer to Note 11 of our consolidated financial statements included elsewhere in this annual report.
We are subject to VAT at a rate of 13% or 9% on the sales of products, at a rate of 6% on the services rendered by us, less any deductible VAT we have incurred. During the periods presented, we were not subject to business tax on the services we provided.
For purposes of improving the VAT system, and further supporting the development of micro, small and medium-sized enterprises, the MOF and the SAT together issued the Notice of the Ministry of Finance and the State Administration of Taxation on Unifying the Threshold for Small-Scale Value-Added Tax Taxpayers (the “Notice No. 33”) which took effect on May 1, 2018, providing the unification of the threshold for being qualified as “small-scale VAT taxpayers”. According to the Notice No.33, the threshold for becoming a small-scale VAT taxpayer shall be that the annual sales amount subject to VAT of the enterprise shall equals to or less than RMB5 million (approximately $0.77 million).
According to the VAT Regulations, a small-scale taxpayer that has taxable sales activities shall calculate the taxable amount under the simplified method by directly multiplying the sales value by the applicable VAT levy rate, and the input tax shall not be deductible. The taxable amount equals to the sales value multiply the applicable VAT levy rate, which is 3%.
On January 30, 2026, the Ministry of Finance and the State Administration of Taxation promulgated the Announcement on the Connection of VAT Preferential Policies after the Implementation of the VAT Law, which took effect on January 1, 2026. According to the above announcement, small-scale VAT payers whose monthly sales amount is less than RMB100,000 (inclusive), or quarterly sales amount is less than RMB300,000 (inclusive), or daily sales amount is less than RMB1,000, are exempted from VAT; for the taxable sales revenue (excluding sales/lease of immovable property or transfer of land use rights) of small-scale VAT payers to which a levy rate of 3% is applicable, VAT will be levied at a reduced levy rate of 1%; for the pre-payment VAT items to which the pre-levy rate of 3% is applicable, a reduced pre-levy rate of 1% will apply. This Announcement shall remain in force until December 31, 2027.
Dividends paid by our WFOEs in China to our intermediary holding company in Hong Kong will be subject to a withholding tax rate of 10%, unless they qualify for a special exemption. If our Hong Kong subsidiaries satisfy all the requirements under the Arrangement Between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income and receives approval from the tax authority, then dividends paid by our WFOEs in China will be subject to a withholding tax rate of 5% instead. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China and Hong Kong—We may not be able to obtain certain benefits under the relevant tax treaty on dividends paid by our PRC subsidiaries to us through our Hong Kong subsidiary.”
If our holding company in the Cayman Islands or any of our subsidiaries outside of China were deemed to be a “resident enterprise” under the Enterprise Income Tax Law, it would be subject to enterprise income tax on its worldwide income at a rate of 25%. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China and Hong Kong—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.”
Critical Accounting Estimate
The preparation of financial statements in conformity with U.S. GAAP requires our management to make estimates and assumptions that affect the reported amounts in our consolidated financial statements and accompanying footnotes. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the assets or liabilities in the future.
We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations. The management determines there are no critical accounting estimates.
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Results of Operations
The following table sets forth a summary of our consolidated results of operations for the periods presented, both in absolute amount and as a percentage of our total revenues for the periods presented. This information should be read together with our consolidated financial statements and related notes included elsewhere in this annual report.
| Years Ended December 31, | ||||||||||||||||||||||||||||
| 2023 | 2024 | 2025 | ||||||||||||||||||||||||||
| RMB | % | RMB | % | RMB | US$ | % | ||||||||||||||||||||||
| (in thousands, except for percentages) | ||||||||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||||
| Sales income | 142,628 | 34.6 | 124,973 | 40.3 | 134,308 | 19,206 | 46.3 | |||||||||||||||||||||
| Cost of goods sold | (61,654 | ) | (14.9 | ) | (29,751 | ) | (9.6 | ) | (25,287 | ) | (3,616 | ) | (8.7 | ) | ||||||||||||||
| Gross Profit | 80,974 | 19.7 | 95,222 | 30.7 | 109,021 | 15,590 | 37.6 | |||||||||||||||||||||
| Post-origination services | 3,629 | 0.9 | 5,326 | 1.7 | — | — | — | |||||||||||||||||||||
| Technical services | 247,770 | 60.1 | 143,648 | 46.3 | 117,698 | 16,831 | 40.6 | |||||||||||||||||||||
| Wealth management | 18,422 | 4.4 | 36,027 | 11.7 | 37,874 | 5,416 | 13.1 | |||||||||||||||||||||
| Total revenues (excluding cost of goods sold) | 412,449 | 100.0 | 309,974 | 100.0 | 289,880 | 41,453 | 100.0 | |||||||||||||||||||||
| Other operating expenses and fees: | ||||||||||||||||||||||||||||
| Sales and marketing | (27,801 | ) | (6.7 | ) | (14,089 | ) | (4.6 | ) | (12,391 | ) | (1,772 | ) | (4.3 | ) | ||||||||||||||
| Origination and servicing | (53,525 | ) | (13.0 | ) | (78,097 | ) | (25.2 | ) | (59,776 | ) | (8,548 | ) | (20.6 | ) | ||||||||||||||
| General and administrative(1) | (270,290 | ) | (65.5 | ) | (222,928 | ) | (71.9 | ) | (181,356 | ) | (25,934 | ) | (62.6 | ) | ||||||||||||||
| (Provision for) reversal of credit losses | (192,756 | ) | (46.7 | ) | (10,565 | ) | (3.4 | ) | 204 | 29 | 0.1 | |||||||||||||||||
| Total operating expenses and fees (including cost of goods sold) | (606,026 | ) | (146.8 | ) | (355,430 | ) | (114.7 | ) | (278,606 | ) | (39,841 | ) | (96.1 | ) | ||||||||||||||
| Operating Loss | (193,577 | ) | (46.9 | ) | (45,456 | ) | (14.7 | ) | 11,274 | 1,612 | 3.9 | |||||||||||||||||
| Interest income and realized gain of investment in marketable securities | 97,669 | 23.7 | 84,622 | 27.3 | 182,418 | 26,085 | 62.9 | |||||||||||||||||||||
| Impairment loss of investments | (27,928 | ) | (6.8 | ) | (4,590 | ) | (1.5 | ) | (330,316 | ) | (47,235 | ) | (113.9 | ) | ||||||||||||||
| Impairment loss of goodwill | (24,809 | ) | (6.0 | ) | — | — | — | — | — | |||||||||||||||||||
| Impairment loss of intangible assets and property, equipment and software | — | — | (20,488 | ) | (6.6 | ) | — | — | — | |||||||||||||||||||
| Unrealized (loss) gain of investment in marketable securities | (2,415 | ) | (0.6 | ) | 5,161 | 1.7 | 366,399 | 52,394 | 126.4 | |||||||||||||||||||
| Dividend income from investments | 3,132 | 0.7 | 4,171 | 1.3 | 700 | 100 | 0.2 | |||||||||||||||||||||
| (Loss) income from disposal of subsidiaries | (75 | ) | (0.0 | ) | 754 | 0.2 | — | — | — | |||||||||||||||||||
| Gain on held-to-maturity investment | 186 | 0.0 | 179 | 0.1 | 190 | 27 | 0.1 | |||||||||||||||||||||
| Exchange (loss) income | (4,289 | ) | (1.0 | ) | 791 | 0.3 | (1,328 | ) | (190 | ) | (0.5 | ) | ||||||||||||||||
| Other income, net | 222 | 0.1 | 1,838 | 0.6 | (2,345 | ) | (334 | ) | (0.8 | ) | ||||||||||||||||||
| Loss before income tax expense and loss in equity method investments | (151,884 | ) | (36.9 | ) | 26,982 | 8.7 | 226,992 | 32,459 | 78.3 | |||||||||||||||||||
| Income tax expense | (7,745 | ) | (1.9 | ) | (13,982 | ) | (4.5 | ) | (56,332 | ) | (8,055 | ) | (19.4 | ) | ||||||||||||||
Income (loss) from equity method investments, net | 19,280 | 4.7 | 37,157 | 12.0 | (3,271 | ) | (468 | ) | (1.1 | ) | ||||||||||||||||||
| Net (loss) income | (140,349 | ) | (34.1 | ) | 50,157 | 16.2 | 167,389 | 23,936 | 57.7 | |||||||||||||||||||
Note:
| (1) | General and administrative expenses include share-based compensation (reversal) of RMB (72,133) thousand, RMB (959) thousand and RMB54 thousand (US$7 thousand) in 2023, 2024 and 2025, respectively. |
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Revenues
Sales income
2025 Compared to 2024. Our sales income was RMB134.3 million (US$19.2 million) in 2025, representing an increase of 7.5% from RMB125.0 million in 2024, primarily because we took proactive initiatives to adjust our product offering structure and market sales strategy by focusing on certain SKUs.
2024 Compared to 2023. Our sales income was RMB125.0 million in 2024, representing a decrease of 12.4% from RMB142.6 million in 2023, primarily due to the fact that, while we took proactive initiatives to adjust our product offering structure with the purpose to enhance our business efficiency and margin, the decrease in the number of our customers and the decline in the retail industry in China, which collectively resulted in the overall decrease in our sales income.
Post-origination services
After the cessation of Jiufu Puhui’s online lending information intermediary services, we continued to recognize revenue from the post-origination service. In 2024, based on our management’s evaluation of the current situation of our business transition and the earlier allocation of our revenues between loan facilitation services and post-origination services in relation to such legacy business, outstanding loans under the relevant online lending activities have been transferred to certain third parties and the relevant rights and obligations have been fulfilled, we recognized all remaining revenues from our legacy business of RMB5.3 million. For the year ended December 31, 2025, no revenue in connection with post-origination services was recorded.
Technical services revenue
2025 Compared to 2024. Our technical services revenue was RMB117.7 million (US$16.8 million) in 2025, representing a decrease of 18.1% from RMB143.6 million in 2024, primarily due to the decrease in demand for our technical services, which was a result of challenging regulatory and market environment for our customers.
2024 Compared to 2023. Our technical services revenue was RMB143.6 million in 2024, representing a decrease of 42.0% from RMB247.8 million in 2023, primarily due to the decrease in demand for our technical services, which was in turn a result of the relative decline in the business operations of our customers.
Wealth management
2025 Compared to 2024. Our wealth management revenue increased by 5.1% to RMB37.9 million (US$5.4 million) in 2025 from RMB36.0 million in 2024. The increase was primarily driven by the increase in the revenue from our insurance services from RMB32.3 million in 2024 to RMB34.6 million (US$4.9 million) in 2025.
2024 Compared to 2023. Our wealth management revenue increased by 95.6% to RMB36.0 million in 2024 from RMB18.4 million in 2023. The increase was primarily driven by the growth of our wealth management services, especially an increase in our revenue from life insurance offerings of RMB27.0 million.
Operating Expenses and Fees
Cost of goods sold
2025 Compared to 2024. Our cost of goods sold were RMB25.3 million (US$3.6 million) in 2025, representing a decrease of 15.0% from RMB29.8 million in 2024, primarily due to our adjustment to the structure of our product offerings, for which we chose SKUs with lower purchase cost. As a result, our gross profit increased by 14.5% from RMB95.2 million in 2024 to RMB109.0 million (US$15.6 million) in 2025.
2024 Compared to 2023. Our cost of goods sold were RMB29.8 million in 2024, representing a decrease of 51.7% from RMB61.7 million in 2023, primarily due to our actions taken to change the mix of our product offerings, thereby reducing the cost of goods sold and increasing our profit. In addition, as the sales under our e-commerce business decreased, the relevant cost of goods decreased as well. Our gross profit increased by 17.6% from RMB81.0 million in 2023 to RMB95.2 million in 2024 due to selling products with higher profit margins.
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Sales and marketing expenses
2025 Compared to 2024. Our sales and marketing expenses were RMB12.4 million (US$1.8 million) in 2025, representing a decrease of 12.1% from RMB14.1 million in 2024. Such decrease resulted from our initiatives to reduce our sales force during the year of 2024, which led to a lower expenses in 2025.
2024 Compared to 2023. Our sales and marketing expenses were RMB14.1 million in 2024, representing a decrease of 49.3% from RMB27.8 million in 2023. Such decrease resulted from our expense control initiatives, especially the reduction in our sales force.
Origination and servicing expenses
2025 Compared to 2024. Our origination and servicing expenses were RMB59.8 million (US$8.5 million) in 2025, representing a decrease of 23.5% from RMB78.1 million in 2024. In 2024, our servicing expenses consisted primarily of expenses and vendor costs for our technical services. As we have ceased to recognize post-origination service revenues, we no longer incur certain origination and servicing related expenses, resulting in decrease in expenses such as litigation and consulting expenses.
2024 Compared to 2023. Our origination and servicing expenses were RMB78.1 million in 2024, representing an increase of 45.9% from RMB53.5 million in 2023. In 2024, our servicing expenses consisted primarily of expenses and vendor costs for our technical services. The referral expenses of Ether Wealth Management Limited were RMB1.5 million, RMB27.0 million for the years ended December 31, 2023 and 2024, respectively.
General and administrative expenses
2025 Compared to 2024. Our general and administrative expenses were RMB181.4 million (US$25.9 million) in 2025, representing a decrease of 18.6% from RMB222.9 million in 2024. This decrease was primarily attributable to (i) workforce restructuring undertaken in 2024, which resulted in lower personnel expenses in 2025, and (ii) our continued implementation of expense control measures, which led to a reduction in consulting fees.
2024 Compared to 2023. Our general and administrative expenses were RMB222.9 million in 2024, representing a decrease of 17.5% from RMB270.3 million in 2023. In 2024, we continued to take proactive measures to manage our expenses, such as cutting our office lease expenses and staff structure optimization.
(Provision for) reversal of credit losses
2025 Compared to 2024. Our reversal of credit losses was RMB0.2 million (US$29 thousands) in 2025 as compared to our provision for credit losses RMB10.6 million in 2024. In 2025, we collected certain credit losses in the amount of RMB3.5 million (US$0.5 million).
2024 Compared to 2023. Our provision for credit losses was RMB10.6 million in 2024, representing a decrease of 94.5% from RMB192.8 million in 2023. The significant decrease reflects a reduction in expected credit losses based on improved credit risk assessments of our contract assets and receivables portfolio. The allowance was estimated in accordance with the CECL model under ASC 326, which incorporates historical loss experience, current conditions, and reasonable and supportable forecasts. The decrease also reflects partial recoveries of previously impaired amounts, including litigation-related collections of RMB10.6 million.
Interest Income and realized gain of investment in marketable securities
Interest income and realized gain of investment in marketable securities represents interest earned on cash deposits in financial institutions, our loans receivable from third-party borrowers, and our investment in wealth management financial products.
2025 Compared to 2024. Our interest income and realized gain of investment in marketable securities was RMB182.4 million (US$26.1 million) in 2025, representing an increase of 115.6% from RMB84.6 million in 2024. This increase was principally due to the increase of our investment in the marketable securities and other wealth management products, as well as the good performance of these financial instruments during the year 2025.
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2024 Compared to 2023. Our interest income was RMB84.6 million in 2024, representing a decrease of 13.4% from RMB97.7 million in 2024. We made certain adjustments to the allocation among investment products in our wealth management and investment portfolios in 2024. As a result of certain withdrawals of term investment products, we had less interest income.
Impairment Loss of Investments
Impairment loss of investments represents an impairment charge where the carrying amount of the investment exceeds its fair value on a non-temporary basis. The fair value of the investee company is estimated based on comparable quoted prices for similar investments in an active market, if applicable, or a discounted market approach which requires significant judgments.
2025 Compared to 2024. Our impairment loss of investments was RMB330.3 million (US$47.2 million) in 2025, as compared to RMB4.6 million in 2024. In 2025, we reevaluated the equity value of Hubei Consumption Financial Company in connection with the change of the applicable accounting method for our investment therein, and recognized the impairment loss of investment of RMB320.7 million (US$45.9 million) based on such evaluation.
2024 Compared to 2023. Our impairment loss of investments was RMB 4.6 million in 2024, as compared to RMB27.9 million in 2023. The impairment primarily reflected the loss of our investment in Beijing Diting Culture Media Co., Ltd. in full due to its difficult operating status.
Impairment Loss of Goodwill
Impairment loss of goodwill represents an impairment loss equal to the difference between the fair value of the reporting unit and its carrying amount where it is more likely than not that the fair value of a reporting unit is less than its carrying amount and, upon a further quantitative impairment test, if the carrying amount of each reporting unit exceeds its fair value.
Our impairment loss of goodwill was nil, nil and RMB24.8 million in 2025, 2024 and 2023, respectively.
Impairment loss of intangible assets and property, equipment and software
We did not incur impairment loss of intangible assets and property, equipment and software in 2025.
In 2024, we recorded an impairment loss of intangible assets and property, equipment and software of RMB20.5 million, which represents the intangible assets impairment of Metaverse Securities Limited and Jiuxing Insurance Brokerage Co., Ltd. due to their continuous operating losses.
We did not incur impairment loss of intangible assets and property, equipment and software in 2023.
Unrealized (Loss) Gain of Investments in Marketable Securities
We recognized unrealized losses of investments in marketable securities of RMB2.4 million in 2023, an unrealized gain of investments in marketable securities of RMB5.2 million in 2024, and an unrealized gain of investments in marketable securities of RMB366.4 million (US$52.4 million) in 2025. Starting in 2024, we made adjustments to our investment portfolio and increased our investment in marketable securities, and as a result, the strong market performance resulted in more unrealized gain of investments in marketable securities. As the market went strongly in 2025, we witnessed increase in our unrealized gain of investments in marketable securities.
Income Tax Expense
2025 Compared to 2024. Our income tax expense was RMB56.3million (US$8.1 million) in 2025, as compared with RMB14.0 million in 2024, primarily due to the fact that some of our subsidiaries started to make profit in 2025, thereby resulting in more taxes.
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2024 Compared to 2023. Our income tax expense was RMB14.0 million in 2024, as compared with RMB7.7 million in 2023, primarily due to the increase in our taxable income.
Income (loss) from Equity Method Investments, Net
2025 Compared to 2024. Our loss in equity method investments in 2025 was RMB3.3 million (US$0.5 million), as compared with an income of RMB37.2 million in 2024, primarily due to net losses incurred by our equity method investees in 2025.
2024 Compared to 2023. Our income in equity method investments in 2024 was RMB37.2 million, as compared with an income of RMB19.3 million in 2023. In 2024, we recognized investment income of RMB38.0 million from our investment in Hubei Consumption Financial Company.
Net (Loss) Income
As a result of the foregoing, we recorded net income of RMB167.4 million (US$23.9 million), net income of RMB 50.2 million, and net loss of RMB140.3 million in 2025, 2024 and 2023, respectively.
Changes in Financial Position
The following table sets forth selected information from our consolidated balance sheets as of December 31, 2024 and 2025. This information should be read together with our consolidated financial statements and related notes included elsewhere in this annual report.
| As of December 31, | ||||||||||||
| 2024 | 2025 | |||||||||||
| RMB | RMB | US$ | ||||||||||
| (in thousands) | ||||||||||||
| Assets: | ||||||||||||
| Cash and cash equivalents | 379,350 | 434,527 | 62,137 | |||||||||
| Restricted cash | 264,263 | 315,599 | 45,130 | |||||||||
| Term deposits | 262,759 | 3,846 | 550 | |||||||||
| Investment in marketable securities | 1,956,027 | 2,847,627 | 407,205 | |||||||||
| Accounts receivable, net | 83,065 | 87,390 | 12,497 | |||||||||
| Other receivables, net | 62,479 | 79,468 | 11,362 | |||||||||
| Loans receivable, net | 6,964 | — | — | |||||||||
| Prepaid expenses and other assets | 159,102 | 165,455 | 23,660 | |||||||||
| Investments | 879,604 | 315,596 | 45,130 | |||||||||
| Liabilities: | ||||||||||||
| Taxes payable | 307,170 | 297,592 | 42,555 | |||||||||
| Accrued expenses and other liabilities | 131,467 | 198,419 | 28,374 | |||||||||
Cash and Cash Equivalents
Cash and cash equivalents represent cash on hand, demand deposits and highly liquid investments placed with banks or other financial institutions with original maturities three months or less.
Our cash and cash equivalents increased by 14.5 % to RMB434.5 million (US$62.1 million) as of December 31, 2025, compared to RMB379.4 million as of December 31, 2024, primarily because we had considerable cash inflow from our business operations.
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Restricted Cash
Our restricted cash mainly consists of funds we received from investors for the purpose of buying or selling securities on their behalf, and bank deposit frozen by certain judicial freezing order.
Our restricted cash increased by 19.4% to RMB315.6 million (US$45.1 million) as of December 31, 2025 from RMB264.3 million as of December 31, 2024, primarily because of a certain judicial freezing order over Jiufu Puhui’s assets resulting in an increase of RMB65.9 million (US$9.4 million) in restricted cash.
Term Deposits
Our term deposits consist of deposits placed with financial institutions with an original maturity of greater than three months and less than one year.
Our term deposits decreased by 98.5% to RMB3.8 million as of December 31, 2025 from RMB262.8 million as of December 31, 2024, primarily because a substantial portion of our term deposits matured as of December 31, 2025.
Investment in Marketable Securities
Our investment in marketable securities mainly consists of our purchase of common stocks of publicly listed companies, exchange-traded funds (ETFs) and private equity funds through securities companies.
Our investment in marketable securities increased by 45.6% to RMB2,847.6 million (US$407.2 million) as of December 31, 2025 from RMB1,956.0 million as of December 31, 2024, primarily because of the strong performance of the market as well as our continuous investment actions.
Accounts Receivable, Net
Our accounts receivable, net of allowance for credit losses, primarily includes receivables from sales income and service fees receivable from third-party entities or financial institution partners.
Our accounts receivable, net of allowance for credit losses increased by 5.2% to RMB87.4 million (US$12.5 million) as of December 31, 2025 from RMB83.1 million as of December 31, 2024, primarily due to the increase of accounts receivable generated through our e-commerce business, which was driven by the steady operation of the e-commerce business.
Other Receivables, Net
Our other receivables, net, primarily includes investment account balances receivable from broker dealers, receivable from third parties and interest receivable.
Our other receivables, net increased by 27.2% to RMB79.5 million (US$11.4 million) as of December 31, 2025 from RMB62.5 million as of December 31, 2024. In 2025, the business growth of Metaverse Securities Limited resulted in the increase of the balance of other receivables in the amount of RMB23.2 million (US$3.3 million) as of December 31, 2025.
Loans Receivable, Net
Our loans receivable mainly represents loans to third-party borrowers.
Our loans receivable, net decreased by 100.0% to nil as of December 31, 2025 from RMB7.0 million as of December 31, 2024, mainly due to our collection efforts. The allowance for credit losses as of December 31, 2024 and 2025 were RMB386.5 million and RMB385.8 million (US$55.2 million), respectively.
Prepaid Expenses and Other Assets
Our prepaid expenses and other assets include deposits, advance to suppliers, prepaid taxes, prepaid service fees, and others.
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Our prepaid expenses and other assets increased by 4.0% to RMB165.5 million (US$23.7 million) as of December 31, 2025 from RMB159.1 million as of December 31, 2024. This was mainly due to the increase in our pre-paid tax and prepaid service fee.
Investments
Our investments consist of equity securities without readily determinable fair value, equity method investments, held-to-maturity and available-for-sale investments.
Our investments decreased by 64.1% to RMB315.6 million (US$45.1 million) as of December 31, 2025 from RMB879.6 million as of December 31, 2024.
Our available-for-sale investments decreased by 75.4% from RMB62.0 million as of December 31, 2024 to RMB15.3 million (US$2.2 million) as of December 31, 2025, mainly due to the maturity of the Standard Chartered Bank linked US Treasury notes we held in 2025.
Our held-to-maturity investments decreased by 63.7% from RMB287.4 million as of December 31, 2024 to RMB104.2 million (US$14.9 million) as of December 31, 2025, mainly because a large amount of certificates of deposit matured in 2025.
Our equity investments decreased by 63.0% from RMB530.2 million as of December 31, 2024 to RMB196.1 million (US$28.0 million) as of December 31, 2025, mainly because that we reevaluated the equity value of Hubei Consumption Financial Company, and recognized the impairment loss of investment of RMB320.7 million (US$45.9 million) based on such evaluation.
Taxes Payable
Our taxes payable decreased by3.1% to RMB297.6 million (US$42.6 million) as of December 31, 2025 from RMB307.2 million as of December 31, 2024. There are no any penalty and interest incurred as of December 31, 2025.
Accrued Expenses and Other Liabilities
Our accrued expenses and other liabilities increased by 50.9% to RMB198.4 million (US$28.4 million) as of December 31, 2025 from RMB131.5 million as of December 31, 2024, primarily due to (i) our financing resulting in other liabilities of RMB22.8 million (US$3.3 million) and (ii) the increase in the other liabilities of RMB44.3 million (US$6.3 million) due to the business growth of Metaverse Securities Limited.
| B. | Liquidity and Capital Resources |
Our principal sources of liquidity have been cash generated from operating activities. Our cash consists of cash on hand and cash in bank, which are unrestricted as to withdrawal. Cash equivalents consist of interest-bearing certificates of deposit with initial term of no more than three months when purchased.
We believe that our current cash, cash equivalents and anticipated cash flow from operations will be sufficient to meet our anticipated cash needs, including our cash needs for working capital and capital expenditures, for at least the next 12 months from the release of this annual report. We may, however, need additional capital in the future to fund our continued operations. If we determine that our cash requirements exceed the amount of cash and cash equivalents we have on hand at the time, we may seek to issue equity or debt securities or obtain credit facilities. The issuance and sale of additional equity would result in further dilution to our shareholders. The incurrence of indebtedness would result in increased fixed obligations and could result in operating covenants that might restrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.
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The following table sets forth a summary of our cash flows for the periods indicated:
| Years Ended December 31, | ||||||||||||||||
| 2023 | 2024 | 2025 | ||||||||||||||
| RMB | RMB | RMB | US$ | |||||||||||||
| (in thousands) | ||||||||||||||||
| Summary Consolidated Cash Flow Data: | ||||||||||||||||
| Net cash provided by operating activities | 46,548 | 46,493 | 207,664 | 29,697 | ||||||||||||
| Net cash used in investing activities | (933,068 | ) | (1,292,027 | ) | (74,210 | ) | (10,613 | ) | ||||||||
| Net cash provided by financing activities | — | — | 5,561 | 795 | ||||||||||||
| Effect of foreign exchange rate changes on cash, cash equivalent and restricted cash | 74,534 | 69,127 | (32,502 | ) | (4,647 | ) | ||||||||||
| Net (decrease) increase in cash, cash equivalents and restricted cash | (811,986 | ) | (1,176,407 | ) | 106,513 | 15,232 | ||||||||||
| Cash, cash equivalents and restricted cash at beginning of the year | 2,632,006 | 1,820,020 | 643,613 | 92,035 | ||||||||||||
| Cash, cash equivalents and restricted cash at end of the year | 1,820,020 | 643,613 | 750,126 | 107,267 | ||||||||||||
Operating activities
Our net cash provided by operating activities was RMB207.7 million (US$29.7 million) in 2025. In 2025, the principal items accounting for the difference between our net cash provided by operating activities and our net income of RMB167.4million (US$23.9 million), primarily resulted from (i) adjustment for non-cash items, mainly including adding back impairment loss of investment of RMB330.3 million (US$47.2 million), deferred taxes of RMB13.5 million (US$1.9 million), partially offset by the unrealized gain of investment in marketable securities of RMB366.4million(US$52.4 million), and (ii) changes in operating assets and liabilities, mainly including an increase in accrued expenses and other liabilities of RMB67.0 million (US$9.6 million).
Our net cash provided by operating activities was RMB46.5 million in 2024. In 2024, the principal items accounting for the difference between our net cash provided by operating activities and our net income of RMB50.2 million, primarily resulted from (i) adjustment for non-cash items, mainly including adding back impairment loss of intangible assets of RMB20.5 million, amortization of RMB13.3 million and depreciation of RMB9.1 million, partially offset by share of income in equity method investments of RMB37.2 million, and (ii) changes in operating assets and liabilities, mainly including increase in accounts receivable of RMB33.8 million and a decrease in operating lease liabilities of RMB6.8 million, partially offset by the decrease in prepaid expenses and other assets of RMB6.9 million.
