Meihua International Medical Technologies Co., Ltd 20-F for FY2025
Meihua International Medical Technologies Co., Ltd. (MHUAF)
About this 20-F
Meihua International Medical Technologies Co., Ltd filed this 20-F on April 29, 2026, covering the fiscal year ended December 31, 2025 (FY2025).
Headline figures
Fiscal year ended December 31, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $61.79M
- down 36.2% from $96.91M a year earlier
- Net income
- $6.78M
- down 37.5% from net income of $10.84M a year earlier
- Diluted EPS
- $18.04
- down 54.5% from $39.62 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
OR
For the fiscal year ended
OR
For the transition period from ___________ to ___________
OR
Date of event requiring this shell company report:
Commission file number:
(Exact name of Registrant as specified in its charter)
Not Applicable
(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:
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
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 (December 31,
2025):
Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
If this report is an annual or transition report,
indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934. Yes ☐
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| 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.
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.
If securities are registered pursuant to Section
12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction
of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
| International Financial Reporting Standards as issued by the International Accounting Standards Board ☐ | Other ☐ |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. ☐ Item 17 ☐ Item 18
If this is an annual report, indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
No
Annual Report on Form 20-F
Year Ended December 31, 2025
TABLE OF CONTENTS
i
INTRODUCTORY NOTES
Use of Certain Defined Terms
Except as otherwise indicated by the context and for the purposes of this annual report on Form 20-F (the “Annual Report”) only, references in this Annual Report to:
| ● | “China” or the “PRC” refers to the People’s Republic of China, including the special administrative regions of Hong Kong and Macau, and only when this Annual Report refers to specific laws and regulations adopted by the PRC and the discretion of China governmental authorities, reference to “China” or the “PRC” excludes Taiwan and the special administrative regions of Hong Kong and Macau; |
| ● | Depending on the context, “we,” “us,” “our company,” “our,” “the Company,” and “Meihua International” refer to Meihua International Medical Technologies Co., Ltd., 美华国际医疗科技有限公司, a Cayman Islands company, its subsidiaries, Kang Fu International Medical Co., Limited (“Kang Fu International Medical”), Yangzhou Huada Medical Device Co., Ltd (“Yangzhou Huada”), Jiangsu Yada Technology Group Co., Ltd. (“Jiangsu Yada”), Jiangsu Huadong Medical Device Industrial Co., Ltd. (“Jiangsu Huadong”) and Hainan Ruiying Technology Co. Ltd. (“Hainan Ruiying”), Meihua Future Manufacturing Limited (“Meihua Future”) |
| ● | “Kang Fu International Medical” refers to Kang Fu International Medical Co., Limited, a limited company organized under the laws of Hong Kong and a wholly owned subsidiary of Meihua International; |
| ● | “Yangzhou Huada” refers to Yangzhou Huada Medical Device Co., Ltd, a limited liability company organized under the laws of China, which is wholly owned by Kang Fu International Medical; |
| ● | “Jiangsu Yada” refers to Jiangsu Yada Technology Group Co., Ltd, a limited liability company organized under the laws of China, which is wholly owned by Yangzhou Huada; |
| ● | “Jiangsu Huadong” refers to Jiangsu Huadong Medical Device Industrial Co., Ltd, a limited liability company organized under the laws of China and a wholly owned subsidiary of Jiangsu Yada; | |
| ● | “Hainan Guoxie” refers to Hainan Guoxie Technology Group Co. Ltd, a limited liability company organized under the laws of China; |
| ● | “Hainan Ruiying” refers to Hainan Ruiying Technology Co. Ltd., a limited liability company organized under the laws of China, which is 51% owned by Jiangsu Huadong; |
| ● | “Meihua Future” refers to Meihua Future Manufacturing Limited, a limited liability company organized under the laws of New York, which is 100% owned by Meihua International; |
| ● | “Ordinary Shares” or “Shares” refer to the Ordinary Shares of Meihua International Medical Technologies Co., Ltd., par value $0.0005 per share before the Company implemented the dual-class share structure in November 2025; “Class A Ordinary Shares” refer to the Class A Ordinary Shares of Meihua International Medical Technologies Co., Ltd., par value $0.05 per share; “Class B Ordinary Shares” refer to the Class B Ordinary Shares of Meihua International Medical Technologies Co., Ltd., par value $0.05 per share |
| ● | “RMB” or “Chinese Yuan” refers to the legal currency of China; |
| ● | “U.S. dollars,” “dollars,” “USD” or “$” refers to the legal currency of the United States; |
| ● | “HKD” refers to the official currency of Hong Kong; |
| ● | “GMV” refers to the total value of all orders shipped for products sold under our sales model, net of returns; |
| ● | “medical professionals” refer to doctors, pharmacists and medical assistants; |
| ● | “SKU,” refers to stock keeping unit; and |
| ● | “Websites” refers to our websites at http://meihuamed.com and http://ir.meihuamed.com. |
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Cautionary Note Regarding Forward-Looking Statements
In addition to historical information, this Annual Report contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. We use words such as “believe,” “expect,” “anticipate,” “project,” “target,” “plan,” “optimistic,” “intend,” “aim,” “will” or similar expressions which are intended to identify forward-looking statements. Such statements include, among others, those concerning market and industry segment growth and demand and acceptance of new and existing products; risks associated with global political changes and global economic conditions, including changes in the U.S.-China political relationship, inflation or uncertainty caused by political violence and unrest, including ongoing global and regional conflicts, other changes in international trade laws, regulations, policies and relations and commercial trends, such as nearshoring, which could potentially significantly reduce the volume of goods transported globally; any projections of sales, earnings, revenue, margins or other financial items; any projections of our industrial park construction and plans, any statements of the plans, strategies and objectives of management for future operations; and any statements regarding future economic conditions or performance, as well as all assumptions, expectations, predictions, intentions or beliefs about future events.
Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, as well as assumptions, which, if they were to ever materialize or prove incorrect, could cause the results of the Company to differ materially from those expressed or implied by such forward-looking statements. Potential risks and uncertainties include, among other things, the possibility that we may not be able to maintain or increase our net revenues and profits due to our failure to anticipate consumer preferences and develop new menswear products or new technology, our failure to execute our business expansion plan, changes in domestic and foreign laws, regulations and taxes including tariffs, changes in economic conditions, uncertainties related to China’s legal system and economic, political and social events in China, a general economic downturn, a downturn in the securities markets, and other risks and uncertainties which are generally set forth under “Item 3. Key information-D. Risk Factors” and elsewhere in this Annual Report.
Readers are urged to carefully review and consider the various disclosures made by us in this Annual Report and our other filings with the SEC. These reports attempt to advise interested parties of the risks and factors that may affect our business, financial condition and results of operations and prospects. The forward-looking statements made in this Annual Report speak only as of the date hereof and we disclaim any obligation, except as required by law, to provide updates, revisions or amendments to any forward-looking statements to reflect changes in our expectations or future events.
iii
PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
A. Directors and Senior Management
Not applicable.
B. Advisors
Not applicable.
C. Auditors
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
A. Offer Statistics
Not applicable.
B. Method and Expected Timetable
Not applicable.
ITEM 3. KEY INFORMATION
In this Annual Report, “Meihua,” refers to Meihua International Medical Technologies Co., Ltd., 美华国际医疗科技有限公司, a Cayman Islands company, and depending on the context, “we,” “us,” “our company,” “our,” “the Company” and “Meihua International” refer to Meihua International Medical Technologies Co., Ltd., 美华国际医疗科技有限公司, a Cayman Islands company, its subsidiaries, Kang Fu International Medical Co., Limited (“Kang Fu International Medical”), Yangzhou Huada Medical Device Co., Ltd. (“Yangzhou Huada”), Jiangsu Yada Technology Group Co., Ltd. (“Jiangsu Yada”), Jiangsu Huadong Medical Device Industrial Co., Ltd. (“Jiangsu Huadong”), Hainan Ruiying Technology Co., Ltd. (“Hainan Ruiying”), and Meihua Future Manufacturing Limited (“Meihua Future”)
Our Holding Company Structure
Meihua is a holding company which was incorporated under the laws of Cayman Islands on November 10, 2020 by our shareholder Yongjun Liu. Meihua’s direct subsidiary is Kang Fu International Medical, a Hong Kong company. Kang Fu International Medical was incorporated on October 13, 2015 by four shareholders, Yongjun Liu, Yin Liu, Ace Capital Limited and King Tai International Holding Limited. On November 22, 2019, Yongjun Liu acquired 93,000 shares in Kang Fu International Medical from Ace Capital Limited and 45,000 shares in Kang Fu International Medical from King Tai International Holding Limited, respectively. Upon consummation of such share transfer, Yongjun Liu and Yin Liu constituted all of the shareholders of Kang Fu International Medical, holding 100% shares of Kang Fu International Medical. On December 21, 2020, Meihua in turn acquired 414,000 shares (69% of the outstanding shares) from Yongjun Liu and 186,000 shares (31% of the outstanding shares) from Yin Liu, respectively, resulting in Kang Fu International Medical becoming Meihua’s wholly owned subsidiary. In exchange for the acquisition on Kang Fu, Meihua issued a total of 159,350 Ordinary Shares to Mr. and Mrs. Liu, who in turn transferred their shares to Bright Accomplish Limited, a holding company for which they are the sole shareholders, on December 21, 2020.
Meihua is not a Chinese operating company but a Cayman Islands holding company with operations conducted by its subsidiaries located in mainland China. Meihua operates its business through its indirect subsidiaries in China. Below is a list of Meihua’s operating subsidiaries:
| ● | Yangzhou Huada Medical Device Co., Ltd., or Yangzhou Huada: a subsidiary wholly owned by Kang Fu International Medical and established in Yangzhou, Jiangsu Province, PRC on December 24, 2001 with a registered capital of $602,400. On March 3, 2022, the registered capital was increased to $50,602,400. Yangzhou Huada manufactures and sells Class I disposable medical devices under our own brands, and distributes Class I and Class II disposable medical devices sourced from other manufacturers, to our domestic customers. Specifically, Yangzhou Huada mainly focuses on the manufacturing, sales and distributions of non-bottled products, such as brushes, ID bracelets for domestic sales. |
| ● | Jiangsu Yada Technology Group Co., Ltd., or Jiangsu Yada: a subsidiary wholly owned by Yangzhou Huada and established in Yangzhou, Jiangsu Province, PRC on December 5, 1991 with a registered capital of RMB51,390,000, which manufactures and sells Class I and Class II disposable medical devices under our own brands, and distributes Class I and Class II disposable medical devices sourced from other manufacturers, to our domestic and overseas customers. Specifically, Jiangsu Yada mainly focuses on overseas sales. |
1
| ● | Jiangsu Huadong Medical Device Industrial Co., Ltd., or Jiangsu Huadong: a subsidiary wholly owned by Jiangsu Yada and established in Yangzhou, Jiangsu Province, PRC on November 18, 2000 with a registered capital of RMB50,000,000, which manufactures and sells Class I, II and III disposable medical devices under our own brands, and distributes Class I, II and III disposable medical devices sourced from other manufacturers, to our domestic and overseas customers. Specifically, Jiangsu Huadong mainly focuses on the manufacturing, sales and distributions of polyethylene bottled products, such as eye drop bottles and tablet bottles. |
| ● | Hainan Ruiying Technology Co., Ltd., or Hainan Ruiyin: a subsidiary of which 51% of registered capital (subscribed but unpaid registered capital) is owned by Jiangsu Huadong, was established in Qionhai City, Hainan Province, China on October 25, 2023, with registered capital of RMB10,000,000, for purposes of serving as a trading and import-export company with a focus on facilitating the introduction of new medical technology, devices and equipment. |
| ● | Meihua Future Manufacturing Limited or Meihua Future: a subsidiary of which 100% of registered capital is owned by Meihua International, was established in State of New York on July 31, 2025, with registered capital of $5,000, for purposes of serving as software service company with a focus on providing the Software as a Service (“SaaS”) development service. |
Meihua owns 100% of Kang Fu International and 100% of Meihua Future. Kang Fu International Medical owns 100% of Yangzhou Huada e. Yangzhou Huada owns 100% of Jiangsu Yada. Jiangsu Yada, in turn, owns 100% of Jiangsu Huadong. Jiangsu Huadong, in turn, owns 51% of the equity interests of Hainan Ruiying. The following diagram illustrates the Company’s corporate structure as of the date of this Annual Report, including Meihua’s principal subsidiary and their respective principal subsidiaries.
2
Cash Flows through Our Company
The structure of cash flows within our organization, and a summary of the applicable regulations, is as follows:
| 1. | Our equity structure is a direct holding structure, pursuant to which the overseas entity listed in the U.S., Meihua International Medical Technologies Co., Ltd. (“Meihua” or “Meihua International”), directly controls Yangzhou Huada Medical Device Co., Ltd (“Yangzhou Huada”) (the “WFOE”) and other domestic operating entities which are directly owned through the Hong Kong company, Kang Fu International Medical Co., Limited (“Kang Fu International Medical”). |
| 2. | Within our direct holding structure, the cross-border transfer of funds within our corporate group is legal and compliant with the laws and regulations of the PRC. After foreign investors’ funds enter Meihua International at the close of securities offerings, the funds can be directly transferred to Kang Fu International Medical, and then transferred to subordinate operating entities through the WFOE. |
If the Company intends to distribute dividends, the Company will transfer the dividends to Kang Fu International Medical in accordance with the laws and regulations of the PRC, and then Kang Fu International Medical will transfer the dividends to Meihua International, and the dividends will be distributed from Meihua International to all shareholders respectively in proportion to the shares they hold, regardless of whether the shareholders are U.S. investors or investors in other countries or regions.
| 3. | In the reporting periods presented in this Annual Report, cash and other asset transfers occurred among the Company and its subsidiaries are as summarized as below: |
| For the year ended December 31, 2025 (in US$) | ||||||||||||||||
| Inter-company cash transfers: | Meihua (Cayman) | Meihua Future (United States) | Kang Fu International Medical (HK) | PRC subsidiaries | ||||||||||||
| Cash transferred from Meihua to Kang Fu International Medical (1) | $ | (1,350,000 | ) | $ | - | $ | 1,350,000 | $ | - | |||||||
| Cash transferred from Kang Fu International Medical to PRC subsidiaries (2) | $ | - | $ | - | $ | (1,000,000 | ) | $ | 1,000,000 | |||||||
| Cash transferred from PRC subsidiaries to Kang Fu International Medical (3) | $ | - | $ | - | $ | 311,129 | $ | (311,129 | ) | |||||||
| Cash transferred from Meihua to Meihua Future (4) | $ | (16,520,000 | ) | $ | 16,520,000 | $ | - | $ | - | |||||||
| (1) | Meihua transferred $1,350,000 to Kang Fu International Medical as a loan to cover working capital. |
| (2) | Kang Fu International Medical contributed $1,000,000 to PRC subsidiaries for capital contribution purposes. |
| (3) | PRC subsidiaries transferred $311,129 to Kang Fu International Medical as a loan to cover working capital. |
| (4) | Meihua transferred $16,520,000 to Meihua Future as a loan to cover working capital. |
| For the year ended December 31,
2024 (in US$) | ||||||||||||
| Inter-company cash transfers: | Meihua (Cayman) | Kang Fu International Medical (HK) | PRC subsidiaries | |||||||||
| Cash transferred from Meihua to Kang Fu International Medical (1) | $ | (5,700,000 | ) | $ | 5,700,000 | $ | - | |||||
| Cash transferred from Kang Fu International Medical to PRC subsidiaries (2) | $ | - | $ | (5,000,000 | ) | $ | 5,000,000 | |||||
| (1) | Meihua transferred $5,700,000 to Kang Fu International Medical as a loan to cover working capital. |
| (2) | Kang Fu International Medical contributed $5,000,000 to PRC subsidiaries for capital contribution purposes. |
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| For the year ended December 31,
2023 (in US$) | ||||||||||||
| Inter-company cash transfers: | Meihua (Cayman) | Kang Fu International Medical (HK) | PRC subsidiaries | |||||||||
| Cash transferred from Meihua to Kang Fu International Medical (1) | $ | (2,500,000 | ) | $ | 2,500,000 | $ | - | |||||
| Cash transferred from Kang Fu International Medical to PRC subsidiaries (2) | $ | - | $ | (1,000,000 | ) | $ | 1,000,000 | |||||
| (1) | Meihua transferred $2,500,000 to Kang Fu International Medical as a loan to cover working capital. |
| (2) | Kang Fu International Medical contributed $1,000,000 to PRC subsidiaries for capital contribution purposes. |
| 4. | No dividends or distributions of a subsidiary have been made to the Company for the years ended December 31, 2025, 2024, and 2023. For the foreseeable future, the Company intends to use the earnings for research and development, to develop new products and to expand its production capacity. As a result, we do not expect to pay any cash dividends in the near future. |
Our PRC subsidiaries’ ability to distribute dividends is based upon their distributable earnings. Current PRC regulations permit our PRC subsidiaries to pay dividends to their respective shareholders only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, each of our PRC subsidiaries is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of each of their registered capitals. These reserves are not distributable as cash dividends. See “Regulations Relating to Dividend Distributions” for more information.
To address persistent capital outflows and the RMB’s depreciation against the U.S. dollar in the fourth quarter of 2016, the People’s Bank of China and the State Administration of Foreign Exchange, or SAFE, have implemented a series of capital control measures in the subsequent months, including stricter 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 subject to tightened scrutiny in the future. The PRC government also imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of the PRC. Therefore, we may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency for the payment of dividends from our profits, if any. Furthermore, if our subsidiaries in the PRC incur debt on their own in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments.
In addition, the Enterprise Income Tax Law and its implementation rules provide that a withholding tax at a rate of 10% will be applicable to dividends payable by Chinese companies to non-PRC-resident enterprises unless reduced under treaties or arrangements between the PRC central government and the governments of other countries or regions where the non-PRC resident enterprises are tax resident. Pursuant to the tax agreement between Mainland China and the Hong Kong Special Administrative Region, the withholding tax rate in respect to the payment of dividends by a PRC enterprise to a Hong Kong enterprise may be reduced to 5% from a standard rate of 10%. However, if the relevant tax authorities determine that our transactions or arrangements are for the primary purpose of enjoying a favorable tax treatment, the relevant tax authorities may adjust the favorable withholding tax in the future. Accordingly, there is no assurance that the reduced 5% withholding rate will apply to dividends received by our Hong Kong subsidiary from our PRC subsidiaries. This withholding tax will reduce the amount of dividends we may receive from our PRC subsidiaries.
Key Information Related to Doing Business in China
Risks and Uncertainties Related to Doing Business in China
Meihua faces various legal and operational risks and uncertainties as a company with its principal subsidiaries based in and primarily operating in China. Most of Meihua’s subsidiaries operations are conducted in the PRC and are governed by PRC laws, rules and regulations. Because PRC laws, rules and regulations are relatively new and quickly evolving, and because of the limited number of published decisions and the non-precedential nature of these decisions, and because the laws, rules and regulations often give the relevant regulator certain discretion in how to enforce them, the interpretation and enforcement of these laws, rules and regulations involve uncertainties and can be inconsistent and unpredictable. The PRC government has the power to exercise significant oversight and discretion over the conduct of our business, and the regulations to which we are subject may change rapidly and with little notice to us or our shareholders. As a result, the application, interpretation, and enforcement of new and existing laws and regulations in the PRC are often uncertain. In addition, these laws and regulations may be interpreted and applied inconsistently by different agencies or authorities, and inconsistently with our current policies and practices.
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See “- D. Risk Factors - Risks Related to Doing Business in China - Because all of our operations are in China, our business is subject to the complex and rapidly evolving laws and regulations there. The Chinese government may exercise significant oversight and discretion over the conduct of our business and may intervene in or influence our operations at any time, which could result in a material change in our operations and/or the value of our Ordinary Shares.” And “- PRC’s economic, political and social conditions, as well as changes in any government policies, laws and regulations, could have a material adverse effect on our business.”
The PRC government has significant oversight and discretion over the conduct of our business, and may intervene in or influence our operations through adopting and enforcing rules and regulatory requirements. For example, in recent years the PRC government, has enhanced regulation in areas such as anti-monopoly, anti-unfair competition, cybersecurity and data privacy. See “- D. Risk Factors - Risks Related to Our Business and Industry - If the Chinese government chooses to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers, such action could significantly limit or completely hinder our ability to offer or continue to offer securities to investors outside of China and, as a result, cause the value of such securities to significantly decline or be worthless.”; and “- Uncertainties with respect to the PRC legal system could adversely affect us.”
In addition, our Ordinary Shares may be delisted from Nasdaq or prohibited from being traded over-the-counter under the Holding Foreign Companies Accountable Act if the PCAOB is unable to inspect our auditor for two consecutive years. Our auditor has been inspected by the PCAOB on a regular basis and it is not subject to the determinations announced by the PCAOB on December 16, 2021. If trading in our Ordinary Shares is prohibited under the Holding Foreign Companies Accountable Act in the future because the PCAOB determines that it cannot inspect or fully investigate our auditor at such future time, the Nasdaq Stock Market may determine to delist our Ordinary Shares. On June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act and on December 29, 2022, a legislation entitled “Consolidated Appropriations Act, 2023” (the “Consolidated Appropriations Act”) was signed into law by President Biden, which contained, among other things, an identical provision to Accelerating Holding Foreign Companies Accountable Act and reduces the number of consecutive non-inspection years required for triggering the listing and trading prohibitions from three years to two years, thus reducing the time period before our securities may be prohibited from trading or delisted. On December 15, 2022, the PCAOB Board determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate its previous determinations to the contrary. However, should PRC authorities obstruct or otherwise fail to facilitate the PCAOB’s access in the future, the PCAOB Board will consider the need to issue a new determination. Our securities may be delisted or prohibited from trading if the PCAOB determines that it cannot inspect or investigate completely our auditor under the Holding Foreign Companies Accountable Act. Our auditor, Li CPA LLC, is headquartered in Aurora, Colorado with its office at STE 2-1001, 2821 South Parker Road, Aurora, Colorado 80014, and has been inspected by the PCAOB on a regular basis. See “- D. Risk Factors - Risks Related to Doing Business in China - Although the audit report included in this Annual Report was issued by U.S. auditors who are currently inspected by the PCAOB, if it is later determined that the PCAOB is unable to inspect or investigate our auditor completely, investors would be deprived of the benefits of such inspection and our Ordinary Shares may be delisted or prohibited from trading.”
Permissions and Approvals Required to be Obtained from PRC Authorities for our Business Operations
As a medical device manufacturing and sales company, we are subject to extensive government regulation and supervision in the PRC. Pursuant to PRC laws, we must obtain production license for Class II and III disposable medical devices and production filing for Class I disposable medical device, operation license for Class III disposable medical devices and operation filing for Class II disposable medical devices, and filing or registration certificates for certain Class I, II or Class III disposable medical devices. As of the date of this Annual Report, we are current on all licenses and certificates and have obtained Class I, II and III disposable medical device qualifications in the PRC.
However, if we fail to timely renew our medical device licenses or registration certificates, it could adversely affect our reputation, financial conditions and results of operations. See “- D. Risk Factors - Risks Related to Our Business and Industry - If we fail to timely renew our medical device licenses or registration certificates, it could adversely affect our reputation, financial conditions and results of operations.”
Permissions and Approvals Required to be Obtained from PRC Authorities for our Securities Offerings
As of the date of this Annual Report, we believe that we and our PRC subsidiaries, (1) are not required to obtain permissions from any PRC authorities to operate or issue our Class A Ordinary Shares to foreign investors, (2) are not subject to permission requirements from the CSRC, the CAC or any other entity that is required to approve our PRC subsidiaries’ operations, and (3) have not received or were denied such permissions by any PRC authorities. Nevertheless, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the Opinions on Severely Cracking Down on Illegal Securities Activities According to Law, or the Opinions, which were made available to the public on July 6, 2021. The Opinions emphasized the need to strengthen the administration over illegal securities activities, and the need to strengthen the supervision over overseas listings by Chinese companies. Given the current PRC regulatory environment, it is uncertain when and whether we or our PRC subsidiaries, will be required to obtain permission from the PRC government to continue to list on U.S. exchanges in the future, and even when such permission is obtained, whether it will be denied or rescinded. We have been closely monitoring regulatory developments in China regarding any necessary approvals from the CSRC or other PRC governmental authorities required for overseas listings. As of the date of this Annual Report, we have not received any inquiry, notice, warning, sanctions or regulatory objection to this offering from the CSRC or other PRC governmental authorities. However, there remains significant uncertainty as to the enactment, interpretation and implementation of regulatory requirements related to overseas securities offerings and other capital markets activities.
5
On February 17, 2023, the CSRC promulgated the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies, or the Trial Measures, and relevant five supporting guidelines, together as the New Overseas Listing Rules, which became effective on March 31, 2023. According to the New Overseas Listing Rules, PRC domestic companies that seek to offer and list securities in overseas markets, either in direct or indirect means, are required to complete the filing procedure with the CSRC and report relevant information. In addition, an overseas-listed company must also submit the filing with respect to its follow-on offerings, issuance of convertible corporate bonds and exchangeable bonds, and other equivalent offering activities, within the time frame specified by the Trial Measures. The New Overseas Listing Rules laid out the regulatory filing requirements for both direct and indirect overseas listings and clarify the determination criteria for indirect overseas listing in overseas markets. For more detailed information, see “Item 3. Key Information-D. Risk Factors-Risks Related to Doing Business in China-Potential Chinese governmental and regulatory interference could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.” Pursuant to the New Overseas Listing Rules, (i) in connection with our previous issuance of securities to foreign investors prior to the New Overseas Listing Rules, neither we, nor our PRC subsidiaries are required to obtain any permissions or approvals from the CSRC, (ii) we are required and we duly made the filing in connection with our previous issuance of securities which closed on January 2, 2024; and (iii) should we decide to issue additional equity or equity-linked securities for listing overseas in the future, we are not required to obtain any permissions or approvals from any PRC government authorities, except for the requisite filing with the CSRC in connection with such issuance. Failure to comply with the filing requirements may result in an order of rectification, a warning and fines up to RMB10 million to the non-compliant domestic companies, and the directly responsible persons of the companies will be warned and fined between RMB500,000 and RMB5 million. Furthermore, if the controlling shareholder and the actual controller of the non-compliant companies organizes or instigates the breach, they will be fined between RMB1 million and RMB10 million. In addition to above filing requirements, the Filings Rules also requires an issuer to report to the CSRC within three business days after occurrence of any the following events: (i) its change of control; (ii) its being subject to investigation or sanctions by any overseas securities regulators or overseas authorities; (iii) its change of listing status or listing segment; (iv) voluntary or mandatory delisting; and (v) material change of its principal business operations to the extent that it ceases to be subject to the filing requirements of the Trial Measures.
Enforceability of Civil Liabilities
We are incorporated under the laws of the Cayman Islands as an exempted company with limited liability. We are incorporated in the Cayman Islands because of certain benefits associated with being a Cayman Islands exempted company, such as political and economic stability, an effective judicial system, a favorable tax system, the absence of foreign exchange control or currency restrictions and the availability of professional and support services. However, the Cayman Islands has a less exhaustive body of securities laws than the United States and provides less protection for investors. In addition, Cayman Islands companies may not have standing to sue before the federal courts of the United States.
Our constitutional documents do not contain provisions requiring that disputes, including those arising under the securities laws of the United States, among us, our officers, directors and shareholders, be arbitrated.
Substantially all of our assets are located in the PRC. In addition, all of our directors and officers are nationals or residents of the PRC and all or a substantial portion of their assets are located in the PRC. As a result, it may be difficult or impossible for investors to effect service of process within the United States upon us or these persons, or to enforce judgments obtained in U.S. courts against us or them, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States. It may also be difficult for investors to enforce judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors.
Maples and Calder (Cayman) LLP, our counsel as to Cayman Islands law, has advised us that it is uncertain whether the courts of the Cayman Islands will:
| ● | recognize or enforce against us judgments of courts of the United States based on certain civil liability provisions of U.S. securities laws; and |
| ● | entertain original actions brought in each respective jurisdiction against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States. |
We have been further advised that there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, although the courts of the Cayman Islands will in certain circumstances recognize and enforce a foreign judgment without any re-examination or re-litigation of the matters adjudicated upon, provided such judgment:
| (a) | is given by a foreign court of competent jurisdiction; |
| (b) | imposes on the judgment debtor a liability to pay a liquidated sum for which the judgment has been given; |
| (c) | is final; |
| (d) | is not in respect of taxes, a fine or a penalty; | |
| (e) | was not obtained by fraud; and |
| (f) | is not of a kind the enforcement of which is contrary to natural justice or the public policy of the Cayman Islands. |
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Subject to the above limitations, in appropriate circumstances, a Cayman Islands court may give effect in the Cayman Islands to other kinds of final foreign judgments such as declaratory orders, orders for performance of contracts and injunctions.
Zhejiang Taihang Law Firm (“Zhejiang Taihang”), our counsel as to PRC law, has advised us that there is uncertainty as to whether PRC courts would (i) recognize or enforce judgments of United States courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States, or (ii) entertain original actions brought in each respective jurisdiction against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States.
Zhejiang Taihang has further advised us that the recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based either on treaties between China and the country or region where the judgment is made or on reciprocity between jurisdictions. China does not have any treaties or other form of reciprocity with the United States or the Cayman Islands that provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedures Law, courts in the PRC will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates the basic principles of PRC law or national sovereignty, security or public interest. As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by a court in the United States or in the Cayman Islands.
A. [Reserved]
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
An investment in our capital stock involves a high degree of risk. You should carefully consider the risks described below, together with all of the other information included in this Annual Report, before making an investment decision. If any of the following risks actually occurs, our business, financial condition or results of operations could suffer. In that case, the trading price of our Ordinary Shares could decline, and you may lose all or part of your investment.
In addition, all the operational risks associated with being based in and having operations in mainland China as discussed in this “Item 3. Key Information-D. Risk Factors-Risks Related to Our Business and Industry” also apply to operations in the special administrative regions of Hong Kong and Macau. With respect to the legal risks associated with being based in and having operations in mainland China as discussed in risk factors under “Item 3. Key Information-D. Risk Factors-Risks Related to Our Corporate Structure” and “Item 3. Key Information-D. Risk Factors-Risks Related to Doing Business in China,” the laws, regulations and discretion of mainland China governmental authorities discussed in this Annual Report are expected to apply to mainland China entities and businesses only, rather than entities or businesses in the Hong Kong Special Administrative Region or Macau which operate under a different set of laws from mainland China.
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Risks Related to Our Business and Industry
In connection with the initial public offering of our Ordinary Shares in February 2022, we entered into certain agreements with a Hong Kong entity pursuant to which we believe we were defrauded of in excess of $10 million; because we failed to disclose such agreements at the time of the initial public offering, regardless of the arguably fraudulent nature of such agreements, we may be subject to potential liabilities or litigation exposure as a result of such agreements.
The Company closed its initial public offering (the “IPO”) of its ordinary shares on February 18, 2022, through which the Company raised $39.4 million through the sale of 39,400 Ordinary Shares at a purchase price of $1,000 per share. During the roadshow leading up to the IPO, a Hong Kong investment company named Tai He International Group Limited (“Tai He”) was referred to the Company by Shengang Securities Company Limited (“Shengang”), the Company’s co-underwriter based in the People’s Republic of China (“PRC”). Tai He, through negotiations with Shengang, asserted that it would participate in the IPO as an investor. As a development stage PRC medical device company, the Company’s management had no experience in the U.S. capital markets and relied on its investment bankers and underwriters in providing guidance and advice concerning its U.S. public offering. Accordingly, the Company was unaware of the actual motives of Tai He. Based on the Company’s trust in Shengang and given the circumstances that the Company was unable to make further verification, the Company hastily entered into a series of agreements with Tai He (the “Tai He Agreements”).
Pursuant to the Tai He Agreements, Tai He agreed to invest a minimum of $35 million in the IPO subject to the Company making a $7.0 million refundable deposit (the “Refundable Deposit”) and advancing a $3.0 million service fee for investor relations and other services (together, the “Services”) payable to Tai He. The Company, its affiliates and individual shareholders paid the $7.0 million Refundable Deposit and $3.0 million service fee to Tai He in several installments from January 27, 2022 to March 11, 2022. After March 11, 2022, the Company has made no other payments to, nor had any direct interaction with, Tai He, and, in actuality, the Company never directly communicated with Tai He during the negotiations, only communicating about Tai He and the Tai He Agreements through Shengang.
After the IPO, through the Company’s internal risk control process, the Company learned that Tai He does not appear to be an investor in the Company and, when the Company attempted to inquire about it, Tai He refused to speak with the Company. Based on the facts as investigated and understood by the Company, the Company believes that it was defrauded by Tai He and that Tai He never actually invested $35 million in the IPO. In fact, the Company learned that Tai He made no investments in the Company at all, and Tai He has no involvement in the Company’s IPO matters. In addition, the Refundable Deposit has not been repaid to the Company and no Services have been provided to the Company by Tai He. As a result, the Company believes that the Tai He Agreements may be deemed a fraud perpetrated by Tai He and Shengang against the Company by Tai He taking advantage of asymmetric information, including the Company’s lack of knowledge and understanding of the U.S. markets, IPO rules and processes, and the trust of the Company.
After consultation with professionals, the Company is now aware that the Tai He Agreements were required to be disclosed to the public and the Company believes that the agreements themselves are fraudulent and non-enforceable, and therefore the Company is disclosing the Tai He Agreements to meet the compliance requirements of the SEC. Further, the Company acknowledges that it had improperly relied on the advice, direction and counsel of Shengang when entering into the Tai He Agreements. After learning of the issue and disclosing it to the public, the Company terminated the Tai He Agreements and discontinued making any additional payments to Tai He. Due to the uncertainty of recovery of the wrongful payments, the Company has written off approximately $4.8 million deposit and fully expensed $2.3 million service fee paid by the Company to Tai He in the year ended December 31, 2022. The Company and its executive management team intends to cooperate with the SEC, as well as any other relevant authorities, to ensure that its investors’ interests are protected while such matters are resolved. Nonetheless, the existence of the Tai He Agreements and the Company’s failure to disclose them could expose the Company to potential shareholder litigation and/or SEC enforcement or other regulatory action.
Our operating history may not be indicative of our future growth or financial results and we may not be able to sustain our historical growth rates.
Our operating history may not be indicative of our future growth or financial results. There is no assurance that we will be able to grow our revenues in future periods. Our growth rates may decline for any number of possible reasons, and some of them are beyond our control, including decreasing customer demand, increasing competition, declining growth of the medical device industry in general, emergence of alternative business models, or changes in government policies or general economic conditions. We will continue to expand our sales network and product offerings to bring greater convenience to our customers and to increase our customer base and number of transactions. However, the execution of our expansion plan is subject to uncertainty and the total number of items sold and number of transacting customers may not grow at the rate we expect for the reasons stated above. If our growth rates decline, investors’ perceptions of our business and prospects may be adversely affected and the market price of our Class A Ordinary Shares could decline.
8
Failure to maintain the quality and safety of our products could have a material and adverse effect on our reputation, financial condition and results of operations.
The quality and safety of our products, whether self-manufactured or outsourced, are critical to our success. As a medical device manufacturer with a history of over 30 years, and a management team with more than 40 years of industry experience, quality and safety are maintained as our core value. Our medical devices are directly used on the human body and are essential to human health. We pay close attention to quality control, monitoring each step in the process from procurement to production and from warehouse to delivery. Maintaining consistent product quality depends significantly on the effectiveness of our quality control system, which in turn depends on a number of factors, including but not limited to the design of our quality control system, employee training to ensure that our employees adhere to and implement our quality control policies and procedures and the effectiveness of monitoring of any potential violation(s) of our quality control policies and procedures. There can be no assurance that our quality control system will always prove to be effective.
In addition, the quality of the products or services provided by our suppliers or business partners is subject to factors beyond our control, including the effectiveness and the efficiency of their quality control system, among others. There can be no assurance that our suppliers or business partners will always be able to adopt appropriate quality control systems and meet our stringent quality control requirements in respect of the products or services they provide. Any failure of our suppliers or business partners to provide satisfactory products or services could harm our reputation and adversely impact our operations. In addition, we may be unable to receive sufficient compensation from suppliers and business partners for the losses caused by them.
As of the date of this Annual Report, we are unaware of any material accidents related to the quality or safety of our products.
Any failure to maintain effective quality control over our products and services could materially adversely affect our business.
The quality of our services and products is critical to the success of our business, and such quality to a large extent depends on the effectiveness of our quality control system. We have developed a rigorous quality control system that enables us to monitor each stage of the production process.
However, despite our quality control management system, we cannot eliminate all risks of errors, defects or failures. We may fail to detect or cure defects as a result of a number of factors, many of which are outside our control, including:
| ● | technical or mechanical malfunctions in the production process; |
| ● | human error or malfeasance by our quality control personnel; |
| ● | tampering by third parties; and |
| ● | defective raw materials or equipment. |
Failure to detect quality defects in our products could result in patient injury, customer dissatisfaction, or other problems that could seriously harm our reputation and business, expose us to liability, and adversely affect our revenue and profitability.
In 2018, our PRC subsidiaries Jiangsu Yada and Jiangsu Huadong were fined an immaterial amount for noncompliance with certain local laws and regulations, which non-compliance was cured by us in the same year.
For the fiscal year of 2025 and as of the date of this Annual Report, we are not aware of any material investigations, prosecutions, disputes, claims or other proceedings relating to quality or quality control issues, nor has the Company received any notices of, been punished for, nor can we foresee any punishment being made by any related government authorities of the PRC as of the date of this Annual Report.
Due to the nature of our business, we may experience or be exposed to significant liability claims or complaints from customers, doctors, patients or hospitals, litigation and regulatory investigations and proceedings, such as claims arising in relation to medical device safety, or adverse publicity involving our products, which could adversely affect our financial condition and results of operations.
We face an inherent risk of liability claims or complaints related to the use of our products by our customers, doctors, patients and hospitals. We take those complaints and claims seriously and endeavor to reduce such complaints by implementing various remedial measures. Nevertheless, we cannot assure you that we can successfully prevent or address all such complaints.
Any complaints or claims against us, even if meritless and unsuccessful, may divert management’s attention and other resources from our business and adversely affect our business and operations. Such complaints or claims may cause customers to lose confidence in us and our brand, which may adversely affect our business and results of operations. Furthermore, negative publicity including but not limited to negative online reviews on social media and crowd-sourced review platforms, industry findings or media reports related to medical device quality and safety, public health concerns, illness, injuries, whether or not accurate, and whether or not concerning our products, can adversely affect our business, results of operations and reputation.
9
We face potential liability, expenses for legal claims and exposure to other harm due to the nature of our business. For example, customers could assert legal claims against us in connection with personal injuries or illness related to the use of medical devices we sell. The PRC government, media outlets and public advocacy groups have been increasingly focused on customer protection in recent years. Selling of defective products may expose us to liabilities associated with customer protection laws. We may be deemed responsible for compensating customer losses even if personal injuries or illness are not directly caused by us. Such liability could arise through the actions of our suppliers or business partners. Thus, we may be held liable if our suppliers or other business partners fail to comply with applicable product quality and safety related rules and regulations. In such a situation, though we can ask the responsible parties to indemnify us for such liability, even if we receive full indemnification our reputation could still be adversely affected.
We may face additional exposure to claims and lawsuits. These claims could divert management time and attention away from our business and result in significant costs to investigate and defend, regardless of the merits of the claims. In some instances, we may elect or be forced to pay substantial damages if we are unsuccessful in our efforts to defend against these claims, which could harm our business, financial condition and results of operations. In addition, our directors, management and employees may from time to time be subject to litigation and regulatory investigations and proceedings or otherwise face potential liability and expense in relation to medical device quality and safety, commercial, labor, employment, securities or other matters, which could adversely affect our reputation and results of operations.
As of the date of this Annual Report, we are not aware of any notices, warnings, investigations, prosecutions, disputes, claims or other proceedings related to customer rights protection having been brought against us, nor have we been punished or fined or can we foresee any punishment or fines to be made by any government authorities of the PRC or any other jurisdiction.
We face the risk of fluctuations in the cost, availability and quality of our raw materials, which could adversely affect our results of operations.
The cost, availability and quality of our principal raw materials, such as rubber, chemical PE, polyethylene, polypropylene, nylon, non-woven fabrics and other bulk commodities, are important to our operations. After years of development, we have established long-term cooperative relationships with numerous raw material suppliers under a positive price negotiation and adjustment mechanism. However, if the cost of raw materials increases due to policy changes, large market price fluctuations or any other reasons, our business and results of operations could be adversely affected.
Lack of availability of raw materials, whether due to shortages in supply, delays or interruptions in processing, failure of timely deliver materials or otherwise, could interrupt our operations and adversely affect our financial results.
Defective raw materials or raw materials with quality issues could subject us to product liability claims or legal actions, which could adversely affect our financial conditions and results of operations.
A significant interruption in the operations of our third-party suppliers and other business partners could potentially disrupt our operations.
We have limited control over the operations of our third-party suppliers and other business partners and any significant interruption in their operations may have an adverse impact on our operations. For example, a significant interruption in the operations of our supplier’s manufacturing facilities could cause delay or termination of shipment of the raw materials to us, which may cause delay or termination of shipment of ordered products to our customers, resulting in damage to our customer relationships. If we could not solve the impact of the interruptions of operations of our third-party suppliers, our business operations and financial results may be materially and adversely affected.
Although we believe that we could establish alternate sources from other suppliers for most of our raw materials, any delay in locating and establishing relationships with other sources could result in shortages or back orders for such raw materials. There can be no assurance that such replacement suppliers will provide the raw materials that are needed by us in the quantities that we request or at the prices that we are willing to pay. Any shortage in quantities or increase in prices could adversely affect our financial conditions and results of operations.
A breakdown in our information technology (IT) systems could result in a significant disruption to our business.
As the Company’s business mainly focuses on the production and manufacturing of traditional medical devices and supplies, the majority of the Company’s computers are only connected to the Company’s internal network environment. External networks and data are filtered and screened through the central exchange servers. Therefore, from a hardware and software perspective, the Company is not exposed to significant cybersecurity risks. However, if we were to suffer a breakdown in our systems, storage, distribution or tracing, we could experience disruptions affecting our business activity, including our manufacturing, research, accounting and billing processes and potentially cause disruptions to our manufacturing process for products currently in production. We may also suffer from partial loss of information and data due to such disruption.
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Our business and operations would suffer in the event of computer system failures, cyber-attacks on our systems or deficiency in our cyber security measures.
Despite the implementation of security measures, our internal computer systems, and those of third parties on which we rely, are vulnerable to damage from computer viruses, unauthorized access, malware, natural disasters, fire, terrorism, war and telecommunication, electrical failures, cyber-attacks or cyber-intrusions over the Internet, attachments to emails, persons inside our organization, or persons with access to systems inside our organization. The risk of a security breach or disruption, particularly through cyber-attacks or cyber intrusion, including by computer hackers, foreign governments or cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. To the extent that any disruption or security breach results in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information and personal information, we could incur liability due to lost revenues resulting from the unauthorized use or theft of sensitive business information, remediation costs, and litigation risks including potential regulatory action by governmental authorities. In addition, any such disruption, security breach or other incident could delay the further development of our future product candidates due to theft or corruption of our proprietary data or other loss of information. Our business and operations could also be harmed by any reputational damage with customers, investors or third parties with whom we work, and our competitive position could be adversely impacted.
As the relevant land plots are of allocated land use right, we may be required to pay the land granting fees to convert such allocated land use rights to granted land use rights.
Allocated land use rights may only be held by Chinese state-owned enterprises, government authorities and public entities or used for certain prescribed purposes - for example, military installations and infrastructure projects. Allocated lands may be requisitioned by the state at any time and without compensation. An allocated land use right may be converted to a granted land use rights by the payment of land granting fees to the land authority. Therefore, we might be required to convert the land use rights of the relevant land plots from “allocated” to “granted” by payment of the land granting fees.
While we utilize numerous suppliers, we do not have long term contracts with any of those suppliers and they could reduce order quantities or terminate their sales to us at any time.
While we utilize numerous suppliers, we do not have long term contracts with any of those suppliers. As a result, at any time, our suppliers could reduce the quantities of products they sell to us or cease selling products to us altogether. Such reductions or terminations could have a material adverse impact on our revenues, profits and financial condition.
Overall tightening of the labor market, increases in labor costs or any possible labor unrest may adversely affect our business and results of operations.
Our business requires a substantial number of personnel. Any failure to retain and maintain stable and dedicated workforce by us may lead to disruption to our business operations. Although we have not experienced any labor shortages to date, we have observed an overall tightening and increasingly competitive labor market. We have experienced, and expect to continue to experience, increases in labor costs due to increases in salary, social benefits and employee headcount. We compete with other companies in our industry and other labor-intensive industries for labor, and we may not be able to offer competitive remuneration and benefits compared to them. If we are unable to manage and control our labor costs, our business, financial condition and results of operations may be materially and adversely affected.
We are dependent on our top customers. If we fail to acquire new customers or retain existing customers in a cost-effective manner, our business, financial condition and results of operations may be materially and adversely affected.
Maintaining existing customers and developing new customers are always essential to our success. Although we are not heavily dependent on one or two customers, we are still dependent on our top customers. For the year ended December 31, 2025, no customer accounted for approximately 10% of the Company’s total revenues. For the year ended December 31, 2024, one customer accounted for approximately 12.77% of the Company’s total revenues. For the year ended December 31, 2023, one customer accounted for approximately 16.84% of the Company’s total revenues.
Our ability to cost-effectively attract new customers and retain existing customers, especially our top customers, is crucial to driving net revenues growth and achieving profitability. We have invested significantly in branding, sales and marketing to acquire and retain customers since our inception. For example, we attend domestic and international expos and exhibitions in marketing our products and attracting new customers. We also expect to continue to invest significantly to acquire new customers and retain existing ones, especially our top customers. There can be no assurance that new customers will stay with us, or the net revenues from new customers we acquire will ultimately exceed the cost of acquiring those customers. In addition, if our existing customers, especially our existing top customers no longer find our products appealing, or if our competitors offer more attractive products, prices, discounts or better customer services, our existing customers may lose interest in us, decrease their orders or even stop ordering from us. If we are unable to retain our existing customers, especially our top customers or to acquire new customers in a cost-effective manner, our revenues may decrease and our results of operations will be adversely affected.
If we are unable to build and maintain sufficient sales and distribution network to meet increasing demand of our products, our ability to execute on our business plan as outlined in this Annual Report will be impaired.
We sell our products through our direct sales force and distribution channel. As of the date of this Annual Report, we have 81 employees in our sales department and 5,385 independent sales agents, 4,409 distributors for domestic sales and 403 exporting distributors for overseas sales. Each of the aforementioned 403 exporting distributors may sell medical devices to at least three overseas customers. We have also established a cooperative network with more than 573 hospitals through our direct sales network. For the years ended December 31, 2025, 2024 and 2023, our direct sales force on disposable medical devices sales contributed 9.42%, 6.98% and 8.32%, respectively, to our revenues, and distributors on disposable medical devices sales contributed 87.96%, 93.02% and 91.68%, respectively, to our revenues. The rest of revenue was contributed by our newly introduced SaaS development service team in fiscal 2025.
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Although our sales and distribution satisfy our existing business needs, they might be insufficient to meet demand for our products as we continue to grow our business, which could result in harm to our sales and business operations, financial condition and results of operations. To mitigate such risk, we intent to invest our internally generated cash from operations and capital to be raised to add additional teams to our direct sales force, expand our geographic reach with new distribution channels into other provinces within China and overseas. If our planned efforts to expand our direct sales force and distribution channels are not effective, our ability to execute on our business plan and to realize continued growth with be impaired.
If we fail to provide a one-stop solution to our customers, we may lose customers, which would cause our financial conditions and results of operations to be adversely affected.
We sell our own brand of products and the products of other brands. For the fiscal year ended December 31, 2025, 2024 and 2023, we recognized total revenues of $61,791,957, $96,909,642 and $97,098,915, respectively. For the fiscal years ended December 31, 2025, 2024, and 2023, sales of Class I, II, III disposable medical devices under our own brands accounted for 44.15%, 49.12% and 49.64%, respectively, and the resales of sourced disposable medical devices from other manufacturers accounted for 53.23%, 50.88% and 50.36%, respectively. The SaaS service and development revenues accounted for 2.62%, nil and nil of our total revenue, respectively.
When we receive an order containing products out of our product portfolio, we may procure such products per the specific order requirements from other manufacturers and provide our customers with a one-stop shopping experience. Lack of availability of these products from other manufacturers, whether due to shortages in supply, delays or interruptions in processing, failure of timely delivery or otherwise, could interrupt our operations and adversely affect our financial results.
Our industry is intensely competitive. We may face competition from, and we may be unable to compete successfully against, new entrants and established companies with greater resources.
The medical device industry is intensely competitive and includes thousands of companies both domestically and internationally. As more medical device companies seek to outsource more of the design, prototyping and manufacturing of their products, we will face increasing competitive pressures to grow our business in order to maintain our competitive position and we may encounter competition from, and lose customers to, other companies with design, technological and manufacturing capabilities similar to ours. Some of our potential competitors may have greater name recognition, greater operating revenues, larger customer bases, longer customer relationships and greater financial, technical, personnel and marketing resources than we have. If we are unsuccessful competing with our competitors for our existing and prospective customers’ business, our financial conditions and results of operation may be adversely affected.
Furthermore, increased competition may reduce our market share and profitability and require us to increase our sales and marketing efforts and capital commitment in the future, which could negatively affect our results of operations or force us to incur further losses. Although we continually aim to grow our customer base, there is no assurance that we will be able to continue to do so in the future against current or future competitors, and such competitive pressures may have a material adverse effect on our business, financial condition and results of operations.
The continuing development of our products depends upon our maintaining strong working relationships with our customers, distributors and independent sales agents.
The research, development, marketing and sales of our current products and potential new and improved products or future product indications for which we receive regulatory clearance or approval depend upon our maintaining working relationships with our customers, distributors and independent sales agents. See “Our Research and Development” below. We rely on those professionals to provide us with considerable knowledge and experience regarding the research, development, marketing and sales of our products. Distributors and independent sales agents assist us in marketing and sales, as well as collecting customers’ feedbacks and advice related to our products. Researchers at hospital and medical institution customers keep us informed of their latest requirements and R&D results. If we cannot maintain our strong working relationships with these professionals and continue to receive their advice and input, the development, improvement and marketing of our products could suffer, which could have a material adverse effect on our business, financial condition and results of operations.
Technological change may adversely affect sales of our products and may cause our products to become obsolete.
The medical device market is characterized by extensive research and development and rapid technological change. Technological progress or new developments in our industry could adversely affect sales of our products. Our products could be rendered obsolete because of future innovations by our competitors or others, which would have a material adverse effect on our business, financial condition and results of operations.
Consolidation in the medical device industry could have an adverse effect on our revenue and results of operations.
Many medical device companies are consolidating to create new companies with greater market power. As the medical device industry consolidates, competition to provide goods and services to industry participants will become more intense. These industry participants may try to use their market power to negotiate price concessions or reductions for our products. If we reduce our prices because of consolidation in the healthcare industry, our revenue would decrease, which could have a material adverse effect on our business, financial condition and results of operations.
12
If we fail to identify, acquire and develop other products, we may be unable to grow our business.
As a significant part of our growth strategy, we intend to develop and commercialize additional products through our research and development program or by acquiring additional technologies and patents from third parties. The success of this strategy depends upon our ability to identify, select and acquire the technologies and patents on terms that are acceptable to us.
Any patents and technology we identify or acquire may require additional development efforts prior to commercial manufacturing and sale, including approval or clearance by the applicable regulatory authorities. All products are prone to the risks of failure inherent in medical device product development, including the possibility that the product will not be shown to be sufficiently safe and effective for approval or clearance by regulatory authorities. In addition, we cannot assure you that any such products that are approved or cleared will be manufactured or produced economically, successfully commercialized or widely accepted in the marketplace.
If we are unable to develop suitable potential products through internal research programs or by obtaining patents or technologies from third parties, it could have a material adverse effect on our business, financial condition and results of operations.
If we are not able to implement our strategies to achieve our business objectives, our business operations and financial performance will be adversely affected.
Our business plan and growth strategy are based on currently prevailing circumstances and the assumption that certain circumstances will or will not occur, as well as the inherent risks and uncertainties involved in various stages of development. However, there is no assurance that we will be successful in implementing our strategies or that our strategies, even if implemented, will lead to the successful achievement of our objectives. If we are not able to successfully implement our strategies, our business operations and financial performance will be adversely affected.
We are dependent upon certain key executives and highly qualified managers and we cannot assure their retention.
Our success depends, in part, upon the continued services of key members of our management team. Our executives’ and managers’ knowledge of the market, our business and our company represents a key strength of our business, which cannot be easily replicated. The success of our business strategy and our future growth also depends on our ability to attract, train, retain and motivate skilled managerial, sales, administration, development and operating personnel.
Although we have developed a mature production system, a stable and reliable sales network and marketing team, a complete after-sales service system, and a research and development process and team that keeps us abreast of market needs, and also developed complete management systems, including personnel management and welfare systems, raw material procurement and supply systems, warehousing systems, safe production and manufacturing procedures and systems, capital utilization management systems, sales and after-sales service systems, quality assessment, review and inspection systems, labor safety security system, accountability system for violations of laws and disciplines, and a comprehensive information feedback system, which ensure the normal business development of the company, if we loss any of our key personnel, there can be no assurance that our existing personnel will be adequate or qualified to carry out our strategy, or that we will be able to hire or retain experienced, qualified employees to carry out our strategy. The loss of one or more of our key management or operating personnel, or the failure to attract and retain additional key personnel, could have a material adverse effect on our business, financial condition and results of operations.
If we fail to adopt new technologies to evolving customer needs or emerging industry standards, our business may be materially and adversely affected.
To remain competitive, we must continue to stay abreast of the constantly evolving industry trends and enhance and improve our technology accordingly. Our success will depend, in part, on our ability to identify, develop or acquire leading technologies useful in our business. There can be no assurance that we will be able to use new technologies effectively or meet customer’s requirements. If we are unable to adapt in a cost-effective and timely manner in response to changing market conditions or customer preferences, whether for technical, legal, financial or other reasons, our business may be materially and adversely affected.
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Changes to our payment terms with both customers and suppliers may materially adversely affect our operating cash flows.
We may experience significant pressure from our suppliers to reduce the number of days our accounts payable remain outstanding. At the same time, we may experience pressure from our customers to extend the number of days before paying our accounts receivable. Any failure to manage our accounts payable and accounts receivable may have a material adverse effect on our business, financial condition and results of operations.
If we are unable to collect account receivables from our customers, our results of operations and cash flows could be adversely affected.
Our business depends on our ability to successfully obtain payment from customers of the amounts they owe us for products sold. As of December 31, 2025, 2024 and 2023, our accounts receivable balance amounted to $84,325,038, $78,660,700 and $78,570,956, respectively. If we are unable to timely collect our accounts receivable on a timely and consistent basis, however, our cash flows and access to operating capital could be adversely affected.
If we fail to manage our inventory effectively, our operations and financial condition may be materially and adversely affected.
If we fail to manage our inventory effectively, we may be subject to a heightened risk of inventory obsolescence, a decline in inventory value, and significant inventory write-downs or write-offs. As of December 31, 2025, 2024 and 2023, our inventory balance amounted to $1,704,309, $1,409,639 and $1,617,225, respectively.
Economic recessions could have a significant, adverse impact on our business.
Our revenues are generated from sales of medical devices both domestically and internationally and we anticipate that revenues from such sales will continue to represent a substantial portion of our total revenues in the near future. Our sales and earnings can also be affected by changes in the general economy.
The medical device industry historically has experienced cyclical fluctuations in financial results due to economic recession, downturns in business cycles of our customers, interest rate fluctuations, and other economic factors beyond our control. Deterioration in the economic environment subjects our business to various risks, which may have a material and adverse impact on our operating results and cause us to not reach our long-term growth goals. For example, a downturn in the economy could directly affect the discretionary spending power of our customers and in turn, depress the number of orders for our products.
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 intellectual property rights held by third parties. For instance, our subsidiary, Jiangsu Huadong was historically a third defendant in an intellectual property infringement case, under which certain products purchased by Jiangsu Huadong involved patent infringement. As of the date of this Annual Report, such case has been settled and Jiangsu Huadong has permanently stopped purchasing and selling the infringing products and destroyed the products in stock as requested by court’s decision. In the future, however, we may be subject to other legal proceedings and claims relating to the intellectual property rights of others. Such future proceedings could also involve existing intellectual property of which we are not aware and on which our products may inadvertently infringe. We cannot assure you that holders of intellectual property purportedly relating to some aspect of our technology or business, if any such holders exist, would not bring such intellectual property claims or enforcement actions against us in China or any other jurisdiction. If we are found to have violated the intellectual property rights of others, we may be subject to liability for our infringement activities or may be prohibited from using such intellectual property going forward, and, in addition, we may incur licensing fees or be forced to develop alternatives of our own. In addition, we may incur significant expenses, and may be forced to divert management’s time and other resources from our business and operations to defend against these infringement claims, regardless of their merits. Successful infringement or licensing claims made against us may result in significant monetary liabilities and may materially disrupt our business and operations by restricting or prohibiting our use of the intellectual property in question, and our business, financial position and results of operations could be materially and adversely affected.
Further, the application and interpretation of China’s patent laws and the procedures and standards for granting patents in China are still evolving and uncertain, and we cannot assure you that PRC courts or regulatory authorities would agree with our analysis or interpretation concerning their implementation.
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We may not be able to prevent others from the unauthorized use of our intellectual property, which could materially harm our business and competitive position.
We rely on a combination of trademark, fair trade practice, patent, copyright and trade secret protection laws in China, as well as confidentiality procedures and contractual provisions, to protect our intellectual property rights. We enter into confidentiality agreements with our employees that include terms identifying all employee-developed intellectual property as service inventions belonging to the Company. In addition, we are carful to remain current in our annual patent fee payments. We regard our trademark, patents, know-how, proprietary technologies, and similar intellectual property as critical to our success. We may become an attractive target to intellectual property attacks in the future with the increasing recognition of our brand. Any of our intellectual property rights could be challenged, invalidated, circumvented or misappropriated, or such intellectual property may not be sufficient to provide us with competitive advantages. In addition, there can be no assurance that (i) all of our intellectual property rights will be adequately protected, or (ii) our intellectual property rights will not be challenged by third parties or found by a judicial authority to be invalid or unenforceable. Intellectual property protection may not be sufficient in China. Confidentiality agreements may be breached by counterparties, and there may not be adequate remedies available to us for any such breach. Accordingly, we may not be able to effectively protect our intellectual property rights or to enforce our contractual rights in China. In addition, policing any unauthorized use of our intellectual property is difficult, time-consuming and costly and the steps we have taken may be inadequate to prevent the misappropriation of our intellectual property. In the event that we must resort to litigation to enforce our intellectual property rights, such litigation could result in substantial costs and a diversion of our managerial and financial resources. We can provide no assurance that we will prevail in such litigation. In addition, our trade secrets may be leaked or otherwise become available to, or be independently discovered by, our competitors. Any failure in protecting or enforcing our intellectual property rights could have a material adverse effect on our business, financial condition and results of operations.
Changes in U.S. and international trade policies, particularly with regard to China, may adversely impact our business and operating results.
The U.S. government has recently made statements and taken certain actions which have led to substantial changes to U.S. and international trade policies, including imposing tariffs internationally and substantially increasing tariffs on products manufactured in China. Since the U.S. only announced these actions recently, and we do not know the extent to which these tariffs will actually take effect or whether or not the tariff policies will ultimately be implemented, we do not know the effect that such actions will have on us or our industry and customers. Although cross-border business currently constitutes only a small portion of our business, as we continue to sell our products internationally and anticipate increasing our international sales in the future, any unfavorable government policies on international trade, such as capital controls or tariffs, may affect the demand for our products and services, impact the competitive position of our products or prevent us from being able to sell products in certain countries. If any new tariffs, legislation and/or regulations are implemented, or if existing trade agreements are renegotiated or, in particular, if the U.S. government takes retaliatory trade actions due to the recent U.S.-China trade tension, such changes could have an adverse effect on our business, financial condition, results of operations.
U.S.-China trade tensions and tariffs imposed on Chinese imports could adversely affect our business.
If significant tariffs or other restrictions are implemented on imports by the U.S. and related countermeasures are taken by impacted foreign countries, our business, including operating results, cash flows and financial condition, may be adversely affected. In January 2025 the U.S. announced the imposition of additional substantial tariffs on imports from various countries, including China, Canada and Mexico, and these countries have imposed or indicated their intention to impose countermeasures. In February 2025, the U.S. imposed tariffs of 10% on all imported goods from China, followed by an additional 10% tariff in March 2025. The U.S. also imposed a 25% tariff on all steel and aluminum imports, beginning in March 2025. In April, the U.S. further escalated the tariffs by imposing a 145% across the board tariff on most Chinese products imported into the U.S. and China reciprocated by imposing 125% tariffs on most U.S. goods imported into China. The U.S.-China “tit for tat” trade war is ongoing and subject to change. The trade wars have led to overall turbulence in the market and we cannot presently anticipate the overall effects on our business or whether or not there will be a de-escalation in the trade wars in the near term.