Our net cash provided by operating activities was RMB46.5million in 2023. In 2023, the principal items accounting for the difference between our net cash provided by operating activities and our net loss of RMB140.3 million were (i) adjustment for non-cash items, mainly including adding back provision for allowance for credit losses of RMB192.8 million, impairment loss of equity securities without readily determinable fair value of RMB29.0 million, and impairment of goodwill of RMB24.8 million, partially offset by share-based compensation of RMB72.1 million, and (ii) changes in operating assets and liabilities, mainly including decrease in prepaid expenses and other assets of RMB56.8 million, decrease in other receivables of RMB63.5 million and decrease in accounts receivable of RMB52.8 million, partially offset by decrease in accrued expenses and other liabilities of RMB116.3 million.
Investing activities
Net cash used in investing activities was RMB74.2 million (US$10.6 million) in 2025, which was primarily attributable to purchase of marketable securities RMB1,909.2 million (US$273.0 million) and purchase of term deposits of RMB47.5 million (US$6.8 million), partially offset by the disposals of marketable securities of RMB1,379.2 million (US$197.2million), the redemptions of term deposits of RMB295.4 million (US$42.2 million), and disposal of long-term investments RMB207.8 million (US$29.7 million).
Net cash used in investing activities was RMB1,292.0million in 2024, which was primarily attributable to purchase of marketable securities RMB3,304.5 million and purchase of term deposits of RMB597.0 million, partially offset by the disposals of marketable securities of RMB1,774.8 million and the redemptions of term deposits of RMB633.7 million.
Net cash used in investing activities was RMB933.1 million in 2023, which was primarily attributable to our purchase of marketable securities of RMB364.0 million and long-term investments of RMB529.5 million and our purchase of term deposits of RMB341.6 million, partially offset by the disposals of marketable securities of RMB134.3 million and the redemptions of term deposits of RMB227.4 million.
Financing activities
Net cash provided by financing activities was nil in 2023 and 2024. Net cash provided by financing activities was RMB5.6 million (US$0.8 million) in 2025, which was primarily attributable to capital contributions from non-controlling interest shareholders.
Capital Expenditures
We had capital expenditures of RMB5.7 million, RMB 1.1 million and RMB 2.7 million (US$ 0.4 million) in 2023, 2024 and 2025, respectively. In these periods, our capital expenditures were mainly used for our efforts to procure new business operations and related licenses by acquisition.
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Contractual Obligations and Commercial Commitments
The following table sets forth our contractual obligations as of December 31, 2025:
| Payments Due by Period | ||||||||||||||||||||
| 2026 | 2027 | 2028 | 2029 | Thereafter | ||||||||||||||||
| (RMB in thousands) | ||||||||||||||||||||
| Contractual Obligations: | ||||||||||||||||||||
| Operating Leases Obligations | 1,153 | nil | nil | nil | nil | |||||||||||||||
Note: With imputed interest of RMB8 million.
Our operating lease obligations relate to our leases of office premises and cloud infrastructure to support our core business systems. We lease certain office premises and cloud infrastructure under non-cancelable operating lease arrangements.
Other than those shown above, we did not have any significant capital and other commitments, long-term obligations, or guarantees as of December 31, 2025.
Off-balance Sheet Arrangements
We have not entered into any material financial guarantees or other commitments to guarantee the payment obligations of any third parties and do not assume credit risk in loans facilitated through our platform. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or product development services with us.
Holding Company Structure
9F Inc. is a holding company with no material operations of its own. We conduct our operations primarily through our subsidiaries, our consolidated VIEs and their subsidiaries in China. As a result, 9F Inc.’s ability to pay dividends depends upon dividends paid by our PRC subsidiaries. If our existing PRC subsidiaries or any newly formed ones incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us. In addition, each of our WFOEs in China is permitted to pay dividends to us only out of its retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Under PRC law, each of our subsidiaries and our consolidated VIEs in China is required to set aside at least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of its registered capital. In addition, each of our WFOEs, consolidated VIEs and their subsidiaries may allocate a portion of its after-tax profits based on PRC accounting standards to a discretionary surplus fund at its discretion. The statutory reserve funds and the discretionary funds are not distributable as cash dividends. Remittance of dividends by a wholly foreign-owned company out of China is subject to examination by the banks designated by the SAFE. Our PRC subsidiaries have not paid dividends and will not be able to pay dividends until they generate accumulated profits and meet the requirements for statutory reserve funds.
| C. | Research and Development, Patents and Licenses, Etc. |
Our success has benefited from our continual efforts in building our technologies and protecting our intellectual property, including patents, trademarks, copyrights and trade secrets. See “Item 4. Information on the Company—B. Business Overview—Technology” for a discussion of our key technology developments and “Item 4. Information on the Company—B. Business Overview—Intellectual Property” for a description on the protection of our intellectual property.
| D. | Trend Information |
Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the period since January 1, 2026 that are reasonably likely to have a material effect on our 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.
| E. | Critical Accounting Estimates |
See “Item 5. Operating and Financial Review and Prospects—B. Operating Results—Critical Accounting Estimate.”
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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.
| Directors and Executive Officers | Age | Position/Title | ||
| Lei Sun | 46 | Chairman of the Board of Directors | ||
| Yifan Ren | 43 | Vice chairman of the Board of Directors | ||
| Changxing Xiao | 53 | Director | ||
| Fangxiong Gong | 62 | Independent Director | ||
| Yuping Ouyang | 51 | Independent Director | ||
| Lei Liu | 44 | Chief Executive Officer and Chief Risk Officer and Director | ||
| Li Zhang | 50 | Chief Financial Officer |
Lei Sun has been our director since January 2014, and our chairman of the board of directors since November 2017. Mr. Sun has over twenty years of experience in financial services industry and is a recipient of numerous prestigious national awards. Prior to founding our company in August 2006, Mr. Sun was a senior manager at the head office of China Minsheng Bank (HKEX: 1988) from September 2005 to August 2006. From August 2005 to September 2005, Mr. Sun served as a department head with Digital China Group Co., Ltd. (SZ: 000034) in charge of the development of internet financing products. Prior to that, Mr. Sun served as a director of banking service department with Taihe Chengxin Investment Co., Ltd. from August 2004. From March 2003 to August 2004, Mr. Sun served as the department head of financial services department of Hi Sun Technology (China) Limited (HKEX: 0818). Mr. Sun received his bachelor’s degree in finance and EMBA from Peking University in 2003 and 2013, respectively.
Yifan Ren has been a director of our company since January 2014, and our vice chairman of the board of directors since June 2020. Mr. Ren has been serving as the general manager of Beijing Aidi Telecommunication Co., Ltd. since June 2012. From January 2009 to June 2012, Mr. Ren worked with Beijing Tiantianfeidu Information Technology Co., Ltd. as the general manager. Between June 2005 and June 2006, Mr. Ren worked as a producer with Beijing News Radio. Mr. Ren received his bachelor’s degree in journalism from Peking University in 2005 and his master’s degree in media & communications from Fordham University in 2009.
Changxing Xiao has been a director of our company since January 2014. Mr. Xiao founded Will Hunting Capital in 2014 and has been serving as a partner since its inception. From 2001 to 2013, Mr. Xiao served as the chief executive officer and chairman of the board of Beijing Hi Sun Advanced Business Solutions Information Technology Limited. From 1995 to 2000, Mr. Xiao served as a department head with Beijing Founder Order Computer System Co., Ltd. Mr. Xiao received his bachelor’s degree in international finance from Peking University in 1995.
Fangxiong Gong has served as our independent director since August 2019. Dr. Gong has been in the financial industry for more than 25 years and is widely recognized in both the research and investment banking fields. Dr. Gong is currently a responsible officer of FXG Asset Management Limited (formerly known as First Seafront Financial Limited), in respect of Type 1 (Dealing in Securities), 4 (Advising on Securities) and 9 (Asset Management) regulated activities since November 2016. From September 2009 to April 2015, Dr. Gong served as a Managing Director of JPMorgan Securities (Asia Pacific) Ltd and Chairman of JPM China Investment Banking, and led JPMorgan China investment banking business. From June 2004 to August 2009, Dr. Gong acted as Head of JPMorgan China Research / Strategy and Chief Economist, leading JPMorgan’s China research team covering equity research, market strategy, macro and foreign exchange rates. Dr. Gong also co-headed JPMorgan EM Asia market research and strategy. Before his career at JPMorgan, Dr. Gong was the Chief Strategist and Co-Head of Global Currency and Rates Research at Bank of America from September 1997 to May 2004. Dr. Gong was an economist at the Federal Reserve Bank of New York from 1995 to 1997, where his duties included research and policy submissions to the Federal Open Market Committee. Dr. Gong holds a Ph.D. in Financial Economics from the University of Pennsylvania, with the Ph.D. thesis jointly done in the Wharton School of University of Pennsylvania and the Economics Department of the University of Pennsylvania, an M.S. in Physics from Temple University in Philadelphia, an M.A. in Operation Research and Economics and a B.S. in Physics from Peking University.
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Yuping Ouyang has served as our independent director since August 2021. Ms. Ouyang has served as chief financial officer and Secretary to the board of director of Gowin Semiconductor Corporation since February 2021, and has served as director of the board of Gowin Semiconductor Corporation since November 2024. Prior to that, Ms. Ouyang served as chief financial officer of China Techfaith Wireless Communication Technology Limited, a Cayman Islands company listed on the Nasdaq Global Market, since August 2008. From September 2004 to August 2008, Ms. Ouyang worked in various finance positions at China Techfaith, including as its US GAAP reporting manager and chief accounting officer. Prior to joining China Techfaith, she served as an accounting manager at Guangzhou Metro Corporation. Ms. Ouyang received her MBA from the Sun Yat-sen University in 2006 and her bachelor’s degree in management from the Guangdong University of Foreign Studies in 1996. Ms. Ouyang is also a licensed member of the Certified Public Accountants of Washington State and a member of the Association of Chartered Certified Accountants.
Lei Liu is our co-founder and has served as our director since August 2019, our chief risk officer since June 2020, and our chief executive officer since August 2020. Previously, Mr. Liu served as our executive president and chief risk officer. Prior to founding our business, Mr. Liu worked as the senior product manager of the retail banking department of the head office of China Minsheng Bank (HKEX: 1988) from 2006 through 2007, responsible for developing personal loan products. Prior to that, Mr. Liu served as a supervisor of personal finance business with the Shenzhen branch of China Minsheng Bank, responsible for business development and product design since 2003. Mr. Liu received his bachelor’s degree in economics from Shanghai University of Finance and Economics in 2003, and his EMBA degree from Peking University in 2018.
Li Zhang has served as our chief financial officer since May 2021 and our director of internal audit and internal control since 2019. Before joining us, Ms. Zhang served as chief financial officer of Agile Fund, a venture capital firm focusing on the technology, media and telecom, sports, fitness and wellness-related sectors in China, from 2018 to 2019. Prior to that time, Ms. Zhang served as director of risk and Compliance of USANA Health Sciences, Inc. and was in charge of audit and compliance matters relating the company’s operation in China from 2015 to 2018. Ms. Zhang also worked for PricewaterhouseCoopers as a senior manager from 2005 to 2015. Ms. Zhang received her bachelor degree in Computer Application Technology from North University of China in 1999 and holds an MBA from Tsinghua University.
| B. | Compensation of Directors and Executive Officers |
For the fiscal year ended December 31, 2025, we paid an aggregate of approximately RMB17.8 million (US$2.5 million) 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 and VIEs 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.
Share Incentive Plans
Our board of directors approved, in June 2015, June 2016 and March 2021, the 2015 Share Incentive Plan, the 2016 Share Incentive Plan and 2021 Share Incentive Plan, respectively (as amended and collectively, the Share Incentive Plans). The Share Incentive Plans are adopted to attract and retain the best available personnel, provide additional incentives to employees, directors, officers, and consultants and promote the success of our business. The maximum aggregate number of ordinary shares under the Share Incentive Plans is 91,603,068 Class A ordinary shares, and an annual increase on the first day of each of the five consecutive fiscal years commencing with the fiscal year beginning January 1, 2022, by (i) an amount equal to 1.0% of the total number of the then issued and outstanding ordinary shares or (ii) such fewer number of shares as may be determined by our board of directors, subject to amendment. As of March 31, 2026, awards to purchase 8,154,519 Class A ordinary shares under the Share Incentive Plans have been granted to our directors, executive officers and employees and outstanding, excluding awards that were forfeited or canceled after the relevant grant dates.
The following paragraphs describe the principal terms of the Share Incentive Plans.
Types of awards. The Share Incentive Plans permit the awards of options, restricted shares, or restricted share units.
Plan administration. Our board of directors or a committee of one or more members of the board of directors administers the Share Incentive Plans. The board or the committee, as applicable, will determine the participants to receive awards, the type and number of awards to be granted to each participant, and the terms and conditions of each award grant. Any grant or amendment of awards to any committee member shall then require an affirmative vote of a majority of the members of the board of directors who are not on the committee.
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Award agreement. Awards granted under the Share Incentive Plans are evidenced by an award agreement that sets forth terms, conditions and limitations for each award, which may include the term of the award, the provisions applicable in the event of the grantee’s employment or service terminates, and our authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind the award.
Eligibility. We may grant awards to our employees, directors and consultants of our company, and other individuals, as determined, authorized and approved by the committee.
Vesting schedule. In general, the committee determines the vesting schedule, which is specified in the relevant award agreement.
Exercise of options. The committee determines the exercise price for each award, which is stated in the award agreement. However, the maximum exercisable term is ten years from the date of a grant.
Transfer restrictions. Awards may not be transferred in any manner by the participant other than in accordance with the exceptions provided in applicable law, the Share Incentive Plans or the relevant award agreement, such as transfers by will or the laws of descent and distribution.
Termination and amendment of the Share Incentive Plans. Unless terminated earlier, each of the Share Incentive Plans has a term of ten years. With the approval of the board of directors, the committee may terminate, amend or modify the Share Incentive Plans; provided, however, that (a) to the extent necessary and desirable to comply with applicable laws, we shall obtain shareholder approval of any Share Incentive Plans amendment in such a manner and to such a degree as required, unless we decide to follow home country practice, and (b) unless we decide to follow home country practice, shareholder approval is required for any amendment to the Share Incentive Plans that (i) increases the number of shares available under the plan (other than any adjustment because of the changes in capital structure of us), or (ii) permits the committee to extend the term of the Share Incentive Plans or the exercise period for an option beyond ten years from the date of grant.
The following table summarizes, as of March 31, 2026, the options granted under the Share Incentive Plans to our current directors, executive officers and other grantees, excluding awards that were forfeited or canceled after the relevant grant dates.
| Name | Class A Ordinary Shares Underlying Options | Exercise Price (US$/Share) | Date of Grant | Date of Expiration | ||||||||||||
| Lei Sun | 6,227,900 | 0—2.34 | 7/10/2015 | 7/9/2020 | ||||||||||||
| 9,600,000 | 0 | 7/1/2016 | 12/31/2024 | |||||||||||||
| 24,958,000 | (1) | 0—2.12 | 10/20/2017 | 12/31/2024 | ||||||||||||
| Lei Liu | 3,000,000 | 0—2.34 | 7/10/2015 | 6/30/2026 | ||||||||||||
| All Directors and Executive Officers as a Group | 43,785,900 | |||||||||||||||
| (1) | Options to purchase 7,737,735 Class A ordinary shares of our Company have been transferred to other employees of our Company. |
As of March 31, 2026, other employees as a group hold options to purchase 6,654,519 Ordinary Shares of our company, with exercise prices ranging from nil to US$3.6953 per share.
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| C. | Board Practices |
Board of Directors
Our board of directors consists of six directors. A director is not required to hold any shares in our Company to qualify to serve as a director. A director may vote with respect to any contract, 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 our directors at which any such contract or proposed contract or arrangement is considered, provided (a) such director has declared the nature of his interest (whether directly or indirectly) interested in a contract, proposed contract or arrangement with our company, either specifically or by way of a general notice, (b) such director has not been disqualified by the chairman of the relevant board meeting, and (c) if such contract or arrangement is a transaction with a related party, such transaction has been approved by the audit committee. The directors may exercise all the powers of our company to borrow money, to mortgage or charge its undertaking, property and uncalled capital, and to issue debentures or other securities whenever money is borrowed or as security for any debt, liability or obligation of our company or of any third party. None of our non-executive directors has a service contract with us that provides for benefits upon termination of service.
Committees of the Board of Directors
We have established three committees under the board of directors: an audit committee, a compensation committee and a nominating and corporate governance committee. 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 Yuping Ouyang and Fangxiong Gong. Yuping Ouyang is the chairperson of our audit committee. We have determined that Yuping Ouyang and Fangxiong Gong each satisfies the “independence” requirements of Rule 5605(a)(2) of the Nasdaq Stock Market Rules and meet the independence standards under Rule 10A-3 under the Exchange Act. We rely on Rule 5615(a)(3) to follow our home country governance requirements of having an audit committee of two members, instead of three. In addition, we have determined that Yuping Ouyang 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:
| ● | appointing the independent auditors and pre-approving all audit and non-audit services permitted to be performed by the independent auditors; |
| ● | reviewing with the independent auditors any audit problems or difficulties and management’s response; |
| ● | discussing the annual audited financial statements with management and the independent auditors; |
| ● | reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any steps taken to monitor and control major financial risk exposures; |
| ● | reviewing and approving all proposed related party transactions; |
| ● | meeting separately and periodically with management and the independent auditors; and |
| ● | monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance. |
Compensation Committee. Our compensation committee consists of Fangxiong Gong and Yuping Ouyang. Yuping Ouyang is the chairperson of our compensation committee. We have determined that Fangxiong Gong and Yuping Ouyang each satisfies the “independence” requirements of Rule 5605(a)(2) of the Nasdaq Stock Market Rules. The compensation committee assists the board in reviewing and approving the compensation structure, including all forms of compensation, relating to our directors and executive officers. The compensation committee is responsible for, among other things:
| ● | reviewing and approving, or recommending to the board for its approval, the compensation for our chief executive officer and other executive officers; |
| ● | reviewing and recommending to the board for determination with respect to the compensation of our non-employee directors; |
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| ● | reviewing periodically and approving any incentive compensation or equity plans, programs or similar arrangements; and |
| ● | selecting compensation consultant, legal counsel or other adviser only after taking into consideration all factors relevant to that person’s independence from management. |
Nominating and Corporate Governance Committee. Our nominating and corporate governance committee consists of Yuping Ouyang and Fangxiong Gong. Fangxiong Gong is the chairperson of our nominating and corporate governance committee. We have determined that Yuping Ouyang and Fangxiong Gong each satisfies the “independence” requirements of Rule 5605(a)(2) of the Nasdaq Stock Market Rules. The nominating and corporate governance committee assists the board of directors in selecting individuals qualified to become our directors and in determining the composition of the board and its committees. The nominating and corporate governance committee is responsible for, among other things:
| ● | selecting and recommending to the board nominees for election by the shareholders or appointment by the board; |
| ● | reviewing annually with the board the current composition of the board with regards to characteristics such as independence, knowledge, skills, experience and diversity; |
| ● | making recommendations on the frequency and structure of board meetings and monitoring the functioning of the committees of the board; and |
| ● | advising the board periodically with regards to significant developments in the law and practice of corporate governance as well as our compliance with applicable laws and regulations, and making recommendations to the board on all matters of corporate governance and on any remedial action to be taken. |
Duties of Directors
Under Cayman Islands law, our directors have a duty to act honestly, in good faith and with a view to our best interests. Our directors also have a duty to exercise the care, diligence and skills that a reasonably prudent person would exercise in comparable circumstances. In fulfilling their duty of care to us, our directors must ensure compliance with our memorandum and articles of association and the class rights vested thereunder in the holders of the shares. A shareholder may in certain circumstances have rights to damages if a duty owed by the directors is breached.
Our board of directors has all the powers necessary for managing, and for directing and supervising, our business affairs. The functions and powers of our board of directors include, among others:
| ● | convening shareholders’ annual general meetings and reporting its work to shareholders at such meetings; |
| ● | declaring dividends and distributions; |
| ● | appointing officers and determining the term of office of the officers; |
| ● | exercising the borrowing powers of our company and mortgaging the property of our company; and |
| ● | approving the transfer of shares in our company, including the registration of such shares in our share register. |
Terms of Directors and Officers
Our directors may be elected by a resolution of our board of directors, or by an ordinary resolution of our shareholders. A director may be appointed on terms that the director shall automatically retire from office (unless he has sooner vacated office) at the next or a subsequent annual general meeting or upon any specified event or after any specified period in a written agreement between our company and the director, if any; but no such term shall be implied in the absence of express provision. Each director whose term of office expires shall be eligible for re-election at a meeting of the shareholders or re-appointment by the board of directors. A director may be removed from office by an ordinary resolution of the shareholders. A director will cease to be a director if, among other things, the director (i) becomes bankrupt or makes any arrangement or composition with his creditors; (ii) dies or is found by our company to be or becomes of unsound mind, (iii) resigns his office by notice in writing to our company, (iv) without special leave of absence from our board, is absent from three consecutive board meetings and our directors resolve that his office be vacated, or (v) is removed from office pursuant to any other provisions of our sixth amended and restated memorandum and articles of association. Our officers are elected by and serve at the discretion of our board of directors.
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Employment Agreements and Indemnification Agreements
We have entered into employment agreements with each of our executive officers. Under these agreements, each of our executive officers is employed for a specified time period. We may terminate employment for cause, for certain acts of the executive officer, such as continued failure to satisfactorily perform his or her duties, willful misconduct or gross negligence in the performance of his or her duties, conviction or entry of a guilty or nolo contendere plea of any felony or any misdemeanor involving moral turpitude, or dishonest acts to our detriment. We may also terminate an executive officer’s employment without cause upon 30-day advance written notice. In such case of termination by us, we will provide severance payments to the executive officer as may be agreed between the executive officers and us. The executive officer may resign at any time with a 30-day advance written notice.
Each executive officer has agreed to hold, both during and after the termination or expiry of his or her employment agreement, in strict confidence and not to use, except as required in the performance of his or her duties in connection with the employment or pursuant to applicable law, any of our confidential information or trade secrets, any confidential information or trade secrets of our clients or prospective clients, or the confidential or proprietary information of any third party received by us and for which we have confidential obligations. The executive officers have also agreed to disclose in confidence to us all inventions, designs and trade secrets which they conceive, develop or reduce to practice during the executive officer’s employment with us and to assign all right, title and interest in them to us, and assist us in obtaining and enforcing patents, copyrights and other legal rights for these inventions, designs and trade secrets.
In addition, each executive officer has agreed to be bound by non-competition and non-solicitation restrictions during the term of his or her employment and typically for one year following the last date of employment. Specifically, each executive officer has agreed not to (i) approach our suppliers, clients, customers or contacts or other persons or entities introduced to the executive officer in his or her capacity as a representative of us for the purpose of doing business with such persons or entities that will harm our business relationships with these persons or entities; (ii) assume employment with or provide services to any of our competitors, or engage, whether as principal, partner, licensor or otherwise, any of our competitors, without our express consent; (iii) seek, directly or indirectly, to solicit the services of, or hire or engage, any person who is known to be employed or engaged by us; or (iv) otherwise interfere with our business or accounts.
We have also 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 276, 227 and 185 employees as of December 31, 2023, 2024 and 2025, respectively. Almost all our employees are located in China and Hong Kong. The following table sets forth the numbers of our employees categorized by function as of December 31, 2025.
| As of December 31, 2025 | ||||
| Function: | ||||
| Product and technology | 30 | |||
| Risk management | 14 | |||
| Business operations | 57 | |||
| Sales and marketing | 27 | |||
| General administration | 57 | |||
| Total | 185 | |||
As required by laws and regulations in China, we participate in various employee benefit plans that are organized by municipal and provincial governments, including, among other things, housing fund, pension, medical insurance and unemployment insurance. We are required under PRC law to make contributions 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.
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We typically enter into standard employment, confidentiality and non-compete agreements with our senior management and core personnel. These contracts include a standard non-compete covenant that prohibits the employee from competing with us, directly or indirectly, during his or her employment and for not more than two years after the termination of his or her employment, provided that we pay compensation equal to 30% of the employee’s salary during the restriction period.
We believe that we maintain a good working relationship with our employees, and we have not experienced any material labor disputes that have affected our operations. None of our employees are represented by labor unions.
| E. | Share Ownership |
Except as specifically noted, the following table sets forth information with respect to the beneficial ownership of our ordinary shares as of March 31, 2026 by:
| ● | each of our directors and executive officers; and |
| ● | each of our principal shareholders who beneficially own 5% or more of our total outstanding shares. |
The calculations in the table below are based on 235,466,660 ordinary shares as of March 31, 2026.
Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, we have included shares that the person has the right to acquire within 60 days after March 31, 2026, including through the exercise of any option, warrant or other right or the conversion of any other security. These shares, however, are not included in the computation of the percentage ownership of any other person.
| Ordinary Shares Beneficially Owned | ||||||||||||||||||||
| Class A ordinary shares | Class B ordinary shares | Total ordinary shares | Percentage of total ordinary shares | Percentage of aggregate voting power† | ||||||||||||||||
| Directors and Executive Officers:* | ||||||||||||||||||||
| Lei Sun(l) | 6,085,465 | 58,348,000 | 64,433,465 | 27.4 | % | 62.0 | % | |||||||||||||
| Yifan Ren(2) | 43,583,400 | — | 43,583,400 | 18.5 | % | 9.1 | % | |||||||||||||
| Changxing Xiao(3) | 13,920,300 | — | 13,920,300 | 5.9 | % | 2.9 | % | |||||||||||||
| Fangxiong Gong | — | — | — | — | — | |||||||||||||||
| Yuping Ouyang | — | — | — | — | — | |||||||||||||||
| Lei Liu(4) | 4,500,000 | 1,347,600 | 5,847,600 | 2.5 | % | 2.3 | % | |||||||||||||
| Li Zhang | — | — | — | — | — | |||||||||||||||
| All Directors and Executive Officers as a Group | 68,089,165 | 59,695,600 | 127,784,765 | 54.3 | % | 76.3 | % | |||||||||||||
| Principal Shareholders: | ||||||||||||||||||||
| Nine F Capital Limited(1) | 6,085,465 | 58,348,000 | 64,433,465 | 27.4 | % | 62.0 | % | |||||||||||||
| Nine Fortune Limited(2) | 43,583,400 | — | 43,583,400 | 18.5 | % | 9.1 | % | |||||||||||||
| DFM Capital Ltd.(3) | 13,920,300 | — | 13,920,300 | 5.9 | % | 2.9 | % | |||||||||||||
| Rich Way Global Limited(5) | 15,263,301 | — | 15,263,301 | 6.5 | % | 3.2 | % | |||||||||||||
Notes:
| * | Mr. Lei Liu’s and Ms. Li Zhang’s business address is Room 1207, Building No. 5, 5 West Laiguangying Road, Chaoyang District, Beijing 100012, People’s Republic of China. Mr. Lei Sun’s business address is Suite 4806-07 48/F, Central Plaza 18 Harbour Rd, Wanchai, Hong Kong. Mr. Fangxiong Gong’s business address is Room 6681, The Center, 99 Queen’s Road Central, Central, Hong Kong. Ms. Yuping Ouyang’s business address is Room 1001, Block A5, 243 Science Street, Huangpu District, Guangzhou 510700, China. Mr. Yifan Ren’s business address is 17/F, 80 Gloucester Road, Wanchai, Hong Kong. Mr. Changxing Xiao’s business address is 2/F, Building B, B36 BOE Universal Business Park, No. 10 Jiuxianqiao Road, Chaoyang District, Beijing, People’s Republic of China. |
| † | For each person or group included in this column, percentage of total voting power represents voting power based on both Class A and Class B ordinary shares held by such person or group with respect to all outstanding shares of our Class A and Class B ordinary shares as a single class. Each holder of our Class A ordinary shares is entitled to one vote per share. Each holder of our Class B ordinary shares is entitled to five votes per share. Our Class B ordinary shares are convertible at any time by the holder into Class A ordinary shares on a one-for-one basis, while Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances. |
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| (1) | Represents (i) 58,348,000 Class B ordinary shares held by Nine F Capital Limited, a British Virgin Islands company indirectly wholly owned by The Nine F Trust; and (ii) 6,085,465 Class A ordinary shares held by Nine F Capital Limited. The registered address of Nine F Capital Limited is Sertus Chambers, P.O. Box 905, Quastisky Building, Road Town, Tortola, British Virgin Islands. The Nine F Trust is a trust established under the laws of Guernsey and managed by Trident Trust Company (HK) Limited as the trustee. Mr. Lei Sun is the settlor and protector of the trust and Mr. Lei Sun and his family members are the trust’s beneficiaries. Under the terms of this trust, Mr. Lei Sun has the power to direct the trustee with respect to the retention or disposal of, and the exercise of any voting and other rights attached to, the shares held by Nine F Capital Limited in our company. |
| (2) | Represents 43,583,400 Class A ordinary shares held by Nine Fortune Limited, a British Virgin Islands company. Nine Fortune Limited is controlled by Mr. Yifan Ren. The registered address of Nine Fortune Limited is Sertus Chambers, P.O. Box 905, Quastisky Building, Road Town, Tortola, British Virgin Islands. |
| (3) | Represents 13,920,300 Class A ordinary shares held by DFM Capital Ltd., a British Virgin Islands company controlled by The DTFM Capital Trust. The registered address of DFM Capital Ltd. is Sertus Chambers, P.O. Box 905, Quastisky Building, Road Town, Tortola, British Virgin Islands. The DTFM Capital Trust is a trust established under the laws of Guernsey and managed by DTFM (PTC) Ltd., a private trust company incorporated in British Virgin Islands, as the trustee. Mr. Changxing Xiao is the settlor of this trust and Mr. Changxing Xiao and his family members are the trust’s beneficiaries. DTFM (PTC) Ltd. is in turn controlled by The DTFM Settlement, a trust established under the laws of Guernsey. The DTFM Settlement is managed by Trident Trust HK as the trustee. Mr. Changxing Xiao is the settlor and enforcer of The DTFM Settlement. Under the terms of the abovementioned trusts, Mr. Changxing Xiao has the power to direct the trustee with respect to the retention or disposal of, and the exercise of any voting and other rights attached to the shares held by DFM Capital Ltd. in our company. |
| (4) | Represents (i) 1,347,600 Class B ordinary shares held by Stone Cube Capital Ltd. a British Virgin Islands company; (ii) 3,000,000 Class A ordinary shares held by Stone Cube Capital Ltd; and (iii) 1,500,000 Class A ordinary shares that Stone Cube Capital Ltd. may purchase upon exercise of options within 60 days after March 31, 2026. The registered address of Stone Cube Capital Ltd. is Sertus Chambers, P.O. Box 905, Quastisky Building, Road Town, Tortola, British Virgin Islands. Stone Cube Capital Ltd is wholly-beneficially-owned by Mr. Liu. |
| (5) | Represents 15,263,301 Class A ordinary shares held by Rich Way Global Limited, a British Virgin Islands company, as reported in a Schedule 13G filed by Rich Way Global Limited and Rongsong Teng on August 5, 2021. Rich Way Global Limited is wholly beneficially owned by Mr. Rongsong Teng. The registered address of Rich Way Global Limited is Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, British Virgin Islands. |
To our knowledge, as of March 31, 2026, a total of 71,688,437 Class A ordinary shares were held by one record holder in the United States, which is the depositary of our ADS program. As of March 31, 2026, none of our Class B ordinary shares are held by U.S. record holders. 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. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company.
| 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 |
Please refer to “Item 6. Directors, Senior Management and Employees—E. Share Ownership.”
| B. | Related Party Transactions |
Contractual Arrangements with our VIEs and its Shareholders
See “Item 4. Information on the Company—C. Organizational Structure.”
Employment Agreements and Indemnification Agreements
See “Item 6. Directors, Senior Management and Employees—C. Board Practices—Employment Agreements and Indemnification Agreements.”
Share Incentive Plans
See “Item 6. Directors, Senior Management and Employees—B. Compensation of Directors and Executive Officers—Share Incentive Plans.”
Option Grants
See “Item 6. Directors, Senior Management and Employees—B. Compensation of Directors and Executive Officers—Share Incentive Plans.”
Other Transactions with Other Related Parties
In 2019, Nanjing Lefang Intelligent Lite Technology Development Co., Ltd., or Nanjing Lefang, an investee over which we have significant influence, provided us with borrower acquisition and referral services. We provided consulting services to Nanjing Lefang in 2019 and related party loan to Nanjing Lefang. As of December 31, 2024 and 2025, we had RMB4.6 million and RMB4.6 million (US$0.7 million) due to Nanjing Lefang, and RMB43.1 million and RMB42.3 million (US6.0 million) due from Nanjing Lefang, respectively. Such amounts due from Nanjing Lefang represented loans we provided, which recognized a full allowance for expected credit losses against as of December 31, 2023. In 2024, Nanjing Lefang repaid RMB400 thousand, and therefore the outstanding balance decreased to RMB43.1 million as of December 31, 2024. In 2025, Nanjing Lefang repaid RMB810 thousand, and therefore the outstanding balance decreased to RMB42.3 million as of December 31, 2025.
As of December 31, 2023, we had RMB92.4 million due from Hainan Chenxi, which represented a related party loan we extended to Hainan Chenxi for the purpose of supporting its efforts to seize the business opportunities during the resurgence of the COVID-19 pandemic. Due to the tepid recovery of the macroeconomic environment after COVID-19 pandemic, Hainan Chenxi incurred continued losses from its wealth management business, and we recognized a full allowance for expected credit losses against the loan as of December 31, 2023. In 2024, Hainan Chenxi attributed a revenue of RMB4 thousand. In 2025, Hainan Chenxi repaid RMB1,665 thousand to us, and therefore the outstanding balance decreased to RMB90.7 million as of December 31, 2025.
As of December 31, 2023, we had RMB57.1 million due from Zhongzheng Jinniu, which represented a related party loan we extended to Zhongzheng Jinniu for the for the purpose of supporting its efforts to seize the business opportunities in an expected securities market resurgence after the COVID-19 pandemic. Due to the tepid recovery of the macroeconomic environment after COVID-19 pandemic, Zhongzheng Jinniu incurred continued loss from its fund business, and we recognized a full allowance for expected credit losses against. From 2024, to support their rapid development of Zhongzheng Jinniu, we extended a new loan of RMB2.4 million to Zhongzheng Jinniu, and hoped they have some opportunity to enhance their business. In 2024, Zhongzheng Jinniu continuously repaid RMB1.5 million, and we recognized a full allowance for expected credit losses against the remaining balance. In 2025, Zhongzheng Jinniu neither made any additional repayments nor received any new loans from us, and the outstanding balance was RMB58.0 million as of December 31, 2025.
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As of December 31, 2023, we had RMB5.0 million due from Zhuhai Yuanxin Investments Partnership (Limited Partnership) based on future cooperation considerations. As of December 31, 2024 and 2025, the gross loan balance remained unchanged, and the full allowance remained in place.
As of December 31, 2023, we had RMB50 thousand due from Beijing Lize Jiaxing Technology Co., Ltd., an equity investee of ours, which represented a related party loan. We have recorded an impairment loss of this loan in full as of December 31, 2023. In 2024, we extended RMB100 thousand more loan to Beijing Lize Jiaxing Technology Co., Ltd., which recognized a full allowance for expected credit losses against as of December 31, 2024. In 2025, Beijing Lize Jiaxing Technology Co., Ltd. repaid RMB150 thousand in full, and the outstanding balance was nil as of December 31, 2025.
As of December 31, 2024, we had RMB1.4 million due to Shuimu Online (Beijing) Technology Co., Ltd., an equity investee of ours, which represented a related party loan. As of December 31, 2025, the amount due to Shuimu Online increased by RMB90 thousand as Shuimu online provided leasing service to the Group.
| C. | Interests of Experts and Counsel |
Not applicable.
Item 8. FINANCIAL INFORMATION
| A. | Consolidated Statements and Other Financial Information |
We have appended consolidated financial statements filed as part of this annual report.
Legal Proceedings
In 2019, we partnered with PICC under our direct lending program, for which PICC provided credit insurance to the institutional funding partners. Our cooperation with PICC on new loans under direct lending program was terminated in December 2019. In November 2019, PICC stopped paying the service fees to us that had been agreed in the cooperation agreement between us and PICC. PICC further disputed with us regarding payments of the service fees under the cooperation agreement. In May 2020, we commenced a legal proceeding against PICC by submitting a complaint with a local court in Beijing for contract non-performance under the cooperation agreement. We, together with our legal counsel of the case, determined that PICC has breached its contractual obligation under the cooperation agreement for not paying service fees that were due to us under our direct lending program. We are seeking payments of approximately RMB2.3 billion from PICC to cover the outstanding service fees and related late payment losses. After our legal action was filed against PICC, PICC filed a civil lawsuit against us at a local court in Guangzhou claiming that the second amendment under the cooperation agreement is invalid, and therefore PICC is not obligated to pay any outstanding service fees and that a portion of the service fees paid to us under the cooperation agreement plus accrued interest should be refunded to PICC. The court proceedings in Beijing and Guangzhou were later consolidated. Currently, the consolidated court proceeding has concluded with the ruling pending. Although the hearing process has been completed, under applicable legal procedures, the court may schedule additional hearings, which could further delay resolution of the matter and increase related costs and uncertainty. If we do not prevail in these lawsuits completely or in part, or fail to reach a favorable settlement with PICC, our results of operations, financial condition, liquidity and prospects would be materially and adversely affected.
Beginning in September 2020, we and certain of our current and former officers, directors and others were named as defendants in various putative securities class actions captioned In re 9F Inc. Securities Litigation, Index No. 654654/2020 (Supreme Court of the State of New York County of New York, Amended Complaint filed Dec. 7, 2020), or the State Court Action, and Holland v. 9F Inc. et al., No. 2:21-cv-00948 (United States District Court for the District of New Jersey), or the Federal Court Action. Both actions allege that defendants made misstatements and omissions in connection with our public offering and disclosures in violation of the federal securities laws. On March 6, 2023, the State Court Action was dismissed without prejudice and plaintiffs were allowed to replead. On April 5, 2023, a second amended complaint was filed in the State Court Action. Briefing on the motion to dismiss the second amended complaint was completed on July 28, 2023. On March 14, 2024, the Court dismissed the State Court Action with prejudice. Plaintiffs filed a notice of appeal on April 11, 2024. On January 30, 2025, the Supreme Court of the State of New York, Appellate Division, First Department unanimously affirmed the lower court’s decision, which granted defendants’ motion to dismiss the second amended complaint. On February 28, 2025, Plaintiffs filed a motion for reargument and leave to appeal to Court of Appeals. We filed a response to the motion on March 24, 2025, and Plaintiffs filed a reply on March 28, 2025. On May 29, 2025, the Appellate Division denied the motion. The State Court Action is over. On November 29, 2022, the Federal Court Action was dismissed without prejudice and plaintiffs were allowed to replead. Briefing on the motion to dismiss the second amended complaint was completed in May 2023. On February 22, 2024, the Court granted plaintiffs’ request to further amend the complaint, and a revised second amended complaint was filed on the same day. Briefing on the motion to dismiss the revised second amended complaint was completed on March 25, 2024. On December 12, 2024, the Federal Court Action was partially dismissed without prejudice. On December 23, 2024, a third amended complaint was filed in the Federal Court Action. We filed our motion to dismiss the third amended complaint on February 12, 2025. Briefing on the motion to dismiss the third amended complaint was completed on April 11, 2025. In November 2025, the Court issued an order and referred the case back to the Magistrate Court. A settlement conference was held before the Magistrate Judge on April 2, 2026. On April 8, 2026, the District Court issued an order administratively terminating the entire action pending consummation of the settlement.
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From time to time, we are subject to legal proceedings in relation to the operation of our business and legacy business. Starting from 2023, each of Jiufu Puhui and Jiufu Shuke has been named as a co-defendant, in their respective capacity as the operator of an online lending information intermediary platform offering online wealth management products to investors, by loan investors in a large number of small claims initiated in local courts in China in relation to our legacy business. Most of those claims are still in early stage of court procedures and it is not possible to ascertain the outcomes of those legal proceedings. We vigorously assert our rights in those proceedings and will continue to do so. In July 2023, the Supreme People’s Court of the PRC issued a civil judgment regarding one of those claims, concluding there had been no intention to form a private lending contract or establish guarantee relationship between that certain loan investor and Jiufu Puhui under our legacy business. The Supreme People’s Court of the PRC further found in the judgment that Jiufu Puhui, as the operator of an online lending information intermediary platform, shall not be responsible for loan repayment to that certain loan investor. However, in 2025 and as of the date of this annual report, a moderate aggregate amount was awarded in favor of loan investors in some of the remaining legal proceedings. Such amount was initially paid by us, and we have subsequently recovered the full amount from a third party with whom we collaborated pursuant to our agreement in connection with the handling of outstanding loans relating to our legacy business. In relation to such legal proceedings, certain assets of the Company, in an aggregate amount of approximately RMB231.0 million, were subject to judicial freezing orders as of March 31, 2026. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—We may from time to time be subject to claims, controversies, lawsuits and legal proceedings, which could have a material adverse effect on our results of operations, financial condition, liquidity, cash flows and reputation.” and “Item 4—Information on the Company—A. History and Development of the Company.”
Dividend Policy
Our board of directors has complete discretion on whether to distribute dividends, subject to the requirements of Cayman Islands law that our company may only pay dividends out of profits or share premium, and provided always that in no circumstances may a dividend be paid if this would result in our company being unable to pay its debts as they fall due in the ordinary course of business. In addition, our shareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our board of directors. Even if our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant.
We do not have any present plan to pay cash dividends on our ordinary shares in the foreseeable future. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business.
We are a holding company incorporated in the Cayman Islands. We 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 4. Information on the Company—B. Business Overview—Regulations—Regulations Related to Our Business Operation in China—Regulations Related to Foreign Exchange—Regulations Related to Dividend Distributions.”
If we pay any dividends on our Class A ordinary shares, we will pay those dividends which are payable in respect of the Class A ordinary shares represented by our ADSs to the depositary, as the registered holder of such Class A ordinary shares, and the depositary then will pay such amounts to our ADS holders in proportion to Class A ordinary shares represented by the ADSs held by such ADS holders, 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 Class A ordinary shares, if any, will be paid in U.S. dollars.
| B. | Significant Changes |
Except as disclosed elsewhere in this annual report, we have not experienced any significant changes since the date of our audited consolidated financial statements included in this annual report.
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Item 9. THE OFFER AND LISTING
| A. | Offering and Listing Details |
See “—C. Markets.”
| B. | Plan of Distribution |
Not applicable.
| C. | Markets |
Our ADSs have been listed on the Nasdaq Global Market since August 15, 2019. On January 18, 2023, we effected a change to the ratio of ADSs to Class A ordinary shares from one ADS to one Class A ordinary share to one ADS to 20 Class A ordinary shares. Except as otherwise indicated, all ADS and per ADS data in this annual report give retroactive effect to such change of ADS ratio to one ADS to 20 Class A ordinary shares. Our ADSs trade under the symbol “JFU.”
| 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 |
The following are summaries of material provisions of our sixth amended and restated memorandum and articles of association and of the Companies Act (As Revised), insofar as they relate to the material terms of our ordinary shares.
Objects of Our Company. Pursuant to section three of our sixth amended and restated memorandum and articles of association, the objects of our company are unrestricted and we have the full power and authority to carry out any object not prohibited by the law of the Cayman Islands.
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Ordinary Shares. Our ordinary shares are divided into Class A ordinary shares and Class B ordinary shares. Holders of Class A ordinary shares and Class B ordinary shares have the same rights except for voting and conversion rights. 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 shares. We may not issue bearer shares. Each Class A ordinary share is entitled to one vote, and each Class B ordinary share is entitled to five votes and is convertible into one Class A ordinary share at the option of the holder thereof. Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances. Upon any sale, transfer, assignment or disposition of any Class B ordinary share by a holder thereof to any non-affiliate of such holder, or upon a change of control of any Class B ordinary share to any person who is not an affiliate of the registered holder of such Class B ordinary share, each of such Class B ordinary shares will be automatically and immediately converted into one Class A ordinary share.
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 an ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our directors. Our sixth amended and restated memorandum and articles of association provides that our directors may, before recommending or declaring any dividend, set aside out of the funds legally available for distribution such sums as they think proper as a reserve or reserves which shall, in the absolute discretion of our directors, be applicable for meeting contingencies or for equalizing dividends or for any other purpose to which those funds may be properly applied. 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. Voting at any shareholders’ meeting is by 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 the total ordinary shares present in person or by proxy. In respect of all matters subject to a shareholders’ vote on a poll, each Class A ordinary share is entitled to one vote and each Class B ordinary share is entitled to five votes.
A quorum required for a meeting of shareholders consists of one or more shareholders present or by proxy, holding shares which represent, in aggregate, not less than one-third of the votes attaching to the issued and outstanding voting shares in our company entitled to vote at general meetings. Shareholders may be present in person or by proxy or, if the shareholder is a legal entity, by its duly authorized representative. Shareholders’ meetings may be convened by our board of directors on its own initiative or upon a request to the directors by shareholders holding shares which represent, in aggregate, no less than one-third of the votes attaching to the issued and outstanding shares in our company entitled to vote at general meetings; however, our sixth amended and restated memorandum and articles of association does not provide our shareholders with any right to put any proposals before annual general meetings or extraordinary general meetings not called by such shareholders. Advance notice of at least seven calendar days is required for the convening of our annual general shareholders’ meeting and any other general shareholders’ meeting.
An ordinary resolution to be passed at a meeting 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. Both ordinary resolutions and special resolutions may also be passed by a unanimous written resolution signed by all the shareholders of our company, as permitted by the Companies Act and our sixth amended and restated memorandum and articles of association. A special resolution will be required for important matters such as a change of name or making changes to our sixth amended and restated memorandum and articles of association. Holders of the ordinary shares may, among other things, divide or combine their shares by ordinary resolution.
Transfer of Ordinary Shares. Subject to the restrictions set out below, any of our shareholders may transfer all or any of his or her ordinary shares by an instrument of transfer in the usual or common form or any other form approved by our board of directors.
Our board of directors may, in its absolute discretion, decline to register any transfer of any ordinary share which is not fully paid up or on which we have a lien. Our board of directors may also decline to register any transfer of any ordinary share unless:
| ● | 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; |
| ● | the instrument of transfer is in respect of only one class of shares; |
| ● | the instrument of transfer is properly stamped, if required; |
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| ● | 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; and |
| ● | a fee of such maximum sum as the Nasdaq Stock Market may determine to be payable or such lesser sum as our directors may from time to time require is paid to us in respect thereof. |
If our directors refuse to register a transfer they shall, within three calendar 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 the Nasdaq Stock Market, be suspended and the register 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 closed for more than 30 calendar days in any calendar year as our board may determine from time to time.
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 will be distributed among our shareholders 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. We are a “limited liability” company 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 sixth amended and restated 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 shares in a notice served to such shareholders at least 14 calendar days prior to the specified time or times of payment. The shares that have been called upon and remain unpaid are subject to forfeiture.
Redemption, Repurchase and Surrender of Ordinary Shares. We may issue shares on terms that such shares are subject to redemption, at our option or at the option of the holders thereof, on such terms and in such manner as may be determined, before the issue of such shares, by our board of directors 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 sixth amended and restated memorandum and articles of association. Under the Companies Act, the redemption or repurchase of any share may be paid out of the 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 materially adversely varied with the consent in writing of the holders of all of the holders of the issued shares of that class or with the sanction of an ordinary resolution passed at a separate meeting of the holders of the shares of that class. The rights conferred upon the holders of the shares of any class issued with preferred or other rights shall 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.
Issuance of Additional Shares. Our sixth 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 of available authorized but unissued shares.
Our sixth amended and restated memorandum and articles of association also authorizes our board of directors to establish from time to time one or more series of preferred shares and to determine, with respect to any series of preferred shares, the terms and rights of that series, including:
| ● | the designation of the series; |
| ● | the number of preferred shares to constitute the series and the subscription price thereof if different from the par value thereof; |
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| ● | the dividend rights, dividend rates, conversion rights, voting rights; and |
| ● | the rights and terms of redemption and liquidation preferences. |
Our board of directors may issue preferred shares without action by our shareholders to the extent authorized but unissued. Issuance of these shares may dilute the voting power of holders of Ordinary Shares.
Inspection of Books and Records. Holders of our ordinary shares will have no general right under Cayman Islands law to inspect or obtain our register of members or our corporate records (other than copies of the memorandum and articles of association, the register of mortgages and charges, and any special resolutions passed by the shareholders). Under Cayman Islands law, the names of our current directors can be obtained from a search conducted at the Registrar of Companies. However, we will provide our shareholders with annual audited financial statements.
Anti-Takeover Provisions. Some provisions of our sixth amended and restated memorandum and articles of association may discourage, delay or prevent a change of control of our company or management that shareholders may consider favorable, including provisions that:
| ● | authorize our board of directors to issue preferred shares in one or more series and to designate the price, rights, preferences, privileges and restrictions of such preferred shares without any further vote or action by our shareholders; 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 sixth 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.
General Meetings of Shareholders and Shareholder Proposals. Our shareholders’ general meetings may be held in such place within or outside the Cayman Islands as our board of directors considers appropriate.
As a Cayman Islands exempted company, we are not obliged by the Companies Act to call shareholders’ annual general meetings. Our sixth 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.
Shareholders’ annual general meetings and any other general meetings of our shareholders may be convened by a majority of our board of directors or our chairman. Advance notice of at least seven 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 at least one shareholder present or by proxy, representing not less than one-third of the votes attaching to the issued and outstanding shares in 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 sixth amended and restated memorandum and articles of association allow our shareholders holding shares representing in 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 our 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 sixth 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.
Election and Removal of Directors
Unless otherwise determined by our company in a general meeting, our sixth amended and restated articles of association provides that our board will consist of not less than three directors. There are no provisions relating to retirement of directors upon reaching any age limit.
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The directors have the power to appoint any person as a director either to fill a casual vacancy on the board or as an addition to the existing board. Our shareholders may also appoint any person to be a director by way of ordinary resolution.
A director may be removed with or without cause by ordinary resolution.
In addition, the office of any director shall be vacated if the director (i) becomes bankrupt or makes any arrangement or composition with his creditors, (ii) dies or is found to be or becomes of unsound mind, (iii) resigns his office by notice in writing to our company, or (iv) without special leave of absence from our board, is absent from three consecutive board meetings and our board resolves that his office be vacated.
Proceedings of Board of Directors
Our sixth amended and restated memorandum and articles of association provide that our business is to be managed and conducted by our board of directors. The quorum necessary for board meetings may be fixed by the board and, unless so fixed at another number, will be a majority of the directors.
Our sixth amended and restated memorandum and articles of association provide that the board may exercise all the powers of our company to borrow money, to mortgage or charge all or any part of the undertaking, property and uncalled capital of our company and to issue debentures and other securities whenever money is borrowed, or as security for any debt, liability or obligation of our company or of any third party.
For further information relating to a director’s power to vote on materially interested transactions or number of shares required for a director’s qualification, see “Item 6. Directors, Senior Management and Employees—C. Board Practices—Board of Directors” and “—Committees of the Board of Directors—Compensation Committee.”
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 which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person and diminish the amount of our share capital by the amount of the shares so canceled. |
Our shareholders may by special resolution, 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 or any capital redemption reserve in any manner permitted by law.
Exempted Company. We are an exempted company with limited liability under the Companies Act. The Companies Act distinguishes between ordinary resident companies and exempted companies. Any company that is incorporated in the Cayman Islands but conducts business mainly outside of the Cayman Islands may apply to be incorporated as an exempted company. The requirements for an exempted company are essentially the same as for an ordinary company except that an exempted company:
| ● | does not have to file an annual return of its shareholders with the Registrar of Companies; |
| ● | is not required to open its register of members for inspection; |
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| ● | does not have to hold an annual general meeting; |
| ● | may issue shares with no par value; |
| ● | may obtain an undertaking against the imposition of any future taxation (such undertakings are given for a period of up to 30 years); |
| ● | may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands; |
| ● | may register as a limited duration company; and |
| ● | may register as a segregated portfolio company. |
“Limited liability” means that the liability of each shareholder is limited to the amount unpaid by the shareholder on that shareholder’s shares of the company (except in exceptional circumstances, such as involving fraud, the establishment of an agency relationship or an illegal or improper purpose or other circumstances in which a court may be prepared to pierce or lift the corporate veil).
Register of Members. Under Cayman Islands law, we must keep a register of members and there should be entered therein:
| ● | (i) the names and addresses of the members, together with a statement of the shares held by each member, and of the amount paid or agreed to be considered as paid, on the shares of each member, (ii) the number and category of shares held by each member, and (iii) whether each relevant category of shares held by a member carries voting rights under the articles of association of the company, and if so, whether such voting rights are conditional; |
| ● | the date on which the name of any person was entered on the register as a member; and |
| ● | the date on which any person ceased to be a member. |
Under Cayman Islands law, the register of members of our company is prima facie evidence of the matters set out therein (i.e., the register of members will raise a presumption of fact on the matters referred to above unless rebutted) and a member registered in the register of members should be deemed as a matter of Cayman Islands law to have legal title to the shares as set against its name in the register of members. Once our register of members has been updated, the shareholders recorded in the register of members will be deemed to have legal title to the shares set against their name in the register of members.
If the name of any person is incorrectly entered in or omitted from our register of members, or if there is any delinquent or unnecessary delay in entering on the register the fact of any person having ceased to be a member of our company, the person or member aggrieved (or any member of our company or our company itself) may apply to the Grand Court of the Cayman Islands for an order that the register be rectified, and the Court may either refuse such application or it may, if satisfied of the justice of the case, make an order for the rectification of the register.
Differences in Corporate Law
The Companies Act is derived, to a large extent, from the older Companies Acts of England but does not follow recent United Kingdom statutory enactments, and accordingly there are significant differences between the Companies Act and the current Companies Act of England. In addition, the Companies Act differs from laws applicable to United States corporations and their shareholders. Set forth below is a summary of certain significant differences between the provisions of the Companies Act applicable to us and the comparable provisions of the laws applicable to companies incorporated in the United States and their shareholders.
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Mergers and Similar Arrangements. The Companies Act permits mergers and consolidations between Cayman Islands companies and between Cayman Islands companies and non-Cayman Islands companies. For these purposes, (a) “merger” means the merging of two or more constituent companies and the vesting of their undertaking, property and liabilities in one of such companies as the surviving company and (b) a “consolidation” means the combination of two or more constituent companies into a combined company and the vesting of the undertaking, property and liabilities of such companies to the consolidated company. In order to effect such a merger or consolidation, the directors of each constituent company must approve a written plan of merger or consolidation, which must then be authorized by (a) a special resolution of the shareholders of each constituent company, and (b) such other authorization, if any, as may be specified in such constituent company’s articles of association. The written plan of merger or consolidation must be filed with the Registrar of Companies together with a declaration as to the solvency of the consolidated or surviving company, a declaration as to the assets and liabilities of each constituent company and an undertaking that a copy of the certificate of merger or consolidation will be given to the members and creditors of each constituent company and that notification of the merger or consolidation will be published in the Cayman Islands Gazette. Dissenting shareholders have the right to be paid the fair value of their shares (which, if not agreed between the parties, will be determined by the Cayman Islands court) if they follow the required procedures, subject to certain exceptions. Court approval is not required for a merger or consolidation which is effected in compliance with these statutory procedures.