As a manufacturer of medical devices with operating subsidiaries in China and with some international sales, we may be impacted by these trade policies in terms of our production costs, supply chain efficiency, and operational capabilities. If further tariffs are imposed or retaliatory trade measures are enacted, these factors could increase the cost of our raw materials and components, disrupt our manufacturing processes, and create additional operational challenges that may affect our overall competitiveness and profitability, even though our overseas sales currently represent a relatively small portion of our total revenue.
We have no business liability or disruption insurance, which could expose us to significant costs and business disruption.
The insurance industry in China is still at an early stage of development, and insurance companies in China currently offer limited business-related insurance products. 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 risks may result in substantial costs and the diversion of resources, which could adversely affect our results of operations and financial condition.
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We may incur liabilities that are not covered by insurance.
While we seek to maintain appropriate levels of insurance, not all claims are insurable and we may experience major incidents of a nature that are not covered by insurance. We maintain accident insurance for some of our high risk employees, such as electricians. We also provide social security insurance including pension, medical insurance, unemployment insurance, maternity insurance, on-the-job injury insurance and housing fund plans through a PRC government-mandated benefit contribution plan for our employees. We do not carry any key-man life insurance, product liability and professional liability insurance. Even if we were to purchase these kinds of insurance, the insurance may not fully protect us from the financial impact of defending against product liability or professional liability claims. We have not purchased any property insurance or business interruption insurance. We have determined that the costs of insuring for related risks and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical. We consider our insurance coverage to be sufficient for our business operations in China. We maintain an amount of insurance protection that we believe is adequate, but there can be no assurance that such insurance will continue to be available on acceptable terms or that our insurance coverage will be sufficient or effective under all circumstances and against all liabilities to which we may be subject. If we were to incur substantial losses or liabilities due to fire, explosions, floods, other natural disasters or accidents or business interruption, our results of operations could be materially and adversely affected. We could, for example, be subject to substantial claims for damages upon the occurrence of several events within one calendar year. In addition, our insurance costs may increase over time in response to any negative development in our claims history or due to material price increases in the insurance market in general.
Pandemics and epidemics, natural disasters, terrorist activities, political unrest, and other outbreaks could disrupt our delivery and operations, which could materially and adversely affect our business, financial condition, and results of operations.
Global pandemics, epidemics in China or elsewhere in the world, or fear of spread of contagious diseases, such as Ebola virus disease (EVD), coronavirus disease 2019 (COVID-19), Middle East respiratory syndrome (MERS), severe acute respiratory syndrome (SARS), H1N1 flu, H7N9 flu, and avian flu, as well as hurricanes, earthquakes, tsunamis, or other natural disasters could disrupt our business operations, reduce or restrict our supply of products and services, incur significant costs to protect our employees and facilities, or result in regional or global economic distress, which may materially and adversely affect our business, financial condition, and results of operations. Actual or threatened war, terrorist activities, political unrest, civil strife, and other geopolitical uncertainty could have a similar adverse effect on our business, financial condition, and results of operations. Any one or more of these events may impede our production and delivery efforts and adversely affect our sales results, or even for a prolonged period of time, which could materially and adversely affect our business, financial condition, and results of operations.
We are also vulnerable to natural disasters and other calamities. We cannot assure you that we are adequately protected from the effects of fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins, war, riots, terrorist attacks, or similar events. Any of the foregoing events may give rise to interruptions, damage to our property, delays in production, breakdowns, system failures, technology platform failures, or internet failures, which could cause the loss or corruption of data or malfunctions of our manufacturing facility as well as adversely affect our business, financial condition, and results of operations.
Our international sales are subject to a variety of risks that could adversely affect our profitability and operating results.
We sell disposable medical devices internationally. For the fiscal years ended December 31, 2025, 2024 and 2023, our international sales accounted for 0.04%, 0.04% and 0.50%, respectively, of our revenues. Although we take measures to minimize risks inherent to our international sales, the following risks may have a negative effect on our profitability and operating results, impair the performance of our foreign sales or otherwise disrupt our business:
| ● | fluctuations in the value of currencies could cause exchange rates to change and impact our profitability; |
| ● | greater difficulty in collecting accounts receivable and longer payment cycles, which can be more common in our international sales, could adversely impact our operating results over a particular fiscal period; and |
| ● | changes in foreign regulations, export duties, taxation and limitations on imports or exports could increase our operational costs, impose fines or restrictions on our ability to carry on our business or expand our international sales. |
We are subject to a variety of environmental laws that could be costly for us to comply with, and we could incur liability if we fail to comply with such laws or if we are responsible for releases of contaminants to the environment.
Our operating subsidiaries are all located in PRC. The manufacturing of our products will generate wastewater, exhaust gas, solid waste and equipment noise. Chinese laws impose various environmental controls on the management, handling, generation, manufacturing, transportation, storage, use and disposal of wastewater, exhaust gas, solid waste, equipment noise and other materials used or generated in the manufacturing of our products. If we fail to comply with any present or future environmental laws, we could be subject to fines, corrective action, other liabilities or the suspension of production.
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We pay great attention to environmental protection and governance and have formulated a systematic environmental protection management system in the treatment of our wastewater, exhaust gas, solid waste and equipment noise in accordance with national requirements. However, changes in environmental laws may result in costly compliance requirements or otherwise subject us to future liabilities. To the extent these changes affect our customers and require changes to their demand in medical devices, our customers may have a reduced need for our products, and, as a result, our revenue could adversely affect.
In addition, with the implementation of the fund-raising investment project, our pollutant emissions will increase, resulting in the increase of the environmental protection spending and the difficulty of environmental protection management, which could have an adverse effect on our financial conditions and results of operations.
As of the date of this Annual Report, the Company is not aware of any investigations, prosecutions, disputes, claims or other proceedings in respect of environmental protection, nor has the Company been punished or can foresee any punishment to be made by any environmental administration authorities of the PRC.
Failure to keep up with the changes in domestic industry policies or standards could have a material and adverse effect on our reputation, financial condition and results of operations.
As a medical device manufacturer, the products we manufacture and sell are closely related to human health, which is subject to strict supervision by relevant Chinese authorities. The related national government authorities have issued a series of regulatory guidelines and industry policies to ensure the healthy development of the industry. In recent years, as China further deepens the reform of its medical and health system, relevant government departments have successively implemented a series of regulations and policies regarding industry standards, bidding, price formation mechanisms, circulation systems and other related fields, which have brought wide and profound impact on the livelihood and development of pharmaceutical companies.
In April 2016, the General Office of the State Council issued the Notice on Key Tasks for Deepening the Reform of the Pharmaceutical and Healthcare System in 2016, proposing to actively encourage the implementation of the “two-invoice system” in pilot cities for comprehensive reform of public hospitals. In December 2016, the Medical Reform Office of the State Council promulgated the Opinions on the Implementation of the “Two-Invoice System” in Drug Procurement by Public Medical Institutions (for Trial Implementation), which means that the “Two Invoice System” has been officially launched and will be further promoted nationwide. Under the “two-invoice system,” invoices are issued once when pharmaceutical products are sold from manufacturers to wholesalers; and then, invoices are issued again when wholesalers resell the products to hospitals. The aim is to shorten circulation links and reduce hospital procurement costs. Under the “two-invoice system,” consumable products manufacturers with advantages of brand and economies of scale could increase their coverage of terminals. At the same time, the “two-invoice system” also presents consumable products manufacturers with higher requirements for the construction and optimization of marketing channels. Manufacturers will need to grow their marketing teams, expand sales networks and improve refined service capabilities.
The deepening of the reform of the domestic pharmaceutical industry and the strengthening of supervision may affect our operations and profitability in the domestic market. If we fail to adapt to the profound changes in industry policies in a timely manner, it could materially and adversely affect our business, financial condition and results of operations.
We depend on our professional technology research and development talents and we cannot assure their retention.
Our success partly depends upon the retention of our professional technology research and development talents (“R&D Talents”). As a high-tech enterprise in the medical device industry, we have a professional R&D Talents team comprised of 69 employees as of the date of this Annual Report, who have expertise in polymer materials, medicine, molds, and mechanical automation and possess high-level professional technology expertise and profound industry experience. Among those R&D Talents, 8 have master’s degrees, 7 have bachelor’s degrees and 11 have associate’s degrees. There can be no assurance that our existing R&D Talents will be adequate or qualified to carry out our strategy, or that we will be able to hire or retain new R&D Talents to carry out our strategy. The loss of one or more of our R&D Talents, or the failure to attract and retain additional R&D Talents, could have a material adverse effect on our business, financial condition and results of operations.
In addition, if we fail to establish a competitive incentive mechanism in terms of career prospects, salary, benefits and working environment, we may face the risk of instability in the scientific research team, which could adversely affect our long-term development.
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Loss of certain procurement bids could have a material and adverse effect on our reputation, financial conditions and results of operations.
According to the Notice of the Ministry of Health on Further Strengthening the Management of Centralized Procurement of Medical Devices (Wei Gui Cai Fa [2007] No. 208), centralized procurement of medical equipment within the large medical equipment management list is required. For other medical equipment and consumables, the provincial health administrative department shall study and formulate a centralized procurement catalog at the provincial and prefecture level based on actual conditions. In recent years, China has actively promoted a provincial-level bidding platform for medical devices with reference to the drug procurement bidding platform. At present, some provinces and cities have conducted a unified bid for some types of medical devices. According to the Notice of the Office of the National Healthcare Security Administration on Centralized Pharmaceutical Purchasing and Price Management in 2023 (Yi Bao Ban Han [2023] No. 13) and the Notice on Key Tasks for Deepening the Reform of the Pharmaceutical and Healthcare System in 2022 (Guo Ban Fa [2022] No. 14) it is a strategy to continually promote the volume-based centralized procurement for medical devices in a long-term period.
Under the centralized procurement model, the price information becomes more transparent and open, which will put greater downward pressure on the winning bid price of the product. If we lose a bid to our competitors due to the disadvantage of product price or other reason, we will lose some hospital customers. If the local procurement platform does not solicit a supplementary bid for a long time or reopen the bid, it could have a material and adverse effect on our reputation, financial conditions and results of operations.
If our employees or customers are involved in improper medical device sales transactions, it could adversely affect our reputation, financial conditions and results of operations.
We have established and improved our internal control system against unfair business practices, to prevent, minimize and eliminate employees and customers improper behaviors in the medical device sales transactions, including unauthorized rebates. There can be no assurance that our existing internal control system will be adequate to prevent, minimize and eliminate such improper transactions, that we will be able to effectively implement our internal control polices, or that we will be able to perfect our internal control system to eliminate such improper transactions. If any individual employees or downstream customers have improper business practices in the purchase and sale of medical devices, we may be identified by the relevant regulatory authorities as a violator of relevant laws and regulations and thus included in the blacklist of commercial records, which could adversely affect our reputation, financial conditions and results of operations.
If we fail to timely renew our medical device licenses or registration certificates, it could adversely affect our reputation, financial conditions and results of operations.
As a medical device manufacturer with all of our operating subsidiaries located in PRC, all of our manufacturing and sales activities must comply with relevant Chinese laws and regulations. Pursuant to the Measures for the Administration of Registration of Medical Devices promulgated on June 27, 2014 and effective on October 1, 2014, as amended from time to time and currently amended as the Measures for the Administration of Registration and Recordation of Medical Devices effective on October 1, 2021, Class I medical devices are subject to recordation administration with Class II and Class III medical devices subject to registration administration. We are in the business of manufacturing and sales of Class I, II and III medical devices. If we fail to timely record or register our medical devices, our financial conditions and results of operations will be adversely affected.
As of the date of this Annual Report, we are current in the recording and/or registration of all of our medical devices.
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Risks Related to Our Corporate Structure
You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited because we are incorporated under Cayman Islands law.
We are an exempted company incorporated under the laws of the Cayman Islands. Our corporate affairs are governed by our amended and restated memorandum and articles of association, the Companies Act (Revised) of the Cayman Islands (the “Companies Act”) and the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary duties of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from the common law of England, the decisions of whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of our shareholders and the fiduciary duties of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws than the United States. Some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States.
Shareholders of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporate records (other than the memorandum and articles of association and any special resolutions passed by such companies, and the register of mortgages and charges of such companies) or to obtain copies of lists of shareholders of these companies. Our directors have discretion under our articles of association to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.
Certain corporate governance practices in the Cayman Islands, which is our home country, differ significantly from requirements for companies incorporated in other jurisdictions such as the United States. We have elected to follow our home country rule instead of certain Nasdaq Listing Rules. See, “Item 16G - Corporate Governance.” We have elected to follow our home country rule instead of certain Nasdaq Listing Rules. See, “Item 16G - Corporate Governance.” To the extent we choose to follow home country practice with respect to corporate governance matters, our shareholders may be afforded less protection than they otherwise would under rules and regulations applicable to U.S. domestic issuers.
As a result of all of the above, our public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as public shareholders of a company incorporated in the United States.
You may be unable to present proposals before annual general meetings or extraordinary general meetings not called by shareholders.
Cayman Islands law provides shareholders with only limited rights to convene 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 articles of association allow our shareholders holding shares representing in aggregate not less than ten percent of our voting share capital in issue, to convene a general meeting of our shareholders, in which case our directors are obliged to call such meeting. Advance notice of at least seven days is required for the convening of our general meetings. A quorum required for a meeting of shareholders consists of at least one shareholder present or by proxy, representing a majority of the paid up voting share capital in the Company.
Cayman Islands economic substance requirements may impact the Company or its operations
Pursuant to the International Tax Cooperation (Economic Substance) Act, 2018 of the Cayman Islands, or the ES Act, that came into force on January 1, 2019, a “relevant entity” conducting a “relevant entity” is required to satisfy the economic substance test set out in the ES Act. A “relevant entity” includes an exempted company incorporated in the Cayman Islands as is our Company. There are nine designated “relevant activities” under the ES Act, and for so long as our Company is carrying on activities which falls within any of the designated relevant activites, it shall comply with all applicable requirements under the ES Act. If the only business activity that the Company carries on is to hold equity participation in other entities and only earns dividends and capital gains, then based on the current interpretation of the ES Act, our Company is a “pure equity holding company” and will therefore only be subject to the minimum substance requirements, which require us to (i) comply with all applicable requirements under the Companies Act and (ii) have adequate human resources and adequate premises in the Cayman Islands for holding and managing equity participations in other entities. However, there can be no assurance that we will not be subject to more requirements under the ES Act. Uncertainties over the interpretation and implementation of the ES Act may have an adverse impact on our business and operations.
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Certain judgments obtained against us by our shareholders may not be enforceable.
We are a Cayman Islands company and substantially all of our assets are located in mainland China. All of our current business operations are conducted in mainland China.
In addition, a majority of our current officers and directors, including Ailiang Wang, Leyi Lee, Chongbo Gao, Shilong Liao and Wenzhang Jia, are nationals and residents of the PRC. Substantially all of the assets of these persons are located in the PRC. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the United States in the event that you believe that your rights have been infringed under the U.S. federal securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of the PRC may render you unable to enforce a judgment against our assets or the assets of our directors and officers.
Risks Related to Doing Business in China
Because all of our operations are in China, our business is subject to the complex and rapidly evolving laws and regulations there. The Chinese government may exercise significant oversight and discretion over the conduct of our business and may intervene in or influence our operations at any time, which could result in a material change in our operations and/or the value of our Class A Ordinary Shares.
As a business operating in China, we are subject to the laws and regulations of the PRC, which can be complex and evolve rapidly. The PRC government has the power to exercise significant oversight and discretion over the conduct of our business, and the regulations to which we are subject may change rapidly and with little notice to us or our shareholders. As a result, the application, interpretation, and enforcement of new and existing laws and regulations in the PRC are often uncertain. In addition, these laws and regulations may be interpreted and applied inconsistently by different agencies or authorities, and inconsistently with our current policies and practices. New laws, regulations, and other government directives in the PRC may also be costly to comply with, and such compliance or any associated inquiries or investigations or any other government actions may:
| ● | Delay or impede our development, |
| ● | Result in negative publicity or increase our operating costs, |
| ● | Require significant management time and attention, and |
| ● | Subject us to remedies, administrative penalties and even criminal liabilities that may harm our business, including fines assessed for our current or historical operations, or demands or orders that we modify or even cease our business practices. |
The promulgation of new laws or regulations, or the new interpretation of existing laws and regulations, in each case that restrict or otherwise unfavorably impact the ability or manner in which we conduct our business and could require us to change certain aspects of our business to ensure compliance, which could decrease demand for our products, reduce revenues, increase costs, require us to obtain more licenses, permits, approvals or certificates, or subject us to additional liabilities. To the extent any new or more stringent measures are required to be implemented, our business, financial condition and results of operations could be adversely affected as well as materially decrease the value of our Class A Ordinary Shares.
If the Chinese government chooses to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers, such action could significantly limit or completely hinder our ability to offer or continue to offer securities to investors outside of China and, as a result, cause the value of such securities to significantly decline or be worthless.
Recent statements by the Chinese government have indicated an intent to exert more oversight and control over offerings that are conducted outside of China and/or foreign investments in China based issuers. The PRC has recently promulgated new rules that require companies collecting or holding large amounts of data to undergo a cybersecurity review prior to listing in foreign countries, a move that will significantly tighten oversight over China-based internet giants. The Measures for Cybersecurity Review (2021 version) was promulgated on December 28, 2021 and became effective on February 15, 2022. These measures specify that any “online platform operators” controlling the personal information of more than one million users which seek to list on a foreign stock exchange are subject to prior cybersecurity review.
As our business belongs to the medical instrument industry in China, and our business does not involve the collection of user data or involve any other type of restricted industry, our business is generally outside the scope of the Measures for Cybersecurity Review. Based on the advice of counsel and our understanding of currently applicable PRC laws and regulations, our recent registered initial public offering in the U.S. was not subject to the review or prior approval of the CAC or the CSRC. Uncertainties still exist, however, due to the possibility that laws, regulations or policies in the PRC could change or rapidly evolve in the future. Any future action by the PRC government expanding the categories of industries and companies whose foreign securities offerings are subject to review by the CSRC or the CAC could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and could cause the value of such securities to significantly decline or be worthless.
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Potential Chinese governmental and regulatory interference could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.
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, or the Opinions. The Opinions emphasized the need to strengthen the administration over illegal securities activities, and the need to strengthen the supervision over overseas listings by Chinese companies. Effective measures, such as promoting the construction of relevant regulatory systems will be taken to deal with the risks and incidents of China-concept overseas listed companies, and cybersecurity and data privacy protection requirements and similar matters.
In addition, an overseas offering and listing is prohibited under any of the following circumstances: (1) if the intended securities offering and listing is specifically prohibited by national laws and regulations and relevant provisions; (2) if the intended securities offering and listing may constitute a threat to or endangers national security as reviewed and determined by competent authorities under the State Council in accordance with law; (3) if there are material ownership disputes over the equity, major assets, and core technology, etc. of the issuer; (4) if, in the past three years, the domestic enterprise or its controlling shareholders or actual controllers have committed corruption, bribery, embezzlement, misappropriation of property, or other criminal offenses disruptive to the order of the socialist market economy, or are currently under judicial investigation for suspicion of criminal offenses, or are under investigation for suspicion of major violations; (5) if, in past three years, directors, supervisors, or senior executives have been subject to administrative punishments for severe violations, or are currently under judicial investigation for suspicion of criminal offenses, or are under investigation for suspicion of major violations; (6) other circumstances as prescribed by the State Council. The Administration Provisions defines the legal liabilities of breaches such as failure in fulfilling filing obligations or fraudulent filing conducts, imposing a fine between RMB 1 million and RMB 10 million, and in cases of severe violations, a parallel order to suspend relevant business or halt operation for rectification, revoke relevant business permits or operational license.
On February 17, 2023, the CSRC promulgated the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies, or the Trial Measures, and five supporting guidelines, which came into effect on March 31, 2023. The Trial Measures and its supporting guidelines reiterate the basic principles of the Draft Rules Regarding Overseas Listing and impose substantially the same requirements for the overseas securities offering and listing by domestic enterprises. Pursuant to the Trial Measures, domestic companies that seek to offer or list securities overseas, both directly and indirectly, shall complete the filing procedures with the CSRC pursuant to the requirements of the Trial Measures within three working days following its submission of initial public offerings or listing application, or its completion of follow-on offering in the same overseas market where it has listed (including issuance of any corporate convertible bonds, exchangeable bonds and other equity-linked securities, but excluding the offering for employees incentive, dividend distribution by shares and share split). If a domestic company fails to complete the required filing procedures or conceals any material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative penalties, such as orders to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties, such as warnings and fines.
According to the Notice on the Administrative Arrangements for the Filing of Overseas Securities Offering and Listing by Domestic Companies from the CSRC, or the CSRC Notice, which was promulgated on February 17, 2023 and became effective on the same day, the domestic companies that have already been listed overseas before the effective date of the Trial Measures (i.e. March 31, 2023), including us, shall be deemed as existing issuers (the “Existing Issuers”). Existing Issuers are not required to complete the filing procedures immediately, and they will be required to file with the CSRC for any subsequent offerings.
However, since the Trial Measures were newly promulgated, their interpretation, application and enforcement remain unclear. If the filing procedure with the CSRC under the Trial Measures is required for any subsequent offerings, listing or any other capital raising activities, which may subject us to additional compliance requirements in the future, we cannot assure you that we will be able to get the clearance of filing procedures under the Trial Measures on a timely basis, or at all. If we do not complete any required record-filing or if we incorrectly conclude that record-filing is not required or if the CSRC or other regulatory agencies promulgate new rules, explanations or interpretations requiring that we obtain their prior approvals or record-filing for any follow-on offering, we may be unable to obtain such approvals and record-filing which could significantly limit or completely hinder our ability to offer or continue to offer securities to our investors.
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Furthermore, the PRC government authorities may strengthen oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers like us. Such actions taken by the PRC government authorities may intervene or influence our operations at any time, which are beyond our control. Therefore, any such action may adversely affect our operations and significantly limit or hinder our ability to offer or continue to offer securities and reduce the value of such securities.
As of the date of this Annual Report, we and our PRC subsidiaries have not been involved in any investigations on cybersecurity review initiated by the Cyber Administration of China or related governmental regulatory authorities, and have not received any requirements to obtain permissions from any PRC authorities to issue our Ordinary Shares to foreign investors or were denied such permissions by any PRC authorities. However, given the current PRC regulatory environment, it is uncertain when and whether we or our PRC subsidiaries, will be required to obtain permission from the PRC government to list on U.S. exchanges in the future, and even when such permission is obtained, whether it will be denied or rescinded.
We have been closely monitoring regulatory developments in China regarding any necessary approvals from the CSRC or other PRC governmental authorities required for overseas listings. As of the date of this Annual Report, except for the potential uncertainties disclosed above, we have not received any inquiry, notice, warning, sanctions or regulatory objection from the CSRC or other PRC governmental authorities. However, there remains significant uncertainty as to the enactment, interpretation and implementation of regulatory requirements related to overseas securities offerings and other capital markets activities.
Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and operations.
Substantially all of our assets and operations are located in the PRC. Accordingly, our business, financial condition, results of operations and prospects may be influenced to a significant degree by political, economic and social conditions in the PRC generally. The Chinese economy differs from the economies of most developed countries in many respects, including the level of government involvement, development, growth rate, control of foreign exchange and allocation of resources. Although the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets, and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in the PRC 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. The Chinese government also exercises significant control over the PRC’s economic growth through allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies.
While the Chinese economy has experienced significant growth over past decades, growth has been uneven, both geographically and among various sectors of the economy. Any adverse changes in economic conditions in the PRC, in the policies of the Chinese government or in the laws and regulations in the PRC could have a material adverse effect on the overall economic growth of the PRC. Such developments could adversely affect our business and operating results, lead to a reduction in demand for our services and adversely affect our competitive position. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall Chinese economy but may nonetheless have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations. In addition, in the past the Chinese government has implemented certain measures, including interest rate adjustment, to control the pace of economic growth. These measures may cause decreased economic activity in the PRC, which may adversely affect our business and operating results.
Non-compliance with labor-related laws and regulations of the PRC may have an adverse impact on our financial condition and results of operation.
We have been subject to stricter regulatory requirements in terms of entering into labor contracts with our employees and paying various statutory employee benefits, including pensions, housing fund, medical insurance, work-related injury insurance, unemployment insurance and childbearing insurance to designated government agencies for the benefit of our employees. Pursuant to the PRC Labor Contract Law, or the Labor Contract Law, that became effective in January 2008 and was amended in July 2012 and its implementing rules that became effective in September 2008, employers are subject to stricter requirements in terms of signing labor contracts, minimum wages, paying remuneration, determining the term of employees’ probation and unilaterally terminating labor contracts. In the event that we decide to terminate some of our employees or otherwise change our employment or labor practices, the Labor Contract Law and its implementation rules may limit our ability to effect those changes in a desirable or cost-effective manner, which could adversely affect our business and results of operations. We believe our current practice complies with the Labor Contract Law and its amendments. However, the relevant governmental authorities may take a different view and impose fines on us.
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As the interpretation and implementation of labor-related laws and regulations are still evolving, we cannot assure you that our employment practice does not and will not violate labor-related laws and regulations in China, which may subject us to labor disputes or government investigations. If we are deemed to have violated relevant labor laws and regulations, we could be required to provide additional compensation to our employees and our business, financial condition and results of operations could be materially and adversely affected.
The PRC’s economic, political and social conditions, as well as changes in any government policies, laws and regulations, could have a material adverse effect on our business.
All of our operations are located in the PRC and substantially of our net revenues are derived from customers where the contracting entity is located in the PRC. Accordingly, our business, financial condition, results of operations, prospects and certain transactions we may undertake may be subject, to a significant extent, to economic, political and legal developments in the PRC.
The PRC’s economy differs from the economies of most developed countries in many respects, including the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. Although the PRC’s economy has been transitioning from a planned economy to a more market-oriented economy since the late 1970s, the PRC government continues to play a significant role in regulating industry development by imposing industrial policies. The PRC government also exercises significant control over the PRC’s economic growth through allocating resources, controlling the incurrence and payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. Changes in any of these policies, laws and regulations could adversely affect the economy in the PRC and could have a material adverse effect on our business.
The PRC government has implemented various measures to encourage foreign investment and sustainable economic growth and to guide the allocation of financial and other resources. However, we cannot assure you that the PRC government will not repeal or alter these measures or introduce new measures that will have a negative effect on us. PRC’s social and political conditions may change and become unstable. Any sudden changes to PRC’s political system or the occurrence of widespread social unrest could have a material adverse effect on our business and results of operations.
Uncertainties with respect to the PRC legal system could adversely affect us.
The PRC legal system is a civil law system based on written statutes. Unlike the common law system, prior court decisions under the civil law system may be cited for reference but have limited precedential value.
In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters generally. The overall effect of legislation over the past three decades has significantly enhanced the protections afforded to various forms of foreign investments in the PRC. However, the PRC has not developed a fully integrated legal system, and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in the PRC. In particular, the interpretation and enforcement of these laws and regulations involve uncertainties. Since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory provisions and contractual terms, it may be difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy. These uncertainties may affect our judgment on the relevance of legal requirements and our ability to enforce our contractual rights or tort claims. In addition, these regulatory uncertainties may be exploited through unmerited or frivolous legal actions or threats in attempts to extract payments or benefits from us.
Furthermore, the PRC legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or at all and may have a retroactive effect. As a result, we may not be aware of our violation of any of these policies and rules until sometime after the violation. In addition, any administrative and court proceedings in the PRC may be protracted, resulting in substantial costs and diversion of resources and management attention.
You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in the PRC against us or our management named in the report based on foreign laws.
We conduct substantially all of our operations in the PRC, and substantially all of our assets are located in the PRC. In addition, all of our officers and directors are PRC nationals and reside within PRC. As a result, it may be difficult for our shareholders to effect service of process upon us or our directors and officers inside the PRC. In addition, the PRC does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with the Cayman Islands and many other countries and regions. Therefore, recognition and enforcement in the PRC of judgments of a court in any of these non-PRC jurisdictions in relation to any matter not subject to a binding arbitration provision may be difficult or impossible.
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We may rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business.
We rely principally on dividends and other distributions on equity from our PRC subsidiaries for our cash requirements, including for services of any debt we may incur.
Our PRC subsidiaries’ ability to distribute dividends is based upon their distributable earnings. Current PRC regulations permit our PRC subsidiaries to pay dividends to their respective shareholders only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, each of our PRC subsidiaries, as a Foreign Invested Enterprise, or FIE, are required to draw 10% of its after-tax profits each year, if any, to fund a common reserve, which may stop drawing its after-tax profits if the aggregate balance of the common reserve has already accounted for over 50 percent of its registered capital. These reserves are not distributable as cash dividends. If our PRC subsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments to us. Any limitation on the ability of our PRC subsidiaries to distribute dividends or other payments to their respective shareholders could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends or otherwise fund and conduct our business.
In addition, the Enterprise Income Tax Law and its implementation rules provide that a withholding tax rate of up to 10% will be applicable to dividends payable by Chinese companies to non-PRC-resident enterprises unless otherwise exempted or reduced according to treaties or arrangements between the PRC central government and governments of other countries or regions where the non-PRC resident enterprises are incorporated.
PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay us from using the proceeds of future securities offerings to make loans or additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.
Any funds we transfer to our PRC subsidiaries, either as a shareholder loan or as an increase in registered capital, are subject to approval by or registration with relevant governmental authorities in the PRC. According to the relevant PRC regulations on foreign-invested enterprises, or FIEs, in the PRC, capital contributions to our PRC subsidiaries are subject to the approval of or filing with the Ministry of Commerce, or MOFCOM or its local branches and registration with a local bank authorized by the State Administration of Foreign Exchange, or SAFE. In addition, (i) a foreign loan of less one year duration procured by our PRC subsidiaries is required to be registered with SAFE or its local branches and (ii) a foreign loan of one year duration or more procured by our PRC subsidiaries is required to be applied to the NDRC in advance for undergoing recordation registration formalities. Any medium or long-term loan to be provided by us to our PRC operating subsidiaries, must be registered with the NDRC and the SAFE or its local branches. We may not be able to complete such registrations on a timely basis, with respect to future capital contributions or foreign loans by us to our PRC subsidiaries. If we fail to complete such registrations, our ability to use the proceeds of any future securities offerings and to capitalize our PRC operations may be negatively affected, which could adversely affect our liquidity and our ability to fund and expand our business.
On March 30, 2015, the SAFE promulgated the Circular on Reforming the Management Approach Regarding the Foreign Exchange Capital Settlement of Foreign-Invested Enterprises, or SAFE Circular 19, which took effect as of June 1, 2015. SAFE Circular 19 launched a nationwide reform of the administration of the settlement of the foreign exchange capitals of FIEs and allows FIEs to settle their foreign exchange capital at their discretion, but continues to prohibit FIEs from using the Renminbi fund converted from their foreign exchange capital for expenditure beyond their business scopes, providing entrusted loans or repaying loans between nonfinancial enterprises. The SAFE issued the Circular on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts, or SAFE Circular 16, effective in June 2016. Pursuant to SAFE Circular 16, enterprises registered in China may also convert their foreign debts from foreign currency to Renminbi on a self-discretionary basis. SAFE Circular 16 provides an integrated standard for conversion of foreign exchange under capital account items (including but not limited to foreign currency capital and foreign debts) on a self-discretionary basis which applies to all enterprises registered in China. SAFE Circular 16 reiterates the principle that Renminbi converted from foreign currency-denominated capital of a company may not be directly or indirectly used for purposes beyond its business scope or prohibited by PRC laws or regulations, while such converted Renminbi shall not be provided as loans to its non-affiliated entities. On October 23, 2019, the SAFE issued the Notice of the State Administration of Foreign Exchange on Further Facilitating Cross-border Trade and Investment, or the SAFE Circular 28, which, among other things, expanded the use of foreign exchange capital to domestic equity investment area. The foreign-invested enterprises, whose business scope do not include equity investment, are allowed to lawfully make domestic equity investments by using their capital on the premise without violation to prevailing special administrative measures for access of foreign investments (negative list) and the authenticity and compliance with the regulations of domestic investment projects. As this circular is relatively new, there remains uncertainty as to its interpretation and application and any other future foreign exchange related rules. Violations of these Circulars could result in severe monetary or other penalties. SAFE Circular 19, SAFE Circular 16 and SAFE Circular 28 may significantly limit our ability to use Renminbi converted from the net proceeds of future securities offerings to fund our PRC subsidiaries, to invest in or acquire any other PRC companies through our PRC subsidiaries, which may adversely affect our business, financial condition and results of operations.
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Although the audit report included in this Annual Report was issued by U.S. auditors who are currently inspected by the PCAOB, if it is later determined that the PCAOB is unable to inspect or investigate our auditor completely, investors would be deprived of the benefits of such inspection and our Class A Ordinary Shares may be delisted or prohibited from trading.
The audit report included in this Annual Report for our 2024 and 2023 fiscal year was issued by Kreit & Chiu CPA LLP (“KC”), a U.S.-based accounting firm that is registered with the PCAOB and can be inspected by the PCAOB. The audit report included in this Annual Report for our 2025 fiscal year was issued by Li CPA LLC (“Li CPA”), a U.S.-based accounting firm that is registered with the PCAOB and can be inspected by the PCAOB. We have no intention of engaging any auditor not based in the U.S. and not subject to regular inspection by the PCAOB. As an auditor of companies that are registered with the SEC and publicly traded in the United States and a firm registered with the PCAOB, both Li CPA and KC are required under the laws of the United States to undergo regular inspections by the PCAOB to assess its compliance with the laws of the United States and professional standards. If we were to engage a different auditor at any time in the future, we would engage an auditor that is U.S.-based and subject to full PCAOB inspection with all materials related to the audit of our financial statements accessible to the PCAOB. There is no guarantee, however, that any future auditor engaged by the Company would remain subject to full PCAOB inspection during the entire term of our engagement. In such case, we will engage a new qualified and fully inspected auditor, which may result in us delaying or restating our financial statements.
The PCAOB was unable to conduct inspections in the PRC without the approval of Chinese government authorities. If it is later determined that the PCAOB is unable to inspect or investigate our auditor completely, investors may be deprived of the benefits of such inspection. Any audit reports not issued by auditors that are completely inspected by the PCAOB, or a lack of PCAOB inspections of audit work undertaken in the PRC that prevents the PCAOB from regularly evaluating our auditors’ audits and their quality control procedures, could result in a lack of assurance that our financial statements and disclosures are adequate and accurate.
As part of a continued regulatory focus in the U. S. on access to audit and other information currently protected by national law, in particular PRC’s, in June 2019, a bipartisan group of lawmakers introduced bills in both houses of the U.S. Congress which, if passed, would require the SEC to maintain a list of issuers for which PCAOB was not able to inspect or investigate the audit work performed by a foreign public accounting firm completely. The proposed Ensuring Quality Information and Transparency for Abroad-Based Listings on our Exchanges (“EQUITABLE”) Act prescribes increased disclosure requirements for these issuers and, beginning in 2025, the delisting from U.S. national securities exchanges such as the Nasdaq of issuers included on the SEC’s list for three consecutive years. It is unclear if this proposed legislation will be enacted. Furthermore, there have been recent deliberations within the U.S. government regarding potentially limiting or restricting China-based companies from accessing U.S. capital markets. On May 20, 2020, the U.S. Senate passed the Holding Foreign Companies Accountable Act (the “HFCAA”), which includes requirements for the SEC to identify issuers whose audit work is performed by auditors that the PCAOB is unable to inspect or investigate completely because of a restriction imposed by a non-U.S. authority in the auditor’s local jurisdiction. The U.S. House of Representatives passed the HFCAA on December 2, 2020, and the HFCAA was signed into law on December 18, 2020. Additionally, in July 2020, the U.S. President’s Working Group on Financial Markets issued recommendations for actions that can be taken by the executive branch, the SEC, the PCAOB or other federal agencies and department with respect to Chinese companies listed on U.S. stock exchanges and their audit firms, in an effort to protect investors in the United States. In response, on November 23, 2020, the SEC issued guidance highlighting certain risks (and their implications to U.S. investors) associated with investments in China-based issuers and summarizing enhanced disclosures the SEC recommends China-based issuers make regarding such risks. On December 2, 2021, the SEC adopted final rules relating to the implementation of certain disclosure and documentation requirements of the HFCAA. We will be required to comply with these rules if the SEC identifies us as having a “non-inspection” year (as defined in the interim final rules) under a process to be subsequently established by the SEC. The SEC is assessing how to implement other requirements of the HFCAA, including the listing and trading prohibition requirements described above. Under the HFCAA, our securities may be prohibited from trading on the Nasdaq or other U.S. stock exchanges if our auditor is not able to be inspected by the PCAOB for three consecutive years, and this ultimately could result in our Ordinary Shares being delisted. Furthermore, on June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act (“AHFCAA”), which, if enacted, would amend the HFCAA and require the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not able to be inspected by the PCAOB for two consecutive years instead of three. On September 22, 2021, the PCAOB adopted a final rule implementing the HFCAA, which provides a framework for the PCAOB to use when determining, as contemplated under the HFCAA, whether PCAOB is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction. On December 16, 2021, the PCAOB issued a Determination Report which found that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in: (1) mainland China of the People’s Republic of China, because of a position taken by one or more authorities in mainland China; and (2) Hong Kong, a Special Administrative Region and dependency of the PRC, because of a position taken by one or more authorities in Hong Kong. On December 23, 2022, the AHFCAA was enacted, which amended the HFCAA by requiring the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three, thus reducing the time period for triggering the prohibition on trading. On August 26, 2022, the CSRC, the Ministry of Finance of the PRC (the “MOF”), and the PCAOB signed a Statement of Protocol (the “Protocol”), governing inspections and investigations of audit firms based in mainland China and Hong Kong, taking the first step toward opening access for the PCAOB to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong. Pursuant to the fact sheet with respect to the Protocol disclosed by the SEC, the PCAOB shall have independent discretion to select any issuer audits for inspection or investigation and has the unfettered ability to transfer information to the SEC. On December 15, 2022, the PCAOB determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate its previous determinations to the contrary. However, should PRC authorities obstruct or otherwise fail to facilitate the PCAOB’s access in the future, the PCAOB will consider the need to issue a new determination.
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Our securities may be delisted under the HFCAA if the PCAOB is unable to inspect auditors with presence in China for three consecutive years. The delisting of our securities, or the threat of their being delisted, may materially and adversely affect the value of your investment. Additionally, the inability of the PCAOB to conduct inspections deprives our investors of the benefits of such inspections.
The above recent developments may have added uncertainties to our ability to continue to list on Nasdaq or to offer our securities and we cannot assure you whether Nasdaq or other regulatory authorities would apply additional and more stringent criteria to us since we are an emerging growth company and substantially all of our operations are conducted in China. The SEC may propose additional rules or guidance that could impact us if our auditor is not subject to PCAOB inspection.
Moreover, on December 29, 2022, legislation entitled “Consolidated Appropriations Act, 2023” (the “Consolidated Appropriations Act”) was signed into law by President Biden. The Consolidated Appropriations Act contained, among other things, an identical provision to the HFCAA, which reduces the number of consecutive non-inspection years required for triggering the prohibitions under the HFCAA from three years to two.
If our Class A Ordinary Shares are unable to be listed on another securities exchange by then, such a delisting would substantially impair your ability to sell or purchase our Class A Ordinary Shares when you wish to do so, and the risk and uncertainty associated with a potential delisting would have a negative impact on the price of our Class A Ordinary Shares.
Fluctuations in exchange rates could have a material and adverse effect on our results of operations and the value of your investment.
The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions and the foreign exchange policy adopted by the PRC government. It is difficult to predict how long such appreciation of RMB against the U.S. dollar may last and when and how the relationship between the RMB and the U.S. dollar may change again. All of our revenues and substantially all of our costs are denominated in Renminbi. We rely on dividends paid by our operating subsidiaries in China for our cash needs. Any significant revaluation of Renminbi may materially and adversely affect our results of operations and financial position reported in Renminbi when translated into U.S. dollars, and the value of, and any dividends payable on, the Ordinary Shares in U.S. dollars. To the extent that we need to convert U.S. dollars into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount we would receive. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of making payments for dividends on our Ordinary Shares or for other business purposes, appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S. dollar amount.
Governmental control of currency conversion may limit our ability to utilize our revenues effectively and affect the value of your investment.
The PRC government imposes controls on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. We receive substantially all of our revenues in Renminbi. Under our current corporate structure, we primarily rely on dividend payments from our PRC subsidiaries to fund any cash and financing requirements we may have. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval of SAFE by complying with certain procedural requirements. Specifically, under the existing exchange restrictions, without prior approval of SAFE, cash generated from the operations of our PRC subsidiaries in China may be used to pay dividends to our company. However, approval from or registration with appropriate government authorities is required, in principle, 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. As a result, we need to obtain SAFE approval to use cash generated from the operations of our PRC subsidiaries to pay off their respective debt in a currency other than Renminbi owed to entities outside China, or to make other capital expenditure payments outside China in a currency other than Renminbi. The PRC government may at its discretion restrict access to foreign currencies for current account transactions in the future. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders, including holders of the Ordinary Shares.
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Any failure to comply with PRC regulations regarding cybersecurity and data protection may subject us to fines and other legal or administrative sanctions, claims or legal proceedings.
The PRC Criminal Law, as amended by its Amendment 7 (effective on February 28, 2009) and Amendment 9 (effective on November 1, 2015), prohibits institutions, companies and their employees from selling or otherwise illegally disclosing a citizen’s personal information obtained during the course of performing duties or providing services, or obtaining such information through theft or other illegal means. On November 7, 2016, the Standing Committee of the National People’s Congress of the PRC issued the Cyber Security Law of the PRC, or Cyber Security Law, which became effective on June 1, 2017. Pursuant to the Cyber Security Law, network operators must not collect users’ personal information without their consent and may only collect users’ personal information necessary to the provision of services. Providers are also obliged to provide security maintenance for their products and services and shall comply with provisions regarding the protection of personal information as stipulated under the relevant laws and regulations. The Civil Code of the PRC (issued by the National People’s Congress of the PRC on May 28, 2020 and effective from January 1, 2021) provides the main legal basis for privacy and personal information infringement claims under PRC civil law. On September 1, 2021, the PRC Data Security Law came into effect. The Data Security Law, among other things, provides for a security review procedure for the data activities that may affect national security. On November 1, 2021, the Personal Information Protection Law came into effect. The Personal Information Protection Law requires, among other things, that the processing of personal information should have a specific and reasonable purpose, and must be conducted in a way that has the least impact on personal rights and interests, and should be limited to the minimum scope necessary to achieve the processing purpose.
PRC regulators, including the Cyberspace Administration of China (the “CAC”), the Ministry of Industry and Information Technology and the Ministry of Public Security, have been increasingly focused on regulation in areas of data security and data protection. The PRC regulatory requirements regarding cybersecurity are constantly evolving. For example, various PRC regulatory bodies, including the CAC, the Ministry of Public Security and the State Administration for Market Regulation (“SAMR”), have enforced data privacy and protection laws and regulations with varying and evolving standards and interpretations.
In April 2020, the PRC government promulgated the 2020 Cybersecurity Review Measures, which came into effect on June 1, 2020. In July 2021, the CAC and other related authorities released a draft amendment to the 2020 Cybersecurity Review Measures for public comments. On December 28, 2021, the PRC government promulgated the 2022 Cybersecurity Review Measures, which came into effect and replaced the 2020 Cybersecurity Review Measures on February 15, 2022. According to the 2022 Cybersecurity Review Measures, (i) critical information infrastructure operators that purchase network products and services and internet platform operators that conduct data processing activities shall be subject to cybersecurity review in accordance with the 2022 Cybersecurity Review Measures if such activities affect or may affect national security; and (ii) internet platform operators holding personal information of more than one million users and seeking to have their securities list on a stock exchange in a foreign country shall file for cybersecurity review with the Cybersecurity Review Office. Under the Regulation on Protecting the Security of Critical Information Infrastructure promulgated by the State Council on July 30, 2021, effective September 1, 2021, “critical information infrastructure” is defined as important network facilities and information systems in important industries and fields, such as public telecommunication and information services, energy, transportation, water conservancy, finance, public services, e-government and national defense, science, technology and industry, as well as other important network facilities and information systems that, in case of destruction, loss of function or leak of data, may severely damage national security, the national economy and the people’s livelihood and public interests. As of the date of this Annual Report, neither we nor any of our PRC Subsidiaries has been informed by any PRC governmental authority that we or any of our PRC Subsidiaries is a “critical information infrastructure operator.”
On September 24, 2024, the State Council promulgated the Administrative Regulations on the Management of Network Data Security, or the Administrative Regulations, taking effect on January 1, 2025, under which, national security review shall be conducted where network data processing activities carried out by a network data processor affect or may affect national security.
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According to the currently in-effect PRC laws and regulations, we believe that neither we nor any of our PRC Subsidiaries is subject to the cybersecurity review, reporting or other permission requirements by the CAC under the applicable PRC cybersecurity laws and regulations with respect to the offering of our securities or the business operations of our PRC Subsidiaries, because neither we nor any of our PRC Subsidiaries qualifies as a critical information infrastructure operator or has conducted any data processing activities that affect or may affect national security or holds personal information of more than one million users. Additionally, as of the date of this Annual Report, neither we nor any of our PRC Subsidiaries has been required by any PRC governmental authority to apply for cybersecurity review, nor have we or any of our PRC Subsidiaries received any inquiry, notice, warning, sanction in such respect or been denied permission from any PRC regulatory authority to list on U.S. exchanges. However, as PRC governmental authorities have significant discretion in interpreting and implementing statutory provisions and there remains significant uncertainty in the interpretation and enforcement of relevant PRC cybersecurity laws and regulations if the PRC regulatory authorities take a position contrary to ours, we cannot assure you that we or any of our PRC Subsidiaries will not be deemed to be subject to PRC cybersecurity review or national security review requirements under the 2022 Cybersecurity Review Measures or the Administrative Regulations, nor can we assure you that we or our PRC Subsidiaries would be able to pass such review. If we or any of our PRC Subsidiaries fails to receive any requisite permission or approval from the CAC for future offerings or the business operations of our PRC Subsidiaries, or the waiver for such permission or approval, in a timely manner, or at all, or inadvertently concludes that such permission or approval is not required, or if applicable laws, regulations or interpretations change and obligate us to obtain such permission or approvals in the future, we or our PRC Subsidiaries may be subject to fines, suspension of business, website closure, revocation of business licenses or other penalties, as well as reputational damage or legal proceedings or actions against us, which may have a material adverse effect on our business, financial condition or results of operations. In addition, we could become subject to enhanced cybersecurity review or investigations launched by PRC regulators in the future pursuant to new laws, regulations or policies.
As of the date of this Annual Report, we have not been involved in any investigations or become subject to a cybersecurity review initiated by the CAC, and we have not received any inquiry, notice, warning, sanctions in such respect or any regulatory objections with respect to our business operations or in connection with future offerings from the CAC. However, as the Cybersecurity Review Measures and the Administrative Regulation were newly issued, there remain uncertainties as to how it would be interpreted and enforced, and to what extent it may affect us.
Certain PRC regulations may make it more difficult for us to pursue growth through acquisitions.
Among other things, the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors issued by MOFCOM which became effective in September 2006 and amended in June 2009 (“M&A Rules”) and Anti-Monopoly Law of the People’s Republic of China promulgated by the Standing Committee of the NPC which became effective in 2008 and amended in 2022 (“Anti-Monopoly Law”), established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time-consuming and complex. Such regulation requires, among other things, that State Administration for Market Regulation (“SAMR”) be notified in advance of any change-of-control transaction in which a foreign investor acquires control of a PRC domestic enterprise or a foreign company with substantial PRC operations, if certain thresholds under the Provisions of the State Council on the Standard for Declaration of Concentration of Business Operators, issued by the State Council in 2008 and amended in 2018 and 2024, respectively, are triggered. Moreover, the Anti-Monopoly Law requires that transactions which involve the national security, the examination on the national security shall also be conducted according to the relevant provisions of the State. In addition, PRC Measures for the Security Review of Foreign Investment which became effective in January 2021 require acquisitions by foreign investors of PRC companies engaged in military-related or certain other industries that are crucial to national security be subject to security review before consummation of any such acquisition. We may pursue potential strategic acquisitions that are complementary to our business and operations.
Complying with the requirements of these regulations to complete such transactions could be time-consuming, and any required approval processes, including obtaining approval or clearance from the MOFCOM, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.
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PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident beneficial owners or our PRC subsidiaries to liability or penalties, limit our ability to inject capital into our PRC subsidiaries, limit our PRC subsidiaries’ ability to increase their registered capital or distribute profits to us, or may otherwise adversely affect us.
In July 2014, SAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investment and Financing and Roundtrip Investment Through Special Purpose Vehicles, or SAFE Circular 37, to replace the Notice on Relevant Issues Concerning Foreign Exchange Administration for Domestic Residents’ Financing and Roundtrip Investment Through Offshore Special Purpose Vehicles, or SAFE Circular 75, which ceased to be effective upon the promulgation of SAFE Circular 37. SAFE Circular 37 requires PRC residents (including PRC individuals and PRC corporate entities) to register with SAFE or its local branches in connection with their direct or indirect offshore investment activities. SAFE Circular 37 is applicable to our shareholders who are PRC residents and may be applicable to any offshore acquisitions that we make in the future.
Under SAFE Circular 37, PRC residents who make, or have prior to the implementation of SAFE Circular 37 made, direct or indirect investments in offshore special purpose vehicles, or SPVs, will be required to register such investments with SAFE or its local branches. In addition, any PRC resident who is a direct or indirect shareholder of an SPV is required to update its filed registration with the local branch of SAFE with respect to that SPV, to reflect any material change. Moreover, any subsidiary of such SPV in China is required to urge the PRC resident shareholders to update their registration with the local branch of SAFE. If any PRC shareholder of such SPV fails to make the required registration or to update the previously filed registration, the subsidiary of such SPV in China may be prohibited from distributing its profits or the proceeds from any capital reduction, share transfer or liquidation to the SPV, and the SPV may also be prohibited from making additional capital contributions into its subsidiary in China. On February 13, 2015, the SAFE promulgated a Notice on Further Simplifying and Improving Foreign Exchange Administration Policy on Direct Investment, or SAFE Notice 13, which became effective on June 1, 2015. Under SAFE Notice 13, applications for foreign exchange registration of inbound foreign direct investments and outbound overseas direct investments, including those required under SAFE Circular 37, will be filed with qualified banks instead of SAFE. The qualified banks will directly examine the applications and accept registrations under the supervision of SAFE.
Certain of our shareholders that we are aware of are subject to SAFE regulations, and we expect all of these shareholders will have completed all necessary registrations with the local SAFE branch or qualified banks as required by SAFE Circular 37. We cannot assure you, however, that all of these shareholders will continue to make required filings or updates in a timely manner, or at all. We can provide no assurance that we are or will in the future continue to be informed of identities of all PRC residents holding direct or indirect interest in our company. Any failure or inability by such shareholders to comply with SAFE regulations may subject us to fines or legal sanctions, such as restrictions on our cross-border investment activities or our PRC subsidiaries’ ability to distribute dividends to, or obtain foreign exchange-denominated loans from, our company or prevent us from making distributions or paying dividends. As a result, our business operations and our ability to make distributions to you could be materially and adversely affected.
Furthermore, as these foreign exchange regulations are still relatively new and their interpretation and implementation have been constantly evolving, it is unclear how these regulations, and any future regulation concerning offshore or cross-border transactions, will be interpreted, amended and implemented by the relevant government authorities. For example, we may be subject to a more stringent review and approval process with respect to our foreign exchange activities, such as remittance of dividends and foreign-currency-denominated borrowings, which may adversely affect our financial condition and results of operations. In addition, if we decide to acquire a PRC domestic company, we cannot assure you that we or the owners of such company, as the case may be, will be able to obtain the necessary approvals or complete the necessary filings and registrations required by the foreign exchange regulations. This may restrict our ability to implement our acquisition strategy and could adversely affect our business and prospects.
As of the date of this Annual Report, to our knowledge these PRC resident shareholders have applied for foreign exchange registration under the SAFE Circular 37 and other related rules. Although they are in the process of making foreign exchange registration, they may still face the above said possible fines in accordance with the PRC Laws.
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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 the PRC are required to participate in various government-mandated employee benefit contribution 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 contribution plans has not been implemented consistently by the local governments in the PRC given the different levels of economic development in different locations. Companies operating in the PRC are also required to withhold individual income tax on employees’ salaries based on the actual salary of each employee upon payment. We may be subject to late fees and fines in relation to the underpaid employee benefits and under-withheld individual income tax, our financial condition and results of operations may be adversely affected.
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 the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Publicly-Listed Company, promulgated by SAFE in 2012, PRC citizens and non-PRC citizens who reside in China for a continuous period of no less than one year who participate in any stock incentive plan of an overseas publicly listed company offered to the director, supervisor, senior management and other employees of, and any individual who has labor relationship with its domestic affiliated entities are required to register with SAFE through a domestic qualified agent, which could be a PRC subsidiary of such overseas listed company, and complete certain other procedures. In addition, an overseas entrusted institution must be retained to handle matters in connection with the exercise or sale of stock options and the purchase or sale of shares and interests. We and our directors, executive officers and other employees who are PRC citizens or who reside in the PRC for a continuous period of no less than one year and who have been granted stock options are subject to these regulations. Failure to complete the SAFE registrations for our employee incentive plans 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.
In addition, the State Administration of Taxation, or SAT, has issued certain circulars concerning employee stock options and restricted shares. Under these circulars, our employees working in the PRC 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 relevant tax authorities and to withhold individual income taxes of those employees who exercise their share options or are granted with restricted shares. If our employees fail to pay or we fail to withhold their income taxes according to relevant laws and regulations, we may face sanctions imposed by the tax authorities or other PRC governmental authorities.
U.S. regulatory bodies may be limited in their ability to conduct investigations or inspections of our operations in the PRC.
Any disclosure of documents or information located in the PRC by foreign agencies may be subject to jurisdiction constraints and must comply with the PRC’s state secrecy laws, which broadly define the scope of “state secrets” to include matters involving economic interests and technologies. There is no guarantee that requests from U.S. federal or state regulators or agencies to investigate or inspect our operations will be honored by us, by entities who provide services to us or with whom we associate, without violating PRC legal requirements, especially as those entities are located in the PRC. Furthermore, under the current PRC laws, an on-site inspection of our facilities by any of these regulators may be limited or prohibited.
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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.
Under the Enterprise Income Tax Law and its implementation rules, an enterprise established outside of the PRC with its “de facto management body” within the PRC is considered a “resident enterprise” and will be subject to the enterprise income tax on its global income at the rate of 25%. The implementation rules define the term “de facto management body” as the body that exercises full and substantial control and overall management over the business, productions, personnel, accounts and properties of an enterprise. In April 2009, the State Administration of Taxation SAT issued the Circular of the SAT on Issues Relating to Identification of PRC-Controlled Overseas Registered Enterprises as Resident Enterprises in accordance with the De Facto Standards of Organizational Management, or SAT Circular 82, which provides certain specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is located in China. Although this circular applies only to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners, the criteria set forth in the circular may reflect the SAT’s general position on how the “de facto management body” text should be applied in determining the tax resident status of all offshore enterprises. According to SAT Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “de facto management body” in China, and will be subject to PRC enterprise income tax on its global income only if all of the following conditions are met: (i) the primary location of the day-to-day operational management is in the PRC; (ii) decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise’s primary assets, accounting books and records, company seals, and board of directors 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 our company is not a PRC resident enterprise for PRC tax purposes. However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.” If the PRC tax authorities determine that our company is a PRC resident enterprise for enterprise income tax purposes, we would be subject to PRC enterprise income on our worldwide income at the rate of 25%. Furthermore, we would be required to withhold a 10% tax from dividends we pay to our shareholders that are non-resident enterprises. In addition, non-resident enterprise shareholders may be subject to PRC tax on gains realized on the sale or other disposition of the Ordinary Shares, if such income is treated as sourced from within the PRC. Furthermore, if we are deemed a PRC resident enterprise, dividends paid to our non-PRC individual shareholders and any gain realized on the transfer of the Class A Ordinary Shares by such shareholders may be subject to PRC tax at a rate of 20% (which, in the case of dividends, may be withheld at source by us). These rates may be reduced by an applicable tax treaty, but it is unclear whether non-PRC shareholders of 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 our Class A Ordinary Shares.
We face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.
On February 3, 2015, the SAT issued the Notice Regarding Certain Corporate Income Tax Matters on Indirect Transfer of Properties by Non-Tax Resident Enterprises, or SAT Bulletin 7. SAT Bulletin 7 extends its tax jurisdiction to transactions involving the transfer of taxable assets through offshore transfer of a foreign intermediate holding company. In addition, SAT Bulletin 7 has introduced safe harbors for internal group restructurings and the purchase and sale of equity through a public securities market. SAT Bulletin 7 also brings challenges to both foreign transferor and transferee (or other person who is obligated to pay for the transfer) of taxable assets, as such persons need to determine whether their transactions are subject to these rules and whether any withholding obligation applies.
On October 17, 2017, the SAT issued the Announcement of the State Administration of Taxation on Issues Concerning the Withholding of Non-resident Enterprise Income Tax at Source, or SAT Bulletin 37, which came into effect on December 1, 2017 and amended in June 2018. The SAT Bulletin 37 further clarifies the practice and procedure of the withholding of non-resident enterprise income tax.
Where a non-resident enterprise transfers taxable assets indirectly by disposing of the equity interests of an overseas holding company, which is an “Indirect Transfer,” the non-resident enterprise as either transferor or transferee, or the PRC entity that directly owns the taxable assets, may report such Indirect Transfer to the relevant tax authority. Using a “substance over form” principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring PRC tax. As a result, gains derived from such Indirect Transfer may be subject to PRC enterprise income tax, and the transferee or other person who pays for the transfer is obligated to withhold the applicable taxes currently at a rate of 10% for the transfer of equity interests in a PRC resident enterprise.
Both the transferor and the transferee may be subject to penalties under PRC tax laws if the transferee fails to withhold the taxes and the transferor fails to pay the taxes.
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We face uncertainties as to the reporting and other implications of certain past and future transactions where PRC taxable assets are involved, such as offshore restructuring, sale of the shares in our offshore subsidiaries and investments. Our company may be subject to filing obligations or taxed if our company is transferor in such transactions and may be subject to withholding obligations if our company is transferee in such transactions, under SAT Bulletin 7 and/or SAT Bulletin 37. For transfer of shares in our company by investors who are non-PRC resident enterprises, our PRC subsidiaries may be requested to assist in the filing under SAT Bulletin 7 and/or SAT Bulletin 37. As a result, we may be required to expend valuable resources to comply with SAT Bulletin 7 and/or SAT Bulletin 37 or to request the relevant transferors from whom we purchase taxable assets to comply with these circulars, or to establish that our company should not be taxed under these circulars, which may have a material adverse effect on our financial condition and results of operations.
Risks Related to Our Class A Ordinary Shares
Our securities are currently suspended from trading on Nasdaq and are subject to a pending delisting determination, and if our appeal is unsuccessful our Class A Ordinary Shares will remain delisted.
On December 2, 2025, we received a Staff Determination from The Nasdaq Stock Market LLC notifying us that we had not regained compliance with Nasdaq Listing Rule 5550(a)(2), the minimum bid price requirement, and that we also no longer satisfied Listing Rule 5550(a)(4), the minimum publicly held shares requirement. As a result, Nasdaq determined that our securities would be delisted from The Nasdaq Capital Market. We timely requested a hearing before a Nasdaq Hearings Panel to appeal the Staff’s determination. However, pursuant to Nasdaq Listing Rule 5815(a)(1)(B)(ii), a timely request for a hearing in connection with a failure to regain compliance during a second 180-day bid price compliance period does not stay the suspension of trading. Accordingly, trading in our Class A Ordinary Shares has been suspended pending the outcome of the appeal. The Nasdaq Hearings Panel held a hearing on January 27, 2026, and determined to deny the Company’s request to continue its listing on the Nasdaq on February 24, 2026. On March 5, 2026, the Company timely appealed to the Office of Appeals and Review, requesting that the Nasdaq Listing and Hearing Review Council (the “Listing Council”) review the Hearings Panel’s decision. The Company is currently awaiting the decision from the Listing Council.
There can be no assurance that the Listing Council will grant us continued listing or provide additional time to regain compliance. If our appeal is unsuccessful, our Class A Ordinary Shares will be delisted from Nasdaq, and we would expect our securities to be quoted on the OTC Markets or another over-the-counter marketplace.
If our securities are delisted:
| ● | liquidity of our Class A Ordinary Shares would likely decline significantly; |
| ● | the market price of our securities may become more volatile; |
| ● | institutional investor interest may decrease; |
| ● | analyst coverage may be reduced or eliminated; and |
| ● | our ability to access the capital markets in the future could be materially adversely affected. |
| ● | In addition, securities traded on the OTC Markets are often subject to lower trading volumes and wider bid-ask spreads, and may be subject to the SEC’s “penny stock” rules, which could further reduce trading activity. |
| ● | If we are unable to regain compliance with Nasdaq’s listing standards or are otherwise unable to relist on Nasdaq or another national securities exchange in the future, the market value of our securities could decline materially and investors may lose all or part of their investment. |
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Our Class A Ordinary Shares Trade on the OTC Markets, Which May Limit Liquidity and Increase Price Volatility
Our Class A Ordinary Shares are currently quoted on the OTC markets rather than listed on a national securities exchange, such as the New York Stock Exchange or the Nasdaq Stock Market. Trading in securities on the OTC markets is often less liquid and more volatile than trading on a national securities exchange, and the OTC markets may be subject to less regulatory oversight and transparency. As a result, investors may find it more difficult to buy or sell our Class A Ordinary Shares at a favorable price or in desired quantities. The trading volume for our Class A Ordinary Shares on the OTC markets has historically been, and may continue to be, lower than that of companies listed on national securities exchanges, which could result in wider bid-ask spreads and may limit our ability to raise capital through equity offerings on acceptable terms.
In addition, many institutional investors are subject to internal investment policies or regulations that restrict or prohibit investments in securities that are not listed on a national securities exchange. Our OTC market status may therefore limit the universe of potential investors in our Class A Ordinary Shares, which could adversely affect the trading price and liquidity of our Class A Ordinary Shares. We cannot assure you that we will successfully apply for or maintain a listing on any national securities exchange or that any such application would be approved. The failure to obtain or maintain a listing on a national securities exchange could have a material adverse effect on the trading price, liquidity, and marketability of our Class A Ordinary Shares.
The market price for our Class A Ordinary Shares may be volatile.
The trading prices of our Class A Ordinary Shares are likely to be volatile and could fluctuate widely due to factors beyond our control. This may happen because of broad market and industry factors, like the performance and fluctuation in the market prices or the underperformance or deteriorating financial results of internet or other companies based in China that have listed their securities in the United States in recent years. The securities of some of these companies have experienced significant volatility since their initial public offerings, including, in some cases, substantial price declines in their trading prices. The trading performances of other Chinese companies’ securities after their offerings, including internet and e-commerce companies, may affect the attitudes of investors toward Chinese companies listed in the United States, which consequently may impact the trading performance of our Class A Ordinary Shares, 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, such as the large decline in share prices in the United States, China and other jurisdictions in late 2008, early 2009 and the second half of 2011, which may have a material adverse effect on the market price of our Class A Ordinary Shares.
In addition to the above factors, the price and trading volume of our Class A Ordinary Shares may be highly volatile due to multiple factors, including the following:
| ● | regulatory developments affecting us, our consumers, or our industry; |
| ● | conditions in the medical supplies business and the public perception of the legitimacy and ethics of certain business practices of our competitors or other market players within the industry; |
| ● | announcements of studies and reports relating to the quality of our product and service offerings or those of our competitors; |
| ● | changes in the economic performance or market valuations of other medical supplies businesses; |
| ● | actual or anticipated fluctuations in our quarterly results of operations and changes or revisions of our expected results; |
| ● | changes in financial estimates by securities research analysts; |
| ● | announcements by us or our competitors of new product 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; |
| ● | fluctuations of exchange rates between the Renminbi and the U.S. dollar; |
| ● | release or expiry of lock-up or other transfer restrictions on our outstanding Class A Ordinary Shares; and |
| ● | sales or perceived potential sales of additional Class A Ordinary Shares. |
The trading market for our Class A Ordinary Shares 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 shares or publish inaccurate or unfavorable research about our business, the market price for our Class A Ordinary Shares 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 Class A Ordinary Shares to decline.
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Raising additional capital and the sale of additional Class A Ordinary Shares or other equity securities could result in dilution to our shareholders, while the incurrence of debt may impose restrictions on our operations.
We may require additional cash resources due to certain future developments, including any investments or acquisitions we may decide to pursue. If our cash resources are insufficient to satisfy our cash requirements, we may seek to sell equity or debt securities or obtain a credit facility in addition to or outside of the Convertible Note and Warrant offering. Such sale of equity securities would result in dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financing covenants that would restrict our operations. Furthermore, the issuance of additional securities by us, whether equity or debt, or the possibility of such issuance, may cause the market price of our Class A Ordinary Shares to decline and existing shareholders may not agree with our financing plans or the terms of such financings.
Future sales of our Class A Ordinary Shares, whether by us or our shareholders, could cause our share price to decline.
If our existing shareholders sell, or indicate an intent to sell, substantial amounts of our Class A Ordinary Shares on the public market, the trading price of Class A Ordinary Shares could decline significantly. Similarly, the perception in the public market that our shareholders might sell Class A Ordinary Shares could also depress the market price of our Class A Ordinary Shares. A decline in the price of our Class A Ordinary Shares might impede our ability to raise capital through the issuance of additional Class A Ordinary Shares or other equity securities. In addition, the issuance and sale by us of additional Class A Ordinary Shares or securities convertible into or exercisable for Class A Ordinary Shares, or the perception that we will issue such securities, could reduce the trading price for our Class A Ordinary Shares as well as make future sales of equity securities by us less attractive or not feasible.
Techniques employed by short sellers may drive down the market price of our Class A Ordinary Shares.
Short selling is the practice of selling securities that the seller does not own but rather has borrowed from a third party with the intention of buying identical securities back at a later date to return to the lender. The short seller hopes to profit from a decline in the value of the securities between the sale of the borrowed securities and the purchase of the replacement shares, as the short seller expects to pay less in that purchase than it received in the sale. As it is in the short seller’s interest for the price of the security to decline, many short sellers publish, or arrange for the publication of, negative opinions regarding the relevant issuer and its business prospects in order to create negative market momentum and generate profits for themselves after selling a security short. These short attacks have, in the past, led to selling of shares in the market.
Public companies listed in the United States that have a substantial majority of their operations in China have at times been the subject of short selling. Much of the scrutiny and negative publicity has centered on allegations of a lack of effective internal control over financial reporting resulting in financial and accounting irregularities and mistakes, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations of fraud. As a result, many of these companies are now conducting internal and external investigations into the allegations and, in the interim, are subject to shareholder lawsuits and/or SEC enforcement actions.
We may in the future be the subject of unfavorable allegations made by short sellers. Any such allegations may be followed by periods of instability in the market price of our Class A Ordinary Shares and negative publicity. If and when we become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we could have to expend a significant amount of resources to investigate such allegations and/or defend ourselves. While we would strongly defend against any such short seller attacks, we may be constrained in the manner in which we can proceed against the relevant short seller by principles of freedom of speech, applicable federal or state law or issues of commercial confidentiality. Such a situation could be costly and time-consuming and could distract our management from growing our business. Even if such allegations are ultimately proven to be groundless, allegations against us could severely impact our business operations and shareholder’s equity, and the value of any investment in our Class A Ordinary Shares could be greatly reduced or rendered worthless.
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Securities analysts may not cover our Class A Ordinary Shares and this may have a negative impact on the market price of our Class A Ordinary Shares.
The trading market for our Class A Ordinary Shares will depend, in part, on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over independent analysts. We do not currently have and may never obtain research coverage by independent securities and industry analysts. If no independent securities or industry analysts commence coverage of us, the trading price for our Class A Ordinary Shares would be negatively impacted. If we obtain independent securities or industry analyst coverage and if one or more of the analysts who covers us downgrades our Class A Ordinary Shares, changes their opinion of our shares or publishes inaccurate or unfavorable research about our business, our share price would likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our Class A Ordinary Shares could decrease and we could lose visibility in the financial markets, which could cause our share price and trading volume to decline.
Because we do not expect to pay dividends in the foreseeable future, you must rely on price appreciation of our Class A Ordinary Shares 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 Class A Ordinary Shares 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 Cayman Islands law, namely that our company may only pay dividends out of profits or share premium; provided 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 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 Class A Ordinary Shares will likely depend entirely upon any future price appreciation of our Class A Ordinary Shares. There is no guarantee that our Class A Ordinary Shares will appreciate in value or even maintain the price at which you purchased our Class A Ordinary Shares. You may not realize a return on your investment in our Class A Ordinary Shares and you may even lose your entire investment in our Class A Ordinary Shares.
Substantial future sales or perceived potential sales of Class A Ordinary Shares in the public market could cause the price of our Class A Ordinary Shares to decline.
Sales of Class A Ordinary Shares in the public market, or the perception that these sales could occur, could cause the market price of our Class A Ordinary Shares to decline. Shares issuable upon conversion of the convertible notes and exercise of the warrants could cause substantial dilution to our existing shareholders and cause the price of our Class A Ordinary Shares to decline. In addition, none of the shares held by our officers and directors are subject to lock-up agreements and may, from time to time, be eligible for sale into the public upon presentation of an appropriate and acceptable legal opinion to our transfer agent. As such, the perceived risk of this potential dilution could cause shareholders to attempt to sell their shares and investors to short our Class A Ordinary Shares. Any such sales may also make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.
We may need additional capital and may sell additional Class A Ordinary Shares or other equity securities or incur indebtedness, which could result in additional dilution to our shareholders or increase our debt service obligations.
We may require additional cash resources due to changed business conditions or other future developments, including any investments or acquisitions we may decide to pursue. If our cash resources are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity securities or equity-linked debt securities could result in additional dilution to our shareholders. The incurrence of indebtedness would result in debt service obligations and could result in operating and financing covenants that would restrict our operations. We cannot assure you that financing will be available in amounts or terms acceptable to us, if at all.
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Certain existing shareholders 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 control approximately 50.0% of the total voting power of our outstanding Class A Ordinary Shares. 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 ownership 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 our Class A Ordinary Shares. 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 our Class A Ordinary Shares due to investors’ perception that conflicts of interest may exist or arise.
We are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.
We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various requirements applicable to other public companies that are not emerging growth companies including, most significantly, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 so long as we are an emerging growth company. As a result, if we elect not to comply with such auditor attestation requirements, our investors may not have access to certain information they may deem important.
In addition, under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to avail ourselves of an exemption that allows us to delay adopting new or revised accounting standards until such time as those standards apply to private companies. As a result, we will not be subject to the same new or revised accounting standards as other public companies that comply with the public company effective dates. We have also elected to take advantage of certain of the reduced disclosure obligations and may elect to take advantage of other reduced reporting requirements in future filings. As a result of these elections, the information that we provide to our stockholders may be different than you might receive from other public reporting companies.
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 insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and |
| ● | the selective disclosure rules by issuers of material nonpublic information under Regulation FD. |
We are required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend to publish our financial results on a semi-annual basis in the form of press releases, distributed pursuant to the rules and regulations of the Nasdaq Global 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 a company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the Nasdaq Global Market corporate governance requirements. As of the date of this Annual Report, we have elected to follow our Cayman Islands practices in lieu of the requirements under Nasdaq 5600 Series pursuant to Rule 5615(a)(3) of the Nasdaq Global Market corporate governance requirements, which, among others, includes the requirements for (i) holding annual general meetings, (ii) holding elections of directors, and (iii) the requirement to obtain shareholder approval in connection with the issuance of in excess of 20% of the Class A Ordinary Shares by the Company with voting power in excess of 20% of the voting power outstanding. These practices may afford less protection to shareholders than they would enjoy if we complied fully with the Nasdaq Global Market corporate governance requirements.
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We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.
As discussed above, we are a foreign private issuer and, therefore, we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act. The determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter. We would lose our foreign private issuer status if, for example, more than 50% of our Class A Ordinary Shares are directly or indirectly held by residents of the U.S. and we fail to meet additional requirements necessary to maintain our foreign private issuer status. In the future, if we lose our foreign private issuer status as of the last date of our second fiscal quarter, we would be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms beginning on the following January 1, which are more detailed and extensive than the forms available to us as a foreign private issuer. In such case, we would also have to comply with U.S. federal proxy requirements, and our officers, directors and principal shareholders would become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. In addition, we would lose our ability to rely upon exemptions from certain corporate governance requirements under the Nasdaq Global Market listing rules. As a U.S. listed public company that is not a foreign private issuer, we would incur significant additional legal, accounting and other expenses that we do not presently incur as a foreign private issuer listed on a U.S. securities exchange.
If we fail to establish and maintain proper internal financial reporting controls, our ability to produce accurate financial statements or comply with applicable regulations could be impaired.
Prior to our initial public offering in February of 2022, we were a private company with limited accounting personnel and other resources with which to address our internal controls and procedures. Since then, we have been in a continuing process to develop, establish, and put in place a system to maintain internal controls and procedures that will allow our management to report on, and our independent registered public accounting firm to attest to, our internal controls over financial reporting if and when required to do so under Section 404 of the Sarbanes-Oxley Act of 2002. Although our independent registered public accounting firm is not required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act until the date we are no longer an emerging growth company, our management will be required to report on our internal controls over financial reporting under Section 404.
As of December 31, 2024, our management assessed the effectiveness of our internal control over financial reporting. The material weaknesses relate to the fact that the Company does not have accounting personnel with sufficient knowledge of U.S. GAAP and SEC reporting procedures. Management concluded that as of December 31, 2024, our internal control over financial reporting were ineffective.
In order to address and resolve the foregoing material weakness, we have implemented measures designed to improve our internal control over financial reporting to remediate this material weakness, including hiring Shanghai Bluehill Advisory Co., Ltd. as our consultant and who has the requisite training and experience in the preparation of financial statements in compliance with applicable SEC requirements. With the assistance of our consultant, we are currently in compliance with U.S. GAAP and SEC reporting requirements. In addition to hiring an outside consultant, we also plan to take remedial measures including (i) hiring more qualified accounting personnel with relevant U.S. GAAP and SEC reporting experience and qualifications to strengthen the financial reporting function and to set up a financial and system control framework; (ii) implementing regular and continuous U.S. GAAP accounting and financial reporting training programs for our accounting and financial reporting personnel; and (iii) setting up an internal audit function as well as engaging an external consulting firm to assist us with assessment of Sarbanes-Oxley compliance requirements and improvement of overall internal control.
The implementation of these measures may not fully address the material weaknesses in our internal control over financial reporting, and we cannot conclude that they have been fully remedied. Our failure to correct theses material weaknesses or our failure to discover and address any other material weaknesses could result in inaccuracies in our financial statements and could also impair our ability to comply with applicable financial reporting requirements and related regulatory filings on a timely basis. As a result, our business, financial condition, results of operations and prospects, as well as the trading price of our Class A Ordinary Shares, may be materially and adversely affected. Moreover, ineffective internal control over financial reporting significantly hinders our ability to prevent fraud. In addition, once we cease to be an “emerging growth company” as such term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. Our management may conclude that our internal control over financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition, as a public company, our reporting obligations may place a significant strain on our management, operational and financial resources and systems for the foreseeable future. We may be unable to timely complete our evaluation testing and any required remediation.
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ITEM 4. INFORMATION ON THE COMPANY
A. History and Development of the Company
Meihua is a holding company incorporated under the laws of the Cayman Islands on November 10, 2020 by our shareholder Yongjun Liu. Meihua’s direct subsidiary is Kang Fu International Medical, a Hong Kong company. Kang Fu International Medical was incorporated on October 13, 2015 by four shareholders, Yongjun Liu, Yin Liu, Ace Capital Limited and King Tai International Holding Limited. On November 22, 2019, Yongjun Liu acquired 93,000 shares from Ace Capital Limited and 450,00 shares from King Tai International Holding Limited, respectively. Upon consummation of such share transfer, Yongjun Liu and Yin Liu constituted all of the shareholders of Kang Fu International Medical, holding 100% shares of Kang Fu International Medical. On December 21, 2020, Meihua in turn acquired 414,000 shares (or 69%) from Yongjun Liu and 186,000 shares (or 31%) from Yin Liu, respectively, resulting in Kang Fu International Medical becoming Meihua’s wholly owned subsidiary. In exchange for the acquisition on Kang Fu, Meihua issued a total of 159,350 Ordinary Shares to Mr. and Mrs. Liu, who in turn transferred their shares to their wholly-owned holding company, Bright Accomplish Limited, on December 21, 2020.
Meihua is not a Chinese operating company but a Cayman Islands holding company with operations conducted by its subsidiaries located in mainland China. Meihua operates its business through its indirect subsidiaries in China. Below is a list of Meihua’s operating subsidiaries in China:
| ● | Yangzhou Huada Medical Device Co., Ltd., or Yangzhou Huada: a subsidiary wholly owned by Kang Fu International Medical and established in Yangzhou, Jiangsu Province, PRC on December 24, 2001 with a registered capital of $602,400, which manufactures and sells Class I disposable medical devices under our own brands, and distributes Class I and Class II disposable medical devices sourced from other manufacturers, to our domestic customers. Specifically, Yangzhou Huada mainly focuses on the manufacturing, sales and distributions of non-bottled products, such as brushes, ID bracelets for domestic sales. |
| ● | Jiangsu Yada Technology Group Co., Ltd., or Jiangsu Yada: a subsidiary wholly owned by Yangzhou Huada and established in Yangzhou, Jiangsu Province, PRC on December 5, 1991 with a registered capital of RMB51,390,000, which manufactures and sells Class I and Class II disposable medical devices under our own brands, and distributes Class I and Class II disposable medical devices sourced from other manufacturers, to our domestic and overseas customers. Specifically, Jiangsu Yada mainly focuses on overseas sales. |
| ● | Jiangsu Huadong Medical Device Industrial Co., Ltd., or Jiangsu Huadong: a subsidiary wholly owned by Jiangsu Yada and established in Yangzhou, Jiangsu Province, PRC on November 18, 2000 with a registered capital of RMB50,000,000, which manufactures and sells Class I, II and III disposable medical devices under our own brands, and distributes Class I, II and III disposable medical devices sourced from other manufacturers, to our domestic and overseas customers. Specifically, Jiangsu Huadong mainly focuses on the manufacturing, sales and distributions of polyethylene bottled products, such as eye drop bottles and tablet bottles. |
| ● | Hainan Ruiying Technology Co., Ltd., or Hainan Ruiyin: a subsidiary of which 51% of registered capital (subscribed but unpaid registered capital) is onwed by Jiangsu Huadong and established in Qionhai City, Hainan Province, China on October 25, 2023, with registered capital of RMB10,000,000, for purposes of serving as a trading and import-export company with a focus on facilitating the introduction of new medical technology, devices and equipment. |
| ● | Meihua Future Manufacturing Limited or Meihua Future: a subsidiary of which 100% of registered capital is owned by Meihua International, was established in the State of New York on July31, 2025, with registered capital of $5,000, for purposes of serving as software service company with a focus on facilitating the SaaS development service. |
Meihua owns 100% of Kang Fu International Medical and 100% of Meihua Future. Kang Fu International Medical owns 100% of Yangzhou Huada. Yangzhou Huada owns 100% of Jiangsu Yada. Jiangsu Yada, in turn, owns 100% of Jiangsu Huadong.
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Jiangsu Huadong, in turn, owns 51% of the equity interests of Hainan Ruiying. The following diagram illustrates our corporate structure as of the date of this Annual Report, including our principal subsidiary and their respective principal subsidiaries.
The structure of cash flows within our organization, and a summary of the applicable regulations, is as follows:
| 1. | Our equity structure is a direct holding structure, pursuant to which the overseas entity listed in the U.S., Meihua International Medical Technologies Co., Ltd. (“Meihua International”), directly controls Yangzhou Huada Medical Device Co., Ltd (“Yangzhou Huada”) (the “WFOE”) and other domestic operating entities which are directly owned through the Hong Kong company, Kang Fu International Medical Co., Limited (“Kang Fu”). |
| 2. | Within our direct holding structure, the cross-border transfer of funds within our corporate group is legal and compliant with the laws and regulations of the PRC. After foreign investors’ funds enter Meihua International at the close of securities offerings, the funds can be directly transferred to Kang Fu, and then transferred to subordinate operating entities through the WFOE. |
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If the Company intends to distribute dividends, the Company will transfer the dividends to Kang Fu in accordance with the laws and regulations of the PRC, and then Kang Fu will transfer the dividends to Meihua International, and the dividends will be distributed from Meihua International to all shareholders respectively in proportion to the shares they hold, regardless of whether the shareholders are U.S. investors or investors in other countries or regions.
| 3. | In the reporting periods presented in this Annual Report, cash and other asset transfers occurred among the Company and its subsidiaries are as summarized as below: |
| For the year ended December 31, 2025 (in US$) | ||||||||||||||||
| Inter-company cash transfers: | Meihua (Cayman) | Meihua Future (United States) | Kang Fu International Medical (HK) | PRC subsidiaries | ||||||||||||
| Cash transferred from Meihua to Kang Fu International Medical (1) | $ | (1,350,000 | ) | $ | - | $ | 1,350,000 | $ | - | |||||||
| Cash transferred from Kang Fu International Medical to PRC subsidiaries (2) | $ | - | $ | - | $ | (1,000,000 | ) | $ | 1,000,000 | |||||||
| Cash transferred from PRC subsidiaries to Kang Fu International Medical (3) | $ | - | $ | - | $ | 311,129 | $ | (311,129 | ) | |||||||
| Cash transferred from Meihua to Meihua Future (4) | $ | (16,520,000 | ) | $ | 16,520,000 | $ | - | $ | - | |||||||
| (1) | Meihua transferred $1,350,000 to Kang Fu International Medical as a working capital loan. |
| (2) | Kang Fu International Medical transferred $1,000,000 to PRC subsidiaries as a capital contribution. |
| (3) | PRC subsidiaries transferred $311,129 to Kang Fu International Medical as a working capital loan. |
| (4) | Meihua transferred $16,520,000 to Meihua Future as a working capital loan. |
For the year ended December 31, 2024 (in US$) | ||||||||||||
| Inter-company cash transfers: | Meihua (Cayman) | Kang Fu International Medical (HK) | PRC subsidiaries | |||||||||
| Cash transferred from Meihua to Kang Fu International Medical (1) | $ | (5,700,000 | ) | $ | 5,700,000 | $ | - | |||||
| Cash transferred from Kang Fu International Medical to PRC subsidiaries | $ | - | $ | (5,000,000 | ) | $ | 5,000,000 | |||||
| (1) | Meihua transferred $5,700,000 to Kang Fu International Medical as a working capital loan. |
| (2) | Kang Fu International Medical contributed $5,000,000 to PRC subsidiaries as a capital contribution. |
For the year ended December 31, 2023 (in US$) | ||||||||||||
| Inter-company cash transfers: | Meihua (Cayman) | Kang Fu International Medical (HK) | PRC subsidiaries | |||||||||
| Cash transferred from Meihua to Kang Fu International Medical (1) | $ | (2,500,000 | ) | $ | 2,500,000 | $ | - | |||||
| Cash transferred from Kang Fu International Medical to PRC subsidiaries | $ | - | $ | (1,000,000 | ) | $ | 1,000,000 | |||||
| (1) | Meihua transferred $2,500,000 to Kang Fu International Medical as a working capital loan. |
| (2) | Kang Fu International Medical contributed $1,000,000 to PRC subsidiaries as a capital contribution. |
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Our PRC subsidiaries’ ability to distribute dividends is based upon their distributable earnings. Current PRC regulations permit our PRC subsidiaries to pay dividends to their respective shareholders only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, each of our PRC subsidiaries is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of each of their registered capitals. These reserves are not distributable as cash dividends. See “Regulations Relating to Dividend Distributions” for more information.
To address persistent capital outflows and the RMB’s depreciation against the U.S. dollar in the fourth quarter of 2016, the People’s Bank of China and the State Administration of Foreign Exchange, or SAFE, have implemented a series of capital control measures in the subsequent months, including stricter 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 subject to tightened scrutiny in the future. The PRC government also imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of the PRC. Therefore, we may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency for the payment of dividends from our profits, if any. Furthermore, if our subsidiaries in the PRC incur debt on their own in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments.
In addition, the Enterprise Income Tax Law and its implementation rules provide that a withholding tax at a rate of 10% will be applicable to dividends payable by Chinese companies to non-PRC-resident enterprises unless reduced under treaties or arrangements between the PRC central government and the governments of other countries or regions where the non-PRC resident enterprises are tax resident. Pursuant to the tax agreement between Mainland China and the Hong Kong Special Administrative Region, the withholding tax rate in respect to the payment of dividends by a PRC enterprise to a Hong Kong enterprise may be reduced to 5% from a standard rate of 10%. However, if the relevant tax authorities determine that our transactions or arrangements are for the primary purpose of enjoying a favorable tax treatment, the relevant tax authorities may adjust the favorable withholding tax in the future. Accordingly, there is no assurance that the reduced 5% withholding rate will apply to dividends received by our Hong Kong subsidiary from our PRC subsidiaries. This withholding tax will reduce the amount of dividends we may receive from our PRC subsidiaries.
Recent Developments
Reverse Share Split
On November 24, 2025, the Company effectuated a reverse share split of its outstanding ordinary shares, par value of $0.0005 per share, at a ratio of 1-for-100, and implemented its dual-class share structure. Following the reverse share split, the Company’s class A ordinary shares have a new par value of $0.05 per share with the new CUSIP number, G5966G116.
Nasdaq Compliance Deficiency
On December 3, 2024, the Company received a notification from The Nasdaq Stock Market LLC (“Nasdaq”) that its Class A ordinary shares had traded below the minimum bid price for 30 consecutive business days. The Company was granted an initial 180-day compliance period and, after transferring to the Nasdaq Capital Market, an additional compliance period through December 1, 2025. The Company did not regain compliance within the prescribed timeframe.
On December 2, 2025, Nasdaq staff determined to delist the Company’s securities, and trading on Nasdaq was suspended on December 9, 2025. The Company’s shares subsequently began trading on the OTC Marketplace under the symbol “MHUAF.” Following a hearing on January 27, 2026, the Nasdaq Hearings Panel denied the Company’s request for continued listing on February 24, 2026. The Company requested further appeal on March 2, 2026; and submit appeal documents on April 9, 2026; however, there can be no assurance that such review will be successful or that the Company will regain a Nasdaq listing.
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Private Placement
On January 2, 2025, the Company entered into an amendment to its previously disclosed securities purchase agreement dated December 27, 2023 with Anson Investments Master Fund LP and Anson East Master Fund LP. Pursuant to the amendment, the parties agreed that no additional closings would occur under the agreement following the previously completed $6.0 million financing on January 2, 2024.
On October 8, 2025, the Company entered into a securities purchase agreement with certain non-U.S. investors pursuant to Regulation S, providing for the issuance of up to 40,000,000 Ordinary Shares at a purchase price of $0.38 per share for aggregate gross proceeds of up to $15.2 million. The offering was completed in multiple closings, with the majority of shares issued in October 2025 and the remaining shares issued in January 2026.
On December 5, 2025, the Company entered into an additional Regulation S private placement with certain non-U.S. investors for the issuance of up to 120,000 Class A ordinary shares at a purchase price of $11.00 per share, for aggregate gross proceeds of approximately $1.32 million. This offering closed on December 15, 2025.
Changes in Directors and Executive Officers
On August 15, 2025, Xin Wang resigned as Chief Executive Officer and as a director, and Lianzhang Zhao resigned as Chief Financial Officer. On the same date, Huijuan Zhao resigned as a director. The Company appointed Leyi Lee as Chief Executive Officer and a director, Shilong Liao as Chief Financial Officer, and Anna Colin as an independent director.
Subsequently, on September 30, 2025, Yongjun Liu resigned as Chairman of the Board, and Xiaoming E resigned as an independent director and from all board committee positions. The Company appointed Ailiang Wang as Chairwoman of the Board and Chongbo Gao as an independent director.
Hainan Industrial Park Development
The Company has started construction of a comprehensive industrial park in Boao Hope City within the Hainan Free Trade Port in the PRC to support our manufacturing and business expansion. The project is expected to benefit from certain government incentives applicable to encouraged industries, including preferential tax policies and tariff exemptions, although the availability and application of such policies are subject to applicable laws and regulations.
The industrial park is planned to cover approximately 516,000 square feet and will be developed in phases. We intend to lease portions of the facilities to third-party medical-related enterprises. We may also supply medical consumables to tenants within the park. There can be no assurance that the project will be completed as planned or that it will achieve the expected benefits.
In March 2026, Hainan Guoxie secured three tenants and leased certain properties within the industrial park. The leases will commence in July 2026 and have a five-year term.
Corporate Information
Our principal executive offices are located at 88 Tongda Road, Touqiao Town, Guangling District, Yangzhou, PRC. Our telephone number at this address is +86-0514-89800199. Our registered office in the Cayman Islands is currently located at the office of Sertus Incorporations (Cayman) Limited, Sertus Chambers, Governors Square, Suite #5-204, 23 Lime Tree Bay Avenue, P.O. Box 2547, Grand Cayman, KY1-1104, Cayman Islands, which may be changed from time to time at the discretion of directors.
We are subject to the informational requirements of the Exchange Act as a foreign private issuer and file reports and other information with the SEC. Reports and other information filed by us with the SEC including this Annual Report, may be inspected and copied at the public reference room of the SEC at 100 F Street, N.E., Washington D.C. 20549. You can also obtain copies of this Annual Report by mail from the Public Reference Section of the SEC, 100 F. Street, N.E., Washington D.C. 20549, at prescribed rates. Additionally, copies of this material may be obtained from the SEC’s Internet site at http://www.sec.gov.
B. Business Overview
Overview
Meihua International is a Cayman Islands exempted company incorporated on November 10, 2020. Kang Fu International is our wholly owned subsidiary formed in Hong Kong on October 13, 2015. We operate our business through our operating subsidiaries, namely 1) Yangzhou Huada, a wholly foreign owned subsidiary of Kang Fu International Medical, formed on December 24, 2001, located in Yangzhou, Jiangsu Province, PRC; 2) Jiangsu Yada, a wholly owned subsidiary of Yangzhou Huada, formed on December 5, 1991, located in Yangzhou, Jiangsu Province, PRC; and 3) Jiangsu Huadong, a wholly owned subsidiary of Jiangsu Yada, formed on November 18, 2000, located in Yangzhou, Jiangsu Province, PRC; 4) Meihua Future, incorporated on July 31, 2025, in New York, United States.
Through our operating subsidiaries, Yangzhou Huada, Jiangsu Yada, and Jiangsu Huadong, we mainly specialize in the research, development, manufacturing and sales of Class I, Class II and Class III disposable medical devices. In July 2025, the Company commenced a Software-as-a-Service (“SaaS”)-related business on a trial basis through the subsidiary, Meihua Future. Revenue generated from this business accounted for approximately 2.6% of total revenue for the fiscal year 2025. The Company is currently evaluating the commercial viability of this business and may expand operations depending on future performance.
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Pursuant to the Regulation on the Supervision and Administration of Medical Devices promulgated on January 4, 2000, which is effective on June 1, 2014 and amended by the State Council on May 4, 2017, February 9, 2021 and December 6, 2024, with the last amendment taking effect on January 1, 2025 (the “Regulation on the Supervision and Administration of Medical Devices”), medical devices are classified into the following three categories based on the degree of risk.
| Class | Standard (per PRC National Medical Device Management regulations) | |
| I | Class I medical devices shall refer to those devices with low level of risks and whose safety and effectiveness can be ensured through routine administration. | |
| II | Class II medical devices shall refer to those devices with moderate risks that must be strictly controlled and regulated to ensure their safety and effectiveness. | |
| III | Class III medical devices shall refer to those devices with relatively high risks that must be strictly controlled and regulated through special measures to ensure their safety and effectiveness. |
We provide our customers with one-stop solution for a variety of safety and quality disposable medical devices. The safety and quality of disposable medical devices are always our core values. We attribute our success to our sustainable and organic growth driven by our capacity expansion based on market demand, our deep understanding of our target end markets and our sound relationships with our customers, distributors, independent sales agents, and suppliers.
Our Revenue Model
We generate revenues through 1) manufacturing and sales of Class I, II, III disposable medical devices under our own brands, 2) resales of Class I, II, III disposable medical devices sourced by us from other manufacturers, 3) SaaS development service. For the fiscal years ended December 31, 2025, 2024, and 2023, our total revenue was $61,791,957, $96,909,642, and $97,098,915, respectively. For the fiscal years ended December 31, 2025, 2024, and 2023, sales of Class I, II, III disposable medical devices under our own brands accounted for 44.15%, 49.12%, and 49.64% of our total revenue, respectively and the resales of sourced disposable medical devices from other manufactures accounted for 53.23%, 50.88%, and 50.36% of our total revenue, respectively. The SaaS service and development revenues accounted for 2.62%, nil and nil of our total revenue, respectively.
Our disposable medical devices reach end users both domestically and internationally. For the fiscal years ended December 31, 2025, 2024, and 2023, our sales of disposable medical devices to domestic direct end users customers and domestic distributor customers accounted for 97.34%, 99.96%, and 99.50% of our revenues, respectively. For the fiscal years ended December 31, 2025, 2024, and 2023, our sales of disposable medical devices to overseas distributing customers accounted for 0.04%, 0.04%, and 0.50%, respectively, of our revenues. For the fiscal years ended December 31, 2025, 2024 and 2023, the revenues generated from SaaS service and development accounted for 2.62%, nil and nil of our total revenues, respectively.
We sell disposable medical devices through our direct sales force and distributors. For the fiscal years ended December 31, 2025, 2024, and 2023, our sales of disposable medical devices through direct sale channels accounted for 9.42%, 6.98%, and 8.32%, respectively, of our revenues, and our sales of disposable medical devices through distributors accounted for 87.96%, 93.02%, and 91.68%, respectively, of our revenues, of which our sales of disposable medical devices through domestic distributors accounted for 87.92%, 92.98%, and 91.18% of our total revenue, respectively, and our sales of disposable medical devices through exporting distributors accounted for 0.04%, 0.04%, and 0.50% of our total revenue, respectively.
Our Products
Our products cover all regions of PRC. Internationally, our products are exported to more than 30 countries, including Europe, North America, South America, Asia, Africa, and Oceania.
Our current product portfolio (consisting of both self-manufactured and out-sourced products) includes: 1) Class I disposable medical devices, such as, disposable medical X-ray films, medical dry films, dry laser imagers, gauze bandages, examination gloves, pharmaceutical packaging materials and containers, low-density polyethylene (LDPE) bottles for eye drops, high-density polyethylene (HDPE) bottles for tablets, etc.; 2) Class II disposable medical devices, such as, disposable full anesthesia kits, medical brush, woman’s examination kits, urethral catheterization kits, gynecological examination kits, endotracheal intubation, medical masks, anal bags, and suction connecting tube, etc.; and 3) Class III disposable medical devices, such as disposable infusion pumps, anesthesia puncture kits, electronic pumps, etc.
As of the date of this Annual Report, we have a total of 3,888 products in our product portfolio, including 3,730 products for domestic sales and 158 products for overseas sales.
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Our top 20 products for the fiscal years ended December 31, 2025 and 2024 were as follows:
| Class Category | Product Name |
Image | Own brand / source from other |
Use | % of Sales in 2025 |
% of Sales in 2024 |
||||||||||
| Class II | Disposable ID bracelet |  |
Own Brand | Identify patients | 12.73 | % | 14.06 | % | ||||||||
| Class II | Disposable woman’s examination kits |  |
Own Brand | Gynecological examination | 9.46 | % | 8.38 | % | ||||||||
| Class II | Disposable medical brush |  |
Own Brand | Clean the test tube or plastic pipe | 8.43 | % | 10.15 | % | ||||||||
| Class II | Medical kit |  |
source from other | For operation | 1.37 | % | 1.72 | % | ||||||||
| Class II | Medical sterile dressing surgical kits |  |
Own brand | Use before operation | 1.56 | % | 2.67 | % | ||||||||
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| Class Category | Product Name |
Image | Own brand / source from other |
Use | % of Sales in 2025 |
% of Sales in 2024 |
||||||||||
| Class II | Medical Brush |  |
source from other | Hand wash before Operation | 3.52 | % | 5.27 | % | ||||||||
| Class I | High-density polyethylene (HDPE) bottles for tablets |  |
Own brand | Tablet bottles | 3.09 | % | 2.89 | % | ||||||||
| Class II | Medical catheter |  |
source from other | Use for catheterization | 3.71 | % | 3.36 | % | ||||||||
| Class II | Uterine tissue suction tube |  |
Own brand | Uterine tissue sampling | 3.58 | % | 0.03 | % | ||||||||
| Other | Disposable plastic milk bottle |  |
Own brand | Use for feeding | 1.39 | % | 1.45 | % | ||||||||
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| Class Category | Product Name |
Image | Own brand / source from other |
Use | % of Sales in 2025 |
% of Sales in 2024 |
||||||||||
| Class I | Low-density polyethylene (LDPE) bottles for eye drops |  |
Own brand | Eyedrop bottle | 2.11 | % | 1.59 | % | ||||||||
| Class II | Disposable Gynecological sampler |  |
Own brand | Getting samples during gynecological examination | 1.02 | % | 2.19 | % | ||||||||
| Class I | Ear Molding Device |  |
source from other | Correction | 1.15 | % | 0.85 | % | ||||||||
| Class I | Disposable anal bag |  |
Own brand | For the rectal colon or ileum anal stoma postoperative patients and patients with urinary incontinence to collect feces and other feces care | 2.91 | % | 3.64 | % | ||||||||
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| Class Category | Product Name |
Image | Own brand / source from other |
Use | % of Sales in 2025 |
% of Sales in 2024 |
||||||||||
| Class I | Throat Tube Strip |  |
source from other | Mainly used to keep the airway open. | 0.97 | % | 0.73 | % | ||||||||
| Other | Nb / PSN rubber cover |  |
Own brand | Use for capping | 0.88 | % | 0.68 | % | ||||||||
| Class I | Wound Gel |  |
source from other | Uses include wound care and skin repair. | 0.85 | % | 0.74 | % | ||||||||
| Class II | Disposable humidified nasal oxygen tube |  |
Own brand | Connect with oxygen supply device and used to moisten the patient and inject oxygen | 0.96 | % | 1.29 | % | ||||||||
| Class II | Dressing Kit |  |
source from other | Used for wound covering, protection, and management. | 1.12 | % | 0.15 | % | ||||||||
| Other | Bandage Scissors |  |
source from other | Specialized tools for medical care and first aid situations. | 0.88 | % | - | % | ||||||||
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As a medical device manufacturing and sales company, we are subject to extensive government regulation and supervision in the PRC. Pursuant to PRC laws, we must obtain production license for Class II and III disposable medical devices, operation license for Class III disposable medical devices, and filing or registration certificates for certain Class I, II or Class III disposable medical devices. As of the date of this Annual Report, we are current on all licenses and certificates and have obtained Class I, II and III disposable medical device qualifications in the PRC. Meanwhile, we have established a sound quality assurance system. We have received international “CE” certification and ISO 13485 system certification. We have also registered with the FDA (registration number: 3006554788) for over 20 products as of the date hereof, including but not limited to ID bracelets, surgical tapes, elastic and adhesive bandages, which are all FDA Class I products.
Our operating subsidiaries focus on the manufacturing, sales of the disposable medical devices and SaaS service and development as follows:
Yangzhou Huada
Yangzhou Huada mainly manufactures and sells Class I disposable medical devices, such as disposable pharmaceutical packaging materials and containers using LDPE for eye drops and high-density polyethylene (“HDPE”) bottles for tablets, as well as disposable plastic baby bottles, NB/PSN rubber covers and 8.2mL folded spoons for tools and containers, etc.
Additionally, Yangzhou Huada is also engaged in the resales of Class I and II disposable medical devices sourced from other manufacturers when we provide one-stop shopping experience to our customers.
As of the date of this Annual Report, Yangzhou Huada has no manufacturing activities for Class II and III disposable medical devices and its sales are limited to our domestic customers.
Jiangsu Yada
Jiangsu Yada mainly manufactures and sells both domestically and internationally 1) Class I disposable medical devices, such as medical dry imaging films; and 2) Class II disposable medical devices, such as disposable woman’s examination kits, suction connecting tubes, and Class II 6866 medical polymer materials and products (including but not limited to transfusion equipment and pipelines, endotracheal intubation for respiratory anesthesia or ventilation), etc.
In addition to above, Jiangsu Yada is also engaged in the domestic and international resales of 1) Class I and Class II disposable medical devices sourced from other manufacturers when we provide one-stop shopping experience to our customers.
As of the date of this Annual Report, Jiangsu Yada has no manufacturing and sales activities for Class III disposable medical devices.
Jiangsu Huadong
Jiangsu Huadong mainly manufactures and sales both domestically and internationally 1) Class I medical devices, such as medical x-ray films, multi-functional self-extracting X-ray film machines, dry films for medical use, gauze bandages, examination gloves, etc.; 2) Class II medical devices, such as disposable full anesthesia kits, urethral catheterization kits, gynecological examination kits, endotracheal intubation, medical masks, and various tubes, etc.; and 3) Class III medical devices, such as disposable infusion pumps, anesthesia puncture kits, electronic pumps, etc.
In addition to above, Jiangsu Huadong is also engaged in the domestic and international resales of Class I, II and III medical devices sourced from other manufacturers when we provide one-stop shopping experience to our customers.
Meihua Future
Meihua Future mainly provides SaaS development service: to develop customized SaaS system, covering the entire project lifecycle including demand analysis, design, R&D, testing, launch, and maintenance support.
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Our One-stop Service
Our operating subsidiaries are located in Touqiao Town, Yangzhou City, Jiangsu Province, PRC (“Touqiao Town”), one of the four medical device centers established in the PRC. Touqiao Town was conferred with the title “Hometown of Medical Device & Consumables in China” by the China Medical Device Industry Association and granted by the Jiangsu local government as one of the 25 nationally certified “Chinese Towns with Special Features” on medical devices. Hundreds of disposable medical device manufacturers have their facilities or offices in Touqiao Town and provide a variety of product offerings to more than 100 countries and areas, including the United States, Europe, Africa, India and Brazil, among others. Lots of medical device professionals, including R&D and technology professionals and thousands of independent sales agents, are also based in Touqiao Town, providing sufficient labor to local medical device companies.
Due to our unique geographical advantage, we are capable of providing one-stop service to our customers. By placing one single order with us, our customers will receive all products on their order even if there are more than 100 to 1,000 different kinds of products on such order and some products are not within our product portfolio. Upon receipt of such orders, we are able to quickly fulfill the orders by including our own branded products in addition to qualified products sourced from other manufacturers in Touqiao Town.
Our one-stop service not only brings benefits and convenience to our customers, but also reduces our procurement costs, such as transportation fees and travel fees, and mitigates the impact of raw material price fluctuations in the market, thus increasing our profit margins.
Our Customers
We have three types of customers, i) direct end user customers, which includes hospitals, pharmacies and medical institutions, ii) domestic distributor customers, which distribute our products to end-user customers in China, and iii) export distributor customers, which distribute our products to end users customers in North America, Asia, South America, Africa and Oceania. Additionally, in 2025, we introduced our SaaS service offering. As of December 31, 2025, the Company had a total of approximately 5,392 customers, of which 573 are direct end user customers, 4,409 are domestic distributors customers, 403 are export distributors customers and 7 are SaaS customers. Our direct end user customers, as well as substantially all of our domestic distributor customers and our export distributor customers, are based in China.
We do not have long-term written sales agreements with our customers. Each customer sale is typically governed by a brief purchase-order based sales agreement. The key terms of the sales agreements (including those agreements with our top customers) include:
| ● | The product’s name, type, quantity and price or the nature of SaaS development service to be provided with pricing |
| ● |
Quality standard - medical device qualifications, including business license, medical device production and operation licenses, medical device registration certificates, inspection report, etc. Lack of one of the qualifications will result in termination of the agreements.
SaaS development service is to develop customized SaaS system, covering the entire project lifecycle (demand analysis, design, R&D, testing, launch, and maintenance support). |
| ● | Delivery method and payment terms. Payments are typically due within 90 days after delivery in products sales; payments are made in installments based on milestones in SaaS business. |
| ● |
Breach of contract terms for medical product, including refund and return of products. Purchasers are entitled to refunds and may return the product if the wrong product is delivered or the product does not meet agreed quality standards. The SaaS agreement includes a 90-day quality guarantee with free O&M support. If the service fails to meet performance standards, the Buyer is entitled to request mandatory repairs or technical corrections to ensure compliance with contract terms.
|
| ● | Medical product’s shipping costs are typically borne by the seller. SaaS development service generally requires customer’s acceptance based on milestones (BRD, UI Design, UAT, Launch). Implicit acceptance if no objection is raised within 7 working days after receiving deliverables. |
| ● | Dispute solutions, including bringing a lawsuit at the local People’s court if negotiations are unsuccessful. |
For the fiscal years ended December 31, 2025, 2024 and 2023, the revenues generated from our sales of disposable medical devices amounted to $60,171,958, $96,909,642 and $96,618,077, respectively. For the fiscal years ended December 31, 2025, 2024, and 2023, our sales of disposable medical devices to domestic direct end users customers and domestic distributor customers accounted for 97.34%, 99.96%, and 99.50% of our revenues, respectively. For the fiscal years ended December 31, 2025, 2024, and 2023, our sales of disposable medical devices to overseas distributing customers accounted for 0.04%, 0.04%, and 0.50%, respectively, of our revenues. For the fiscal years ended December 31, 2025, 2024 and 2023, the revenues generated from SaaS service and development accounted for 2.62%, nil and nil of our total revenues, respectively.
As we provide our products to export distributor customers based upon their regional coverage, we do not have country-specific information on end-users overseas. Substantially all end users who acquire our products through domestic distributors are based in China. End users who acquire our products through licensed export distributors have two types - foreign distributors from other countries and end users from other countries. For the year ended December 31, 2025, no customer accounted for approximately 10% of the Company’s total revenues. For the year ended December 31, 2024, one customer accounted for approximately 12.77% of the Company’s total revenues. For the year ended December 31, 2023, one customer accounted for approximately 16.84% of the Company’s total revenues.
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Our Suppliers
We source our suppliers through multiple channels: (i) through referrals from local medical device industry associations, (ii) through industry exhibitions/expos, (iii) through our distributors, and (iv) through open bids.
Our suppliers are divided into three categories: (1) those providing raw materials for the manufacturing of our products, (2) those providing products for our resales, and (3) those providing outsourced SaaS development subcontractors.
Our raw and auxiliary materials include rubber, chemical polyethylene (PE), polyethylene, polypropylene, nylon and non-woven fabrics, all of which are purchased from certified and qualified suppliers in China. Our raw materials supply has been very stable for many years and are easily sourced due to our unique geographical location.
We distribute products sourced from certain suppliers when it comes to our one-stop service. We from time to time receive orders from our customers with a variety of products not in our product portfolio. Through our suppliers, we are capable of accommodating our customers’ need and providing one-stop service to our customers.
We do not have long-term written purchase agreements with our suppliers. As we source from numerous suppliers, we do not consider any particular one or more of our suppliers to be material to our business. As of the date of this Annual Report, we have a total number of 73 suppliers. We can utilize any supplier we determine at our sole discretion. Although we can utilize any supplier we determine, we believe that we established and maintain healthy and stable relationships with our significant suppliers through years of cooperation. For the year ended December 31, 2025, our three most significant suppliers were Yangzhou Tianyi Medical Device Co., Ltd., Yangzhou Xiaguang Medical Device Co., Ltd., and Yangzhou Jiangzhou Medical Device Co., Ltd., representing 12.14%, 9.93% and 8.67% of our total purchase respectively. For the year ended December 31, 2024, our three most significant suppliers were Yangzhou Tianyi Medical Device Co., Ltd., Yangzhou Xiaguang Medical Device Co., Ltd., and Yangzhou Jiangzhou Medical Device Co., Ltd., representing 13.73%, 9.14% and 9.05% of our total purchase respectively. For the year ended December 31, 2023, our three most significant suppliers were Yangzhou Tianyi Medical Device Co., Ltd., Yangzhou Century Shunda Technology Co., Ltd., and Yangzhou Xiaguang Medical Device Co., Ltd., representing 14.46%, 9.24% and 8.19% of our total purchase respectively. Each supplier order is typically governed by a brief purchase-order based purchase agreement. The key terms of the supplier purchase agreements (including those agreements with our significant suppliers) include:
| ● | The product’s name, type, quantity and price. |
| ● | The supply cooperation relationship of the parties. Some suppliers supply finished products for re-sale and others supply raw materials for manufacturing. |
| ● | Quality terms which are typically expressed with reference to national or industry standards. |
| ● | Delivery method and payment terms, with payment due 90 days after delivery. Shipping costs are the responsibility of the supplier in products sales; Under SaaS subcontract arrangement, payments are made based on milestones in system development. |
| ● | Breach of contract terms, including refund and return of products, compensatory damages. If the supplier cannot deliver the product within the time agreed, or if the products do not meet the stated quality standard, the supplier must compensate us for losses caused, including treble damages if the products are defective or counterfeit. In the event we cannot pay timely, liquidated damages are due to the supplier. SaaS service breach of contract terms, including the supplier provides product quality assurance. |
| ● | For some significant supplier agreements, the breaching party is contractually required to pay 10% of the contract amount as liquidated damages if they unilaterally terminate the agreement. If the supplier fails to deliver the products within the time agreed, the supplier is contractually required to pay 5% or 0.05% of the contract amount on a daily basis for each and every date they delay delivery. |
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Marketing and Sales
We market and sell our products through multiple channels: (1) through direct sales force, including our own employees and independent sales agents, and (ii) through distribution network, including our domestic and exporting distributors.
Direct Sales Force
Our Sales Team
As of the date of this Annual Report, we have a direct sales team consisting of 81 employees. Our sales team provides us with direct access to our customers and is capable of addressing our customers’ needs in a fast and efficient way. They also coordinate with our distributors and independent sales agents in marketing and sales of our products.
The compensation package for our sales team includes fixed base salaries and commissions of 0.5%-1.0% based on the revenues or collections they achieve. We provide our sales team with regular training and internally developed systems to assist them in quickly becoming proficient and productive sales personnel.
Independent Sales Agents
As of the date of this Annual Report, we have a large number of independent sales agents for the marketing and sales of our products in the Chinese market, covering all regions of the PRC. Our independent sale agents market and sell our products in the regions where they are located.
We have no written sale agent agreements with our independent sale agents and we are connected with them via oral agreements. Upon successful sales of our products to customers secured by them, they settle their commission with our customers. We do not provide any commission or make any payments to them.
Our direct sales force has secured a total of 573 domestic customers, including hospitals and medical institutions. We will continue to work with existing, and identify and secure new, independent sales agents to expand our customer base and enhance our brand recognition across China.
Distribution Network
As of the date of this Annual Report, we have 4,409 domestic distributors and 403 exporting distributors. Distributors usually purchase products from us at a lower price and then resell our products to end customers both domestically and internationally at a comparatively higher price and earn the price difference.
Our domestic distributors cover 33 provincial-level administrative regions of the PRC for the resales of our products in the Chinese market. They market and distribute our products in the regions where they locate and have secured approximately 5,392 domestic customers for us, including hospitals and medical institutions.
Our exporting distributors are limited to our overseas sales. Each of our exporting distributor usually sells medical devices to at least three overseas customers. We therefore estimate conservatively that the total number of established direct and indirect customer relationships established overseas through our exporting distributors in Europe, North America, South America, Asia, Africa and Oceania to be about 1,119.
Distributors must have related qualifications in order to distribute our products. Upon our verification and approval by inspecting their qualification materials, such as business license, disposable medical device operation license and medical device exporting license, etc., and verifying their sales channels, distribution capacity and business reputation, distributors are authorized to distribute our products to their domestic and overseas customers.
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We do not have long-term written agreements with our distributors. Each distributor order is typically governed by a brief purchase-order based sales agreement. The key terms of the distributor purchase agreements include:
| ● | The product’s name, type quantity and price. |
| ● | Quality standard - medical device qualifications, including business license, medical device production and operation licenses, medical device registration certificates, inspection report, etc. Lack of one of the qualifications will result in termination of the agreements. |
| ● | Delivery method and payment terms; payment is typically due within 90 days after delivery. Shipping costs re typically borne by us. |
| ● | Breach of contract terms, including refund and return of products. Distributors are entitled to refunds and may return the product if the wrong product is delivered or the product does not meet agreed quality standards. |
| ● | Dispute solutions, including bringing a lawsuit at the local People’s court. |
Our distributors have secured a total of approximately 5,392 customers for us both domestically and internationally. We will continue to work with existing distributors, and identify and secure new distributors, to expand our customer base and enhance our brand recognition both in the PRC and abroad.
Our Research and Development (“R&D”)
We invest in R&D efforts that advance our technology with the goal to expand new products and improve upon our existing product offerings. Our R&D expenses totaled approximately $2.4 million, $3.5 million, and $2.8 million, for the years ended December 31, 2025, 2024, and 2023, respectively. R&D expenses mainly consist of applicable personnel, design, sample testing and materials expenses. As of the date of this Annual Report, we had a total of 69 employees in the R&D department. In the future, we expect R&D expenses to increase in absolute dollars as we continue to develop new products, enhance existing products and technologies and perform activities related to obtaining additional regulatory approval.
We adhere to a market-oriented R&D approach and actively cooperate with universities, hospitals, medical institutions, distributors and independent sales agents in sorting out our R&D orientation based on the real market demand. Our market-oriented R&D approach includes the following:
| ● | Hospitals to Factories. There is usually a technology department or scientific research department in every hospital in China. Hospitals conduct R&D on innovative products due to their needs, but they normally have no manufacturing capabilities and qualifications. As a disposable medical device manufacturer, to serve our customers better, we from time to time communicate with hospital personnel and keep ourselves informed of their latest demands, including but not limited to acquiring the patents on their IP list required for the manufacturing of certain products, and research, develop and manufacture such products that tailored to their needs. |
| ● | Universities to Factories. A lot of universities and medical colleges have research centers, where they develop and patent certain R&D results. We from time to time communicate with their research personnel and keep ourselves informed of their latest R&D and patents, and if needed by our customers, purchase patents from them and research, develop and manufacture products with such patents. |
| ● | Customers’ Feedbacks from Distributors and Independent Sales Agents. Distributors and independent sales agents from time to time receive feedbacks and proposals from end use customers and then pass on to us. Upon our internal evaluations on those feedbacks and proposals, we may either research, develop and improve our products accordingly, or entrust university or college research centers for R&D. Once we receive their R&D results, we may improve our products in accordance with their R&D results, including acquiring patents from those centers for manufacturing of our products. |
By continuously upgrading and improving products and technologies that tailed to our customers’ requirements, we have further strengthened our customer’s loyalty.
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As of the date of this Annual Report, we have 27 registered patents. Faced with the ever-changing market demands, we continue to abandon and phase out unsuitable patents and technologies, and simultaneously invest in acquiring new patents and technologies that tailored to our customer’s fast changing requirements.
We believe our ability to rapidly develop innovative products is attributable to the dynamic product innovation process that we have implemented, the versatility and leveragability of our core technology and the management philosophy behind that process. We have recruited and retained professionals with significant experience in the development and improvement of medical devices. We have a pipeline of products in various stages of development that are expected to provide additional commercial opportunities. Our research and development efforts are based at our operating subsidiaries in PRC.
Competition
The medical device industry is intensely competitive, subject to rapid change and significantly affected by new product introductions and other market activities of industry participants. We compete or plan to compete with manufacturers of disposable medical devices. Some of these competitors are large, well-capitalized companies with significantly greater market share and resources than we have. As a consequence, they are able to spend more on product development, marketing, sales and other product initiatives than we can. We also compete with smaller medical device companies that have single products or a limited range of products. Some of our competitors have:
| ● | significantly greater name recognition; |
| ● | broader or deeper relations with healthcare professionals, customers and third-party payers; |
| ● | more established distribution networks; |
| ● | additional lines of products and the ability to offer rebates or bundle products to offer greater discounts or other incentives to gain a competitive advantage; |
| ● | greater experience in conducting research and development, manufacturing, clinical trials, marketing and obtaining regulatory clearance or approval for products; and |
| ● | greater financial and human resources for product development, sales and marketing and patent prosecution. |
The Company believes that it competes favorably with respect to these factors, although there can be no assurance that the Company will be able to continue to compete successfully in the future.
We believe the following companies may be our primary competitors:
| ● | Shandong Weigao Group Medical Polymer Co., Limited, is principally engaged in the research and development, production and sale of single-use medical devices. The Group has a wide range of products, which includes: i) consumables (infusion sets, syringes, medical needles, blood bags, pre-filled syringes, blood sampling products, and other consumables); ii) orthopedic materials and iii) blood purification consumables and equipment. Currently, its sales are mainly conducted in the PRC market, but it is actively exploring opportunities in international markets, with products having been exported to 30 countries and regions, including the United States, Germany, Romania, Australia and the United Kingdom. (Source: http://en.weigaogroup.com/gfccontentEn/Enterpr.aspx) |
| ● | Jiangxi Hongda Medical Equipment Group Ltd. specializes in manufacturing sterile medical devices for single use. Their products cover nine categories, such as infusion sets, blood transfusion equipment, injection equipment, puncture sets, examination and assistant supplies, anesthesia appliances, catheters, medical equipment, cardiovascular intervention, blood purification products, etc. It is a major supplier of sterile medical equipment for a lot of countries, such as the United States, Europe, Africa, the Middle East and the Southeast Asia. It is also one of biggest manufacturers to produce and process medical disposables, with nearly a quarter of the total market share in China alone. (Source: http://en.jxhd.cn/comcontent_detail.html) |
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| ● | Henan Tuoren Medical Device Co., Ltd., founded in 2004, is a healthcare solutions provider, focusing on medical consumables and extending to electronic medical devices, surgery devices and biomedical materials. It is dedicated to designing, developing and distributing medical devices to its customers, covering 220 kinds of products with over 1880 specifications mainly in the field of anesthesia, pain management, nursing, diagnostics, surgery, hemodialysis and intervention. Its products have been sold to more than 70 countries and regions around the world, with international subsidiaries established in the United States and India. (Source: http://www.tuoren.com/en/index.php?s=/about/history.html) |
| ● | Allmed Medical Products Co., Ltd., founded in 1992, is the largest OEM (original equipment manufacturer) manufacturer and exporter of wound care products in China, providing a worldwide range of traditional wound care products, including gauze swabs, non-woven swabs, lap sponges, fluffy bandages, abdominal pads, non-stick pads, adhesive bandages, elastic bandages, medical kits and disposable drapes, etc. Compared with our products, their products are very limited. (Source: http://www.allmed-china.com/index.php?m=content&c=index&a=lists&catid=11) |
| ● | Jiangxi Sanxin Medtec Co., Ltd., founded in 1997, is a listed company in China, focusing on researching and developing, manufacturing and marketing of medical devices. It is the first listed company in the field of syringe and infusion. Their main products are “catheter tubing series,” “blood purification series,” “syringe series” and “infusion & transfusion series,” totally four series products with over 30 types of more than 1000 specifications. Its products are sold both domestically and internationally, covering more than 30 provinces in China and more than 60 countries and regions nationwide. (Source: http://www.sanxin-med.com/category/Category/index/cid/295) |
| ● | Jiangxi 3L Products Group Co., Ltd., founded in 1990, combines the scientific research, production and marketing of single use medicinal macromolecular products and equipment, medical purification equipment sales, and maintenance and installation work into one. It established trade abroad with more than 20 countries and regions. It also has branch offices in Hong Kong, South Africa, Russia, etc. In the past few years, their surgical towels comprised of more than 90% of the domestic market share in China, and their combined sales have taken over half of the nationwide total product needs in the domestic market in China. (Source: http://www2.3l.com.cn/web/2.htm) |
Our main competitors from other provinces and cities are Shandong Weigao Group, Jiangxi Hongda Group, Henan Tuoren Group, and Hubei Allmed Co., Ltd. These companies are our competitors as well as our partners. For example, Weigao Group in Shandong Province distributes disposable infusion pumps, medical kits, and other products produced by our Huodong subsidiary, while our Huadong subsidiary distributes the detained needle products of Weigao Group in our Yangzhou area; Tuoren Group distributes nitrile glove products of our Huadong subsidiary in Henan Province, while our Huadong subsidiary distributes Tuoren’s medical guidewires and catheters in our Jiangsu Province. Another example is Hubei Allmed Co., Ltd., 80% of whose products are exported with 20% are domestically distributed (in comparison to our 80% domestic sales and 20% indirect exporting sales). The disposable stainless steel medical brushes it exports are exclusively supplied by our Yada subsidiary, so we regard company not only our domestic client, but also our competitor in the international market. Because of the huge market in China and in the world, there are tens of thousands of varieties of medical consumables. Not a single company in the world can dominate the entire market. While competing in the market, we more often cooperate with each other. Under the guidance of industry associations and local governments, we have formed an industry alliance to continuously exchange ideas with each other, discuss market development needs, and to build a common development platform. It should be noted that in the face of the sudden outbreak of the epidemic last year and this year, we shared information, supported each other with epidemic prevention materials, raw materials, and auxiliary materials, as well as production equipment, thus achieving win-win cooperation with fruitful outcomes.