Separate from the statutory provisions relating to mergers and consolidations, the Companies Act also contains, there are statutory provisions that facilitate the reconstruction and amalgamation of companies by way of schemes of arrangement between the company and its creditors (or any class of them) or its members (or any class of them), provided that (i) any such arrangement with creditors is approved by a majority in number of the creditors (or class of creditors) with whom the arrangement is to be made, who must in addition represent 75% in value of such creditors (or class of creditors), and (ii) any such arrangement with members is approved by 75% in value of the members (or class of members) with whom the arrangement is to be made, that are present and voting either in person or by proxy at a meeting, or meetings, convened for that purpose. The convening of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of the Cayman Islands. Any such arrangement which is approved by such requisite majorities as aforesaid, and which is sanctioned by the Grand Court, will be binding on all the creditors (or class of creditors) or members (or class of members), as the case may be, and also on the company. While a dissenting shareholder has the right to express to the court the view that the transaction ought not to be approved, the Grand Court of the Cayman Islands can be expected to approve the arrangement if it determines that:
| ● | the statutory provisions as to the required majority vote have been met; |
| ● | the shareholders have been fairly represented at the meeting in question and the statutory majority are acting bona fide without coercion of the minority to promote interests adverse to those of the class; |
| ● | the arrangement is such that may be reasonably approved by an intelligent and honest man of that class acting in respect of his interest; and |
| ● | the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Act. |
The Companies Act also contains a statutory power of compulsory acquisition which may facilitate the “squeeze out” of dissentient minority shareholder upon a tender offer. When a tender offer is made and accepted by holders of 90% of the shares affected within four months, the offeror may, within a two-month period commencing on the expiration of such four month period, require the holders of the remaining shares to transfer such shares to the offeror on the terms of the offer. An objection can be made to the Grand Court of the Cayman Islands but this is unlikely to succeed in the case of an offer which has been so approved unless there is evidence of fraud, bad faith or collusion.
If an arrangement and reconstruction is thus approved, or if a tender offer is made and accepted, a dissenting shareholder would have no rights comparable to appraisal rights, which would otherwise ordinarily be available to dissenting shareholders of Delaware corporations, providing rights to receive payment in cash for the judicially determined value of the shares.
Shareholders’ Suits. In principle, we will normally be the proper plaintiff to sue for a wrong done to us as a company, and as a general rule, a derivative action may ordinarily not be brought by a minority shareholder. However, based on English authority, which would in all likelihood be of persuasive authority in the Cayman Islands, the Cayman Islands courts can be expected (and have had occasion) to follow and apply the common law principles (namely the rule in Foss v. Harbottle and the exceptions thereto) so that a minority shareholder may be permitted to commence a class action against, or derivative actions in the name of, our company to challenge:
| (a) | a company acts or proposes to act illegally or ultra vires; |
| (b) | the act complained of, although not ultra vires, could only be effected duly if authorized by more than a simple majority vote that has not been obtained; and |
| (c) | those who control the company are perpetrating a “fraud on the minority.” |
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Indemnification of Directors and Executive Officers and Limitation of Liability. Cayman Islands law does not limit the extent to which a company’s memorandum and articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime. Our sixth amended and restated memorandum and articles of association requires us to indemnify our officers and directors for actions, proceedings, costs, charges, expenses, losses, damages or liabilities incurred in their capacities as such unless such losses or damages arise from dishonesty, willful default or fraud of such directors or officers. This standard of conduct is generally the same as permitted under the Delaware General Corporation Law for a Delaware corporation.
In addition, we have entered into indemnification agreements with our directors and executive officers that provide such persons with additional indemnification beyond that provided in our sixth amended and restated memorandum and articles of association.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controlling us under the foregoing provisions, we have been informed that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
Directors’ Fiduciary Duties. Under Delaware corporate law, a director of a Delaware corporation has a fiduciary duty to the corporation and its shareholders. This duty has two components: the duty of care and the duty of loyalty. The duty of care requires that a director act in good faith, with the care that an ordinarily prudent person would exercise under similar circumstances. Under this duty, a director must inform himself of, and disclose to shareholders, all material information reasonably available regarding a significant transaction. The duty of loyalty requires that a director acts in a manner he reasonably believes to be in the best interests of the corporation. He must not use his corporate position for personal gain or advantage. This duty prohibits self-dealing by a director and mandates that the best interest of the corporation and its shareholders take precedence over any interest possessed by a director, officer or controlling shareholder and not shared by the shareholders generally. In general, actions of a director are presumed to have been made on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the corporation. However, this presumption may be rebutted by evidence of a breach of one of the fiduciary duties. Should such evidence be presented concerning a transaction by a director, the director must prove the procedural fairness of the transaction, and that the transaction was of fair value to the corporation.
As a matter of Cayman Islands law, a director of a Cayman Islands company is in the position of a fiduciary with respect to the company and therefore he owes the following duties to the company, a duty to act in good faith in the best interests of the company, a duty not to make a personal profit based on his position as director (unless the company permits him to do so), a duty not to put himself in a position where the interests of the company conflict with his personal interest or his duty to a third party and a duty to exercise powers for the purpose for which such powers were intended. A director of a Cayman Islands company owes to the company a duty to act with skill and care. 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.
Shareholder Action by Written Consent. Under the Delaware General Corporation Law, a corporation may eliminate the right of shareholders to act by written consent by amendment to its certificate of incorporation. Cayman Islands law and our sixth amended and restated memorandum and articles of association provide that shareholders may approve corporate matters by way of a unanimous written resolution signed by or on behalf of each shareholder who would have been entitled to vote on such matter at a general meeting without a meeting being held.
Shareholder Proposals. Under the Delaware General Corporation Law, a shareholder has the right to put any proposal before the annual meeting of shareholders, provided it complies with the notice provisions in the governing documents. A special meeting may be called by the board of directors or any other person authorized to do so in the governing documents, but shareholders may be precluded from calling special 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 sixth amended and restated memorandum and articles of association allow our shareholders holding shares representing in 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 a shareholder’s meeting, in which case our directors shall convene an extraordinary general meeting. Other than this right to requisition a shareholders’ meeting, our sixth amended and restated articles of association do not provide our shareholders with other right to put proposal before annual general meetings or extraordinary general meetings not called by such shareholders. As an exempted Cayman Islands company, we are not obliged by law to call shareholders’ annual general meetings.
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Cumulative Voting. Under the Delaware General Corporation Law, cumulative voting for elections of directors is not permitted unless the corporation’s certificate of incorporation specifically provides for it. Cumulative voting potentially facilitates the representation of minority shareholders on a board of directors since it permits the minority shareholder to cast all the votes to which the shareholder is entitled on a single director, which increases the shareholder’s voting power with respect to electing such director. There are no prohibitions in relation to cumulative voting under the laws of the Cayman Islands but our sixth amended and restated memorandum and articles of association do not provide for cumulative voting. As a result, our shareholders are not afforded any less protections or rights on this issue than shareholders of a Delaware corporation.
Removal of Directors. Under the Delaware General Corporation Law, a director of a corporation with a classified board may be removed only for cause with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. Under our sixth amended and restated memorandum and articles of association, directors may be removed with or without cause, by an ordinary resolution of our shareholders. In addition, a director’s office shall be vacated if the director (i) becomes bankrupt or makes any arrangement or composition with his creditors; (ii) dies or is found to be or becomes of unsound mind; (iii) resigns his office by notice in writing to the company; (iv) without special leave of absence from our board of directors, is absent from three consecutive meetings of the board and the board resolves that his office be vacated or; (v) is removed from office pursuant to any other provisions of our sixth amended and restated memorandum and articles of association.
Transactions with Interested Shareholders. The Delaware General Corporation Law contains a business combination statute applicable to Delaware corporations whereby, unless the corporation has specifically elected not to be governed by such statute by amendment to its certificate of incorporation, it is prohibited from engaging in certain business combinations with an “interested shareholder” for three years following the date that such person becomes an interested shareholder. An interested shareholder generally is a person or a group who or which owns or owned 15% or more of the target’s outstanding voting share within the past three years. This has the effect of limiting the ability of a potential acquirer to make a two-tiered bid for the target in which all shareholders would not be treated equally. The statute does not apply if, among other things, prior to the date on which such shareholder becomes an interested shareholder, the board of directors approves either the business combination or the transaction which resulted in the person becoming an interested shareholder. This encourages any potential acquirer of a Delaware corporation to negotiate the terms of any acquisition transaction with the target’s board of directors.
Cayman Islands law has no comparable statute. As a result, we cannot avail ourselves of the types of protections afforded by the Delaware business combination statute. However, although Cayman Islands law does not regulate transactions between a company and its significant shareholders, the directors of the company are required to comply with the fiduciary duties which they owe to the company under Cayman Islands law, including the duty to ensure that, in their opinion, any such transactions are bona fide in the best interests of the company and are entered into for a proper purpose and not with the effect of constituting a fraud on the minority shareholders.
Restructuring. A company may present a petition to the Grand Court of the Cayman Islands for the appointment of a restructuring officer on the grounds that the company:
| (a) | is or is likely to become unable to pay its debts; and |
| (b) | intends to present a compromise or arrangement to its creditors (or classes thereof) either pursuant to the Companies Act, the law of a foreign country or by way of a consensual restructuring. |
The Grand Court may, among other things, make an order appointing a restructuring officer upon hearing of such petition, and any restructuring officer so appointed shall have such powers and carry out such functions as the court may order. At any time (i) after the presentation of a petition for the appointment of a restructuring officer but before an order for the appointment of a restructuring officer has been made, and (ii) when an order for the appointment of a restructuring officer is made, until such order has been discharged, no suit, action or other proceedings (other than criminal proceedings) shall be proceeded with or commenced against the company, no resolution to wind up the company shall be passed, and no winding up petition may be presented against the company, except with the leave of the court and subject to such terms as the court may impose. However, notwithstanding the presentation of a petition for the appointment of a restructuring officer or the appointment of a restructuring officer, a creditor who has security over the whole or part of the assets of the company is entitled to enforce the security without the leave of the court and without reference to the restructuring officer appointed.
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Dissolution; Winding up. Under the Delaware General Corporation Law, unless the board of directors approves the proposal to dissolve, dissolution must be approved by shareholders holding 100% of the total voting power of the corporation. Only if the dissolution is initiated by the board of directors may it be approved by a simple majority of the corporation’s outstanding shares. Delaware law allows a Delaware corporation to include in its certificate of incorporation a supermajority voting requirement in connection with dissolutions initiated by the board.
Under Cayman Islands law, a company may be wound up by either an order of the courts of the Cayman Islands or by a special resolution of its members or, if the company is unable to pay its debts as they fall due, by an ordinary resolution of its members. The court has authority to order winding up in a number of specified circumstances including where it is, in the opinion of the court, just and equitable to do so. Under the Companies Act and our sixth amended and restated articles of association, our company may be dissolved, liquidated or wound up by a special resolution of our shareholders, or by an ordinary resolution on the basis that our company is unable to pay its debts as they fall due.
Variation of Rights of Shares. Under the Delaware General Corporation Law, a corporation may materially adversely vary the rights of a class of shares with the approval of a majority of the outstanding shares of such class, unless the certificate of incorporation provides otherwise. Under Cayman Islands law and our sixth amended and restated articles of association, if our share capital is divided into more than one class of shares, we may vary the rights attached to any class with the written consent of all the holders of the issued shares of that class or with the sanction of an ordinary resolution passed at a separate meeting of the holders of the shares of that class.
Amendment of Governing Documents. Under the Delaware General Corporation Law, a corporation’s governing documents may be amended with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. Under the Companies Act, our sixth amended and restated memorandum and articles of association may only be amended by a special resolution of our shareholders.
Rights of Non-resident or Foreign Shareholders. There are no limitations imposed by our sixth amended and restated memorandum and articles of association on the rights of non-resident or foreign shareholders to hold or exercise voting rights on our shares. In addition, there are no provisions in our sixth amended and restated memorandum and articles of association that require our company to disclose shareholder ownership above any particular ownership threshold.
| C. | Material Contracts |
We have not entered into any material contracts other than in the ordinary course of business and other than those described in “Item 4. Information on the Company,” “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions,” or elsewhere in this annual report on Form 20-F.
| D. | Exchange Controls |
See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Related to Our Business Operation in China—Regulations Related to Foreign Exchange,” “—Regulations Related to Dividend Distribution,” and “—Regulations Related to Employee Stock Incentive Plans.”
| E. | Taxation |
The following summary of the material Cayman Islands, PRC (including Hong Kong) 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 annual report, all of which are subject to change. This summary does not deal with all possible tax consequences relating to an investment in our 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, the People’s Republic of China (including Hong Kong) 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 holders of our ADSs or ordinary shares levied by the government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or after execution brought within the jurisdiction of the Cayman Islands. The Cayman Islands 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.
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Payments of dividends and capital in respect of our ordinary shares and ADSs will not be subject to taxation in the Cayman Islands and no withholding tax will be required on the payment of a dividend or capital to any holder of our ordinary shares or the ADSs, nor will gains derived from the disposal of our ordinary shares or the ADSs be subject to Cayman Islands income or corporate tax.
No stamp duty is payable in respect of the issue of the shares or on an instrument of transfer in respect of a share.
People’s Republic of China Taxation
Under the Enterprise Income Tax Law and its Implementation Rules, an enterprise established outside of the PRC with “de facto management body” within the PRC is considered a resident enterprise. The Implementation Rules defines the term “de facto management body” as the body that exercises full and substantial control and overall management over the business, productions, personnel, accounts and properties of an enterprise. In April 2009, the State Administration of Taxation issued SAT Circular 82, which provides certain specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is located in China. Although SAT Circular 82 only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners, the criteria set forth in SAT Circular 82 may reflect the State Administration of Taxation’s general position on how the “de facto management body” text should be applied in determining the tax resident status of all offshore enterprises. According to SAT Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “de facto management body” in China 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 that 9F Inc. is not a PRC resident enterprise for PRC tax purposes. 9F Inc. is not controlled by a PRC enterprise or PRC enterprise group and we do not believe that 9F Inc. meets all of the conditions above. 9F Inc. is a company incorporated outside the PRC. As a holding company, its key assets are its ownership interests in its subsidiaries, and its key assets are located, and its records (including the resolutions of its board of directors and the resolutions of its shareholders) are maintained, outside the PRC. In addition, we are not aware of any offshore holding companies with a similar corporate structure as ours ever having been deemed a PRC “resident enterprise” by the PRC tax authorities. However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.”
If the PRC tax authorities determine that 9F Inc. is a PRC resident enterprise for enterprise income tax purposes, we may be required to withhold a 10% withholding tax from dividends we pay to our shareholders that are non-resident enterprises, including the holders of our ADSs. In addition, non-resident enterprise shareholders (including our ADS holders) may be subject to a 10% PRC tax on gains realized on the sale or other disposition of ADSs or ordinary shares, if such income is treated as sourced from within the PRC. It is unclear whether our non-PRC individual shareholders (including our ADS holders) would be subject to any PRC tax on dividends or gains obtained by such non-PRC individual shareholders in the event we are determined to be a PRC resident enterprise. If any PRC tax were to apply to such dividends or gains, it would generally apply at a rate of 20% unless a reduced rate is available under an applicable tax treaty. However, it is also unclear whether non-PRC shareholders of 9F Inc. would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that 9F Inc. is treated as a PRC resident enterprise. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China and Hong Kong—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.”
Provided that our Cayman Islands holding company, 9F Inc., is not deemed to be a PRC resident enterprise, holders of our ADSs and ordinary shares who are not PRC residents will not be subject to PRC income tax on dividends distributed by us or gains realized from the sale or other disposition of our shares or ADSs. However, under SAT Public Notice 7 and SAT Bulletin 37, where a non-resident enterprise conducts an “indirect transfer” by transferring taxable assets, including, in particular, equity interests in a PRC resident enterprise, indirectly by disposing of the equity interests of an overseas holding company, the non-resident enterprise, being the transferor, or the transferee or the PRC entity which directly owned such taxable assets may report to the tax authority such indirect transfer. Using a “substance over form” principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring PRC tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax, and the transferor is obligated to withhold the applicable taxes, currently at a rate of 10% for the transfer of equity interests in a PRC resident enterprise. However, SAT Public Notice 7 also includes safe harbors for internal group restructurings and purchase and sales of shares through a public securities market. We and our non-PRC resident investors may be at risk of being required to file a return and being taxed under SAT Public Notice 7 and SAT Bulletin 37, and we may be required to expend valuable resources to comply with SAT Public Notice 7 and SAT Bulletin 37, or to establish that we should not be taxed under these circulars. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China and Hong Kong—We face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.”
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U.S. Federal Income Tax Considerations
The following is a summary of U.S. federal income tax considerations generally applicable to the ownership and disposition of our ADSs or ordinary shares by a U.S. Holder (as defined below) that holds our ADSs or ordinary shares as “capital assets” (generally, property held for investment) under the U.S. Internal Revenue Code of 1986, as amended (“the Code”). This discussion is based upon the Code, U.S. Treasury Regulations promulgated thereunder (“U.S. Treasury Regulations”), judicial decisions, administrative pronouncements, the income tax treaty between the United States and the PRC (the “Treaty”), and other relevant authorities, all as in effect as of the date hereof and all of which are subject to differing interpretations or change, possibly with retroactive effect. There can be no assurances that the Internal Revenue Service will not take, or that a court will not sustain, a contrary position.
The following summary does not address all aspects of U.S. federal income taxation that may be important to particular investors in light of their individual circumstances or to persons in special tax situations such as:
| ● | banks and other financial institutions; |
| ● | insurance companies; |
| ● | pension plans; |
| ● | cooperatives; |
| ● | regulated investment companies; |
| ● | real estate investment trusts; |
| ● | broker-dealers; |
| ● | traders that elect to use a mark-to-market method of accounting; |
| ● | certain former U.S. citizens or long-term residents; |
| ● | tax-exempt entities (including private foundations); |
| ● | persons that acquire their ADSs or ordinary shares pursuant to any employee share option or otherwise as compensation; |
| ● | 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; |
| ● | persons holding their ADSs or ordinary shares in connection with a trade or business outside the United States; |
| ● | persons that actually or constructively own ADSs or ordinary shares representing 10% or more of our stock (by vote or value); |
| ● | investors that have a functional currency other than the U.S. dollar; |
| ● | partnerships or other entities taxable as partnerships for U.S. federal income tax purposes, or persons holding ADSs or ordinary shares through such entities. |
all of whom may be subject to tax rules that differ significantly from those discussed below.
In addition, this discussion does not address any considerations relating to non-U.S., state, local or any U.S. federal estate, gift, alternative minimum tax or the Medicare tax on certain net investment income.
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Each U.S. Holder should consult its tax advisor regarding the U.S. federal, state, local and non-U.S. income and other tax considerations applicable to the ownership and disposition of our ADSs or ordinary shares.
General
For purposes of this discussion, a “U.S. Holder” is a beneficial owner of our ADSs or ordinary shares that is, for U.S. federal income tax purposes:
| ● | an individual who is a citizen or resident of the United States; |
| ● | a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created in, or organized under the laws of the United States or any state thereof or the District of Columbia; |
| ● | an estate the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; or |
| ● | a trust (A) the administration of which is subject to the primary supervision of a U.S. court and the control of one or more U.S. persons with respect to all of its substantial decisions or (B) that has in effect a valid election to be treated as a U.S. person under the Code or applicable Regulations. |
If a partnership (or other entity or arrangement treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of our ADSs or ordinary shares, the tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership. Partnerships holding our ADSs or ordinary shares and partners in such partnerships should consult their respective tax advisors as to the U.S. federal income tax considerations relating to an investment in our ADSs or ordinary shares in light of their particular circumstances.
This discussion assumes that the representations contained in the deposit agreement are true and that the obligations in the deposit agreement and any related agreement have been and will be complied with in accordance with the terms thereof. Accordingly, for U.S. federal income tax purposes, a U.S. Holder of ADSs will generally be treated as the beneficial owner of the underlying shares represented by the ADSs and deposits or withdrawals of ordinary shares for ADSs will generally not be subject to U.S. federal income tax.
Passive foreign investment company considerations
A non-U.S. corporation, such as our company, will be 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 (generally determined on the basis of a quarterly average) during such year is attributable to assets that produce or are held for the production of passive income. For this purpose, cash and assets readily convertible into cash are categorized as passive assets and goodwill and other unbooked intangibles will generally be taken into account in determining asset value. Passive income generally includes, among other things, dividends, interest and income equivalent to interest, rents, royalties, and gains from the disposition of passive assets. We will be treated as owning a proportionate share of the assets and earning a proportionate share of the income of any other corporation in which we own, directly or indirectly, 25% or more (by value) of the stock.
Although the law in this regard is not entirely clear, we treat our VIEs and their subsidiaries as being owned by us for U.S. federal income tax purposes because we control their management decisions and are entitled to substantially all of the economic benefits associated with these entities. As a result, we consolidate their results of operations in our consolidated U.S. GAAP financial statements. If it were determined, however, that we do not own the VIEs for U.S. federal income tax purposes, it may increase the likelihood that we will be treated as a PFIC for any taxable year.
Based on the market price of our ADSs and the nature and composition of our assets (in particular the retention of a substantial amount of cash, deposits and investments), we believe that we were likely a PFIC for U.S. federal income tax purposes for our taxable year ended December 31, 2025, and we will likely be a PFIC for our current taxable year ending December 31, 2026 unless the market price of our ADSs significantly increases and/or we invest a substantial amount of cash and other passive assets we hold in assets that produce or are held for the production of non-passive income.
If we are a PFIC for any year during which a U.S. Holder holds our ADSs or ordinary shares, we will generally continue to be treated as a PFIC with respect to such U.S. Holder for all succeeding years during which such U.S. Holder holds our ADSs or ordinary shares, unless we were to cease to be a PFIC and such U.S. Holder makes a “deemed sale” election with respect to the ADSs or ordinary shares. The U.S. federal income tax rules that apply if we are classified as a PFIC for the current taxable year or any subsequent taxable year are discussed below under “—Passive foreign investment company rules.”
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Dividends
As noted above, we were likely a PFIC for our most recent taxable year ended December 31, 2025 and we will likely be a PFIC for our current taxable year. Accordingly, the treatment most likely to apply to a U.S. Holder is set forth below under “—Passive foreign investment company rules.” If our ADSs or ordinary shares are not treated as stock of a PFIC with respect to a particular U.S. Holder, the following rules will generally apply. The gross amount of any 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 for U.S. federal income tax purposes, will generally be includible in the gross income of a U.S. Holder as dividend income on the day actually or constructively received by the U.S. Holder, in the case of ordinary shares, or by the depositary bank, in the case of ADSs. Because we do not intend to determine our earnings and profits on the basis of U.S. federal income tax principles, any distribution we pay will generally be treated as a “dividend” for U.S. federal income tax purposes. Dividends received on our ADSs or ordinary shares will generally not be eligible for the dividends received deduction allowed to corporations in respect of dividends received from U.S. corporations.
Individuals and other non-corporate U.S. Holders may be subject to tax at the lower capital gains tax rate applicable to “qualified dividend income,” provided that certain conditions are satisfied, including that (1) the ADSs or ordinary shares on which the dividends are paid are readily tradable on an established securities market in the United States, or, in the event that we are deemed to be a PRC resident enterprise under the PRC tax law, we are eligible for the benefit of the Treaty, (2) we are neither a PFIC nor treated as such with respect to a U.S. Holder for the taxable year in which the dividend is paid or the preceding taxable year, and (3) certain holding period and other requirements are met. The ADSs are listed on the Nasdaq Global Market, which is an established securities market in the United States, and will be considered readily tradable on an established securities market for as long as the ADSs continue to be listed on the Nasdaq Global Market. There can be no assurance that the ADSs will continue to be considered readily tradable on an established securities market in later years. Because the ordinary shares will not be listed on a U.S. exchange, we do not believe that dividends received with respect to ordinary shares that are not represented by ADSs will be treated as qualified dividends.
For U.S. foreign tax credit purposes, dividends paid on our ADSs or ordinary shares generally will be treated as income from foreign sources and generally will constitute passive category income. In the event that we are deemed to be a PRC resident enterprise under the Enterprise Income Tax Law, a U.S. Holder may be subject to PRC withholding taxes on dividends paid on the ADSs or ordinary shares (see “Item 10. Additional Information—E. Taxation—People’s Republic of China Taxation”). Depending on the U.S. Holder’s particular facts and circumstances and subject to a number of complex conditions and limitations, PRC withholding taxes on dividends not in excess of any applicable rate under the Treaty may be treated as foreign taxes eligible for credit against a U.S. Holder’s U.S. federal income tax liability. A U.S. Holder who does not elect to claim a foreign tax credit for foreign tax withheld may instead claim a deduction for U.S. federal income tax purposes in respect of such withholding, but only for a year in which such holder elects to do so for all creditable foreign income taxes. The rules governing the foreign tax credit are complex and each U.S. Holder should consult its tax advisor regarding the availability of the foreign tax credit under its particular circumstances.
Sale or other disposition
As noted above, we were likely a PFIC for our most recent taxable year ended December 31, 2025 and we will likely be a PFIC for our current taxable year. Accordingly, the treatment most likely to apply to a U.S. Holder is set forth below under “—Passive foreign investment company rules.” If our ADSs or ordinary shares are not treated as stock of a PFIC with respect to a particular U.S. Holder, the following rules will generally apply. A U.S. Holder will generally recognize gain or loss upon the sale or other disposition of our ADSs or ordinary shares in an amount equal to the difference between the amount realized upon the disposition and the U.S. Holder’s adjusted tax basis in such ADSs or ordinary shares. Any such gain or loss will generally be long-term capital gain or loss if the U.S. Holder’s holding period in the ADSs or ordinary shares exceeds one year at the time of disposition. Long-term capital gains realized by non-corporate U.S. Holders are generally eligible for reduced rates of taxation. The deductibility of a capital losses is subject to limitations. The deductibility of capital losses is subject to limitations. Any such gain or loss will generally be U.S.-source gain or loss for U.S. foreign tax credit purposes, which may limit the U.S. Holder’s ability to claim a foreign tax credit in respect of any foreign tax imposed on the disposition unless the U.S. Holder has other income that is treated as derived from foreign sources.
As described in “Item 10. Additional Information—E. Taxation—People’s Republic of China Taxation,” if we are deemed to be a PRC resident enterprise under the Enterprise Income Tax Law, gains from the disposition of the ADSs or ordinary shares may be subject to PRC income tax and will generally be U.S. source, which may limit the ability to receive a foreign tax credit. If a U.S. Holder is eligible for the benefits of the Treaty, such holder may be able to elect to treat such gain as PRC source income under the Treaty. However, if a U.S. Holder is not eligible for the benefits of the Treaty or does not elect to apply the Treaty, then such holder may not be able to claim a foreign tax credit arising from any PRC tax imposed on the disposition of the ADSs or ordinary shares. The rules regarding foreign tax credits and deduction of foreign taxes are complex. U.S. Holders should consult their tax advisors regarding the availability of a foreign tax credit or deduction in light of their particular circumstances, including their eligibility for benefits under the Treaty.
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Passive foreign investment company rules
If we are a PFIC for any taxable year during which a U.S. Holder holds our ADSs or ordinary shares, and unless the U.S. Holder makes a mark-to-market election (as described below), the U.S. Holder will generally be subject to special tax rules on (i) any excess distribution that we make to the U.S. Holder (which generally means any distribution paid during a taxable year to a U.S. Holder that is greater than 125 percent of the average annual distributions paid in the three preceding taxable years or, if shorter, the U.S. Holder’s holding period for the ADSs or ordinary shares), and (ii) any gain realized on the sale or other disposition of ADSs or ordinary shares. Under the PFIC rules:
| ● | the excess distribution or gain will be allocated ratably over the U.S. Holder’s holding period for the ADSs or ordinary shares; |
| ● | the amount allocated to the current taxable year and any taxable years in the U.S. Holder’s holding period prior to the first taxable year in which we are a PFIC (a “pre-PFIC year”), will be taxable as ordinary income; |
| ● | the amount allocated to each prior taxable year, other than a pre-PFIC year, will be subject to tax at the highest tax rate in effect for individuals or corporations, as appropriate, for that year; and |
| ● | an additional tax equal to the interest charge generally applicable to underpayments of tax will be imposed with respect to the tax attributable to each prior taxable year, other than a pre-PFIC year. |
If we are a PFIC for any year during which a U.S. Holder holds our ADSs or ordinary shares, we will generally continue to be treated as a PFIC with respect to the U.S. Holder for all succeeding years during which the U.S. Holder owns the ADSs or ordinary shares. However, if we cease to be a PFIC, provided that a U.S. Holder has not made a mark-to-market election, as described below, such U.S. Holder may avoid some of the adverse effects of the PFIC regime by making a “deemed sale” election with respect to the ADSs or ordinary shares, as applicable. If such election is made, such U.S. Holder will be deemed to have sold our ADSs or ordinary shares at their fair market value and any gain from such deemed sale would be subject to the rules described above. After the deemed sale election, so long as we do not become a PFIC in a subsequent taxable year, the ADSs or ordinary shares with respect to which such election was made will not be treated as shares in a PFIC and such U.S. Holder will not be subject to the rules described below with respect to any “excess distribution” such U.S. Holder receives from us or any gain from an actual sale or other disposition of the ADSs or ordinary shares. The rules dealing with deemed sale elections are very complex. Each U.S. Holder should consult its tax advisors regarding the possibility and considerations relating to a deemed sale election.