A demand for one-stop service for medical consumables is an inevitable development in the medical consumables industry. There are several reasons why our company has achieved steady development over its more than 30 years history. One of the most important reasons is our one-stop service system, through which we can supply all disposable medical devices required by the client, combining products manufactured by us with products outsourced from others but passed through our quality control scrutiny. Through market research, we have learned that our competitors are also developing a one-stop service system and are in one of the following levels of progress: first, some companies have established a one-stop service system; second, some companies have established a one-stop service system, but their system is underperforming and needs improvement; and third, some companies are still undergoing development of a one-stop service system.
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There are currently approximately 412 manufacturers and distributors of medical consumables where the company is located in Touqiao Town, which is known as the “Hometown of Medical Consumables in China.” As a top player in the region, the Company’s revenues accounted for approximately 12% of the total revenues generated from all medical device manufactures in Touqiao Town. Our total sales in 2025 were more than RMB700 million (approximately $96 million), with more than 10,000 product types. By comparison, our research indicates that the annual sales of the second- and third-ranking companies in Touqiao Town are just over RMB150 million, while the annual sales of the fourth- and fifth-ranking companies are in the range of RMB100 million to RMB150 million, with a lesser variety of product types. Since our production scale and number of product types far surpass those of other companies in Touqiao Town, we consider other local companies to be our partners more than our competitors. We supply each other’s needs in terms of production, procurement, and distribution. At the same time, these local enterprises in Touqiao Town are not able to provide customers with the same one-stop service that we provide due to their limited scale and product types. The total output value of the top 20 companies in Touqiao Town, including our company, was about RMB3.0 billion in 2025. Our company’s output value in 2025 was RMB710 million, accounting for about 23.6% of the total output value, while the other four next-largest companies in Touqiao Town had a total output value of about RMB615 million in 2025, accounting for 20.5% of the total output value.
Competitive Strengths
We are dedicated to serving our customers. We believe that the following strengths contribute to our success and are the differentiating factors that set us apart from our peers:
| ● | Cost-effective methods to address customers’ significant needs with a variety of products. As of the date of this Annual Report, we have a total of 3,888 products in our product portfolio covering all Class I, II, and III disposable medical devices, including 3,730 products for domestic sales and 158 products for overseas sales. Through sales of different products to our customers via our one-stop service, we are able to cost-effectively address our client’s needs. |
| ● | Massive distribution network of clients, distributors, and suppliers. Through both direct sales and our massive distribution network, our products are sold to hospitals, pharmacies and medical institutions both domestically and internationally. As of the date of this Annual Report, we have 81 employees in our sales department and 5,385 independent sales agents, 4,409 distributors for domestic sales and 403 exporting distributors for overseas sales. We not only have accumulated a substantial domestic customer base and forged strong relationships with these customers, but also established good long-term cooperative relationships with well-known foreign medical equipment brand companies, which extends our reach world-wide. We believe that these customers will continue to be a source of business as well as a good referral source to new customers. |
| ● | Geographical advantages allow us to provide one-stop service to our customers at reduced cost. Hospitals and other medical institutions normally have lists of over a hundred or even a thousand of different kinds of disposable medical devices which they must procure on a regular basis. Our PRC operating subsidiaries and primary operations are located in Touqiao Town, Yangzhou City, Jiangsu Province, one of the four medical device centers in PRC. Dubbed the “Hometown of Medical Devices & Consumables in China,” Touqiao Town hosts hundreds of disposable medical device manufacturers manufacturing all different kinds of products. In addition to our own products, we are qualified to distribute products sourced from other manufacturers. As a result, our clients are able to receive all required products by placing just a single order with us. When we receive an order from our hospital clients or distributors, we are able to quickly fulfill the order by including our own branded products and qualified products sourced from other manufacturers in Touqiao Town. There are also large numbers of medical device professionals, including research and development, or “R&D,” and technology professionals, and thousands of independent sales agents based near our primary operations. We are therefore able to procure high quality raw materials and products of other brands at a comparatively low price within a short period of time and to obtain sufficient labor and support to our one-stop service and manufacturing. |
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| ● | Economies of scale and automation provide significant cost advantages. The scale of our production is regional-leading within Yangtze River Delta region of China. The disposable medical devices we manufacture and sell are mainly low value-added products, which, however, are largely consumed and in huge demand every day in hospitals, medical institutions, and other health related industry entities. Through scaled production, we are able to increase our profits margin. In the procurement process, the production scale reduces our procurement costs and mitigate the impact of raw material price fluctuations. In the manufacturing process, we retrofitted equipment and introduced automation to improve production efficiency. At present, we have 12 purification plants covering a total area of approximately 110,352 square feet (10,252 square meters). |
| ● | Leading competitive position maintained by high quality standard systems. Quality and safety are always our core value. Applying information acquired during our long-term business transactions with major medical institutions across China, we have developed a sophisticated quality management system, as well as a strict and effective internal control standard system. All of our products, either self-manufactured or sourced, fall within our quality control system subject to our quality inspection before delivery (See the section entitled “Quality Control” in Business). |
| ● | Market-driven research and development allow for continual improvement and long-term client loyalty. As of the date of this Annual Report, we have an R&D team of 69 people, accounting for 11.15% of our total employees. For the fiscal year ended December 31, 2025, we have invested a total of $2.4 million in the products and technologies R&D. For the fiscal year ended December 31, 2024, we have invested a total of $3.46 million in the products and technologies R&D. For the fiscal year ended December 31, 2023, we have invested a total of $2.75 million in the products and technologies R&D. We adhere to a market-oriented R&D approach and actively cooperate with universities, hospitals, medical institutions, distributors and independent sales agents in sorting out our R&D orientation based on the real market demand. We continuously upgrade and improve our products and technologies to better suit our customers. |
| ● | Visionary and experienced management team Building a trusted brand and always doing the right thing for people has been at the heart of our founding management team since day one. Our company culture, strategic vision and operational execution are driven by our visionary founder, Yongjun Liu. Mr. Liu is a successful entrepreneur who has been engaged in the medical device industry for more than 40 years and has accumulated extensive experiences and led his businesses to make remarkable achievements. He has been awarded as Excellent Entrepreneur, Honest Entrepreneur Representative and Medical Device Industry Representative on multiple occasions. At the same time, he is keen on public welfare undertakings. He has also sponsored a lot of splendid undertakings such as road reconstruction in towns and villages, donations to the Red Cross Society, reconstruction of nursing homes, poverty alleviation and aid for students. Our company culture mirrors our founder’s mission to empower and serve those who serve others. |
Quality Control
All of our products, either self-manufactured or sourced, fall within our quality control system subject to our quality inspection before delivery. For sourced products, they must first be shipped to us for quality inspection, upon passing inspection, be packaged, labeled and shipped to our customers.
Medical device and equipment are medical products directly applied to the human body, which is closely related to the life and health of users. Quality and safety are always our core value. Reliable, safe and stable product quality is an important driving factor for maintaining market competitiveness. Through long-term business dealings with major hospitals and medical institutions across China, we believe that we have developed a sophisticated quality control management system as well as a strict and effective internal control system in accordance with the requirements of Chinese laws and regulations.
We prioritize product quality management and are committed to strengthening the professional ethics and cultivating quality consciousness of our employees, forming a strict quality management system, which we believe is in line with international standards.
Our rigorous quality control management programs have earned us a number of quality-related manufacturing designations. Our manufacturing facilities are ISO 13485 compliant with ISO 13485:2016 edition certification achieved in 2020. In 2018, we achieved compliance with European Union’s CE certification, allowing certain of our products (such as Disposable Amniotic Membrane Perforators, Disposable Medical Suction Connecting Tubes and Disposable Gynecological Samplers) to be CE marked. In April 2020, we renewed registration of certain products with the FDA, including ID bracelet, surgical tapes, elastic, adhesive bandages, etc., allowing our products to enter U.S. market. We have more than 60 categories of products that have passed the quality system inspections administered by the China Food and Drug Administration and local authorities in Yangzhou City.
We have annual quality targets, which are distributed to our employees and all departments annually. We conduct monthly follow-ups and quarterly evaluations on execution of the plans held to ensure that the annual quality targets are met.
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However, despite our quality control management system, we cannot eliminate all risks of errors, defects or failures. We may fail to detect or cure defects as a result of a number of factors, many of which are outside our control, including:
| ● | technical or mechanical malfunctions in the production process; |
| ● | human error or malfeasance by our quality control personnel; |
| ● | tampering by third parties; and |
| ● | defective raw materials or equipment. |
Failure to detect quality defects in our products could result in patient injury, customer dissatisfaction, or other problems that could seriously harm our reputation and business, expose us to liability, and adversely affect our revenue and profitability.
In 2018, our PRC subsidiaries Jiangsu Yada and Jiangsu Huadong got fined of immaterial amount for noncompliance with the local laws and regulations. Upon receipt of the fine notices, we promptly reacted to the comments from the related local government, rectified the noncompliance situation, recalled all noncompliance products and paid the fines in full. As a result, we took some measures to avoid future noncompliance.
Specific rectification measures and the impacts on our products and business are as follows:
| No. | Penalty decision | Misconduct for penalized | Regulatory measures after rectification |
Effect on products/business | ||||
| 1 | (Yangzhou) Shi Yao Jian Xie Fa [2017] No. 48 / (Yangzhou) Shi Yao Jian Xie Fa [2018] No. 23 | Medical surgical film does not label the texture of the transparent plastic film/ providing fake registration product criterion to the Food and Drug regulatory authority that supervises and inspects products | Canceling registration certificates and stopping producing such related products | The Company has canceled the relevant registration certificates and no longer produced such products. Because the output of these products is minor, which occupies an extremely low proportion of the Company’s total products, terminating the production of this product will not exert any adverse effect on the Company’s business. | ||||
| 2 | (Yangzhou) Shi Yao Jian Xie Fa [2017] No. 46 | Production of inspection gloves that fail to meet the compulsory standards [model specification: 7.5] (Production date of glossy powder: 20170108) (The reason for the insufficient tension is that the rubber supplier has not followed the specifications standards during production) | Enhancing the random inspection of the supplier’s production specification standards when accepting outsourced materials, as well as promoting the proportion of random inspections | Such administrative penalty has not adversely affected products and the Company’s business. | ||||
| 3 | (Yangzhou) Shi Yao Jian Xie Fa [2018] No. 16 | “ultraviolet absorbance” test of disposable infusion pumps has failed (The main reason that caused the product’s UV absorbance to exceed the standard is the secondary vulcanization time and vulcanization temperature of the liquid storage bag has not met the specified requirements. The liquid storage bag is an outsourcing material, and the original supplier does not strictly follow its production process specifications during production, which shortens the secondary vulcanization time and vulcanization temperature, causing UV absorbance to exceed the standard.) | 1. Switch to another supplier of the liquid storage bag; 2. Improve the internal control standard requirements for the incoming inspection of liquid storage bags (the ultraviolet absorbance index of the incoming inspection liquid storage bag is ≤ 0.2) |
Such administrative penalty has not adversely affected products and the Company’s business. |
For the fiscal year of 2025 and as of the date of this Annual Report, we are not aware of any investigations, prosecutions, disputes, claims or other proceedings in respect of quality issues, nor has the Company been punished or can foresee any punishment to be made by any related government authorities of the PRC.
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Class I, II, and III Medical Device Approval Process in China
“Class I” medical devices in China refers to sanitary and civilian products with extremely low risk, which do not need to be disinfected. To record this type of product in the official catalogue, a recordation application must be submitted on the website of the National Medical Products Administration. The application must clarify relevant information about product standard, the scope of use, production technologies, and instructions for the use of material. The device may then be produced and distributed after obtaining the online approval of the National Medical Products Administration. The following chart is an overview of the application and approval process for Class I devices recordation for reference:
Schedule 1 Flow Chart of the Application Procedures for Recordation of the Medical Devices of Class I
(statutory time limit: on-the-spot conclusion)
Please refer to the Regulation on Supervision and Administration of Medical Devices, the Measures for the Administration of Registration and Recordation of Medical Devices, and the Announcements on Matters Relating to the Recordation of the Class I medical Devices for the application requirements and procedures for the recordation of Class I medical device products.
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“Class II” and “Class III” medical devices in China refer to medical-grade products with higher risk. The application procedures for registration of these two types of products in China are as follows: First, the products are submitted for inspection with various materials. After the submitted materials are reviewed by the experts to their satisfaction, the National Medical Products Administration will organize a team of experts to visit the factory for on-site inspection and acceptance. After passing the on-site acceptance, the products with higher risk are required to be clinically tested. Only after the clinical report and other application documents are submitted to the National Medical Products Administration, which approves these materials and issues the product registration certificate, shall the enterprise be allowed to produce and distribute the product. The following chart is an overview of the application and approval process for Class II and III devices registration for reference:
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Please refer to the Regulation on Supervision and Administration of Medical Devices, the Measures for the Administration of Registration and Recordation of Medical Devices, the Operational Guidelines for the Registration and Approval of Domestic Class II Medical Devices, and the Operational Guidelines for the Registration and Approval of Domestic Class III and Imported Medical Devices for the application requirements and procedures for the registration of Class II and Class III medical device products.
The chart below summarizes the classification, approval dates, and current approval terms of our top 20 products:
| No. | Product Name | Remarks | Date
of approval |
Term of validity | Class | |||||
| 1 | Disposable ID bracelet | By Yada, CE certified | 2020-12-17 | 2029-7-24 | Class II | |||||
| 2 | Disposable medical brush | Class II | ||||||||
| 3 | Masks | By Huadong | 2025-10-22 | 2031-02-25 | Class II | |||||
| 4 | Disposable women’s examination kits | By Huadong | 2025-09-23 | 2031-02-24 | Class II | |||||
| 5 | Medical Brush | Source from other (No registration certificate is required) | Class II | |||||||
| 6 | Medical kit | Source from other (No registration certificate is required) | Class II | |||||||
| 7 | Medical sterile dressing surgical kits | By Yada, CE certified | 2020-12-17 | 2029-7-24 | Class II | |||||
| 8 | Medical catheter | Source from other (No registration certificate is required) | Class II | |||||||
| 9 | Uterine tissue suction tube | By Yada, CE certified | 2020-12-17 | 2029-7-24 | Class II | |||||
| 10 | Low-density polyethylene (LDPE) bottles for eye drops | By Huada, Long term | Class I | |||||||
| 11 | High-density polyethylene (HDPE) bottles for tablets | By Huada, Long term | Class I | |||||||
| 12 | Disposable women’s examination kits | Source from other (No registration certificate is required) | Class II | |||||||
| 13 | Disposable Gynecological sampler | By Yada, CE certified | 2020-12-17 | 2029-7-24 | Class II | |||||
| 14 | Disposable medical brush (type B1) | By Yada, CE certified | 2020-12-17 | 2029-7-24 | Class II | |||||
| 15 | Disposable anal bag | By Yada, CE certified | 2020-12-17 | 2029-7-24 | Class II | |||||
| 16 | Inspection gloves | By Yada | 2016-2-29 | Long term | Class I | |||||
| 17 | Disposable humidified nasal oxygen tube | By Huadong | 2025-10-17 | 2031-03-07 | Class II | |||||
| 18 | Disposable suction connecting tube | By Huadong | 2025-10-28 | 2031-03-08 | Class II | |||||
| 19 | Medical dressing | By Huadong | 2018-4-18 | 2028-4-17 | Class II | |||||
| 20 | Electronic pump | By Huadong | 2026-02-06 | 2031-03-08 | Class III |
Competitive Challenges
| ● | Our production capacity for certain pandemic prevention products is limited. Our existing production capacity for certain products, consisting primarily of some pandemic prevention-related products, is unable to meet the current market demand due to limitations on our funding, production equipment, and facilities. As a result, our ability to expand our market share in this area is limited. |
| ● | To date, limited access to capital has slowed our ability to gain additional market share. Our various product lines have developed rapidly and are competitive in the market. However, expansion of our production capacity, deepening of our marketing network, and improvement of our research and development efforts require sufficient capital investment. To date, lack of access to sufficient capital has limited some projects with development potential and has tempered our further expansion of market share. The Company may need more capital to expand its operations. |
| ● | We sell primarily low value-added products, which limits our sales margins. The Company currently primarily manufactures and sells Class I and Class II medical products, with a lesser proportion of Class III products. The medical device industry is highly competitive, especially in respect of low value-added medical devices, which has low entry requirements subject to rapid change and significantly affected by new product introductions and other activities of industry participants. We face potential competition from major medical device companies worldwide, many of which have longer, more established operating histories, and significantly greater financial, technical, marketing, sales, distribution, and other resources. As a result, we may find it difficult to compete with companies commercializing high-end products and enjoying a higher profit margins per-product. |
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Manufacturing
Our production is comprised of both in-house manufacturing and outsourcing to third parties. The third party manufactures generally shall ship products to us for our inspection first, and upon passing our inspection, we will label and assemble, and then ship them to clients per orders.
In-house Manufacturing
All of our in-house production is located at our facilities in Yangzhou, Jiangsu Province, PRC. At those facilities, we produce products and stock inventory of raw materials, components and finished goods at our facilities pursuant to the market demand, orders we receive or plan to receive, our production plan and capacity, procurement information from our direct sales force and our distributors. Our in-house per-order production model is as follows:
Due to the nature of the products, all products must be produced in the dust-free purification workshops and must be sterilized. This production process is subject to continuous review and monitoring by the quality control team to ensure that finished products are of the highest quality and meet customer requirements and ISO 13485 medical device quality management systems standard.
In order to the maintain product safety and a high standard of product quality, we implement a strict set of quality control policies and inspection protocols. These policies and protocols are enforced by our quality control team, senior management and officers along every step of the production to post-production process.
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Outsourcing
Our outsourcing of products, which to some extent expands our production capacity, are produced by third party manufacturers by either 1) using qualified raw material suppliers designated by us and completing the production in accordance with our standards, or 2) using their own selection of raw materials and production standards in line with our quality control requirements.
Given our unique geographical location, we are able to procure qualified raw materials and locate qualified third party manufacturers and suppliers locally at a cost-effective way such as lower price and save of transportation costs in a shorten period, thus realizing scale production, reducing our production costs and increasing profit margin. By outsourcing some semi-finished product processing to the local consigned manufacturers in Touqiao Town, we not only expand our production capacity and improve our production efficiency, but also reduce production costs while meeting clients’ demands for products of various specifications.
Environmental
Due to the nature of the Company’s products, the Company’s PRC subsidiaries do not generate industrial wastewater and wastes. Generally speaking, the wastewater generated by our Company’s products is sanitary wastewater which can be disposed directly into municipal pipelines. The generated corner wastes is generally cleaned and collected by the cleaning personnel on time, and then transported to the municipal garbage disposal site for treatment by the local sanitation department. Solid wastes generated during operation shall be collected and sent to relevant manufacturers for recycling. If new products are developed in the future and environmental measures are needed according to law, the Company will take corresponding environmental protection measures according to relevant laws and regulations. The waste discharge fees for the fiscal years of 2025, 2024, and 2023 were $4,127, $4,415, and $5,105, respectively, which has been paid in full.
The Company and its subsidiaries passed the environmental inspection and evaluation by the Environmental Protection Bureau of Yangzhou Guangling District in 2020, which determined that no waste, hazardous substances or wastewater were produced during manufacturing.
As of the date of this Annual Report, our waste discharge is in compliance with the local laws and regulations and we are not aware of any warning, investigations, prosecutions, disputes, claims or other proceedings in respect of environmental protection, nor have we been punished or can foresee any punishment to be made by any government authorities of the PRC.
Intellectual Property
Our business is dependent on a combination of trademarks, patents, copy rights, domain names, trade names, trade secrets and other proprietary rights in order to protect our intellectual property rights. As of the date of this Annual Report, we have three (3) registered trademarks, twenty-seven (27) registered patents and two (2) copyrights in the PRC.
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Trademarks
Set forth below is a detailed description of our registered trademarks:
| Country | Trademark | Trademark Registration No. | Trademark Name | Trademark Registration Date | Trademark Classes | Trademark Owner | Trademark Term | Trademark Status | ||||||||||||
| China |  | 19576090 | Hu Jun | 08/28/2017 | 30 | Jiangsu Yada | 08/28/2017 to 08/27/2027 | Registered | ||||||||||||
| China |  | 1415306 | Yada | 06/28/2000 | 10 | Jiangsu Yada | 06/28/2020 to 6/27/2030 | Registered | ||||||||||||
| China |  | 1421255 | Yada | 07/14/2000 | 6 | Jiangsu Yada | 07/14/2020 to 07/13/2030 | Registered | ||||||||||||
Patents
China’s patent law stipulates that there are three types of patent protection: invention patent, utility model patent and design patent.
| ● | A patent for invention refers to a new technical solution for a product, a method or an improvement thereof. |
| ● | Utility model patent refers to a new technical solution suitable for practical use, which is proposed for the shape, structure or combination of the product. |
| ● | Design patent refers to the new design of product shape, pattern, color or their combination, which is aesthetic and suitable for industrial application. |
Set forth below is a detailed description of our registered patents:
| Country | Patent No. | Patent Name | Patent Publication Date |
Patent Type |
Patent Validity Period |
Patent Status |
|||||||
| China | ZL201310537304.7 | Wound marginal cell crawling promoting type temperature control swell-shrink type drainage tube | 09/09/2015 | Invention | 20 years from the application date (11/03/2013) | Renewed and effective | |||||||
| China | ZL201821229644.8 | Bone mineral density instrument with good anti-falling performance | 7/5/2019 | Utility model | 10 years from the application date (8/1/2018) | Registered and effective | |||||||
| China | ZL2019 2235101 2.X | Novel device for gynecological diagnosis and treatment | 10/16/2020 | Utility model | 10 years from the application date (12/24/2019) | Registered and effective | |||||||
| China | ZL202020002206.9 | Joint fixation frame for orthopedic surgery | 10/23/2020 | Utility model | 10 years from the application date (01/01/2020) | Registered and effective | |||||||
| China | ZL202020017703.6 | Wound debridement device for emergency care | 10/16/2020 | Utility model | 10 years from the application date (01/06/2020) | Registered and effective |
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| Country | Patent No. | Patent Name | Patent Publication Date |
Patent Type |
Patent Validity Period |
Patent Status | |||||||
| China | ZL2013105373 27.8 | Interrupted thread clearance hole wall type injection needle | 11/4/2015 | Invention | 20 years from the application date (11/3/2013) | Registered and effective | |||||||
| China | ZL201922473496.5 | Sputum suction tube preventing respiratory mucosa from being damaged | 10/20/2020 | Utility model | 10 years from the application date (12/31/2019) | Registered and effective | |||||||
| China | ZL202020129072.7 | High-flow oxygen supply mask drainage and medicine delivery mechanism in the department of respiratory medicine | 10/20/2020 | Utility model | 10 years from the application date (01/20/2020) | Registered and effective | |||||||
| China | ZL201922332612.1 | Uterine cavity sampler for gynecological reproductive clinics | 10/23/2020 | Utility model | 10 years from the application date (12/23/2019) | Registered and effective | |||||||
| China | ZL201922412254.5 | Disposable intubate package | 10/30/2020 | Utility model | 10 years from the application date (12/28/2019) | Registered and effective | |||||||
| China | ZL201921757111.1 | Painless anesthetic needle | 11/3/2020 | Utility model | 10 years from the application date (10/19/2019) | Registered and effective | |||||||
| China | ZL201910037322.6 | Neurological rehabilitation adjuvant therapy stimulation device | 10/23/2020 | Invention | 20 years from the application date (01/15/2019) | Registered and effective | |||||||
| China | ZL202023332943.4 | Glucometer | 10/15/2021 | Utility model | 10 years from the application date (12/31/2020) | Registered and effective | |||||||
| China | ZL202023296047.7 | Portable blood glucose meter | 1/7/2022 | Utility model | 10 years from the application date (12/31/2020) | Registered and effective | |||||||
| China | ZL202023343934.5 | Bone density tester | 1/14/2022 | Utility model | 10 years from the application date (12/31/2020) | Registered and effective | |||||||
| China | ZL202023296027.X | Rotatable densitometer | 1/18/2022 | Utility model | 10 years from the application date (12/31/2020) | Registered and effective | |||||||
| China | ZL202023290045.7 | Surgical stapler | 1/18/2022 | Utility model | 10 years from the application date (12/31/2020) | Registered and effective | |||||||
| China | ZL202023295973.2 | New cutting stapler | 3/29/2022 | Utility model | 10 years from the application date (12/31/2020) | Registered and effective | |||||||
| China | ZL202023313858.3 | New medical mask | 1/17/2022 | Utility model | 10 years from the application date (12/31/2020) | Registered and effective | |||||||
| China | ZL202023295982.1 | New warm and anti-fog masks | 3/29/2022 | Utility model | 10 years from the application date (12/31/2020) | Registered and effective |
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| Country | Patent No. | Patent Name | Patent Publication Date |
Patent Type |
Patent Validity Period |
Patent Status | |||||||
| China | ZL202023296016.1 | Wrist blood pressure meter | 3/29/2022 | Utility model | 10 years from the application date (12/31/2020) | Registered and effective | |||||||
| China | ZL202023342335.1 | Portable blood pressure meter | 1/14/2022 | Utility model | 10 years from the application date (12/31/2020) | Registered and effective | |||||||
| China | ZL202023313904.X | Medical identification wristband | 3/29/2022 | Utility model | 10 years from the application date (12/31/2020) | Registered and effective | |||||||
| China | ZL202023342334.7 | Corrective device to prevent myopia | 1/18/2022 | Utility model | 10 years from the application date (12/31/2020) | Registered and effective | |||||||
| China | 2018212296448 | Bone densitometer with good anti-fall performance | 7/26/2019 | Utility model | 10 years from the application date (8/1/2018) | Registered and effective |
Our currently registered patents do not relate to our top 20 products, which are mature products. Instead, our registered patents represent the phased achievements of our R&D department, which will serve as the basis for future research and the planned development of new products.
Currently, we have 27 registered and effective patents, and we have not signed any royalty or licensing agreements with any third parties with respect to these patents. Currently, however, we are working under a collaboration agreement to develop and register a patented product for production and sale. The patent relates to a tracheal tube kit capable of pulverization and dosing by a tube wall fan spraying concurrently, and it is a utility model patent issued in China with a validity period of ten years from May 29, 2019. A utility model patent is issued for a new technical scheme suitable for practical use based on the shape, structure or combination of the products used. Moreover, to be suitable for a utility model patent, an invention must possess novelty, creativity and practicability. We are authorized by the patent owner to develop a new use for his patent and to file a medical device registration certificate for the developed product. Under our agreement with the patent owner, once the product is in production and sales, we will distribute 25% of the profit after tax to him. Under the agreement, the patent owner has the right to request an accounting of profits at his own expense. If the patent owner wishes to transfer the patent in the future, he can only transfer it to us. For this collaboration agreement, we have completed the development of the new use of the patented product, and we are in the process of applying for medical device registration certificate. Because the new product has not been put into production and has not generated any sales yet, we have not distributed any profit to the patent owner and no other fees have been paid or received under the agreement. The collaboration agreement and the profit-sharing arrangement are for a perpetual term. The collaboration agreement may be terminated, however, in the event that we are unable to provide an accurate accounting of profits for the product to the patent owner. In that case, all rights to the patent may be returned to the patent owner and we will be liable for damages in the amount of an additional 10% of net profits received from the product.
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Copyrights
Set forth below is a detailed description of our registered copyrights:
| Country | Copyright No. | Copyright Name | Copyright Publication Date |
Copyright Type |
Copyright Application Date |
Copyright Status |
|||||||
| China | 2019SR0829585 | Self-service printing terminal control system software of image diagnostic film (V1.0) | 8/9/2019 | software copyright | 6/13/2019 | Registered and effective | |||||||
| China | 2019SR0813645 | Intelligent Medical film image printing output system software (V1.0) | 8/6/2019 | software copyright | 6/20/2019 | Registered and effective |
Insurance
We maintain group life insurance for some of our high-risk employees, such as electricians, plumbers and tooling operators. We also provide social security insurance including pension, medical insurance, unemployment insurance, maternity insurance, on-the-job injury insurance and housing fund plans through a PRC government-mandated benefit contribution plan for our employees. We do not carry any key-man life insurance, product liability and professional liability insurance. Even if we purchase these kinds of insurance, the insurance may not fully protect us from the financial impact of defending against product liability or professional liability claims. We have not purchased any property insurance or business interruption insurance. We have determined that the costs of insuring for related risks and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical. We consider our insurance coverage to be sufficient for our business operations in China.
Legal Proceedings
We may from time to time be subject to various legal or administrative claims and proceedings arising in the ordinary course of business. Litigation or any other legal or administrative proceeding, regardless of the outcome, is likely to result in substantial cost and diversion of our resources, including our management’s time and attention.
With the exception of the following proceedings, we are currently not a party to any material legal or administrative proceedings:
| ● | On August 29, 2023, a legal proceeding, Zhu Cheng v. Jiangsu Yada Technology Group Co., Ltd., Yangzhou Huada Medical Equipment Co., Ltd., Jiangsu Huadong Medical Equipment Industrial Co., Ltd., and Rehabilitation International Medical Co., Ltd. [Case No.: (2023) Su 1091 Minchu No. 1779], was filed with the Yangzhou Economic and Technological Development Zone People’s Court. The materials of the company contract dispute case include a complaint, evidence, notice of response and subpoena, among other things. Zhu Cheng’s lawsuit claims joint and several liability from Jiangsu Yada Technology Group Co., Ltd., Yangzhou Huada Medical Equipment Co., Ltd., Jiangsu Huadong Medical Equipment Industrial Co., Ltd., and Rehabilitation International Medical Co., Ltd. for payment of $2.3 million and, from June 2022, a loss of 1.5 times LPR from the 30th to the actual date of payment. The main basis for Zhu Cheng’s claim is the “Letter of Termination of Contract” signed by two foreign companies (Xintai International Holdings Co., Ltd., Ace Capital Limited) and Jiangsu Yada Technology Group Co., Ltd. on August 20, 2019. The “Contract Termination Agreement” mainly stipulates that Jiangsu Yada Technology Group Co., Ltd. will compensate Xintai International Holdings Co., Ltd. and Ace Capital Limited for the fees paid by companies that were listed in South Korea. The case was heard for the first time on October 9, 2023, in the Eighth Court of the Yangzhou Economic and Technological Development Zone People’s Court. The content of the hearing focused on the presentation and cross-examination of evidence by both parties. On September 19, 2024, the Yangzhou Economic and Technological Development Zone People’s Court ruled that Jiangsu Yada needed to pay the plaintiff Zhu Cheng RMB 17 million plus interest. On December 12, 2025, the Yangzhou Intermediate People’s Court of Jiangsu Province ruled to revoke the original judgment, dismiss Cheng Zhu’s lawsuit, and allocate the litigation and appraisal costs among the parties, with this ruling being final. |
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REGULATIONS
We operate our business in the PRC under a legal regime consisting of the National People’s Congress, which is the country’s highest legislative body, the State Council, which is the highest authority of the executive branch of the PRC central government, and several ministries and agencies under its authority, including the State Administration of Foreign Exchange, or SAFE, the Ministry of Commerce, or MOFCOM, the National Development and Reform Commission, or NDRC, the State Administration for Market Regulation, or SAMR, formerly known as the State Administration for Industry and Commerce, or SAIC, the National Medical Products Administration, or NMPA (formerly known as the China Food and Drug Administration, or CFDA), the Ministry of Ecology and Environment, or MEE (formerly known as the Ministry of Environmental Protection, or MEP), the Ministry of Civil Affairs, or MCA, and their respective authorized local counterparts.
This section sets forth a summary of the most significant rules and regulations that affect our business activities in the PRC.
Regulation Relating to Foreign Investment
All limited liability companies incorporated and operating in the PRC are governed by the Company Law of the People’s Republic of China, or the Company Law, which was amended and promulgated by the Standing Committee of the National People’s Congress on December 29, 2023, and became effective on July 1, 2024. The Company Law stipulates the establishment and withdrawal of the company, the organizational structure and the capital system of the company, and strengthens the responsibilities of shareholders and management personnel and Corporate Social Responsibility. Foreign invested projects must also comply with the Company Law, with exceptions as specified in foreign investment laws.
The Foreign Investment Law of the People’s Republic of China (the “Foreign Investment Law”) was adopted by the second meeting of the 13th National People’s Congress on March 15, 2019, which became effective on January 1, 2020. On December 26, 2019, the State Council promulgated Regulation for Implementing the Foreign Investment Law of the People’s Republic of China (the “Regulation”), which became effective on January 1, 2020.
The Foreign Investment Law and the Regulation apply the administrative system of pre-establishment national treatment plus negative list to foreign investment and clarify the state shall develop a catalogue of industries for encouraging foreign investment to specify the industries, fields, and regions where foreign investors are encouraged and directed to invest. The MOFCOM and NDRC promulgated the Special Administrative Measures for the Access of Foreign Investment (Negative List) (2024 Version) (the “2024 Negative List”) on September 6, 2024, which became effective on November 1, 2024. The 2024 Negative List replaced both the 2021 Negative List and the 2020 Negative List and now serves as the main basis for management and guidance for the MOFCOM to manage and supervise foreign investments. The restricted and prohibited industry categories have shareholding requirements as prescribed in the 2024 Negative List. Those industries not set out on the 2024 Negative List shall be classified as industries permitted for foreign investment. None of our businesses are on the 2024 Negative List, nor on the 2021 Negative List or the 2020 Negative List. Therefore, the Company is able to conduct its business through its wholly owned PRC Subsidiaries without being subject to restrictions imposed by the foreign investment laws and regulations of the PRC. In addition, the version of the Catalogue of Industries for Encouraged Foreign Investment currently in force was amended in 2022 and became effective on January 1, 2023, which replaced the Catalogue of Industries for Encouraged Foreign Investment (2020 version).
Regulation Relating to Wholly Foreign-owned Enterprises
The Company Law provides that companies established in the PRC may take the form of company of limited liability or company limited by shares. Each company has the status of a legal person and owns its assets itself. Assets of a company may be used in full for the company’s liability. The Company Law applies to foreign-invested companies unless relevant laws provide otherwise.
The Foreign Investment Law replaced Law of the People’s Republic of China on Wholly Foreign-owned Enterprises. It stipulates that the PRC implements a system of pre-establishment national treatment plus negative list for the administration of foreign investment. Foreign investors are not allowed to invest in fields or sectors prohibited in the market access negative list for foreign investment. Foreign investors that intend to invest in the fields subject to access restrictions stipulated in market access negative list for foreign investment shall satisfy the conditions stipulated in such negative list. The PRC policies supporting enterprise development are equally applicable to foreign-invested enterprises. The PRC does not impose expropriation on foreign investment. Under special circumstances, if it requires imposing expropriation on foreign investment due to the need of public interest, expropriation shall be imposed according to legal procedures, and the foreign-invested enterprises concerned shall receive fair and reasonable compensation. Foreign-invested enterprises can raise funds through public issuance of stocks, corporate bonds and other securities in accordance with the law. Overall, The Foreign Investment Law establishes the clear principle of applying national treatment to FIEs except those engaged in industries on the 2024 Negative List. Since our current and planned business is not on the 2024 Negative List, to the best of our knowledge, it will not create any material adverse effect to our Company’s business.
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Regulations Relating to Intellectual Property
Copyright
China has adopted comprehensive legislation governing intellectual property rights, including trademarks and copyrights. China is a signatory to the primary international conventions on intellectual property rights and has been a member of the Agreement on Trade Related Aspects of Intellectual Property Rights since its accession to the WTO in December 2001.
In September 1990, the SCNPC promulgated the Copyright Law of the People’s Republic of China, effective in June 1991 and amended in 2001, 2010 and 2020 respectively. The amended Copyright Law extends copyright protection to internet activities, products disseminated over the internet and software products. In addition, there is a voluntary registration system administered by the Copyright Protection Centre of China.
In order to further implement the Computer Software Protection Regulations, promulgated by the State Council in December 2001 and amended in 2011 and 2013 respectively, the National Copyright Administration issued Computer Software Copyright Registration Procedures in February 2002, which specify detailed procedures and requirements with respect to the registration of software copyrights.
Trademark
According to the Trademark Law of the People’s Republic of China, promulgated by the SCNPC in August 1982, and amended in 1993, 2001, 2013 and 2019 respectively, the Trademark Office of China National Intellectual Property Administration is responsible for the registration and administration of trademarks and is also responsible for resolving trademark disputes in China. Registered trademarks are valid for ten years from the date the registration is approved. A registrant may apply to renew a registration within twelve months before the expiration date of the registration. If the registrant fails to apply in a timely manner, a grace period of six additional months may be granted. If the registrant fails to apply before the grace period expires, the registered trademark shall be deregistered. Renewed registrations are valid for ten years. In April 2014, the State Council issued the revised Implementation of the Trademark Law, which specified the requirements of applying for trademark registration and review.
Patent
According to the Patent Law of the People’s Republic of China promulgated by the SCNPC in 1984 and amended in 1992, 2000, 2008 and 2020, respectively, a patentable invention or a utility model must meet three criteria: novelty, inventiveness and practicability. A patent is valid for a twenty-year term for an invention and a ten-year term for a utility model or design, starting from the application date.
Domain Names
In May 2012, the China Internet Network Information Center issued the Implementing Rules for Domain Name Registration. On June 18, 2019, the China Internet Network Information Center promulgated the Implementing Rules of China Country Code Top-Level Domain Names Registration, which became effective on the same day and replaced the Implementing Rules for Domain Name Registration, setting forth the detailed rules for registration of country code top-level domain names. In August 2017, China’s Ministry of Industry and Information Technology promulgated the Administrative Measures on Internet Domain Names, or the Domain Name Measures. The Domain Name Measures regulate the registration of domain names, such as the top-level domain name “.cn.”
Regulations on Offshore Parent Holding Companies’ Direct Investment in and Loans to Their PRC Subsidiaries
An offshore company may invest equity in a PRC company, which will become the PRC subsidiary of the offshore holding company after investment. Such equity investment is subject to a series of laws and regulations generally applicable to any foreign-invested enterprise in China, all as amended from time to time, and their respective implementing rules; the Administrative Provisions on Foreign Exchange in Domestic Direct Investment by Foreign Investors; and the Notice of the State Administration on Foreign Exchange on Further Improving and Adjusting Foreign Exchange Administration Policies for Direct Investment (2015 Version). Under the aforesaid laws and regulations, the increase of the registered capital of a foreign-invested enterprise is subject to the prior approval by the original approval authority of its establishment. In addition, the increase of registered capital and total investment amount shall both be registered with SAIC and SAFE. Shareholder loans made by offshore parent holding companies to their PRC subsidiaries are regarded as foreign debts in China for regulatory purpose, which is subject to a number of PRC laws and regulations, including the PRC Foreign Exchange Administration Regulations as amended in August 2008 (the “Foreign Exchange Administration Regulations”), the Interim Measures on Administration on Foreign Debts (2022 Version), the Tentative Provisions on the Statistics Monitoring of Foreign Debts (2020 Version) and its implementation rules, and the Administration Rules on the Settlement, Sale and Payment of Foreign Exchange. Under these regulations, the shareholder loans made by offshore parent holding companies to their PRC subsidiaries shall be registered with SAFE.
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Regulations Relating to Foreign Exchange
Pursuant to the Foreign Exchange Administration Regulations, the RMB is freely convertible for current account items, including the distribution of dividends, interest payments, trade and service-related foreign exchange transactions, but not for capital account items, such as direct investments, loans, repatriation of investments and investments in securities outside the PRC, unless SAFE’s prior approval is obtained and prior registration with SAFE is made. In May 2013 SAFE promulgated the Administrative Provisions on Foreign Exchange in Domestic Direct Investment by Foreign Investors and Relevant Supporting Documents which provides for and simplifies the operational steps and regulations on foreign exchange matters related to direct investment by foreign investors, including foreign exchange registration, account opening and use, receipt and payment of funds, and settlement and sales of foreign exchange.
Pursuant to the Circular on Relevant Issues concerning Foreign Exchange Administration of Overseas Investment and Financing and Return Investments Conducted by Domestic Residents through Overseas Special Purpose Vehicles or the SAFE Circular 37, promulgated by SAFE and which became effective on July 4, 2014, (a) a PRC resident shall register with the local SAFE branch before he or she contributes assets or equity interests in an overseas special purpose vehicle, or Overseas Special Purpose Vehicles (SPV), that is directly established or controlled by the PRC Resident for the purpose of conducting investment or financing; and (b) following the initial registration, the PRC Resident is also required to register with the local SAFE branch for any major change, in respect of the Overseas SPV, including, among other things, a change of the Overseas SPV’s PRC Resident shareholder(s), name of the Overseas SPV, term of operation, or any increase or reduction of the Overseas SPV’s registered capital, share transfer or swap, and merger or division. Pursuant to SAFE Circular 37, failure to comply with these registration procedures may result in penalties.
Pursuant to the Circular of the State Administration of Foreign Exchange on Further Simplifying and Improving the Direct Investment-related Foreign Exchange Administration Policies, or the SAFE Notice 13, which was promulgated on February 13, 2015 and with effect from June 1, 2015, the foreign exchange registration under domestic direct investment and the foreign exchange registration under overseas direct investment is directly reviewed and handled by banks in accordance with the SAFE Notice 13, and the SAFE and its branches shall perform indirect regulation over the foreign exchange registration via banks.
Regulations Relating to Dividend Distributions
According to the Company Law and the Foreign Investment Law, each of our PRC subsidiaries, as a foreign invested enterprise, or FIE, are required to draw 10% of its after-tax profits each year, if any, to fund a common reserve, which may stop drawing its after-tax profits if the aggregate balance of the common reserve has already accounted for over 50% of its registered capital. These reserves are not distributable as cash dividends. Furthermore, under the Enterprise Income Tax Law, the maximum tax rate for the withholding tax imposed on dividend payments from PRC foreign invested companies to their overseas investors that are not regarded as “resident” for tax purposes is 20%. The rate was reduced to 10% under the implementation regulation for the Enterprise Income Tax Law. However, a lower withholding tax rate might be applied if there is a tax treaty between China and the jurisdiction of the foreign holding companies, such as tax rate of 5% in the case of Hong Kong companies that holds at least 25% of the equity interests in the foreign-invested enterprise, and certain requirements specified by PRC tax authorities are satisfied.
Regulations Relating to Overseas Listings
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, or the Opinions. The Opinions emphasized the need to strengthen the administration over illegal securities activities, and the need to strengthen the supervision over overseas listings by Chinese companies. Effective measures, such as promoting the construction of relevant regulatory systems will be taken to deal with the risks and incidents of China-concept overseas listed companies, and cybersecurity and data privacy protection requirements and similar matters.
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On February 17, 2023, the CSRC promulgated the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies, or the Trial Measures, and five supporting guidelines, which came into effect on March 31, 2023. The Trial Measures and its supporting guidelines, reiterate the basic principles of the Draft Rules Regarding Overseas Listing and impose substantially the same requirements for the overseas securities offering and listing by domestic enterprises. Pursuant to the Trial Measures, domestic companies that seek to offer or list securities overseas, both directly and indirectly, shall complete filing procedures with the CSRC pursuant to the requirements of the Trial Measures within three working days following its submission of initial public offerings or listing application. If a domestic company fails to complete the required filing procedures or conceals any material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative penalties, such as orders to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties, such as warnings and fines.
According to the Notice on the Administrative Arrangements for the Filing of Overseas Securities Offering and Listing by Domestic Companies from the CSRC, or the CSRC Notice, which was promulgated on February 17, 2023 and became effective on the same day, the domestic companies that have already been listed overseas before the effective date of the Overseas Listing Trial Measures (i.e. March 31, 2023) shall be deemed as existing issuers (the “Existing Issuers”). Existing Issuers are not required to complete the filing procedures immediately, and they shall be required to file with the CSRC for any subsequent offerings or upon the occurrence of material events such as change of control, being subject to investigation or sanctions by any overseas securities regulators or overseas authorities, change of listing status, listing on other stock exchange or voluntary or mandatory delisting. Further, according to the CSRC Notice, domestic company obtained approval from overseas regulatory authorities or securities exchanges (for example, the effectiveness of a registration statement for offering and listing in the U.S. has been approved) for their indirect overseas offering and listing prior March 31, 2023 but have not yet completed their indirect overseas issuance and listing, are granted a six-month transition period from March 31, 2023 to September 30, 2023. Those issuers that complete their indirect overseas offering and listing within such six-month period are deemed as Existing Issuers and are not required to file with the CSRC for their indirect overseas offerings and listings. Within such six-month transition period, however, if such domestic companies fail to complete their indirect overseas issuance and listing, they shall complete the filing procedures with the CSRC.
The Opinions, the Trial Measures and any related implementing rules to be enacted may subject us to additional compliance requirements in the future financial activities. See “Risk Factors - Risks Relating to Doing Business in the PRC - The Chinese governmental and regulatory interference could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.”
In August 2006, six PRC regulatory authorities, including the CSRC, jointly adopted the M&A Rules. The M&A Rules, among other things, require that if an overseas company established or controlled by PRC companies or individuals, or PRC Citizens, intends to acquire equity interests or assets of any other PRC domestic company affiliated with the PRC Citizens, such acquisition must be submitted to the MOFCOM for approval. The M&A Rules also require that an Overseas SPV formed for overseas listing purposes and controlled directly or indirectly by the PRC Citizens shall obtain the approval of the CSRC prior to overseas listing and trading of such Overseas SPV’s securities on an overseas stock exchange.
Based on current PRC laws and regulations, our corporate structure and arrangements are not subject to the M&A Rules. However, there are substantial uncertainties as to how the M&A Rules will be interpreted or implemented in the context of an overseas offering, and its opinions summarized above are subject to any new laws, rules and regulations or detailed implementations and interpretations in any form relating to the M&A Rules.
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Regulations Relating to Employment
The Labor Law of the People’s Republic of China, or the Labor Law, which became effective in January 1995 and was amended in 2018, and the Labor Contract Law of the People’s Republic of China, or the Labor Contract Law, effective in January 2008 and amended in 2012, require employers to provide written contracts to their employees, restrict the use of temporary workers and aim to give employees long-term job security. Employers must pay their employees’ wages equal to or above local minimum wage standards, establish labor safety and workplace sanitation systems, comply with state labor rules and standards and provide employees with appropriate training on workplace safety. In September 2008, the State Council promulgated the Implementing Regulations for the PRC Labor Contract Law which became effective immediately and interprets and supplements the provisions of the Labor Contract Law.
Under the Labor Contract Law, an employer shall limit the number of dispatched workers so that they do not exceed a certain percentage of its total number of workers. In January 2014, the MOHRSS issued the Interim Provisions on Labor Dispatching, which became effective in March 2014, pursuant to which it provides that the number of dispatched workers used by an employer shall not exceed 10% of the total number of its employees.
The PRC governmental authorities have passed a variety of laws and regulations regarding social insurance and housing funds from time to time, including, among others, the Social Insurance Law of the People’s Republic of China, the Regulation of Insurance for Labor Injury, the Regulations of Insurance for Unemployment, the Provisional Insurance Measures for Maternal Employees, the Interim Administrative Provisions on Registration of Social Insurance (repealed) and the Administrative Regulations on the Housing Provident Fund. Pursuant to these laws and regulations, enterprises in the PRC shall provide their employees with welfare schemes covering pension insurance, unemployment insurance, maternity insurance, occupational injury insurance and medical insurance, as well as housing fund and other welfare plans. Failure to comply with such laws and regulations may result in various fines and legal sanctions and supplemental contributions to the local social insurance and housing fund regulatory authorities.
Regulations Relating to Environmental Protection
Environmental Protection Law
The Environmental Protection Law of the PRC, or the Environmental Protection Law, was promulgated and effective on December 26, 1989, and most recently amended on April 24, 2014. This Environmental Protection Law has been formulated for the purpose of protecting and improving both the living environment and the ecological environment, preventing and controlling pollution, other public hazards and safeguarding people’s health.
According to the provisions of the Environmental Protection Law, in addition to other relevant laws and regulations of the PRC, the Ministry of Environmental Protection and its local counterparts take charge of administering and supervising said environmental protection matters. Pursuant to the Environmental Protection Law, the environmental impact statement on any construction project must assess the pollution that the project is likely to produce and its impact on the environment, and stipulate preventive and curative measures; the statement shall be submitted to the competent administrative department of environmental protection for approval. Installations for the prevention and control of pollution in construction projects must be designed, built and commissioned together with the principal part of the project.
Permission to commence production at or utilize any construction project shall not be granted until its installations for the prevention and control of pollution have been examined and confirmed to meet applicable standards by the appropriate administrative department of environmental protection that examined and approved the environmental impact statement. Installations for the prevention and control of pollution shall not be dismantled or left idle without authorization. Where it is absolutely necessary to dismantle any such installation or leave it idle, prior approval shall be obtained from the competent local administrative department of environmental protection.
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The Environmental Protection Law makes it clear that the legal liabilities of any violation of said law include warning, fine, rectification within a time limit, compulsory cease operation, compulsory reinstallation of dismantled installations of the prevention and control of pollution or compulsory reinstallation of those left idle, compulsory shutout or closedown, or even criminal punishment.
As of the date of this Annual Report, we are not aware of any warning, investigations, prosecutions, disputes, claims or other proceedings in respect of environmental protection, nor have we been punished or can foresee any punishment to be made by any government authorities of the PRC.
Order on Ecosystem by the Ministry of Ecology and Environment 2019 Classification-based Management on Fixed Pollutant Source
Pursuant to the Catalog of Classified Management of Pollutant Discharge Permits for Stationary Pollution Sources, which was promulgated by the Ministry of Ecology and Environment on July 28, 2017 and most recently amended on December 20, 2019. The Ministry of Ecology and Environment implements a classification-based management on the environmental impact assessment, or EIA, of pollutants according to pollutant amount and the impact of the pollutants on the environment as below:
| ● | For those pollutant discharge units with large amount of pollutants and significant environmental impacts, the key management on a pollutant discharge permit is required; |
| ● | For those pollutant discharge units with small amount of pollutants and small environmental impacts, the simplified management on a pollutant discharge permit is required; and |
| ● | For those pollutant discharge units with very small amount of pollutants and very small environmental impacts, the pollutant discharge registration form is required. |
The medical device manufacturing is classified as to fill in a Registration Form. Upon submission of all required documentation, we are registered under the new system by filling in Pollution Source Registration Form.
Regulations Relating to Customer Rights Protection
The PRC Customer Rights and Interests Protection Law, or Customer Protection Law, as amended on October 25, 2013 and effective on March 15, 2014, sets out the obligations of business operators and the rights and interests of the customers. Pursuant to this law, business operators must guarantee that the commodities they sell satisfy the requirements for personal or property safety, provide customers with authentic information about the commodities, and guarantee the quality, function, usage and term of validity of the commodities. Failure to comply with the Customer Protection Law may subject business operators to civil liabilities such as refunding purchase prices, exchange of commodities, repairing, ceasing damages, compensation, and restoring reputation, and even subject the business operators or the responsible individuals to criminal penalties if business operators commit crimes by infringing the legitimate rights and interests of customers.
Regulations Relating to Tax in the PRC
Income Tax
The PRC Enterprise Income Tax Law was promulgated in March 2007 and was most recently amended in December 2018. The PRC Enterprise Income Tax Law applies a uniform 25% enterprise income tax rate to both foreign-invested enterprises and domestic enterprises, except where tax incentives are granted to special industries and projects. Under the PRC Enterprise Income Tax Law, an enterprise established outside China with “de facto management bodies” within China is considered a “resident enterprise” for PRC enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income. Under the implementation regulations to the PRC Enterprise Income Tax Law, a “de facto management body” is defined as the body that exercises full and substantial control and overall management over the business, productions, personnel, accounts and properties of an enterprise.
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In April 2009, the Ministry of Finance, or MOF, and SAT jointly issued the Notice on Issues Concerning Process of Enterprise Income Tax in Enterprise Restructuring Business, or the Circular 59. In December 2009, SAT issued the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises, or the Circular 698. Both Circular 59 and Circular 698 became effective retroactively as of January 2008. In March 2011, SAT issued the Notice on Several Issues Regarding the Income Tax of Non-PRC Resident Enterprises, or the SAT Circular 24, effective in April 2011. By promulgating and implementing these circulars, the PRC tax authorities have enhanced their scrutiny over the direct or indirect transfer of equity interests in a PRC resident enterprise by a non-resident enterprise.
In February 2015, SAT issued the Notice on Certain Corporate Income Tax Matters on Indirect Transfer of Properties by Non-PRC Resident Enterprises, or the SAT Bulletin 7, to supersede existing provisions in relation to the indirect transfer as set forth in Circular 698, while the other provisions of Circular 698 remain in force. SAT Bulletin 7 introduces a new tax regime that is significantly different from that under Circular 698. SAT Bulletin 7 extends its tax jurisdiction to capture not only indirect transfers as set forth under Circular 698 but also transactions involving transfer of immovable property in China and assets held under the establishment, and placement in China, of a foreign company through the offshore transfer of a foreign intermediate holding company. SAT Bulletin 7 also addresses transfer of the equity interest in a foreign intermediate holding company broadly. In addition, SAT Bulletin 7 provides clearer criteria than Circular 698 on how to assess reasonable commercial purposes and introduces safe harbor scenarios applicable to internal group restructurings. However, it also brings challenges to both the foreign transferor and transferee of the indirect transfer as they have to determine whether the transaction should be subject to PRC tax and to file or withhold the PRC tax accordingly. In October 2017, SAT issued the SAT Bulletin 37 which superseded the Non-resident Enterprises Measures and SAT Circular 698 as a whole and partially amended some provisions in SAT Circular 24 and SAT Bulletin 7. 37SAT Bulletin 37 purports to clarify certain issues in the implementation of the above regime, by providing, among others, the definition of equity transfer income and tax basis, the foreign exchange rate to be used in the calculation of withholding amount, and the date of occurrence of the withholding obligation. Specifically, SAT Bulletin 37 provides that where the transfer income subject to withholding at source is derived by a non-PRC resident enterprise in installments, the installments may first be treated as recovery of costs of previous investments. Upon recovery of all costs, the tax amount to be withheld must then be computed and withheld.
Value-Added Tax
The PRC Provisional Regulations on Value-Added Tax were promulgated by the State Council on December 13, 1993, which became effective on January 1, 1994 and were subsequently amended from time to time. The Detailed Rules for the Implementation of the PRC Provisional Regulations on Value-Added Tax (2011 Revision) was promulgated by the Ministry of Finance on December 25, 1993 and subsequently amended on December 15, 2008 and October 28, 2011. On November 19, 2017, the State Council promulgated the Decisions on Abolishing the PRC Provisional Regulations on Business Tax and Amending the PRC Provisional Regulations on Value-Added Tax. Pursuant to these regulations, rules and decisions, all enterprises and individuals engaged in sale of goods, provision of processing, repair, and replacement services, sales of services, intangible assets, real property, and the importation of goods within the PRC territory are VAT taxpayers. On March 21, 2019, the Ministry of Finance, the SAT, and the General Administration of Customs jointly issued the Announcement on Relevant Policies on Deepen the Reform of Value-Added Tax. Sales revenue represents the invoiced value of goods, net of VAT. The VAT is based on gross sales price, starting from April 1, 2019, VAT rate was lowered to 13%.
On December 25, 2024, the Standing Committee of the National People’s Congress of the PRC promulgated the Value-Added Tax Law of the People’s Republic of China, or the Value-Added Tax Law. The Value-Added Tax Law will take effect on January 1, 2026 and shall supersede the PRC Provisional Regulations on Value-Added Tax. Under the Value-Added Tax Law, (i) entities and individuals that sell goods, services, intangible assets, real property, or import goods within the PRC territory are VAT taxpayers and shall pay VAT in accordance with the Value-Added Tax Law; and (ii) a 13% VAT rate applies to the sales of goods, except for agricultural products, pesticides, natural gas and other items expressly listed under the Value-Added Tax Law.
LAWS AND REGULATIONS RELATING TO MEDICAL DEVICES
Regulation and Classification of Medical Devices
Pursuant to the Regulation on the Supervision and Administration of Medical Devices, the Medical Products Administration of the State Council shall be responsible for the national administration and supervision of medical devices of the PRC and its local counterparts take charge of the local administration and supervision of medical devices of the PRC. Under this regulation, medical devices have been classified into three categories based on the degree of risk. Class I medical devices shall refer to those devices with low level of risks and whose safety and effectiveness can be ensured through routine administration. Class II medical devices shall refer to those devices with moderate risks that must be strictly controlled and regulated to ensure their safety and effectiveness. Class III medical devices shall refer to those devices with relatively high risks that must be strictly controlled and regulated through special measures to ensure their safety and effectiveness.
The products we currently manufacture and sell include Class I, II and III disposable medical devices.
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Registration and Filings of Medical Devices
Pursuant to the Regulation on the Supervision and Administration of Medical Devices and the Measures for the Administration of Registration and Recordation of Medical Devices, Class I medical devices are subject to filing administration, and Class II and Class III medical devices are subject to pre-approval registration administration. A registration certificate for Class II and Class III medical devices are issued upon approval, which is valid for five years and may be renewed six months prior to its expiration date.
Clinical trials are generally required for the registration of Class II and Class III medical devices, with certain exceptions as stipulated under the Regulation on the Supervision and Administration of Medical Devices.
As of the date of this Annual Report, we are current on the registration and filing for all of our medical devices.
Production License for Medical Devices
Pursuant to the Regulation on the Supervision and Administration of Medical Devices and the Administrative Measures on the Supervision of the Production of Medical Devices, or the Administrative Measures on Medical Devices Production, promulgated on July 30, 2014 and came into effect on October 1, 2014, as amended in 2017 and came into effect on November 11, 2017 (as amended on March 10, 2022 and effective on May 1, 2022), manufacturers engaged in the manufacturing of Class I medical devices are subject to production filing administration and receive production filing certificates upon satisfaction of filing requirements; while those engaged in the manufacturing of Class II and Class III medical devices are subject to pre-approval licensing administration and receive medical device production licenses upon receipt of approval for licensing. A medical device production license is valid for five years and may be renewed 30 to 90 business days prior to its expiration date.
In addition, a manufacturer of medical devices shall satisfy the following conditions:
| (1) | possessing production sites, environmental conditions, production equipment and professional technicians that are suitable for such medical device produced; |
| (2) | possessing organizations or professional examination staff and examination equipment that carry out quality examination for such medical device produced; |
| (3) | formulating a management system which ensures the quality of such medical device; |
| (4) | having capability of after-sale services that is suitable for such medical device produced; and |
| (5) | satisfying the requirements as prescribed in production R&D and production technique documents. |
As of the date of this Annual Report, we are current on the production filing and licensing of the medical devices.
Production and Quality Management of Medical Devices
Pursuant to the Administrative Measures on Medical Devices Production, and the Standards on Production and Quality Management of Medical Devices promulgated by the CFDA on December 29, 2014 and came into effect on March 1, 2015, an enterprise engaged in the production of medical devices shall establish and effectively maintain a quality control system in accordance to the requirements of the Standards on Production and Quality Management of Medical Devices. The enterprise engaged in the production of medical devices shall regularly conduct comprehensive self-inspection on the operation of quality management system and submit this report to the local food and drug supervision and administration authorities before the end of every year. The enterprise shall also establish its procurement control procedure and assess its suppliers by establishing an examination system to ensure the purchased products are in compliance with the statutory requirements. The enterprise shall apply risk management to the whole process of design and development, production, sales and after-sale services.
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Pursuant to The Notice of Four Guidelines including On-site Inspection Guidelines for the Standards on Production and Quality Management of Medical Devices promulgated by the CFDA on September 25, 2015 and came into effect on September 25, 2015, during the course of on-site verification of the registration of medical devices and on-site inspection of production license (including change production license), the inspection team shall, in accordance with the guidelines, issue recommended conclusions for on-site inspections, which shall be divided into “Passed,” “Failed” and “Reassessment after rectification.” During the supervision and inspection, if it is found that the requirements of the key items or ordinary items that may have direct impact on product quality are not satisfied, the enterprise shall suspend production and go through rectification. If it is found that the requirements of the ordinary items are not satisfied, and it does not directly affect product quality, the enterprise shall rectify in a prescribed time. The regulatory authorities will examine and verify the recommended conclusions and on-site inspection materials submitted by the inspection group and issue the final inspection results.