If we are a PFIC for any taxable year during which a U.S. Holder holds our ADSs or ordinary shares and any of our subsidiaries, our VIEs or any of the subsidiaries of our VIEs are also PFICs (each “a lower-tier PFIC”), such U.S. Holder will generally be treated as owning a proportionate amount (by value) of the shares of such lower-tier PFIC for purposes of the application of these rules. U.S. Holders should consult their tax advisors regarding the application of the PFIC rules to any of our subsidiaries, our VIEs or any of the subsidiaries of our VIEs.
As an alternative to the foregoing rules, a U.S. Holder of “marketable stock” (as defined below) in a PFIC may make a mark-to-market election with respect to such stock. If a U.S. Holder makes this election with respect to our ADSs, the holder will generally (i) include as ordinary income for each taxable year that we are a PFIC the excess, if any, of the fair market value of ADSs held at the end of the taxable year over the adjusted tax basis of such ADSs and (ii) deduct as an ordinary loss in each such taxable year the excess, if any, of the adjusted tax basis of the ADSs over the fair market value of such ADSs held at the end of the taxable year, but such deduction will only be allowed to the extent of the amount previously included in income as a result of the mark-to-market election. The U.S. Holder’s adjusted tax basis in the ADSs would be adjusted to reflect any income or loss resulting from the mark-to-market election. If a U.S. Holder makes a mark-to-market election in respect of our ADSs and we cease to be a PFIC, the holder will not be required to take into account the gain or loss described above during any period for which we are not a PFIC. If a U.S. Holder makes a mark-to-market election, any gain such U.S. Holder recognizes upon the sale or other disposition of our ADSs in a year when we are a PFIC will be treated as ordinary income and any loss will be treated as ordinary loss, but such loss will only be treated as ordinary loss to the extent of the net amount previously included in income as a result of the mark-to-market election.
The mark-to-market election is available only for “marketable stock,” which is stock that is regularly traded on a qualified exchange or other market, as defined in the applicable U.S. Treasury Regulations. Our ADSs, but not our ordinary shares, are traded on a qualified exchange or other market. We anticipate that our ADSs should qualify as being regularly traded, but no assurances may be given in this regard.
Because a mark-to-market election cannot be made for any lower-tier PFICs that we may own, a U.S. Holder may continue to be subject to the PFIC rules with respect to such U.S. Holder’s 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.
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We do not intend to provide the information necessary for U.S. Holders to make qualified electing fund elections, which, if available, would result in tax treatment different from (and generally less adverse than) the general tax treatment for PFICs described above.
If we are classified as a PFIC, a U.S. Holder will generally be required to file an annual report with the IRS with respect to its investment in our ADSs or ordinary shares. U.S. Holders should consult their tax advisors concerning the U.S. federal income tax considerations of owning and disposing of our ADSs or ordinary shares if we were, are, or become a PFIC, including the unavailability of a qualified electing fund election, the possibility of making a mark-to-market election and the annual PFIC filing requirements, if any.
| F. | Dividends and Paying Agents |
Not applicable.
| G. | Statement by Experts |
Not applicable.
| H. | Documents on Display |
We are subject to the periodic reporting and other informational requirements of the Exchange Act. Under the Exchange Act, we are required to file reports and other information with the SEC. Specifically, we are required to file annually a Form 20-F no later than four months after the close of each fiscal year. All information we file with the SEC can be obtained over the internet at the SEC’s website at www.sec.gov. 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. Our principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act, and our executive officers and directors are exempt from the short-swing profit recovery provisions contained in Section 16 of the Exchange Ac.
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’ meetings 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 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.
| I. | Subsidiary Information |
Not applicable.
| J. | Annual Report to Security Holders |
Not applicable.
Item 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risks
Foreign Exchange Risk
Substantially all of our revenues and expenses are denominated in RMB. The functional currency of certain of our subsidiaries is local currency (such as Hong Kong dollars) other than Renminbi or U.S. dollars. We do not believe that we currently have any significant direct foreign exchange risk and have not used any derivative financial instruments to hedge exposure to such risk. Although our exposure to foreign exchange risks should be limited in general, the value of your investment in our ADSs will be affected by the exchange rate between U.S. dollar and Renminbi because the value of our business is effectively denominated in RMB, while our ADSs will be traded in U.S. dollars.
The conversion of Renminbi into other currencies, including U.S. dollars, is based on rates set by the People’s Bank of China. The Renminbi has fluctuated against other currencies, at times significantly and unpredictably. The value of Renminbi against other currencies is affected by changes in China’s political and economic conditions and by China’s foreign exchange policies, among other things. It is difficult to predict how market forces or government policies may impact the exchange rate between Renminbi and other currencies in the future.
To the extent that we need to convert U.S. dollars into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the RMB amount we receive from the conversion. Conversely, if we decide to convert Renminbi 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 Renminbi would have a negative effect on the U.S. dollar amounts available to us.
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Interest rate 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.
We do not expect that the fluctuation of interest rates will have a material impact on our financial condition. However, we cannot provide assurance that we will not be exposed to material risks due to changes in market interest rates in the future.
We may invest our cash in interest-earning instruments. Investments in both fixed rate and floating rate interest earning instruments carry a degree of interest rate risk. Fixed rate securities may have their fair market value adversely impacted due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall.
Item 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
| A. | Debt Securities |
Not applicable.
| B. | Warrants and Rights |
Not applicable.
| C. | Other Securities |
Not applicable.
| D. | American Depositary Shares |
On January 18, 2023, we effected a change to the ratio of ADSs to Class A ordinary shares from one ADS to one Class A ordinary share to one ADS to 20 Class A ordinary shares.
Charges Our ADS Holders May Have to Pay
An ADS holder will be required to pay the following fees under the terms of the deposit agreement with Citibank, N.A., the depositary bank for the American Depositary Shares:
| Service | Fees | |
| (1) Issuance of ADSs (e.g., an issuance upon a deposit of Shares, upon a change in the 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 ADS (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 share(s) ratio, or for any other reason) | Up to U.S.$5.00 per 100 ADS (or fraction thereof) canceled | |
| (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 ADS (or fraction thereof) held | |
| (4) Distribution of ADSs pursuant to (i) stock dividends or other free stock distributions, or (ii) exercise of rights to purchase additional ADSs | Up to U.S.$5.00 per 100 ADS (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 ADS (or fraction thereof) held | |
| (6) ADS Services | Up to U.S.$5.00 per 100 ADS (or fraction thereof) held on the applicable record date(s) established by the depositary bank | |
| (7) Registration of ADS Transfers (e.g., upon a registration of the transfer of registered ownership of ADSs, upon a transfer of ADSs into The Depository Trust Company, or the DTC, and vice versa, or for any other reason.) | Up to U.S.$5.00 per 100 ADS (or fraction thereof) held | |
| (8) Conversion of ADSs of one series for ADSs of another series (e.g., upon conversion of Partial Entitlement ADSs for Full Entitlement ADSs, or upon conversion of Restricted ADSs into freely transferable ADSs, and vice versa). | Up to U.S.$5.00 per 100 ADS (or fraction thereof) converted |
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An ADS holder will also be responsible to pay certain charges such as:
| ● | taxes (including applicable interest and penalties) and other governmental charges; |
| ● | the registration fees as may from time to time be in effect for the registration of Class A ordinary shares on the share register and applicable to transfers of Class A ordinary shares to or from the name of the custodian, the depositary bank or any nominees upon the making of deposits and withdrawals, respectively; |
| ● | certain cable, telex and facsimile transmission and delivery expenses; |
| ● | in connection with the conversion of foreign currency, the fees, expenses, spreads, taxes and other charges of the depositary and/or conversion service providers (which may be a division, branch or affiliate of the depositary); |
| ● | any reasonable and customary out-of-pocket expenses incurred in such conversion and/or on behalf of the holders and beneficial owners in complying with currency exchange control or other governmental requirements; and |
| ● | the fees, charges, costs and expenses incurred by the depositary, the custodian, or any nominee in connection with the ADR program. |
ADS fees and charges for (i) the issuance of ADSs, and (ii) the cancellation of ADSs are charged to the person for whom the ADSs are issued (in the case of ADS issuances) and to the person for whom ADSs are canceled (in the case of ADS cancellations). In the case of ADSs issued by the depositary into 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 being issued or the DTC participant(s) holding the ADSs being canceled, as the case may be, on behalf of the beneficial owner(s) and will be charged by the DTC participant(s) to the account of the applicable beneficial owner(s) in accordance with the procedures and practices of the DTC participants 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 case of (i) registration of ADS transfers, the ADS transfer fee will be payable by the ADS Holder whose ADSs are being transferred or by the person to whom the ADSs are transferred, and (ii) conversion of ADSs of one series for ADSs of another series, the ADS conversion fee will be payable by the Holder whose ADSs are converted or by the person to whom the converted ADSs are delivered.
In the event of refusal to pay the depositary fees, the depositary 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 fees from any distribution to be made to the ADS holder. Certain depositary fees and charges (such as the ADS services fee) may become payable shortly after the closing of the ADS offering. 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. You will receive prior notice of such changes. The depositary 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 agree from time to time.
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. In 2025, we received no reimbursement from the depositary.
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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
Not applicable.
Item 15. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, under the supervision and with the participation of our chief executive officer and chief financial officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures, which is defined in Rules 13a-15(e) of the Exchange Act.
Based upon that evaluation, our management, with the participation of our chief executive officer and chief financial officer, has concluded that, as of December 31, 2025, our disclosure controls and procedures were not effective because of the material weaknesses in our internal control over financial reporting described below. Notwithstanding thereof, we believe that our consolidated financial statements included in this annual report fairly present our financial position, results of operations and cash flows for the fiscal years covered thereby in all material respects.
Management’s 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 Exchange Act. 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 in accordance with U.S. GAAP and 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 a company’s assets, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that a company’s receipts and expenditures are being made only in accordance with authorizations of a company’s management and directors, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of a company’s assets that could have a material effect on the consolidated financial statements.
Our management, with the participation of our chief executive officer and chief financial officer, conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2025 based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO 2013 Framework). Based on this evaluation, we noted the following deficiencies that we believe to be material weaknesses: (1) a lack of sufficient financial reporting and accounting personnel with appropriate U.S. GAAP knowledge and SEC reporting experience to properly address complex U.S. GAAP technical accounting issues and to prepare and review financial statements and related disclosures in accordance with U.S. GAAP and the financial reporting requirements set forth by the SEC; (2) a lack of proper documentation in support of certain accounting transactions and for the facilitation of the audit process and a lack of proper documentation in support of our investment values, credit losses and impairment analysis; and (3) a lack of sufficient policies and procedures to monitor the accounting treatment of complex financial instruments. Any of these material weaknesses, if not timely remedied, may lead to significant misstatements in our consolidated financial statements in the future.
As a result of the above material weaknesses, management has concluded that our internal control over financial reporting was ineffective as of December 31, 2025.
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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness of our internal control over financial reporting 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 and procedures may deteriorate. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—In connection with the audit of our consolidated financial statements included in this annual report, we and our independent registered public accounting firm identified three material weaknesses in our internal control over financial reporting. If we fail to develop and maintain an effective system of internal control over financial reporting, we may be unable to accurately report our financial results or prevent fraud.”
Management’s Plan for Remediation of Material Weaknesses
Our management will review the implementation of the existing internal control measures and conduct rectification accordingly, and strictly follow the internal control requirements. We also plan to enhance the effectiveness of our financial reporting process by placing additional focus on the timeliness and quality of our detailed account analyses and to strengthen the integrity of our disclosure controls by developing a formal process to ensure that all significant transactions will be thoroughly evaluated for disclosure during the financial reporting process in order to remediate the material weaknesses described above.
We are in the process of implementing measures to address the material weaknesses identified. We are actively enlisting additional personnel experienced in such fields and establishing an ongoing program to provide sufficient and additional appropriate training to our accounting staff, especially trainings related to U.S. GAAP and SEC financial reporting requirements. To address the change to our financial reporting and accounting team, we also hired two dedicated professionals in 2024 who focus on the financial reporting under the direct supervision of our chief financial officer. In addition, we plan to engage a qualified financial consulting firm with extensive experience in U.S. GAAP and SEC reporting to assist us in the preparation of our consolidated financial statements and related notes to the financial statements, completion of related account analyses and reconciliations, and development of accounting policies and procedures that are designed to ensure compliance with U.S. GAAP. We also plan to update our policies and procedures and redesigning controls in connection with financial instruments at each reporting period. However, while we are implementing these measures, we need more time to fully implement them to remediate the material weaknesses. Furthermore, we cannot assure you that the implementation of these measures will be sufficient to eliminate such material weaknesses, or that material weaknesses or significant deficiencies in our internal control over financial reporting will not be identified in the future. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—In connection with the audit of our consolidated financial statements included in this annual report, we and our independent registered public accounting firm identified three material weaknesses in our internal control over financial reporting. If we fail to develop and maintain an effective system of internal control over financial reporting, we may be unable to accurately report our financial results or prevent fraud.”
This annual report on Form 20-F does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC where domestic and foreign registrants that are non-accelerated filers, which we are, are not required to provide the auditor attestation report.
Changes in Internal Control over Financial Reporting
During the audit of our company’s consolidated financial statements as of and for the year ended December 31, 2024, our management, together with our prior independent registered public accounting firm, identified material weaknesses related to (1) a lack of sufficient financial reporting and accounting personnel with appropriate U.S. GAAP knowledge and SEC reporting experience to properly address complex U.S. GAAP technical accounting issues and to prepare and review financial statements and related disclosures in accordance with U.S. GAAP and the financial reporting requirements set forth by the SEC; (2) a lack of proper documentation in support of certain accounting transactions and for the facilitation of the audit process and a lack of proper documentation in support of our investment values, credit losses and impairment analysis; and (3) a lack of sufficient policies and procedures to monitor the accounting treatment of complex financial instruments.
In 2025, we implemented a number of remedial measures to address the material weaknesses with respect thereto, including (i) the hire of additional competent and qualified personnel with appropriate knowledge and work experience of financial reporting; (ii) the implementation of new processes and procedures in our financial reporting closing process to provide additional levels of review and account analysis; and (iii) the enhancement and improvement of the internal controls in relation documentation of critical accounting estimates and procedures.
139
As of December 31, 2025, based on an assessment performed by our management on the effectiveness of the remediation measures mentioned above, we concluded that the material weakness we identified in 2024 remained not remediated as of December 31, 2025.
Other than as described above, there were no changes in our internal controls over financial reporting that occurred during the period covered by this annual report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 16. RESERVED
Item 16A. AUDIT COMMITTEE FINANCIAL EXPERT
Our board of directors has determined that Yuping Ouyang, a member of our audit committee and an independent director (under the standards set forth in Rule 5605(c)(2)) of the Nasdaq Stock Market Rules and Rule 10A-3 under the Exchange Act, is 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 and employees, effective in August 2019. We have posted a copy of our code of business conduct and ethics on our website at https://ir.9fgroup.com/Corporate-Governance.
Item 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth the aggregate fees in connection with certain professional services rendered by Wei, Wei & Co., LLP, our previous external auditor, and Marcum Asia CPAs LLP, our principal external auditor, for the periods indicated. We did not pay any other fees to our auditor during the periods indicated below.
The table below sets forth information about fees payable by us to Wei, Wei & Co., LLP for the fiscal years ended December 31, 2023 and 2024, and fees payable by us to Marcum Asia CPAs LLP for the fiscal year ended December 31, 2025, respectively.
| For the Year Ended December 31, | ||||||||||||
| 2023 | 2024 | 2025 | ||||||||||
| (in thousands of RMB) | ||||||||||||
| Audit fees(1) | 5,680 | 5,474 | 4,852 | |||||||||
| (1) |
“Audit fees” represents the aggregate fees billed for professional services rendered by our principal auditor for the audit of our annual financial statements. |
The policy of our audit committee is to pre-approve all audit and other service provided by Wei, Wei & Co., LLP for the year ended December 31, 2023, 2024 and by Marcum Asia CPAs LLP for the year ended December 31, 2025 as described above, other than those for de minimis services which are approved by the audit committee prior to the completion of the audit.
Item 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
See “Item 16G. Corporate Governance.”
Item 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
Not applicable.
140
Item 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
On September 16, 2025, we dismissed Wei, Wei & Co., LLP (“Wei, Wei”), as our independent registered public accounting firm and engaged Marcum Asia CPAs LLP (“Marcum Asia”), as our independent registered public accounting firm. The change of our independent registered public accounting firm was approved by the audit committee of our board and the board of directors. The decision was not made due to any disagreements between us and Wei, Wei.
The reports of Wei, Wei on our consolidated financial statements for the fiscal years ended December 31, 2023 and 2024 contained no adverse opinion or disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles.
During the fiscal years ended December 31, 2023 and 2024 and the subsequent interim period through September 16, 2025, there have been (i) no disagreements, as defined in item 16F(a)(1)(iv) of the instructions to 20-F, between us and Wei, Wei on any matter of accounting principles or practices, financial statement disclosure, or audit scope or procedure, which disagreements, if not resolved to the satisfaction of Wei, Wei would have caused it to make reference to the subject matter of the disagreement(s) in connection with its reports on our consolidated financial statements for such years, or (ii) no “reportable events”, as defined in item 16F(a)(1)(v) of the instructions to 20-F, that would be required to be described this annual report other than the material weaknesses in the Company’s internal control over financial reporting relating to (1) a lack of sufficient financial reporting and accounting personnel with appropriate U.S. GAAP knowledge and SEC reporting experience to properly address complex U.S. GAAP technical accounting issues and to prepare and review financial statements and related disclosures in accordance with U.S. GAAP and the financial reporting requirements set forth by the SEC; (2) a lack of proper documentation in support of certain accounting transactions and for the facilitation of the audit process and a lack of proper documentation in support of the Company’s investment values, credit losses and impairment analysis; and (3) a lack of sufficient policies and procedures to monitor the accounting treatment of complex financial instruments.
We have provided Wei, Wei with a copy of the disclosures hereunder and required under Item 16F of Form 20-F and requested from Wei, Wei a letter addressed to the SEC indicating whether it agrees with such disclosures. A copy of Wei, Wei’s letter dated April 30, 2026 is attached as Exhibit 16.1.
During each of the fiscal years ended December 31, 2023 and 2024 and the subsequent interim period through September 16, 2025, neither we, nor anyone on our behalf, has consulted with Marcum Asia regarding (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our consolidated financial statements, and neither a written report nor oral advice was provided to us that Marcum Asia concluded was an important factor considered by us in reaching a decision as to any accounting, audit, or financial reporting issue, (ii) any matter that was the subject of a disagreement pursuant to Item 16F(a)(1)(iv) of the instructions to Form 20-F, or (iii) any reportable event pursuant to Item 16F(a)(1)(v) of the instructions to Form 20-F.
Item 16G. CORPORATE GOVERNANCE
As a Cayman Islands company listed on the Nasdaq Global Market, we are subject to the Nasdaq listing standards. Section 5250(d), Section 5635(c) Section 5605(b)(1), Section 5605(c)(2) and Section 5620 of the Nasdaq Listing Rules require listed companies to distribute their annual reports, obtain shareholders’ approval on adoption of equity incentive awards plans, have a majority of their board members be independent and an audit committee of at least three members, and hold an annual meeting of shareholders no later than one year after the end of their fiscal year-end. However, the Nasdaq Stock Market Rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. We followed home country practice with respect to the foregoing requirements.
Our shareholders may be afforded less protection than they would otherwise enjoy under the Nasdaq listing standards applicable to U.S. domestic issuers given our reliance on the home country practice exception.
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 U.S. domestic public companies.”
Item 16H. MINE SAFETY DISCLOSURE
Not applicable.
Item 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
141
Item 16J. INSIDER TRADING POLICIES
Our board of directors has
The Amended and Restated Statement of Policies Governing Material, Non-Public Information and the Prevention of Insider Trading, is incorporated herein by reference to Exhibit 11.2 to this annual report on Form 20-F.
Item 16K. CYBERSECURITY
Risk Management and Strategy
We have implemented comprehensive
cybersecurity risk assessment procedures to ensure effectiveness in cybersecurity management, strategy and governance and reporting cybersecurity
risks.
We have developed a comprehensive
cybersecurity threat defense system to address both internal and external threats. This system spans multiple security domains, including
network, host and application layers. It integrates a range of security capabilities, such as threat defense, continual monitoring, in-depth
analysis, rapid response, as well as strategic deception and countermeasures. Our approach to managing cybersecurity risks and safeguarding
sensitive data is multi-faceted, involving technological safeguards, procedural protocols, a rigorous program of surveillance on our corporate
network, continual testing of aspects of our security posture internally and with third-party consultants or collaborators, internal and
external evaluations of our security measures, a solid incident response framework and regular cybersecurity training sessions for our
employees. Our IT department is actively engaged in continual monitoring of the performance of our application, platforms and infrastructure
to ensure prompt identification and response to potential issues, including potential cybersecurity threats. We also engage
Our IT department engages with third-party service providers to ensure their compliance with our cybersecurity standards and to assess risks arising from our engagements with such third-party service providers. We have implemented a set of procedures to ensure effective management of the cybersecurity risks associated with the use of third-party service providers. These procedures include conducting cybersecurity assessments and tracking the capabilities and qualifications of third-party security service providers through our supplier assessment process. Additionally, for independent security researchers, we require adherence to the security-related agreement when submitting vulnerabilities.
As of the date of this annual
report, we have
Governance
142
PART III
Item 17. FINANCIAL STATEMENTS
We have elected to provide consolidated financial statements pursuant to Item 18.
Item 18. FINANCIAL STATEMENTS
The consolidated financial statements of 9F Inc. are included at the end of this annual report.
Item 19. EXHIBITS
143
| * | Filed with this Annual Report on Form 20-F. |
| ** | Furnished with this Annual Report on Form 20-F. |
144
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.
| 9F Inc. | |||
| By: | /s/ Lei Liu | ||
| Name: | Lei Liu | ||
| Title: | Chief Executive Officer | ||
Date: April 30, 2026
145
9F Inc.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
F-1
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of
9F Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of 9F Inc. (the “Company”) as of December 31, 2025, the related consolidated statements of operations, comprehensive income, changes in shareholders’ equity and cash flows for the year ended December 31, 2025, and the related notes and schedule listed in Schedule I (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025, and the results of its operations and its cash flows for the year ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the 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.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
We have served as the Company’s auditor since 2025.
April 30, 2026
F-2
| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of 9F Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of 9F Inc. and subsidiaries (the “Company”) as of December 31, 2024 and the related consolidated statements of operations, comprehensive income (loss), changes in shareholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2024, and the related notes and the financial statement schedule listed in the accompanying index (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for each of the years in the two-years period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
Convenience Translation
Our audit also comprehended the translation of Renminbi amounts into United States dollar amounts and, in our opinion, such translation has been made in conformity with the basis stated in Note 2 to the financial statements. Such United States dollar amounts are presented solely for the convenience of readers outside the People’s Republic of China.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. |
F-3
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate.
Critical Audit Matter Description
The audit involved significant auditor judgment and effort in evaluating the fair value measurement of the company's Level 3 investments, such as private equity investments, sustainable bond and structured notes. These investments lack observable market prices, requiring the company to use its own valuation models and assumptions, including discounted cash flow models or other valuation techniques based on unobservable inputs.
Principal considerations that led us to determine that this matter is a critical audit matter
| ● | Significant Management Judgment and Estimation Uncertainty: The valuation of Level 3 investments inherently involves a high degree of management judgment and estimation uncertainty, particularly concerning the selection of appropriate valuation models, assumptions (e.g., discount rates, growth rates, comparable companies), and the underlying data used in the models. |
| ● | Complexity of Valuation Models: The valuation models themselves are complex and require the involvement of specialists to develop or evaluate, such as those involving embedded options or complex financial structures. |
| ● | Nature and Extent of Audit Effort: Significant audit effort was required to evaluate the reasonableness of management's valuation methodologies and assumptions, test the underlying data used in the models, and assess the appropriateness of the fair value measurements recorded in the financial statements. This included evaluating the expertise and objectivity of management's specialists, performing sensitivity analyses, and considering alternative valuation approaches. |
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the valuation of Level 3 investments included the following:
| ● | Evaluated the qualifications and independence of management's valuation specialists. |
| ● | Tested the completeness and accuracy of the data used in the valuation models by comparing it to external sources, where available, or performing detailed testing of internal records. |
| ● | Performed sensitivity analyses to assess the impact of changes in key assumptions on the fair value measurements. |
| ● | Developed independent expectations of fair value, or a range of fair values, and comparing them to management's fair value estimates. |
| ● | Reviewed management's disclosures related to Level 3 investments to ensure they adequately reflect the estimation uncertainty and judgments involved in the valuation process. |
/s/ Wei, Wei & Co., LLP
Flushing, New York
August 8, 2025
We have served as the Company’s auditors since 2021.
F-4
9F INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except for number of shares and per share data)
| December 31, | December 31, | December 31, | ||||||||||
| 2024 | 2025 | 2025 | ||||||||||
| RMB | RMB | US$ | ||||||||||
| ASSETS: | ||||||||||||
| Cash and cash equivalents | ||||||||||||
| Restricted cash | ||||||||||||
| Term deposits | ||||||||||||
| Investment in marketable securities | ||||||||||||
| Accounts receivable, net | ||||||||||||
| Other receivables, net | ||||||||||||
| Loans receivable, net | ||||||||||||
| Prepaid expenses and other assets, net | ||||||||||||
| Investments | ||||||||||||
| Operating lease right-of-use assets, net | ||||||||||||
| Property, equipment and software, net | ||||||||||||
| Intangible assets, net | ||||||||||||
| TOTAL ASSETS | ||||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||
| Liabilities: | ||||||||||||
| Payroll and welfare payable | ||||||||||||
| Taxes payable | ||||||||||||
| Accrued expenses and other liabilities | ||||||||||||
| Operating lease liabilities | ||||||||||||
| Amounts due to related parties | ||||||||||||
| Deferred tax liabilities | ||||||||||||
| TOTAL LIABILITIES | ||||||||||||
| Commitments and Contingencies (Note 19) | ||||||||||||
| Shareholders’ equity: | ||||||||||||
| Class A ordinary shares (US$ | * | |||||||||||
| Class B ordinary shares (US$ | * | |||||||||||
| Additional paid-in capital | ||||||||||||
| Statutory reserves | ||||||||||||
| Accumulated deficit | ( | ) | ( | ) | ( | ) | ||||||
| Accumulated other comprehensive income | ||||||||||||
| Total 9F Inc. shareholders’ equity | ||||||||||||
| Non-controlling interest | ||||||||||||
| Total shareholders’ equity | ||||||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||
| * |
The accompanying notes are an integral part of these consolidated financial statements.