The inspection team has conducted several on-site inspections on our standards of production and quality management of medical devices during the track record period, the recommended conclusions issued by the inspection team were “Passed” or “Rectification within the prescribed period.” The matters with respect to “Rectification within the prescribed period” have been rectified within the prescribed period and submitted to the inspection team.
According to the on-site inspections on our standards of production and quality management conducted by competent authorities, we are in compliance with the requirements of the standards on production and quality management of medical devices.
Good Clinical Practice for Medical Devices
On March 1, 2016, the CFDA and the National Health and Family Planning Commission jointly promulgated the Good Clinical Practice for Medical Devices, which became effective as of June 1, 2016 and repealed on March 24, 2022. On March 24, 2022, the National Medical Products Administration and the National Health Commission of the People’s Republic of China jointly issued the Good Clinical Practice for Medical Devices (2022 Version), which became effective as of May 1, 2022. The regulation includes full procedures of clinical trial of medical devices, including, among others, the protocol design, conduction, monitoring, verification, inspection, and data collection, recording, analysis and conclusion and reporting procedure of a clinical trial.
For conducting clinical trials of medical devices, an applicant shall organize to formulate scientific and reasonable clinical trial protocol based on the categories, risks and intended use of the medical devices for the clinical study. The applicant shall be responsible for organizing to develop and revise of the researcher’s manual, clinical trial protocol, informed consent form, case report form, relevant standard operating procedures and other relevant documents, and shall be responsible for organizing necessary trainings for the clinical trials. The applicant shall select the clinical trial institutions and its researchers from the qualified medical device clinical trial institutions according to the characteristics of the medical devices to be used in the clinical study.
As an applicant for clinical trials of medical devices, we are responsible for initiating, applying, organizing and monitoring such clinical trials, and shall be responsible for the authenticity and reliability of the clinical trials.
Operation License for Medical Device
Pursuant to the Regulation on the Supervision and Administration of Medical Devices and the Administrative Measures on the Operation Supervision of Medical Devices, promulgated on July 30, 2014 and came into effect on October 1, 2014 and last amended on March 10, 2022, filing and licensing are not required for the operation of Class I medical devices. Operators engaged in the operation of Class II medical devices are subject to filing administration and will receive medical device operation filing certificate upon satisfaction of filing requirement, while operators engaged in the operation of Class III medical devices are subject to pre-approval licensing administration and will receive medical device operation license upon receipt of approval for licensing. A medical device operation license is valid for five years and may be renewed 30 to 90 business days prior to its expiration date.
To engage in business operations of medical devices, the following requirements shall be met:
| 1. | Having a quality control institution or staff corresponding to the business scope and scale, and the staff shall have relevant education or professional titles certified by the state. |
| 2. | Having an operation and storage premise corresponding to the business scope and scale. |
| 3. | Having storage conditions corresponding to the business scope and scale; warehouses are not required if all storage is commissioned to other operators of medical devices. |
| 4. | Having a quality control system corresponding to the medical devices concerned. |
| 5. | Possessing the capability of professional guidance, technical training and after-sale service corresponding to the medical devices it operates; or it has come into an agreement on technical support with a relevant institution. |
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An enterprise to be engaged in business operations of Category III medical devices shall also have a computerized information management system compliant with quality standards to ensure traceability of products. An enterprise to be engaged in business operations of Category I or Category II medical devices is encouraged to set up such a system.
As of the date of this Annual Report, we are current on the operation filing and licensing of the medical devices.
Special Procedures for Examination and Approval of Innovative Medical Devices
On October 2017, the General Office of the CPC Central Committee and the General Office of the State Council issued the Opinions on Deepening the Reform of the Evaluation and Approval Systems and Encouraging Innovation on Drugs and Medical Devices, which aims to encourage the innovation for medical devices.
Pursuant to the Opinions, the priority review and approval will be applicable to innovative medical devices supported by the National Science and Technology Major Projects and the National Key R&D Program of China, and the clinical trials of which having been conducted by the National Clinical Research Center, and approved by the management department of National Clinical Research Center. Pursuant to the Special Procedures for Examination and Approval of Innovative Medical Devices which were promulgated by the NMPA on November 2, 2018 and came into effect on December 1, 2018, special procedures shall be applicable to the examination and approval for medical devices in the following circumstances:
| (1) | if the applicant legally owns the invention patent of the core technology of the product through its technological innovation activities in the PRC, or legally obtained the invention patent or the right of use thereof through transfer in the PRC, and that the interval between the date of application for the special examination and approval of innovative medical devices to the date of authorized publication should not exceed five years; or the patent administration department of the State Council has disclosed the application for the invention patent of the core technology and the Patent Search and Consultation Center of the National Intellectual Property Administration of the PRC has issued the patent search report setting out the novelty and innovation of the core technology solution of the product; |
| (2) | the applicant has developed the prototype product and completed the preliminary research under a true and controllable process that generated complete and traceable data; |
| (3) | the product has major working mechanism or mechanism of action which is the first of its kind in the PRC, has fundamental improvement in product performance or safety compared with similar products, is of an internationally leading standard in terms of techniques and has significant clinical value. The Center for Medical Device Evaluation of the NMPA should give priority to the innovative medical devices in their technical review upon receiving the registration application, after which the NMPA will give priority to the product in their administrative approval. |
Advertisements of Medical Devices
Pursuant to the Regulations on Tentative Measures for the Censorship of Advertisement for Drugs, Medical Devices, Dietary Supplements, Food Formula for Special Medical Purpose promulgated by SAMR on December 24, 2019 and came into effect on March 1, 2020, the State Administration for Market Regulation is responsible for organizing and guiding the review of advertisements for drugs, medical devices, health foods and formula foods for special medical purposes. The administrations for market regulation and drug administrations (hereinafter referred to as the “advertisement review authorities”) of all provinces, autonomous regions and centrally administered municipalities shall be responsible for the review of advertisements for drugs, medical devices, health food and formula food for special medical purposes, and may entrust other administrative authorities to implement review of advertisements pursuant to the law.
The validity period of the advertisement approval number for drugs, medical devices, health food and formula food for special medical purposes shall be consistent with the shortest validity period of the product registration certificate, filing certificate or production license. If no valid period is prescribed in the product registration certificate, filing certificate or production license, the valid period of the advertisement approval number shall be two years.
Advertisements for drugs, medical devices, health food and formula food for special medical purposes shall be true and legitimate and shall not contain any false or misleading contents. Advertisers shall be responsible for the veracity and legitimacy of the contents of advertisements for drugs, medical devices, health food and formula food for special medical purposes.
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National Medical Insurance Program
The national medical insurance program was adopted pursuant to the Decision of the State Council on the Establishment of the Urban Employee Basic Medical Insurance Program issued by the State Council on December 14, 1998, under which all employers in urban cities are required to enroll their employees in the Urban Employee Basic Medical Insurance Program and the insurance premium is jointly contributed by the employers and employees. Pursuant to the Opinions on the Establishment of the New Rural Cooperative Medical System forwarded by the General Office of the State Council on January 16, 2003, China launched the New Rural Cooperative Medical System to provide medical insurance for rural residents in selected areas which has since spread to the whole nation. The State Council promulgated the Guiding Opinions of the State Council about the Pilot Urban Resident Basic Medical Insurance on July 10, 2007, under which urban residents of the pilot district, rather than urban employees, may voluntarily join Urban Resident Basic Medical Insurance. In 2015, the PRC government announced the Outline for the Planning of the National Medical and Health Service System (2015-2020) which aims to establish a basic medical and health care system that covers both rural and urban citizens by 2020. On January 3, 2016, the State Council issued the Opinions on Integrating the Basic Medical Insurance Systems for Urban and Rural Residents to integrate the Urban Resident Basic Medical Insurance and the New Rural Cooperative Medical System and the establishment of a unified Basic Medical Insurance for Urban and Rural Residents, which will cover all urban and rural non-working residents expect for rural migrant workers and persons in flexible employment arrangements who participate in the basic medical insurance for urban employees.
With regard to reimbursement for medical devices and diagnostic tests, the Notice of Opinion on the Diagnosis and Treatment Management, Scope and Payment Standards of Medical Service Facilities Covered by the National Urban Employees Basic Medical Insurance Scheme (Lao She Bu Fa [1999] No. 22) prescribes the coverage of diagnostic and treatment devices and diagnostic tests where part of the fees is paid through the basic medical insurance scheme. It also includes a negative list that precludes certain devices and medical services from governmental reimbursement. Detailed reimbursement coverage and rate for medical devices and medical services (including diagnostic tests and kits) are subject to each province’s local policies.
Export Registration
Pursuant to the Regulation on the Supervision and Administration of Medical Devices and the Administrative Measures on Medical Devices Production, in accordance with the spirit of the Notice of Guo Ban Fa [94] No. 66 of the State Council, the Medical Products Administration conducts inspections of safety and legality of the exported products manufactured by domestic enterprises, grants legitimate production license in China (if these products are sold within Chinese territory). In accordance with international practice, the quality of exported medical devices is mainly supervised by the importing countries. However, some importing countries/regions may require exporting enterprises to provide Medical Device Product Export Sales Certificates issued by the CFDA. Pursuant to Announcement on Issuing the Provisions on the Administration of Medical Device Product Export Sales Certificates, promulgated by the CFDA and effective on September 1, 2015, such exporting enterprises may apply to the provincial departments of the CFDA at the places where enterprises are located for Medical Device Product Export Sales Certificates.
The premise of obtaining Medical Device Product Export Sales Certificates is that the relevant production enterprises have obtained medical device product registration certificates and production licenses or have undergone the formalities for recordation and production recordation of medical device products in China. The valid period of Medical Device Product Export Sales Certificates, except being specified for one time use, shall not expire after the earliest deadline of any certificate among various certificates submitted by the enterprise amid the application materials, and shall be no longer than two years. Where the relevant materials submitted by an enterprise change, the enterprise shall report to the certificate issuing department in a timely manner. Where the relevant materials change, or the Medical Device Product Export Sales Certificate still needs to be used after its expiration, the enterprise shall apply for a new Medical Device Product Export Sales Certificate. Where the CFDA find that any relevant enterprises fail to meet the requirements of relevant regulations on production, they shall downgrade the credit ratings of such enterprises to lower levels; or, when any enterprises are considered failing to meet the requirements for issuance of certificates anymore, or the relevant materials submitted by the enterprises change, the provincial CFDA departments shall notify the relevant information in a timely manner.
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Two-invoice System
According to the Notice of Publishing Opinions on Implementing Two-invoice System in Drug Procurement Among Public Medical Institutions (For Trial Implementation) which was issued on December 26, 2016, the “two-invoice system” refers to the system that requires one invoice to be issued from pharmaceutical manufacturers to pharmaceutical distributors and the other invoice to be issued from pharmaceutical distributors to medical institutions. The wholly owned or holding commercial company (only one commercial company is permitted in the whole country) or the domestic general agent for overseas drugs (only one domestic agent is permitted in the whole country) established by a pharmaceutical manufacturer or a group enterprise integrating science, industry and trade may be regarded as a manufacturer. The allocation of drugs between a pharmaceutical distribution group enterprise and its wholly owned (holding) subsidiaries or among its wholly owned (holding) subsidiaries may not be regarded as a process for which an invoice should be issued, but one invoice is allowed to be issued at most.
Currently, some provinces in the PRC have formulated relevant rules and regulations to implement the “two-invoice system” in the field of medical consumables, for instance, the Notice on the Sharing of Transparent Procurement Results of Medical Devices (Medical Consumables) across the Province promulgated by the Fujian Provincial Medical Security Management Committee Office in July 2018, the Notice on Further Promoting the “Two Invoice System” on Medicines and Medical Consumables issued by eight local government departments of Shaanxi Province including Deepen Medical and Healthcare System Reform Leading Group Office of Shaanxi Province in July 2018, and the Opinions on Implementation of the “Two Invoice System” in Medical Consumables Procurement by Public Medical Institutions in Anhui Province (for Trial Implementation) issued by five local government departments of Anhui Province including Food and Drug Administration of Anhui Province in November 2017.
LAWS AND REGULATIONS RELATING TO LAND USE
Overview of relevant PRC Laws and Regulations on Land Use Rights
Pursuant to relevant PRC land laws and stipulations, there are two kinds of land in China: 1) collectively owned land, which is normally owned by the farmers or village for agricultural use; and 2) state owned land which is sub-divided into allocated and granted land use rights. Allocated land are land rights granted by the Chinese government to an entity for a particular purpose (e.g., research, military, medical etc.). These allocated rights are inferior in that they must be used for the specified purpose and cannot be transferred, leased or mortgaged. Granted land, on the other hand, is paid for and can be used for commercial and industrial purposes. These land use rights are the preferred land use rights for foreign investors as they are freely transferable (subject normally to the land being developed, as undeveloped land cannot normally be sold), leased and mortgaged. Land may be designated for commercial, industrial, residential or other purposes and may not be used for any non-designated purpose. The land authorities may impose administrative sanctions, including fines, injunction orders or even confiscation of the land use rights, for any breach of this provision. The term of land use rights varies depending on the designated purpose. A land user may extend the term by entering into a contract to extend the term and pay an additional land grant fee to the land authorities. Upon the execution of a land use rights grant contract and payment of the land grant fee, owners of land use rights will be issued a State-owned land use certificate, which sets forth, among other things: (i) the nature (granted or allocated); (ii) designated purpose; (iii) term of the land use rights; (iv) the location and area of the land; and (v) whether the land use rights are subject to any security interest. This certificate is the primary evidence of legal and valid land use rights.
Overview of relevant PRC Laws and Regulations on Buildings
It is required under the PRC law to obtain relevant permits from different authorities before commencing the construction of a building. The required permits are, inter alia, a State-owned Land Use Certificate, a Planning Permit of Land for Construction Use, a Planning Permit of Construction Project, and a Commencement Permit of Construction Project (except for those projects where the construction investment is less than RMB 300,000 or the construction area is less than 300 square meters). After the completion of construction, the owner shall also apply at relevant authorities for inspection and acceptance of the construction project and then obtain a Certificate for Completion Acceptance of Construction Project as well as a Title Certificate for Building. Further, pursuant to relevant PRC laws and regulations, the premises title certificate is the only legal certificate by which the owner legally has the ownership in respect of the building and thereby exercises rights to possess, utilize, profit from and dispose of the premises. Without such certificate, it is not permitted to transfer the premises.
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According to the Urban and Rural Planning Law of the PRC, if a rural construction planning permit is not obtained in accordance with the law or construction is not carried out in accordance with the provisions of the rural construction planning permit, the township or town people’s government shall order the construction to stop and make corrections within a time limit.
Not all the buildings of Jiangsu Yada and Jiangsu Huadong attached on the land have appropriate title certificates. The buildings not granted title certificate are at a risk of being dismantled or other administrative penalties if they are identified as illegal buildings due to the violation of the PRC Land Administration Law, the PRC Law on Urban and Rural Planning, and other relevant laws and regulations.
Regulation and Classification of Land Allocation
According to the PRC Land Administration Law, the State legally adopts the system of compensation for the use of land owned by the State, except where the State allocates the right to use state-owned land within the bounds of the law; A construction project developer utilizing state-owned land shall generally obtain the use right of state owned land through paid means such as granting for compensation. The following categories of land may be directly allocated with the lawful approval of the people’s governments at or above the county level: (1) land for use by government institutions or the military; (2) land for urban infrastructure or public welfare projects; (3) land for energy, transportation. and water conservancy projects as well as other infrastructure projects supported by the government; and (4) other land as provided for by laws or administrative regulations. In addition, according to the Provisions on the Economical and Intensive Use of Land (promulgated by Order No.61 of the Ministry of Natural Resources on May 22, 2014 and amended in accordance with the Decision of the Ministry of Natural Resources on the First Group of Repealed and Amended Departmental Rules adopted at the 2nd executive meeting of the Ministry of Natural Resources on July 16, 2019), except that land for military use, affordable housing, or other special purposes such as national security or public order may be supplied without consideration by means of allocation, payment is required for land used for business purposes, including land used for office space of state authorities, transportation, energy, or water conservancy and other infrastructure (industry), urban infrastructure and various social undertakings; the land user and land prices for commercial use shall be determined by means of bidding, auction, or listing. The acquisition and use of allocated land by enterprises shall comply with the special restrictions as prescribed by laws and regulations.
Pursuant to Interim Regulations of the People’s Republic of China Concerning the Assignment and Transfer of the Right to the Use of the State-owned Land in the Urban Areas, promulgated by the State Council and amended on November 29, 2020, the allocated right to the use of the land may not be transferred, leased, or mortgaged, with the exception of cases as specified in following cases and subject to the approval of the land administration departments and the housing administration departments under the people’s governments at the municipal and county levels: (i) the land users are companies, enterprises, or other economic organizations, or individuals; (ii) a certificate for the use of state-owned land had been obtained; (iii) possessing legitimate certificates of property rights to the above-ground buildings and other attached objects; and (iv) a contract for assigning the right to the use of land is signed in accordance with the regulations and the land user makes up for the payment of the assignment fee to the local municipal or county people’s government or uses the proceeds resulting from the transfer, lease or mortgage to pay the assignment fee. Any units or individuals that transfer, lease or mortgage the allocated right to the use of the land without authorization shall have their illegal incomes thus secured confiscated by the land administration departments under the people’s governments at the municipal and county levels and shall be fined in accordance with the seriousness of the case.
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C. Organizational Structure
See “-A. History and Development of the Company.”
D. Property, Plants and Equipment
Property, Plants, and Equipment
Our PRC headquarters, manufacturing facilities and office spaces are located in Yangzhou, Jiangsu Province, PRC.
Land Use Rights We Obtained
We obtained the following land use rights for the construction of our headquarters, manufacturing facilities and office spaces, which cover an aggregate lot area of approximately 383,172 square feet (equivalent to 35,598.64 square meters), with the breakdown of land use set forth in the table below:
| Land User | Land Use Type |
Description/Use | Location | Lot Area (Square Meters) |
||||||
| Yangzhou Huada | Allocation | Industrial land | Tongda Road, Touqiao Town, Hanjiang District, Yangzhou | 6,700.24 | ||||||
| Jiangsu Yada | Assignment | Industrial land | Xinqiao Village, Touqiao Town, Guangling District, Yangzhou | 15,991.00 | ||||||
| Jiangsu Huadong | Allocation | Industrial land | No.88 Tongda Road, Touqiao Town, Guangling District, Yangzhou | 11,717.44 | ||||||
| Jiangsu Yada | Allocation | Industrial land | Tongda Road, Touqiao Town, Hanjiang District, Yangzhou | 1,189.16 | ||||||
| Total | 35,597.84 | |||||||||
Properties We Own
We own the premises of our headquarters, manufacturing facilities and office spaces, which cover an aggregate building area of approximately 241,541 square feet (equivalent to 22,439.92 square meters), with the breakdown of square footage set forth in the table below:
| Description/Use | Owner | Location | Area (Square Meters) | |||
| Manufacturing facility | Jiangsu Yada | No.58 Yada Road, Touqiao Town | Land Lot Area 15,991.00/ Building Area 3,545.09 (Floors 1-4) | |||
| Manufacturing facility | Jiangsu Yada | No.58 Yada Road, Touqiao Town | Land Lot Area 15,991.00/ Building Area 394.62 (Floor 1) | |||
| Manufacturing facility | Jiangsu Yada | No.58 Yada Road, Touqiao Town | Land Lot Area 15,991.00/ Building Area 2,412.30 | |||
| Manufacturing facility | Jiangsu Yada | No.58 Yada Road, Touqiao Town | Land Lot Area 15,991.00/ Building Area 428.79 (Floor 1) | |||
| Manufacturing facility | Yangzhou Huada | No.1 East Tongda Road, Touqiao Town | Land Lot Area 6,700.24/ Building Area 2,109.77 (Floors 1-2) | |||
| Office space & manufacturing facility | Yangzhou Huada | No.2,3,4 East Tongda Road, Touqiao Town | Land Lot Area 6,700.24 464.2 (Floor 1); 1,224.45 (Floors 1-2); 1,005.73 (Floor 1) | |||
| Manufacturing facility | Jiangsu Yada | No.1 Zhu Group, Xuzhuang, Datong Village, Touqiao Town | 3,023.2 | |||
| Manufacturing facility | Jiangsu Huadong | No.88 Tongda Road, Touqiao Town | Land Lot Area 11717.44/ Building Area 3,709.93 (Floors 1-2) | |||
| Manufacturing facility | Jiangsu Huadong | No.88 Tongda Road, Touqiao Town | Land Lot Area 11717.44/ Building Area 4,586.04 (Floors 1-2) | |||
| Total | 22,439.92 |
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Properties We Lease
In addition to the above-mentioned properties that we own, we currently lease several properties in Yangzhou for an aggregate area of approximately 86,101 square feet (equivalent to 7,999 square meters) from our PRC subsidiaries for processing shops and office space. All leases are subject to renewal upon approval of the lessors, subject to the lessor receiving renewal requests at least three months in advance. Presently, the leases have been renewed through fiscal year 2026.
The breakdown of the leased properties is as follows:
| Lessor/Rental Cost per month |
Lessee | Location | Area (Square Meter) |
Annual Rent |
Term | Use | ||||||
| Jiangsu Huadong | Yangzhou Huada | No.88 Tongda Road, Guangling District, Yangzhou | 670 | $5,593 (RMB40,200.00) |
January 1, 2026 to December 31, 2026 | Processing Workshop | ||||||
| Jiangsu Yada | Yangzhou Huada | No.88 Tongda Road, Guangling District, Yangzhou | 20 | $167 (RMB1,200.00) |
January 1, 2026 to December 31, 2026 | Office | ||||||
| Jiangsu Huadong | Jiangsu Yada | No.88 Tongda Road, Guangling District, Yangzhou | 1,100 | $9,183 (RMB66,000.00) |
January 1, 2026 to December 31, 2026 | Processing Workshop | ||||||
| Yangzhou Huada | Jiangsu Huadong | No.88 Tongda Road, Guangling District, Yangzhou | 4,804.15 | $40,104 (RMB288,249.00) |
January 1, 2026 to December 31, 2026 | Processing Workshop | ||||||
| Jiangsu Yada | Jiangsu Huadong | No.88 Tongda Road, Guangling District, Yangzhou | 1,325.00 | $11,061 (RMB79,500.00) |
January 1, 2026 to December 31, 2026 | Office | ||||||
| Mr. Yi Zhu* | Yangzhou Huada | Room H, 5th Floor, No. 629 Lingling Road, Xuhui District, Shanghai | 115.91 | $7,036 (RMB50,569.00) |
January 1, 2026 to December 31, 2026 | Office |
| * | Mr. Yi Zhu is not a related party to the Company. |
ITEM 4A. UNRESOLVED STAFF COMMENTS
Not applicable.
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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion of our financial condition and results of operations is based upon and should be read in conjunction with our consolidated financial statements and their related notes included in this Annual Report. This report contains forward-looking statements. In evaluating our business, you should carefully consider the information provided under the caption “Item 3. Key Information-D. Risk Factors” in this Annual Report. We caution you that our businesses and financial performance are subject to substantial risks and uncertainties.
| A. | Operating Results |
Business Overview
The Company, through its operating subsidiaries, is mainly engaged in the manufacture, research and development and sales of Class I, II and III medical devices. It has a history of more than 30 years and has a sound product category, with more than 800 domestic products and more than 403 export products. The main product lines include disposable infusion pumps, anesthesia puncture kits, electronic pumps, full anesthesia kits, urethral catheterization kits, gynecological examination kits, endotracheal intubation, dressing application and various tubes. It is the leading enterprise in China’s medical consumables industry. The Company has received qualification to manufacture and produce China’s first, second and third type of medical device consumables and, at the same time, the Company has acquired FDA registration and the European Union’s CE certification. Relevant permissions have been obtained in major sales markets to meet local regulatory requirements. In fiscal 2025, in addition to its core medical device business, the Company provides Software as a Service (SaaS) solution, which include cloud-based platform access, implementation services, and ongoing technical support and system optimization.
The Company’s distribution network covers major global markets. Internationally, the Company mainly exports medical devices through exporting distributors. Up to now, the Company has 403 exporting distributors responsible for distributing its products to end users in Europe, North America, Asia, South America, Africa, and Oceania. In the Chinese market, the Company sells products under its own brand to customers all over the country. The Company’s product permeation for mainland China has reached major medical institutions and pharmacies through some 4409 distributors. At the same time, the Company has established a cooperative network with more than 573 hospitals through its own direct sales channels.
Revenues decreased by approximately $35.12 million to $61.79 million for the year ended December 31, 2025 from approximately $96.91 million for the year ended December 31, 2024.
Net income decreased by approximately $4.06 million, or approximately 37%, to $6.78 million for the year ended December 31, 2025 from approximately $10.84 million for the year ended December 31, 2024. The decrease was mainly due to a decrease in gross profit.
Revenues decreased by approximately $0.19 million, or approximately 0.2%, to $96.91 million for the year ended December 31, 2024 from approximately $97.10 million for the year ended December 31, 2023. The decrease was mainly due to a decline in demand for customer orders, which we believe occurred because of the stalling recovery of China’s economy.
Net income decreased by approximately $0.75 million, or approximately 7%, to $10.84 million for the year ended December 31, 2024 from approximately $11.59 million for the year ended December 31, 2023. The decrease was mainly due to an increase in operating expenses.
Recent Developments
On January 2, 2025, the Company entered into an amendment to its previously disclosed securities purchase agreement dated December 27, 2023 with Anson Investments Master Fund LP and Anson East Master Fund LP. Pursuant to the amendment, the parties agreed that no additional closings would occur under the agreement following the previously completed $6.0 million financing on January 2, 2024.
On October 8, 2025, the Company entered into a securities purchase agreement with certain non-U.S. investors pursuant to Regulation S, providing for the issuance of up to 40,000,000 Ordinary Shares at a purchase price of $0.38 per share for aggregate gross proceeds of up to $15.2 million. The offering was completed in multiple closings, with the majority of shares issued in October 2025 and the remaining shares issued in January 2026.
On December 5, 2025, the Company entered into an additional Regulation S private placement with certain non-U.S. investors for the issuance of up to 120,000 Class A ordinary shares at a purchase price of $11.00 per share, for aggregate gross proceeds of approximately $1.32 million. This offering closed on December 15, 2025.
To support its long-term growth strategy, the Company has previously explored the application of AI technologies in online health consultation services and has also initiated preliminary design efforts for a surgical robotic assisted surgery (RAS) system. As of the date of this report, these initiatives remain at an early stage and there have been no material developments. The Company continues to evaluate potential opportunities in these areas based on market conditions and its strategic priorities.
The Company has commenced the development of a medical industrial park in the Hainan Free Trade Port. See “Item 4. Information on the Company—Hainan Industrial Park Development.”
We expect Phase I to begin generating revenue following completion of interior fit-out and tenant leasing, currently anticipated in July 2026. However, the timing and level of revenue will depend on tenant demand and market conditions. The project is subject to risks, including construction delays, cost overruns, and changes in government policies, which could affect its expected financial impact.
In March 2026, Hainan Guoxie secured three tenants and entered into lease agreements for certain properties within the industrial park. The leases will commence in July 2026 and have a term of five years.
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Results of Operations
The following table sets forth a summary of our consolidated results of operations for the periods presented. This information should be read together with our consolidated financial statements and related notes included elsewhere in this Annual Report. The results of operations in any period are not necessarily indicative of our future trends.
(Amounts expressed in U.S. dollars, except share data and per share data, or otherwise noted)
Years Ended December 31, 2025, 2024 and 2023
| For the Year Ended December 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| Revenues | ||||||||||||
| Third party sales | $ | 60,960,630 | $ | 96,141,089 | $ | 96,682,474 | ||||||
| Related party sales | 831,327 | 768,553 | 416,441 | |||||||||
| Total revenues | 61,791,957 | 96,909,642 | 97,098,915 | |||||||||
| Cost of revenues | 42,631,183 | 63,609,840 | 63,900,597 | |||||||||
| Gross profit | 19,160,774 | 33,299,802 | 33,198,318 | |||||||||
| Operating expenses | ||||||||||||
| Selling | 4,224,423 | 6,637,689 | 7,295,460 | |||||||||
| General and administrative | 3,212,200 | 7,784,753 | 6,540,944 | |||||||||
| Research and development | 2,382,984 | 3,456,098 | 2,753,315 | |||||||||
| Allowance for credit losses | 1,057,255 | 1,109,347 | 1,933,661 | |||||||||
| Total operating expenses | 10,876,862 | 18,987,887 | 18,523,380 | |||||||||
| Income from operations | 8,283,912 | 14,311,915 | 14,674,938 | |||||||||
| Other (income) expense: | ||||||||||||
| Change in fair value in convertible debt | - | 678,297 | - | |||||||||
| Interest expense | 241,523 | 1,506,700 | 250,781 | |||||||||
| Interest income | (1,258,606 | ) | (1,014,402 | ) | (873,439 | ) | ||||||
| Currency exchange (loss) gain | (35,852 | ) | (380,254 | ) | 153,440 | |||||||
| Other (income) expense, net | (68,709 | ) | (104,557 | ) | 95,382 | |||||||
| Total other expenses (income) | (1,121,644 | ) | 685,784 | (373,836 | ) | |||||||
| Income before income tax provision | 9,405,556 | 13,626,131 | 15,048,774 | |||||||||
| Income taxes expense | 2,623,730 | 2,788,824 | 3,457,733 | |||||||||
| Net income | $ | 6,781,826 | $ | 10,837,307 | $ | 11,591,041 | ||||||
Year ended December 31, 2025 compared to year ended December 31, 2024
Revenues
Revenues decreased by approximately $35.12 million to $61.79 million for the year ended December 31, 2025 from approximately $96.91 million for the year ended December 31, 2024, which was mainly due to less revenue from sales of disposable medical devices for the year ended December 31, 2025. The decrease in revenue from sale of disposable medical devices was primarily attributable to reduction in sales volume because of increasing market competition and reduction in market demand. The quantity of disposable medical devices sold was 1.01 billion pieces for the year ended December 31, 2025, decreased by approximately 43% from last year. The negative impact from the lower in sales volume was offset by a slightly increase in the average selling price. For the year ended December 31, 2025, our average price of disposable medical devices was $0.43 per piece, increased by 9% from last year due to different product composition.
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Cost of revenues
Cost of revenues primarily include cost of materials, direct labor costs, overhead, SaaS outsourcing cost and other related incidental expenses that are directly attributable to the Company’s principal operations. Cost of revenues decreased by approximately $20.98 million, or approximately 33%, to $42.63 million for the year ended December 31, 2025 from approximately $63.61 million for the year ended December 31, 2024. The decrease was generally in line with decrease in revenue exception of some fixed costs such as depreciation expenses and of administrative salary within production department.
Gross profit margin
The following table sets forth the overall gross profit margin of the Company:
| For the Year Ended December, 31 | ||||||||
| 2025 | 2024 | |||||||
| Revenues | $ | 61,791,957 | $ | 96,909,642 | ||||
| Costs of revenues | 42,631,183 | 63,609,840 | ||||||
| Gross profit | $ | 19,160,774 | $ | 33,299,802 | ||||
| Gross profit margin % | 31 | % | 34 | % | ||||
Gross profit decreased by approximately $14.14 million, or approximately 42%, to $19.16 million for the year ended December 31, 2025 from approximately $33.30 million for the year ended December 31, 2024. Gross profit margin was 31% and 34% for the years ended December 31, 2025 and 2024.
Operating costs and expenses
Our operating costs and expenses consist of selling expenses, general and administrative expenses and research and development expenses.
Selling
The following table sets forth a breakdown of the selling expenses of the Company:
Years Ended December 31, 2025 and 2024
| 2025 | 2024 | |||||||
| Transportation expenses | $ | 1,627,266 | $ | 2,472,343 | ||||
| Salaries and benefits | 1,131,603 | 1,365,613 | ||||||
| Entertainment expenses | 553,979 | 1,136,047 | ||||||
| Conference expenses | 455,218 | 1,001,334 | ||||||
| Travel allowance | 301,522 | 344,229 | ||||||
| Auto expenses | 129,294 | 268,271 | ||||||
| Advertising expenses | 324 | 861 | ||||||
| Other expenses | 25,217 | 48,991 | ||||||
| Total | $ | 4,224,423 | $ | 6,637,689 | ||||
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The selling expenses decreased by approximately $2.41 million, or approximately 36%, to $4.22 million for the year ended December 31, 2025 from approximately $6.64 million for the year ended December 31, 2024. The decrease was mainly attributable to the following reasons:
| (a) | Our transportation expenses decreased by approximately $0.85 million, or approximately 34%, to $1.63 million for the year ended December 31, 2025 from $2.47 million for the year ended December 31, 2024. The decrease in transportation expenses was due to reduced business travel because of declined customer orders. |
| (b) | Our entertainment expenses decreased by approximately $0.58 million, or approximately 51%, to $0.55 million for the year ended December 31, 2025 from $1.14 million for the year ended December 31, 2024. The decrease in entertainment expenses was due to a decrease in demand for customer orders. |
| (c) | Our conference expenses decreased by approximately $0.55 million, or approximately 55%, to $0.45 million for the year ended December 31, 2025 from $1.0 million for the year ended December 31, 2024. The decrease in conference expenses was due to less exhibitions and promotion spent because of declined customer orders and budget control. |
General and administrative
General and administrative expenses primarily consist of the following expenses:
Years Ended December 31, 2025 and 2024
| 2025 | 2024 | |||||||
| Salaries and benefits | $ | 1,377,768 | $ | 1,418,060 | ||||
| Entertainment expenses | 729,473 | 1,292,742 | ||||||
| Conference fee | 444,408 | 867,419 | ||||||
| Auto expenses | 122,636 | 245,414 | ||||||
| Maintenance expenses | 33,126 | 93,140 | ||||||
| Depreciation expenses | 145,076 | 149,821 | ||||||
| Travel allowance | 128,764 | 138,984 | ||||||
| Office expenses | 495,006 | 360,899 | ||||||
| Surtax expenses | 407,589 | 629,456 | ||||||
| Service expenses | 677,919 | 1,240,791 | ||||||
| Legal cost | (1,349,565 | ) | 1,348,027 | |||||
| Total | $ | 3,212,200 | $ | 7,784,753 | ||||
General and administrative expenses decreased by approximately $4.57 million, or approximately 59%, to $3.21 million for the year ended December 31, 2025, from approximately $7.78 million for the year ended December 31, 2024. The decrease was primarily due to (a) reverse of legal cost accrued approximately $1.35 million due to the related case was finalized and the frozen assets was release; (b) entertainment expenses decreasing by $0.56 million from $1.29 million for the year ended December 31, 2024 to approximately $0.73 million for the year ended December 31, 2025; (c) conference fee decreasing by $0.42 million from $0.87 million for the year ended December 31, 2024 to $0.44 million for the year ended December 31, 2025; (d) surtax expenses decreasing by $0.22 million from $0.63 million for the year ended December 31, 2024 to $0.41 million for the year ended December 31, 2025,(e) service expenses related to consulting expense decreasing by $0.56 million from $1.24 million for the year ended December 31, 2024 to $0.68 million for the year ended December 31, 2025, offset by (f) office expenses increasing by approximately $0.14 million from $0.36 million for the year ended December 31, 2024 to approximately $0.50 million for the year ended December 31, 2025.
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Research and development
The following table sets forth a breakdown of the research and development expenses of the Company:
Years Ended December 31, 2025 and 2024
| 2025 | 2024 | |||||||
| Sample manufacturing expenses | $ | 919,154 | $ | 1,693,327 | ||||
| Salaries and benefits | 1,075,841 | 1,049,054 | ||||||
| Travel allowance | 181,912 | 194,754 | ||||||
| Depreciation expenses | 6,348 | 9,831 | ||||||
| Design expenses | 43,576 | 101,547 | ||||||
| Material expenses | 27,562 | 53,937 | ||||||
| Other expenses | 128,591 | 353,648 | ||||||
| Total | $ | 2,382,984 | $ | 3,456,098 | ||||
The research and development expenses decreased by approximately $1.08 million, or approximately 31%, to $2.38 million for the year ended December 31, 2025, from approximately $3.46 million for the year ended December 31, 2024. The decrease was mainly due to decrease in sample manufacturing expenses.
Income from operations
As a result of the factors described above, our income from operations decreased by approximately $6.03 million, or approximately 42%, to $8.28 million for the year ended December 31, 2025 from approximately $14.31 million for the year ended December 31, 2024.
Income tax expense
The provision for income taxes decreased by approximately $0.17 million, or approximately 6%, to $2.62 million for the year ended December 31, 2025, from approximately $2.79 million for the year ended December 31, 2024. The decrease was mainly due to the decrease of taxable income in 2025.
Net income
As a result of the factors described above, our net income decreased by approximately $4.06 million, or approximately 37%, to $6.78 million for the fiscal year ended December 31, 2025 from approximately $10.84 million for the fiscal year ended December 31, 2024.
Unrealized foreign currency translation adjustment
The Company’s reporting currency is the United States dollar (“US$”). The Company’s operations are primarily conducted through the PRC subsidiaries where the local currency is the functional currency. The functional currency of Kang Fu HK is the Hong Kong dollar and the functional currency of other subsidiaries is the Renminbi (“RMB”). Results of operations and cash flows are translated at average exchange rates during the period, assets and liabilities are translated at the unified exchange rate at the end of the period and equity is translated at historical exchange rates. Translation adjustments resulting from the process of translating the financial statements denominated in RMB into U.S. dollars are included in other comprehensive income. Our foreign currency translation income for the fiscal year ended December 31, 2025 was approximately $6.65 million, compared to the foreign currency translation loss of approximately $4.27 million for the fiscal year ended December 31, 2024. The change was primarily due to the exchange rate fluctuation of RMB against the U.S. dollars.
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Year ended December 31, 2024 compared to year ended December 31, 2023
Revenues
Revenues decreased by approximately $0.19 million to $96.91 million for the year ended December 31, 2024 from approximately $97.10 million for the year ended December 31, 2023. The decrease was mainly due to disposal of Hainan Guoxie.
Cost of revenues
Cost of revenues primarily include cost of materials, direct labor costs, overhead, and other related incidental expenses that are directly attributable to the Company’s principal operations. Cost of revenues decreased by approximately $0.29 million, or approximately 0.5%, to $63.61 million for the year ended December 31, 2024 from approximately $63.90 million for the year ended December 31, 2023. The decrease was generally in line with decrease in revenue except some fixed cost such as lease expense and salary of administrative employees in production department.
Gross profit margin
The following table sets forth the overall gross profit margin of the Company:
| For the Year Ended December, 31 | ||||||||
| 2024 | 2023 | |||||||
| Revenues | $ | 96,909,642 | $ | 97,098,915 | ||||
| Costs of revenues | 63,609,840 | 63,900,597 | ||||||
| Gross profit | $ | 33,299,802 | $ | 33,198,318 | ||||
| Gross profit margin % | 34 | % | 34 | % | ||||
Gross profit increased by approximately $0.10 million, or approximately 0.3%, to $33.30 million for the year ended December 31, 2024 from approximately $33.20 million for the year ended December 31, 2023. Gross profit margin was 34% for both the years ended December 31, 2023 and 2024.
Operating costs and expenses
Our operating costs and expenses consist of selling expenses, general and administrative expenses and research and development expenses.
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Selling
The following table sets forth a breakdown of the selling expenses of the Company:
Years Ended December 31, 2023 and 2022
| 2024 | 2023 | |||||||
| Transportation expenses | $ | 2,472,343 | $ | 2,322,690 | ||||
| Salaries and benefits | 1,365,613 | 1,362,236 | ||||||
| Entertainment expenses | 1,136,047 | 1,102,463 | ||||||
| Conference expenses | 1,001,334 | 1,042,010 | ||||||
| Travel allowance | 344,229 | 358,120 | ||||||
| Auto expenses | 268,271 | 254,148 | ||||||
| Advertising expenses | 861 | 8,096 | ||||||
| Consulting fee | - | 781,580 | ||||||
| Other expenses | 48,991 | 64,117 | ||||||
| Total | $ | 6,637,689 | $ | 7,295,460 | ||||
The selling expenses decreased by approximately $0.66 million, or approximately 9%, to $6.64 million for the year ended December 31, 2024 from approximately $7.30 million for the year ended December 31, 2023. The decrease was mainly attributable to the following reasons:
| (a) | Our consulting fees decreased to nil for the year ended December 31, 2024 from approximately $0.78 million for the year ended December 31, 2023. The Company signed a contract with a third-party consultant on October 12, 2023 in order to conduct market research and analysis on the Company’s main basic medical consumables and robotic surgical systems in the U.S. and related overseas countries. There was no such expense for the year ended December 31, 2024. |
| (b) | Our transportation expenses increased by approximately $0.15 million, or approximately 6%, to $2.47 million for the year ended December 31, 2024 from $2.32 million for the year ended December 31, 2023. The increase in business travel was due to an increase in demand for customer orders. |
General and administrative
General and administrative expenses primarily consisted of the following expenses:
Years Ended December 31, 2024 and 2023
| 2024 | 2023 | |||||||
| Salaries and benefits | $ | 1,418,060 | $ | 1,441,286 | ||||
| Entertainment expenses | 1,292,742 | 1,218,660 | ||||||
| Conference fee | 867,419 | 808,637 | ||||||
| Auto expenses | 245,414 | 230,171 | ||||||
| Maintenance expenses | 93,140 | 103,317 | ||||||
| Depreciation expenses | 149,821 | 118,368 | ||||||
| Travel allowance | 138,984 | 138,171 | ||||||
| Office expenses | 96,492 | 81,972 | ||||||
| Surtax expenses | 629,456 | 585,101 | ||||||
| Amortization expenses | 26,973 | 62,149 | ||||||
| Rental expenses | 6,765 | 7,753 | ||||||
| Insurance expenses | 5,067 | 115,723 | ||||||
| Service expenses | 1,240,791 | 1,292,755 | ||||||
| Legal cost | 1,348,027 | - | ||||||
| Other expenses | 225,602 | 336,881 | ||||||
| Total | $ | 7,784,753 | $ | 6,540,944 | ||||
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General and administrative expenses increased by approximately $1.24 million, or approximately 19%, to $7.78 million for the year ended December 31, 2024, from approximately $6.54 million for the year ended December 31, 2023. The increase was primarily due to (a) legal cost increasing by approximately $1.35 million from $nil for the year ended December 31, 2023 to approximately $1.35 million for the year ended December 31, 2024; (b) entertainment expenses increasing by $0.07 million from $1.22 million for the year ended December 31, 2023 to approximately $1.29 million for the year ended December 31, 2024; (c) conference fee increasing by $0.06 million from $1.22 million for the year ended December 31, 2023 to $1.29 million for the year ended December 31, 2024; offset by (d) insurance expenses decreasing by $0.11 million from $0.12 million for the year ended December 31, 2023 to $5,067 for the year ended December 31, 2024, and (e) other expenses decreasing by approximately $0.11 million from $0.34 million for the year ended December 31, 2023 to approximately $0.23 million for the year ended December 31, 2024.
Research and development
The following table sets forth a breakdown of the research and development expenses of the Company:
Years Ended December 31, 2024 and 2023
| 2024 | 2023 | |||||||
| Sample manufacturing expenses | $ | 1,693,327 | $ | 1,236,407 | ||||
| Salaries and benefits | 1,049,054 | 1,067,154 | ||||||
| Travel allowance | 194,754 | 128,118 | ||||||
| Depreciation expenses | 9,831 | 10,007 | ||||||
| Design expenses | 101,547 | 80,922 | ||||||
| Material expenses | 53,937 | 27,066 | ||||||
| Other expenses | 353,648 | 203,641 | ||||||
| Total | $ | 3,456,098 | $ | 2,753,315 | ||||
The research and development expenses increased by approximately $0.70 million, or approximately 26%, to $3.46 million for the year ended December 31, 2024, from approximately $2.75 million for the year ended December 31, 2023. The increase was mainly due to increase in sample manufacturing expenses.
Income from operations
As a result of the factors described above, our income from operations decreased by approximately $0.36 million, or approximately 2.5%, to $14.31 million for the year ended December 31, 2024 from approximately $14.67 million for the year ended December 31, 2023.
Income tax expense
The provision for income taxes decreased by approximately $0.67 million, or approximately 19%, to $2.79 million for the year ended December 31, 2024, from approximately $3.46 million for the year ended December 31, 2023. The decrease was mainly due to the decrease of taxable income in 2024.
Net income
As a result of the factors described above, our net income decreased by approximately $0.75 million, or approximately 7%, to $10.84 million for the fiscal year ended December 31, 2024 from approximately $11.59 million for the fiscal year ended December 31, 2023.
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| B. | Liquidity and Capital Resources |
Cash Flows and Working Capital
As of December 31, 2025 and 2024, we had cash of approximately $15.15 million and $17.29 million, respectively. We believe that our current cash, cash to be generated from our operations and access to capital market will be sufficient to meet our working capital needs for at least the next twelve months. We do not have any amounts committed to be provided by our related party. We are also not dependent upon future financing to meet our liquidity needs for the next twelve months. In order to implement our growth strategies, we plan to expand our business. With additional capacity, and varied product offerings, the Company will provide tailored “one-stop” services from wound care, to surgical auxiliary supplies, to disease prevention. To do so, we may need more capital through equity financing to expand our production and meet market demands.
Substantially our medical consumables sales operations are conducted in China and all of our revenues, expense and cash are denominated in RMB. RMB is subject to the exchange control regulation in China, and, as a result, we may have difficulty in distributing any dividends outside of China due to PRC exchange control regulations which restrict the ability to convert RMB into U.S. Dollars. In fiscal 2025, our provision of SaaS solutions operations was conducted in USA and all of revenues, expense and cash are denominated in USD.
Under applicable PRC regulations, foreign-invested enterprises in China may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, a foreign-invested enterprise in China is required to set aside at least 10% of its after-tax profit every year as its general reserves based on PRC accounting standards until the accumulative amount of such reserves reaches 50% of its registered capital. These reserves can’t be distributed as cash dividends. The board of directors of a foreign-invested enterprise has the discretion to allocate a portion of its after-tax profits to staff welfare and bonus funds, which can’t be distributed to equity owners except liquidation. Under PRC law, RMB can be converted into U.S. Dollars under the company’s “current account” (including dividends, trade and service-related foreign exchange transactions) rather than the “capital account” (including foreign direct investments and loans, without the prior approval of the SAFE).
For retained earnings accrued after such date, the board of directors will declare dividends after taking into account our operations, earnings, financial condition, the demand for cash and availability and other relevant factors. Any declaration, payment and amount of dividends should be subject to our By-laws, charter and applicable Chinese and U.S. state and federal laws and regulations, including the approval from the shareholders of each subsidiary which intends to declare such dividends, if applicable.
We have limited financial obligations dominated in U.S. dollars, thus the foreign currency restrictions and regulations in PRC on the dividends distribution will not have a material impact on the liquidity, financial condition and results of operations of our Company.
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Cash Flow Summary
Years Ended December 31, 2025, 2024 and 2023
| 2025 | 2024 | 2023 | ||||||||||
| Net Cash Provided by Operating Activities | $ | 569,883 | $ | 14,636,805 | $ | 2,275,750 | ||||||
| Net Cash Used in Investing Activities | (20,125,194 | ) | (20,421,028 | ) | (12,458,698 | ) | ||||||
| Net Cash Provided by Financing Activities | 17,194,783 | 6,213,831 | 706,125 | |||||||||
| Effect of Exchange Rate Changes on Cash | 225,485 | (67,534 | ) | (332,999 | ) | |||||||
| Cash at Beginning of Year | 17,288,952 | 16,926,878 | 26,736,700 | |||||||||
| Cash at End of Year | $ | 15,153,909 | $ | 17,288,952 | $ | 16,926,878 | ||||||
Years Ended December 31, 2025 and 2024
Cash Flow in Operating Activities
Net cash provided by operating activities was approximately $0.57 million for the year ended December 31, 2025, primarily comprised of net income of approximately $6.78 million and adjusted for non-cash items approximately $0.67 million, decrease in bank acceptances receivable of $7.12 million, offset by decrease in accounts payable of $7.48 million, decrease in taxes payable of $1.10 million, decrease in accrued expenses of $0.63 million, increase in accounts receivable of approximately $3.98 million, increase in prepayments and other assets of approximately $0.59 million.
Net cash provided by operating activities was approximately $14.64 million for the year ended December 31, 2024, primarily comprised of net income of approximately $10.84 million and adjusted for non-cash items approximately $3.83 million, increase in accounts payable of $0.93 million, increase in accrued expenses and other liabilities of $0.60 million, decrease in bank acceptance receivables of $1.33 million, decrease in prepayments and other assets of approximately $1.30 million, offset by increase in accounts receivable of approximately $4.54 million.
Net cash provided by operating activities was approximately $2.28 million for the year ended December 31, 2023, primarily comprised of net income of approximately $11.59 million and adjusted for non-cash items approximately $2.28 million, decrease in prepayments and other assets of approximately $1.76 million, decrease in bank acceptance receivables of $1.03 million, offset by increase in accounts receivable of approximately $13.56 million.
Cash Flow in Investing Activities
Net cash used in investing activities was approximately $20.13 million for the year ended December 31, 2025. It consisted of purchases of property and equipment and intangible assets of approximately $15,629, prepayment for digital assets investments of approximately $16.52 million, advance to related party of approximately $10.96 million, offset by collection of a related party of approximately $7.37 million.
Net cash used in investing activities was approximately $20.42 million for the year ended December 31, 2024. It consisted of purchases of property and equipment and intangible assets of approximately $0.13 million, advance to related parties of approximately $17.29 million, long term investment of approximately $4.86 million, offset by collection of long-term deposit for buildings, proceeds from disposal of property, plant and equipment of approximately $0.57 million.
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Net cash used in investing activities was approximately $12.46 million for the year ended December 31, 2023. It consisted of purchases of property and equipment and intangible assets of approximately $4.69 million, deposits to a related party of approximately $9.18 million related to a pre-investment deposit for the purchase of 40% equity interest of Jiangsu Guomai Medical Equipment Co., Ltd, offset by collection from long-term deposit for buildings of approximately $0.71 million, proceeds from disposal of long-term investment of approximately $0.35 million and proceeds from disposal of property, plant and equipment of approximately $0.35 million.
Cash Flow in Financing Activities
For the year ended December 31, 2025, the Company had net cash provided by financing activities of approximately $17.19 million, which consisted of the proceeds from short-term bank loans of approximately $14.61 million, proceeds from private placement of approximately $16.52 million, offset by repayments of short-term bank loans of approximately $13.94 million.
For the year ended December 31, 2024, the Company had net cash provided by financing activities of approximately $6.21 million, which consisted of the proceeds from short-term bank loans of approximately $10.56 million, proceeds from convertible debt of approximately $5.58 million, offset by repayments of short-term bank loans of approximately $9.73 million, share repurchase of approximately $0.20 million.
For the year ended December 31, 2023, the Company had net cash provided by financing activities of approximately $0.71 million, which consisted of the proceeds from short-term bank loans of approximately $6.64 million, offset by repayments of short-term bank loans of approximately $5.93 million.
Off-Balance Sheet Arrangements
As of December 31, 2025 and 2024, there were no off-balance sheet arrangements.
C. Research and Development, Patents and Licenses, etc.
Please see Item 4.A. “Information on the Company-Business Overview-Intellectual Property,” above.
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 year ended December 31, 2025 that are reasonably likely to have a material adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.
E. Critical Accounting Policies and Estimates
A summary of our significant accounting policies is included in Note 2 of our audited consolidated financial statements included in this Form 20-F. The preparation of consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Our estimates and assumptions are based on historical experiences and changes in the business environment. However, actual results may differ from estimates under different conditions, sometimes materially. Critical accounting policies and estimates are defined as those that are both most important to the portrayal of our financial condition and results of operations and require management judgment. Our critical accounting policies and estimates are described below.
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Allowance for Credit Losses
The Company adopted ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” effective January 1, 2020.ASC 326 introduces an approach based on expected losses to estimate the allowance for credit losses, which replaces the previous incurred loss impairment model.
We estimated allowance for credit losses to reserve for potentially uncollectible receivable amounts periodically. We consider factors in assessing the collectability of the accounts receivable, such as historical distribution of the age of the amounts due, payment history, creditworthiness, forward-looking factor, historical collections data of the customers, to assess the credit risk characteristics. We estimated the allowance by segmenting accounts receivable into groups based on their shared credit risk characteristics and the ages of the underlying receivables, and assessed the expected credit loss rate for each group periodically. If there is strong evidence indicating that the accounts receivable is likely to be unrecoverable, we also make specific allowance in the period in which a loss is determined to be probable. Our estimate of the key assumptions did not change significantly throughout the years presented.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Directors and Senior Management
The following table sets forth certain information regarding our directors and senior management, as well as employees upon whose work we are dependent, as of the date of this Annual Report.
| Directors and Executive Officers | Age | Position/Title | ||
| Ailiang Wang | 57 | Chairman of the board of directors | ||
| Leyi Lee | 35 | Chief Executive Officer and Director | ||
| Shilong Liao | 48 | Chief Financial Officer | ||
| Anna Colin | 29 | Independent Director | ||
| Chongbo Gao | 47 | Independent Director | ||
| Wenzhang Jia | 60 | Independent Director |
The following is a brief biography of each of our executive officers and directors:
Ailiang Wang - Chairman of the board of directors
Ms. Ailiang Wang served as the Chairwoman and Chief Executive Officer of Guangzhou Lanjikang Medical Technology Co., Ltd. from October 2023 to September 01, 2025 where she formulated and implemented the company’s three-year strategic development plan, led the research and development and commercialization of core product lines, successfully obtained EU CE certification and US FDA 510(k) approval for products, established an international distribution network covering multiple countries in Europe and North America, and let an important series B round fundraising. Prior to that, Ms. Wang was the Chief Executive Officer of Beijing tiandetai Technology Co., Ltd.from May 2015 to February 2023 where she led the formulation of the company’s five-year development strategy for medical supplies and equipment sales and led the construction of a core supplier cooperation system, establish exclusive or priority agency cooperation relationships with more than 20 well-known domestic and foreign medical equipment manufacturers. Ms. Wang earned her Master of Medicine degree from Xiangya Hospital, Central South University in 1999.
Leyi Lee - Chief Executive Officer and Director
Ms. Leyi Lee served as the Director of Sales in DeepMind Health from February 2024 until August 2025, where she led commercial strategy for AI-driven healthcare solutions. From March 2019 until January 2024, Ms. Lee was the Business Manager at Mindray Medical International, responsible for driving market growth across medical devices including monitors and ultrasound systems. From February 2014 to February 2019, she was the Sales Manager at SenseTime, focusing on market strategy and client acquisition and product-market fit optimization. Ms. Lee received her master’s degree in business administration from The Hong Kong Polytechnic University in 2015 and her bachelor’s degree (honorary) in business administration from The Hang Seng University of Hong Kong in 2013.
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Shilong Liao - Chief Financial Officer
Mr. Shilong Liao served as the CFO of Jing Guang Da Limited, where he led fundraising, oversaw financial operations and compliance and risk management from December 2024 until August 2025. Previously, he was Finance Director at Siemens Healthineers from January 2019 to October 2024, responsible for strategic financial planning, financial operations and digital transformation, and managing a 150+ member finance team. Before that, Mr. Liao served as Finance Manager at The Phoenix Partnership from June 2014 to December 2018, where he led multiple rounds of funding, re-engineered financial processes, and strengthened financial controls. Mr. Liao received his master’s degree in accounting from Shanghai University of Finance and Economics in 2006 and his bachelor’s degree in accounting from Xiamen University in 2004.
Chongbo Gao - Independent Director
Mr. Chongbo Gao has served as the chief operating officer for Bosheng (Shenzhen) Meidical Devices Co., Ltd. from March 2018 to September 30, 2025 where he focused on the full-chain development of the medical device industry, and possess multiple experiences in medical device research and development transformation, clinical application management, and regional industrial coordination. Mr. Gao earned his Master of Medicine degree from Guangzhou Medical University in 2003.
Anna Colin - Independent Director
Ms. Anna Colin has served as the chief operating officer for Piper Sandler since May 2024, responsible for designing firm-wide operations strategy and overseeing regulatory compliance for new fund launches. Ms. Colin worked as an operations manager in Goldman Sachs from April 2022 to May 2024, where she managed a team of five for hedge fund client asset reporting and custody and designed risk dashboard for real-time position monitoring. From August 2021 to October 2022, Ms. Colin worked as the operations analyst at Morgan Stanley, where she collaborated with risk teams to investigate trade breaks, optimized operational workflows and executed post-trade clearing and settlement for equities and fixed income transactions. Ms. Colin received her master’s degree in finance from the London School of Economics and Political Sciences in 2020 and her bachelor’s degree in finance and economics from The Warton School of the University of Pennsylvania in 2019.
Wenzhang Jia - Independent Director
Mr. Wenzhang Jia has been a director of our Company, and the chairman of our audit committee, since June 28, 2022. Mr. Jia is the chairman and chief financial officer of Jiangsu Xibei Electronic Network Co., a company that produces and sells wire and cable, cable TV equipment and network communications equipment, a position he has served in since February of 2000. Mr. Jia received his Bachelor’s degree in finance in 2004 from Yangzhou Institute of Commerce and Industry and pursued post-graduate studies in business administration at Tsinghua University in 2007. Mr. Jia has been president of the Yangzhou Electrical Appliance Industry Association since 2007.
As a result of Mr. Jia’s knowledge and experience in business and finance, we believe Mr. Jia is qualified to serve as a director on our board of directors and will provide us with valuable oversight and guidance.
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Family Relationships
None of our directors or executive officers has a family relationship as defined in Item 401 of Regulation S-K.
B. Compensation
Set forth below is the compensation paid to our executive officers and directors during the fiscal year ended December 31, 2025:
| Name | 2025 Compensation | |||
| Ailiang Wang | $ | 0 | ||
| Leyi Lee | $ | 0 | ||
| Shilong Liao | $ | 0 | ||
| Anna Colin | $ | 0 | ||
| Chongbo Gao | $ | 0 | ||
| Wenzhang Jia | $ | 0 | ||
| Xin Wang (former CEO) | $ | 40,400 | ||
| Lianzhang Zhao (former CFO) | $ | 31,020 | ||
| Huijuan Zhao (former director) | $ | 27,700 | ||
| Yongjun Liu (former director) | $ | 46,448 | ||
| Xiaoming E (former director) | $ | 9,849 | ||
C. Board Practices
Employment Agreement with our Chief Executive Officer and Chief Financial Officer
Effective August 15, 2025, the Company appointed Ms. Leyi Lee to serve as the Company’s CEO and a director and Mr. Shilong Liao to serve as the Company’s CFO. In conjunction with his appointment as CEO of MHUA, Ms. Leyi Lee entered into a three-year employment agreement with MHUA. In conjunction with his appointment as CFO of MHUA, Mr. Liao entered into a three-year employment agreement with MHUA.
Directors Service Contracts
On April 28, 2026, the Company entered into amended director offer letters with each of the directors, pursuant to which Ailiang Wang (Chairwoman) receives $120,000 annually, Leyi Lee (Director) receives $60,000 annually, Chongbo Gao (independent director) receives $36,000 annually, Anna Colin (independent director) receives $18,000 annually, and Wenzhang Jia (independent director) receives $30,000 annually.
The director offer letters for Ms. Wang, Mr. Gao, Ms. Colin, Ms. Lee and Mr. Jia generally provide for an initial term of one year, subject to renewal or earlier termination in accordance with their terms.
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Committees of the Board
We maintain three committees under the board of directors: an audit committee, a compensation committee, and a nominating and corporate governance committee. We have adopted separate charters for each of the three committees. Each committee’s members and functions are described below.
Audit Committee. Our audit committee consists of Wenzhang Jia, Anna Colin and Chongbo Gao, and is chaired by Mr. Jia. Wenzhang Jia, Anna Colin and Chongbo Gao each satisfies the “independence” requirements of Rule 5605(c)(2) of the Listing Rules of the Nasdaq Stock Market and meets the independence standards under Rule 10A-3 under the Exchange Act. We have determined that Wenzhang Jia qualifies as an “audit committee financial expert.” The audit committee will oversee our accounting and financial reporting processes and the audits of the financial statements of our company. The audit committee is responsible for, among other things:
| ● | selecting the independent registered public accounting firm and pre-approving all auditing and non-auditing services permitted to be performed by the independent registered public accounting firm; |
| ● | reviewing with the independent registered public accounting firm any audit problems or difficulties and management’s response; |
| ● | reviewing and approving all proposed related party transactions, as defined in Item 404 of Regulation S-K under the Securities Act; |
| ● | discussing the annual audited financial statements with management and the independent registered public accounting firm; |
| ● | reviewing major issues as to the adequacy of our internal controls and any special audit steps adopted in light of material control deficiencies; |
| ● | annually reviewing and reassessing the adequacy of our audit committee charter; |
| ● | meeting separately and periodically with management and the independent registered public accounting firm; and |
| ● | reporting regularly to the board of directors. |
Compensation Committee. Our compensation committee consists of Wenzhang Jia, Anna Colin and Chongbo Gao, and is chaired by Chongbo Gao. The compensation committee will assist the board of directors in reviewing and approving the compensation structure, including all forms of compensation, relating to our directors and executive officers. Our chief executive officer may not be present at any committee meeting during which his compensation is deliberated upon. The compensation committee is responsible for, among other things:
| ● | reviewing the total compensation package for our executive officers and making recommendations to the board of directors with respect to it; |
| ● | reviewing the compensation of our non-employee directors and making recommendations to the board of directors with respect to it; and |
| ● | periodically reviewing and approving any long-term incentive compensation or equity plans, programs or similar arrangements, annual bonuses, and employee pension and welfare benefit plans. |
Nominating Committee. Our nominating committee consists of Wenzhang Jia, Wenzhang Jia, Anna Colin and Chongbo Gao, and is chaired by Anna Colin. The nominating committee will assist the board of directors in selecting individuals qualified to become our directors and in determining the composition of the board of directors and its committees. The nominating committee is responsible for, among other things:
| ● | recommending nominees to the board of directors for election or re-election to the board of directors, or for appointment to fill any vacancy on the board of directors; |
| ● | reviewing annually with the board of directors the current composition of the board of directors with regards to characteristics such as independence, age, skills, experience and availability of service to us; |
| ● | selecting and recommending to the board of directors the names of directors to serve as members of the audit committee and the compensation committee, as well as of the nominating committee itself; and |
| ● | monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance. |
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Duties of Directors
Under Cayman Islands law, our directors owe fiduciary duties to our company, including a duty of loyalty, a duty to act honestly, and a duty to act in a manner they consider in good faith to be in our best interests. Our directors must also exercise their powers only for a proper purpose. Our directors also owe to our company a duty to exercise the skills they actually possess and such care and diligence that a reasonably prudent person would exercise in comparable circumstances.
In fulfilling their duty of care to us, our directors must ensure compliance with our memorandum and articles of association as may be amended from time to time. Our company has a right to seek damages against any director who breaches a duty owed to us.
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 officers; and |
| ● | exercising the borrowing powers of our company and mortgaging the property of our company |
Terms of Directors
Our directors may be elected by a resolution of our board of directors, or by an ordinary resolution of our shareholders. Our directors are not subject to a term of office and hold office until such time as they are removed from office by ordinary resolution of the shareholders. A director will cease to be a director automatically 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 the company, or (iv) is convicted of an arrestable offence.
Code of Business Conduct and Ethics
Our board of directors has adopted a code of business conduct and ethics that applies to our directors, officers and employees. A copy of this code is available on our website. We intend to disclose on our website any amendments to the Code of Business Conduct and Ethics and any waivers of the Code of Business Conduct and Ethics that apply to our principal executive officer, principal financial officer, principal accounting officer, controller, or persons performing similar functions.
Clawback Policy
While the Company does not presently have in place any significant incentive compensation agreements or awards related to the Company’s overall financial performance, the Company’s board of directors has adopted a clawback policy in order to comply with federal securities laws. As such, we have adopted a clawback policy in which we may seek the recovery or forfeiture of incentive compensation paid by us, including cash, equity or equity-based compensation, in the event we restate our financial statements under certain circumstances. The clawback policy applies to our executive officers, any employee who was eligible to receive incentive compensation and whose conduct contributed to the need for a restatement, and any other former executive officer or other employee who contributed to the need for such restatement.
D. Employees
Employees
We had 486, 619, and 617 full-time employees as of December 31, 2025 and 2024, 2023, respectively. The following table sets forth the number of full-time employees based on category of employment and place of employment as of December 31, 2025:
| Function/Department | Yangzhou Huada | Jiangsu Huadong | Jiangsu Yada | Total | ||||||||||||
| Management | 11 | 33 | 37 | 81 | ||||||||||||
| Sales and Marketing | 9 | 36 | 35 | 80 | ||||||||||||
| Research and Development | - | 37 | 32 | 69 | ||||||||||||
| Production | 33 | 95 | 128 | 256 | ||||||||||||
| Subtotal Total | 53 | 201 | 232 | 486 | ||||||||||||
Our success depends on our ability to attract, motivate, train and retain qualified personnel. We believe we offer our employees competitive compensation packages and an environment that encourages self-development and, as a result, have generally been able to attract and retain qualified personnel and maintain a stable core management team.
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As required by laws and regulations in China, we participate in various employee social security plans that are organized by municipal and provincial governments including, among other things, pension, medical insurance, unemployment insurance, maternity insurance, on-the-job injury insurance and housing fund plans through a PRC government-mandated benefit contribution plan. 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.
We believe we maintain a good working relationship with our employees, and we have not experienced any material labor disputes. None of our employees are represented by a labor union.
E. Share Ownership
The following table sets forth, as of the date of this Annual Report, the beneficial ownership of our Ordinary Shares by each executive officer and director, by each person known by us to beneficially own more than 5% of our Ordinary Shares and by the executive officers and directors as a group. Except as otherwise indicated, all shares are owned directly and the percentage shown is based on 697,914 shares of Ordinary Shares issued and outstanding.
| Title of class | Name of beneficial owner | Amount of beneficial ownership | Percent of class | |||||||
| Current Executive Officers and Directors | ||||||||||
| Ordinary Shares | Yongjun Liu(1) | 159,350 | 18.57 | % | ||||||
| Ordinary Shares | Xin Wang | - | - | % | ||||||
| Ordinary Shares | Lianzhang Zhao | - | - | % | ||||||
| Ordinary Shares | Tongying Zhang | - | - | % | ||||||
| Ordinary Shares | Xiaoming E | - | - | % | ||||||
| Ordinary Shares | Huijuan Zhao | - | - | % | ||||||
| Ordinary Shares | Wenzhang Jia | - | - | % | ||||||
| Total of All Current Officers and Directors: | 159,350 | 18.57 | % | |||||||
| ≥ 5% Beneficial Owners | ||||||||||
| None. | ||||||||||
| (1) | Mr. Liu holds these shares through Bright Accomplish Limited, a holding company controlled jointly by Mr. Liu and his wife, Yin Liu. |
As used in this table, “beneficial ownership” means the sole or shared power to vote, or to direct the voting of, a security, or the sole or shared investment power with respect to a security (i.e., the power to dispose of, or to direct the disposition of, a security). In addition, for purposes of this table, a person is deemed, as of any date, to have “beneficial ownership” of any security that such person has the right to acquire within 60 days after such date.
The persons named above have full voting and investment power with respect to the shares indicated. Under the rules of the Securities and Exchange Commission, a person (or group of persons) is deemed to be a “beneficial owner” of a security if he or she, directly or indirectly, has or shares the power to vote or to direct the voting of such security, or the power to dispose of or to direct the disposition of such security. Accordingly, more than one person may be deemed to be a beneficial owner of the same security. A person is also deemed to be a beneficial owner of any security, which that person has the right to acquire within 60 days, such as options or warrants to purchase our Ordinary Shares.
Major Shareholders
Other than as set forth above, there are no beneficial owners of 5% or more of our voting securities. The company is not directly or indirectly owned or controlled by another corporation(s) or by any foreign government. There are no arrangements, known to us, the operation of which may at a subsequent date result in a change in control of the 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
See Item 6 “Directors, Senior Management and Employees-E. Share Ownership.”
B. Related Party Transactions
Except for the transactions set forth below, during our preceding three financial years up to the date of this Annual Report, there have been no transactions or loans between the company and (a) enterprises that directly or indirectly through one or more intermediaries, control or are controlled by, or are under common control with, the company; (b) associates; (c) individuals owning, directly or indirectly, an interest in the voting power of the company that gives them significant influence over the company, and close members of any such individual’s family; (d) key management personnel, that is, those persons having authority and responsibility for planning, directing and controlling the activities of the company, including directors and senior management of companies and close members of such individuals’ families; and (e) enterprises in which a substantial interest in the voting power is owned, directly or indirectly, by any person described in (c) or (d) or over which such a person is able to exercise significant influence.
| Name of related parties | Relationship with the Company | |
| Jiangsu Zhongxiangxin International Science and Technology Innovation Park Co., Ltd. (“Zhongxiangxin”) | An equity method investee | |
| Hainan Guoxie Technology Group Co. Ltd. (“Hainan Guoxie”) | An equity method investee | |
| Jiangsu Guomai Medical Equipment Co., Ltd (“Jiangsu Guomai”) | An equity method investee | |
| Ms. Liu Fang | Daughter of Mr. Yongjun Liu, a shareholder of the Company | |
| Yangzhou Meihua Import and Export Co., Ltd. | An entity controlled by Mr. Kai Liu, son of Mr.Yongjun Liu, a shareholder of the Company |
(1) Transaction with Ms. Liu Fang
On December 19, 2023, Jiangsu Huadong signed a letter of intent with Ms. Fang Liu (daughter of Mr. Yongjun Liu) to purchase 40% equity interest of Jiangsu Guomai Medical Equipment Co., Ltd (“Guomai”). Jiangsu Huadong prepaid $9.2 million in deposits to Ms. Liu Fang and, as a result, a 40% equity interest in Guomai was pledged to Jiangsu Huadong. The transaction was closed in November 2024.
(2) Transaction with Yangzhou Meihua Import and Export Co., Ltd.
We sell products at market price to Yangzhou Meihua Import and Export Co., Ltd., an affiliate of us. For the fiscal years ended December 31, 2025, 2024 and 2023, the sales amount was $831,327, $768,553 and $416,441, respectively, and as of December 31, 2025 and 2024, the amount account receivable from Yangzhou Meihua Import and Export Co., Ltd. Were $1,499,525, and $727,180, respectively. The main business of Yangzhou Meihua Import and Export Co., Ltd. is the import and export of medical consumables, and the main types of products it purchases from the Company are dressing wounds and wiping wounds, Yang Ke Tou (Suction tube), disposable urinary swab, disposable umbilical cord clamp, disposable suction connection pipe, disposable medical gauze, medical urine cup, medical disinfection dressing surgical kit and round head steel needles.
(2) Loans to related parties:
| Due from related party | As of December 31, | |||||||
| Name of related party | 2025 | 2024 | ||||||
| Zhongxiangxin | $ | - | $ | 6,854,443 | ||||
| Hainan Guoxie | 11,466,326 | 10,190,726 | ||||||
| Jiangsu Guomai | 10,009,867 | - | ||||||
| Total | $ | 21,476,193 | $ | 17,045,169 | ||||
For the year ended December 31, 2024, the Company advanced $6,849,972 (RMB50 million) to Zhongxiangxin with a fixed interest rate of 2.35%. As of December 31, 2024, principal and interests amounted to $6,854,443, which were fully collected on March 20, 2025.
For the year ended December 31, 2024, the Company advanced $10,190,726 to Hainan Guoxie. The advance is interest-free and will be converted into a capital injection in Hainan Guoxie. For the year ended December 31, 2025, the Company further advanced $1,275,600 (RMB5.8 million) to Hainan Guoxie.
For the year ended December 31, 2025, the Company advanced $10,438,861 to Jiangsu Guomai with a fixed interest rate of 2.35%, The advance was used to support the operations of Guomai. After partial collection, the principle and interests amounted to $10,009,867 as of December 31, 2025.
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ITEM 8. FINANCIAL INFORMATION
A. Consolidated Statements and Other Financial Information
Financial Statements
We have appended consolidated financial statements filed as part of this Annual Report. See Item 18 “Financial Statements.”
Legal Proceedings
See Item 4 -B “Business Overview” above, under “Legal Proceedings.”
Dividend Policy
To date, we have not paid any cash dividends on our shares. As a Cayman Islands company, we may only declare and pay dividends except when the corporation is insolvent or would thereby be made insolvent or when the declaration or payment would be contrary to any restrictions contained in our Articles of Association. Dividends may be declared and paid out of surplus only; but in case there is no surplus, dividends may be declared or paid out of the net profits for the fiscal year in which the dividend is declared and for the preceding fiscal year. We currently anticipate that we will retain any available funds to finance the growth and operation of our business and we do not anticipate paying any cash dividends in the foreseeable future. Additionally, our cash held in foreign countries may be subject to certain control limitations or repatriation requirements, limiting our ability to use this cash to pay dividends.
B. Significant Changes
No significant change has occurred since the date of our consolidated financial statements filed as part of this Annual Report.
ITEM 9. THE OFFER AND LISTING
A. Offer and Listing Details
Our Class A Ordinary Shares is listed on the OTC Market and trade under the symbol “MHUAF.”
B. Plan of Distribution
Not applicable.
C. Markets
See our disclosures above under “A. Offer and Listing Details.”
D. Selling Shareholders
Not applicable.
E. Dilution
Not applicable.
F. Expenses of the Issue
Not applicable.
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ITEM 10. ADDITIONAL INFORMATION
A. Share Capital
Not applicable.
B. Memorandum and Articles of Association
The information required by Item 10.B of Form 20-F is included in the section titled “Description of Share Capital” in our Registration Statement on Form F-3 filed on February 24, 2025, which section is incorporated herein by reference. Our Second Amended and Restated Memorandum and Articles of Association is filed as Exhibit 1.4 to this Annual Report, and are hereby incorporated by reference into this Annual Report.
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 5 “Operating and Financial Review and Prospects-F. Tabular Disclosure of Contractual Obligations,” Item 7 “Major Shareholders and Related Party Transactions,” or filed (or incorporated by reference) as exhibits to this Annual Report or otherwise described or referenced in this Annual Report.
D. Exchange Controls
Cayman Islands Exchange Controls
There are no material exchange controls restrictions on payment of dividends, interest or other payments to the holders of our Class A Ordinary Shares or on the conduct of our operations in the Cayman Islands, where we were incorporated. There are no material Cayman Islands laws that impose any material exchange controls on us or that affect the payment of dividends, interest or other payments to nonresident holders of our Class A Ordinary Shares. Cayman Islands law and our memorandum and articles of association do not impose any material limitations on the right of non-residents or foreign owners to hold or vote our Class A Ordinary Shares.
PRC Exchange Controls
Regulations on Foreign Currency Exchange
Under the PRC Foreign Currency Administration Rules promulgated on January 29, 1996 and last amended on August 5, 2008 and various regulations issued by SAFE and other relevant PRC government authorities, payment of current account items in foreign currencies, such as trade and service payments, payment of interest and dividends can be made without prior approval from SAFE by following the appropriate procedural requirements. By contrast, the conversion of RMB into foreign currencies and remittance of the converted foreign currency outside the PRC for the purpose of capital account items, such as direct equity investments, loans and repatriation of investment, requires prior approval from SAFE or its local office.
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On February 13, 2015, SAFE promulgated the Circular on Simplifying and Improving the Foreign Currency Management Policy on Direct Investment, effective from June 1, 2015, which cancels the requirement for obtaining approvals of foreign exchange registration of foreign direct investment and overseas direct investment from SAFE. The application for the registration of foreign exchange for the purpose of foreign direct investment and overseas direct investment may be filed with qualified banks, which, under the supervision of SAFE, may review the application and process the registration.
According to SAFE Circular 19, a foreign-invested enterprise may, according to its actual business needs, settle with a bank the portion of the foreign exchange capital in its capital account for which the relevant foreign exchange bureau has confirmed monetary contribution rights and interests (or for which the bank has registered the account-crediting of monetary contribution). For the time being, foreign-invested enterprises are allowed to settle 100% of their foreign exchange capitals on a discretionary basis; a foreign-invested enterprise shall truthfully use its capital for its own operational purposes within the scope of business; where an ordinary foreign-invested enterprise makes domestic equity investment with the amount of foreign exchanges settled, the invested enterprise shall first go through domestic re-investment registration and open a corresponding Account for Foreign Exchange Settlement Pending Payment with the foreign exchange bureau (bank) at the place of registration. According to SAFE Circular 16, enterprises registered in PRC may also convert their foreign debts from foreign currency into Renminbi on self-discretionary basis. SAFE Circular 16 provides an integrated standard for conversion of foreign exchange under capital account items (including but not limited to foreign currency capital and foreign debts) on self-discretionary basis, which applies to all enterprises registered in the PRC. SAFE Circular 16 reiterates the principle that Renminbi converted from foreign currency-denominated capital of a company may not be directly or indirectly used for purposes beyond its business scope and may not be used for investments in securities or other investment with the exception of bank financial products that can guarantee the principal within the PRC unless otherwise specifically provided. Besides, the converted Renminbi shall not be used to make loans for related enterprises unless it is within the business scope or to build or to purchase any real estate that is not for the enterprise own use with the exception for the real estate enterprise. On October 23, 2019, the SAFE issued the SAFE Circular 28, which, among other things, expanded the use of foreign exchange capital to domestic equity investment area. Non-investment foreign-funded enterprises are allowed to lawfully make domestic equity investments by using their capital on the premise without violation to prevailing special administrative measures for access of foreign investments (negative list) and the authenticity and compliance with the regulations of domestic investment projects.
On January 26, 2017, SAFE promulgated the Circular on Further Improving Reform of Foreign Exchange Administration and Optimizing Genuineness and Compliance Verification, or SAFE Circular 3, which stipulates several capital control measures with respect to the outbound remittance of profits from domestic entities to offshore entities, including (i) banks must check whether the transaction is genuine by reviewing board resolutions regarding profit distribution, original copies of tax filing records and audited financial statements, and (ii) domestic entities must retain income to account for previous years’ losses before remitting any profits. Moreover, pursuant to SAFE Circular 3, domestic entities must explain in detail the sources of capital and how the capital will be used, and provide board resolutions, contracts and other proof as a part of the registration procedure for outbound investment.
Regulations on Foreign Exchange Registration of Overseas Investment by PRC Residents
SAFE issued the SAFE Circular 37 to regulate foreign exchange matters in relation to the use of special purpose vehicles, or SPVs, by PRC residents or entities to seek offshore investment and financing or conduct round trip investment in China. SAFE Circular 37 defines a SPV as an offshore entity established or controlled, directly or indirectly, by PRC residents or entities for the purpose of seeking offshore financing or making offshore investment, using legitimate onshore or offshore assets or interests, while “round trip investment” is defined as direct investment in China by PRC residents or entities through SPVs, namely, establishing foreign-invested enterprises to obtain the ownership, control rights and management rights. SAFE Circular 37 stipulates that, prior to making contributions into an SPV, PRC residents or entities be required to complete foreign exchange registration with SAFE or its local branch. In addition, SAFE promulgated the Notice on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning Direct Investment in February 2015, which amended SAFE Circular 37 and became effective on June 1, 2015, requiring PRC residents or entities to register with qualified banks rather than SAFE in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing.
PRC residents or entities who had contributed legitimate onshore or offshore interests or assets to SPVs but had not obtained registration as required before the implementation of the SAFE Circular 37 must register their ownership interests or control in the SPVs with qualified banks. An amendment to the registration is required if there is a material change with respect to the SPV registered, such as any change of basic information (including change of the PRC residents, name and operation term), increases or decreases in investment amount, transfers or exchanges of shares, and mergers or divisions. Failure to comply with the registration procedures set forth in SAFE Circular 37 and the subsequent notice, or making misrepresentation on or failure to disclose controllers of the foreign-invested enterprise that is established through round-trip investment, may result in restrictions being imposed on the foreign exchange activities of the relevant foreign-invested enterprise, including payment of dividends and other distributions, such as proceeds from any reduction in capital, share transfer or liquidation, to its offshore parent or affiliate, and the capital inflow from the offshore parent, and may also subject relevant PRC residents or entities to penalties under the PRC Foreign Exchange Administration Regulations. See “Risk Factors-Risks Related to Doing Business in China-PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident beneficial owners or our PRC subsidiaries to liability or penalties, limit our ability to inject capital into our PRC subsidiaries, limit our PRC subsidiaries’ ability to increase its registered capital or distribute profits to us, or may otherwise adversely affect us.”
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Regulations on Dividend Distribution
Distribution of dividends of foreign investment enterprises are mainly governed by the Foreign Investment Enterprise Law, issued in 1986 and amended in 2000 and 2016 respectively, and the Implementation Rules under the Foreign Investment Enterprise Law, issued in 1990 and amended in 2001 and 2014 respectively. Under these regulations, foreign investment enterprises in the PRC may distribute dividends only out of their accumulative profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, no less than 10% of the accumulated profits of the foreign investment enterprises in the PRC are required to be allocated to fund certain reserve funds each year unless these reserves have reached 50% of the registered capital of the enterprises. A PRC company is not permitted to distribute any profits until any losses from previous fiscal years have been offset. Profits retained from prior fiscal years may be distributed together with distributable profits from the current fiscal year. Under our current corporate structure, our BVI holding company may rely on dividend payments from our wholly foreign-owned enterprise incorporated in China to fund any cash and financing requirements we may have. Limitation on the ability of our operating subsidiaries to make remittance to our WOFEs and on the ability of our WOFEs to pay dividends to us could limit our ability to access cash generated by the operations of those entities.
E. Taxation
The following summary of the material Cayman Islands, PRC and U.S. federal income tax consequences of an investment in our Class A Ordinary Shares and Class B 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 Class A Ordinary Shares and Class B Ordinary Shares, such as the tax consequences under U.S. state and local tax laws or under the tax laws of jurisdictions other than the Cayman Islands, the People’s Republic of China and the United States.
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 investors 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 a party to a double tax treaty entered with the United Kingdom in 2010 but is otherwise is not party to any double tax treaties which are applicable to any payments made to or by our company. There are no exchange control regulations or currency restrictions in the Cayman Islands.
Payments of dividends and capital in respect of Class A Ordinary Shares and Class B Ordinary Shares will not be subject to taxation in the Cayman Islands and no withholding will be required under Cayman Islands laws on the payment of a dividend or capital to any holder of Ordinary Shares, nor will gains derived from the disposal of Class A Ordinary Shares and Class B Ordinary Shares be subject to Cayman Islands income or corporation tax.
The Cayman Islands enacted the International Tax Co-operation (Economic Substance) Act (2021 Revision) together with the Guidance Notes published by the Cayman Islands Tax Information Authority from time to time. The Company is required to comply with the economic substance requirements from July 1, 2019 and make an annual report in the Cayman Islands as to whether or not it is carrying on any relevant activities and if it is, it must satisfy an economic substance test.
People’s Republic of China Taxation
Under the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside 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 at the rate of 25% on its global income. 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, production, personnel, accounts and properties of an enterprise. In April 2009, the SAT issued the SAT Circular 82, which provides certain specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is located in China. Although this circular only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners, the criteria set forth in the circular may reflect the SAT’s general position on how the “de facto management body” 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 the PRC 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.
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Further to SAT Circular 82, the SAT issued the SAT Bulletin 45, which took effect in September 2011, to provide more guidance on the implementation of SAT Circular 82. SAT Bulletin 45 provides for procedures and administration details of determination on resident status and administration on post-determination matters. Our Company is a company incorporated outside the PRC. As a holding company, its sole asset is its share ownership of its direct subsidiary, a Hong Kong company, 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. As such, we do not believe that our Company meets all of the conditions above or is a PRC resident enterprise for PRC tax purposes. However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.” There can be no assurance that the PRC government will ultimately take a view that is consistent with us. If the PRC tax authorities determine that our Cayman Islands holding company is a PRC resident enterprise for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. For example, a 10% withholding tax would be imposed on dividends we pay to our non-PRC enterprise shareholders. In addition, nonresident enterprise shareholders may be subject to PRC tax on gains realized on the sale or other disposition of Class A Ordinary Shares and Class B Ordinary Shares, as if such income is treated as sourced from within the PRC. Furthermore, if we are deemed a PRC resident enterprise, dividends paid to our non-PRC individual shareholders and any gain realized on the transfer of Class A Ordinary Shares and Class B Ordinary Shares by such shareholders may be subject to PRC tax at a rate of 20% (which, in the case of dividends, may be withheld at source by us). These rates may be reduced by an applicable tax treaty, but it is unclear whether in practice non-PRC shareholders of our Company would be able to obtain 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. See “Risk Factors-Risks Related to Doing Business in China-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.”
Notwithstanding the foregoing, our PRC subsidiaries, Jiangsu Huadong enjoy preferential income tax rate of 15% until December 31, 2025, due to its treatment as “National High-Tech Enterprises” in China. Prior to the expiration date of such treatment, it may submit applications for renewal and continue enjoying the preferential income tax rate if granted.
United States Federal Income Taxation Considerations
The following discussion is a summary of United States federal income tax considerations generally applicable to the ownership and disposition of our Class A Ordinary Shares and Class B Ordinary Shares by a U.S. holder (as defined below) that acquires our Class A Ordinary Shares and Class B Ordinary Shares and holds our Class A Ordinary Shares and Class B Ordinary Shares as “capital assets” (generally, property held for investment) under the United States Internal Revenue Code of 1986, as amended (the “Code”). This discussion is based upon existing United States federal income tax law, which is subject to differing interpretations and may be changed, possibly with retroactive effect. No ruling has been sought from the Internal Revenue Service (the “IRS”) with respect to any United States federal income tax consequences described below, and there can be no assurance that the IRS or a court will not take a contrary position. This discussion does not address all aspects of United States federal income taxation that may be important to particular investors in light of their individual circumstances, including investors subject to special tax rules (for example, certain financial institutions, insurance companies, broker-dealers, traders in securities that have elected the mark-to-market method of accounting for their securities, partnerships and their partners, regulated investment companies, real estate investment trusts, and tax-exempt organizations (including private foundations)), investors who are not U.S. holders, investors who own (directly, indirectly, or constructively) 10% or more of our stock (by vote or value), investors that will hold their Class A Ordinary Shares and Class B Ordinary Shares as part of a straddle, hedge, conversion, constructive sale, or other integrated transaction for United States federal income tax purposes, investors required to accelerate the recognition of any item of gross income with respect to our Class A Ordinary Shares and Class B Ordinary Shares as a result of such income being recognized on an applicable financial statement, or investors that have a functional currency other than the United States dollar, all of whom may be subject to tax rules that differ significantly from those summarized below. In addition, this discussion does not discuss any non-United States, alternative minimum tax, state, or local tax or any non-income tax (such as the U.S. federal gift or estate tax) considerations, or the Medicare tax on net investment income. Each U.S. holder is urged to consult its tax advisor regarding the United States federal, state, local, and non-United States income and other tax considerations of an investment in our Class A Ordinary Shares and Class B Ordinary Shares.
General
For purposes of this discussion, a “U.S. holder” is a beneficial owner of our Class A Ordinary Shares and Class B Ordinary Shares that is, for United States federal income tax purposes, (i) an individual who is a citizen or resident of the United States, (ii) a corporation (or other entity treated as a corporation for United States federal income tax purposes) created in, or organized under the laws of, the United States or any state thereof or the District of Columbia, (iii) an estate the income of which is subject to United States federal income taxation regardless of its source, or (iv) a trust (A) the administration of which is subject to the primary supervision of a United States court and which has one or more United States persons who have the authority to control all substantial decisions of the trust or (B) that has otherwise elected to be treated as a United States person under the Code or applicable United States Treasury regulations.
If a partnership (or other entity or arrangement treated as a partnership for United States federal income tax purposes) is a beneficial owner of our Class A Ordinary Shares and Class B Ordinary Shares, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. Partnerships holding our Class A Ordinary Shares and Class B Ordinary Shares and partners in such partnerships are urged to consult their tax advisors as to the particular United States federal income tax consequences of an investment in our Class A Ordinary Shares and Class B Ordinary Shares.
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Sale or Other Disposition of Class A Ordinary Shares and Class B Ordinary Shares
Subject to the PFIC rules discussed below, a U.S. holder will generally recognize capital gain or loss upon the sale or other disposition of Class A Ordinary Shares and Class B 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 Class A Ordinary Shares and Class B Ordinary Shares. Any capital gain or loss will be long-term if our Class A Ordinary Shares and Class B Ordinary Shares have been held for more than one year and will generally be United States source gain or loss for United States foreign tax credit purposes. Long-term capital gain of individuals and other non-corporate U.S. holders is generally eligible for a reduced rate of taxation. The deductibility of a capital loss may be subject to limitations.
In the event that we are treated as a PRC “resident enterprise” under the Enterprise Income Tax Law and gain from the disposition of our Class A Ordinary Shares and Class B Ordinary Shares is subject to tax in the PRC, a U.S. holder that is eligible for the benefits of the income tax treaty between the United States and the PRC may elect to treat the gain as PRC source income. If a U.S. holder is not eligible for the benefits of the income tax treaty or fails to make the election to treat any gain as foreign source, then such U.S. holder may not be able to use the foreign tax credit arising from any PRC tax imposed on the disposition of our Class A Ordinary Shares and Class B Ordinary Shares unless such credit can be applied (subject to applicable limitations) against U.S. federal income tax due on other income derived from foreign sources in the same income category (generally, the passive category). U.S. holders are advised to consult their tax advisors regarding the tax consequences if a foreign tax is imposed on a disposition of our Class A Ordinary Shares and Class B Ordinary Shares, including the availability of the foreign tax credit under their particular circumstances and the election to treat any gain as PRC source.
Passive Foreign Investment Company Rules
If we are a PFIC for any taxable year during which a U.S. holder holds our Class A Ordinary Shares and Class B 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 that have a penalizing effect, regardless of whether we remain a PFIC, for subsequent taxable years, 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% of the average annual distributions paid in the three preceding taxable years or, if shorter, the U.S. holder’s holding period for our Class A Ordinary Shares and Class B Ordinary Shares), and (ii) any gain realized on the sale or other disposition, including, under certain circumstances, a pledge, of Class A Ordinary Shares and Class B Ordinary Shares. Under the PFIC rules:
| ● | such excess distribution and/or gain will be allocated ratably over the U.S. holder’s holding period for our Class A Ordinary Shares and Class B Ordinary Shares; |
| ● | such 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, or pre-PFIC year, will be taxable as ordinary income; |
| ● | such 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 that year; and |
| ● | an interest charge generally applicable to underpayments of tax will be imposed on the tax attributable to each prior taxable year, other than a pre-PFIC year. |
If we are a PFIC for any taxable year during which a U.S. holder holds our Class A Ordinary Shares and Class B Ordinary Shares and any of our non-United States subsidiaries is also a PFIC, such U.S. holder would be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC for purposes of the application of these rules. U.S. holders are advised to consult their tax advisors regarding the application of the PFIC rules to any of our subsidiaries.
As an alternative to the foregoing rules, a U.S. holder of “marketable stock” in a PFIC may make a mark-to-market election with respect to our Class A Ordinary Shares and Class B Ordinary Shares, provided that our Class A Ordinary Shares and Class B Ordinary Shares are regularly traded on the Nasdaq Global Market.
Because a mark-to-market election cannot be made for any lower-tier PFICs that a PFIC may own, a U.S. holder who makes a mark-to-market election with respect to our Class A Ordinary Shares and Class B Ordinary Shares will generally continue to be subject to the general 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 United States federal income tax purposes. If a mark-to-market election is made, the U.S. 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 Class A Ordinary Shares and Class B Ordinary Shares held at the end of the taxable year over the adjusted tax basis of such Class A Ordinary Shares and Class B Ordinary Shares and (ii) deduct as an ordinary loss the excess, if any, of the adjusted tax basis of our Class A Ordinary Shares and Class B Ordinary Shares over the fair market value of such Class A Ordinary Shares and Class B Ordinary Shares held at the end of the taxable year, but only to the extent of the net amount previously included in income as a result of the mark-to-market election. The U.S. holder’s adjusted tax basis in our Class A Ordinary Shares and Class B Ordinary Shares would be adjusted to reflect any income or loss resulting from the mark-to-market election. If a U.S. holder makes an effective mark-to-market election, in each year that we are a PFIC any gain recognized upon the sale or other disposition of our Class A Ordinary Shares and Class B Ordinary Shares will be treated as ordinary income and loss will be treated as ordinary loss, but only to the extent of the net amount previously included in income as a result of the mark-to-market election. If a U.S. holder makes a mark-to-market election it will be effective for the taxable year for which the election is made and all subsequent taxable years unless our Class A Ordinary Shares and Class B Ordinary Shares are no longer regularly traded on a qualified exchange or the IRS consents to the revocation of the election.
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If a U.S. holder makes a mark-to-market election in respect of a PFIC and such corporation ceases to be a PFIC, the U.S. holder will not be required to take into account the mark-to-market gain or loss described above during any period that such corporation is not a PFIC.
We do not intend to provide information necessary for U.S. holders to make qualified electing fund elections, which, if available, would result in tax treatment different from (and generally less adverse than) the general tax treatment for PFICs described above.
If a U.S. holder owns our Class A Ordinary Shares and Class B Ordinary Shares during any taxable year that we are a PFIC, such holder would generally be required to file an annual IRS Form 8621. Each U.S. holder is advised to consult its tax advisors regarding the potential tax consequences to such holder if we are or become a PFIC, including the possibility of making a mark-to-market election.
F. Dividends and Paying Agents
Not applicable.
G. Statement by Experts
Not applicable.
H. Documents on Display
We have filed this Annual Report on Form 20-F with the SEC under the Exchange Act. Statements made in this Annual Report as to the contents of any document referred to are not necessarily complete. With respect to each such document filed as an exhibit to this Annual Report, reference is made to the exhibit for a more complete description of the matter involved, and each such statement shall be deemed qualified in its entirety by such reference.
We are subject to the informational requirements of the Exchange Act as a foreign private issuer and file reports and other information with the SEC. Reports and other information filed by us with the SEC including this Annual Report, may be inspected and copied at the public reference room of the SEC at 100 F Street, N.E., Washington D.C. 20549. You can also obtain copies of this Annual Report by mail from the Public Reference Section of the SEC, 100 F. Street, N.E., Washington D.C. 20549, at prescribed rates. Additionally, copies of this material may be obtained from the SEC’s Internet site at http://www.sec.gov. The SEC’s telephone number is 1-800-SEC-0330. In accordance with Nasdaq Stock Market Rule 5250(d).
As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of quarterly reports and proxy statements, and officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.
I. Subsidiary Information
See “Item 4.A, Information on the Company - History and Development of the Company” above.
J. Annual Report to Security Holders.
If we are required to provide an annual report to security holders in response to the requirements of Form 6-K, we will submit the annual report to security holders in electronic format in accordance with the EDGAR Filer Manual.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign Exchange Risk
Foreign currency risk arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operations. Substantially all of our revenue-generating transactions, and a majority of our expense-related transactions, are denominated in Renminbi, which is the functional currency of our operations. We do not hedge against currency risk.
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The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions. 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 reduce the Renminbi 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, servicing outstanding debts, or for other business purposes, appreciation of the U.S. dollar against the Renminbi would reduce the U.S. dollar amounts available to us.
Our functional currency is the RMB, and our financial statements are presented in U.S. dollars. The RMB appreciate by 4.2% and depreciated 2.8% for the year ended December 31, 2025 and 2024, respectively. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the RMB and the U.S. dollar in the future. The change in the value of the RMB relative to the U.S. dollar may affect our financial results reported in the U.S. dollar terms without giving effect to any underlying changes in our business or results of operations. Currently, our assets, liabilities, revenues and costs are denominated in RMB.
Interest Rate Risk
We are not currently exposed to interest rate risk. We do not own any interest-bearing instruments and our interest-bearing debt carries a fixed rate.
Market Price Risk
We are not currently exposed to commodity price risk or market price risk.
Inflation
Inflation does not materially affect our business or the results of our operations.
Seasonality
Seasonality does not materially affect our business or the results of our operations.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
A. Debt Securities
On December 27, 2023, the Company entered into a securities purchase agreement (the “SPA”) with certain institutional investors (the “Investors”), pursuant to which the Company agreed to issue, from time to time, up to $50,500,0000 in the Company’s securities (the “Offering”), consisting of convertible notes, issuable at a 7.0% original issue discount (the “Notes”), and accompanying ordinary share purchase warrants (the “Warrants”) with five-year terms and exercisable for a number of the Company’s ordinary shares, par value $0.05 per share (the “Ordinary Shares”), equal to 50% of the number obtained from dividing each Note’s principal amount by the applicable VWAP (as defined in the SPA), subject to adjustment pursuant and a 4.99% beneficial ownership limitation. Pursuant to the SPA, the Company agreed to issue to the Investors at the initial closing of the Offering (the “First Closing”) $6,000,000 in Notes, convertible at the lower of (i) $273.8 per share (or 110% of the VWAP of the Ordinary Shares on December 27, 2023) or (ii) a price per share equal to 95% of the lowest VWAP of the Ordinary Shares during the seven (7)-trading day period immediately preceding the applicable conversion date, subject to certain adjustments and a 4.99% beneficial ownership limitation, and Warrants exercisable for up to an aggregate of 12,053 ordinary shares, at an exercise price of $298.69 per share (or 120% of the VWAP of the Ordinary Shares on December 27, 2023). The Notes do not bear interest except upon the occurrence of an event of default thereunder, have 364-day maturity dates, must be redeemed by the Company at a premium in the event of (i) a Subsequent Financing (as defined in the SPA), (ii) a Change of Control (as defined in the SPA) and (iii) certain equity conditions listed therein. The Company also has the option to redeem the Notes in the event that the Company deems it in its best interest to do so, such as if it believes an event of default under the Notes is imminent. The Notes contain certain other covenants and events of default customary for similar transactions.
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The First Closing occurred on January 2, 2024. After the First Closing, and subject to the satisfaction of certain additional conditions, including an Investor holding an outstanding Note with a principal amount below $500,000, additional tranches of funding may occur pursuant to the SPA (each, an “Additional Closing”). In conjunction with each Additional Closing, Investors will receive an additional Note containing substantially the same terms as the initial Notes issued, convertible into Ordinary Shares at 110% of the VWAP of the Ordinary Shares on the trading day immediately preceding such Additional Closing and subject to adjustment, and a Warrant exercisable for Ordinary Shares equal to 50% of the number obtained from dividing the principal amount of the Note by the VWAP on the trading day immediately prior to such Additional Closing, and such Warrant will be exercisable for 120% of the VWAP of the Ordinary Shares on the trading day immediately preceding such Additional Closing.
In addition, pursuant to the SPA and subject to certain exceptions, the Company (i) granted the Investors the right to participate in a Subsequent Financing (as defined in the SPA) until 12 months from the date on which no Notes or Warrants are outstanding, (ii) agreed not to issue or announce the issuance or proposed issuance of any Ordinary Shares or Ordinary Share Equivalents (as defined in the SPA) or file any registration statement with respect thereto during (x) the 60-day period beginning on the date of the SPA and (y) the 60-day period commencing on each Additional Closing and (iii) agreed not to enter into a Variable Rate Transaction (as defined in the SPA), or conduct a dilutive issuance (unless Investor approval is received) until such time that no Notes or Warrants are outstanding. In the event of a Subsequent Financing, the Investor has the right to demand the Company use 30% of such proceeds to repay their outstanding Notes at a 105% premium and on a pro rata basis. Additionally, the Company agreed not to effect a reverse split or reclassification of its capital stock within 12 months from the date of the SPA without the Investors’ prior consent, and subject to certain exceptions, and not to incur any additional indebtedness over $500,000 without the Investors’ prior consent, which consent is not to be unreasonably withheld. The SPA contains certain other representations and warranties, covenants and indemnities customary for similar transactions.
On December 26, 2024, the Company and the Investors entered into an amendment to the SPA pursuant to which the parties agreed that there would only be the one closing under the SPA for the sale of $6,000,000 of ordinary shares and a warrant and there would be no further sales made under the SPA.
The Note and the Ordinary Shares underlying the Notes were issued pursuant to an effective shelf registration statement on Form F-3, as amended (File No. 333-27419), initially filed with the U.S. Securities and Exchange Commission (“SEC”) on August 24, 2023 and declared effective on September 29, 2023, and pursuant to a prospectus supplement dated January 2, 2024 filed under Rule 424(b)(5) of the Securities Act of 1933, as amended (the “Securities Act”), which registering the Notes issued at the First Closing and the Ordinary Shares underlying such Notes.
B. Warrants and Rights
As of the date of this Annual Report, we had the following warrants and options outstanding:
Five years warrants to purchase 12,053 of our Class A Ordinary Shares, exercisable at $298.69 per share, were issued to the Investors, dated December 27, 2023, which warrants are held by the Investors (as disclosed above) and were sold pursuant to an exemption from registration in accordance with Rule 506(b) of Regulation D under the Securities Act.
C. Other Securities
Not applicable.
D. American Depositary Shares
Not applicable.
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PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
See “Item 10. Additional Information” for a description of the rights of securities holders, which remain unchanged.
Use of Proceeds
The following “Use of Proceeds” information relates to the registration statement on Form F-1, as amended (File Number 333-258659), for our initial public offering, which was declared effective by the SEC on February 15, 2022. In February 2022, we completed our initial public offering in which we issued and sold an aggregate of 36,000 Ordinary Shares, at a price of $1,000 per share for approximately $34.6 million. Prime Number Capital LLC and Shengang Securities Company Limited were the representatives of the underwriters of our initial public offering.
We incurred approximately $1.3 million in expenses in connection with our initial public offering. None of the transaction expenses included payments to directors or officers of our company or their associates, persons owning more than 10% or more of our equity securities or our affiliates. None of the net proceeds we received from the initial public offering were paid, directly or indirectly, to any of our directors or officers or their associates, persons owning 10% or more of our equity securities or our affiliates. The net proceeds raised from the initial public offering were $34,576,000 after deducting underwriting discounts and the offering expenses payable by us. We had used up the proceeds for working capital and research and development costs.
ITEM 15. CONTROLS AND PROCEDURES
A. Disclosure Controls and Procedures
An evaluation was performed by management, including the Company’s Chief Executive Officer (“CEO”) and the Company’s Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rules 13a-15(b) and 15d-15(b) of the U.S. Exchange Act as of December 31, 2025 (the “Evaluation Date”).
Disclosure controls and procedures are controls and procedures that are designed to ensure that that the information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, and the identification of material weaknesses discussed below, our CEO and our CFO concluded that our disclosure controls and procedures, were not effective as of the Evaluation Date.
B. Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2025. The assessment was based on criteria established in the framework Internal Control-Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concluded that our internal control over financial reporting was not effective as of December 31, 2025. Our management identified the material weakness(es) in our internal control over financial reporting as insufficient in-house personnel in our accounting department with sufficient knowledge of the U.S. GAAP and SEC reporting rules.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or because the degree of compliance with policies or procedures may deteriorate.
Based on such assessment, we identified a material weakness in our internal control over financial reporting as of December 31, 2025. A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses identified to date relate to a lack of accounting staff and resources with appropriate knowledge of generally accepted accounting principles in the United States (“U.S. GAAP”) and SEC reporting and compliance requirements. As a result of the above material weaknesses, management has concluded that our internal control over financial reporting was not effective as of December 31, 2025.
In order to address and resolve the foregoing material weakness, we have begun to implement measures designed to improve our internal control over financial reporting to remediate this material weakness. We plan to take remedial measures including (i) hiring more qualified accounting personnel with relevant U.S. GAAP and SEC reporting experience and qualifications to strengthen the financial reporting function and to set up a financial and system control framework; (ii) implementing regular and continuous U.S. GAAP accounting and financial reporting training programs for our accounting and financial reporting personnel; and (iii) setting up an internal audit function as well as engaging an external consulting firm to assist us with assessment of Sarbanes-Oxley compliance requirements and improvement of overall internal control.
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C. Attestation Report of the Registered Public Accounting Firm
Because the Company is a non-accelerated filer and an emerging growth company, this Annual Report 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, and “emerging growth companies,” which we also are, are not required to provide the auditor attestation report.
D. Changes in Internal Controls over Financial Reporting
Other than as described above, there were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the year ended December 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
ITEM 16. [RESERVED]
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
The audit committee of our board of directors currently consists of three members, Wenzhang Jia, Anna Colin and Chongbo Gao. Our board of directors has determined that all of our audit committee members are “independent” under the Exchange Act and have the requisite financial knowledge and experience to serve as members of our audit committee. In addition, our board of directors has determined that Wenzhang Jia is an “audit committee financial expert” as defined in Item 16A of the Instructions to Form 20-F and meets Nasdaq’s financial sophistication requirements due to his current and past experience in various companies in which he was responsible for, amongst others, the financial oversight responsibilities.
ITEM 16B. CODE OF ETHICS
We have adopted a Code of Business Conduct and Ethics (the “Code of Ethics”) that applies to all of the directors, officers and employees of the Company and its subsidiaries, including our principal executive officer, principal financial officer and principal accounting officer. The Code of Ethics addresses, among other things, honesty and ethical conduct, conflicts of interest, compliance with laws, regulations and policies, including disclosure requirements under the federal securities laws, confidentiality, trading on inside information, and reporting of violations of the code. A copy of the Code of Ethics is filed as Exhibit 14.1 to our amended registration statement on Form F-1 filed on August 10, 2021 and is incorporated herein by reference. During the fiscal year ended December 31, 2025, there were no waivers of our Code of Ethics.
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth the aggregate fees by categories specified below in connection with services rendered by our principal external auditors for the periods indicated.
| Fiscal Year Ended December 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| Audit Fees* | $ | 274,900 | $ | 357,783 | $ | 226,600 | ||||||
| Audit-Related Fees | ||||||||||||
| Tax Fees | ||||||||||||
| All Other Fees | ||||||||||||
| Total | $ | 274,900 | $ | 357,783 | $ | 226,600 | ||||||
| * | “Audit Fees” consisted of the aggregate fees billed for professional services rendered for the audit of our annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements. |
Our Audit Committee pre-approves all auditing services and permitted non-audit services to be performed for us by our independent auditor, including the fees and terms thereof (subject to the de minimums exceptions for non-audit services described in Section 10A(i)(l)(B) of the Exchange Act that are approved by our Audit Committee prior to the completion of the audit).
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable
110
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
On June 26, 2024, the board of directors approved and authorized the Company’s proposal to adopt a share repurchase plan of up to $3 million of the Company’s outstanding Ordinary Shares (the “Share Repurchase Plan”). Under the Share Repurchase Plan, as disclosed in the Company’s Current Report on Form 6-K filed on July 1, 2024, management is authorized to purchase Ordinary Shares from time to time through open market purchases or privately negotiated transactions at prevailing prices as permitted by securities laws and other legal requirements, including Rule 10b-18 and Rule 10b5-1 under the Exchange Act, as well as the Company’s insider trading policy, and subject to market conditions and other factors.
Following the board of directors’ approval, the Company engaged Tiger Brokers (NZ) Limited (“Tiger Brokers”) as the Company’s exclusive repurchase agent for the Share Repurchase Plan. In conjunction with the Share Repurchase Plan, and as approved by the board of directors, the Company also intends to implement a 10b5-1 plan (the “10b5-1 Plan”) with Tiger Brokers. In conjunction with the Share Repurchase Plan, the company completed the following issuer repurchases of equity securities.
Issuer Purchases of Equity Securities
| Period | (a) Total number of ordinary shares purchased | (b) Average price paid per ordinary share | (c) Total number of shares purchased as part of publicly announced plans or programs | (d) maximum number (or approximately dollar value) of shares that may yet be purchased under the plans or programs | ||||||||||||
| 07/17/2024 to 08/14/2024 | 2,320 | $ | 83.03 | 2,320 | $ | 2,807,289 | ||||||||||
| TOTAL | 2,320 | $ | 83.03 | 320 | $ | 2,807,289 | ||||||||||
ITEM 16F. CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT
On December 26, 2025, the Company, upon the approval of the Board and the audit committee of the Board (the “Audit Committee”), dismissed Kreit & Chiu CPA LLP (“Kreit & Chiu CPA”), the former independent registered public accounting firm of the Company and appointed Li CPA LLC (PCAOB ID: 7093) (“Li CPA”) to serve as its independent registered public accounting firm for the year ended December 31, 2025.
Kreit & Chiu CPA’s reports on the Company’s financial statements for the fiscal year ended December 31, 2024, 2023, and 2022 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or accounting principles. Furthermore, during the Company’s two most recent fiscal years ended December 31, 2024, there were no disagreements with Kreit & Chiu CPA on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Kreit & Chiu CPA, would have caused Kreit & Chiu CPA to make reference to the subject matter of the disagreements in connection with its reports on the Company’s financial statements for such year. Also, during this time, there were no “reportable events,” as defined in Item 304(a)(1)(v) of Regulation S-K.
The Company provided Kreit & Chiu CPA with a copy of the above disclosure and requested that Kreit & Chiu CPA furnish the Company with a letter addressed to the U.S. Securities and Exchange Commission stating whether or not it agrees with the above statements.
During the two most recent fiscal years and any subsequent interim periods prior to the engagement of Li CPA, neither the Company, nor someone on behalf of the Company, has consulted Li CPA regarding (i) the application of accounting principles to any specified transaction, either completed or proposed or the type of audit opinion that might be rendered on the Company’s consolidated financial statements, and neither a written report nor oral advice was provided to the Company that Li CPA concluded was an important factor considered by the Company in reaching a decision as to any accounting, auditing, or financial reporting issue, or (ii) any matter that was either the subject of a “disagreement,” as defined in Item 304(a)(1)(iv) of Regulation S-K, or a “reportable event,” as defined in Item 304(a)(1)(v) of Regulation S-K, or any other matters set forth in Item 304(a)(2)(i) and (ii) of Regulation S-K
ITEM 16G. CORPORATE GOVERNANCE
As a foreign private issuer, we have the option to follow the corporate governance practices of our home country, as opposed to following Nasdaq corporate governance requirements, except to the extent that such laws would be contrary to U.S. securities laws and provided that we discloses the practices we are not following and describe the home country practices we follow instead. As we are a Cayman Islands company, our corporate governance practices are governed by applicable Cayman Islands law and our Memorandum and Articles, and we may choose to follow Cayman Islands practices where deemed appropriate.
Accordingly, pursuant to the home country rule exemption set forth under Nasdaq Listing Rule 5615(a)(3), which provides (with certain exceptions not relevant to the conclusions expressed herein) that a foreign private issuer may follow its home country practice in lieu of the requirements of the Nasdaq Listing Rules 5600 Series, we have opted to follow the home country rule exemption in conjunction with the following the requirements, among others (i) holding annual general meetings, (ii) holding elections of directors, and (iii) the requirement to obtain shareholder approval in connection with the issuance of in excess of 20% of the ordinary shares by the Company with voting power in excess of 20% of the voting power outstanding.
111
ITEM 16H. MINE SAFETY DISCLOSURE
Not applicable.
ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
ITEM 16J. INSIDER TRADING POLICIES
On June 26, 2024, the board of directors
ITEM 16K. CYBERSECURITY
Currently, the Company’s IT department is in charge of cybersecurity management and implementing cybersecurity and data protection work. Three cybersecurity management personnel in the IT department all graduated in computer or engineering majors with more than five years of experience in cybersecurity-related positions. The IT department continuously monitors the Company’s network and information systems, analyzes potential vulnerabilities, and implements security measures to prevent and mitigate cybersecurity risks. The IT department is involved in developing and establishing a robust process preventing, detecting, mitigating, and remedying cybersecurity incidents.
As the Company’s business mainly focuses
on the production and manufacturing of traditional medical devices and supplies, the majority of the Company’s computers are only
connected to the Company’s internal network environment. External networks and data are filtered and screened through the central
exchange servers. Therefore, from a hardware and software perspective, the Company is not exposed to significant cybersecurity risks.
The Company has established the “Cybersecurity Incident Management and Emergency Response System” (“System”). This System applies to all departments and affiliated companies and subsidiaries of the Company. The objective of implementing the System is to establish a robust framework for managing and responding to network and information security incidents within the Company, effectively prevent, timely control and minimize the adverse impact of the incidents by promptly and effectively addressing such incidents, and thus maintain the continuous security of the Company’s network systems. The System includes a “Cybersecurity Incident Response Plan” tailored to the functions of the business departments and each critical business process, and account for the potential impact of varying degrees of security incidents on the cybersecurity system. The core principle of these plans is proactive preparedness, with measures being established prior to the occurrence of cybersecurity incidents. In the event of a cybersecurity incident, the System will offer and execute alternative plans, mitigating cybersecurity threats and minimizing losses. The System addresses multiple dimensions, such as cybersecurity incidents, network security vulnerabilities, information leaks, and equipment and facility failures by providing guidelines for these areas. The System also classifies cybersecurity incidents into different levels and develop corresponding strategies.
Furthermore, to ensure effective management and
coordination of network and information security, the Company has established a Cybersecurity Leadership Team (the “Team”).
112
PART III
ITEM 17. FINANCIAL STATEMENTS
We have elected to provide financial statements pursuant to Item 18.
ITEM 18. FINANCIAL STATEMENTS
The financial statements are filed as part of this Annual Report beginning on page F-1.
ITEM 19. EXHIBITS
113
114
| * | Filed herein. |
| ** | Furnished herein. |
| *** | All schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished to the SEC upon request. |
115
SIGNATURE
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 report on its behalf.
| Date: April 29, 2026 | MEIHUA INTERNATIONAL MEDICAL TECHNOLOGIES LIMITED |
| /s/ Leyi Lee | |
| Leyi Lee | |
| Chief Executive Officer |
116
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
MEIHUA INTERNATIONAL MEDICAL TECHNOLOGIES CO., LTD.
CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE YEARS ENDED
DECEMBER 31, 2025, 2024 AND 2023
TABLE OF CONTENTS
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
Meihua International Medical Technologies Co., Ltd.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Meihua International Medical Technologies Co., Ltd. (the “Company”) as of December 31, 2025, the related consolidated statements of loss and comprehensive loss, changes in shareholders’ equity and cash flows for the year ended December 31, 2025, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the 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.
/s/
We have served as the Company’s auditor since 2025.
April 29, 2026
PCAOB ID Number
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
Meihua International Medical Technologies Co., Ltd.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Meihua International Medical Technologies Co., Ltd. (the “Company”) as of December 31, 2024, and the related consolidated statements of income and comprehensive income, changes in shareholders’ equity, and cash flows for each of the two years in the period ended December 31, 2024, and the related notes to the consolidated financial statements (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the entity’s management. Our responsibility is to express an opinion on the entity’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Kreit & Chiu CPA LLP
We served as the Company’s auditor from 2022 to 2025.
Los Angeles, California
April 25, 2025
PCAOB ID: 6651
F-3
MEIHUA INTERNATIONAL MEDICAL TECHNOLOGIES CO., LTD.
CONSOLIDATED BALANCE SHEETS
As of December 31, 2025 and 2024
(US$, except share data or otherwise noted)
| 2025 | 2024 | |||||||
| Assets | ||||||||
| Cash | $ | $ | ||||||
| Restricted Cash | ||||||||
| Bank acceptance receivables | ||||||||
| Accounts receivable, net | ||||||||
| Accounts receivable-a related party | ||||||||
| Inventories | ||||||||
| Due from related parties | ||||||||
| Prepayments and other current assets | ||||||||
| Total current assets | ||||||||
| Property, plant and equipment | ||||||||
| Intangible assets | ||||||||
| Long term investment | ||||||||
| Prepayments and other noncurrent assets | ||||||||
| Deferred tax assets.net | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and shareholders’ equity | ||||||||
| Liabilities | ||||||||
| Short-term bank borrowings | $ | $ | ||||||
| Accounts payable | ||||||||
| Taxes payable | ||||||||
| Accrued expenses and other current liabilities | ||||||||
| Contingent liability | ||||||||
| Total current liabilities | $ | $ | ||||||
| Commitments and contingencies | ||||||||
| Shareholders’ equity | ||||||||
| Class A Ordinary Shares, $ | ||||||||
| Class B Ordinary Shares, $ | ||||||||
| Preferred share, $ | ||||||||
| Share to be issued | ||||||||
| Treasury shares, at cost, | ( | ) | ( | ) | ||||
| Additional paid-in capital | ||||||||
| Statutory surplus reserves | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total shareholders’ equity | $ | $ | ||||||
| Total equity | $ | $ | ||||||
| Total liabilities and equity | $ | $ | ||||||
| * |
The accompanying notes form an integral part of these consolidated financial statements.
F-4
MEIHUA INTERNATIONAL MEDICAL TECHNOLOGIES CO., LTD.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the years ended December 31, 2025, 2024 and 2023
(US$, except share data or otherwise noted)
| For the Years Ended December 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| Revenues | ||||||||||||
| Third party sales | $ | $ | $ | |||||||||
| Related party sales | ||||||||||||
| Total revenues | ||||||||||||
| Cost of revenues | ||||||||||||
| Gross profit | $ | $ | $ | |||||||||
| Operating expenses | ||||||||||||
| Selling | ||||||||||||
| General and administrative | ||||||||||||
| Research and development | ||||||||||||
| Allowance for credit losses | ||||||||||||
| Total operating expenses | ||||||||||||
| Income from operations | ||||||||||||
| Other (income) expense: | ||||||||||||
| Change in fair value in convertible debt | ||||||||||||
| Interest expense | ||||||||||||
| Interest income | ( | ) | ( | ) | ( | ) | ||||||
| Currency exchange loss (gain) | ( | ) | ( | ) | ||||||||
| Other (income) expense, net | ( | ) | ( | ) | ||||||||
| Total other (income) expenses | ( | ) | ( | ) | ||||||||
| Income before income tax provision | ||||||||||||
| Income taxes expense | ||||||||||||
| Net income | $ | $ | $ | |||||||||
| Net loss attributable to non-controlling interests | ( | ) | ( | ) | ||||||||
| Net income attributable to shareholders | ||||||||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ||||||||
| Comprehensive income | $ | $ | $ | |||||||||
| Comprehensive loss attributable to non-controlling interests | ( | ) | ( | ) | ||||||||
| Comprehensive income attributable to shareholders | $ | $ | $ | |||||||||
| Weighted average number of ordinary shares - basic and diluted* | ||||||||||||
| EPS – basic and diluted* | $ | $ | $ | |||||||||
| -Basic and diluted – Class A Ordinary shares | $ | $ | $ | |||||||||
| -Basic and diluted – Class B Ordinary shares | $ | $ | $ | |||||||||
| * |
The accompanying notes form an integral part of these consolidated financial statements.
F-5
MEIHUA INTERNATIONAL MEDICAL TECHNOLOGIES CO., LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
For the years ended December 31, 2025, 2024 and 2023
(US$, except share data)
| Ordinary shares* | Additional paid-in | Share to be | Treasury | Treasury shares | Statutory surplus | Retained | Accumulated other comprehensive | Non-controlling | Total | |||||||||||||||||||||||||||||||||||||||||||
| Class A | Amount | Class B | Amount | capital | issued | shares | amount | reserves | earnings | income (loss) | interests | Equity | ||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2022 | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | - | - | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||
| Appropriation of statutory reserve | - | - | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||
| Currency translation adjustment | - | - | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2023 | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of convertible debt | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Treasury stocks | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Warrants | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | - | - | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||
| Disposal of shareholders’ interest in a subsidiary | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||
| Appropriation of statutory reserve | - | - | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||
| Currency translation adjustment | - | - | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2024 | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares in private placements | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Fractional share issued for reverse stock split | - | ( | ) | - | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Appropriation of statutory reserve | - | - | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||
| Currency translation adjustment | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2025 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| * |
The accompanying notes form an integral part of these consolidated financial statements.