F-5
9F INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands except for number of shares and per share data)
| Year ended December 31, | Year ended December 31, | Year ended December 31, | Year ended December 31, | |||||||||||||
| 2023 | 2024 | 2025 | 2025 | |||||||||||||
| RMB | RMB | RMB | US$ | |||||||||||||
| Revenues: | ||||||||||||||||
| Sales income | ||||||||||||||||
| Cost of goods sold | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gross Profit | ||||||||||||||||
| Post-origination services | ||||||||||||||||
| Technical services | ||||||||||||||||
| Wealth management | ||||||||||||||||
| Total revenues (excluding cost of goods sold) | ||||||||||||||||
| Other operating expenses and fees: | ||||||||||||||||
| Sales and marketing | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Origination and servicing | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| General and administrative expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| (Provision for) reversal of credit losses | ( | ) | ( | ) | ||||||||||||
| Total operating expenses and fees (including cost of goods sold) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Operating (loss) income | ( | ) | ( | ) | ||||||||||||
| Interest income and realized gain of investment in marketable securities | ||||||||||||||||
| Impairment loss of investments | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Impairment loss of goodwill | ( | ) | ||||||||||||||
| Impairment loss of intangible assets and property, equipment and software | ( | ) | ||||||||||||||
| Unrealized (loss) gain investment in marketable securities | ( | ) | ||||||||||||||
| Dividend income from investments | ||||||||||||||||
| (Loss) gain from disposal of subsidiaries | ( | ) | ||||||||||||||
| Gain on held-to-maturity investment | ||||||||||||||||
| Exchange (loss) income | ( | ) | ( | ) | ( | ) | ||||||||||
| Other income (expense), net | ( | ) | ( | ) | ||||||||||||
| (Loss) income before income tax expense and loss in equity method investments | ( | ) | ||||||||||||||
| Income tax expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income (loss) from equity method investments, net | ( | ) | ( | ) | ||||||||||||
| Net (loss) income | ( | ) | ||||||||||||||
| Net loss (income) attributable to the non-controlling interest shareholders | ( | ) | ||||||||||||||
| Net (loss) income (attributable to the Company’s ordinary shareholder) | ( | ) | ||||||||||||||
| (Loss) earnings per share | ||||||||||||||||
| Basic | ( | ) | ||||||||||||||
| Diluted | ( | ) | ||||||||||||||
| Weighted Average Shares Outstanding | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
| (Loss) earnings per ADS (1 ADS equals 20 Class A ordinary shares) | ||||||||||||||||
| Basic | ( | ) | ||||||||||||||
| Diluted | ( | ) | ||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-6
9F INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Amounts in thousands except for number of shares and per share data)
| Year ended December 31, | Year ended December 31, | Year ended December 31, | Year ended December 31, | |||||||||||||
| 2023 | 2024 | 2025 | 2025 | |||||||||||||
| RMB | RMB | RMB | US$ | |||||||||||||
| Net (loss) income | ( | ) | ||||||||||||||
| Other comprehensive income (loss): | ||||||||||||||||
| Unrealized gain on available-for-sale investments | ||||||||||||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ||||||||||||
| Total comprehensive (loss) income | ( | ) | ||||||||||||||
| Total comprehensive income (loss) attributable to the non-controlling interest shareholders | ( | ) | ||||||||||||||
| Total comprehensive (loss) income attributable to the Company’s ordinary shareholder | ( | ) | ||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-7
9F INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Amounts in thousands except for number of shares and per share data)
| 9F Inc. Shareholders’ Equity | ||||||||||||||||||||||||||||||||||||
| Accumulated | Total | |||||||||||||||||||||||||||||||||||
| Ordinary shares | Additional | other | 9F Inc. | Non- | Total | |||||||||||||||||||||||||||||||
| Number of shares | Amount | paid-in capital | Statutory reserve | Deficit | comprehensive income (loss) | shareholders’ equity | controlling interest | shareholders’ equity | ||||||||||||||||||||||||||||
| RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | |||||||||||||||||||||||||||||
| Balance as of December 31, 2022 | ( | ) | ||||||||||||||||||||||||||||||||||
| Share-based compensation | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Other comprehensive income | — | |||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2023 | ( | ) | ||||||||||||||||||||||||||||||||||
| Share-based compensation | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Net income | — | |||||||||||||||||||||||||||||||||||
| Provision for statutory reserve | — | ( | ) | |||||||||||||||||||||||||||||||||
| Other comprehensive income | — | |||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2024 | ( | ) | ||||||||||||||||||||||||||||||||||
| Share-based compensation | — | |||||||||||||||||||||||||||||||||||
| Net income | — | ( | ) | |||||||||||||||||||||||||||||||||
| Provision for statutory reserve | — | ( | ) | |||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Capital injection from non-controlling interest shareholders | — | |||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2025 | ( | ) | ||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2025 in US$ | * | ( | ) | |||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-8
9F INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands except for number of shares and per share data)
| Year ended December 31, 2023 | Year ended December 31, 2024 | Year ended December 31, 2025 | Year ended December 31, 2025 | |||||||||||||
| RMB | RMB | RMB | US$ | |||||||||||||
| Cash Flows from Operating Activities: | ||||||||||||||||
| Net (loss) income | ( | ) | ||||||||||||||
| Depreciation | ||||||||||||||||
| Amortization of intangible assets | ||||||||||||||||
| Amortization of right-of-use assets | ||||||||||||||||
| Deferred income taxes | ( | ) | ( | ) | ||||||||||||
| Share-based compensation | ( | ) | ( | ) | ||||||||||||
| (Gain) loss from disposal of property and equipment | ( | ) | ||||||||||||||
| Share of (income) loss in equity method investments | ( | ) | ( | ) | ||||||||||||
| Unrealized loss (gain) of investment in marketable securities | ( | ) | ( | ) | ( | ) | ||||||||||
| Loss (income) from disposal of subsidiaries | ( | ) | ||||||||||||||
| Impairment loss of investment | ||||||||||||||||
| Impairment loss of intangible assets and property, equipment and software | ||||||||||||||||
| Gain on held-to-maturity investment | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Dividend income from equity securities without readily determinable fair value | ( | ) | ( | ) | ||||||||||||
| Provision (reversal) for credit losses | ( | ) | ( | ) | ||||||||||||
| Impairment of goodwill | ||||||||||||||||
| Accretion of interest on held-to-maturity investment | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Changes in operating assets and liabilities | ||||||||||||||||
| Accounts receivable | ( | ) | ( | ) | ( | ) | ||||||||||
| Interest receivable | ||||||||||||||||
| Other receivables | ( | ) | ( | ) | ( | ) | ||||||||||
| Loans receivable | ( | ) | ( | ) | ||||||||||||
| Prepaid expenses and other assets | ( | ) | ( | ) | ||||||||||||
| Amount due to related parties | ( | ) | ||||||||||||||
| Accrued expenses and other liabilities | ( | ) | ||||||||||||||
| Taxes payable | ( | ) | ( | ) | ( | ) | ||||||||||
| Payroll and welfare payable | ( | ) | ( | ) | ( | ) | ||||||||||
| Deferred revenue | ( | ) | ( | ) | ||||||||||||
| Operating lease liabilities | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net cash provided by operating activities | ||||||||||||||||
| Cash Flows from Investing Activities: | — | |||||||||||||||
| Purchases of property, equipment and software and intangible assets | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Proceeds from sale of property and equipment | ||||||||||||||||
| Purchase of term deposits | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Redemptions of term deposits | ||||||||||||||||
| Acquisitions of subsidiaries, net of cash acquired | ( | ) | ||||||||||||||
| Purchase of marketable securities | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Disposals of marketable securities | ||||||||||||||||
| Disposals of subsidiaries, net of cash disposed | ||||||||||||||||
| Purchases of long-term investments | ( | ) | ( | ) | ||||||||||||
| Disposal of long-term investments | ||||||||||||||||
| Provision of loans to related parties | ( | ) | ( | ) | ||||||||||||
| Repayment of loans to related parties | ||||||||||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Cash Flows from Financing Activities: | ||||||||||||||||
| Capital contribution by non-controlling shareholders | ||||||||||||||||
| Net cash provided by financing activities | ||||||||||||||||
| Effect of foreign exchange rate changes on cash, cash equivalent and restricted cash | ( | ) | ( | ) | ||||||||||||
| Net (decrease) increase in cash, cash equivalent, and restricted cash | ( | ) | ( | ) | ||||||||||||
| Cash, cash equivalent, and restricted cash at the beginning of the year | ||||||||||||||||
| Cash, cash equivalent, and restricted cash at the end of the year | ||||||||||||||||
| Supplemental disclosures of cash flow information: | ||||||||||||||||
| Cash paid for income taxes | ||||||||||||||||
| Reconciliation to amounts on consolidated balance sheets at the beginning of the year: | ||||||||||||||||
| Cash and cash equivalents | ||||||||||||||||
| Restricted cash | ||||||||||||||||
| Total cash, cash equivalents, and restricted cash at the beginning of the year | ||||||||||||||||
| Reconciliation to amounts on consolidated balance sheets at the end of the year: | ||||||||||||||||
| Cash and cash equivalents | ||||||||||||||||
| Restricted cash | ||||||||||||||||
| Total cash, cash equivalents, and restricted cash at the end of the year | ||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-9
9F Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023, 2024 and 2025
(Amounts in thousands except for number of shares and per share data)
1. ORGANIZATION AND PRINCIPAL ACTIVITIES
9F Inc. (the “Company”
or “9F”) was incorporated under the laws of the Cayman Islands on
Prior to the incorporation of the Company, the Group operated its business in China through Jiufu Shuke Technology Group Co, Ltd (“Jiufu Shuke”), formerly known as Jiufu Jinke Holding Group Co, Ltd., as a limited liability company owned by the original shareholders (the “Founders”), Zhenxiang Zhong, Guangwu Gao, and Yifan Ren. On August 25, 2014, Jiufu Shuke became the Group’s consolidated VIEs through the contractual arrangements described below in “Basis of consolidation” in Note 2.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying consolidated financial statements of the Group have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”).
Basis of consolidation
The consolidated financial statements include the financial statements of the Company, its subsidiaries and consolidated VIEs, including the VIEs’ subsidiaries, for which the Group is the primary beneficiary.
All transactions and balances among the Company, its subsidiaries, the VIEs and the VIEs’ subsidiaries have been eliminated upon consolidation.
As PRC laws and regulations prohibit and restrict foreign ownership of internet value-added businesses, the Group operates its internet related business in the PRC through three PRC domestic companies, Jiufu Shuke, Beijing Yi Qi Mai and Beijing Puhui Lianyin Information Technology Limited (“Beijing Puhui”), whose equity interests are held by certain management members and the Founders of the Group. The Group established four wholly-owned foreign invested subsidiaries in the PRC, Beijing Shuzhi Lianyin Technology Co., Ltd (“Shunzhi Lianyin”), Zhuhai Xiaojin Hulian Technology Co., Ltd (“Xiaojin Hulian”), Zhuhai Wukong Youpin Technology Co., Ltd (“Wukong Youpin”), and Qianhai Fuyuan Network Technology (Shenzhen) Co., Ltd (“Qianhai Fuyuan”, together with Shunzhi Lianyin, Xiaojin Hulian, and Wukong Youpin collectively referred as the “WFOEs”).
F-10
By entering into a series of agreements (the “VIE Agreements”), the Group, through WFOEs, obtained control over Jiufu Shuke and Beijing Puhui (collectively referred as “VIEs”). The VIE Agreements enable the Group to (1) have power to direct the activities that most significantly affect the economic performance of the VIEs, and (2) receive the economic benefits of the VIEs that could be significant to the VIEs. Accordingly, the Group is considered the primary beneficiary of the VIEs and has consolidated the VIEs’ financial results of operations, assets and liabilities in the Group’s consolidated financial statements. In making the conclusion that the Group is the primary beneficiary of the VIEs, the Group’s rights under the Power of Attorney also provide the Group’s abilities to direct the activities that most significantly impact the VIEs’ economic performance. The Group also believes that this ability to exercise control ensures that the VIEs will continue to execute and renew the Master Exclusive Service Agreement and pay service fees to the Group. By charging service fees to be determined and adjusted at the sole discretion of the Group, and by ensuring that the Master Exclusive Services Agreement is executed and remains effective, the Group has the rights to receive substantially all of the economic benefits from the VIEs.
Details of the VIE Agreements, are set forth below:
VIE Agreements that give the Group effective control over the VIEs include:
Voting Rights Proxy Agreement and Irrevocable Power of Attorney
Each shareholder of the VIEs grant to any person designated by the WFOEs to act as its attorney-in-fact to exercise all shareholder rights under PRC law and the relevant articles of association, including but not limited to, appointing directors, supervisors and officers of the VIEs as well as the right to sell, transfer, pledge and dispose all or a portion of the equity interest held by such shareholders of the VIEs. The proxy and power of attorney agreements will remain effective as long as the WFOEs exist. The shareholders of the VIEs do not have the right to terminate the proxy agreements or revoke the appointment of the attorney-in-fact without written consent of the WFOEs.
Exclusive Option Agreement
Each shareholder of the VIEs granted 9F or any third party designated by 9F the exclusive and irrevocable right to purchase from such shareholders of the VIEs, to the extent permitted by PRC law and regulations, all or part of their respective equity interests in the VIEs for a purchase price equal to the registered capital. The shareholders of the VIEs will then return the purchase price to 9F or any third party designated by 9F after the option is exercised. 9F may transfer all or part of its option to a third party at its own option. The VIEs and its shareholders agree that without prior written consent of 9F, they may not transfer or otherwise dispose of the equity interests or declare any dividends. The option agreement will remain effective until 9F or any third party designated by 9F acquires all equity interest of the VIEs.
Spousal Consent
The spouse of each shareholder of the VIEs has entered into a spousal consent letter to acknowledge that he or she consents to the disposition of the equity interests held by his or her spouse in the VIEs in accordance with the exclusive option agreement, the power of attorney and the equity pledge agreement regarding the VIE structure described above, and any other supplemental agreement(s) may be consented by his or her spouse from time to time. Each such spouse further agrees that he or she will not take any action or raise any claim to interfere with the arrangements contemplated under the mentioned agreements. In addition, each such spouse further acknowledges that any right or interest in the equity interests held by his or her spouse in the VIEs do not constitute property jointly owned with his or her spouse and each such spouse unconditionally and irrevocably waives any right or interest in such equity interests.
Loan Agreement
Pursuant to the loan agreements between the WFOEs and each shareholder of the VIEs, the WFOEs extended loans to the shareholders of the VIEs, who had contributed the loan principal to the VIEs as registered capital. The shareholders of VIEs may repay the loans only by transferring their respective equity interests in the VIEs to 9F Inc. or its designated person(s) pursuant to the exclusive option agreements. These loan agreements will remain effective until the date of full performance by the parties of their respective obligations thereunder.
F-11
The VIE Agreements that enables the Group to receive substantially all of their economic benefits include:
Equity Interest Pledge Agreement
Pursuant to equity interest pledge agreement, each shareholder of the VIEs has pledged all of his or her equity interest held in the VIEs to the WFOEs to secure the performance by the VIEs and their shareholders of their respective obligations under the contractual arrangements, including the payments due to the WFOEs for services provided. In the event that the VIEs breach any obligations under these agreements, the WFOEs as the pledgees, will be entitled to request immediate disposal of the pledged equity interests and have priority to be compensated by the proceeds from the disposal of the pledged equity interests. The shareholders of the VIEs shall not transfer their equity interests or create or permit to be created any pledges without the prior written consent of WFOEs. The equity interest pledge agreement will remain valid until the master exclusive service agreement and the relevant exclusive option agreements and proxy and power of attorney agreements, expire or are terminated.
Master Exclusive Service Agreement
Pursuant to exclusive service agreement, the WFOEs have the exclusive right to provide the VIEs with technical support, consulting services and other services. The WFOEs shall exclusively own any intellectual property arising from the performance of the agreement. During the term of this agreement, the VIEs may not accept any services covered by this agreement provided by any third party. The exclusive service agreements provide that the VIEs shall pay service fees to WFOEs, and WFOEs are entitled to and responsible for all economic benefits and risks derived by VIEs. The agreement will remain effective unless the WFOEs terminate the agreement in writing.
Risks in relation to the VIE structure
The Group believes that the contractual arrangements with the VIEs and their current shareholders are in compliance with PRC laws and regulations and are legally enforceable. However, uncertainties in the PRC legal system could limit the Group’s ability to enforce the contractual arrangements. If the legal structure and contractual arrangements were found to be in violation of PRC laws and regulations, the PRC government could:
| ● | Revoke the business and operating licenses of the Group’s PRC subsidiaries or consolidated affiliated entities; |
| ● | Discontinue or restrict the operations of any related-party transactions among the Group’s PRC subsidiaries or consolidated affiliated entities; |
| ● | Impose fines or other requirements on the Group’s PRC subsidiaries or consolidated affiliated entities; |
| ● | Require the Group’s PRC subsidiaries or consolidated affiliated entities to revise the relevant ownership structure or restructure operations; |
| ● | Restrict or prohibit the Group’s use of the proceeds from any public offering to finance the Group’s business and operations in China; |
| ● | Shut down the Group’s servers or blocking the Group’s online platform; |
| ● | Discontinue or place restrictions or onerous conditions on the Group’s operations; and/or |
| ● | Require the Group to undergo a costly and disruptive restructuring. |
The Group’s ability to conduct its business may be negatively affected if the PRC government were to carry out any of the afore mentioned actions. As a result, the Group may not be able to consolidate the VIEs in its consolidated financial statements as it may lose the ability to exert effective control over the VIEs and its shareholders, and it may lose the ability to receive the economic benefits from the VIEs. The Group currently does not believe that any penalties imposed or actions taken by the PRC government would result in the liquidation of the Company, its WFOEs, or the VIEs.
Under the VIE Arrangements, the Group has the power to direct activities of the VIEs and can have assets transferred out of the VIEs. Therefore, the Group considers that there is no asset in the VIEs that can be used only to settle obligations of the VIEs, except for assets that correspond to the amount of the registered capital and PRC statutory reserves, if any. As the VIEs are incorporated as limited liability companies under the Company Law of the PRC, creditors of the VIEs do not have recourse to the general credit of the Group for any of the liabilities of the VIEs.
F-12
Currently there is no contractual arrangement which requires the Group to provide additional financial support to the VIEs. However, as the Group conducts its businesses primarily based on the licenses held by the VIEs, the Group has provided and will continue to provide financial support to the VIEs.
Revenue-producing assets held by the VIEs include certain internet content provision (“ICP”) licenses and other licenses, domain names and trademarks. The ICP licenses and other licenses are required under relevant PRC laws, rules and regulations for the operation of internet businesses in the PRC and therefore are integral to the Group’s operations. The ICP licenses require that core PRC trademark registrations and domain names are held by the VIEs that provide the relevant services.
The Company consolidates Yuan Yu Global Fund SPC and accounts for as a VIE because it is deemed to control such fund. The Company has an economic interest and as the investment manager, is deemed to have both the power to direct the most significant activities of the products and the right to receive benefits that could potentially be significant to this fund.
The following table sets forth the assets, liabilities, results of operations and cash flows of the VIEs and their subsidiaries, which are included in the Group’s consolidated financial statements after the elimination of intercompany balances and transactions:
| As of December 31, 2024 | As of December 31, 2025 | |||||||
| RMB | RMB | |||||||
| Assets: | ||||||||
| Cash and cash equivalents | ||||||||
| Restricted cash | ||||||||
| Investment in marketable securities | ||||||||
| Accounts receivable, net | ||||||||
| Other receivables, net | ||||||||
| Loans receivable, net | ||||||||
| Amount due from the subsidiaries of the Group* | ||||||||
| Prepaid expenses and other assets | ||||||||
| Investments | ||||||||
| Operating lease right-of-use assets, net | ||||||||
| Property, equipment and software, net | ||||||||
| Total assets | ||||||||
| Liabilities: | ||||||||
| Payroll and welfare payable | ||||||||
| Taxes payable | ||||||||
| Accrued expenses and other liabilities | ||||||||
| Operating lease liabilities | ||||||||
| Amounts due to related parties | ||||||||
| Amount due to the subsidiaries of the Group* | ||||||||
| Deferred tax liabilities | ||||||||
| Total liabilities | ||||||||
| * |
| For the years ended December 31, | ||||||||||||
| 2023 | 2024 | 2025 | ||||||||||
| RMB | RMB | RMB | ||||||||||
| Net revenues | ||||||||||||
| Net (loss) income | ( | ) | ||||||||||
F-13
| For the years ended December 31, | ||||||||||||
| 2023 | 2024 | 2025 | ||||||||||
| RMB | RMB | RMB | ||||||||||
| Net cash provided by operating activities | ||||||||||||
| Net cash (used in) provided by investing activities | ( | ) | ( | ) | ||||||||
| Net cash provided by financing activities | ||||||||||||
The VIEs contributed an aggregate of
Reclassifications
Certain reclassifications have been made to the prior years’ consolidated financial statements to conform to the current year’s presentation. These reclassifications had no impact on net (loss) income, shareholders’ equity, or cash flows as previously reported.
Use of estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Areas where management uses subjective judgment include, but are not limited to revenue recognition, provision for credit losses for receivables, impairment loss of investments, share-based compensation and valuation allowance for deferred tax assets. Actual results may differ materially from these estimates.
Revenue recognition
The Group follows the Financial Accounting Standards Board (FASB) Accounting Standards Codification 606 (“ASC 606”), Revenue from Contracts with Customers (Topic 606).
The core principle of Topic 606 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. Under the guidance of FASB ASC 606, we are required to (a) identify the contract(s) with a customer, (b) identify the performance obligations in the contract, (c) determine the transaction price, (d) allocate the transaction price to the performance obligations in the contract and (e) recognize revenue when (or as) the Group satisfies its performance obligation.
F-14
Technical services
The Group offers technical services to customers including technology empowerment services, operations and marketing services, customized software development, etc. Technology empowerment services to customers with respect to user acquisition, risk management, consumption scenario perceptions and comprehension and data modeling.
Technical services generate revenues primarily from fixed-price short-term contracts from technology empowerment services, operations and marketing support services and is generally recognized over time on a ratable basis. Revenue generated from technology customized software development is recognized when control over the customized software has been transferred to the customer.
Sales income
Sales income from sales of the products to end customers directly through the online stores run on third party e-commerce platforms with a platform service agreement. Under the platform service agreement, the Group sets up online stores on the platforms to sell the Group’s products to end customers. The platforms provide services to support the operations of the online store including processing sales orders and collecting from end customers. The platforms charge the Group service fees based on the Group’s sales through the online stores. The Group enters sales contracts directly with the end customers. The platforms do not take control of the goods and are not a party to sales contracts with end customers. The Group is responsible for selling and fulfilling all obligations according to its sales contracts with end customers, including delivering products and providing customer support. Accordingly, the Group determined the end customers (as opposed to the platforms) as its customers. The Group identifies its performance obligation to transfer control of provide and deliver the products ordered on the e-commerce platform to the customers. The sales contracts with end customers normally include a customer’s right to return products within 7 days after receipt of goods. If customers report defects after receipt but are still within the warranty period (varies from 6 months to 24 months), the Group will have the defective goods repaired, replaced or take other appropriate action to compensate timely, usually within 48 hours.
The Group recognizes revenues
net of discounts and sales returns when the products are delivered and title is passed to customers. For the years ended December 31,
2023, 2024 and 2025, sales returns are RMB
Wealth management
Wealth management revenue consists of: (i) internet securities services revenue, which primarily consists of commissions and brokerage income, management fee income and agency fee income; and (ii) insurance services revenue, primarily consists of customers referral income.
The Group offers offshore securities investment services and IPO subscription service and charge fees to individual investors to connect them with Hong Kong and U.S. stock markets. Internet securities services generate revenue from commissions through customers’ transactions in stocks by providing brokerage services.
The Group enters into insurance service contracts with insurance companies with a pre-agreed commission. The commissions are normally calculated as a percentage (which varies depending on the type of insurance products involved) of the premium collected by paid to the insurance companies from sales facilitated by the Group.
F-15
For each type of wealth management services, the Group recognizes revenue when (or as) the entity satisfies the service/performance obligation by transferring the promised service to customers. The internet securities service is recognized at a point in time on the trade date when the performance obligation is satisfied. The insurance service commissions are earned when each individual service is completed.
Legacy business
In December 2020, as part of the effort to redirect the Group’s business focus, we ceased publishing information relating to new offerings of investment opportunities in legacy products for investors on our online lending information intermediary platform. Pursuant to certain collaboration arrangements entered into by us and certain licensed asset management companies, the rights of investors in then existing loans underlying the legacy products have been transferred to such companies.
Online Lending Information Intermediary Services revenue (under legacy business). Through its online platform, the Group provided intermediary services for the personal financing products, One Card, under which the holders of One Card could apply for loans on a revolving basis (“revolving loan products”). The Group also provided one-time loan facilitation services to meet various consumption needs (“non-revolving loan products”). The Group has determined that it was not the legal lender or borrower in the loan origination and repayment process but acting as an intermediary to bring the lender and the borrower together. Therefore, the Group did not record loans receivable or payable arising from the loans facilitated between the investors and borrowers on its platform. The Group considered its customers to be both the investors and borrowers. The Group considered the loan facilitation services and post-origination services as two separate services, which represented two separate performance obligations under Topic 606, as these two deliverables were distinct in that customers could benefit from each service on its own and the Group delivered the services were separately identifiable from each other in the contract.
In December 2020, the Group ceased publishing information relating to new offerings of investment opportunities in legacy products for investors on its online lending information intermediary platform. Pursuant to certain collaboration arrangements entered into by the Group and a licensed asset management company, the rights of investors in existing loans underlying the legacy products were transferred to the asset management company. After such transfer, the outstanding balance of loans facilitated became nil and loan facilitation services were in 2023, 2024 and 2025, and the asset management company provided the existing investors with services in relation to the return of their remaining investment in loans in the direct lending program. Through its direct lending program, the Group provided traffic referral services to financial institution partners, allowing the financial institution partners to gain access to borrowers who passed the Group’s risk assessment.
Revenues of legacy business recognized in 2023, 2024 and 2025 were
RMB
Value added taxes (“VAT”)
The Group is subject to
value added tax, or VAT, at a rate
F-16
Disaggregation of revenues
Technical service revenue, sales income and post-origination services revenue are generated from
China, while wealth management revenue is primarily derived from Hong Kong.
| December 31, | December 31, | December 31, | ||||||||||
| 2023 | 2024 | 2025 | ||||||||||
| RMB | RMB | RMB | ||||||||||
| Technical services | ||||||||||||
| Sales income | ||||||||||||
| Post-origination services | ||||||||||||
| Wealth management | ||||||||||||
| Total | ||||||||||||
Deferred Revenue
Deferred revenue consists of post-origination service fees received from borrowers, investors and financial institution partners for which services have not yet been provided. Deferred revenues are recognized ratably as revenue when the post-origination services are delivered during the loan period. Deferred revenue was fully recognized as of the end of 2024.
Quality assurance fund liability
In order to provide assurance for investors, the Group established an investors’ protection plan. The Group cooperated with third party guarantee and insurance companies, who provided investor protection services to replace the former quality assurance fund model, and the Group has no legal obligation to make compensation payments to investors on defaulted loans, and therefore no longer records a quality assurance fund liability in accordance with ASC 405-20, Extinguishments of liabilities.
Fair value
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 Group considers the principal or most advantageous market in which it would transact, and it considers assumptions that market participants would use when pricing the asset or liability.
Authoritative literature provides a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The level in the hierarchy within which the fair value measurement in its entirety falls is based upon the lowest level of input that is significant to the fair value measurement as follows:
| ● | Level 1—inputs are based upon unadjusted quoted prices for identical assets or liabilities traded in active markets. |
| ● | Level 2—inputs are based upon 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 and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. |
| ● | Level 3—inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based valuation techniques that include option pricing models, discounted cash flow models, and similar techniques. |
F-17
The Group’s financial instruments include cash and cash equivalents, restricted cash, accounts receivable, other receivables, prepaid expenses and other assets, marketable securities, term deposits, long-term investments, amount due from related parties, amount due to related parties, and accrued expenses and other liabilities. The carrying amounts of these financial instruments, except for long-term investments approximate their fair values because of their generally short-term maturities.
Cash and cash equivalents
Cash and cash equivalents represent cash on hand and demand deposits placed with banks or other financial institutions, which have original maturities of three months or less. The Group considers all highly liquid investments with stated maturity dates of three months or less from the date of purchase to be cash equivalents.