F-6
MEIHUA INTERNATIONAL MEDICAL TECHNOLOGIES CO., LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2025, 2024 and 2023
(US$)
| For the Year Ended December 31 | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| Cash Flows from operating activities: | ||||||||||||
| Net income | $ | $ | $ | |||||||||
| Adjustments reconcile net income to net cash provided by operating activities: | ||||||||||||
| Depreciation | ||||||||||||
| Amortization | ||||||||||||
| Net loss from disposal of property, plant and equipment | ||||||||||||
| Allowance for credit losses | ||||||||||||
| Deferred tax expense (benefit) | ( | ) | ( | ) | ||||||||
| Currency exchange loss (gain) | ( | ) | ( | ) | ||||||||
| Net interest income (expense) | ( | ) | ||||||||||
| Gain from equity method investments | ( | ) | ( | ) | ( | ) | ||||||
| Gain from disposal of equity interest in a subsidiary | ( | ) | ||||||||||
| Loss from disposal of property, plant and equipment | ||||||||||||
| Change in fair value in convertible debt | ||||||||||||
| (Reversal) accrual of contingent liability | ( | ) | ||||||||||
| Amortization of operating lease right-of-use assets | ||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Bank acceptance receivables | ||||||||||||
| Accounts receivable | ( | ) | ( | ) | ( | ) | ||||||
| Accounts receivable-related party | ( | ) | ( | ) | ( | ) | ||||||
| Inventories | ( | ) | ( | ) | ||||||||
| Prepayments and other assets | ( | ) | ||||||||||
| Due from related parties | ( | ) | ||||||||||
| Accounts payable | ( | ) | ||||||||||
| Taxes payable | ( | ) | ( | ) | ||||||||
| Accrued expenses and other current liabilities | ( | ) | ||||||||||
| Operating leases liabilities | ( | ) | ( | ) | ||||||||
| Net cash provided by operating activities | ||||||||||||
| Cash flows from investing activities: | ||||||||||||
| Purchases of property, plant and equipment | ( | ) | ( | ) | ( | ) | ||||||
| Additions to intangible assets | ( | ) | ||||||||||
| Long term investment | ( | ) | ||||||||||
| Proceeds from disposal of long-term investment | ||||||||||||
| Proceeds from disposal of property, plant and equipment | ||||||||||||
| Collection of long-term deposits for buildings | ||||||||||||
| Cash in disposed subsidiary | ( | ) | ||||||||||
| Prepayment for digital assets investments | ( | ) | ||||||||||
| Advance to related parties | ( | ) | ( | ) | ||||||||
| Deposits to a related party | ( | ) | ||||||||||
| Collection from related parties | ||||||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||||||
| Proceeds from convertible debt | ||||||||||||
| Proceeds from short-term bank borrowings | ||||||||||||
| Repayment to short-term bank loans | ( | ) | ( | ) | ( | ) | ||||||
| Share repurchase | ( | ) | ||||||||||
| Proceeds from private placement | ||||||||||||
| Net cash provided by financing activities | ||||||||||||
| Effect of foreign exchange rate changes | ( | ) | ( | ) | ||||||||
| Net increase (decrease) in cash and restricted cash | ( | ) | ( | ) | ||||||||
| Cash and restricted cash, beginning of year | ||||||||||||
| Cash and restricted cash, end of year | $ | $ | $ | |||||||||
| Reconciliation to amount on consolidated balance sheets: | ||||||||||||
| Cash | $ | $ | $ | |||||||||
| Restricted cash | ||||||||||||
| Total cash and restricted cash | $ | $ | $ | |||||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION: | ||||||||||||
| Cash paid for: | ||||||||||||
| Interest | $ | $ | $ | |||||||||
| Income taxes | $ | $ | $ | |||||||||
| Non-cash transactions | ||||||||||||
| Deposits to a related party reclassified to investments | $ | $ | $ | |||||||||
| Operating lease right-of-use asset obtained in exchange of operating lease liabilities | $ | $ | $ | |||||||||
The accompanying notes form an integral part of these consolidated financial statements.
F-7
MEIHUA INTERNATIONAL MEDICAL TECHNOLOGIES CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and principal activities
Principal Activities:
Meihua International Medical Technologies Co.,
Ltd. (“Meihua” or “the Company”) was incorporated on
As of December 31, 2025, the Company’s subsidiaries are as follows:
| Entity Name | Registered Location | Percentage of ownership | Date of incorporation | Principal activities | ||||||
| 康复国际医疗有限公司 Kang Fu International Medical Co., Limited (“Kang Fu”) | ||||||||||
| 扬州华达医疗器械有限公司 Yangzhou Huada Medical Device Co., Ltd. (“Yangzhou Huada”) | ||||||||||
| 江苏亚达科技集团有限公司 Jiangsu Jiangsu Yada Technology Group Co., Ltd. (“Jiangsu Jiangsu Yada”) | ||||||||||
| 江苏华东医疗器械实业有限公司 Jiangsu Jiangsu Huadong Medical Device Industrial Co., Ltd. (“Jiangsu Jiangsu Huadong”) | ||||||||||
| 海南瑞营科技有限公司 Hainan Ruiying Technology Co., Ltd. (“Hainan Ruiying”) | ||||||||||
| 美华未来制造有限公司 Meihua Future Manufacturing Limited (“Meihua Future”) |
Kang Fu was incorporated on October 13, 2015 with
a registered capital of HKD
Yangzhou Huada is a subsidiary wholly owned by
Kang Fu and established in Yangzhou, China on December 24, 2001 with a registered capital of $
Jiangsu Yada is a subsidiary wholly owned by Yangzhou
Huada and was established in Yangzhou, China on December 5, 1991 with a registered capital of RMB
Jiangsu Huadong is a subsidiary wholly owned by
Jiangsu Yada and was established in Yangzhou, China on November 18, 2000 with a registered capital of RMB
Those three subsidiaries primarily manufacture and sell Class I, II and III disposable medical devices under the Company’s own brands, and distribute Class I, II and III disposable medical devices sourced from other manufacturers to our domestic and overseas customers.
Hainan Ruiying is a subsidiary
Meihua Future is a subsidiary wholly owned by
Meihua and was established in New York, United States on July 31, 2025 with a registered capital of $
F-8
2. Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include all accounts of Meihua and its subsidiaries (collectively, the “Company”) and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). All inter-company transactions have been eliminated.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the amounts reported and disclosed in the consolidated financial statements and related notes.
The most significant estimates and judgments include allowance for credit loss, the fair value of convertible loans and income taxes related to realization of deferred tax assets and uncertain tax position. Actual amounts could differ from those estimates.
Functional Currency and Foreign Currency Translation
The Company’s reporting currency is the United States dollar (“US$”). The Company’s operations are principally conducted through the PRC subsidiaries where the local currency is the functional currency. Therefore, the functional currency of Kang Fu is Hong Kong dollar and the functional currency of other subsidiaries is Renminbi (“RMB”).
Transactions denominated in currencies other than the functional currencies are translated into the functional currency of the entity at the exchange rates prevailing on the transaction dates. Monetary assets and liabilities denominated in currencies other than the applicable functional currency are translated into the functional currency at the prevailing rates of exchange at the balance date. The resulting exchange differences are reported in the consolidated statements of income and comprehensive income.
The assets and liabilities of the Company are
translated at the exchange spot rate at the balance sheet date, stockholders’ equity is translated at the historical rates and the
revenues and expenses are translated at the average exchange rates for the periods. The resulting translation adjustments are reported
under other comprehensive income in the consolidated statements of income and comprehensive income in accordance with Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 220, Comprehensive Income.
| For the Years Ended December 31 | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| Period Ended spot | US$1=RMB | US$1=RMB | US$1=RMB | |||||||||
| Period Average | US$1=RMB | US$1=RMB | US$1=RMB | |||||||||
The exchanges rates used for translation from
Hong Kong dollar to US$ was
F-9
2. Summary of Significant Accounting Policies (cont.)
Certain Risks and Concentration
The Company’s financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and receivables. As of December 31, 2025 and 2024, substantially all the Company’s cash were held in major financial institutions located in Hong Kong and mainland China, which management considers to be of high credit quality.
For the year ended December 31, 2025, no customer
accounted for approximately 10% of the Company’s total revenues. For the year ended December 31, 2024, one customer accounted for
approximately
As of December 31, 2025, no customer accounted
for approximately 10% of the Company’s accounts receivable. As of December 31, 2024, one customer accounted for approximately
For the year ended December 31, 2025, one supplier
accounted for approximately
Fair Value Measurement
Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact, and it considers assumptions that market participants would use when pricing the asset or liability.
The Company adopted the guidance of Accounting Standards Codification (“ASC”) 820 for fair value measurements which clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:
| Level 1: | Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date. | |
| Level 2: | Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data. | |
| Level 3: | Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information. |
The Company’s financial instruments include cash, accounts receivable, bank acceptance receivables, due from related parties, accounts payable, other liabilities and accrued expenses and short-term bank borrowings. The carrying amounts approximate their fair values due to their short maturities as of December 31, 2025 and 2024.
Assets and liabilities measured or disclosed at fair value on a recurring basis
The Company elected the fair value option to account for its convertible loans. The Company engaged an independent valuation firm to perform the valuation. The convertible loans are classified as level 3 instruments as the valuation was determined based on unobservable inputs which are supported by little or no market activity and reflect the Company’s own assumptions in measuring fair value. Significant estimates used in developing the fair value of the convertible loans include time to maturity, historical volatility of the Company’s share prices, risk-free interest rate and discount rate. Refer to Note 11 for additional information. As the inputs used in developing the fair value for level 3 instruments are unobservable, and require significant management estimation, a change in these inputs could result in a significant change in the fair value measurement.
F-10
2. Summary of Significant Accounting Policies (cont.)
Cash
Cash consists of petty cash on hand and cash held in banks, which are highly liquid and are unrestricted as to withdrawal or use.
Restricted Cash
The Company’s restricted cash is substantially cash balance in designated bank accounts as security for lawsuit in process.
Bank Acceptance Receivables
Bank acceptance receivables are issued by bank
under the request of the Company’s customers, to pay for the purchased goods. The Company can choose to hold acceptance notes until
maturity and receive the face value payment from the bank, or sell (exchange) the acceptance notes at a discount to another party willing
to wait until maturity to receive the bank’s promised payment. The maturity date of the receivables is all within one year of the
original issuance date and carried at face value. The Company is not lending money, it just sells goods to the customers (customers can
pay the purchased goods by cash, accounts receivable or bank acceptance receivables). The receivables mature within one year, and are
non-interest bearing. As bank acceptance receivables are issued by the banks and payments are guaranteed. The Company has not discounted
any bank acceptances and there were no endorsed bank acceptances that are unmatured as of December 31, 2025. The Company collected approximately
$
Accounts Receivable and Allowance for Credit Losses
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which requires the Company to measure and recognize expected credit losses for financial assets held and not accounted for at fair value through net income. The Company adopted this guidance effective January 1, 2020. ASC 326 introduces an approach based on expected losses to estimate the allowance for credit losses, which replaces the previous incurred loss impairment model. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements. Accounts receivable is recognized and carried at original invoiced amount less an estimated allowance for credit losses. The Company estimates the allowance for credit losses based on an analysis of the aging of accounts receivable, assessment of collectability, including any known or anticipated economic conditions, customer-specific circumstances, recent payment history and other relevant factors.
The Company’s allowances for credit losses
were $
Inventories
Inventories are valued using the lower of cost or net realizable value. Cost is principally determined using the weighted-average method. Manufactured inventories included cost of materials, labor and overhead expenses. The Company records adjustments to inventory for excess quantities, obsolescence, or impairment, when appropriate, to reflect inventory at net realizable value. These adjustments are based upon a combination of factors including current sales volume, market conditions, lower of cost or market analysis and expected realizable value of the inventory.
There were no write-downs recognized of inventories as of December 31, 2025 and 2024.
Prepayment and other current assets
Prepayment and other assets primarily consist of prepayments for land use right and property, prepayment for digital assets investments, refundable tax credits and receivables, security deposits made to customers, advances to employees and land use right receivable, which are presented net of allowance for credit losses. These balances are unsecured and are reviewed periodically to determine whether their carrying value has become impaired. The Company considers the balances to be impaired if the utilization or refund of the balances becomes doubtful. The Company uses the aging method to estimate the allowance for uncollectible balances. The allowance is also based on management’s best estimate of specific losses on individual exposures, as well as a provision on historical trends of collections and utilizations. Actual amounts received or utilized may differ from management’s estimate of credit worthiness and the economic environment. Delinquent account balances are written off against allowance for doubtful accounts after management has determined that the likelihood of collection is not probable.
F-11
2. Summary of Significant Accounting Policies (cont.)
Property, Plant and Equipment
Property, plant and equipment items are recorded
at their historic cost, less accumulated depreciation and impairment losses.
| Category | Useful lives | Estimated residual value | ||||
| Buildings | % | |||||
| Machinery and Equipment | % | |||||
| Motor vehicles | % | |||||
| Electronic Equipment | % | |||||
| Office Equipment | % | |||||
| Inspection Equipment | % | |||||
Major improvements are capitalized and expenditures for maintenance and repairs are expensed as incurred. Construction in progress represents property, plant and equipment under construction or being installed. Costs include original cost, installation, construction and other direct costs. Interest expenses directly related to construction in progress would be capitalized. Construction in progress is transferred to the appropriate fixed asset account and depreciation commences when the asset has been substantially completed and placed in service.
Intangible Assets
Intangible assets are non-monetary assets without
physical substance. These items are initially measured at cost and subsequently carried at cost less any accumulated amortization and
impairment losses. Intangible assets with finite useful lives are amortized on a straight-line basis over their estimated useful lives.
| Category | Useful lives | |
| Land use rights | ||
| Patent | ||
| Trademark |
Impairment of Long-Lived Assets
The Company accounts for impairment of long-lived assets in accordance with Accounting Standards Codification (“ASC”) 360, Property, Plant and Equipment. (“ASC 360”). Long-lived assets consist primarily of property, plant and equipment, and intangible assets. In accordance with ASC 360, the Company evaluates the carrying value of long-lived assets when it determines a triggering event has occurred, or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When indicators exist, recoverability of assets is measured by a comparison of the carrying value of the asset group to the estimated undiscounted future net cash flows expected to be generated by the asset. Examples of such triggering events include a significant disposal of a portion of such assets, and adverse change in the market involving the business employing the related assets. If such assets are determined not to be recoverable, the Company performs an analysis of the fair value of the asset group and will recognize an impairment loss when the fair value is less than the carrying amounts of such assets. The fair value, based on reasonable and supportable assumptions and projections, require subjective judgments. Depending on the assumptions and estimates used, the appraised fair value projected in the evaluation of long-lived assets can vary within a range of outcomes. The Company considers the likelihood of possible outcomes in determining the best estimate for the fair value of the assets. The Company did not record any impairment charges for the years ended December 31, 2025, 2024 and 2023. There can be no assurance that future events will not have impact on company revenue or financial position which could result in impairment in the future.
F-12
2. Summary of Significant Accounting Policies (cont.)
Investment
ASU 2016-01 (“ASU 2016-01”), Recognition and Measurement of Financial Assets and Financial Liabilities amends certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The main provisions require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value through earnings, unless they qualify for a measurement alternative.
Equity Investments with Readily Determinable Fair Values
Equity investments with readily determinable fair values are measured and recorded at fair value using the market approach based on the quoted prices in active markets at the reporting date.
Equity investments without readily determinable fair values
After the adoption of ASU 2016-01, the Company elected to record equity investments without readily determinable fair values and not accounted for under the equity method at cost, less impairment, adjusted for subsequent observable price changes on a nonrecurring basis, and report changes in the carrying value of the equity investment in current earnings. Changes in the carrying value of the equity investment are required to be made whenever there are observable price changes in orderly transactions for the identical or similar investment of the same issuer. Reasonable efforts shall be made to identify price changes that are known or that can reasonably be known.
Equity investments accounted for using the equity method
The Company accounts for its equity investment over which it has significant influence but does not own a majority equity interest or otherwise control, using the equity method. The Company adjusts the carrying amount of the investment and recognizes investment income or loss for its share of the earnings or loss of the investee after the date of investment. The Company assesses its equity investment for other-than-temporary impairment by considering factors including, but not limited to, current economic and market conditions, operating performance of the entity, including current earnings trends and undiscounted cash flows, and other entity-specific information. The fair value determination, particularly for investments in a privately held entity, requires judgment to determine appropriate estimates and assumptions. Changes in these estimates and assumptions could affect the calculation of the fair value of the investment and determination of whether any identified impairment is other-than-temporary.
The Company continually reviews its investments in equity investees to determine whether a decline in fair value below the carrying value is other-than-temporary. The primary factors the Company considers in its determination include the financial condition, operating performance and the prospects of the equity investee; other company specific information such as recent financing rounds; market and industry in which the equity investee operates; and the length of time that the fair value of the investment is below its carrying value. If the decline in fair value is deemed to be other-than-temporary, the carrying value of the equity investee is written down to fair value.
For the years ended December 31, 2025, 2024 and
2023,
Value-added Tax
Value-added taxes (“VAT”) collected
from customers relating to product sales and remitted to governmental authorities are presented on a net basis. VAT collected from customers
is excluded from revenue which is recorded in VAT payable. The Company is subject to a VAT rate of
Related Parties
Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all significant related party transactions.
F-13
2. Summary of Significant Accounting Policies (cont.)
Revenue Recognition
Effective January 1, 2018, the Company adopted ASC Topic 606 using the modified retrospective adoption method. Based on the requirements of ASC Topic 606, revenue is recognized when control of the promised goods or services is transferred to the customers in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those goods or services. The Company primarily sells its products to hospitals and medical equipment companies. Revenue is recognized when the following 5-step revenue recognition criteria are met:
| 1) | Identify the contract with a customer |
| 2) | Identify the performance obligations in the contract |
| 3) | Determine the transaction price |
| 4) | Allocate the transaction price |
| 5) | Recognize revenue when or as the entity satisfies a performance obligation |
Product sales
Revenue from product sales is recognized at the
point in time control of the products is transferred, generally upon customer receipt based upon the standard contract terms. Shipping
and handling activities are considered to be fulfillment activities rather than promised services and are not, therefore, considered to
be separate performance obligations. The Company’s sales terms provide no right of return outside of a standard quality policy and
returns are generally not significant. Payment terms for product sales are generally set at 90 to 180 days after the consideration becomes
due and payable. Revenue from disposable medical devices product sales accounted for
SaaS development service
The Company started to introduce SaaS development
service to its customers in 2025. The contract term for SaaS development service is generally within one to twelve months. The Company’s
SaaS development service contracts are primarily on a fixed-price basis, which require the Company to perform services including project
planning, project design, application development and system integration based on customers’ specific needs. These services also
require significant production and customization. Upon delivery of the services, customer acceptance is generally required. Revenue
from SaaS development service is recognized over time as the customer simultaneously receives and consumes the benefits provided by the
Company and the Company has an enforceable right for payments. The Company uses an input method based on cost incurred as the Company
believes that this method most accurately reflects the Company’s progress toward satisfaction of the performance obligation, which
usually takes less than one year. Under this method, revenue is recognized as work is performed based on the ratio of costs incurred to
date to the total estimated costs at completion of the performance obligations. Revenue from SaaS development service accounted for
Revenue Disaggregation
The Company’s disaggregated revenues are
represented by three categories which are type of goods and
Type of Revenue
| For the year ended December 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| US$ | US$ | US$ | ||||||||||
| Self-manufactured disposable medical devices | ||||||||||||
| Resales of disposable medical devices from third party manufacturers | ||||||||||||
| SaaS development service | ||||||||||||
| Total Revenue | ||||||||||||
Type of sale model
| For the year ended December 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| US$ | US$ | US$ | ||||||||||
| Direct sales of disposable medical devices | ||||||||||||
| Distributors sales of disposable medical devices | ||||||||||||
| SaaS development service | - | - | ||||||||||
| Total Revenue | ||||||||||||
F-14
2. Summary of Significant Accounting Policies (cont.)
Earnings per Ordinary Share
Earnings (loss) per ordinary share is calculated in accordance with ASC 260, Earnings per Share. Basic earnings (loss) per ordinary share is computed by dividing the net income (loss) attributable to shareholders of the Company by the weighted average number of ordinary shares outstanding during the period using the two-class method. Under the two-class method, net income is allocated between Ordinary Shares and other participating securities based on their participating rights. Diluted income per share is calculated by dividing net income attributable to ordinary shareholders as adjusted for the effect of dilutive potential ordinary shares outstanding during the period. Potential ordinary shares include ordinary shares issuable upon the exercise of outstanding share options by using the treasury stock method and ordinary shares issuable upon the conversion of convertible instruments using the if-converted method. Potential ordinary shares are not included in the denominator of the diluted net (loss)/earnings per share calculation when inclusion of such shares would be anti-dilutive.
Comprehensive Income
ASC 220, Comprehensive Income (“ASC 220”) establishes rules for reporting and display of comprehensive income and its components. ASC 220 requires that unrealized gains and losses on the Company’s foreign currency translation adjustments be included in comprehensive income.
Advertising Costs
The Company’s advertising costs are expensed
as incurred. Advertising expenses are included in selling expenses in the accompanying consolidated statements of income and comprehensive
income. Advertising expenses were $
Research and Development Costs
Research and development expenses are expensed
as incurred. Research and development expenses were $
Income Tax
Current income taxes are provided on the basis of net profit for financial reporting purposes, adjusted for income and expense items which are not assessable or deductible for income tax purposes, in accordance with the regulations of the relevant tax jurisdictions.
Deferred income taxes are recognized for temporary differences between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements, net operating loss carry forwards and credits. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided in accordance with the laws of the relevant taxing authorities. Deferred tax assets and liabilities are measured using enacted rates expected to apply to taxable income in which temporary differences are expected to be reversed or settled. The effect on deferred tax assets and liabilities of changes in tax rates is recognized in the statement of comprehensive income in the period of the enactment of the change.
The Company considers positive and negative evidence when determining whether a portion or all of its deferred tax assets will more likely than not be realized. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carry-forward periods, its experience with tax attributes expiring unused, and its tax planning strategies. The ultimate realization of deferred tax assets is dependent upon its ability to generate sufficient future taxable income within the carry-forward periods provided for in the tax law and during the periods in which the temporary differences become deductible. When assessing the realization of deferred tax assets, the Company has considered possible sources of taxable income including (i) future reversals of existing taxable temporary differences, (ii) future taxable income exclusive of reversing temporary differences and carryforwards, (iii) future taxable income arising from implementing tax planning strategies, and (iv) specific known trend of profits expected to be reflected within the industry.
The Company recognizes a tax benefit associated
with an uncertain tax position when, in its judgment, it is more likely than not that the position will be sustained upon examination
by a taxing authority. For a tax position that meets the more-likely-than-not recognition threshold, the Company initially and subsequently
measures the tax benefit as the largest amount that the Company judges to have a greater than
F-15
2. Summary of Significant Accounting Policies (cont.)
Segment Reporting
ASC 280, “Segment Reporting,” establishes
standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure
as well as information of the Company’s business segments, geographical areas, segments and major customers. The Company uses the
“management approach” in determining reportable operating segments.
The Company has disclosed the type of revenue by government category as follows.
| December 31, 2025 | December 31, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||
| US$ | US$ | US$ | ||||||||||||||||||||||||||||||||||
| Category | Produced | Purchased | Total | Produced | Purchased | Total | Produced | Purchased | Total | |||||||||||||||||||||||||||
| Class I | ||||||||||||||||||||||||||||||||||||
| Class II | ||||||||||||||||||||||||||||||||||||
| Class III | ||||||||||||||||||||||||||||||||||||
| Others | ||||||||||||||||||||||||||||||||||||
| SaaS service and development | ||||||||||||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||||||||||||
Class I, II, and III medical devices are defined by the National Medical Products Administration of China according to their risk levels under the Regulation on the Supervision and Administration of Medical Devices (2021 Revision), Article 6 as follows:
| ● | “Class I Medical Devices” means medical devices with low risks, whose safety and effectiveness can be ensured through routine administration. |
| ● | “Class II Medical Devices” means medical devices with moderate risks, which shall be strictly controlled and administered to ensure their safety and effectiveness. |
| ● | “Class III Medical Devices” means medical devices with relatively high risks, which shall be strictly controlled and administered through special measures to ensure their safety and effectiveness. |
Furthermore, the Company has disclosed revenue by major product type included in each government category.
| December 31, | December 31, | December 31, | ||||||||||||
| Category | Products | 2025 | 2024 | 2023 | ||||||||||
| US$ | US$ | US$ | ||||||||||||
| Class I | Eye drops bottle | |||||||||||||
| Oral medicine bottle | ||||||||||||||
| Anal bag | ||||||||||||||
| Other Class I | ||||||||||||||
| Subtotal-Class I | ||||||||||||||
| Class II | Masks | |||||||||||||
| Identification tape | ||||||||||||||
| Disposable medical brush | ||||||||||||||
| Gynecological inspection kits | ||||||||||||||
| Surgical kit | ||||||||||||||
| Medical brush | ||||||||||||||
| Medical kit | ||||||||||||||
| Other Class II | ||||||||||||||
| Subtotal-Class II | ||||||||||||||
| Class III | Electronic pump | |||||||||||||
| Anesthesia puncture kit | ||||||||||||||
| Disposable infusion pump | ||||||||||||||
| Infusion pump | ||||||||||||||
| Electronic infusion pump | ||||||||||||||
| Laparoscopic trocar | ||||||||||||||
| Other Class III | ||||||||||||||
| Subtotal-Class III | ||||||||||||||
| Others | ||||||||||||||
| SaaS service and development | - | - | ||||||||||||
| Total | ||||||||||||||
For the years ended December 31, 2025, 2024 and
2023, revenues and assets within PRC contributed over
F-16
2. Summary of Significant Accounting Policies (cont.)
Recent Accounting Pronouncements
In June 2022, the Financial Accounting Standards Board (“FASB”) issued ASU 2022-03 Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The update clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The update also clarifies that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. The update also requires certain additional disclosures for equity securities subject to contractual sale restrictions. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2024, and interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. As an emerging growth company, the standard is effective for the Company for the year ended December 31, 2025. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires disclosure of significant segment expenses and other segment items on an annual and interim basis under ASC 280. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods beginning after December 15, 2024. Early adoption is permitted and the amendments in this ASU should be applied on a retrospective basis to all periods presented. The Company adopted this ASU on January 1, 2024. The adoption of this ASU did not have significant impact on the Company’s financial statements.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). This ASU requires that public business entities must annually “(1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate).” A public entity should apply the amendments in ASU 2023-09 prospectively to all annual periods beginning after December 15, 2024. The Company adopted this ASU on January 1, 2025. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.
On March 21, 2024, the FASB issued Accounting Standards Update No. 2024-01 (“ASU 2024-01”), which clarifies how an entity determines whether a profits interest or similar award is (1) within the scope of ASC 718 or (2) not a share-based payment arrangement and therefore within the scope of other guidance. The guidance in ASU 2024-01 applies to all entities that issue profits interest awards as compensation to employees or nonemployees in exchange for goods or services. ASU 2024-01 is effective for public business entities for annual periods beginning after December 15, 2024, including interim periods within those periods. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), and in January 2025, the FASB issued ASU 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date (“ASU 2025-01”). ASU 2024-03 requires additional disclosure of the nature of expenses included in the income statement as well as disclosures about specific types of expenses included in the expense captions presented in the income statement. ASU 2024-03, as clarified by ASU 2025-01, is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact these standards will have on it financial statements.
F-17
2. Summary of Significant Accounting Policies (cont.)
Recent Accounting Pronouncements (cont.)
In May 2025, the FASB issued ASU 2025-03, Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity. ASU 2025-03 clarifies the guidance to determine the accounting acquirer in a business combination that is effected primarily by exchanging equity interests, when the legal acquiree is a variable interest entity (“VIE”) that meets the definition of a business. ASU 2025-03 requires entities to consider the same factors in ASC 805, Business Combinations, required for determining which entity is the accounting acquirer in other acquisition transactions. ASU 2025-03 is effective for the Company’s annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods, with early adoption permitted. ASU 2025-03 is required to be applied on a prospective basis to any acquisition transaction that occurs after the initial application date. The Company is currently assessing the impact this standard will have on the Company’s consolidated financial statements.
In July 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2025-05, Measurement of Credit Losses for Accounts Receivable and Contract Assets. ASU 2025-05 amends ASC 326, Financial Instruments—Credit Losses, and introduces a practical expedient available for all entities and an accounting policy election available for all entities, other than public business entities, that elect the practical expedient. These changes apply to the estimation of expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under ASC 606, Revenue Recognition. Under the practical expedient, entities may assume that current conditions as of the balance sheet date remain unchanged for the remaining life of the asset when developing reasonable and supportable forecasts. This simplifies the estimation process for short-term financial assets. ASU 2025-05 is effective for the Company’s annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods, with early adoption permitted. ASU 2025-05 should be applied on a prospective basis. The Company is currently assessing the impact this standard will have on the Company’s Consolidated Financial Statements.
ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities. In December 2025, the FASB issued this ASU to establish authoritative guidance on the accounting for government grants received by business entities. This update is effective beginning with the Company’s 2029 fiscal year annual reporting period, with early adoption permitted. The Company is currently evaluating the impact that the adoption of this standard will have on its consolidated financial statements.
In December 2025, the FASB issued ASU 2025-12, Codification Improvements. ASU 2025-12 makes thirty-three incremental improvements to generally accepted accounting principles. ASU 2025-12 is effective for all entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. The Company is currently evaluating the impact of ASU 2025-12 on its financial statements and related disclosures.
The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s combined balance sheets, statements of income and statements of cash flows.
F-18
3. Accounts receivable, net
Accounts receivable consisted of the following:
December 31, 2025 | December 31, 2024 | |||||||
| Accounts receivable | $ | $ | ||||||
| Less: allowances for credit losses | ( | ) | ( | ) | ||||
| Total accounts receivable, net | ||||||||
| Less: accounts receivable, net, related parties | ( | ) | ( | ) | ||||
| Accounts receivable from third parties, net | $ | $ | ||||||
For the years ended December 31, 2025, 2024 and
2023, allowance for credit losses were $
Allowance for credit losses movement is as follows:
December 31, 2025 | December 31, 2024 | |||||||
| Beginning balance | $ | ( | ) | $ | ( | ) | ||
| Allowance for credit losses | ( | ) | ( | ) | ||||
| Foreign exchange translation | ( | ) | ||||||
| Ending balance | $ | ( | ) | $ | ( | ) | ||
4. Prepayments and other assets
Prepayments and other current assets consist of the following:
| December 31, 2025 | December 31, 2024 | |||||||
| US$ | US$ | |||||||
| Long term receivable on land use right (1) | ||||||||
| Receivable for property (2) | ||||||||
| Prepayment for digital assets investments (3) | ||||||||
| Prepayment tax | ||||||||
| Others receivable | ||||||||
| Total | ||||||||
| Less: non-current portion | ( | ) | ( | ) | ||||
| Prepayments and other current assets | ||||||||
| (1) |
| (2) |
| (3) |
F-19
5. Inventories
Inventories consist of the following:
| December 31, 2025 | December 31, 2024 | |||||||
| US$ | US$ | |||||||
| Raw material | ||||||||
| Work-in-process | ||||||||
| Finished goods | ||||||||
| Goods shipped | ||||||||
| Low-value consumables | ||||||||
| Total | ||||||||
For the years ended December 31, 2025, 2024 and 2023, there were writes-down of inventories.
6. Property, Plant and Equipment
Property, plant and equipment consisted of the following:
| December 31, 2025 | December 31, 2024 | |||||||
| US$ | US$ | |||||||
| Buildings | ||||||||
| Machinery and equipment | ||||||||
| Motor vehicles | ||||||||
| Electronic equipment | ||||||||
| Office equipment | ||||||||
| Inspection equipment | ||||||||
| Total | ||||||||
| Less: accumulated depreciation | ||||||||
| Property and equipment, net | ||||||||
Depreciation expense was $
As of December 31, 2025 and 2024, the Company pledged buildings to secure bank borrowings as disclosed in Note 9.
7. Intangible Assets
Intangible assets consisted of the following:
| December 31, 2025 | December 31, 2024 | |||||||
| US$ | US$ | |||||||
| Land use rights | ||||||||
| Patents | ||||||||
| Software | ||||||||
| Trademarks | ||||||||
| Total | ||||||||
| Less: accumulated amortization | ||||||||
| Intangible assets, net | ||||||||
F-20
7. Intangible Assets (cont.)
Amortization expense was $
The following table sets forth the Company’s amortization expenses for the twelve months ending December 31 of the following years:
| Twelve months ending December 31, | Estimated Amortization Expense | |||
| 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Thereafter | ||||
| Total | $ | |||
8. Investment
| Equity investments accounted for using the equity method (i) | Equity investments without readily determinable fair values (ii) | Total | ||||||||||
| US$ | US$ | US$ | ||||||||||
| Balance as of December 31, 2023 | ||||||||||||
| Additions | ||||||||||||
| Transfer from the investment in subsidiary to equity investment | ||||||||||||
| Share of gain in equity method investee | ||||||||||||
| Foreign exchange translation | ( | ) | ( | ) | ( | ) | ||||||
| Balance as of December 31, 2024 | ||||||||||||
| Share of gain in equity method investee | ||||||||||||
| Foreign exchange translation | ||||||||||||
| Balance as of December 31, 2025 | ||||||||||||
| (i) |
For the years ended December 31, 2025, 2024 and
2023, Jiangsu Huadong owns
F-21
8. Investment (cont.)
On February 26, 2024, the Company transferred
its
On November 5, 2024, Jiangsu Huadong invested
$
On December 18, 2025, Ruiying invested into Hainan Anbes Toy Co., Ltd.(“Anhes”) and toy sales in the PRC. The Company accounted for the investments using the equity method, because the Company has significant influence but does not own a majority equity interest or otherwise control over the equity investee. For the year ended December 31, 2025, Anhes currently has no substantive operations.
| (ii) |
On March 3, 2011, Jiangsu Yada invested RMB
For the years ended December 31, 2025, 2024 and 2023, no impairment indicators were identified and no loss related to revaluation of its investment in the private company was recorded.
F-22
9. Bank Borrowings
Bank borrowings are working capital loans from banks in China. Short-term bank borrowings as of December 31, 2025 consisted of the following:
| Lender | Company | Rate | Issuance Date | Expiration Date | Amount- RMB | Amount- US$ | ||||||||||||
| Jiangsu Yangzhou Rural Commercial Bank | Jiangsu Huadong | % | ||||||||||||||||
| Bank of China | Jiangsu Huadong | % | ||||||||||||||||
| Bank of Communications | Jiangsu Huadong | % | ||||||||||||||||
| Bank of Communications | Jiangsu Huadong | % | ||||||||||||||||
| China Everbright Bank | Jiangsu Huadong | % | ||||||||||||||||
| CITIC Bank | Yangzhou Huada | % | ||||||||||||||||
| Bank of Communications | Yangzhou Huada | % | ||||||||||||||||
| China Minsheng Bank | Yangzhou Huada | % | ||||||||||||||||
| China Zhe Shang Bank | Yangzhou Huada | % | ||||||||||||||||
| China Zhe Shang Bank | Yangzhou Huada | % | ||||||||||||||||
| Agricultural Bank of China | Jiangsu Yada | % | ||||||||||||||||
| Total | ||||||||||||||||||
| * |
| ** |
Short-term bank borrowings as of December 31, 2024 consisted of the following:
| Lender | Company | Rate | Issuance Date | Expiration Date | Amount- RMB | Amount- US$ | ||||||||||||
| Jiangsu Yangzhou Rural Commercial Bank | Jiangsu Huadong | % | ||||||||||||||||
| Bank of China | Jiangsu Huadong | % | ||||||||||||||||
| Bank of Communications | Jiangsu Huadong | % | ||||||||||||||||
| Bank of Jiangsu | Jiangsu Huadong | % | ||||||||||||||||
| CITIC Bank | Yangzhou Huada | % | ||||||||||||||||
| CITIC Bank | Yangzhou Huada | % | ||||||||||||||||
| Industrial and Commercial Bank of China | Jiangsu Yada | % | ||||||||||||||||
| Agricultural Bank of China | Jiangsu Yada | % | ||||||||||||||||
| Total | ||||||||||||||||||
Interest expense was $
The Company’s short-term bank borrowings are pledged by the Company’s assets and guaranteed by the Company’s major shareholders Yongjun Liu, Yin Liu, Kai Liu and its subsidiary Jiangsu Yada.
The carrying values of the Company’s pledged assets to secure short-term borrowings by the Company are as follows:
| December 31, 2025 | December 31, 2024 | |||||||
| US$ | US$ | |||||||
| Buildings, net | ||||||||
F-23
10. Right-of-use assets
The Group signed lease agreements to rent office space from Commercial Bank of China branch in Qionghai. The lease agreements will expire on September 30, 2026. The Group’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The lease was no long included in the Group’s consolidated financial statement due to the disposal of Hainan Guoxie on February 26, 2024.
Total lease expense for the years ended December
31, 2025, 2024 and 2023 amounted to $, $
11. Convertible loans
On December 27, 2023, the Company entered into a securities purchase
agreement (the “SPA”) with certain institutional investors (the “Investors”), pursuant to which the Company agreed
to issue, from time to time, up to $
The First Closing occurred on January 2, 2024.
Gross proceeds amounted to approximately $
Based on the valuation report performed by an
independent valuation firm, the fair value of the convertible notes upon issuance was determined to be of $
The assumptions used to value the convertible notes were as follows:
| For the year ended December 31, 2024 |
||||
| Time to maturity | ||||
| Historical volatility of the company’s share prices | % | |||
| Risk-free interest rate | % | |||
| Discount rate | % |
For the year ended December 31, 2024, due to change
in fair value of the convertible loans, the Company recognized unrealized loss of $
The convertible debt was fully converted into
Effective December 26, 2024, the Company and the
Investor reached into an agreement that there would only be the single $
F-24
12. Taxes Payable
Taxes payable consisted of the following:
| December 31, 2025 | December 31, 2024 | |||||||
| US$ | US$ | |||||||
| VAT payable | ||||||||
| Income tax payable | ||||||||
| Other tax payable | ||||||||
| Total | ||||||||
13. Income Taxes
Cayman Islands
Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gain. Additionally, upon payments of dividends to the shareholders, no Cayman Islands withholding tax is imposed.
United States
Under the current laws of United States, the Company’s
U.S. subsidiary, Meihua Future, is subject to U.S. federal corporate income tax at a rate of
Hong Kong
Under the current Hong Kong Inland Revenue Ordinance,
the Company’s Hong Kong subsidiary, Kang Fu, is subject to
PRC
Provisions for income tax are as follows:
| December 31, 2025 | December 31, 2024 | December 31, 2023 | ||||||||||
| US$ | US$ | US$ | ||||||||||
| Provisions for current income tax | ||||||||||||
| Deferred income tax benefit | ( | ) | ( | ) | ||||||||
| Total | ||||||||||||
According to PRC tax regulations, the PRC net operating loss can generally carry forward for no longer than five years starting from the year subsequent to the year in which the loss was incurred, and that of high-tech enterprises is no more than 10 years. Carryback of losses is not permitted. As of December 31, 2025 and 2024, the Company had net operating losses of $, respectively, which will be available to offset future taxable income. If not used, these carryforwards will expire from 2025 through 2034.
F-25
13. Income Taxes (cont.)
The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Recovery of substantially all of the Company’s deferred tax assets is dependent upon the generation of future income, exclusive of reversing taxable temporary differences. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are recoverable, management believes that it is more likely than not that the results of future operations will generate sufficient taxable income to realize the deferred tax assets as of December 31, 2025 and 2024. However, since the deferred tax assets arising from operating loss has a limited window of use, to be conservative, management decided to record a partial valuation allowance. While we consider the facts above, our projections of future income qualified tax-planning strategies may be changed due to the macroeconomic conditions and our business development. The deferred tax assets could be utilized in the future years if we make profits in the future, the valuation allowance shall be reversed.
The following is a reconciliation of the Company’s total income tax expense to the income before income taxes for the years ended December 31, 2025, 2024 and 2023, respectively:
| 2025 | 2024 | 2023 | ||||||||||
| US$ | US$ | US$ | ||||||||||
| Income before income tax provision | ||||||||||||
| Tax at the PRC EIT tax rates | ||||||||||||
| International tax rate difference | ||||||||||||
| Effect of preferential tax | ( | ) | ( | ) | ( | ) | ||||||
| Tax effect of R&D expenses additional deduction* | ( | ) | ( | ) | ( | ) | ||||||
| Tax effect of non-deductible expenses | ||||||||||||
| Change in valuation allowance | ||||||||||||
| Income tax expense | ||||||||||||
| * |
Under the Enterprise Income Tax Law (“EIT Law”), Foreign
Investment Enterprises (“FIEs”) and domestic companies are subject to Enterprise Income Tax (“EIT”) at a uniform
rate of
Jiangsu Huadong was granted a High and New Technology
Enterprise (“HNTE”) certificate and received a preferential tax rate of
The EIT Law also provides that an enterprise established
under the laws of a foreign country or region but whose “de facto management body” is located in the PRC be treated as a resident
enterprise for PRC tax purposes and consequently be subject to the PRC income tax at the rate of
The EIT Law also imposes a withholding income
tax on dividends distributed by a FIE to its immediate holding company outside of the PRC. Kang Fu, which is the parent of Yangzhou Huada,
Jiangsu Yada and Jiangsu Huadong, is therefore subject to a maximum withholding tax of
Uncertain tax positions
The Company 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, 2025, 2024 and 2023, the Company did not have any significant unrecognized uncertain tax positions.
F-26
14. Shareholders’ Equity
On November 8, 2025, the Company held an extraordinary general meeting of shareholders and approved the following, among others:
(1)
(2) Immediately following the Share Consolidation,
the authorized share capital of the Company be increased from $
(3)
In addition, following the Share Capital Amendment
having taken effect, and upon the Company’s receipt of the consent to repurchase and application for shares as duly executed by
Bright Accomplish Limited (“BAL”), the Company shall repurchase
The Share Consolidation and the Increase of the
Authorized Share Capital and the Share Capital Amendment was considered as the Company’s recapitalization. All historical share
and per share amounts in these condensed financial statements have been retroactively adjusted to reflect the share consolidation and
redesignation. As of December 31, 2025 and 2024, the Company had
F-27
14. Shareholders’ Equity (cont.)
Private placements
On October 8, 2025, the Company entered into a
Securities Purchase Agreement. Pursuant to the agreement, the Company shall issue
On December 5, 2025, the Company entered into
a Securities Purchase Agreement. Pursuant to the agreement, the Company issued
Conversion of convertible loans
For the year ended December 31, 2024, the Company issued
Warrants
As of December 31, 2025, there were
The warrants were valued using the black-Scholes
model.
As of (Jan 2, | ||||
| Share price | $ | |||
| Exercise price | $ | |||
| Interest rate | % | |||
| Time to maturity | ||||
| Volatility | % | |||
A summary of warrants activity for the December 31, 2025 was as follows:
| Number of warrants | Weighted average exercise price per share | Weighted average life Years | Expiration dates | |||||||||||
| US$ per share | ||||||||||||||
| Balance of warrants outstanding as of December 31, 2024 | ||||||||||||||
| Balance of warrants outstanding and exercisable as of December 31, 2025 | ||||||||||||||
Treasury Shares
For the year ended December 31, 2025, the Company repurchased an aggregate
of
F-28
15. Statutory Surplus Reserves and Restricted Net Assets
Pursuant to laws applicable to entities incorporated
in the PRC, the Company is required to make appropriations to certain reserve funds, comprising the statutory surplus reserve and the
discretionary surplus reserve, based on after-tax net income determined in accordance with generally accepted accounting principles of
the PRC (“PRC GAAP”). Appropriations to the statutory surplus reserve are required to be at least
As a result of these PRC laws and regulations
and the requirement that distributions by 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 the statutory reserves of the Company’s PRC subsidiaries. The aggregate amounts of capital and statutory reserves restricted
which represented the amount of net assets of the relevant subsidiaries in the Company not available for distribution was $
Under PRC laws and regulations, statutory surplus reserves are restricted to set-off against losses, expansion of production and operation and increasing registered capital of the respective company and are not distributable other than upon liquidation. The reserves are not allowed to be transferred to the Company in terms of cash dividends, loans or advances, nor allowed for distribution except under liquidation.
16. Related Party Transactions and Balances
| (1) |
| Name of related parties | Relationship with the Company | |
| Jiangsu Zhongxiangxin International Science and Technology Innovation Park Co., Ltd. (“Zhongxiangxin”) | ||
| Hainan Guoxie Technology Group Co. Ltd. (“Hainan Guoxie”) | ||
| Jiangsu Guomai Medical Equipment Co., Ltd (“Jiangsu Guomai”) | ||
| Yangzhou Meihua Import and Export Co., Ltd. |
| (2) |
| As of December 31, | ||||||||
| Name of related party | 2025 | 2024 | ||||||
| Yangzhou Meihua Import and Export Co., Ltd. | $ | $ | ||||||
For the year ended December 31, 2025 and 2024, the Group sold manufactured products to Yangzhou Meihua Import and Export Co., Ltd. The balance as of December 31, 2025 is outstanding as of the date of this report.
F-29
16. Related Party Transactions and Balances (cont.)
| (3) |
| Due from related party | As of December 31, | |||||||
| Name of related party | 2025 | 2024 | ||||||
| Zhongxiangxin | $ | $ | ||||||
| Hainan Guoxie | ||||||||
| Jiangsu Guomai | ||||||||
| Total | $ | $ | ||||||
For the year ended December 31, 2024, the Company
advanced $
For the year ended December 31, 2024, the Company
advanced $
For the year ended December 31, 2025, the Company
advanced $
| (4) | Related Party Sales |
The Company sells products to its related parties and the sales amount from related parties for 2025, 2024 and 2023 are as follows:
| For the Year Ended December 31, | ||||||||||||
| Name of related party | 2025 | 2024 | 2023 | |||||||||
| Yangzhou Meihua Import and Export Co., Ltd. | $ | $ | $ | |||||||||
17. Commitments And Contingencies
Contingencies
The Company may be involved
in various legal proceedings, claims and other disputes arising from the commercial operations, projects, employees and other matters
which, in general, are subject to uncertainties and in which the outcomes are not predictable. The Company determines whether an estimated
loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. As of December
31, 2024, based on the progress of the legal proceeding, the amount of assets frozen by the court, and the professional assessment of
the legal proceeding’s final outcome by the lawyers, the accrued contingency liability related to the legal proceeding unresolved amounted
to $
F-30
18. Subsequent Events
The Company has evaluated the impact of events that have occurred subsequent to December 31, 2025, through the date the consolidated financial statements were available to be issued, and concluded that no subsequent events have occurred that would require recognition in the consolidated financial statements or disclosure in the notes to the consolidated financial statements, except as follow:
Bank borrowing
As the date these consolidated financial statements
were available to be issued, the Company has new bank borrowings in the amount of $
New bank borrowing
Subsequent new bank borrowings consisted of the following:
| Lender | Company | Rate | Issuance Date | Collateral/ Security | Amount- RMB | Amount- US$ | ||||||||||||
| Jiangsu Yangzhou Rural Commercial Bank | Jiangsu Huadong | % | ||||||||||||||||
| Bank of Communications | Jiangsu Huadong | % | ||||||||||||||||
| Total | ||||||||||||||||||
Repayment
Subsequent repayments on bank borrowings consisted of the following:
| Lender | Company | Rate | Repayment Date | Collateral/Security | Amount- RMB | Amount- USD | ||||||||||||
| Jiangsu Yangzhou Rural Commercial Bank | % | |||||||||||||||||
| Bank of Communications | % | |||||||||||||||||
| Bank of China | % | |||||||||||||||||
| Bank of Communications | % | |||||||||||||||||
| China Zhe Shang Bank | % | |||||||||||||||||
| Agricultural Bank of China | % | |||||||||||||||||
| Total | ||||||||||||||||||
F-31
Exhibit 1.4
THE CAYMAN ISLANDS THE COMPANIES ACT
(REVISED)
Second Amended and
Restated Memorandum of
Association of
Meihua International Medical Technologies Co., Ltd.
美华国际医疗科技有限公司
(adopted by special resolutions of the Company passed on November 8, 2025)
Assistant Registrar
THE CAYMAN ISLANDS
THE COMPANIES ACT (REVISED)
SECOND AMENDED AND RESTATED MEMORANDUM OF
ASSOCIATION OF
Meihua International Medical Technologies Co., Ltd.
美华国际医疗科技有限公司
(the “Company”)
(adopted by special resolutions of the Company passed on November 8, 2025)
| 1. | Name |
The name of the Company is Meihua International Medical Technologies Co., Ltd. 美华国际医疗科技有限公司.
| 2. | Registered Office |
The registered office of the Company shall be situated at the Office of Sertus Incorporations (Cayman) Limited, Sertus Chambers, Governors Square, Suite # 5-204, 23 Lime Tree Bay Avenue, P.O. Box 2547, Grand Cayman, KY1-1104, Cayman Islands, or such other place in the Cayman Islands as the Directors may, from time to time decide, being the registered office of the Company.
| 3. | General Objects and Powers |
The objects for which the Company is established are unrestricted and the Company shall have full power and authority to carry out any object not prohibited by Section 7(4) of the Companies Act (Revised) or as the same may be amended from time to time, or any other law of the Cayman Islands.
| 4. | Limitations on the Company’s Business |
| 4.1 | For the purposes of the Companies Act (Revised) the Company has no power to: |
| (a) | carry on the business of a Bank or Trust Company without being licensed in that behalf under the provisions of the Banks & Trust Companies Act (Revised); or |
| (b) | to carry on Insurance Business from within the Cayman Islands or the business of an Insurance Manager, Agent, Sub- agent or Broker without being licensed in that behalf under the provisions of the Insurance Act (Revised); or |
| (c) | to carry on the business of Company Management without being licensed in that behalf under the provisions of the Companies Management Act (Revised). |
| 4.2 | The Company shall not trade in the Cayman Islands with any person, firm or corporation except in furtherance of the business of the Company carried on outside the Cayman Islands; provided that nothing in this section shall be construed as to prevent the Company effecting and concluding contracts in the Cayman Islands, and exercising in the Cayman Islands all of its powers necessary for the carrying on of its business outside the Cayman Islands. |
| 5. | Company Limited by Shares |
The Company is a company limited by shares. The liability of each member is limited to the amount, if any, unpaid on the shares held by such member.
| 6. | Authorised Shares |
The authorised share capital of the Company is USD 500,000,000 divided into (i) 7,000,000,000 Class A Ordinary Shares of a nominal or par value of USD0.05 each; (ii) 1,000,000,000 Class B Ordinary Shares of a nominal or par value of USD0.05 each; and (iii) 2,000,000,000 Preferred Shares of a nominal or par value of USD0.05 each. Subject to the provisions of the Companies Act (Revised) and the Articles of Association of the Company, the Company shall have power to redeem or purchase any of its shares and to increase, reduce, sub-divide or consolidate the share capital and to issue all or any part of its capital whether original, redeemed, increased or reduced with or without any preference, priority or special privilege or subject to any postponement of rights or to any conditions or restrictions whatsoever and so that unless the conditions of issue shall otherwise expressly provide every issue of shares whether stated to be ordinary, preference or otherwise shall be subject to the powers on the part of the Company hereinbefore provided.
| 7. | Continuation |
Subject to the provisions of the Companies Act (Revised) and the Articles of Association of the Company, the Company may exercise the power contained in Section 206 of the Companies Act (Revised) to deregister in the Cayman Islands and be registered by way of continuation under the laws of any jurisdiction outside the Cayman Islands.
THE CAYMAN ISLANDS
THE COMPANIES ACT
(REVISED)
Second Amended
and Restated
Articles of
Association of
Meihua International Medical Technologies Co., Ltd.
美华国际医疗科技有限公司
(adopted by special resolutions passed on November 8, 2025)
THE CAYMAN ISLANDS
THE COMPANIES ACT (REVISED)
SECOND AMENDED AND RESTATED ARTICLES OF
ASSOCIATION
OF
Meihua International Medical Technologies Co., Ltd.
美华国际医疗科技有限公司
(the “Company”)
(adopted by special resolutions passed on November 8, 2025)
| 1. | Table A |
The Table ‘A’ in the First Schedule of The Companies Act (Revised) shall not apply to this Company and the following shall constitute the Articles of Association of the Company.
| 2. | Definitions and Interpretation |
| 2.1 | References in these Articles of Association (“Articles”) to the “Companies Act” shall mean the Companies Act (Revised) of the Cayman Islands and any statutory amendments or re-enactment thereof. In these Articles, save where the content otherwise requires: |
“Affiliate” means in respect of a person or entity, any other person or entity that, directly or indirectly (including through one or more intermediaries), controls, is controlled by, or is under common control with, such person or entity, and (i) in the case of a natural person, shall include, without limitation, such person’s spouse, parents, children, siblings, mother-in-law and father-in-law and brothers and sisters-in-law, a trust solely for the benefit of any of the foregoing, a company, partnership or entity wholly owned by one or more of the foregoing, and (ii) in the case of an entity, shall include a partnership, a corporation or any natural person or entity which directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such entity. The term “control” in this definition shall mean the ownership, directly or indirectly, of securities possessing more than fifty percent (50%) of the voting power of the corporation, or the partnership or other entity (other than, in the case of corporation, securities having such power only by reason of the happening of a contingency not within the reasonable control of such partnership, corporation, natural person or entity), or having the power to control the management or elect a majority of members to the board of directors or equivalent decision-making body of such corporation, partnership or other entity;
“Class A Ordinary Shares” means the class A ordinary shares of the Company in the share capital of the Company;
“Class B Ordinary Shares” means the class B ordinary shares of the Company in the share capital of the Company;
“Conversion Date” means in respect of a Conversion Notice means the day on which that Conversion Notice is delivered;
“Conversion Notice” means a written notice delivered to the Company at its office (and as otherwise stated therein) stating that a holder of Class B Ordinary Shares elects to convert the number of Class B Ordinary Shares specified therein pursuant to Article 4.4(a);
“Conversion Number” in relation to any Class B Ordinary Shares, such number of Class A Ordinary Shares as may, upon exercise of the Conversion Right, be issued at the Conversion Rate;
“Conversion Rate” in relation to the conversion of Class B Ordinary Shares to Class A Ordinary Shares means, at any time, on a one-to-one basis. The foregoing Conversion Rate shall also be adjusted to account for any subdivision (by share split, subdivision, exchange, capitalisation, rights issue, reclassification, recapitalisation or otherwise) or combination (by reverse share split, share consolidation, exchange, reclassification, recapitalisation or otherwise) or similar reclassification or recapitalisation of the Class A Ordinary Shares in issue into a greater or lesser number of shares occurring after the original filing of the Articles without a proportionate and corresponding subdivision, combination or similar reclassification or recapitalisation of the Class B Ordinary Shares in issue;
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“Conversion Right” in respect of a holder of Class B Ordinary Shares, subject to the provisions of these Articles and to any applicable fiscal or other laws or regulations including the Act, to convert all or any of its Class B Ordinary Shares, into the Conversion Number of Class A Ordinary Shares in its discretion;
“Directors” and “Board of Directors” means the Directors of the Company for the time being, or as the case may be, the Directors assembled as a board or as a committee thereof, and “Director” means any one of the Directors;
“Members” means those persons whose names are entered in the register of members as the holders of shares and includes each subscriber of the Memorandum pending the issue to him of the subscriber share or shares, and “Member” means any one of them;
“Memorandum of Association” means the Memorandum of Association of the Company, as amended and re-stated from time to time;
“Ordinary Resolution” means a resolution:
| (a) | passed by a simple majority of such Members as, being entitled to do so, vote in person or, where proxies are allowed, by proxy at a general meeting of the Company and where a poll is taken regard shall be had in computing a majority to the number of votes to which each Member is entitled; or |
| (b) | approved in writing by all of the Members entitled to vote at a general meeting of the Company in one or more instruments each signed by one or more of the Members and the effective date of the resolution so adopted shall be the date on which the instrument, or the last of such instruments if more than one, is executed; |
“Paid up” means paid up as to the par value and any premium payable in respect of the issue of any shares and includes credited as paid up;
“Preferred Shares” means the preferred shares of the Company with a par value of US$0.0005 each in the share capital of the Company;
“Register of Members” means the register to be kept by the Company in accordance with Section 40 of the Companies Act; “Seal” means the Common Seal of the Company (if any) including any facsimile thereof;
“Shares” means shares in the capital of the Company, including a fraction of any of them and “Share” means any one of them; “Special Resolution” means a resolution passed in accordance with Section 60 of the Companies Act, being a resolution:
| (a) | passed by a majority of not less than two-thirds of such Members as, being entitled to do so, vote in person or, where proxies are allowed, by proxy at a general meeting of the Company of which notice specifying the intention to propose the resolution as a Special Resolution has been duly given and where a poll is taken regard shall be had in computing a majority to the number of votes to which each Member is entitled, or |
| (b) | approved in writing by all of the Members entitled to vote at a general meeting of the Company in one or more instruments each signed by one or more of the Members and the effective date of the Special Resolution so adopted shall be the date on which the instrument or the last of such instruments if more than one, is executed. |
| 2.2 | In these Articles, words and expressions defined in the Companies Act shall have the same meaning and, unless otherwise required by the context, (a) the singular shall include the plural and vice versa; (b) the masculine shall include the feminine and the neuter and references to persons shall include companies and all legal entities capable of having a legal existence; (c) “may” shall be construed as permissive and “shall” shall be construed as imperative; (d) a reference to a dollar or dollars (or $) is a reference to dollars of the United States of America; and (e) references to a statutory enactment shall include reference to any amendment or re-enactment thereof for the time being in force. |
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| 3. | Share Certificates |
| 3.1 | Every person whose name is entered as a Member in the Register of Members, shall without payment, be entitled to a share certificate signed by a Director of the Company specifying the number and class of shares held and the amount paid up thereof, provided that in respect of a share or shares held jointly by several persons, the Company shall not be bound to issue more than one share certificate and delivery of a certificate for a share to one of several joint holders shall be sufficient delivery to all. |
| 3.2 | If a share certificate is worn out, lost or defaced, it may be renewed on production of the worn out or defaced certificate, or on satisfactory proof of its loss together with such indemnity as the Directors may reasonably require. Any Member receiving a share certificate shall indemnify and hold the Company and its officers harmless from any loss or liability which it or they may incur by reason of wrongful or fraudulent use or representation made by any person by virtue of the possession of such a share certificate. |
| 4. | Issue of Shares |
| 4.1 | Subject to the provisions of these Articles, the unissued shares of the Company (whether forming part of the original or any increased authorised shares) shall be at the disposal of the Directors who may offer, allot, grant options over or otherwise dispose of them to such persons at such times and for such consideration, and upon such terms and conditions as the Directors may determine. |
| 4.2 | The Company may in so far as may be permitted by Companies Act, pay a commission to any person in consideration of his subscribing or agreeing to subscribe whether absolutely or conditionally for any shares. Such commissions may be satisfied by the payment of cash or the lodgement of fully or partly paid-up shares or partly in one way and partly in the other. The Company may also on any issue of shares pay such brokerage as may be lawful. |
| 4.3 | Before any Preferred Shares of any series are issued, the Directors shall fix, by resolution or resolutions, the following provisions of such series: |
| (a) | the designation of such series and the number of Preferred Shares to constitute such series; |
| (b) | whether the shares of such series shall have voting rights, in addition to any voting rights provided by Companies Act, and, if so, the terms of such voting rights, which may be general or limited; |
| (c) | the dividends, if any, payable on such series, whether any such dividends shall be cumulative, and, if so, from what dates, the conditions and dates upon which such dividends shall be payable, the preference or relation which such dividends shall bear to the dividends payable on any Shares of any other class of Shares or any other series of Preferred Shares; |
| (d) | whether the Preferred Shares or such series shall be subject to redemption by the Company, and, if so, the times, prices and other conditions of such redemption; |
| (e) | the amount or amounts payable upon Preferred Shares of such series upon, and the rights of the holders of such series in, a voluntary or involuntary liquidation, dissolution or winding up, or upon any distribution of the assets, of the Company; |
| (f) | whether the Preferred Shares of such series shall be subject to the operation of a retirement or sinking fund and, if so, the extent to and manner in which any such retirement or sinking fund shall be applied to the purchase or redemption of the Preferred Shares of such series for retirement or other corporate purposes and the terms and provisions relative to the operation of the retirement or sinking fund; |
| (g) | whether the Preferred Shares of such series shall be convertible into, or exchangeable for, Shares of any other class of Shares or any other series of Preferred Shares or any other securities and, if so, the price or prices or the rate or rates of conversion or exchange and the method, if any, of adjusting the same, and any other terms and conditions of conversion or exchange; |
| (h) | the limitations and restrictions, if any, to be effective while any Preferred Shares or such series are outstanding upon the payment of dividends or the making of other distributions on, and upon the purchase, redemption or other acquisition by the Company of, the existing Shares or Shares of any other class of Shares or any other series of Preferred Shares; |
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| (i) | the conditions or restrictions, if any, upon the creation of indebtedness of the Company or upon the issue of any additional Shares, including additional shares of such series or of any other class of Shares or any other series of Preferred Shares; and |
| (j) | any other powers, preferences and relative, participating, optional and other special rights, and any qualifications, limitations and restrictions of any other class of Shares or any other series of Preferred Shares. |
| 4.4 | Subject to Article 4.1, the Memorandum and any Special Resolution to the contrary and without prejudice to any special rights conferred thereby on the holders of any other Shares or class of Shares, Class A Ordinary Shares and Class B Ordinary Shares shall carry equal rights and rank pari passu with one another in all respects other than as set out below: |
| (a) | Conversion Rights: |
| (i) | Subject to the provisions hereof and to compliance with all fiscal and other laws and regulations applicable thereto, including the Act, a holder of Class B Ordinary Shares shall have the Conversion Right in respect of each Class B Ordinary Share in its holding. For the avoidance of doubt, a holder of Class A Ordinary Shares shall have no rights to convert Class A Ordinary Shares into Class B Ordinary Shares under any circumstances. |
| (ii) | [Each Class B Ordinary Share shall be converted at the option of the holder, at any time after issue and without the payment of any additional sum, into such Conversion Number of fully paid Class A Ordinary Shares calculated at the Conversion Rate]. Such conversion shall take effect on the Conversion Date. A Conversion Notice shall not be effective if it is not accompanied by the share certificates in respect of the relevant Class B Ordinary Shares and/or such other evidence (if any) as the Directors may reasonably require to prove the title of the person exercising such right (or, if such certificates have been lost or destroyed, such evidence of title and such indemnity as the Directors may reasonably require). Any and all taxes and stamp, issue and registration duties (if any) arising on conversion shall be borne by the holder of Class B Ordinary Shares requesting conversion. |
| (iii) | On the Conversion Date, every Class B Ordinary Share converted shall automatically be re-designated and re-classified (or in such other manner as the Directors may direct that is not in contravention of applicable laws) as the applicable Conversion Number of Class A Ordinary Shares with such rights and restrictions attached thereto and shall rank pari passu in all respects with the Class A Ordinary Shares then in issue and the Company shall enter or procure the entry of the name of the relevant holder of converted Class B Ordinary Shares as the holder of the corresponding number of Class A Ordinary Shares resulting from the conversion of the Class B Ordinary Shares in, and make any other necessary and consequential changes to, the register of members and shall procure that, if required, certificates in respect of the relevant Class A Ordinary Shares, together with a new certificate for any unconverted Class B Ordinary Shares comprised in the certificate(s) surrendered by the holder of the Class B Ordinary Shares, are issued to the holders thereof. |
| (iv) | Until such time as the Class B Ordinary Shares have been converted into Class A Ordinary Shares, the Company shall: (A) at all times keep available for issue and free of all liens, charges, options, mortgages, pledges, claims, equities, encumbrances and other third-party rights of any nature, and not subject to any pre-emptive rights out of its authorised but unissued share capital, such number of authorised but unissued Class A Ordinary Shares as would enable all Class B Ordinary Shares to be converted into Class A Ordinary Shares and any other rights of conversion into, subscription for or exchange into Class A Ordinary Shares to be satisfied in full; and (B) not make any issue, grant or distribution or take any other action if the effect would be that on the conversion of the Class B Ordinary Shares to Class A Ordinary Shares it would be required to issue Class A Ordinary Shares at a price lower than the par value thereof. |
| (b) | Voting Rights: |
| (i) | Holders of Class A Ordinary Shares and Class B Ordinary Shares have the right to receive notice of, attend, speak and vote at general meetings of the Company. Holders of shares of Class A Ordinary Shares and Class B Ordinary Shares shall, at all times, vote together as a single class on all matters submitted to a vote for Members’ consent. |
| (ii) | Each Class A Ordinary Share shall be entitled to one (1) vote on all matters subject to the vote at general meetings of the Company; whereas, each Class B Ordinary Share shall be entitled to fifty (50) votes on all matters subject to the vote at general meetings of the Company. |
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| (c) | Transfer of Class B Ordinary Shares |
| (i) | Upon any sale, transfer, assignment or disposition of Class B Ordinary Shares by a holder thereof to any person or entity which is not an Affiliate of such holder, such Class B Ordinary Shares validly transferred to the new holder shall be automatically and immediately converted into such Conversion Number of Class A Ordinary Shares calculated based on the Conversion Rate. |
| (ii) | For the avoidance of doubt, (i) a sale, transfer, assignment or disposition shall be effective upon the Company’s registration of such sale, transfer, assignment or disposition in the Company’s register of Members; and (ii) the creation of any pledge, charge, encumbrance or other third party right of whatever description on any of Class B Ordinary Shares to secure a holder’s contractual or legal obligations shall not be deemed as a sale, transfer, assignment or disposition unless and until any such pledge, charge, encumbrance or other third party right is enforced and results in the third party holding fee simple ownership interest to the related Class B Ordinary Shares, in which case all the related Class B Ordinary Shares shall be automatically converted into the same number of Class A Ordinary Shares upon the Company’s registration of the third party or its designee as a Member holding that number of Class A Ordinary Shares in the register of Members. |
| 5. | Variation of Rights Attaching to Shares |
| 5.1 | If at any time the share capital of the Company is divided into different classes of shares, the rights attaching to any class (unless otherwise provided by the terms of issue of the shares of that class) may be varied or abrogated with the consent in writing of the holders of two-thirds of the issued shares of that class, or with the sanction of a resolution passed by at least a two-thirds majority of the holders of shares of the class present in person or by proxy at a separate general meeting of the holders of the shares of the class. To every such separate general meeting the provisions of these Articles relating to general meetings of the Company shall mutatis mutandis apply, but so that the necessary quorum shall be at least one person holding or representing by proxy at least one-third of the issued shares of that class and that any holder of shares of that class present in person or by proxy may demand a poll. |
| 5.2 | For the purposes of a separate class meeting, the Directors may treat two or more or all the classes of Shares as forming one class of Shares if the Directors consider that such classes of Shares would be affected in the same way by the proposals under consideration, but in any other case shall treat them as separate classes of Shares. |
| 5.3 | 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 therewith or by the redemption or purchase of shares of any class by the Company. |
| 5.4 | The Company shall not issue shares to bearer form. |
| 6. | Transfer of Shares |
| 6.1 | Subject to such of the restriction of these Articles as may be applicable (including, without limitation, Article 4.4(c)), any Member may transfer all or any of his shares by an instrument in writing in any usual or common form or any other form which the Directors may approve or on behalf of the transferor and if in respect of a nil or partly paid up share or if so required by the Directors shall also be executed on behalf of the transferee and shall be accompanied by the certificate of the shares to which it relates and such other evidence as the Directors may reasonably require to show the right of the transferor to make the transfer. The transferor shall be deemed to remain a holder of the share until the name of the transferee is entered in the Register of Members in respect thereof. |
| 6.2 | The Directors may in their absolute discretion to decline to register any transfer of any share, whether or not it is a fully paid share, without assigning any reason for so doing. If the Directors refuse to register a transfer they shall within 2 months of the date on which the transfer was lodged with the Company send to the transferor and transferee notice of the refusal. |
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| 6.3 | All instruments of transfer which shall be registered shall be retained by the Company, but any instrument of transfer which the Directors may decline to register shall (except in any case of fraud) be returned to the person depositing the same. |
| 6.4 | The registration of transfers may be suspended at such times and for such periods as the Directors may from time to time determine, provided always that such registration shall not be suspended for more than 45 days in any year. |
| 7. | Transmission of Shares |
| 7.1 | In case of the death of a Member, the survivor or survivors, or the legal personal representatives of the deceased survivor, where the deceased was a joint holder, and the legal personal representatives of the deceased, where he was a sole holder, shall be the only persons recognized by the Company as having any title to the shares. |
| 7.2 | Any person becoming entitled to a share in consequence of the death, bankruptcy, liquidation or dissolution of a Member shall, upon such evidence being produced as may from time to time be properly required by the Directors, and subject as hereinafter provided, elect either to be registered himself as holder of the share or to have some person nominated by him registered as the transferee thereof, but the Directors shall, in either case, have the same right to decline or suspend registration as they would have had in the case of a transfer of the share by that Member before his death or bankruptcy, as the case may be. |
| 7.3 | A person becoming entitled to a share by reason of the death, bankruptcy, liquidation or dissolution of the holder shall be entitled to the same dividends and other advantages to which he would be entitled if he were the registered holder of the share, except that he shall not, before being registered as a Member in respect of the share, be entitled in respect of it to exercise any right conferred by membership in relation to meetings of the Company. |
| 8. | Redemption and Purchase of Own Shares |
| 8.1 | Subject to the provisions of the Companies Act, the Company may: |
| (a) | issue shares on terms that they are to be redeemed or are liable to be redeemed at the option of the Company on such terms and in such manner as the Directors may determine before the issue of such shares; |
| (b) | purchase its own shares (including any redeemable shares) on such terms and in such manner as the Directors may determine and agree with the Member; and |
| (c) | make a payment in respect of the redemption or purchase of its own shares in any manner permitted by the Companies Act, including out of capital. |
| 8.2 | A share which is liable to be redeemed by the Company shall be redeemed by the Company giving to the Member notice in writing of the intention to redeem such shares (a “Redemption Notice”) and specifying the date of such redemption which must be a day on which banks in the Cayman Islands are open for business. |
| 8.3 | Any share in respect of which Redemption Notice has been given shall not be entitled to participate in the profits of the Company in respect of the period after the date specified as the date of redemption in the Redemption Notice. |
| 8.4 | The redemption or purchase of any share shall not be deemed to give rise to the redemption or purchase of any other share. |
| 8.5 | At the date specified in the Redemption Notice, or the date on which the shares are to be purchased, the holder of the shares being redeemed or purchased shall be bound to deliver up to the Company at its Registered Office the certificate thereof for cancellation and thereupon the Company shall pay to him the redemption or purchase moneys in respect thereof. |
| 8.6 | The Directors may when making payments in respect of redemption or purchase of shares, if authorised by the terms of issue of the shares being redeemed or purchased or with the agreement of the holder of such shares, make such payment either in cash or in specie. |
| 9. | Fractional Shares |
The Directors may issue fractions of a share of any class of shares, and, if so issued, a fraction of a share (calculated to three decimal points) shall be subject to and carry the corresponding fraction of liabilities (whether with respect to any unpaid amount thereon, contribution, calls or otherwise), limitations, preferences, privileges, qualifications, restrictions, rights (including, without limitation, voting and participation rights) and other attributes of a whole share of the same class of shares. If more than one fraction of a share of the same class is issued to or acquired by the same Member such fractions shall be accumulated. For the avoidance of doubt, in these Articles the expression “share” shall include a fraction of a share.