Restricted cash
The restricted cash primarily
consists of amounts received from investors for the purpose of buying or selling securities on their behalf, and bank deposit frozen by
certain judicial freezing order. As of December 31, 2024, and 2025, the Group had restricted bank deposits of RMB
Term deposits
Term deposits consist of deposits placed with financial institutions with an original maturity of greater than three months and less than one year.
Investment in marketable securities
The Group invests in marketable equity securities to meet business objectives. The marketable securities are classified as investments with readily determinable fair values, which are reported at fair value in the consolidated balance sheets. The Group purchases common stocks, funds, floating rate bonds on the open market through bank and securities companies.
Loans receivable
Loans receivable are measured at amortized cost and net of allowance for current expected credit losses. If the loans receivable with allowance for current expected credit losses is subsequently collected, the previously recognized allowance for current expected credit losses is reversed.
F-18
Inventories
Inventories consisting
of products available for sale are valued at the lower of cost or net realizable value with cost determined using the first-in,
first-out cost method. Net realizable value is based on estimated selling prices in the ordinary course of business, less reasonably
predictable transportation cost. Adjustments are recorded when future estimated net realizable value is less than cost. Write-downs
are recorded in cost of revenues in the consolidated statements of operations and comprehensive income (loss). Certain costs
attributable to buying and receiving products, such as freight in, are also included in inventories. As of December 31, 2024, and
2025, the Group had inventories of RMB
Allowance for credit losses
Accounts receivable, other
receivables, loans receivable and amounts due from related parties are stated at their historical carrying amount net of write-offs and
an allowance for credit losses. The Group maintains an allowance for credit losses in accordance with ASC Topic 326, Credit Losses (“ASC326”).
The Group continuously monitors collections from its borrowers based on
various factors, including aging, historical collection data, specific collection issues that have been identified, borrower concentration,
general economic conditions and other factors surrounding the credit risk of specific borrowers. Uncollectible receivables are written
off when a settlement is reached for an amount that is less than the outstanding balance or when the Group has determined it is probable
that the balance will not be collected.
| Accounts receivable | Other receivables | Loans receivable (Note 3) | Amounts due from related parties (Note 10) | Total | ||||||||||||||||
| RMB | RMB | RMB | RMB | RMB | ||||||||||||||||
| Balance at December 31, 2023 | ||||||||||||||||||||
| Provision for credit losses | ||||||||||||||||||||
| Reversals | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Write-offs | ( | ) | ( | ) | ||||||||||||||||
| Foreign currency translation adjustment | ||||||||||||||||||||
| Balance at December 31, 2024 | ||||||||||||||||||||
| Provision for credit losses | ||||||||||||||||||||
| Reversals | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Write-offs | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Balance at December 31, 2025 | ||||||||||||||||||||
F-19
Investments
The Group’s investments consist of equity securities without readily determinable fair values, equity method investments, held-to-maturity and available-for-sale investments.
| a. | Equity securities without readily determinable fair value |
For investments in common stock or in-substance common stock issued by privately-held companies on which the Group does not have significant influence, and investments in privately-held companies’ shares that are not common stocks or in-substance common stocks, as these equity securities do not have readily determinable fair value, the Group measure these equity securities investments at cost, less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer (referred to as the measurement alternative). All dividends received from investments accounted for under the measurement alternative are recognized in the consolidated statements of operations as dividend income from investments in the period in which the right to receive such dividends is established, which is generally the declaration date.
The Group reviews its equity securities without readily determinable fair value for impairment at each reporting period. If a qualitative assessment indicates that the investment is impaired, the Group estimates the investment’s fair value in accordance with the principles of ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”). If the fair value is less than the investment’s carrying value, the Group recognizes an impairment loss equal to the difference between the carrying value and the fair value in the consolidated statements of operations.
| b. | Equity method investments |
Investee companies over which the
Group has the ability to exercise significant influence, but does not have a controlling interest, are accounted for using the
equity method of accounting in accordance with ASC Topic 323, Investments-Equity Method and Joint Ventures (“ASC 323”).
Significant influence is generally considered to exist when the Group has an ownership interest in the voting stock of the investee
between
The Group reviews its equity method investments for impairment whenever an event or circumstance indicates that an other-than-temporary impairment has occurred. The Group considers available quantitative and qualitative evidence in evaluating potential impairment of its equity method investments. An impairment charge is recorded when the carrying amount of the investment exceeds its fair value and this condition is determined to be other-than-temporary.
| c. | Held-to-maturity |
The balance of held-to-maturity securities are recorded at amortized cost. Securities for which management has the intent and ability to hold until maturity are classified as held-to-maturity and are carried at cost, adjusted for amortization of premiums and accretion of discounts on a level yield basis (amortized cost).
The allowance for credit losses of the held-to-maturity securities reflects the Group’s estimated expected losses over the contractual lives of the held-to-maturity debt investments.
| d. | Available-for-sale investments |
For investments determined to be debt securities, the Group accounts for it as long-term available-for-sale investments when they are not classified as either trading or held-to-maturity investments. The available-for-sale investments are carried at their fair value and the unrealized gains or losses from the changes in fair values are included in accumulated other comprehensive income (loss) in the consolidated statement of comprehensive income (loss).
The Group evaluates each individual investment periodically for impairment. For investments where the Group does not intend to sell, the Group evaluates whether a decline in fair value is due to deterioration in credit risk. Credit-related impairment losses, not to exceed the amount that fair value is less than the amortized cost basis, are recognized through an allowance for credit losses on the consolidated balance sheet with corresponding adjustment in the consolidated statements of operations and comprehensive income or loss. Subsequent increases in fair value due to credit improvement are recognized through reversal of the credit losses and corresponding reduction in the allowance for credit losses. Any decline in fair value that is non-credit related is recorded in accumulated other comprehensive income as a component of shareholders’ equity.
F-20
Goodwill
Goodwill represents the excess of the purchase price of acquired businesses over the estimated fair value assigned to the individual assets acquired and liabilities assumed.
Goodwill is not depreciated or amortized but is tested for impairment on an annual basis as of December 31, and in between annual tests when an event occurs or circumstances change that could indicate that the asset might be impaired. In accordance with ASC Topic 350, the Group first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If as a result of the qualitative assessment, it is more likely than not that the fair value of the reporting unit is less than its carrying amount, the quantitative impairment test is mandatory. Otherwise, no further testing is required. The quantitative impairment test consists of a comparison of the fair value of each reporting unit with its carrying amount, including goodwill. If the carrying amount of each reporting unit exceeds its fair value, an impairment loss equal to the difference between the fair value of the reporting unit and its carrying amount will be recorded. However, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.
Application of the goodwill impairment test requires management judgement, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value of each reporting unit. A reporting unit is identified as a component for which discrete financial information is available and is regularly reviewed by management. The judgment in estimating the fair value of reporting units includes estimating future cash flows, determining appropriate discount rates and making other assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value for each reporting unit.
Based on the Group’s impairment assessment, the Group fully impaired
the goodwill in the amount of RMB
Intangible assets
Intangible assets
consist of purchased license assets, which are recorded at cost less accumulated amortization and impairment. Amortization is provided on a
straight-line basis over the estimated useful lives which are
Property, equipment and software, net
Property, equipment and
software consists of computer and transmission equipment, furniture and office equipment, office buildings, software, and leasehold
improvements, which are recorded at cost less accumulated depreciation, amortization and impairment. The net residual value of property,
equipment and software is to
| Computer and electronic equipment | ||
| Furniture and office equipment | ||
| Office building | ||
| Software | ||
| Leasehold improvements |
F-21
Origination and servicing expense
Origination and servicing expense consists primarily of variable expenses and vendor costs, including costs related to credit assessment, customer and system support expenses for the operation of the insurance brokerage business.
Sales and marketing expenses
Sales and marketing expenses consists primarily of staff costs and various marketing expenses, including those related to user acquisition.
General and administrative expenses
General and administrative expenses mainly consist of salaries, bonuses, benefits, office facilities and other support overhead costs, professional services fees as well as non-recurring items.
Cost of goods sold
Cost of goods sold primarily consists of the purchase price of products, packaging material, handling costs and product delivery costs. Cost of goods sold is related to sales income.
Government subsidy income
The Group receives government
grants and subsidies in the PRC from various local governments from time to time which are granted for general corporate purposes and
to support its ongoing operations in the region. The grants are determined at the discretion of the relevant government authority and
there are no restrictions on their use. The government subsidies are recorded as other income in the consolidated statements of operations
in the period the cash was received. The government grants received by the Group were RMB
Leases
The Group leases certain
office premises in different cities in the PRC and overseas under operating leases. In accordance with FASB ASC Topic 842, the Group
determines whether an arrangement constitutes a lease and records lease liabilities and right-of-use assets on its consolidated
balance sheets at the lease commencement date. The Group measures its lease liabilities based on the present value of the total
lease payments to be paid discounted based on the more readily determinable rate implicit in the lease or the Groups incremental
borrowing rate, which is the estimated rate the Group would be required to pay for a collateralized borrowing equal to the total
lease payments over the term of the lease. The Group estimates its incremental borrowing rate based on an analysis of corporate debt
of companies with credit and financial profiles similar to its own. The Group measures right-of-use assets based on the
corresponding present value of lease payments adjusted for payments made to the lessor at or before the commencement date, and
initial direct costs it incurs under the lease. The Group begins recognizing rent expense when the lessor makes the underlying asset
available for use by the Group. The Group’s leases have remaining lease terms of up to
The Group elects to apply the short-term lease measurement and recognition exemption for contracts with lease terms of 12 months or less therefore the short-term leases are not recorded on the Group’s consolidated balance sheet.
F-22
Income taxes
Current income taxes are provided on the basis of net profit (loss) for financial reporting purposes, adjusted for income and expenses which are not assessable or deductible for income tax purposes, in accordance with the laws of the relevant tax jurisdictions.
Deferred income taxes are provided using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between financial statement and the tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are also provided for net operating loss carryforwards.
Net deferred tax assets are recognized to the extent that these assets are more likely than not to be realized. In making such a determination, management considers all positive and negative evidence, including future reversals of projected future taxable income and results of recent operations. Net deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that a portion of or all of the net deferred tax assets will not be realized.
In order to assess uncertain
tax positions, the Group applies a more likely than not threshold and a two-step approach for the tax position measurement and financial
statement recognition. Under the two-step approach, the first step is to evaluate the tax position for recognition by determining if the
weight of available evidence indicates that it is more likely than not that the position will be sustained, including resolution of related
appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than
Share-based compensation
Share-based payment transactions with employees and management, such as share options, are measured based on the grant date fair value of the equity instrument. The Group has elected to recognize compensation expenses using the straight-line method for all employee equity awards granted with graded vesting provided that the amount of compensation cost recognized at any date is at least equal to the portion of the grant-date value of the options that are vested at that date, over the requisite service period of the award, which is generally the vesting period of the award. Compensation expenses for awards with performance conditions are recognized when it is probable that the performance condition will be achieved. The Group has elected to recognize forfeitures when they occur.
Net income (loss) per ordinary share
Basic net income (loss) per ordinary share is computed by dividing net income (loss) attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.
Diluted net income per ordinary share reflects the potential dilution that would occur if securities were exercised or converted into ordinary shares. The Group has share options which could potentially dilute basic net income per ordinary share in the future. The dilutive effect of outstanding share-based awards is reflected in the diluted net (loss) income per share by application of the treasury stock method or if converted method. When the Group has a loss, the dilutive effect of these securities is not included as they would be anti-dilutive.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker (the “CODM”), which is the chief executive officer. The Group has three reportable segments: E-commerce services, technology Empowerment service and Wealth Management services.
Foreign currency translation
The Group’s reporting currency is RMB. The functional currency of the Group’s entities in Hong Kong is Hong Kong dollars. The functional currency of the Group’s other overseas entities is US dollars. The functional currency of the Group’s subsidiaries and VIEs in the PRC is Renminbi (“RMB”).
Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at the rates of exchange at the balance sheet date. Transactions in currencies other than the functional currency during the year are converted into the functional currency at the applicable rates of exchange prevailing when the transactions occurred. Transaction gains and losses are recognized in the consolidated statements of operations.
Assets and liabilities are translated from each entity’s functional currency to the reporting currency using the exchange rates in effect on the balance sheet date. Equity amounts are translated at historical exchange rates. Revenues, expenses, gains and losses are translated using the average rates for the year. The resulting foreign currency translation adjustments are recorded in other comprehensive income/(loss) in the consolidated statements of comprehensive income/(loss), and the accumulated foreign currency translation adjustments are presented as a component of accumulated other comprehensive income/(loss) in the consolidated statements of changes in shareholders’ equity.
F-23
Convenience translation
Translations of amounts from
RMB into US$ are presented solely for the convenience of the reader and were calculated at the rate of US$
Significant risks and uncertainties
| i) | 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 cash and cash equivalents
of the Group included aggregate amounts of RMB
| ii) | Concentration of credit risk |
Assets that potentially subject
the Group to significant concentrations of credit risk primarily consist of cash and cash equivalents, restricted cash, term deposits,
short-term investments, accounts receivable, other receivable, loans receivable, amount due from related party, and long-term investment.
The maximum exposure of such assets to credit risk is their carrying amounts as of the balance sheet dates. As of December 31, 2024 and
2025, the majority of the Group’s cash and cash equivalents, restricted cash and certain wealth management products and time deposits
with maturities more than one year recorded in marketable securities and other investments were held at major financial institutions located
in the Chinese mainland and Hong Kong which the management believes are of high credit ratings for issuer, product risk rating and low
historical default rate and holding period. As of December 31, 2024 and 2025, the majority of the Group’s cash and cash equivalents
were deposited in financial institutions located in the PRC. As of December 31, 2025, according to the Deposit Insurance Regulation
in different areas, RMB
F-24
The following tables summarized the customer with greater than 10% of the total revenue and account receivables:
| For the Year Ended December 31, | ||||||||||||
| Percentage of the total revenue | 2023 | 2024 | 2025 | |||||||||
| Customer A | % | |||||||||||
| Customer B | % | |||||||||||
| Customer C | % | % | ||||||||||
| Percentage of the Accounts receivable | December 31, 2024 | December 31, 2025 | ||||||
| Customer A | % | % | ||||||
| Customer C | % | % | ||||||
| * |
| iii) | Fair value risk |
The assets of the Group
that are measured at fair value include investment in marketable securities and available-for-sale investment. The fair value
information is sensitive to changes in the unobservable inputs used to determine fair value and such changes could result in the
fair value at the reporting date to be different from the fair value presented. When the management’s assessment indicates
that an impairment exists, the Group writes down the investment to its fair value. The assets measured at fair value by this group
were RMB
| iv) | Legal risk |
From time to time, the Group are subject to legal proceedings in relation to the operation of our business and legacy business. We may be subject to claims, controversies, lawsuits and legal proceedings, which could have a material adverse effect on our results of operations, financial condition, cash flows and reputation. Please refer to Note 19-commitments and contingencies for further details.
| v) | Cyber Security risk |
All of our services are connected to and controlled and monitored by internet-based platforms administered by us or third-party providers. Additionally, we rely on internal computer networks for many of the systems used to operate the business generally. We may be vulnerable to breaches, unauthorized access, misuse, computer viruses or other malicious code and cyber-attacks. We take protective measures and endeavors to modify these internal systems as circumstances warrant to prevent unauthorized intrusions or disruptions. Through the date of this report, there were no cyber security issues.
Recent accounting pronouncements adopted
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”, which improves reportable segment disclosure requirements. The amendments require the disclosure of (1) significant segment expenses that are regularly provided to the CODM and included within each reported measure of segment profit or loss; (2) an amount for other segment items by reportable segment and a description of its composition; and (3) the title and position of the CODM and an explanation of how the CODM uses the reported measure(s). The amendments also provide disclosure requirements for interim periods and entities that have a single reportable segment. The new guidance is required to be applied retrospectively to all prior periods presented in the financial statements. The Group adopted this update effective January 1, 2024 and there is no material effect on the financial statements. Please refer to Note 14 for further details.
F-25
In December 2023, the FASB issued ASU 2023-09, which establishes new income tax disclosure requirements in addition to modifying and eliminating certain existing requirements. The ASU amends ASC 740-10-50-12 to require public business entities (“PBEs”) to disclose a reconciliation between the amount of reported income tax expense (or benefit) from continuing operations and the amount computed by multiplying the income (or loss) from continuing operations before income taxes by the applicable statutory federal (national) income tax rate of the jurisdiction (country) of domicile. If PBE is not domiciled in the United States, the federal (national) income tax rate in such entity’s jurisdiction (country) of domicile shall normally be used in the rate reconciliation. The amendments prohibit the use of different income tax rates for subsidiaries or segments. Further, PBEs that use an income tax rate in the rate reconciliation that is other than the U.S. income tax rate must disclose the rate used and the basis for using it. The ASU also adds ASC 740-10-50-12A, which requires entities to annually disaggregate the income tax rate reconciliation between the following eight categories by both percentages and reporting currency amounts: (1) State and local income tax, net of federal (national) income tax effect; (2) Foreign tax effects; (3) Effect of changes in tax laws or rates enacted in the current period; (4) Effect of cross-border tax laws; (5) Tax credits; (6) Changes in valuation allowances; (7) Nontaxable or nondeductible items; (8) Changes in unrecognized tax benefits. PBEs must apply the ASU’s guidance to annual periods beginning after December 15, 2024 (2025 for calendar-year-end PBEs). Early adoption is permitted. Entities may apply the amendments prospectively or may elect retrospective application. The Group has adopted this ASU 2023-09 from January 1, 2025 on a prospective basis, and the adoption did not have a material impact on its consolidated financial statements but resulted in certain additional disclosures as required by ASU.
Recently issued accounting pronouncements not yet adopted
In November 2024, the FASB issued ASU 2024-03 “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40)”. The amendments in this update intend to improve the disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation, amortization, and depletion) in commonly presented expense captions (such as cost of sales, selling, general and administrative expenses, and research and development). ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027. The Group is currently evaluating the impact from the adoption of this ASU on its consolidated financial statements.
In July 2025, the FASB issued ASU 2025-05, “Financial Instruments—Credit Losses (Topic 326)”. This amendment provides a practical expedient that assumes that current conditions as of the balance sheet date do not change for the remaining life of the asset in developing reasonable and supportable forecasts as part of estimating expected credit losses. For public business entities, ASU 2025-05 will be effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. The guidance will be applied on a prospective basis. Early adoption is permitted in both interim and annual reporting periods in which financial statements have not yet been issued or made available for issuance. The Company adopted this update effective January 1, 2026 and there is no material effect on the financial statements.
3. LOANS RECEIVABLE, NET
| December 31, | December 31, | |||||||
| 2024 | 2025 | |||||||
| Loans receivable | ||||||||
| Less: allowance for credit losses | ( | ) | ( | ) | ||||
| Total | ||||||||
In 2025, the group had no new loan agreements with the third parties. The allowance for credit losses was recorded as the loans receivable was deemed uncollectible due to the absence of recovery based on the management evaluations.
The following table sets forth the aging of loans as of December 31, 2024 and December 31, 2025:
| 1 - 89 days past due | 90 days or more past due | Total past due | Current | Total loans | ||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||
4. PREPAID EXPENSES AND OTHER ASSETS
| December 31, | December 31, | |||||||
| 2024 | 2025 | |||||||
| Inventory | ||||||||
| Advances to suppliers | ||||||||
| Prepaid taxes (i) | ||||||||
| Prepaid service fees | ||||||||
| Other | ||||||||
| Less: impairment on advance to supplier and prepaid service fees | ( | ) | ( | ) | ||||
| Total | ||||||||
| (i) |
F-26
5. FAIR VALUE OF ASSETS AND LIABILITIES
Assets and liabilities measured or disclosed at fair value on a recurring basis
The following tables present the fair value hierarchy for assets and liabilities measured at fair value on a recurring basis subsequent to initial recognition:
| December 31, 2024 | Level 1 | Level 2 | Level 3 | Fair Value | ||||||||||||
| Assets | RMB | RMB | RMB | RMB | ||||||||||||
| Available for sale investment (i) | ||||||||||||||||
| Investment in marketable securities | ||||||||||||||||
| Total Assets | ||||||||||||||||
| December 31, 2025 | ||||||||||||||||
| Assets | ||||||||||||||||
| Available for sale investment | ||||||||||||||||
| Investment in marketable securities | ||||||||||||||||
| Total Assets | ||||||||||||||||
| (i) |
The Group retained an independent third-party valuation firm to perform valuations of assets classified as Level 3 within the fair value hierarchy for the years ended December 31, 2024 and 2025.
Assets and liabilities measured or disclosed at fair value on a non-recurring basis
For equity securities without readily determinable fair values, the
fair value was determined using directly or indirectly observable inputs in the market place (Level 2 inputs). Whenever events or changes
in circumstances indicate that the carrying value may no longer be recoverable, the fair value of aforementioned long-term investments
was determined using models with significant unobservable inputs (Level 3 inputs), primarily the enterprise value to P/B multiples observed in the market, adjusted by the Company for a discount for lack of marketability,
with impairment charges of RMB
There were no transfers into and out of Level 3 fair value measurements during the year ended December 31, 2025.
F-27
6. INVESTMENTS
| Equity securities without readily | Equity | Held-to- | Available | |||||||||||||||||
| determinable | method | maturity | for sale | |||||||||||||||||
| fair value | investments | investment | investment | Total | ||||||||||||||||
| RMB | RMB | RMB | RMB | RMB | ||||||||||||||||
| Balance at December 31, 2022 | ||||||||||||||||||||
| Additions (ii) (iii) | ||||||||||||||||||||
| Disposal | ( | ) | ( | ) | ||||||||||||||||
| Adjustment of interest on held-to-maturity investments | ||||||||||||||||||||
| Accumulated other comprehensive income | ( | ) | ( | ) | ||||||||||||||||
| Impact of accounting method changes | ||||||||||||||||||||
| Share of income in equity method investments | ||||||||||||||||||||
| Impairment charges | ( | ) | ( | ) | ||||||||||||||||
| Foreign currency translation adjustment | ||||||||||||||||||||
| Balance at December 31, 2023 | ||||||||||||||||||||
| Additions (ii) (iv) | ||||||||||||||||||||
| Disposal | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Adjustment of interest on held-to-maturity investments | ||||||||||||||||||||
| Accumulated other comprehensive income | ||||||||||||||||||||
| Impact of accounting method changes | ||||||||||||||||||||
| Share of income in equity method investments | ||||||||||||||||||||
| Impairment charges | ( | ) | ( | ) | ||||||||||||||||
| Foreign currency translation adjustment | ||||||||||||||||||||
| Balance at December 31, 2024 | ||||||||||||||||||||
| Additions | ||||||||||||||||||||
| Disposal at maturity (ii) (iii) (iv) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Adjustment of interest on held-to-maturity investments | ||||||||||||||||||||
| Accumulated other comprehensive income (iv) | ||||||||||||||||||||
| Impact of accounting method changes (i) | ( | ) | ||||||||||||||||||
| Share of income in equity method investments | ( | ) | ( | ) | ||||||||||||||||
| Impairment charges (i) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ||||||||||||||||
| Balance at December 31, 2025 | ||||||||||||||||||||
| (i) | |
| (ii) | |
| (iii) | |
| (iv) |
F-28
7. PROPERTY, EQUIPMENT AND SOFTWARE, NET
| December 31, | December 31, | |||||||
| 2024 | 2025 | |||||||
| RMB | RMB | |||||||
| Office building | ||||||||
| Computer and electronic equipment | ||||||||
| Furniture and office equipment | ||||||||
| Leasehold improvements | ||||||||
| Software | ||||||||
| Total property and equipment | ||||||||
| Accumulated depreciation and amortization | ( | ) | ( | ) | ||||
| Accumulated impairment of software | ( | ) | ( | ) | ||||
| Property, equipment and software, net | ||||||||
Depreciation and
amortization expense on property, equipment and software for the years ended December 31, 2023, 2024 and 2025 were RMB
8. INTANGIBLE ASSETS, NET
| December 31, | December 31, | |||||||
| 2024 | 2025 | |||||||
| RMB | RMB | |||||||
| Brokerage licenses | ||||||||
| Trade Name | ||||||||
| Technology | ||||||||
| Accumulated amortization | ( | ) | ( | ) | ||||
| Accumulated impairment loss of intangible assets | ( | ) | ( | ) | ||||
| Intangible assets, net | ||||||||
The amortization periods range
from
9. ACCRUED EXPENSES AND OTHER LIABILITIES
| December 31, | December 31, | |||||||
| 2024 | 2025 | |||||||
| RMB | RMB | |||||||
| Accrued advertising and marketing fees | ||||||||
| Payables related to service fees | ||||||||
| Receipts in advance | ||||||||
| The third-party loans (i) | ||||||||
| Amounts due to customers for the segregated bank balances held on their behalf (ii) | ||||||||
| Deposits | ||||||||
| Other | ||||||||
| Total accrued expenses and other current liabilities | ||||||||
| (i) | |
| (ii) |
F-29
10. RELATED PARTY BALANCES AND TRANSACTIONS
Below summarizes the major related parties and their relationships with the Group, and the nature of their services provided to/by the Group:
| Name of related parties | Relationship with the Group | Major transaction with the Group | ||
| Nanjing Lefang | ||||
| Hainan Chenxi Investment Consulting Co., Ltd (“Hainan Chenxi”) | ||||
| Zhongzheng Jinniu (Beijing) Investment Consulting Co., Ltd (“Zhongzheng Jinniu”) | ||||
| Beijing Lize Jiaxing Technology Co., LTD (“Lize Jiaxing”) | ||||
| Zhuhai Yuanxin Investment Partnership (“Zhuhai Yuanxin”) | ||||
| Shuimu Online (Beijing) Technology Co., Ltd(Shuimu Online) |
Details of related party balances and transactions as of December 31, 2024 and 2025 and for the years ended December 31, 2023, 2024 and 2025 are as follows:
| (1) |
| Year ended December 31, | Year ended December 31, | Year ended December 31, | ||||||||||
| 2023 | 2024 | 2025 | ||||||||||
| RMB | RMB | RMB | ||||||||||
| Hainan Chenxi | ||||||||||||
| (2) |
| December 31, | December 31, | |||||||
| 2024 | 2025 | |||||||
| RMB | RMB | |||||||
| Zhongzheng Jinniu | ||||||||
| Hainan Chenxi | ||||||||
| Nanjing Lefang | ||||||||
| Zhuhai Yuanxin | ||||||||
| Lize Jiaxing | ||||||||
| Subtotal | ||||||||
| Impairment | ( | ) | ( | ) | ||||
| Total | ||||||||
In 2025, there was no new
business transactions between the Group and Zhongzheng Jinniu, Zhuhai Yuanxin. Hainan Chenxi, Nanjing Lefang, and Lize Jiaxin repaid RMB
| (3) |
| December 31, 2024 | December 31, 2025 | |||||||
| RMB | RMB | |||||||
| Shuimu online | ||||||||
| Nanjing Lefang | ||||||||
| Total | ||||||||
In 2025, Shuimu online provided leasing service
to the Group in the amount of RMB
F-30
11. INCOME TAXES
9F Inc. is a company incorporated in the Cayman Islands. Under the current laws of the Cayman Islands, it is not subject to tax on either income or capital gains.
Under the current laws of the British Virgin Islands, entities incorporated in the British Virgin Islands are not subject to tax on their income or capital gains.
According to the HK regulations,
HK entities are subject to a two-tiered income tax rate for taxable income earned in Hong Kong. The first HK$
Under the PRC Enterprise Income
Tax Law (the “EIT Law”), the Group’s subsidiaries domiciled in the PRC are subject to a
For the above-mentioned preferential tax treatments that were expired, the group did not apply for preferential tax treatments again.
For qualified small and low-profit
enterprises, from January 1, 2023 to December 31, 2027,
The Group’s subsidiary tax rate in Southeast
Asia ranges from
The current and deferred components of the income tax expense which were substantially attributable to the Group’s PRC subsidiaries and VIEs and VIEs’ subsidiaries, are as follows:
| Year ended December 31, | Year ended December 31, | |||||||
| 2023 | 2024 | |||||||
| RMB | RMB | |||||||
| Current income tax expense | ||||||||
| Deferred income tax benefit | ( | ) | ( | ) | ||||
| Total | ||||||||
| Year ended December 31, | ||||
| 2025 | ||||
| RMB | ||||
| Current income tax expense | ||||
| PRC | ||||
| Hong Kong | ||||
| Total current tax expense | ||||
| Deferred income tax expense | ||||
| PRC | ||||
| Hong Kong | ||||
| Total deferred tax expense | ||||
| Total income tax expense | ||||
| PRC | ||||
| Hong Kong | ||||
| Total income tax expense | ||||
F-31
Income before income tax expense is attributable to the following geographic locations:
| Year ended December 31, 2025 | ||||||||
| RMB | USD | |||||||
| PRC | ||||||||
| Hong Kong | ||||||||
| Others | ||||||||
| Total | ||||||||
The reconciliation of income tax expense at statutory tax rate to income tax expense recognized is as follows:
| Year ended December 31, | Year ended December 31, | |||||||
| 2023 | 2024 | |||||||
| RMB | RMB | |||||||
| (Loss) income before income tax expenses | ( | ) | ||||||
| Statutory tax rate in the PRC | % | % | ||||||
| Income tax (benefit) expense at statutory tax rate | ( | ) | ||||||
| Non-recognized income | ( | ) | ( | ) | ||||
| Change in valuation allowance | ||||||||
| Adjustment on current income tax of the prior periods | ||||||||
| Effect of tax holiday and preferential tax rates | ( | ) | ( | ) | ||||
| Tax loss carryforwards | ( | ) | ( | ) | ||||
| Share-based compensation expenses | ( | ) | ||||||
| Effect of different tax rates of entities operating in other jurisdictions | ( | ) | ||||||
| Income tax expense | ||||||||
Upon adoption of ASU 2023-09, Improvements to Income Tax Disclosures, the reconciliation of taxes at the PRC statutory income tax rate to our provision for (benefit from) income taxes for the year ended December 31, 2025 was as follows:
| Year ended December 31, 2025 | ||||||||
| RMB | % | |||||||
| Income before income tax expenses | % | |||||||
| Statutory tax rate in the PRC | % | % | ||||||
| Income tax expense at statutory tax rate | % | |||||||
| Domestic tax effects | ||||||||
| Non-taxable income | ( | ) | ( | )% | ||||
| Change in valuation allowance | ( | ) | ( | )% | ||||
| Changes in tax rates | % | |||||||
| Preferential tax rates | ( | ) | ( | )% | ||||
| Expired NOL | % | |||||||
| Other | ||||||||
| Other jurisdictions’ tax effects | ||||||||
| Hong Kong | ||||||||
| Statutory tax rate difference between Hong Kong and PRC | ( | ) | ( | )% | ||||
| Other | ( | ) | ( | )% | ||||
| Cayman | ||||||||
| Statutory tax rate difference between Cayman and PRC | ( | ) | ( | )% | ||||
| BVI | ||||||||
| Statutory tax rate difference between BVI and PRC | % | |||||||
| Other foreign jurisdictions | ||||||||
| Other | ||||||||
| Income tax expense | % | |||||||
Upon adoption of ASU 2023-09,
Improvements to Income Tax Disclosures, cash paid for income taxes,
net of refunds, during the year ended December 31, 2025 was RMB
F-32
The aggregate amount and per ordinary share effect of the tax holiday are as follows:
| December 31, 2023 | December 31, 2024 | December 31, 2025 | ||||||||||
| RMB | RMB | RMB | ||||||||||
| The aggregate amount of tax holiday and preferential tax rates | | | | |||||||||
| The aggregate effect of the above on basic and fully diluted net (loss) income per ordinary share: Basic and diluted | ||||||||||||
The tax effects of temporary differences that gave rise to the deferred tax balances are as follows:
| December 31, | December 31, | |||||||
| 2024 | 2025 | |||||||
| Deferred tax assets | RMB | RMB | ||||||
| Allowance for credit losses | ||||||||
| Net operating loss carry forwards | ||||||||
| Impairment of investments | ||||||||
| Accelerated depreciation of property, equipment and software | ||||||||
| Less: valuation allowance | ( | ) | ( | ) | ||||
| Total deferred tax assets, net | ||||||||
| Deferred tax liabilities | ||||||||
| Unrealized gain of investment in marketable securities | ||||||||
| Intangible asset from acquisition | ||||||||
| Total deferred tax liabilities | ||||||||
| Net off against deferred tax assets | ( | ) | ||||||
| Net deferred tax liabilities | ||||||||
The movements in the valuation allowance are as follows:
| December 31, | December 31, | |||||||
| 2024 | 2025 | |||||||
| RMB | RMB | |||||||
| Balance at beginning of year | ||||||||
| Additions | ||||||||
| Reversal | ( | ) | ( | ) | ||||
| Balance at end of year | ||||||||
According to PRC tax regulations, the PRC enterprise’s net operating loss can be generally carried forward for no longer than five years, and HNTE’s net operating losses can be carried forward for no more than ten years, starting from the year subsequent to the year in which the loss was incurred. Carryback of losses is not permitted. The Group will re-apply for the HNTE certificate when the prior certificate expires in the foreseeable future.
Total net operating losses
carryforwards of the Group’s subsidiaries in PRC is RMB
The Group evaluates each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measure the unrecognized benefits associated with the tax positions. As of December 31, 2023, 2024 and 2025, the Group did not have any unrecognized uncertain tax positions. For the years ended December 31, 2023, 2024 and 2025, the Company did not incur any interest and penalties related to potential underpaid income tax expenses.
F-33
Uncertainties exist with respect
to how the current income tax law in the PRC applies to the Group’s overall operations, and more specifically, with regard to tax
residency status. The EIT Law includes a provision specifying that legal entities organized outside of the PRC will be considered residents
for Chinese income tax purposes if the place of effective management or control is within the PRC. The implementation rules to the EIT
Law provide that non-resident legal entities will be considered PRC residents if substantial and overall management and control over the
manufacturing and business operations, personnel, accounting and properties, occurs within the PRC. Despite the present uncertainties
resulting from the limited PRC tax guidance on the issue, the Group does not believe that the legal entities organized outside of the
PRC within the Group should be treated as residents for EIT law purposes. If the PRC tax authorities subsequently determine that the Group
and its subsidiaries registered outside the PRC should be deemed resident enterprises, the Group and its subsidiaries registered outside
the PRC will be subject to the PRC income taxes, at a statutory income tax rate of
According to PRC Tax
Administration and Collection Law, the statute of limitations is for a period of
In accordance with the EIT
Law, dividends, which arise from profits of foreign invested enterprises (“FIEs”), are subject to a
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 Group completed its feasibility analysis on a method, which the Group will ultimately execute if necessary to repatriate the undistributed earnings of the VIEs without significant tax costs. As such, the Group did not accrue deferred tax liabilities on the earnings of the VIEs given that the Group will ultimately use this provision.
12. SHARE-BASED COMPENSATION
Share incentive plan
Share options
In 2015, the Group adopted
the 2015 Share Incentive Plan (the “2015 Plan”) and, in 2016, the Group adopted the 2016 Share Incentive Plan (the “2016
Plan”), which permits the grant of three types of awards: options, restricted shares and restricted share units. Persons eligible
to participate in the 2015 Plan and 2016 Plan (collectively, the “Plans”) includes employees, consultants and directors of
the Group or any of affiliates, which include the Group’s parent company, subsidiaries and the Group. Under the 2015 plan, ordinary
shares available for issuance were
During the years ended December 31, 2023, 2024 and 2025, the Group did grant or issue any shares.
F-34
The activity in share options is set out below:
| Number of | Weighted Average Exercise | Weighted Average Grant-date | ||||||||||
| Options | Price | Fair Value | ||||||||||
| RMB | RMB | |||||||||||
| Outstanding as of December 31, 2023 | ||||||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Forfeited | ( | ) | ||||||||||
| Outstanding as of December 31, 2024 | ||||||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Forfeited | ( | ) | ||||||||||
| Outstanding as of December 31, 2025 | ||||||||||||
| Vested and expected to vest as of December 31, 2025 | ||||||||||||
The following table summarizes information with respect to share options outstanding as of December 31, 2025:
| Options Outstanding | Options Exercisable | |||||||||||||||
| Number | Weighted Average Remaining Contractual | Number | Weighted Average Remaining Contractual | |||||||||||||
| Exercise Price | Outstanding | Life | Outstanding | Life | ||||||||||||
| RMB | ||||||||||||||||
| 0.00 | ||||||||||||||||
| 0.06 | ||||||||||||||||
| 6.74 | ||||||||||||||||
| 7.78 | ||||||||||||||||
| 14.32 | ||||||||||||||||
| 14.72 | ||||||||||||||||
| 24.06 | ||||||||||||||||
| 24.11 | ||||||||||||||||
A summary of share-based compensation recognized related to share options granted and ordinary shares issued is as follows:
| Year ended December 31, 2023 | Year ended December 31, 2024 | Year ended December 31, 2025 | ||||||||||
| RMB | RMB | RMB | ||||||||||
| General and administrative expenses (i) | ( | ) | ( | ) | ||||||||
| (i) |
As of December 31, 2023, 2024 and 2025, unrecognized compensation cost
related to unvested option awards granted to employees of the Group was RMB
F-35
13. ORDINARY SHARES
The Group’s Amended
and Restated Memorandum of Association authorizes the Group to issue
In August 2019, the Company
completed its initial public offering and issued
In 2022, the Company
issued
Class A ordinary shares—The
Company is authorized to issue
Class B ordinary shares—The
Company is authorized to issue
Others—The
Company is authorized to issue an additional
14. SEGMENT INFORMATION
The Company uses the management
approach to determine
F-36
The Company’s
operations are organized into segments, consisting of E-commerce services, technology Empowerment service and Wealth Management
services. Segment information is presented after elimination of inter-segment transactions and revenues, cost of goods sold,
origination and servicing and operating expenses are directly attributable, or are allocated, to each segment. The CODM measures the
performance of each segment based on metrics of revenues and net income (loss) and uses these results to evaluate the performance
of, and to allocate resources to each of the segments.
| For the year ended December 31, 2025 | ||||||||||||||||||||
| E-commerce services | Technology empowerment services | Wealth management services | Unallocated items(i) | Consolidated | ||||||||||||||||
| RMB | RMB | RMB | RMB | RMB | ||||||||||||||||
| Total revenues | ||||||||||||||||||||
| Operating costs and expenses: | ||||||||||||||||||||
| Cost of goods sold | ||||||||||||||||||||
| Sales and marketing | ||||||||||||||||||||
| Origination and servicing | ||||||||||||||||||||
| General and administrative | ||||||||||||||||||||
| Total operating costs and expenses | ||||||||||||||||||||
| Operating income (loss) | ( | ) | ( | ) | ||||||||||||||||
| Total other income, net | ||||||||||||||||||||
| Income (loss) before income taxes | ( | ) | ||||||||||||||||||
| Income taxes | ||||||||||||||||||||
| Net income (loss) | ( | ) | ||||||||||||||||||
| Less: net (loss) income attributable to non-controlling interests | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Net income (loss) attributable to 9F, Inc. | ( | ) | ||||||||||||||||||
| For the year ended December 31, 2024 | ||||||||||||||||||||
| E-commerce services | Technology empowerment services | Wealth management services | Unallocated items(i) | Consolidated | ||||||||||||||||
| RMB | RMB | RMB | RMB | RMB | ||||||||||||||||
| Total revenues | ||||||||||||||||||||
| Operating costs and expenses: | ||||||||||||||||||||
| Cost of goods sold | ||||||||||||||||||||
| Sales and marketing | ||||||||||||||||||||
| Origination and servicing | ||||||||||||||||||||
| General and administrative | ||||||||||||||||||||
| Total operating costs and expenses | ||||||||||||||||||||
| Operating income (loss) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Total other income (loss), net | ( | ) | ( | ) | ||||||||||||||||
| Income (loss) before income taxes | ( | ) | ||||||||||||||||||
| Income taxes | ( | ) | ||||||||||||||||||
| Net income (loss) | ( | ) | ||||||||||||||||||
| Less: net (loss) income attributable to non-controlling interests | ( | ) | ||||||||||||||||||
| Net income (loss) attributable to 9F, Inc. | ( | ) | ||||||||||||||||||
F-37
| For the year ended December 31, 2023 | ||||||||||||||||||||
| E-commerce services | Technology empowerment services | Wealth management services | Unallocated items(i) | Consolidated | ||||||||||||||||
| RMB | RMB | RMB | RMB | RMB | ||||||||||||||||
| Total revenues | ||||||||||||||||||||
| Operating costs and expenses: | ||||||||||||||||||||
| Cost of goods sold | ||||||||||||||||||||
| Sales and marketing | ||||||||||||||||||||
| Origination and servicing | ||||||||||||||||||||
| General and administrative | ( | ) | ||||||||||||||||||
| Total operating costs and expenses | ( | ) | ||||||||||||||||||
| Operating income (loss) | ( | ) | ( | ) | ||||||||||||||||
| Total other income (loss), net | ( | ) | ( | ) | ||||||||||||||||
| Income (loss) before income taxes | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Income taxes | ( | ) | ( | ) | ||||||||||||||||
| Net income (loss) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Less: net income (loss) attributable to non-controlling interests | ( | ) | ( | ) | ||||||||||||||||
| Net income (loss) attributable to 9F, Inc. | ( | ) | ( | ) | ( | ) | ||||||||||||||
| (i) |
15. EMPLOYEE BENEFITS
Full time employees of the
Group in the PRC participate in a government-mandated defined contribution plan pursuant to which certain pension benefits, medical care,
unemployment insurance, employee housing fund and other welfare benefits are provided to employees. The Group accrues for these benefits
based on certain percentages of the employees’ salaries. The total contributions for such employee benefits were RMB
16. STATUTORY RESERVES AND RESTRICTED NET ASSETS
In accordance with the PRC
laws and regulations, the Group’s PRC subsidiaries and VIEs and their subsidiaries are required to make appropriations to a statutory
reserve, which is appropriated from net profits as reported in their PRC statutory accounts. The Group’s PRC subsidiaries and VIEs
are required to appropriate at least
Appropriations to an enterprise expansion reserve and a staff welfare and bonus reserve are to be made at the discretion of the board of directors of each of the Group’s PRC subsidiaries and VIEs. There were no appropriations to these reserves by the Group’s PRC entities for the years ended December 31, 2023, 2024 and 2025.
As a result of 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 PRC GAAP, the PRC entities are restricted from transferring a portion of their net assets to the Company. Amounts restricted include
paid-in capital and statutory reserves of the Group’s subsidiaries and VIEs and their subsidiaries. As of December 31, 2025, the
aggregate amounts of paid-in capital, capital reserves and statutory reserves that represented the amount of net assets of the relevant
entities in the Group not available for distribution amounted to approximately RMB
F-38
17. EARNINGS PER SHARE
Basic net income attributable to the Company’s ordinary shareholders is based on the weighted average shares outstanding during the relevant period. Diluted net income attributable to the Company’s ordinary shareholders is based on the weighted average common shares outstanding during the relevant period adjusted for the dilutive effect of unexercised share options outstanding. For the year ended 2023, share options were included in the diluted loss per share as they would be anti-dilutive.
The following table presents a reconciliation of basic and diluted earnings (loss) per share:
| For the years ended | ||||||||||||
| December 31, | ||||||||||||
| 2023 | 2024 | 2025 | ||||||||||
| RMB | RMB | RMB | ||||||||||
| Net (loss) income attributable to the Company’s ordinary shareholders | ( | ) | ||||||||||
| Weighted average shares Outstanding - Basic | ||||||||||||
| Dilutive securities -Unexercised share options | ||||||||||||
| Weighted average shares outstanding – fully diluted | ||||||||||||
| (Loss) earnings per share - Basic | ( | ) | ||||||||||
| (Loss) earnings per share – fully diluted | ( | ) | ||||||||||
| (Loss) earnings per ADS (1 ADS equals 20 Class A ordinary shares) – Basic | ( | ) | ||||||||||
| (Loss) earnings per ADS (1 ADS equals 20 Class A ordinary shares) – fully diluted | ( | ) | ||||||||||
18. LEASES
The Group leases certain office premises to support its core business system under non-cancelable leases. The Group determines if an arrangement is a lease at inception. Some lease agreements contain lease and non-lease components, which the Group chooses not to account for as separate components as the Group has elected the practical expedient. As of December 31, 2025, the Group had no long-term leases that were classified as a financing lease. There were no renewal options in these lease contracts. As of December 31, 2025, the Group did not have additional operating leases that have not yet commenced.
| For the year ended December 31, 2024 | For the year ended December 31, 2025 | |||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
| Operating cash flows from operating leases | ||||||||
| Non-cash right-of-use assets in exchange for new lease liabilities: | ||||||||
| Operating leases | ||||||||
| Weighted average remaining lease term | ||||||||
| Operating leases | ||||||||
| Weighted average discount rate | ||||||||
| Operating leases | % | % | ||||||
| Short-term lease cost | ||||||||
As of December 31, 2025, the maturity of operating lease liabilities are as follows:
| The years ended December 31, | RMB | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Subtotal | ||||
| Less imputed interest | ||||
| Total | ||||
Payments under operating leases
are expensed on a straight-line basis over the periods of their respective leases. The terms of the leases do not contain rent escalation
or contingent rents. For the years ended December 31, 2023, 2024 and 2025, total rental expense for all operating leases amounted to RMB
F-39
19. COMMITMENTS AND CONTINGENCIES
Contingencies
The Group is subject to legal and administrative proceedings in the ordinary course of business. The Group does not believe that any currently pending proceeding, except for the legal proceedings disclosed below, or administrative proceeding to which the Group is a party will have a material effect on its business or financial condition as of the issuance date of the consolidated financial statements.
Legal proceedings
In 2019, we partnered
with PICC Property and Casualty Company Limited Guangdong Branch (“PICC”) under our direct lending program, for which PICC provided credit insurance to the institutional funding partners. Our
cooperation with PICC on new loans under direct lending program was terminated in December 2019. In November 2019, PICC stopped
paying the service fees to us that had been agreed in the cooperation agreement between us and PICC. PICC further disputed with us
regarding payments of the service fees under the cooperation agreement. In May 2020, we commenced a legal proceeding against PICC by
submitting a complaint with a local court in Beijing for contract non-performance under the cooperation agreement. We, together with
our legal counsel of the case, determined that PICC had breached its contractual obligation under the cooperation agreement for not
paying service fees that were due to us under our direct lending program. We are seeking payments of approximately RMB
The Group is vigorously asserting its rights against PICC and will defend itself against any claims brought against the Group by PICC in the legal proceeding. Currently, the consolidated court proceeding has concluded with the ruling pending.
From time to time, we are subject to legal proceedings in relation to the operation
of our business and legacy business. Starting from 2023, each of Jiufu Puhui and Jiufu Shuke has been named as a co-defendant, in their
respective capacity as the operator of an online lending information intermediary platform offering online wealth management products
to investors, by loan investors in a large number of small claims initiated in local courts in China in relation to our legacy business.
Most of those claims are still in early stage of court procedures and it is not possible to ascertain the outcomes of those legal proceedings.
We are vigorously assert our rights in those proceedings and will continue to do so. In July 2023, the Supreme People’s Court of
the PRC issued a civil judgment regarding one of those claims, concluding there had been no intention to form a private lending contract
or establish a guarantee relationship between that certain loan investor and Jiufu Puhui under our legacy business. The Supreme People’s
Court of the PRC further found in the judgment that Jiufu Puhui, as the operator of an online lending information intermediary platform,
shall not be responsible for loan repayment to that certain loan investor. However, as of the date of this annual report, a moderate aggregate
amount was awarded in favor of loan investors in some of the remaining legal proceedings. Such amount was initially paid by us, and we
have subsequently recovered the full amount from a third party with whom we collaborated pursuant to our agreement in connection with
the handling of outstanding loans relating to our legacy business. In relation to such legal proceedings, certain assets of the Group,
in an aggregate amount of approximately RMB
F-40
Beginning in September 2020, we and certain of our current and former officers, directors and others were named as defendants in various putative securities class actions captioned In re 9F Inc Securities Litigation, Index No. 654654/2020 (Supreme Court of the State of New York County of New York, Amended Complaint filed Dec. 7, 2020), or the State Court Action, and Holland v. 9F Inc. et al. No, 2:21-cv-00948 (United States District Court for the District of New Jersey), or the Federal Court Action, Both actions allege that defendants made misstatements and omissions in connection with our public offering and disclosures in violation of the federal securities laws. On March 6, 2023, the State Court Action was dismissed without prejudice and plaintiffs were allowed to replead. On April 5, 2023, a second amended complaint was filed in the State Court Action. Briefing on the motion to dismiss the second amended complaint was completed on July 28, 2023. On March 14, 2024, the Court dismissed the State Court Action with prejudice. Plaintiffs filed a notice of appeal on April 11, 2024. On January 30, 2025, the Supreme Court of the State of New York, Appellate Division, First Department unanimously affirmed the lower court’s decision, which granted defendants’ motion to dismiss the second amended complaint. On February 28, 2025, Plaintiffs filed a motion for reargument and leave to appeal to Court of Appeals. We filed a response to the motion on March 24, 2025, and Plaintiffs filed a reply on March 28, 2025. On May 29, 2025, the Appellate Division denied the motion. The State Court Action is over.
On November 29, 2022, the Federal Court Action was dismissed without prejudice and plaintiffs were allowed to replead. Briefing on the motion to dismiss the second amended complaint was completed in May 2023. On February 22, 2024, the Court granted plaintiffs’ request to further amend the complaint, and a revised second amended complaint was filed on the same day. Briefing on the motion to dismiss the revised second amended complaint was completed on March 25, 2024. On December 12, 2024, the Federal Court Action was partially dismissed without prejudice. On December 23, 2024, a third amended complaint was filed in the Federal Court Action. We filed our motion to dismiss the third amended complaint on February 12, 2025, and briefing is ongoing. Briefing on the motion to dismiss the third amended complaint was completed on April 11, 2025. In November 2025, the Court issued an order and referred the case back to the Magistrate Court. A settlement conference was held before the Magistrate Judge on April 2, 2026. On April 8, 2026, the District Court issued an order administratively terminating the entire action pending consummation of the settlement.
20. SUBSEQUENT EVENTS
The Group has reviewed its subsequent events through the issuance date of the consolidated financial statements, no material subsequent events have occurred that require recognition in or disclosure to the consolidated financial statements.
F-41
9F INC.
SCHEDULE 1-CONDENSED BALANCE SHEETS
(PARENT COMPANY ONLY)
(Amounts in thousands except for number of shares and per share data)
| December 31, | December 31, | December 31, | ||||||||||
| 2024 | 2025 | 2025 | ||||||||||
| RMB | RMB | US$ | ||||||||||
| Assets: | ||||||||||||
| Cash and cash equivalents | ||||||||||||
| Amounts due from subsidiaries and VIEs | ||||||||||||
| Other receivables | ||||||||||||
| Investments in subsidiaries and VIEs | ||||||||||||
| Total assets | ||||||||||||
| Liabilities: | ||||||||||||
| Accrued expenses and other liabilities | ||||||||||||
| Total liabilities | ||||||||||||
| Shareholders’ Equity: | ||||||||||||
| Additional paid-in capital | ||||||||||||
| Accumulated Deficit | ( | ) | ( | ) | ( | ) | ||||||
| Accumulated other comprehensive income | ||||||||||||
| Total shareholders’ equity | ||||||||||||
| Total liabilities and shareholders’ equity | ||||||||||||
F-42
9F INC.
SCHEDULE 1-CONDENSED STATEMENTS OF OPERATIONS
(PARENT COMPANY ONLY)
(Amounts in thousands except for number of shares and per share data)
| Year ended December 31, 2023 | Year ended December 31, 2024 | Year ended December 31, 2025 | Year ended December 31, 2025 | |||||||||||||
| RMB | RMB | RMB | US$ | |||||||||||||
| Equity in (loss) income of subsidiaries and VIEs | ( | ) | ||||||||||||||
| Operating costs and expenses | ( | ) | ( | ) | ( | ) | ||||||||||
| Interest income | ||||||||||||||||
| Net (loss) income | ( | ) | ||||||||||||||
F-43
9F INC.
SCHEDULE 1 - CONDENSED STATEMENTS OF COMPREHENSIVE
INCOME (LOSS)
(PARENT COMPANY ONLY)
(Amounts in thousands except for number of shares and per share data)
| Year ended December 31, | Year ended December 31, | Year ended December 31, | Year ended December 31, | |||||||||||||
| 2023 | 2024 | 2025 | 2025 | |||||||||||||
| RMB | RMB | RMB | US$ | |||||||||||||
| Net (loss) income | ( | ) | ||||||||||||||
| Other comprehensive income | ||||||||||||||||
| Foreign currency translation adjustments | ( | ) | ( | ) | ||||||||||||
| Comprehensive (loss) Income | ( | ) | ||||||||||||||
F-44
9F INC.
SCHEDULE 1 - CONDENSED STATEMENTS of CASH FLOW
(PARENT COMPANY ONLY)
(Amounts in thousands except for number of shares and per share data)
| Year ended December 31, | Year ended December 31, | Year ended December 31, | Year ended December 31, | |||||||||||||
| 2023 | 2024 | 2025 | 2025 | |||||||||||||
| RMB | RMB | RMB | US$ | |||||||||||||
| Cash Flows from Operating Activities: | ||||||||||||||||
| Net (loss) income | ( | ) | ||||||||||||||
| Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: | ||||||||||||||||
| Equity in earnings (loss) of subsidiaries and VIEs | ( | ) | ( | ) | ( | ) | ||||||||||
| Share-based compensation expense | ( | ) | ( | ) | ||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||||
| Other receivables | ( | ) | ||||||||||||||
| Accrued expenses and other liabilities | ( | ) | ( | ) | ||||||||||||
| Amounts due from subsidiaries and VIEs | ( | ) | ( | ) | ( | ) | ||||||||||
| Net cash (used in) provided by operating activities | ( | ) | ( | ) | ( | ) | ||||||||||
| Cash Flows from Investing Activities: | ||||||||||||||||
| Disposal of long-term investments | ( | ) | ||||||||||||||
| Purchase of marketable securities | ( | ) | ( | ) | ( | ) | ||||||||||
| Disposals of marketable securities | ||||||||||||||||
| Net cash (used in) provided by investing activities | ( | ) | ( | ) | ||||||||||||
| Cash Flows from Financing Activities: | ||||||||||||||||
| Proceeds from exercise of share options | ||||||||||||||||
| Net cash provided by financing activities | ||||||||||||||||
| Effect of exchange rate changes | ( | ) | ( | ) | ||||||||||||
| Net decrease in cash and cash equivalents | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Cash and cash equivalents at beginning of year | ||||||||||||||||
| Cash and cash equivalents at end of year | ||||||||||||||||
F-45
9F INC.
SCHEDULE 1— NOTES TO CONDENSED FINANCIAL
INFORMATION OF PARENT COMPANY
(PARENT COMPANY ONLY)
| 1. | Schedule I has been provided pursuant to the requirements of Rule 12-04 and 5-04(c) of Regulation S-X, which require condensed financial information as to the financial position, changes in financial position and results of operations of a parent company as of the same dates and for the same periods for which audited consolidated financial statements have been presented when the restricted net assets of consolidated subsidiaries exceed 25 percent of consolidated net assets as of the end of the most recently completed fiscal year. |
| 2. | The condensed financial information of 9F Inc. has been prepared using the same accounting policies as set out in the accompanying consolidated financial statements except that the equity method has been used to account for investments in its subsidiaries, VIEs and the VIEs subsidiaries. |
| 3. | Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The footnote disclosures contain supplemental information relating to the operations of the Group and, as such, these statements should be read in conjunction with the notes to the Consolidated Financial Statements of the Group. No dividends were paid by the Group’s subsidiaries and VIEs to the parent company in 2023, 2024 and 2025. |
| 4. | As of December 31, 2025, there were no material contingencies, significant provisions of long-term obligations, guarantees of the Group, except for those which have been separately disclosed in the consolidated financial statements. |
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