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| 10. | Lien |
| 10.1 | The Company shall have a first priority lien and charge on every share (not being a fully paid up share) for all moneys (whether presently payable or not) called or payable at a fixed time in respect of that share, and the Company shall also have a first priority lien and charge on all shares (other than fully paid up shares) registered in the name of a member for all moneys presently payable by him or his estate to the Company, but the Directors may at any time declare any share to be wholly or in part exempt from the provisions of this Article. The Company’s lien, if any, on a share shall extend to all dividends and other moneys payable in respect thereon. |
| 10.2 | The Company may sell, in such manner as the Directors think fit, any shares on which the Company has a lien, but no sale shall be made unless some sum in respect of which the lien exists is presently payable, nor until the expiration of 14 days after a notice in writing, stating and demanding payment of such part of the amount in respect of which the lien exists as is presently payable, has been given to the registered holder for the time being of the share, or the persons entitled thereto of which the Company has notice, by reason of his death or bankruptcy, winding up or otherwise by operation of Companies Act or court order. |
| 10.3 | To give effect to any such sale the Directors may authorise some person to transfer the shares sold to the purchaser thereof. The purchaser shall be registered as the holder of the shares comprised in any such transfer, and he shall not be bound to see to the application of the purchase money, nor shall his title to the shares be affected by any irregularity or invalidity in the proceedings in reference to the sale. |
| 10.4 | The proceeds of the sale shall be received by the Company and applied in payment of such part of the amount in respect of which the lien exists as is presently payable, and the residue, if any, shall (subject to a like lien for sums not presently payable as existed upon the shares prior to the sale) be paid to the person entitled to the shares at the date of the sale. |
| 11. | Calls on Shares |
| 11.1 | The Directors may from time to time make calls upon the Members in respect of any moneys unpaid on their shares (whether on account of the nominal value of the shares or by way of premium or otherwise), and each Member shall (subject to receiving at least 14 days’ notice in writing specifying the time or times and place of payment) pay to the Company at the time or times and place so specified the amount called on his shares. The non-receipt of a notice of any call by, or the accidental omission to give notices of a call to, any Members shall not invalidate the call. A call may be revoked or postponed as the Directors may determine. |
| 11.2 | The joint holders of a share shall be jointly and severally liable to pay all calls in respect thereof. |
| 11.3 | If a sum called in respect of a share is remain unpaid before or on the day appointed for payment thereof, the person from whom the sum is due shall pay interest on the sum from the day appointed for the payment thereof to the time of the actual payment at such rate not exceeding 10 percent per annum as the Directors may determine, but the Directors shall be at liberty to waive payment of that interest wholly or in part. |
| 11.4 | Any sum which by the terms of issue of a share becomes payable on allotment or at any fixed date, whether on account of the nominal value of the share or by way of premium or otherwise, shall for the purposes of these Articles be deemed to be a call duly made, notified and payable on the date on which by the terms of issue the same becomes payable, and in case of non- payment all the relevant provisions of these Articles as to payment of interest and expenses, forfeiture or otherwise shall apply as if such sum had become payable by virtue of a call duly made and notified. |
| 11.5 | The provisions of these Articles as to the liability of joint holders and as to payment of interest shall apply in the case of non- payment of any sum which, by the terms of issue of a share, becomes payable at a fixed time, whether on account of the amount of the share, or by way of premium, as if the same had become payable by virtue of a call duly made and notified. |
| 11.6 | The Directors may make arrangements on the issue of shares, differentiate between the Members, as to the amount of calls to be paid and the times of payment. |
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| 11.7 | The Directors may, if they think fit, receive from any Member willing to advance the same, all or any part of the moneys uncalled and unpaid upon any shares held by him, and upon all or any of the moneys so advanced may (until the same would, but for such advance, become presently payable) pay interest at such rate not exceeding 10 percent per annum (unless the Company in general meeting shall otherwise direct), as may be agreed between the Directors and the Member paying the sum in advance. |
| 12. | Forfeiture of Shares |
| 12.1 | If a Member fails to pay any call or instalment of a call with any interest on the day appointed for payment thereof, the Directors may, at any time thereafter during such time as any part of such call or instalment remains unpaid, serve a notice in writing on him requiring payment of so much of the call or instalment as is unpaid, together with any interest accrued and expenses incurred by the reason of such non-payment. |
| 12.2 | The notice shall name a further day (not earlier than the expiration of 14 days from the date of the service of the notice) on or before which the payment required by the notice is to be made, and shall state that in the event of non-payment at or before the time appointed the shares in respect of which the call was made will be liable to be forfeited. |
| 12.3 | If the requirements of any such notice as aforesaid are not complied with, any share in respect of which the notice has been given may at any time thereafter, before the payment required by notice has been made, be forfeited by a resolution of the Directors to that effect and such forfeiture shall extend to all dividends declared in respect of the share so forfeited but not actually paid before such forfeiture. |
| 12.4 | A forfeited share may be sold, cancelled or otherwise disposed of on such terms and in such manner as the Directors in their absolute discretion think fit, and at any time before a sale, cancellation or disposition the forfeiture may be cancelled on such terms as the Directors in their absolute discretion think fit. |
| 12.5 | A person whose shares have been forfeited shall cease to be a Member in respect of the forfeited shares, but shall, notwithstanding, remain liable to pay to the Company all moneys which, at the date of forfeiture, were payable by him to the Company in respect of the shares, but his liability shall cease if and when the Company receives payment in full of the fully paid up amount of the shares. |
| 12.6 | A statutory declaration in writing that the declarant is a Director of the Company, and that a share in the Company has been duly forfeited or surrendered or sold to satisfy a lien of the Company on a date stated in the declaration, shall be conclusive evidence of the facts therein stated as against all persons claiming to be entitled to the share. The Company may receive the consideration, if any, given for the share on any sale or disposition thereof and may execute a transfer of the share in favour of the person to whom the share is sold or disposed of and he shall thereupon be registered as the holder of the share, and shall not be bound to see to the application of the purchase money, if any, nor shall his title to the share be affected by any irregularity or invalidity in the proceedings in reference to the forfeiture, sale or disposal of the share. |
| 12.7 | When any shares have been forfeited, an entry shall be made in the Register of Members recording the forfeiture and the date thereof, and so soon as the shares so forfeited have been sold or otherwise disposed of, an entry shall be made of the manner and date of the sale or disposal thereof. |
| 12.8 | The provisions of these Articles as to forfeiture shall apply in the case of non-payment of any sum, which by the terms of issue of a share, becomes due and payable at any time, whether on account of the amount of the share, or by way of premium, as if the same had been payable by virtue of a call duly made and notified. |
| 13. | Alteration of Share Capital |
| 13.1 | The Company may from time to time by Ordinary Resolution increase the share capital by such sum, to be divided into shares of such classes and amount, as the resolution shall prescribe. |
| 13.2 | The Company may by Ordinary Resolution: |
| (a) | consolidate and divide all or any of its share capital into shares of larger amount than its existing shares; |
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| (b) | subdivide its 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; |
| (c) | 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 its share capital by the amount of the shares so cancelled; and |
| (d) | convert all or any of its paid up shares into stock and reconvert that stock into paid up shares of any denomination. |
| 13.3 | The Company may by Special Resolution reduce its share capital and any capital redemption reserve in any manner, authorised and consent required by Companies Act. |
| 14. | Closing Register of Members or Fixing Record Date |
| 14.1 | For the purpose of determining those Members that are entitled to receive notice of, attend or vote at any meeting of Members or any adjournment thereof, or those Members that are entitled to receive payment of any dividend, or in order to make a determination as to who is a Member for any other purpose, the Directors may provide that the Register of Members shall be closed for transfers for a stated period but not to exceed in any case 40 days. If the Register of Members shall be so closed for the purpose of determining those Members that are entitled to receive notice of, attend or vote at a meeting of Members such register shall be so closed for at least 10 days immediately preceding such meeting and the record date for such determination shall be the first day of the closure of the Register of Members. |
| 14.2 | In lieu of or apart from closing the Register of Members, the Directors may fix in advance a date as the record date for any such determination of those Members that are entitled to receive notice of, attend or vote at a meeting of the Members and for the purpose of determining those Members that are entitled to receive payment of any dividend the Directors may, at or within 90 days prior to the date of declaration of such dividend fix a subsequent date as the record date for such determination. |
| 14.3 | If the Register of Members is not so closed and no record date is fixed for the determination of those Members that are entitled to receive notice of, attend or vote at a meeting of Members or those Members that are entitled to receive payment of a dividend, the date on which notice of the meeting is posted or the date on which the resolution of the Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of Members. When a determination of those Members that are entitled to receive notice of, attend or vote at a meeting of Members has been made as provided in this section, such determination shall apply to any adjournment thereof. |
| 15. | General Meeting of Members |
| 15.1 | The Directors, whenever they consider necessary or desirable, may convene meetings of the Members of the Company. The Directors shall convene a meeting of Members upon the written requisition of any Members or Members entitled to attend and vote at general meeting of the Company who hold not less than 10 percent of the paid up voting share capital of the Company in respect to the matter for which the meeting is requested, deposited at the registered office of the Company specifying the objects of the meeting for a date no later than 21 days from the date of deposit of the requisition signed by the requisitionists. If the Directors do not convene such meeting for a date not later than 30 days after the date of such deposit, the requisitionists themselves may convene the general meeting in the same manner, as nearly as possible, as that in which meetings may be convened by the Directors, and all reasonable expenses incurred by the requisitionists as a result of the failure of the Directors shall be reimbursed to them by the Company. |
| 15.2 | If at any time there are no Directors of the Company, any two Members (or if there is only one Member then that Member) entitled to vote at general meetings of the Company may convene a general meeting in the same manner as nearly as possible as that in which meetings may be convened by the Directors. |
| 16. | Notice of General Meetings |
| 16.1 | At least seven days’ notice counting from the date service is deemed to take place as provided in these Articles specifying the place, the day and the hour of the meeting and, in case of special business, the general nature of that business, shall be given in manner hereinafter provided or in such other manner (if any) as may be prescribed by the Company by Ordinary Resolution to such persons as are, under these Articles, entitled to receive such notices from the Company. |
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| 16.2 | Notwithstanding the aforesaid Article, a meeting of Members is held in contravention of the requirement to give notice shall be deemed to have been validly held if the consent of all Members entitled to receive notice of some particular meeting and attend and vote thereat, that meeting may be convened by such shorter notice or without notice and in such manner as those Members may think fit. |
| 16.3 | The accidental omission to give notice of a meeting to, or the non-receipt of a notice of a meeting by any Member shall not invalidate the proceedings at any meeting. |
| 17. | Proceedings at General Meetings |
| 17.1 | No business shall be transacted at any general meeting unless a quorum of Members is present at the time when the meeting proceeds to business. Save as otherwise provided by these Articles, a quorum shall consist of one or more Members present in person or by proxy holding at least a majority of the paid up voting share capital of the Company. If the Company has only one Member, that only Member present in person or by proxy shall be a quorum for all purposes. |
| 17.2 | If within half an hour from the time appointed for the meeting a quorum is not present, the meeting, if convened upon the requisition of Members, shall be dissolved. In any other case it shall stand adjourned to the same day in the next week, at the same time and place or to such other day and at such other time and place as the Directors may decide, and if at the adjourned meeting a quorum is not present within half an hour from the time appointed for the meeting the Member or Members present and entitled to vote shall be a quorum. |
| 17.3 | At every meeting the Members present shall choose someone of their number to be the chairman (the “Chairman”). If the Members are unable to choose a Chairman for any reason, then the person representing the greatest number of voting shares present at the meeting shall preside as Chairman, failing which the oldest individual Member present at the meeting or failing any Member personally attending the meeting, the proxy present at the meeting representing the oldest Member of the Company, shall take the chair. |
| 17.4 | The Chairman may, with the consent of any meeting, at which a quorum is present (and shall if so directed by the meeting) adjourn any meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. When a meeting is adjourned for 10 days or more, notice of the adjourned meeting shall be given as in the case of an original meeting. Save as aforesaid, it shall not be necessary to give any notice of an adjournment or of the business to be transacted at an adjourned meeting. |
| 17.5 | All business carried out at a general meeting shall be deemed special with the exception of declaring a dividend, the consideration of the accounts, balance sheets, and reports of the Directors and the Company’s auditors, the appointment and removal of Directors, and the appointment and the fixing of the remuneration of the Company’s auditors. No special business shall be transacted at any general meeting without the consent of all Members entitled to receive notice of that meeting unless notice of such special business has been given in the notice convening that meeting. |
| 17.6 | Any one or more Members may participate in a general meeting by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participating by such means shall constitute presence in person at a meeting. A resolution in writing signed by all the Members for the time being entitled to receive notice of and to attend and vote at general meetings (or being corporations by their duly authorized representatives) shall be as valid and effective as if the same had been passed at a general meeting of the Company duly convened and held. |
| 18. | Votes of Members |
| 18.1 | A resolution put to the vote of the meeting shall be decided on a poll. Subject to any rights and restrictions for the time being attached to any class or classes of shares, on a poll every Member and every person representing a Member by proxy shall have one vote for each Class A Ordinary Share and fifty (50) votes for each Class B Ordinary Share of which he or the person represented by proxy is the holder. |
| 18.2 | Unless otherwise required under the Companies Act or by these Articles, holders of Class A Ordinary Shares and Class B Ordinary Shares shall at all times vote together as one class on all resolutions submitted to a vote by the Members. |
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| 18.3 | A fraction of a Class A Ordinary Share shall entitle its holder to an equivalent fraction of one (1) vote, and a fraction of a Class B Ordinary Share shall entitle its holder to an equivalent fraction of fifty (50) votes. |
| 18.4 | A poll shall be taken in such manner as the Chairman directs, and the result of the poll shall be deemed to be the resolution of the meeting. |
| 18.5 | In the case of an equality of votes, the Chairman of the meeting shall be entitled to a second or casting vote. |
| 18.6 | In the case of joint holders the vote of the senior who tenders a vote whether in person or by proxy shall be accepted to the exclusion of the votes of the joint holders and for this purpose seniority shall be determined by the order in which the names stand in the Register of Members. |
| 18.7 | A Member of unsound mind, or in respect of whom an order has been made by any court having jurisdiction in lunacy, may vote by his committee, or other person in the nature of a committee appointed by that court, and any such committee or other person, may on a poll, vote by proxy. |
| 18.8 | No Member shall be entitled to vote at any general meeting unless all calls or other sums presently payable by him in respect of shares in the Company held by him and carrying the right to vote have been paid. |
| 19. | Members’ Proxies |
| 19.1 | The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or, if the appointor is a corporation, either under seal or under the hand of an officer or attorney duly authorised. A proxy need not be a Member of the Company. An instrument appointing a proxy may be in any usual or common form or such other form as the Directors may approve. The instrument appointing a proxy shall be deemed to confer authority to demand or join in demanding a poll. |
| 19.2 | On a poll, votes may be given either personally or by proxy. The instrument appointing a proxy shall be deposited at the Registered Office or at such other place appointed for the meeting before the time for holding the meeting at which the person named in such instrument proposes to vote. |
| 20. | Corporations Acting by Representatives at Meetings |
Any corporation or other form of corporate legal entity which is a Member or a Director of the Company may, by resolution of its directors or other governing body, authorise such person as it thinks fit to act as its representative at any meeting of the Members or any class of Members of the Company or of the Board of Directors or of a Committee of Directors, and the person so authorised shall be entitled to exercise the same powers on behalf of such corporation which he represents as that corporation could exercise if it were an individual Member or Director of the Company.
| 21. | Directors |
| 21.1 | The name of the first Director(s) shall either be determined in writing by a majority (or in the case of a sole subscriber that subscriber) of, or elected at a meeting of, the subscribers of the Memorandum of Association. The Company may by Ordinary Resolution appoint any person to be a Director. |
| 21.2 | Subject to the provisions of these Articles, a Director shall hold office until such time as he is removed from office by the Company by Ordinary Resolution. |
| 21.3 | Unless and until otherwise determined by an Ordinary Resolution of the Company, the Directors shall not be less than one in number, and there shall be no maximum number of Directors. |
| 21.4 | The remuneration of the Directors shall from time to time be determined by the Company by Ordinary Resolution. |
| 21.5 | The shareholding qualification for Directors may be fixed by the Company by Ordinary Resolution and unless and until so fixed no share qualification shall be required. |
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| 21.6 | The Directors shall have power at any time and from time to time to appoint any other person as a Director, either to fill a casual vacancy or as an additional Director, subject to the maximum number (if any) imposed by the Company by Ordinary Resolution. |
| 22. | Alternate Director |
| 22.1 | Any Director may in writing appoint another Director or another person to be his alternate to act in his place at any meeting of the Directors at which he is unable to be present and may at any time in writing to revoke the appointment of an alternate appointed by him. Every such alternate shall be entitled to be given notice of meetings of the Directors and to attend and vote thereat as a Director at any such meeting at which the person appointing him is not personally present and generally at such meeting to have and exercise all the powers, right, duties and authorises of the Director appointing him. |
| 22.2 | An alternate shall not be an officer of the Company and shall be deemed to be the agent of the Director appointing him. A Director may at any time in writing revoke the appointment of an alternate appointed by him. The remuneration of such alternate shall be payable out of the remuneration of the Director appointing him and the proportion thereof shall be agreed between them. If a Director shall die or cease to hold the office of Director, the appointment of his alternate shall thereupon cease and terminate. |
| 22.3 | Any Director may appoint any person, whether or not a Director, to be the proxy of that Director to attend and vote on his behalf, in accordance with instructions given by that Director, or in the absence of such instructions at the discretion of the proxy, at a meeting or meetings of the Directors which that Director is unable to attend personally. The instrument appointing the proxy shall be in writing under the hand of the appointing Director and shall be in any usual or common form or such other form as the Directors may approve, and must be lodged with the chairman of the meeting of the Directors at which such proxy is to be used, or first used, prior to the commencement of the meeting. |
| 23. | Officers |
| 23.1 | The Directors of the Company may, by resolution of Directors, appoint officers of the Company at such times as shall be considered necessary or expedient, and such officers may consist of a president, one or more vice presidents, a secretary, and a treasurer and/or such other officers as may from time to time be deemed desirable. The officers shall perform such duties as shall be prescribed at the time of their appointment subject to any modifications in such duties as may be prescribed by the Directors thereafter, but in the absence of any specific allocation of duties it shall be the responsibility of the president to manage the day to day affairs of the Company, the vice presidents to act in order of seniority in the absence of the president, but otherwise to perform such duties as may be delegated to them by the president, the secretary to maintain the registers, minute books and records (other than financial records) of the Company and to ensure compliance with all procedural requirements imposed on the Company by applicable law, and the treasurer to be responsible for the financial affairs of the Company. |
| 23.2 | Any person may hold more than one office and no officer need be a Director or Member of the Company. The officers shall remain in relevant office until removed from the said office by the Directors, whether or not a successor is appointed. |
| 23.3 | Any officer who is a body corporate may appoint any person its duly authorised representative for the purpose of representing it and of transacting any of the business of the officers. |
| 24. | Powers and Duties of Directors |
| 24.1 | The business of the Company shall be managed by the Directors who may pay all expenses incurred preliminary to and in connection with the setup and registration of the Company, and may exercise all such powers of the Company necessary for managing and for directing and supervising, the business affairs of the Company as are not required by the Companies Act or by these Articles required to be exercised by the Members subject to any delegation of such powers as may be authorised by these Articles and permitted by the Companies Act and to such requirements as may be prescribed by resolution of the Members, but no requirement made by resolution of the Members shall prevail if it was inconsistent with these Articles nor shall such resolution invalidate any prior act of the Directors which would have been valid if such resolution had not been made. |
| 24.2 | The Directors may from time to time and at any time by power of attorney or otherwise appoint any company, firm or person or body of persons, whether nominated directly or indirectly by the Directors, to be the attorney or attorneys of the Company for such purposes and with such powers, authorities and discretion (not exceeding those vested in or exercisable by the Directors under these Articles) and for such period and subject to such conditions as they may think fit, and any such powers of attorney may contain such provisions for the protection and convenience of persons dealing with any such attorney as the Directors may think fit and may also authorise any such attorney to delegate all or any of the powers, authorities and discretions vested in him. |
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| 24.3 | The Directors may exercise all the powers of the Company to borrow money and to mortgage or charge its undertaking, property, assets (present and future) and uncalled capital or any part thereof, to issue debentures, debenture stock and other securities whenever money is borrowed or as security for any debt, liability or obligation of the Company or of any third party. |
| 25. | Committees of Directors |
| 25.1 | The Directors may delegate any of their powers to committees consisting of such member or members of their body as they think fit; any committee so formed shall in the exercise of the powers so delegated conform to any regulations that may be imposed on it by the Directors. |
| 25.2 | The Directors may establish any committees, local boards or agencies for managing any of the businesses and affairs of the Company, and may appoint any persons to be members of such committees, local boards, managers or agents for the Company and may fix their remuneration and may delegate to any committees, local board, manager or agent any of the powers, authorities and discretions vested in the Directors, with the power to sub-delegate, and may authorise the members of any committees, local boards or agencies, or any of them, to fill any vacancies therein and to act notwithstanding vacancies, and any such appointment and delegation may be made upon such terms and subject to such conditions as the Directors may think fit, and the Directors may remove any person so appointed and may annul or vary any such delegation, but no person dealing in good faith and without notice of any such annulment or variation shall be affected thereby. |
| 26. | Disqualification of Directors |
The office of Director shall be automatically vacated, if the Director:
| (a) | becomes bankrupt or makes any arrangement or composition with his creditors; |
| (b) | is found to be or becomes of unsound mind; |
| (c) | resigns his office by notice in writing to the Company; |
| (d) | is removed from office by Ordinary Resolution; |
| (e) | is convicted of an arrestable offence; or |
| (f) | dies. |
| 27. | Proceedings of Directors |
| 27.1 | The meetings of the Board of Directors and any committee thereof shall be held at such place or places as the Directors shall decide. |
| 27.2 | The Directors may elect a chairman of their meetings and determine the period for which he is to hold office. If no such chairman is elected, or if at any meeting the chairman is not present within fifteen minutes after the time appointed for holding the meeting, the Directors present may choose one of their number to be chairman for the meeting. If the Directors are unable to choose a chairman, for any reason, then the seniority Director present at the meeting shall preside as the chairman of the meeting. |
| 27.3 | The Directors may meet together (either within or without the Cayman Islands) for the dispatch of business, adjourn and otherwise regulate their meetings and proceedings as they think fit. Questions arising at any meeting shall be decided by a majority of votes. In case of an equality in votes the chairman shall have a second or casting vote. A Director may at any time summon a meeting of the Directors. If the Company shall have only one Director, the provisions hereinafter contained for meetings of the Directors shall not apply but such sole Director shall have full power to represent and act for the Company in all matters and in lieu of minutes of a meeting shall record written resolutions and sign as a resolution of the Directors. Such note or memorandum shall constitute sufficient evidence of such resolution for all purposes. |
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| 27.4 | Any one or more members of the Board of Directors or any committee thereof may participate in a meeting of such Board of Directors or committee by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participating by such means shall constitute presence in person at a meeting. |
| 27.5 | The quorum necessary for the transaction of the business of the Directors may be fixed by the Directors, and unless so fixed, if there be more than two Directors shall be two, and if there be two or less Directors shall be one. A Director represented by proxy or by an alternate Director at any meeting shall be deemed to be present for the purposes of determining whether or not a quorum is present. |
| 27.6 | A Director who is in any way, whether directly or indirectly, interested in a contract or proposed contract with the Company shall declare the nature of his interest at a meeting of the Directors. A general notice given to the Directors by any Director to the effect that he is a member of any specified company or firm and is to be regarded as interested in any contract which may thereafter be made with that company or firm shall be deemed a sufficient declaration of interest in regard to any contract so made. A Director may vote in respect of any contract or proposed contract or arrangement notwithstanding that he may be interested therein and if he does so his vote shall be counted and he may be counted in the quorum at any meeting of the Directors at which any such contract or proposed contract or arrangement shall come before the meeting for consideration. |
| 27.7 | A Director may hold any other office or place of profit under the Company (other than the office of auditor) in conjunction with his office of Director for such period and on such terms (as to remuneration and otherwise) as the Directors may determine and no Director or intending Director shall be disqualified by his office from contracting with the Company either with regard to his tenure of any such other office or place of profit or as vendor, purchaser or otherwise, nor shall any such contract or arrangement entered into by or on behalf of the Company in which any Director is in any way interested, be liable to be avoided, nor shall any Director so contracting or being so interested be liable to account to the Company for any profit realised by any such contract or arrangement by reason of such Director holding that office or of the fiduciary relation thereby established. A Director, notwithstanding his interest, may be counted in the quorum present at any meeting whereat he or any other Director is appointed to hold any such office or place of profit under the Company or whereat the terms of any such appointment are arranged and he may vote on any such appointment or arrangement. |
| 27.8 | The Directors shall cause to be entered and kept in books or files provided for the purpose minutes or memoranda of the following (where applicable): - |
| (a) | all appointments of officers made by the Directors; |
| (b) | the names of the Directors, and any alternate Director who is not also a Director, present at each meeting of the Directors and of any committee of the Directors; and |
| (c) | all resolutions and proceedings of all meetings of the Members, all meetings of the Directors and all meetings of committees and, where the Company has only one Member and/or one Director, all written resolutions of the decisions of the sole Member and/or the sole Director; |
and any such minutes or memoranda of any meeting or decisions of the Directors, or any committee, or of the Company, if purporting to be signed by the chairman of such meeting, or by the chairman of the next succeeding meeting, shall be receivable as prima facie evidence of the matters stated therein.
| 27.9 | When the Chairman of a meeting of the Directors signs the minutes of such meeting the same shall be deemed to have been duly held notwithstanding that all the Directors have not actually come together or that there may have been a technical defect in the proceedings. |
| 27.10 | A resolution in writing signed by a majority of the Directors for the time being shall be as valid and effectual for all purposes as a resolution of the Directors passed at a meeting of the Directors duly called and constituted. Such resolution in writing may consist of several documents each signed by one or more of the Directors. |
| 27.11 | The continuing Directors may act notwithstanding any vacancy in their body but if and so long as their number is reduced below the number fixed by or pursuant to the Articles of the Company as the necessary quorum of Directors, the continuing Directors may act for the purpose of increasing the number, or of summoning a general meeting of the Company, but for no other purpose. |
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| 27.12 | A committee appointed by the Directors may elect a chairman of its meetings. If no such chairman is elected, or if at any meeting the chairman is not present within 15 minutes after the time appointed for holding the same, the members present may choose one of their number to be chairman of their meetings. |
| 27.13 | A committee appointed by the Directors may meet and adjourn as it thinks fit. Questions arising at any meeting shall be determined by a majority of votes of the committee members present and in case of an equality of votes the chairman shall have a second or casting vote. |
| 27.14 | All acts done bona fide by any meeting of the Directors or of a committee of Directors, or by any person acting as a Director, shall notwithstanding that it was afterwards discovered that there was some defect in the appointment of any such Director or person acting as aforesaid, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and was qualified to be a Director. |
| 28. | Dividends |
| 28.1 | Subject to any rights and restrictions for the time being attached to any class or classes of shares, the Directors may from time to time declare dividends (including interim dividends) and other distributions on shares of the Company in issue and authorise payment of the same out of the funds of the Company lawfully available therefor. |
| 28.2 | Subject to any rights and restrictions for the time being attached to any class or classes of shares, the Company may by Ordinary Resolution declare final dividends, but no dividend shall exceed the amount recommended by the Directors. |
| 28.3 | The Directors may, before recommending or declaring any dividend, set aside out of the funds legally available for distribution of the Company such sums as they think proper as a reserve or reserves which shall, at the absolute discretion of the Directors be applicable for meeting contingencies, or for equalising dividends or for any other purpose to which those funds may be properly applied and may pending such application, in the Directors’ absolute discretion, either be employed in the business of the Company or be invested in such investments (other than shares of the Company) as the Directors may from time to time think fit. |
| 28.4 | No dividend shall be paid otherwise than out of profits or, subject to the restrictions of the Companies Act, the share premium account. |
| 28.5 | Any dividend may be paid by cheque or warrant sent through the post directed to the registered address of the Member or person entitled thereto (or in case of joint holders, to the registered address of any one of such joint holders whose name stands first on the Register of Members of the Company in respect of the joint holding) or addressed to such person at such address as the holder or joint holders may in writing direct. Every such cheque or warrant shall be made payable to the order of the person to whom it is sent, but in any event the Company shall not be liable or responsible for any cheque or warrant lost in transmission nor for any dividend, bonus, interest or other monies lost to the Member or person entitled thereto by the forged endorsement of any cheque or warrant. Any payment of the cheque or warrant by the Company’s banker on whom it is drawn shall be a good discharge to the Company. |
| 28.6 | The Directors when paying dividends to the Members in accordance with the foregoing provisions may make such payment either in cash or in specie. |
| 28.7 | Subject to the rights of persons, if any, entitled to shares with special rights as to dividend, all dividends shall be declared and paid according to the amounts paid or credited as paid on the shares in respect whereof the dividend is paid, but no amount paid or credited as paid on a share in advance of calls shall be treated for the purposes of this article as paid on the share. All dividends shall be apportioned and paid proportionately to the amounts paid or credited as paid on the shares during any portion or portions of the period in respect of which the dividend is paid but if any share is issued on terms providing that it shall rank for dividend as from a particular date that share shall rank for dividend accordingly. For the avoidance of doubts, holders of Class A Ordinary Shares have the equal rights and entitlement to dividends pro rate as the holders of Class B Ordinary Shares. |
| 28.8 | If several persons are registered as joint holders of any share, any of them may give effectual receipts for any dividend or other moneys payable on or in respect of the share. |
| 28.9 | No dividend shall bear interest against the Company. |
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| 29. | Accounts and Audit |
| 29.1 | The Directors shall cause books of account relating to the Company’s affairs to be kept in such manner as may be determined from time to time by the Directors. |
| 29.2 | The books of account shall be kept at the registered office of the Company, or at such other place or places as the Directors think fit, and shall always be open to the inspection of the Directors. |
| 29.3 | The Directors shall from time to time determine whether and to what extent and at what times and places and under what conditions or regulations the accounts and books of the Company or any of them shall be open to the inspection of Members not being Directors, and no Member (not being a Director) shall have any right of inspecting any account or book or document of the Company except as conferred by the Companies Act or authorised by the Directors or by the Company by ordinary resolution. |
| 29.4 | The Directors shall from time to time determine whether and to what extent and at what times and places and under what conditions the records, documents and registers of the Company or any of them shall be open to the inspection of Members not being Directors, and no Member (not being a Director) shall have any right of inspecting any records, documents or registers of the Company except as conferred by the Companies Act or authorised by resolution of the Directors. |
| 30. | Capitalisation of Profits |
| 30.1 | Subject to the Companies Act, the Directors may, with the authority of an Ordinary Resolution, resolve that it is desirable to capitalise any part of the amount for the time being standing to the credit of any of the Company’s reserve accounts (including a share premium account and capital redemption reserve), or to the credit of the profit and loss account or otherwise available for distribution, and accordingly that such sum be set free for distribution, amongst the Members who would have been entitled thereto if distributed by way of dividend and in the same proportion, on condition that the same be not paid in cash but be applied either in or towards paying up any amounts (if any) for the time being unpaid on any shares held by such Members respectively, or paying up in full unissued shares or debentures of the Company to be allotted and distributed credited as fully paid up to and amongst such Members in the proportion aforesaid or partly in the one way and partly in the other. Provided that a share premium account and a capital redemption reserve fund may, for the purposes of this Article, only be applied in the paying up of unissued shares to be allotted to Members of the Company as fully paid bonus shares. |
| 30.2 | Whenever such a resolution as aforesaid shall have been passed the Directors shall make all appropriations and applications of the undivided profits resolved to be capitalised thereby, and all allotments and issues of fully paid shares or debentures, if any and generally shall do all acts and things required to give effect thereto, with full power to the Directors to make such provision by the issue of fractional certificates by payment in cash or otherwise as they think fit for the case of shares or debentures becoming distributable in fractions, and also to authorise any person to enter on behalf of all the Members entitled thereto into an agreement with the Company providing for the allotment to them respectively, credited as fully paid up, of any further shares or debentures to which they may be entitled upon such capitalisation, or as the case may require, for the payment up by the Company on their behalf, by the application thereto of their respective proportions of the profits resolved to be capitalised, of the amounts or any part of the amounts remaining unpaid on their existing shares, and any agreement made under such authority shall be effective and binding on all such Members. |
| 31. | Share Premium Account |
| 31.1 | The Board of Directors shall in accordance with the Companies Act establish a share premium account and shall carry to the credit of such account from time to time a sum equal to the amount or value of the premium paid on the issue of any share. |
| 31.2 | There shall be debited to any share premium account on the redemption or purchase of a share the difference between the nominal value of such share and the redemption or purchase price provided always that at the discretion of the Board of Directors such sum may be paid out of the profits of the Company or, if permitted by the Companies Act, out of capital. |
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| 32. | Indemnity |
Subject to the provisions of the Companies Act and in the absence of fraud or wilful default, the Company may indemnify against all expenses, including legal fees, and against all judgments, fines and amounts paid in settlement and reasonably incurred in connection with legal, administrative or investigative proceedings any person who:
| (a) | is or was a party or is threatened to be made a party to any threatened, pending or completed proceedings, whether civil, criminal, administrative or investigative, by reason of the fact that the person is or was a Director, managing director, agent, auditor, secretary and other officer for the time being of the Company; or |
| (b) | is or was, at the request of the Company, serving as a Director, managing director, agent, auditor, secretary and other officer for the time being of, or in any other capacity is or was acting for, another company or a partnership, joint venture, trust or other enterprise. |
| 33. | Notices |
| 33.1 | Notice shall be in writing and may be given by the Company or by the person entitled to give notice to any Member either personally by electronic mail, by facsimile or by sending it through the post in a prepaid letter or via a recognised courier service, fees prepaid, addressed to the Member at his address as appearing in the Register of Members. Notices posted to addresses outside the Cayman Islands shall be forwarded by prepaid airmail. A notice may be given by the Company to the joint holders of a share by giving the notice to the joint holder first named in the Register of Members in respect of the share. |
| 33.2 | Any Member present, either personally or by proxy, at any meeting of the Company shall for all purposes be deemed to have received due notice of such meeting and, where requisite, of the purposes for which such meeting was convened. |
| 33.3 | Any notice, if served by (a) post, shall be deemed to have been served 5 days after the time when the letter containing the same is posted and if served by courier, shall be deemed to have been served 5 days after the time when the letter containing the same is delivered to the courier or, (b) facsimile, shall be deemed to have been served upon confirmation of receipt or (c) electronic mail, shall be deemed to have been served upon confirmation of receipt, or (d) recognised delivery service, shall be deemed to have been served 48 hours after the time when the letter containing the same is delivered to the courier service provider. |
| 33.4 | A notice may be given by the Company to the persons entitled to a share in consequence of the death, bankruptcy or insolvency of a Member by sending it through the post in a prepaid letter, by airmail if appropriate addressed to them by name or by the title of representatives of the deceased or assignee or trustee of the bankrupt or insolvent or by a like description at the address, if any, supplied for the purpose by the persons claiming to be so entitled, or, until such an address has been so supplied, by giving the notice in any manner in which the same might have been given if the death, bankruptcy or insolvency had not occurred. |
| 33.5 | Notice of every general meeting shall be given in the manner hereinbefore authorised to: |
| (a) | all Members who have a right to receive notice and who have supplied the Company with an address for the giving of notices to them and in case of joint holder, the notice shall be sufficient if given to the first named joint holder in the Register of Members; and |
| (b) | every person entitled to a share in consequence of the death or bankruptcy of a Member, who but for his death or bankruptcy would be entitled to receive notice of the meeting. |
No other person shall be entitled to receive notice of general meetings.
| 34. | Seal |
| 34.1 | The Directors shall provide for the safe custody of the Seal of the Company. The Seal when affixed to any instrument shall be witnessed by a Director or the secretary or officer of the Company or any other person so authorised from time to time by the Directors or of a committee of the Directors authorised by the Directors on that behalf. The Directors may provide for a facsimile of the Seal and approve the signature of any Director or authorised person which may be reproduced by printing or other means on any instrument and it shall have the same force and validity as if the Seal has been affixed to such instrument and the same had been signed as hereinbefore described. |
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| 34.2 | Notwithstanding the foregoing, a director or officer, representative or attorney of the Company shall have the authority to affix the Seal, or a duplicate of the Seal, over his signature alone on any instrument or document required to be authenticated by him under Seal or to be filed with the Registrar of Companies in the Cayman Islands or elsewhere wheresoever. |
| 35. | Winding Up |
| 35.1 | If the Company shall be wound up the liquidator may, with the sanction of an Ordinary Resolution of the Company and any other sanction required by the Companies Act, divide amongst the Members in specie or cash the whole or any part of the assets of the Company whether they shall consist of property of the same kind or not and may, for such purpose set such value as he deems fair upon any property to be divided as aforesaid and may determine how such division shall be carried out as between the Members or different classes of Members. The liquidator may, with the like sanction, vest the whole or any part of such assets in trustees upon such trusts for the benefit of the contributors as the liquidator shall think fit, but so that no Member shall be compelled to accept any shares or other securities whereon there is any liability. |
| 35.2 | Without prejudice to the rights of holders of shares issued upon special terms and conditions, if the Company shall be wound up, and the assets available for distribution among the Members as such shall be insufficient to repay the whole of the paid-up capital, such assets shall be distributed so that, as nearly as may be, the losses shall be borne by the Members in proportion to the capital paid-up, or which ought to have been paid-up, at the commencement of the winding up on the shares held by them respectively. If on a winding up the assets available for distribution among the Members shall be more than sufficient to repay the whole of the capital paid-up at the commencement of the winding up, the excess shall be distributed among the Members in proportion to the capital paid up at the commencement of the winding up on the shares held by them respectively. For the avoidance of doubts, holders of Class A Ordinary Shares have the equal rights and entitlement to liquidation proceeds pro rate as the holders of Class B Ordinary Shares. |
| 36. | Amendment of Memorandum and Articles of Association |
The Company may alter or modify the provisions contained in these Memorandum and Articles of Association as originally drafted or as amended from time to time by a Special Resolution and subject to the Companies Act and the rights attaching to the various classes of shares.
| 37. | Registration By Way of Continuation |
The Company may by Special Resolution resolve to be registered by way of continuation in a jurisdiction outside the Cayman Islands or such other jurisdiction in which it is for the time being incorporated, registered or existing. In furtherance of a resolution adopted pursuant to this Article. The Directors may cause an application to be made to the Registrar of Companies to deregister the Company in the Cayman Islands or such other jurisdiction in which it is for the time being incorporated, registered or existing and may cause all such further steps as they consider appropriate to be taken in accordance to the Companies Act to effect the transfer by way of continuation of the Company.
| 38. | Financial Year |
Unless the Directors otherwise specify, the financial year of the Company:
| (a) | shall end on 31st December in the year of its incorporation and each following year; and |
| (b) | shall begin when it was incorporated and on 1st January in each following year. |
-18-
Exhibit 4.19
Meihua International Medical Technologies Co., Ltd.
88 Tongda Road, Touqiao Town
Guangling District, Yangzhou, 225000
People’s Republic of China
April [ ], 2026
Re: Amended Director Offer Letter
Dear [Name]:
Meihua International Medical Technologies Co., Ltd., a Cayman Islands exempt company (the “Company”), offered you a position as a member of its Board of Directors (the “Board”), starting on [ ], pursuant to a letter agreement dated [ ]. We hereby amend and restate such letter agreement. The amended and restated letter agreement (the “Agreement”) shall constitute an agreement between you and the Company and contains all the terms and conditions relating to the services you agree to provide to the Company.
1. Term. Your term shall begin on the date of this letter and continue subject to the provisions in Section 8 below or until your successor is duly elected and qualified. The position shall be up for re-election each year at the annual shareholder’s meeting and upon re-election, the terms and provisions of this Agreement shall remain in full force and effect.
2. Services. You shall render services as a member of the Board (the “Duties”). During the term of this Agreement, you shall attend and participate in such number of meetings of the Board and of the committee(s) of which you are a member as regularly or specially called. You may attend and participate at each such meeting via teleconference, video conference or in person. You shall consult with the other members of the Board and committee(s) as necessary via telephone, electronic mail or other forms of correspondence.
3. Compensation. As compensation for your services to the Company, you will receive $[ ] in cash/stock per year for serving on the Board, which shall be paid to you quarterly in arrears as determined by the Company. You shall be reimbursed for reasonable and approved expenses incurred by you in connection with the performance of your Duties.
4. No Assignment. Because of the personal nature of the services to be rendered by you, this Agreement may not be assigned by you without the prior written consent of the Company.
5. Confidential Information; Non-Disclosure. In consideration of your access to certain Confidential Information (as defined below) of the Company, in connection with your business relationship with the Company, you hereby represent and agree as follows:
a. Definition. For purposes of this Agreement the term “Confidential Information” means:
i. Any information which the Company possesses that has been created, discovered or developed by or for the Company, and which has or could have commercial value or utility in the business in which the Company is engaged; or
ii. Any information which is related to the business of the Company and is generally not known by non-Company personnel.
iii. Confidential Information includes, without limitation, trade secrets and any information concerning services provided by the Company, concepts, ideas, improvements, techniques, methods, research, data, know-how, software, formats, marketing plans, and analyses, business plans and analyses, strategies, forecasts, customer and supplier identities, characteristics and agreements.
| b. | Exclusions. Notwithstanding the foregoing, the term Confidential Information shall not include: |
i. Any information which becomes generally available to the public other than as a result of a breach of the confidentiality portions of this Agreement, or any other agreement requiring confidentiality between the Company and you;
ii. Information received from a third party in rightful possession of such information who is not restricted from disclosing such information; and
iii. Information known by you prior to receipt of such information from the Company, which prior knowledge can be documented.
c. Documents. You agree that, without the express written consent of the Company, you will not remove from the Company’s premises, any notes, formulas, programs, data, records, machines or any other documents or items which in any manner contain or constitute Confidential Information, nor will you make reproductions or copies of same. You shall promptly return any such documents or items, along with any reproductions or copies, to the Company upon the earliest of Company’s demand, termination of this Agreement, or your termination or Resignation, as defined in Section 8 herein.
d. Confidentiality. You agree that you will hold in trust and confidence all Confidential Information and will not disclose to others, directly or indirectly, any Confidential Information or anything relating to such information without the prior written consent of the Company, except as maybe necessary in the course of your business relationship with the Company. You further agree that you will not use any Confidential Information without the prior written consent of the Company, except as may be necessary in the course of your business relationship with the Company, and that the provisions of this paragraph (d) shall survive termination of this Agreement.
e. Ownership. You agree that Company shall own all right, title and interest (including patent rights, copyrights, trade secret rights, mask work rights, trademark rights, and all other intellectual and industrial property rights of any sort throughout the world) relating to any and all inventions (whether or not patentable), works of authorship, mask works, designations, designs, know-how, ideas and information made or conceived or reduced to practice, in whole or in part, by you during the term of this Agreement and that arise out of your Duties (collectively, “Inventions”) and you will promptly disclose and provide all Inventions to the Company. You agree to assist the Company, at its expense, to further evidence, record and perfect such assignments, and to perfect, obtain, maintain, enforce, and defend any rights assigned.
f. Non-Solicitation. So long as you are a member of the Board and for a period of 12 months thereafter, you shall not directly or indirectly solicit for employment any individual who was an employee of the Company during your tenure.
6. Termination and Resignation. Your membership on the Board may be terminated for any or no reason by a vote of the stockholders holding at least a majority of the shares of the Company’s issued and outstanding shares entitled to vote. Your membership on the Board or on a Board committee may be terminated for any or no reason by a majority of the Board at any time, if you have been declared incompetent by an order of a court of competent jurisdiction or convicted of a felony. You may also terminate your membership on the Board or on a committee for any or no reason by delivering your written notice of resignation to the Company (“Resignation”), and such Resignation shall be effective upon the time specified therein or, if no time is specified, upon receipt of the notice of resignation by the Company. Upon the effective date of the termination or Resignation, your right to compensation hereunder will terminate subject to the Company’s obligations to pay you any compensation (including the vested portion of the Shares) that you have already earned and to reimburse you for approved expenses already incurred in connection with your performance of your Duties as of the effective date of such termination or Resignation. Any Shares that have not vested as of the effective date of such termination or Resignation shall be forfeited and cancelled.
7. Governing Law. All questions with respect to the construction and/or enforcement of this Agreement, and the rights and obligations of the parties hereunder, shall be determined in accordance with the law of the State of New York applicable to agreements made and to be performed entirely in the State of New York.
8. Entire Agreement; Amendment; Waiver; Counterparts. This Agreement expresses the entire understanding with respect to the subject matter hereof and supersedes and terminates any prior oral or written agreements with respect to the subject matter hereof. Any term of this Agreement may be amended and observance of any term of this Agreement may be waived only with the written consent of the parties hereto. Waiver of any term or condition of this Agreement by any party shall not be construed as a waiver of any subsequent breach or failure of the same term or condition or waiver of any other term or condition of this Agreement. The failure of any party at any time to require performance by any other party of any provision of this Agreement shall not affect the right of any such party to require future performance of such provision or any other provision of this Agreement. This Agreement may be executed in separate counterparts each of which will be an original and all of which taken together will constitute one and the same agreement, and may be executed using facsimiles of signatures, and a facsimile of a signature shall be deemed to be the same, and equally enforceable, as an original of such signature.
9. Indemnification. The Company shall, to the maximum extent provided under applicable law, indemnify and hold you harmless from and against any expenses, including reasonable attorney’s fees, judgments, fines, settlements and other legally permissible amounts (“Losses”), incurred in connection with any proceeding arising out of, or related to, your performance of your Duties, other than any such Losses incurred as a result of your gross negligence or willful misconduct. The Company shall advance to you any expenses, including reasonable attorneys’ fees and costs of settlement, incurred in defending any such proceeding to the maximum extent permitted by applicable law. Such costs and expenses incurred by you in defense of any such proceeding shall be paid by the Company in advance of the final disposition of such proceeding promptly upon receipt by the Company of (a) written request for payment and (b) appropriate documentation evidencing the incurrence, amount and nature of the costs and expenses for which payment is being sought.
10. Not an Employment Agreement. This Agreement is not an employment agreement, and shall not be construed or interpreted to create any right for you to continue employment with the Company.
11. Acknowledgement. You accept this Agreement subject to all the terms and provisions of this Agreement. You agree to accept as binding, conclusive, and final all decisions or interpretations of the Board of Directors of the Company of any questions arising under this Agreement.
(Signature Page Follows)
The Agreement has been executed and delivered by the undersigned and is made effective as of the date set first set forth above.
| Sincerely, | ||||
| Meihua International Medical Technologies Co., Ltd. | ||||
| By: | ||||
| Name: | Ailiang Wang | |||
| Title: | Chairwoman of the Board | |||
| Agreed and Accepted by: | ||||
| Name: | [*] | |||
Exhibit 8.1
Principal Subsidiaries of the Registrant
| Principal Subsidiaries | Place of Incorporation | |
| Kang Fu International Medical Co., Limited | Hong Kong | |
| Yangzhou Huada Medical Device Co., Ltd. | P.R. C. | |
| Jiangsu Yada Technology Group Co., Ltd. | P.R.C. | |
| Jiangsu Huadong Medical Device Industrial Co., Ltd. (“JH”) | P.R.C. | |
| Hainan Ruiying Technology Co., Ltd. (51% owned by JH) | P.R.C. | |
| Meihua Future Manufacturing Limited | New York, U.S. |
Exhibit 12.1
Certification of the Principal Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Leyi Lee, certify that:
| 1. | I have reviewed this annual report on Form 20-F of Meihua International Medical Technologies Co., Ltd.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; |
| 4. | The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have: |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c. | Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d. | Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and |
| 5. | The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions): |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting. |
Date: April 29, 2026
| By: | /s/ Leyi Lee | |
| Name: | Leyi Lee | |
| Title: | Chief Executive Officer (Principal Executive Officer) |
Exhibit 12.2
Certification of the Principal Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Shilong Liao, certify that:
| 1. | I have reviewed this annual report on Form 20-F of Meihua International Medical Technologies Co., Ltd.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; |
| 4. | The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have: |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c. | Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d. | Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and |
| 5. | The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions): |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting. |
Date: April 29, 2026
| By: | /s/ Shilong Liao | |
| Name: | Shilong Liao | |
| Title: | Chief Financial Officer (Principal Financial Officer) |
Exhibit 13.1
Certification by the Principal Executive Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the annual report of Meihua International Medical Technologies Co., Ltd. (the “Company”) on Form 20-F for the fiscal year ended December 31, 2025, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Leyi Lee, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: April 29, 2026 | ||
| By: | /s/ Leyi Lee | |
| Name: | Leyi Lee | |
| Title: | Chief Executive Officer (Principal Executive Officer) |
|
Exhibit 13.2
Certification by the Principal Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the annual report of Meihua International Medical Technologies Co., Ltd. (the “Company”) on Form 20-F for the fiscal year ended December 31, 2025, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Shilong Liao, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: April 29, 2026 | ||
| By: | /s/ Shilong Liao | |
| Name: | Shilong Liao | |
| Title: | Chief Financial Officer (Principal Financial Officer) |
|
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the registration statement (File no. 333-274194) on Form F-3/A, the registration statement (File no. 333-276882) on Form F-1/A, and the registration statement (File no. 333-293682) on Form F-3 of our report dated April 25, 2025, relating to the consolidated financial statements of Meihua International Medical Technologies Co., Ltd. appearing in the entity’s Annual Report on Form 20-F for the years ended December 31, 2024 and 2023.
/s/ Kreit & Chiu CPA LLP
Los Angeles, California
April 29, 2026
Exhibit 23.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the registration statement (File no. 333-274194) on Form F-3/A, the registration statement (File no. 333-276882) on Form F-1/A, and the registration statement (File no. 333-293682) on Form F-3 of our report dated April 29, 2026, relating to the consolidated financial statements of Meihua International Medical Technologies Co., Ltd. appearing in the entity’s Annual Report on Form 20-F for the years ended December 31, 2025.
/s/ Li CPA LLC
Aurora Colorado
April 29, 2026
Exhibit 99.4
Zhejiang Taihang Law Firm
35F, Dikai Chengxing International Building, No. 98, Chengxing Road, Shangcheng District, Hangzhou, Zhejiang, 310020, China
Date: Apr 29, 2026
To:
MEIHUA INTERNATIONAL MEDICAL TECHNOLOGIES CO., LTD. (the “Company”)
88 Tongda Road, Touqiao Town
Guangling District, Yangzhou, 225000
People’s Republic of China
Dear Sir/Madam:
We hereby consent to the reference of our name under the headings on “Item 3 Key Information—Permissions and Approvals Required to be Obtained from PRC Authorities for our Business Operations”, “Item 3 Key Information—Enforceability of Civil”, “Item 3 Key Information—D. RISK FACTORS—Risks Related to Doing Business in China”in MEIHUA INTERNATIONAL MEDICAL TECHNOLOGIES CO., LTD.’s Annual Report on Form 20-F for the year ended December 31, 2025 (the “Annual Report”), which will be filed with the Securities and Exchange Commission (the “SEC”) on the date hereof. We also consent to the filing of this consent letter with the SEC as an exhibit to the Annual Report.
In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act 1933, or under the Securities Exchange Act of 1934, in each case, as amended, or the regulations promulgated thereunder.
Yours sincerely,
| /s/ Rong Huang | ||
| Name: | Rong Huang | |
| Title: | Lawyer | |
On behalf of Zhejiang Taihang Law Firm
Address: 35F, Dikai Chengxing International Building, No. 98, Chengxing Road, Shangcheng District, Hangzhou, Zhejiang, 310020, China
Web: http://www.taihanglawyer.com
Tel: +86-571-85862509